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Coal, gas, renewables, and growth

Recently it was reported that the growth rate of Germany, Europe’s largest economy and the world’s fourth largest, fell to only 0.6% in 2019. This caught my attention because it is a significant drop from 1.5% in 2018 and 2.2% average for 2014-2017. The UK and France managed to grow 1.4% in Q1-Q3 2019 so far, while Italy has crawled to only 0.1% growth (see Table 1).

From 1998 to 2018, or two decades, China, India, and South Korea have managed to expand their GDP size from four to 13 times while others have expanded only by 2.3 times at most. So we may ask, what are the “secrets” of China, India, and South Korea for the big expansion of their GDP sizes?

There are a dozen plus factors, but for this paper, I want to test the hypothesis that “stable, cheaper energy is stable growth.” Thus, I will leave out other factors (rule of law, property rights protection, global openness, lower taxes, etc.) for now.

First I checked the consumption of fossil fuels coal and natural gas — stable, predictable, dispatchable on demand — in power generation, units in million tonnes oil equivalent (mtoe).

China, India, and South Korea have indeed expanded their coal capacity by 2.4 times to 2.9 times while the four Europeans and the US have decreased their coal consumption. But the US has increased its already high consumption of natural gas while China and South Korea have also expanded their gas use but not at the level of the US (see Table 2).

Then I checked their consumption of intermittent, unstable, and non-dispatchable energy sources like wind and solar. China, the US, and Germany are the world leaders, with India, Japan, and the UK trying to catch up (see Table 3).

The total consumption of wind and solar, despite their rapid expansion in recent years, remain very small compared to use of coal and gas for many countries. For instance, the wind and solar of China (123 mtoe), India (20.6 mtoe), and South Korea (2.6 mtoe) in 2018 were only 6.4%, 2.8%, and 2.9% respectively of their coal consumption. The US’ wind and solar (84.8 mtoe) in 2018 was only 12.1% of its natgas consumption.

It is safe to say that the reason why China, India, and South Korea have expanded their economies faster than the other seven large economies is partly (or largely) because they relied more on stable and cheaper fossil fuels especially coal, and never relied on intermittent, unstable wind and solar in their continuing march towards modernization and industrialization.

The US has escaped the anemic growth pattern of the Europeans because it increased its reliance on natgas, also a fossil fuel, even though its coal use has declined.

US President Donald Trump is correct in his opening speech at the ongoing 50th World Economic Forum (WEF) in Davos, Switzerland, that US will pursue its energy independence (and dominance) in fossil fuels and not be swayed by climate scare and doom stories, and embrace the energy of low and anemic growth — wind and solar and other variable renewables.

 

Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers.

minimalgovernment@gmail.com

Taking sport management seriously

This article is an excerpt from the author’s paper on “Athletes beyond sports: A research proposal to explore the determinants of sport entrepreneurship in the Philippines” that she presented at the 7th National Business and Management Conference.

Opportunities abound to develop or exploit underdeveloped industries such as agriculture and technology, given the right enablers and government support. Sport is one such sector that is gaining increased attention, especially with the recently concluded Southeast Asian Games 2019.

We can trace the phenomenon of the modern-day Olympics as having precipitated the commercialization of sports, which today impacts various businesses such as broadcasting, fitness, tourism, and retail. According to KPMG, the global sports industry is estimated at $600 to 700 billion, with compounded annual growth rates upwards of 4.3% since 2014, with the largest share from participatory sports. In 2017, the sports sector accounted for roughly 3% of the US economy, comprising sport consumption, sport investments, government expenditures, and net exports.

No other industry is probably as socially intertwined as sports is, due to the deep, at times, irrational and emotional attachment of fans to their athletes and teams — truly, a veritable marketer’s dream. A Social Weather Stations survey in 2019 reveals that “95% of Filipino adults feel proud when the Philippines does well at international sport competition.” Even the UNESCO has acknowledged the developmental role that sport participation plays in health, education, and inclusion in at least six of the 17 goals crafted in the 2030 Agenda for Sustainable Development.

But despite the avowed enthusiasm and untapped consumerism of Filipinos toward sports, one wonders why sport management remains nascent or limited to stereotypical images of sport agents and basketball. While one may rationalize that “management is management” regardless, any particular sector necessarily operates within a different set of contextual factors.

Hence, there is an imperative to professionalize sport management and boost sport management education. By definition, sport management involves the business and management of products and services related to sport and physical activity in its various organizational settings. It has given rise to evolving specialties in the areas of sport marketing, sport law, sport finance, as well as sport entrepreneurship — with unparalleled innovation that puts mainstream businesses to shame.

Formal sport management education began in 1966 at the Ohio University, in response to the growing demand for managing sport. In 2011, the Commission on Higher Education, through its Memorandum Order No. 23, outlined the policies and standards for a “hybrid” physical education degree with sports and wellness management (BPE-SWM). To date, at least 10 local schools offer this degree, albeit a pale comparison with the United States’ 521 schools offering bachelor’s degrees in sport management, and with the likes of ASEAN neighbors such as Thailand, which have master’s and doctorate programs.

