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Banking supervision: CAMELS to SAFr in 2021

Today’s environment presents unprecedented challenges for the banking sector.  The lingering uncertainties brought about by the constantly evolving economic and financial landscape require us to rethink the way we operate and respond to these attendant risks. Regulators are not exempted. Banking supervisors continue to step up efforts in strengthening supervisory, examination and enforcement powers and aligning regulations with international best practices.

BSP Deputy Governor Chuchi Fonacier, in a memorandum to all BSP-supervised financial institutions (BSFIs) dated March 5, officially announced the implementation of a new rating system called Supervisory Assessment Framework (SAFr).

What is SAFr? How will the existing supervisory approach of the BSP change SAFr? These and more were answered during the recent General Meeting of the Association of Bank Compliance Officers (ABCOMP) headed by President Amelia Amparado.

Thea Josefina Santos, BSP Director of the Treasury and Asset Management Supervision Department, explained the adoption of SAFr (pronounced “safer”) is part of initiatives to improve BSP’s existing prudential regulatory and supervisory framework and is also aimed at aligning the framework with guidance and best practices issued by international standard-setting bodies.

SAFr is a single integrated risk-based assessment framework and is anchored on business models where the supervisory activities consider not only the BSFI’s risk profile but also its impact on the financial system. This new framework replaces CAMELS (capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk), the current primary rating system for banks and quasi-banks.

It has become a challenge to assess and determine the continuing coherence and effectiveness of these numerous rating systems, which prompted the BSP to adopt an overarching framework that will use a common language, facilitate consistent application, and ensure the prioritization of appropriate supervisory activities across the sector.

SAFr has three major elements: a) the BSFI’s impact / importance to the financial system in the event of its failure; b) the risk profile derived through an assessment of BSFI’s material risks as identified through the significant activities that serve as the key driver of the risk; and c) the supervisory intensity which is a function of the first two elements.

The combination of the first two factors will let the BSP determine the level /degree of its supervisory attention with the BSFI. A BSFI with a higher impact and risk would essentially require higher degree of supervisory intensity.

The key feature of SAFr is its emphasis on the importance of business models. In the SAFr, it is explicitly recognized that the business model is the starting point of a robust assessment of a BSFI’s risk profile. As such, supervisors would identify a BSFI’s significant activities in its business models which represent the basic units of assessment.

This activity-based approach shifts the conversation to the activities of the BSFI that are most important to its viability/sustainability, and those that are most likely to increase the institution’s exposure to existing/emerging vulnerabilities.

Another key change introduced is the frequency of the onsite examination.  Currently, onsite examinations are conducted yearly for small/simple, and big/complex banks. With SAFr, the impact assessment will be taken into account in the design and implementation of the supervisory plan/activities. Nevertheless, Mary Ann Cube, Director and Head of Financial Supervision Department VII, stressed that there will still be a process of monitoring the BSFIs in between examinations, with the benefit of offsite surveillance.

Originally scheduled to be implemented in July, the BSP moved the deployment of SAFr to January 2021 to give BSFIs ample time to prepare. Lualhati Caguiat, Director of Financial Supervision Department IV, further added that the impact assessment is now being conducted, for the design of BSP’s examination program starting 2021.

The adoption of SAFr is a welcome development the banking community as we embark on a pivotal time, marked by greater opportunities to strengthen the safety and soundness of the financial system, which in turn, increases public confidence and trust.  At PNB, I must say, compliance is more than just an obligation, it’s a way of doing business and serves as a serious commitment to integrity, ethics, and good governance.

Oprah Winfrey said: “Real integrity is doing the right thing, knowing that nobody’s going to know whether you did it or not.”

 

Flor Gozon Tarriela is chairman of the Philippine National Bank and PNB Capital. She is a former Undersecretary of Finance and the first Filipina vice-president of Citibank N.A. She is a trustee of FINEX Foundation, FINEX Academy and an Institute of Corporate Directors fellow.

