Palace sets mid- December timeline for budget signing
THE President’s spokesman said Thursday that he expects President Rodrigo R. Duterte to sign next year’s spending plan by the second week of December, signaling confidence in avoiding any further snags that might delay the 2021 national budget.
In a briefing, Herminio L. Roque, Jr. said he expects the 2021 National Expenditure Program to be signed before the year ends, and added that the country cannot afford a re-enacted budget, which is expected to dampen the recovery from the coronavirus crisis.
“Inaasahan mapipirmahan ng Presidente at least on the second week of December kasi ipa-publish pa ‘yan sa dyaryo at sa Official Gazette para maging epektibo at sa ganun para walang re-enacted budget pagdating sa Enero (We are hoping the President will sign by the second week of December, because there are publication requirements for new legislation and thus we expect no re-enacted budget in January),” he said.
Last week, the House of Representatives approved the P4.5-trillion spending plan for 2021 after Mr. Duterte called on the chamber to hold a special session that will fast-track the passage of the budget following a power struggle between Former Speaker Alan Peter S. Cayetano and his successor Lord Allan Q. Velasco.
The President brokered the shared speakership term between the two last year but the delayed handover provoked a vote by insurgent legislators that ousted Mr. Cayetano during the budget deliberations.
Budget deliberations are ongoing in the Senate. Senate Committee on Finance Chairman Juan Edgardo M. Angara said he expects hearings on government agencies’ individual budgets will conclude this week.
The Palace has said that the government cannot afford to have a re-enacted budget because the 2020 budget, if rehashed for the early months of next year, has no allocations specifically for COVID-19 measures. — Gillian M. Cortez
Loss of domestic refining seen driving up PHL fuel costs; risks to forex
THE Philippines will have to spend more on imported petroleum products over the coming years should it be left with one domestic refinery or none at all, Fitch Group’s research arm said.
Fitch Solutions Country Risk & Industry Research said with zero or one domestic refinery, the Philippines will have to spend an additional $600,000 to $900,000 each year on imported fuel.
In May, the two domestic refineries shut down due to weak demand. One, run by the Philippine unit of Royal Dutch Shell PLC, has since announced a permanent closure due to worsened margins.
The other refinery, run by Petron Corp., is also considering closing its 180,000 barrel-per-day (bpd) refinery in Bataan, which would leave the Philippines “fully dependent” on imports of processed petroleum products, Fitch Solutions said.
With the expected rise in consumption over the next few years alongside the economic recovery, Fitch Solutions forecast the ratio of imports by 2025 to rise to 67% from 48% over the past decade. The share of imports could still rise “depending on Petron’s decision,” it said.
In turn, the “inability to offset rising fuel import needs with its own production” will likely lead to greater import costs.
“Downsized domestic refining output, next to a rising need for imports, is expected to prove a drag on the trade balance over the coming years, creating pressures for the Philippines’ external financing position when domestic demand for energy is rising,” Fitch Solutions said.
In the six months to June, Pilipinas Shell Petroleum Corp. and Petron reported a 19% decrease in combined output to 3.878 billion liters of refined petroleum, according to the Energy department’s Oil Industry Management Bureau.
Fitch Solutions said refining capacity may dwindle by “nearly 40%,” the lowest level since the 1960s, if only the Petron refinery is operational.
Petroleum imports totaled 5.954 billion liters over the same period, down 35.4% decline from a year earlier.
The Department of Energy said in August that the shutdown of Pilipinas Shell’s 110,000 bpd refinery in Tabangao, Batangas will not affect the fuel supply as the company will replace its output with more imported refined petroleum.
As the Philippines becomes more dependent on energy imports, its economy will also be “tied to fluctuations” in global energy prices.
Fitch Solutions warned that heightened dependence will pose risks like an “extra” burden on foreign exchange reserves or the ability to attract foreign investment — a “highly negative prospect as the country is still deficient in many key infrastructures in and outside of oil and gas.”