Great athletes — even Michael Jordan — cannot become great coaches without osmosis and technical know-how. Uninitiated sport leaders who have assumed positions through privilege rather than through merit run the risk of making decisions based on hubris and self-interest rather than on stewardship, discernment, and proper governance. As the euphoria surrounding the 149 gold medals that our country won during the SEA Games 2019 is slowly dissipating, we are jolted by discoveries of excesses and opportunity losses that even the unprecedented budget could not hide. As in any venture, sporting events should be strategic, not only for the collective “feel-good” but also for long-term value creation.

The socialization value, economic significance, and psychic income of sport legitimize its importance in the spheres of public and private agenda. Therefore, sustainable and lucrative success will depend on our having the skill sets for, and the knowledge of the nuances of, managing sport. Otherwise, we will set ourselves up for colossal blunders.

 

Geraldine Go-Bernardo lectures on Sport Management and Strategic Management at the Management and Organization Department of the Ramon V. Del Rosario College of Business of De La Salle University. She is a businesswoman as well as a former team captain of the National Women’s Dragon Boat Team and Executive Director of the Philippine Sports Commission.

geraldine.bernardo@dlsu.edu.ph

Abolish the travel tax

In the era of tax reforms that are meant to simplify life for taxpayers, streamline tax collection effort. and enhance revenues for government, the Philippine travel tax that is imposed on departing Filipinos for abroad (with exemptions) in the amount of P1,620 per person is outdated at best and illegal at worst.

This travel tax was first imposed in 1956 when Magsaysay was our president and Singapore was part of Malaysia. Its purpose was to prevent unnecessary foreign travels and to conserve precious foreign exchange. It was meant to promote domestic tourism that required only pesos, not dollars.

At first, the tax was a fixed charge based on the cost of the ticket. In a series of Presidential Decrees up to 1984 when Marcos was still the President and Southeast Asia’s first rail line LRT 1 opened, it was amended to travel class whether business or economy, to a percentage of the fare with a cap, until it ended up with what we have today in 2020 — P1,620 for economy and P2,700 for business.

There is no basis for these amounts. Neither is there a rationale anymore on their imposition on the traveling public. It used to be imposed on arriving passengers too. We have a liberalized foreign currency regime and can freely travel with hard foreign currency or credit cards. Fares today can be as cheap as one peso gimmicks or as expensive as a car but the tax remains the same. It is inflexible and government actually loses revenues that may be collected if a well-studied tax base is used.

For example, levying 1% on the base fare is a start. For those who can afford higher ticket classes, the tax is proportionately higher. It will be effective and progressive. The reduced rates and exemptions can all be removed. The travel tax can be certain and simple.

This single tax is collected by a single agency, the Tourism Infrastructure and Enterprise Zone Authority (TIEZA). It is a highly inefficient manner to raise revenues. By design, it should be a systematic way for agents to collect and remit to the Bureau of Internal Revenue directly using the same channel of payment.

Travel tax by TIEZA is administratively costly, a waste of time, and burdensome for travelers who end up queuing one more time online or at TIEZA counters. It is more red tape for exempted persons to secure an exemption certificate for such amounts or to ask for their refunds that worsen the travel experience. It is also prone to abuse that requires a separate effort by state auditors that eats up additional resources. Remember the TIEZA Teo controversy.

JESHOOTS.COM/UNSPLASH

There is also a problem with how the travel tax is allocated. Its collection is usually justified for the promotion of tourism projects (50% goes to TIEZA) and the support of education (40% goes to the Commission on Higher Education) and culture (10% goes to the National Commission for Culture and the Arts).

Tax reform is ready to remove these cross-subsidies and directly allocate the amounts in the agency’s national budgets for accountability, transparency, and utility. It will simplify the national accounts and lessen compliance issues.

What is not obvious is that from the 50% share of TIEZA, fully 45% of the funds are used for administrative expenses. It is a waste of taxpayer’s money. The better solution is to provide an agency budget for TIEZA that is determined by standard planning cycles and expenditure programs that all other government agencies undergo. It will make it fair.

The track record for the 55% for tourism projects needs to be checked. Government does not spend scarce resources on investments that the private sector will gladly enter into. Tourism is such an industry — markets are free, barriers to entry are low, and margins are high.

There is the Constitutional right to travel. Article III, Section 6 of the Constitution states that “The liberty of abode and of changing the same within the limits prescribed by law shall not be impaired except upon lawful order of the court. Neither shall the right to travel be impaired except in the interest of national security, public safety, or public health, as may be provided by law.”

The imposition of a fixed tax on traveling Filipinos financially burdens the taxpayer. This is especially true for short international destinations on budget airlines for cost-conscious passengers whose plane fare may be less than the tax. It is regressive and anti-poor. It is administratively inefficient and downright wasteful with one tax being collected by one agency that relies on it to fund its operations. No wonder it makes it difficult for travelers to claim exemptions. It is unfair for state agencies for the separate effort required and to TIEZA that requires a regular budget.

It is time to abolish an archaic tax.