Making a counter-offer to a resigning employee

One of my hardworking supervisors has submitted a resignation to accept a lucrative job offer as a department manager in a major company. He has been with us since ten years ago and is already ripe to assume a higher position in the following months. Is it a good idea to make a counter-offer so that he will not leave us? — Yellow Bell.

An elderly man lived alone near a playground. Some children would often play basketball every afternoon while the old man was trying to sleep, and he was disturbed by the noise, including the ball rebounding off his window.

The old man offered to pay them P100 daily for their post-game refreshments on condition that they play much louder than before. The wilder, the better. He said laughter and horse-playing reminded him of youth. After three days of wild basketball, he reduced their daily allowance to P50 claiming that’s the only amount he can afford. A day later, he offered to give them only P20. One day, he announced that he can no longer afford to give them money.

Feeling cheated, the kids never played wild basketball again, to pressure the old man into restoring their allowance.

No matter how good your employee salary and benefit package is, there will always be added pressure for the organization to do just a bit more, no matter how unreasonable the demands. Things can come as a shock — imagine sitting comfortably in your office only to learn of the resignation of a valued employee.

COGENT REASONS
Would you make a counter-offer to possibly reverse the resignation?

It’s a dilemma. But let me tell you this straight — don’t make that mistake! The employee has already resigned and it’s not wise to make a counter-offer. Here are the reasons why you should not prevent any worker from resigning:

One, making a counter-offer sets a bad precedent. It may embolden other people to do the same, in the hope of getting what they want. The only thing that you can do as soon as you receive a resignation letter is to advise the employee to think it over. Give him more time to reflect on his decision. But never encourage any false expectation of a better offer.

Two, you failed to anticipate his next move. It’s your fault. So why make amends by offering a new package? A counter-offer is an admission that you’ve been negligent in helping the employee succeed. If you’ve failed in that category, what makes you think you can solve the situation by making a counter-offer?

Three, a casual “stay interview” is better than an exit interview. A “stay interview” is a proactive approach that will help you take the pulse of each and every employee long before they file a resignation. Instead of the exit interview, you’re better off asking employees questions like: How can I help you succeed in this organization? What are the things you need to help you fast-track your career goals?

Four, a determined employee will leave, no matter what you do. Only the employee can decide what’s best for him, his career, and his family. There’s no point in making a counter-offer. Sure, there are many points you can invoke, such as any seniority rights the worker may have accumulated or other career opportunities. Just the same, it is only the employee who can decide if these things are important to him.

Last, leave the door open for future collaboration and cooperation. Don’t burn the bridge. Instead, pave the way for some business opportunities between your organization and the resigned employee’s new employer. However, every step of the way, never hint that the resigned employee can go back anytime when things go wrong with his new employer. This would be unfair to those who have chosen to remain loyal to your company.

PROMOTION FROM WITHIN
When somebody resigns from your organization, it means that person has carefully weighed the pros and cons of his decision. There’s no point in interfering with that decision. You can’t do much, anyway. Instead, focus your attention on those people who have decided to stick it out with you. The best thing you can do is to promote someone from within to replace your resigned employee.

Promotion from within is an admirable management policy that you should advocate and follow strictly. Don’t even think of hiring an external candidate unless extremely necessary. Otherwise, external hiring may provoke disgruntled people into resigning. Besides, it would expose your negligence in preparing a succession plan, which includes giving people opportunities to train and perform challenging tasks.

To avoid compounding the problem, discover how you can stem the tide of resignations by conducting periodic, individual “stay interviews” with your employees. The more often you interact with people, the greater the likelihood of anticipating any resignations.

 

Send anonymous questions to elbonomics@gmail.com or via https://reyelbo.consulting

Aboitiz holding firm gets top credit rating for P10-billion retail bonds

ABOITIZ Equity Ventures, Inc. (AEV) has received the top credit rating by a local debt watcher for its proposed P10-billion fixed-rate retail bonds.