There is also the risk of creating depreciatory pressures for its own currency, while import inflation or disinflation risk will become “more elevated.”
While the Philippines can still offset high import costs with a reserves buffer and remittances in the near term, policymakers will have to manage the growing risks that could result in “tighter” monetary policy over the longer term.
The closure of Pilipinas Shell’s refinery is part of a larger rationalization scheme of the Anglo-Dutch multinational. It has cut a quarter or $5 billion of its capital expenditure this year, and billions more from operations through asset divestments and streamlining operations. It specifically planned to reduce the number of its global refineries to 10 from 17 last year.
Not only are Shell’s cost-cutting efforts seen in the downstream oil sector, but also in the exploration segment as Shell Philippines Exploration B.V. will also sell its operating stake in the country’s sole natural gas field project in Malampaya, northwest of Palawan.
Meanwhile, Petron may shelve its plans to invest further in its refinery business, Fitch Solutions said, given the operational challenges and the “uncompetitive” tax regime for refiners. In 2017, the company said it will invest $10 billion to upgrade its refinery in Limay, Bataan, while also building a larger one in the southern Philippines. — Adam J. Ang
16 airports still closed to commercial flights — CAAP
THE Civil Aviation Authority of the Philippines (CAAP) said 16 airports remain closed to commercial flights, while the local governments in charge of 33 others have given their consent for operations, subject to safety rules.
In a statement late Wednesday, CAAP said the 16 airports that are still closed are Calbayog, Camiguin, Catarman2, Catbalogan, Dumaguete, Guiuan, Hilongos, Laaog, Maasin, Puerto Princesa, Roxas City, Tuguegarao, San Vicente, Sanga- Sanga, Siargao, and Surigao.
It said flights to and from the 33 airports that are allowed to operate are required to obtain prior approval from local governments.
The government has allowed travel agencies, tour operators, reservation services and related activities to resume operations at 50% capacity for areas placed under general community quarantine (GCQ) and at 100% capacity for areas placed under the modified GCQ (MGCQ).
The ban on non-essential foreign travel by Filipinos has been lifted starting Oct. 21.
Such moves are a step towards normaling operations, according to Cebu Pacific Air, Inc.
The gradual reopening of travel is expected to fuel business activity, Philippine Airlines said.
Philippine Airlines, operated by PAL Holdings, Inc., carried 16.8 million passengers last year while Cebu Pacific, operated by Cebu Air, Inc., carried 22.5 million passengers. Philippines AirAsia carried 8.55 million passengers in 2019.
Fitch Ratings does not expect airlines to bounce back to their pre-pandemic passenger volume next year because of the continuing spread of the coronavirus disease 2019 (COVID-19). The forecast is based on the assumption that a COVID-19 vaccine or treatment will not be widely available in 2021. — Arjay L. Balinbin
Philippines third most exposed to climate change in region — study
THE PHILIPPINES was ranked as the third most vulnerable country in the region to climate change in 2019, according to a study conducted by ValueChampion, a Singapore-based financial technology (fintech) company.
According to the ValueChampion study, the Philippines had the highest 10-year climate risk index score among 12 countries evaluated; an average annual temperature increase of 1.45 degrees Celsius over a hundred years; and a 10% likelihood of experiencing a heatwave in the next 20 years.
In the past year, the Philippines bore the brunt of six weather disturbances which resulted in millions of pesos in economic losses per person last year, according to ValueChampion senior research analyst Anastassia Evlanova.
“In 2019, the Philippines six severe weather events resulted in at least $3.53 million (or P171.5 million) in economic losses per capita, one of the highest losses recorded out of the 12 countries analyzed,” Ms. Evlanova said.
She added that climate change has had a “considerable impact” on multiple sectors of the economy, including energy consumption, infrastructure, agriculture and healthcare.
ING Bank NV Manila Branch’s senior economist Nicholas Antonio T. Mapa said the reported economic loss in the study was “quite startling, but likely not surprising.”