Ideas, seismic activity, dinner, and the CCP

By Marian Pastor Roces

THE OUTRAGE spiked social Geiger counters. The Imelda Marcos re-appearance at the Cultural Center of the Philippines (CCP), upon the invitation of its Board to be honored as founder, set off rumblings at a time of heightened seismic activity. Even if low intensity, the bubbling-over is as much produced by pent-up steam as Taal’s.

Taal of course comes to mind because the dinner organizers gave a post facto justification: a volcanic eruption relief drive. The weak spin did not merit rebuttal.

Nevertheless, there are matters to bother with, concerning the cocktail that includes Imelda, the CCP, imprudent parties, and volcanic eruptions. All of it is to do with ideas whose time is past.

The most obvious of these is that which supposes that “politics” can and should be separated from “art.” The party is about “art”; the “politics” can be left at the Little Theater entrance. The former is supposed to be ethereal and elevated. In this view, the latter is muddy stuff that art shirks from.

This effete idea has not been in play in art, globally, for at least a century. Its persistence in the Philippines can only be attributed to its usefulness to Imeldific sorts who need this separation to keep skeletons in closets, maneuvers in shadows, and silverware in their proper places.

By boxing out art from how power is distributed in a society, art is kept airless and bloodless. And it is inevitably just show. Art that’s just show will not be neutral. It is available to nefarious purpose.

Less obvious but more insidious is the idea that art is soft. Software and soft power are among the too-easy metaphors that facilitate the injection of vile politics into art’s muscle, rendering it flaccid and manipulable. Buying into this idea of softness allows spurious cultural explanations and hard political manipulation to escape attention.

For example, one pundit opines that utang na loob (debt of gratitude) attributed to CCP employees explains the continuing goodwill that somehow warrant the party. But whether or not this cultural proclivity produced the impetus for the event, is hardly as important as the re-entry strategy of the Marcos family into the realm of political legitimacy through the area they believe soft and vulnerable to penetration: art.

It does not do Filipinos any good to appeal to cultural explanation where straightforward political explanation is gets quicker to the heart of the matter. In fact, attributing political steps backward — to backward politics in general — to purported cultural flaws has the effect of concealing brazen play. This event is part of the Marcos family juggernaut back into deceptively soft-shelled hard power.

The CCP party was because Marcos. It was not because culture. And certainly not because flawed culture.

A third fatuous idea comes to surface at this intersection of culture and politics. It is the notion that art’s relationship to democracy is exactly the same as art’s relationship to autocracy. Few artists — even the avowedly apolitical — think this. But the country’s leadership from even before Marcos have entertained this misconception.

Still, it is the Marcos family in 1969, and them again in 2020, that represents the ghoulish tenacity of this vision of art as ethically neutral. The CCP as an institution began under its weight; unburdened itself of it, post 1986; and is now dealing with its undertow.

The Imeldific CCP did not last long. Her considerable force that pushed this illusory picture of art had dissipated well before the Marcos forced evacuation to Hawaii in 1986. Her apologists’ claims about the value of her arts infrastructure have since been collapsed by sheer commonsensical appreciation of artistic production engaged in political process. More than half of CCP’s institutional life (34 years) transpired with artists articulating evolving relationships between art and the Philippine democratic project; and with global political tremors.

The CCP does not belong to this fat old woman, and never to her svelte earlier self and her vanities about art; nor to her scheming children. But, yes, there is an undertow pulling the institution to the past. Its retrograde energy issues from the fantasy of apolitical art; its hallucinatory power, from actual power exercised by the retooled Marcos political infrastructure that is heavily invested in cultural rehabilitation. These power mongers need the CCP.

The use of Taal’s sulfur-smelling eruption to try to perfume the odious dinner shows up the cynicism of the Marcos rehab managers. It is remarkably uncreative (and quite inappropriate to a cultural center) and insulting to artists, cultural workers, rescuers, relief workers, victims, on and on. However, it is equally insulting to read comments about the CCP as unchangeably Imeldific. The CCP is more than its founders and leaders past and present; more than its early history; and more than its mix of ideas about art.

The CCP is 50 years old. It is a number that occasions more than celebratory gestures. In this half century, the Philippines’ complex community of artists and cultural workers has re-shaped it in directions the Marcoses cannot conceive. Among other stuff that happens as a matter of course, the CCP outgrew its beginnings. The dinner would have produced protestation: the Marcoses and their friends inside and outside the CCP smell old and decayed. A profusion of fresh flowers did not mask the smell of decomposition that wafted out of the building.

But just as the Philippines can now happily expect opposition to the use of the CCP as a stage for attempted Marcosian resurrections, the country can rely on the CCP’s broad constituency and stakeholders to sustain a trajectory away from the unworthy ideas that gave birth to it.

 

Marian Pastor Roces is an independent curator and critic whose research interests include international art events, museums, identity politics, cities, and clothing. She is the founder and principal of TAO, Inc., a museum and exhibition development corporation. More of her critical texts can be found in Gathering: Political Writing on Art and Culture, the first collection of Roces’s essays co-published in 2019 by the Museum of Contemporary Art and Design and ArtAsiaPacific Foundation.