In a disclosure to the exchange on Thursday, the conglomerate said its planned bond issuance had been given a PRS Aaa credit rating by Philippine Rating Services Corp. (PhilRatings).

The company announced last week that it applied to issue bonds at an aggregate amount of P5 billion, with an oversubscription option of up to P5 billion. These bonds represent the second tranche of AEV’s P30-billion bond program.

On Thursday, AEV said that the proposal was given a PRS Aaa credit rating by PhilRatings, which means the bonds are of highest quality and have minimal credit risk. It also means the company has an “extremely strong” capacity to meet its financial obligation.

The credit rating was given a stable outlook by PhilRatings, meaning it is expected to last for the next 12 months.

AEV is eyeing to do the bond offering within the fourth quarter of 2020. The bonds will be listed at the Philippine Dealing and Exchange Corp.

The company selected BDO Capital & Investment Corp. and First Metro Investment Corp. to be joint issue managers, and with BPI Capital Corp., China Bank Capital Corp. and SB Capital Investment Corp., to be joint lead underwriters for the offering. BDO Unibank, Inc. – Trust and Investments Group was tapped to be the trustee.

Earnings of AEV in the six months to June stood at P4 billion, down 55% from a year ago, due to a 57% income drop in its power business to P2.9 billion.

AEV shares at the stock exchange grew P2 or 4.35% to P48 apiece on Thursday. — Denise A. Valdez

How PSEi member stocks performed — October 1, 2020

Here’s a quick glance at how PSEi stocks fared on Thursday, October 1, 2020.

Peso strengthens further ahead of BSP policy decision

THE PESO strengthened further on Thursday as the market expected the central bank to keep rates steady at its policy meeting set to conclude later in the day.

The local unit closed at P48.43 versus the dollar on Thursday, climbing 6.5 centavos from its P48.495 finish on Wednesday.

The peso opened Thursday’s session stronger at P48.46 against the greenback. It climbed to as high as P48.41, while its weakest showing was at P48.51 versus the dollar.

Dollars traded rose to $807.6 million on Thursday from $726.57 million on Wednesday.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message that the peso rose amid expectations that the Bangko Sentral ng Pilipinas (BSP) keep benchmark rates steady.

The BSP was widely expected to leave interest rates untouched at its meeting on Thursday as it wants to leave some room for further adjustments in case economic recovery lags, analysts said.

In a BusinessWorld poll held last week, 14 of 15 analysts said they expect the Monetary Board (MB) to keep interest rates steady at its fifth policy-setting review for the year on Oct. 1.

The MB has cut rates by 175 basis points so far this year. Rates on the overnight reverse repurchase, lending, and deposit facilities are currently record lows of 2.25%, 2.75% and 1.75% respectively.

BSP Governor Benjamin E. Diokno earlier said the current policy stance may be kept for the next few quarters. He said the BSP still has bullets when needed and is committed to a “long-term low inflation regime” and will continue to do what they have done “for maybe another two years.”

A trader said local currency saw stronger demand ahead of the central bank’s meeting.

“The peso appreciated from broad market expectations that the BSP will keep main interest rates unchanged in its policy decision later on Thursday,” the trader said in an e-mail.

On Friday, Mr. Ricafort expects the peso to move from P48.40 to P48.55 versus the dollar while the trader sees it ranging from P48.35 to P48.55. — KKTJ

PHL stocks climb on positive factory output data

THE MAIN INDEX sustained its climb on Thursday as investors started gaining optimism amid improving economic data and a possible fiscal stimulus in the United States.

The bellwether Philippine Stock Exchange index (PSEi) rose 80.64 points or 1.37% to close at 5,944.87, while the broader all shares index picked up 33.43 points or 0.94% to end at 3,562.28.

“Local shares made huge gains towards closing driven by strong economic data within and outside the region,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a mobile message.

September Philippine manufacturing data released on Thursday showed a seven-month high factory output due to the relaxation of local quarantine restrictions. The country’s purchasing managers’ index climbed to 50.2 in September from 47.3 in August, breaching for the first time since February the 50-neutral mark that separates expansion from contraction.