“The Philippines is no stranger to the adverse impact of climate change on our economy and our lives as whole…Despite not having adequate funding, we’ve seen the extreme adverse impact these tragedies can inflict on the lives of Filipinos both in terms of general safety and health, as well as on the economy,” Mr. Mapa told BusinessWorld.
He said flash floods, super typhoons and droughts could waylay food security, leading to shortages and high inflation.
“Lack of equipment and foresight may also mean that rebuilding and recovery from these crises may take longer than needed, with the recovery effort likely running up a bill to deplete our government coffers even more,” he added, saying authorities have always had to contend with these factors.
In ValueChampion’s study, the Philippines ranked third, behind Vietnam and Thailand, which were reckoned to be “most impacted by climate change.”
The study based its findings on average climate risk indexes between 1999 and 2018, historical metrics, and climate change projections.
The Center for Energy, Ecology, and Development’s Research, Policy, and Law Program Head Avril De Torres said that the Philippines has consistently found itself at the top of global climate vulnerability rankings by various research organizations.
“While (ValueChampion’s) findings are no longer surprising, it serves as another reminder as to why radical changes are needed in the way we respond to the climate emergency, especially in the energy sector,” she said in an e-mailed statement.
In a separate report published in June, the World Bank said that Philippine public investment in the new normal should focus on “supporting the country’s resilience to natural disasters and climate change to ensure its sustainable long-term growth.” — Angelica Y. Yang
Inspect rice imports for misdeclared quality, not just volume, Senate urges Customs
THE rice import process should screen for misdeclared rice shipments, because importers evade higher tariffs by declaring their rice to be of lower quality, a Senator said at a hearing in the chamber Thursday.
Senator Francis N. Pangilinan said the Bureau of Customs (BoC) should ensure rice imports are classified correctly because the disparity in valuations between high-quality rice with 5% broken grains content and lower-quality varieties with 25% broken content.
“Ang laki ng nawawala kung ang dine-deklara 25% broken, tapos sa BoC walang capacity to determine, whether it is well- milled or regular-milled (We lose a lot when a shipment is declared 25% broken, while the BoC has no capacity to determine whether a shipment is well-milled or regular-milled),” Mr. Pangilinan said.
According to the Department of Agriculture, 25% broken rice costs $438 per ton, while 5% broken rice costs $490 per ton. Mr. Pangilinan said it is possible shipment values are being understated via misdeclarations of rice quality.
“You will lose 35% of the $50 (difference in value), ganon kalaki ‘yung di nakokolekta (that’s how much we’re failing to collect), that’s why the DA, the BoC and the DoF (Department of Finance), will have to figure out how to inspect and determine the quality of rice,” he said.
Customs Commissioner Rey Leonardo B. Guerrero said experts will be deployed in the agency to help with inspections. “Kung pwede mabigyan kami ng mga experts na tutulong sa pag-examine sa quality ng rice (We need experts to help determine rice quality),” Mr. Guerrero said.
“Ang sa amin, pagdating sa border control. Ang responsibilidad ay nasa BPI (Bureau of Plant Industry) pagdating sa importasyon ng bigas (We’re in charge of border control, while the BPI’s responsibility is to determine rice import quality).”
The BPI, meanwhile, said its personnel only monitor for food safety and disease, and are not trained to determine rice quality.
As such, Senators requested the help of the Food Development Center (FDC), which previously assisted in the “fake rice” issue.
“When I was with the NFA, ‘yan ‘yung katulong to determine ‘yung quality ng bigas. Kung maaalala niyo ‘yung fake rice from China, FDC ang nag-test, validate, may kapasidad ‘yan (It was the FDC that tested for rice quality when the fake rice from China issue arose),” Mr. Pangilinan said. — Charmaine A. Tadalan
Rice import valuations trending higher, BoC says
AVERAGE VALUATIONS on rice imports are rising, the Bureau of Customs (BoC) said, producing total tariff collections of P13.08 billion in the nine months to September.
“The collections are down because the import volumes are also down, but the average valuation — the value over volume — started to improve,” Customs Commissioner Rey Leonardo B. Guerrero was quoted as saying in a statement issued by the Finance department Thursday.