Davos seeks a better world, but who’s going to pay for it?

By Nir Kaissar

IF INVESTORS want a better world, they’ll have to pay for it.

The world’s uber-elite converged on Davos, Switzerland, on Tuesday for the World Economic Forum’s annual meeting. The group of more than 2,000 is worth an estimated $500 billion and includes at least 119 billionaires. This year’s theme is “Stakeholders for a Cohesive and Sustainable World” and includes panels such as “Averting a Climate Apocalypse” and “Balancing Domestic and Global Inequality,” so you can count on plenty of chatter about the world’s most pressing problems.

Aside from the obvious point that no one wants to hear about wealth inequality and climate change from a gaggle of billionaires whose carbon footprint dwarfs that of an ordinary person, the gathering comes amid growing suspicions that many of the corporate titans expected at Davos aren’t just casual observers of the world’s ills but actively perpetuate them in the pursuit of profits.

Corporate executives seem to be coming to that realization themselves. The Business Roundtable, an association of US CEOs, abandoned the principle of shareholder primacy last August, pledging instead to “lead their companies for the benefit of all stakeholders,” including customers, employees, suppliers, and communities. The move is an implicit — if not explicit — admission that, as my Bloomberg Opinion colleague Joe Nocera put it last week, “Shareholder value has caused much harm in the three decades since it became the core value of American capitalism: diabetics who can’t afford insulin; students ripped off by for-profit universities; patients gouged by hospital chains; and so much else.”

That singular focus on profits has also been an undeniable windfall for shareholders of US companies. Consider that from 1871 to 1979, earnings per share for the S&P 500 Index grew 3.4% a year, according to numbers compiled by Yale professor Robert Shiller. In the late 1970s and early 1980s, a new generation of executives, including most famously General Electric Co.’s Jack Welch, made profit maximization their single-minded priority. Since 1980, earnings have grown 5.6% a year.

Earnings are the invisible hand that drive stock returns. The S&P 500 returned 11.8% a year during the four decades from 1980 to 2019. Of that, nearly half came from the 5.6% of earnings growth. Dividends contributed 3% and change in valuation kicked in the remaining 3.2%, as measured by change in the 12-month trailing price-to-earnings ratio. Earnings have been even more of a workhorse in recent years as dividend yields have declined and — contrary to popular perception — investors have been reluctant to pay more for stocks. Of the 13.6% annual return from the S&P 500 from 2010 to 2019, a whopping 10.2% came from earnings growth and just 3.4% came from dividends and change in valuation.

It’s hard to see how that pace of earnings growth — and the return from stocks by extension — is sustainable if companies decide that shareholders are no longer their only concern. Sure, some efforts to broaden the base of stakeholders may contribute to future growth, or at least not detract from it. Germany, for example, has a decades-old tradition of co-determination in which workers are represented on corporate boards, and German companies have generated higher earnings growth than their US counterparts since Germany enacted co-determination in 1976.

But the scale of the problems contemplated at Davos this week is likely to require more drastic intervention. Taking on inequality is likely to mean retraining millions of workers for higher-value jobs and paying them accordingly. Confronting climate change will require significant spending on research and in some cases abandoning whole lines of business. Those costs will be borne by shareholders big and small, from the bigwigs gathered at Davos to university endowments to pension funds to ordinary retirement savers.

And not just in the US. The swell of protest and populist movements around the world is in part a reaction to the negative effects of shareholder primacy. Executives appear to be listening. Days after the Business Roundtable ditched shareholder primacy in the US, Business for Inclusive Growth, a coalition of 34 multinational companies, announced an initiative to tackle inequality with help from the Organization for Economic Cooperation and Development.

There will be no shortage of observers calling the gathering at Davos an empty gesture this week, but the billionaires are right about one thing: Ignoring inequality and climate change is no longer an option. Now let’s see who’s willing to pay for it.

 

BLOOMBERG OPINION

Rotary Club of Makati West and Rotary Club of Manila hold 2nd joint meeting in 2020

The Rotary Club of Makati West (RCMW) and the Rotary Club of Manila (RCM) held Thursday its second joint meeting for the year with no other than Department of Finance (DOF) Secretary Carlos Dominguez III as guest of honor and speaker. The joint meeting held at the Philamlife Tower in Makati was jampacked with RCMW President Eric B. Tensuan and RCM President Jackie Rodriguez leading the roster of attendees from the two distinguished rotary clubs.

A fellow Rotarian, Sec. Dominguez presented the “Status of Tax Reform and its Impact on Both Small and Large Domestic and International Businesses.” He expressed confidence that the Congress could pass this year the remaining packages of the comprehensive tax reform program (CTRP), which he considers a “foundational plank” of the government’s socioeconomic agenda, and an indispensable element in bankrolling its priority programs.

Package 2 of the CTRP – the proposed Corporate Income Tax and Incentives Rationalization Act (CITIRA) – aims to gradually lower the corporate income tax to 20% from the current 30%, as well as rationalize the fiscal incentives system to create a level playing field especially for new businesses.