“This is still lower than its year-ago level of 51.8, but marks the first period of expansion in six months—the highest reading since Feb 2020… All things considered, this means that the country’s manufacturing activity only started to pick up in September following the mid-March lockdowns,” Mr. Limlingan said.

Another catalyst was the proposed coronavirus fiscal stimulus in the US, which will address the economic slowdown caused by the pandemic.

“Local market sustained its upward momentum in line with regional markets on signs of potential progress toward a fresh US fiscal stimulus,” Diversified Securities, Inc. Equity Trader Aniceto K. Pangan said in a text message.

The US administration is eyeing an above $1.5-trillion fiscal stimulus to support industries affected by the coronavirus pandemic, from which $20 billion will be allotted to the hard-hit airline industry.

US stocks ended Wednesday’s session with gains: the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite indices all grew 1.20%, 0.83% and 0.74%, respectively.

Back home, nearly all sectoral indices also recorded improvements at the close of Thursday’s trading. Financials increased 21.34 points or 1.86% to 1,163.14; services added 21.71 points or 1.49% to 1,475.59; holding firms climbed 81.10 points or 1.33% to 6,139.75; property advanced 32.22 points or 1.17% to 2,772.51; and industrials edged up 4.6 points or 0.05% to 7,905.81. Mining and oil was the sole declining index, falling 56.36 points or 0.95% to 5,850.13 at the end of the session.

Some 1.96 billion issues valued at P5.43 billion switched hands on Thursday, higher than the previous day’s 1.07 billion issues worth P5.48 billion.

Decliners outnumbered advancers, 108 against 81. Some 53 names ended unchanged.

Foreign investors remained net sellers, with net outflows declining to P545.8 million from P585.58 million in the previous session. — Denise A. Valdez

Congressmen call for lifting of jeepney ban amid coronavirus

MORE than a hundred congressmen have signed a resolution asking the government to lift the ban on public utility jeepneys amid a coronavirus pandemic.

The lawmakers signed House Resolution 1254, which cited the “need to address the worsening economic plight of jeepney drivers and operators who have been grounded since the start of the community quarantine.”

The document was authored by Manila Rep. Bienvenido A. Abante, Jr., Quezon City Rep. Jose Christopher Y. Belmonte and members of the six-member Makabayan bloc at the House of Representatives.

The lawmakers said 75,000 traditional jeepneys on 900 routes all over Metro Manila have been affected since the government restricted mass transportation to contain the pandemic.

President Rodrigo R. Duterte locked down the entire Luzon island in mid-March, suspending work, classes and public transportation to control the coronavirus. People should stay home except to buy food and other basic goods, he said.

The lockdown in many parts of the country including the capital region where infections are mostly concentrated has since been relaxed, but the wildly painted jeepney that has become a Philippine cultural icon remained mostly banned.

The ban on jeepneys, where passengers closely sit next to and in front of each other, was in keeping with state efforts to enforce social distancing.

The presidential palace in June said jeepneys might soon be allowed under a relaxed lockdown as long as they are roadworthy, pursuant to the government’s modernization plan for these vehicles.

In their resolution, the congressmen cited an international research from the University of Amsterdam and the United States Centers for Disease Control and Prevention that showed there was a reduced risk of viral spread in well-ventilated open-air vehicles.

As of Sept. 18, 206 traditional public utility jeepney routes have been opened, or about 23% of the more than 900 existing routes.

This allowed 17,372 traditional jeepney units in Metro Manila to resume operations or almost a quarter of the 75,000 total.

“Even with the phased reopening of routes, the gradual increase in the number of operating jeepney units and the introduction of modern jeepneys, the number of available public transportation units remain lacking and has thus caused hardships among commuters,” according to a copy of the resolution.