The average valuation of rice imports rose by 6.5% between January and Oct. 15, with the March average at P18,753.82 per ton from P18,178.86 in January. The average rose further to P20,503.07 in May and P27,120 in September.
It said P1.19 billion worth of duties were collected from 176,768 metric tons (MT) of rice imports valued at P3.55 billion in August. In January the equivalent figures were P1.29 billion collected from 223,279 MT valued at P4.058 billion.
Tariff collections have exceeded the P10 billion annual quota which will finance the operations of the Rice Competitiveness Enhancement Fund (RCEF), which is authorized by Republic Act No. 11203 or the Rice Tariffication Law, the measure which liberalized and tariffied rice imports.
In a separate statement Thursday, the BoC said it will subject 60 rice importers to post clearance audits for shipments brought in during the first half of 2020.
“In addition to the audit, the BoC has also intensified intelligence and enforcement measures, verifying reports from concerned citizens and stakeholders such as local farmer federations, in order to interdict smuggled rice into the country,” it said.
According to its recently-concluded 2019 audit, the BoC found that rice importers owe the agency a combined P1.4 billion worth of deficiencies in customs duties, penalties, surcharges, and interest due to undervaluation of goods.
The Federation of Free Farmers has called on the government to impose temporary safeguard duties or additional tariffs on imported rice instead of giving cash handouts to farmers.
The P10-billion yearly budget for RCEF supports mechanization and other measures to allow farmers to better compete against imports. — Beatrice M. Laforga
Rural utilities warn delayed bill payments to have serious impact on industry
THE delayed payment of power bills during the entire quarantine period will have a serious impact on the entire power supply chain, electric cooperatives warned.
Government orders to allow delayed payments during even the less strict forms of quarantine “will have a huge economic impact on the entire electric power supply chain,” the Philippine Rural Electric Cooperatives Association (Philreca) and National Association of General Managers of Electric Cooperatives (Nagmec) said in a joint statement issued late Wednesday.
“(E)lectric cooperatives can only absorb so much in terms of decreased or no cashflow that might result from the mandatory grace period or staggered payments,” they said.
The Department of Energy (DoE) in an advisory issued Sept. 23 ordered the energy industry to continue providing at least a 30-day grace period after the easing of stricter forms of quarantine and allowing installment payments on power bills in arrears. Rural utilities and their managers sought clarification from the government’s task force on emerging infectious diseases and the Joint Congressional Energy Committee whether a provision in Republic Act No. 11494, or the Bayanihan to Recover as One Act (Bayanihan II), compels them to relax their collection policies during the enhanced and modified enhanced community quarantine only, or throughout all forms of quarantine.
About 80% of consumer electric bill payments ultimately go to power suppliers, transmission firms, taxes, and pass-through charges, while the rest goes to the utilities, they said.
“If this meager amount will not be paid to the ECs (electric cooperatives), their operations will significantly be affected,” the two organizations said.
In the advisory, Energy Secretary Alfonso G. Cusi urged those “who are capable to pay” to settle their bills within the original due dates “to lessen the impact and help manage the cash flow in the energy supply chain.”
Philreca and Nagmec also requested the Energy Regulatory Commission (ERC) to allow them to take advantage of prompt- payment discounts even when they make partial payments to suppliers.
“Everything is still being studied for consideration,” ERC Commissioner Floresinda G. Baldo-Digal said in a message. The regulator has yet to issue its industry-wide guidelines to implement the DoE advisory. The organizations also asked the commission to adjust the capital recovery fee and minimum energy off-take provisions in their power supply agreements. — Adam J. Ang
SB Corp. receives P10B for loan program, to take applications next week
THE Small Business Corp. (SB Corp.) said it will start accepting loan applications on Oct. 26, after receiving an allocation of P10 billion for lending to micro, small and medium enterprises (MSMEs).