“The sooner Congress passes the bill, the quicker potential investors will discard their wait-and-see attitude and bring more business to the country. This will have incalculable benefits for our economic growth,” Dominguez said.

The two rotary clubs held their first joint meeting for 2020 on 9 January with BSP Gov. Benjamin Diokno as their guest of honor and speaker.

A devoted mother, a compassionate leader

‘Mompreneur’ Monica San Gabriel on making smart decisions and choices in life

In an interview with BusinessWorld, Bag Tag Inc. President, Founder and Product Developer Monica San Gabriel was asked how she’s been handling stress given all the tasks on her shoulders. “Count one to 10,” she replied in jest. After a short pause, she blithely added: “I just drink, because if you keep complaining, it will attract negativity.”

From the way she answers a serious question and turns each conversation in a very casual tone, one can already figure out how Ms. San Gabriel is taking life lightheartedly. For whatever roles she plays — from taking good care of her family to managing a bag tag empire — this ‘mompreneur’ manages to enjoy what life has to offer by coming up with smart decisions and choices.

A HUMBLE ENTREPRENEURIAL JOURNEY
It was in 2001 when Ms. San Gabriel, together with her husband, started a luggage label empire. They merely started selling PVC bag tags in bazaars until a local airport offered them some retail space, which paved the way for shopping giants to notice their humble business.

For Ms. San Gabriel, venturing into a bag tag business is a smart choice since it caters to a broad spectrum of market. “We really saw its potential since everybody has a bag that you have to mark as yours. So, it’s not just for traveling, it’s also for school, work or gym,” she said.

At present, Bag Tag has nine stores located in shopping malls across Metro Manila, including SM Megamall where it has two branches. Its product offerings expanded to embroidered and leather bag tags, urban straps, luggage wraps and traveling accessories, among others.

According to Ms. San Gabriel, the success of Bag Tag has helped them fund their children’s education and meet some of the expenses of the family at home.

LEADING WITH A NOBLE HEART
Ms. San Gabriel actually comes from a family of entrepreneurs. Her family has been involved in different ventures including dermcare, hair care, and F&B. In fact, she considered her interest in running a business as something she acquired from her dad.

“My dad molded us to be an entrepreneur. So he started with restaurants, and then he got into skin care and hair care. From there, he taught us lot of things in business,” she said. “Up to now, we consult him for business decisions or plans.”

Even her sympathetic approach in leadership, particularly in managing a team of 20 people scattered all across production, marketing and sales, is something she obtained from her dad.

“I don’t get mad. Si daddy kasi malumanay lang (My dad is soft-spoken),” she said. “Positive vibes only, chill. I don’t allow myself to be stressed.”

LIVING A WELL-BALANCED LIFE
Aside from Ms. San Gabriel’s carefree demeanor, what’s fascinating about her is how she attains work-life balance in the form of pastimes that enrich her and keep her fulfilled.

Reading and drinking alcoholic beverages are some of her guilty pleasures, as she shared. She even professed to having a 25-book target by year’s end. When she’s not out drinking with her friends, on the other hand, she just stays on her balcony and enjoys a bottle or two at night – a moment that she considers as her “me time.”

Despite juggling tasks between being an entrepreneur and a mom-of-three, Ms. San Gabriel is still able to take leisure seriously. She still finds her way to simply sit back and watch her favorite shows on Netflix and HBO, as well as share time with her family over dinner. From time to time, she also joins her husband in biking around the country. And just recently, she took the responsibility of being a judge secretary in the girl’s gymnastics division in the recent Southeast Asian Games, an obvious consideration given her experience judging meets in the past.

MAKING A SWITCH
Considering all the duties and responsibilities that her roles demand, it is truly essential for Ms. San Gabriel to take good care of her wellbeing by embracing some lifestyle shifts that allows her the habitual pleasure she craves with less of the harm it usually brings. Her choice to adopt a smoke-free nicotine alternative, coupled with the way she gave priority to herself first, brought her closer to the proper mindset needed to face the duties her roles demand and to pursue interests that let her live her life to the fullest.

“I switched to IQOS in 2017. My friend introduced me to this heated tobacco alternative. When I went to Japan, I bought three right away-one for me, one for my brother, and one for my friend. I’ve been smoking since college and I’ve only ever quit when I’m pregnant.”

Three years later and she still feels grateful for switching to IQOS. “I no longer get smoker’s cough in the morning. There’s no more phlegm, no more smell. When I wake up I no longer feel like I have to catch my breath.”

When asked for advice to smokers, she has this to say: “Cold turkey, for me, is still the best play. It worked with my brothers as they have successfully curbed their smoking habit. But for those who can’t quit like me, it’s nice that we have less harmful alternatives available.”

Monica San Gabriel is part of a new breed of women who defy preconceived notions of who a mother or a lady boss should be. But don’t get it wrong, Monica still goes to work during the day, she makes it a point to gather her family for dinner at night, and once a month, she takes them out on trips. It’s just the way she keeps her social life buzzing, her interests nurtured, and her physical endeavors actively pursued that, all in all, makes her distinctly inspiring.