Mar S. Valbuena, president of the Samahang Manibela Mananakay at Nagkaisang Terminal ng Transportasyon, earlier said the government must address the plight of the country’s half-a-million jeepney drivers, 140,000 of whom are in the capital region. 

On June 2, police arrested six jeepney drivers in Caloocan City after they protested their continued ban under a relaxed lockdown. One of them was a 72-year-old man named Elmer Cordero. The Commission on Human Rights has expressed “deep concern” about the arrests.

Mr. Valbuena earlier said the government might be using the pandemic to push its agenda of phasing out old jeepneys.

Under the modernization program launched in June 2017, operators must stop using 15-year-old units and older, and replace these with new ones in three years.

To date, only 4% of about 370,000 old jeepneys nationwide have been replaced. — Kyle Aristophere T. Atienza

Coronavirus cases top 314,000; death toll rises to 5,562

THE DEPARTMENT of Health (DoH) reported 2,415 coronavirus infections on Thursday, bringing the total to 314,079.

The death toll rose by 59 to 5,562, while recoveries increased by 771 to 254,223, it said in a bulletin.

There were 54,294 active cases, 86.6% of which were mild, 9% did not show symptoms, 1.4% were severe and 3.1% were critical.

Of the new cases, 930 came from Metro Manila, 238 from Cavite, 128 from Rizal, 123 from Laguna and 103 from Negros Occidental, the agency said.

Metro Manila had the highest number of new deaths with 26, followed by Central Visayas with seven, Western Visayas with six, the Ilocos region with five and Zamboanga Peninsula with four.

Northern Mindanao and the Calabarzon region reported three deaths each, the Bicol and Caraga regions had two each, while Central Luzon reported one death.

More than 3.5 million people have been tested for the COVID-19 (coronavirus disease 2019), DoH said.

Meanwhile, dine-in restaurants in areas under general lockdown may fully reopen and extend business hours, depending on local government rules, according to the Trade department. The agency said it would allow higher operating capacity for other businesses that have been allowed to partially run.

Local governments have the final say on how much capacity restaurants can operate, says Trade secretary Ramon M. Lopez an online news briefing on Thursday.

Restaurants had been allowed to operate at up to 50% capacity in places under a general community quarantine.

The Trade department will issue an advisory about the policy, Mr. Lopez said. Barber shops and salons may increase their capacity to as much as 75%, he told One News.

The government would try to allow more sectors to reopen and increase the capacity of those that are still operating partially, he said.

These include legal services, accounting, engineering, architectural services, management consultancy, programming and IT, and retail, he said. — Vann Marlo M. Villegas and Jenina P. Ibañez

Duterte tells House not to lose focus on 2021 budget amid squabble

PRESIDENT Rodrigo R. Duterte urged congressmen to prioritize the 2021 national budget amid a squabble over a term-sharing deal for the speakership.

The President, who brokered the term-sharing between Speaker Alan Peter S. Cayetano and Marinduque Representative Lord Alan Q. Velasco last year, met with the two on Tuesday.

Deputy Speaker Luis Raymund F. Villafuerte, Jr. told the ABS-CBN News Channel on Wednesday a deal was reached to honor the gentleman’s agreement.

“His request was for the budget to be passed as soon as possible,” presidential spokesman Harry L. Roque told an online news briefing in Filipino on Thursday.

An early passage would allow the government to maximize its anti-coronavirus efforts, he said.

Mr. Cayetano on Wednesday offered to quit as speaker, which majority of congressmen rejected in a vote. He said Mr. Velasco was “too excited” to take over the speakership amid legislative priorities.

Before his privilege speech, Mr. Cayetano said allies of Mr. Velasco led a text message brigade asking colleagues not to listen to him.

He said they were meddling in the speakership because they were aiming for key committee positions.

Mr. Cayetano, who was Mr. Duterte’s vice-presidential running mate in 2016, said Mr. Velasco would either lose the numbers game or face a coup for being unpopular and seeking to pass the national budget without any changes.