Under the Bayanihan to Recover as One Act (Bayanihan II) or Republic Act 11494, SB Corp. is authorized to lend P10 billion more for its COVID-19 Assistance to Restart Enterprises program, with P6 billion set aside for the tourism sector.
Loan sizes will depend on MSMEs’ assets and annual sales, the Trade department said in a statement Thursday. It said it will allocate the loans in such a way as to maximize the number of borrowers.
Borrowers will be charged a one-time service fee of between 4% and 8%, which will vary by loan duration. The maximum term is four years. Payments come with a grace period of six months, and one year for tourism businesses.
MSMEs with financial statements for 2018 and 2019 filed with the Bureau of Internal Revenue, with no major negative credit track record, are assured of receiving loans, the department said.
Applicants with no financial statements must submit their barangay or municipal business permits, photos or video clips of their business assets, and proof of sales.
SB Corp. targets 50,000 loan approvals for MSMEs over the rest of the year, or a monthly rate of 15,000 to 18,000 borrowers. — Jenina P. Ibañez
Enlistment for clinical trials of anti-flu drug Avigan under way
THE RECRUITMENT of patients for clinical trials of the Japanese anti-flu drug Avigan against the coronavirus has started, the Department of Health (DoH) said on Thursday.
One hundred patients will be recruited from the Philippine General Hospital, Sta. Ana Hospital, Dr. Jose N. Rodriguez Memorial Hospital and Quirino Memorial and Medical Center, Health Undersecretary Maria Rosario S. Vergeire told an online news briefing.
The hospitals have had a hard time trying to enlist patients for the vaccine made by Fujifilm Toyama Chemical Co., Ltd. since trials are also happening for other drugs, she said. Health officials met with hospital representatives on Friday to discuss the enlistment.
“So we are still pursuing the recruitment,” Ms. Vergeire said. “We will ask help from our medical directors at these hospitals so we can fast-track the trials,” she said in Filipino.
The Health department reported 1,664 coronavirus infections on Thursday, bringing the total to 363,888.
The death toll rose by 38 to 6,783, while recoveries increased by 843 to 312,333, it said in a bulletin.
There were 44,772 active cases, 83.6% of which were mild, 11.2% did not show symptoms, 1.9% were severe and 3.3% were critical.
Cavite reported the highest number of new cases with 81, followed by Malabon City and Davao City with 76 each, Iloilo City with 75 and Quezon City with 69.
Of the new deaths, 11 came from Metro Manila, eight from the Calabarzon region, seven from Davao and six from Western Visayas, the agency said.
Central Visayas reported three new deaths, while Soccsksargen reported two and Cagayan Valley reported one death. More than 4.2 million people have been tested for the coronavirus, DoH said.
The coronavirus has sickened 41.5 million and killed about 1.1 million people worldwide, according to the Worldometers website, citing various sources including data from the World Health Organization (WHO).
About 31 million people have recovered from the virus, it said.
It added that active cases stood at 9.5 million, 1% of which or 74,213 were either serious or critical.
The United States had the most infections at more than 8.6 million, followed by India with 7.7 million and Brazil with 5.3 million. The US also had the most deaths at 227,409, Brazil had 155,459 and India had 116,681.
DoH on Monday said it was P10.5 billion short of funds for coronavirus vaccines to cover a fifth of the Philippines’ more than 100 million population.
The agency needs more than P12 billion to inoculate priority groups including health workers and the poor, Ms. Vergeire said. It only has allotted P2.5 billion for vaccines in its P204-billion budget for next year. The cost considered two doses for each person, she said.
The Philippines has funds to buy coronavirus vaccines but it needs more so the entire population of more than 100 million could be inoculated, President Rodrigo R. Duterte said last week. He said he would look for more funds so all Filipinos could be vaccinated, adding that he was okay with vaccines developed either by Russia or China.
Marikina Rep. Stella Luz A. Quimbo at the weekend said vaccinating 20 million Filipinos would cost almost P13 billion. She added that the budget was only enough to cover 3.9 million Filipinos at a testing price of P641 each.