Picking up speed

When the Philippine government enacted the Tax Reform for Acceleration and Inclusion law (TRAIN) in 2018, the momentum that the country’s automotive sector effectively hit a speed bump. Vehicle sales dropped for the first time in seven years as the industry reeled amid imposition of higher automobile taxes alongside accelerated inflation.

During that time, a joint report of the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and the Truck Manufacturers Association (TMA) showed that total sales for 2018 fell 16% to 357,410 units from 425,673 vehicles in 2017, the first drop for the country since 2011 when vehicle sales also dropped by 16% to 141,616 units.

The drop was taken as a sign of falling consumer confidence, as more Filipinos were less likely to commit to lease or loan payment plans for a new car as they struggled to keep up with the soaring prices. So when 2019 saw a resurgence in sales, there is a renewed sense of optimism among the country’s car makers.

Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) President Rommel R. Gutierrez said the auto industry is optimistic about reaching its 410,000 overall sales target for 2019, with CAMPI and TMA accounting for 89% of the projection.

“The year 2019 has been challenging for the industry due to various internal and external factors. Thankfully the industry’s collective efforts, supported by sustained economic growth, have paid off. We will not rest on our laurels as we aim for further growth in the coming months, and hopefully for the whole of 2020,” Mr. Gutierrez said in a statement.

Automobile sales saw a slight bump in 2019, as December sales posted the fourth month of continuous growth, according to a joint report from CAMPI and Truck Manufacturers Association (TMA). Data showed that 369,941 vehicles were sold, up 3.5% year on year, mainly due to improved sales of light commercial vehicles and light trucks.

In fact, the auto industry posted growth every month in 2019, except for a 15% drop in January and a 2.4% drop in August.

For December alone, overall vehicle sales rose by 5.5% to 33,715 units from 31,945 units sold in the same month in 2018.

This followed two months of sales records, with November recording the year’s highest sales of 34,465 units, up 10.3% from units sold in the same month in 2018.

The joint data showed that commercial vehicle sales for 2019, which accounts for 69.5% of the market, grew 5% to 260,744 vehicles from 248,390 in 2018. An 11% and 3.9% rise in sales of light commercial vehicles and light trucks, respectively, offset the lower sales of Asian utility vehicles or AUVs (-15.4%), trucks and buses.

Paving the path for a new decade

The Philippines is bucking the trend seen all over the globe, where car makers are experiencing a continued recession due to a lack of buyers. According to an analysis by experts LMC Automotive, the number of vehicles sold across major global markets dipped to 90.3 million last year, down from 94.4 million in 2018, and the 95.2 million cars sold in 2017.

Factoring in the challenges for the global car industry is the growing pressure from governments and consumers to ditch the traditional internal combustion engine to address the climate crisis. Economic challenges across the globe, such as Brexit and the weakening of economies like China and India, are also causing an impact.

In China, the world’s largest market for vehicles, a sharp slowdown in economic growth and the elimination of tax incentives for electric car purchases caused demand to plummet. The number of vehicles sold dropped 2.3 million from 2018, said LMC.

Meanwhile, even as automakers all over the world are investing billions of dollars into electric vehicles to try to meet tougher emissions regulations imposed by lawmakers, it remains uncertain whether the market can yet afford them.

“Automakers are facing challenges that mean they will have to make changes to business models above and beyond those required by technological reconfiguration,” the IMF said in its October 2019 World Economic Outlook.

For the present, things seem to be sound in the country. Credit and market intelligence experts Fitch Solutions forecasted vehicle sales to sustain its growth in the next few years, according to a report published in December 2018.

“While we expect households and businesses will have adjusted to the higher vehicle excise taxes imposed under the Philippines’ Tax Reform for Acceleration and Inclusion (TRAIN) law in 2019, we believe that unfavorable economic conditions in the form of high interest rates, elevated inflation and a still weak peso will see car sales remain under pressure,” Fitch had said.

The firm added that over the full 2019-2027 forecast period, passenger car sales in the Philippines will average annual growth of 6.5%, to around 205,000 units by the end of 2027. — Bjorn Biel M. Beltran

Advanced technologies and developing preferences

The automotive industry has entered a new decade, bringing with it innovations from the previous years that have been transforming vehicles across the globe and are set to keep up with the ever-changing preferences of their consumers.

The Fourth Industrial Revolution has discharged a lot of advancements that have maximized the function of vehicles and have taken them to a higher level of serving today’s motorists.

Foremost of these innovations are the Internet Of Things (IoT) and artificial intelligence (AI). Sarwat Singh, a senior partner in research and consulting firm Frost & Sullivan, credits the two for unleashing transformation in the automotive sector. In a recent Forbes article, he recognizes these two for “driving unprecedented transformations across vehicle and device connectivity, autonomous driving, electric powertrains, and shared mobility.”

Likewise, IoT and AI are observed by Daniel Newman, principal analyst of research firm Futurum Research, to be working together in bringing out an improved personal driving experience.

“Imagine the car adjusting the seat, mirror, radio, and air-conditioning each time a new driver enters,” Mr. Newman also wrote in Forbes. “Imagine AI that can read your mood and alert you when you seem to be getting sleepy or distracted. It’s something that promises to make your car more comfortable — and the road safer, as well.”