Mr. Roque said the President would respect lawmakers’ decision on the leadership because it is an “internal decision.” — Gillian M. Cortez

Regional Updates (10/01/20)

Transport chief wants private firms to give contactless cards for free to commuters

TRANSPORTATION SECRETARY Arthur P. Tugade wants the reloadable card for fare payments at Metro Manila’s busway and railway systems be given for free to commuters in consideration of the coronavirus-prompted crisis, a department official said. Transportation Assistant Secretary Goddes Hope O. Libiran said in a phone message that Mr. Tugade had directed the concerned officials in the agency’s road and rail sectors to negotiate with the consortium behind the beep smart card, AF Payments, Inc., which is composed of Metro Pacific Investments Corp. (MPIC) and Ayala Corp. “Dapat libre lang ang card (The card should be for free). We are still under quarantine measures.  Workers who have just returned to work are the main users of the rail system and the EDSA Busway,” Mr. Tugade was quoted as saying in a statement. AF Payments, however, said it is selling the cards at cost. “Starting October 1, beepTM cards are being sold at cost,” the company said in a statement. “We would like to assure the commuters that we will continue working together with government agencies and transport stakeholders to find ways on how to serve the public that’s truly beneficial to all,” it added. MPIC is one of three Philippine subsidiaries of Hong Kong’s First Pacific Co. Ltd., the others being PLDT, Inc. and Philex Mining Corp. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., maintains an interest in BusinessWorld through the Philippine Star Group. — Arjay L. Balinbin 

Gov’t targets 42,000 beds for medical, isolation facilities

SECRETARY CARLITO G. Galvez Jr., chief implementer of the coronavirus response program, said at least 42,000 hospital beds are needed to further boost the country’s health and isolation facilities. “Kailangan magkaroon tayo ng karagdagang (We need to have additional) hospital beds at (and) quarantine isolation facilities… 42,000 beds  (in total),” he said in a briefing on Thursday. Mr. Galvez said P4.5 billion has been allocated by the government for the construction of more coronavirus disease 2019 (COVID-19) quarantine centers. Another P4.5 billion is budgeted for the use of existing hotels in Metro Manila and other urbanized areas as quarantine and isolation facilities. Metro Manila remains as the country’s COVID-19 epicenter, accounting for more than half of total patients, but Mr. Galvez said the daily reported cases are going down. He added that if the downtrend continues, he agrees with Metro Manila mayors that the economy can reopen further by November, but still with strict health protocols. Mr. Galvez said the inter-agency task force is discussing possible adjustments in the guidelines for the different quarantine levels. — Gillian M. Cortez 

Duterte calls for consultations on Bataan nuclear plant revival

THE PRESIDENT has ordered the Energy secretary to hold community consultations before moving forward with plans to revive the Bataan Nuclear Power Plant (BNPP). Palace Spokesperson Harry L. Roque said President Rodrigo R. Duterte gave this directive during a recent meeting with Energy Secretary Alfonso G. Cusi and Mark O. Cojuangco, a former Pangasinan representative and nuclear energy advocate. “What the President said was start from the ground… and I take that to mean that us here in Bataan should be consulted first,” Mr. Roque said in a briefing held in Bataan on Thursday. Mr. Duterte issued an executive order in July directing an inter-agency body headed by the Department of Energy (DoE) to study the feasibility of using nuclear energy locally. The order also called for a feasibility study on reviving the mothballed BNPP. Mr. Cojuangco, during his term in the 14th Congress, filed a bill for the commercial operation of the plant. — Gillian M. Cortez