Some lawmakers have said intelligence funds of the Executive branch should be channelled to the health sector. — Vann Marlo M. Villegas
Gov’t eases limits for shopping malls ahead of year-end holidays
THE GOVERNMENT has allowed shopping malls to turn on free WI-FI and lower air conditioning temperature ahead of the holiday season as part of easing measures against the coronavirus.
Malls may also conduct doorbuster sales, according to the Trade department. People between 15 and 65 years old may go out of their homes, but local governments can set higher age limits, it said in a memo signed on Oct. 20.
These establishments must maintain health protocols, including requiring customers to wear face masks and shields and observe social distancing. The malls must frequently disinfect their premises and provide adequate ventilation.
Malls were earlier allowed to reopen at limited capacities during the stricter lockdowns but were barred from providing free WiFi connection to dissuade people from crowding. Air conditioning was also limited at 26 degrees Celsius.
A Trade memo signed on Oct. 20 removes these restrictions and allows malls to set temperatures lower than 24 degrees. Government agencies such as the Trade, Labor and Health departments will monitor compliance.
The Philippine Chamber of Commerce and Industry last week sought rent relief for smaller tenants of malls and commercial buildings. It said tenants should be allowed to pay a percentage of their sales until their businesses have recovered. — Jenina P. Ibañez
PSEi climbs to 6,300 level on investor optimism
By Denise A. Valdez
Senior Reporter
LOCAL SHARES continued to climb on Thursday on sustained investor bullishness over hopes of an economic rebound in the fourth quarter.
The benchmark Philippine Stock Exchange index (PSEi) landed on 6,344.63 at the close of trading, up 66.04 points or 1.05%. The wider all shares index grew 27.90 points or 0.74% to end at 3,788.75.
The PSEi was posting losses during the first hours of trading as investors were securing profits from the three-day climb of the market. The index opened at 6,309.87 and hit a low of 6,241.31 before recovering and ending the session at its peak of 6,344.63.
“The market continued its upward trend on the prospects of an economic recovery from easing restrictions with deeper and wider reopening of the economy,” Diversified Securities, Inc. Equity Trader Aniceto K. Pangan said in a text message.
The government has been relaxing quarantine rules to facilitate economic activity, such as allowing leisure travel and full capacity operations of hotels.
New coronavirus cases have also been declining in recent weeks, with 1,509 new cases reported on Wednesday, totalling 362,243 local cases since the start of the outbreak.
“Given the speed and magnitude of the run-up, there is a high probability of a technical correction occurring in the next few sessions. A retest of the psychological support level of 6,000 is possible. If the market does maintain itself above this, we could see the market continue its rally to cover the gap at 6,700,” PNB Securities, Inc. President Manuel Antonio G. Lisbona said in a text message.
Four sectoral indices ended Thursday’s session higher: property climbed 81.63 points or 2.72% to 3,076.69; industrials rose 125.28 points or 1.50% to 8,477.59; holding firms gained 62.90 points or 0.97% to 6,510.46; and mining and oil added 49.01 points or 0.64% to 7,693.93.
Two closed in red territory: financials slid 10.56 points or 0.83% to 1,257.65 and services fell 6.21 points or 0.42% to 1,463.26 at the end of trading.
“Thursday’s rally still had conviction with net value turnover posting P9.1 billion, above the year-to-date average of P5.9 billion. Foreigners remained net buyers with Thursday’s net inflows amounting to P214.2 million,” Japhet Louis O. Tantiangco, senior research analyst at Philstocks Financial, Inc., said in a text message.
Total value turnover on Thursday was P9.81 billion with 1.28 billion issues switching hands, lower than Wednesday’s P10.52 billion with 2 billion issues.
Decliners outnumbered advancers, 112 against 100. Some 43 names were unchanged.
“We may see more profit taking on the last trading day for the week. But nonetheless, it will end as one of the best weeks that the market has had in the last few months,” Christopher John Mangun, research head at AAA Southeast Equities, Inc., said in an e-mail.