Another notable transformation in vehicles is the emergence of a connected vehicle ecosystem, as seen by Mr. Singh in powertrains, advanced driver assistance systems, connected services, and smart interiors. The development of business models such as freemium and subscription-based services are also observed in line with the establishment of a “highly-networked” environment among automobiles.

Automation has also started to modify the vehicles of the future, and it is expected to go in full force soon. “Car manufacturers, mobility service providers and autonomous technology companies are furiously pushing to be the first to debut their vision of autonomous shared transportation,” the automotive & transportation analyst forecasted.

Electric vehicles (Evs) are standing out as well, offering a cleaner and more efficient choice for motorists. In fact, The Guardian recently reported that automotive analysts in Europe expect 2020 to be the “year of the electric car.” Data firm IHS Markit projects the number of models available in the continent to increase to more than 330 by 2025, while LMC Automotive predicts EV sales to go as many as 540,000 models.

Pulse of Consumers

As much as vehicles are getting advancements, consumer tastes have been refined, as a global survey of 8,000 people by social intelligence company Brandwatch has recently discovered.

First among these is the prominence of quality as the important attribute for choosing a vehicle company, getting 30% of the responses. Affordability followed, with 21%.

“Quality can, of course, mean different things to different people and different markets,” Brandwatch added. “It’s important for auto brands to dig further into this and find out what aspects (security, aesthetics, reliability) are most important for their target audience.”

The firm also pointed out that most of the respondents consider renewable energy as one of the biggest transformative technologies in 2020, although few chose sustainability as an important factor in choosing an auto brand.

“This could be because vehicles that don’t harm the environment are very much still in the minority, and could be seen as too expensive or not practically viable for consumers,” the research firm reasoned out.

Professional services network Deloitte has also delved into the pulse of automotive consumers on critical issues affecting the automotive sector, including the development of advanced technologies.

The findings showed a growing interest in EVs. Most of the countries surveyed have tallied increases in the preference for alternative powertrain technology. Lower emissions and lower operating costs are found to be the top reasons for considering these vehicles.

Interest in autonomous vehicles, however, is “equally split” as most markets still perceive such vehicles to be unsafe. However, a strong majority of consumers in India, China, and South Korea are found to be more comfortable with AVs if they were government-certified.

While trust in traditional automakers to bring AV technology to the market continues to decline in US and Japan, trust in existing technology companies and new players are inching up overall.

Consumers are likewise split on the benefits of connected vehicles, with Indian and Chinese markets “embracing the idea at more than twice the rate than consumers in Germany”. Moreover, respondents have also expressed their concern about privacy and data security, especially regarding the type of entity they would most trust to manage the data being generated and shared by connected vehicles.

The research also spotted resistance among consumers to multimodal mobility. While greater access to mass transit is unanimously preferred as the top means of reducing traffic congestion, “the idea of combining different modes of transportation into a single trip remains largely an occasional behavior for most consumers.” — Adrian Paul B. Conoza

Farm output seen to have improved

AGRICULTURAL PRODUCTION is seen to have improved in the fourth quarter of 2019 driven by increased spending of Filipinos on food during the Christmas season, and other rice-producing areas filling the gaps for those hit by typhoons in the latter part of the year.

The Philippine Statistics Authority (PSA) is scheduled to report fourth-quarter farm performance today (Jan. 22).

“The fourth quarter of 2019 should see a rising economic growth for the agriculture and food sectors propelled by expenditures on regular and special food items,” Roy S. Kempis, a professor with Pampanga State Agricultural University, said in an e-mail.

For Rolando T. Dy, Executive Director of the University of Asia and the Pacific Center for Food and Agribusiness, he said fourth-quarter farm output could have grown between “1.5 to 2%.” However, he did not specify factors that might have led to this.

The Agriculture department said output growth likely hit 2.5 to 3% last quarter due to productivity increase plus the support from the department.

In the third quarter of 2019, farm production grew 2.87% versus the downward-revised year-ago print of 0.87% and the second quarter’s contraction of 1.27% as gains in most of the sub-sectors offset the drop seen in palay output, which accounted for 15% of the total value of production.

The third-quarter print was the fastest farm production growth in more than two years or since the 6.2% growth in the second quarter of 2017, and was the best third-quarter output growth since the 3% recorded in 2016.

This brought nine-month agriculture output growth to 0.77%. This compares to the 2.5-3.5% target range for farm output growth under the 2017-2022 Philippine Development Plan.

In 2018, farm production grew 1.8% in the fourth quarter, which brought full-year agricultural output growth to 0.56%, Philippine Statistics Authority (PSA) data showed. This is well below the Department of Agriculture’s (DA) 2.5% goal for that year.

Mr. Kempis said the livestock and poultry industries mainly benefitted from the increase in consumers’ food spending.

However, he noted that overall, the performance of both industries “is expected to have declined significantly because of the ASF (African Swine Fever), while the latter only affected the areas immediately surrounding the NCR (National Capital Region), the demand for pork and processed pork products could have been tempered even in areas in the Visayas and Mindanao.”