Nationwide round-up

Solon dares colleagues to declare Speaker’s seat vacant

A LAWMAKER supporting Speaker Alan Peter S. Cayetano dared his colleagues to declare the House of Representatives’ top post vacant and hold an election. Anakalusugan Partylist Rep. Michael T. Defensor made the call following Wednesday’s vote rejecting Mr. Cayetano’s announcement of his resignation — or intent to resign — in a privilege speech. “Basically, whatever it was, whether it was resignation or offer for resignation, the vote is a manifestation of the continued support of the overwhelming majority of the House,” Mr. Defensor said in an interview over ANC. “And if in the end, they do not get the numbers then I think we should just continue our work and respect each other,” he added. Meanwhile, members of a party-list bloc warned that the leadership tussle should be closely watched as it relates to strategically re-aligning some “lump sum” appropriations supposedly allocated to the congressional districts of several lawmakers. “Let’s be keen on future developments (in the leadership crisis) to further unveil the interests of lawmakers for pork,” ACT Teachers Party-list Rep. France L. Castro said in Filipino during a press conference on Thursday. — Kyle Aristophere T. Atienza

Justice dep’t spokesperson quits

JUSTICE UNDERSECRETARY Mark L. Perete resigned from his post effective immediately, citing “serious reasons” that are “very personal.” Mr. Perete, also the department’s spokesperson, said in a Viber message to reporters early Thursday morning, “After much thought, I have decided to submit my resignation from the DOJ effective today due to serious reasons.” He also said, “I would have liked to continue under Secretary (Menardo I.) Guevarra’s leadership but it would be a disservice to do so at this time. Mr. Perete was appointed in July 2018 under the term of Mr. Guevarra. He previously served as technical assistant with the position of assistant secretary for legal affairs at the Office of the President. Mr. Perete had also been a legal counsel for a private company and a law professor. — Vann Marlo M. Villegas

Challenge looms to San Miguel airport tax perks legislation

A GROUP of economists and former public officials said they will support a veto of legislation granting tax breaks for San Miguel Aerocity, Inc.’s P740-billion Bulacan airport project if Congress passes the measure.

Action for Economic Reforms (AER) said in a statement Thursday that legislators reject Senate Bill 1823, which grants 10 years’ worth of tax exemptions over the airport’s construction period. The bill also gives San Miguel Aerocity a 50-year franchise.

“This bill, if passed, will supplant existing laws or future laws and that is very, very dangerous… not only for the economic rules but even for democracy. Imagine that, we are suppressing laws just to accommodate certain interests and in that context, we will indeed ask for a veto in the event that Congress approves this bill,” AER Cofounder and Coordinator Filomeno S. Sta. Ana III said in an online briefing Thursday.

Mr. Sta Ana said the group hopes the executive will seriously consider a veto but in case the measure is signed into law, “It will set a very bad precedent because even if this veto does not materialize, expect organizations like the AER to push for the rejection of this bill, or in the event that it becomes a law, a rejection of this law,” he said.

He said the measure, if passed, will undermine the government’s plan to reform the tax incentive system and may encourage other companies to ask Congress for tax incentives as well.

Deliberations on the bill in the Senate started early this week. A counterpart measure, House Bill No. 7241 has been approved by that chamber.

The President has 30 days from receipt of a bill passed by Congress to either sign it into law or veto it.

In absence of a signature or veto notice within the given period, the bill will lapse into law.

“What (incentives) you give to one private proponent, you have to give to everybody. It is better for all investors if they can follow a general law like CREATE and get their incentives in the general manner,” Rene Santiago, a transport expert and a former consultant for the Japan International Cooperation Agency (JICA), said in the same briefing.

In a statement last week, AER first warned that the proposal to provide tax perks “runs contrary to the core objectives” of the tax reform plan, currently embodied in the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) bill.

The group also said the tax perks should be made available only in the event of market failure. In 2016, a study by JICA indicated that service improvements at Ninoy Aquino International Airport and Clark International Airport can accommodate future demand for air travel in the area surrounding the capital region.

The Department of Finance also opposed the proposed tax incentives for the Bulacan airport because it is an unsolicited bid, which according to Finance Assistant Secretary Maria Teresa S. Habitan should not be given fiscal perks.

Mr. Sta Ana said the measure’s revenue impact is still difficult to assess at the moment.

Asked to comment, San Miguel Aerocity had not responded at deadline time. — Beatrice M. Laforga

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