ASF is a viral disease affecting only domestic and wild pigs. Outbreaks in the country started in July 2019, according to a report submitted by the DA to the World Organization for Animal Health.

Data from the Bureau of Animal Industry showed pigs culled already reached 147,334 heads as of Dec. 15, of which 18% were infected by the virus. Total barangays affected totaled 612 from the provinces of Bulacan, Pampanga, Nueva Ecija, Aurora, Tarlac, Rizal, Cavite, Pangasinan, and in Metro Manila.

Mr. Kempis also noted that the rice damage caused by typhoons that hit the country at the end of 2019 may have been offset by the output of other rice-producing provinces.

“Although Typhoon Tisoy and Ursula may have challenged this, palay harvests in non-affected areas can still contribute to a good harvest of this staple food,” he added.

Data from the DA showed agricultural damage due to calamities in 2019 reached P16 billion, lower than 2018’s P34.45 billion.

Specifically, for the fourth quarter, Typhoon Nakri (locally known as Typhoon Quiel) caused farm damage of about P334.207 million; Typhoon Kalmaegi (locally known as Typhoon Ramon), led to estimated damage of about P26.607 million; Typhoon Kammuri (Typhoon Tisoy) caused P3.7 billion worth of production loss; and Typhoon Phanfone (Typhoon Ursula) caused P3.05 billion worth of damage. — Vincent Mariel P. Galang

No turning point in sight as IMF predicts sluggish global growth

WASHINGTON/DAVOS — Global growth appears to have bottomed out but there is no rebound in sight and risks ranging from trade tensions to climate shocks makes the outlook uncertain, a top International Monetary Fund (IMF) official said on Monday.

For 2020 and 2021, the IMF trimmed back its global growth forecasts, mostly due to a sharper-than-expected slowdown in India and other emerging markets, even as it said that a US-China trade deal added to hopes the activity was bottoming out.

With trade wars weighing on exports and investment, the global economy expanded by 2.9% last year, its slowest pace since the global financial crisis, despite near synchronized central bank easing that added half a percentage point to global growth.

International monetary fund’s economic growth projections for select major economies

“We have not reached a turning point yet,” IMF Managing Director Kristalina Georgieva told a news conference on the eve of the annual meeting of the World Economic Forum (WEF) in the Swiss ski resort of Davos. “The reality is that global growth remains sluggish.

“Just in the very first weeks of the new year we have witnessed increased geopolitical tensions in the Middle East and we have seen the dramatic impact that climate shocks could have. We saw them in Australia as well as parts of Africa.”

The IMF now sees growth at 3.3% this year, below its October projections of 3.4% and also cut the 2021 forecast to 3.4% from 3.6%.

The reductions reflect the IMF’s reassessment of economic prospects for a number of major emerging markets, notably India, where domestic demand has slowed more sharply than expected amid a contraction of credit and stress in the nonbank sector.

The IMF also said it marked down growth forecasts for Chile due to social unrest and for Mexico, due to a continued weakness in investment.

The Fund said that an easing of tensions between the United States and China, which had stunted GDP growth in 2019, had boosted market sentiment, amid “tentative” signs that trade and manufacturing were bottoming out.

BOOST FOR CHINA, NOT US
The Fund’s cautious outlook assumes that there are no additional flare-ups in US-China trade tensions but Ms. Georgieva warned that the root cause of the problem is not yet fixed.

“The underlying causes of trade tensions and the fundamental issues of reform of the trade system are still with us.”

The IMF upgraded China’s 2020 growth forecast by 0.2 percentage point to 6.0% because the US trade deal included a partial tariff reduction and canceled tariffs on Chinese consumer goods that had been scheduled for December. These tariffs had been built into the IMF’s previous forecasts.

But the Fund did not give a boost to its US growth forecast for China’s pledges to increase purchases of U.S. goods and services by $200 billion over two years. Instead, the IMF said 2020 US growth would be 0.1 percentage point lower than forecast in October, at 2.0% because of the fading stimulus effects from 2017 tax cuts and the Federal Reserve’s monetary easing.

Euro zone growth also was marked down 0.1 percentage point from October, to 1.3% for 2020, largely due to a manufacturing contraction in Germany and decelerating domestic demand in Spain.

India saw a sharp, 1.2 percentage point cut to its 2020 growth forecast to 5.8%, the IMF’s biggest markdown for any emerging market, because of the domestic credit crunch. Monetary and fiscal stimulus is expected to lift India’s growth rate back to 6.5% in 2021, although this is still 0.9 percentage point lower than forecast in October.

Other emerging markets saw forecast downgrades, the IMF said, including Chile, which has been hit by social unrest. Mexico will grow just 1.0% in 2020, down from 1.3% forecast in October. — Reuters

International monetary fund’s economic growth projections for select major economies

WASHINGTON/DAVOS — Global growth appears to have bottomed out but there is no rebound in sight and risks ranging from trade tensions to climate shocks makes the outlook uncertain, a top International Monetary Fund (IMF) official said on Monday. Read the full story.

International monetary fund’s economic growth projections for select major economies

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