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Foreign LNG companies ‘committed’ to entering PHL — Gatchalian

FOREIGN entities have approached the Senate energy committee to seek guidance on the direction of the country’s liquefied natural gas (LNG) industry, the panel’s chairman said, pointing to the continuing interest to set up local facilities.

Senator Sherwin T. Gatchalian, who chairs the Senate committee on energy, said the foreign companies, which he said have businesses related to LNG, were “committed” to enter the Philippines as they had visited his office “a few times.”

Aside from the foreigners, he said some local groups had sought an audience with his office on their plans to develop LNG facilities.

As an example, Mr. Gatchalian cited the group of businessman Lucio C. Tan through MacroAsia Corp., which he said has a US company as partner for the project.

“You have to partner with the US. They’re the most abundant in terms of supply of LNG. Mura pa (And also cheap),” he told reporters.

MacroAsia is a prospective new entrant in the local LNG business, which already has First Gen Corp. and Phoenix Petroleum Philippines, Inc. as the leaders in terms of project development.

Last week, Lopez-led First Gen and its partner Tokyo Gas Co. Ltd. secured certification from the Energy department to declare their project as one of national significance, helping ease the process of securing permits. Phoenix Petroleum earlier sought extension of its notice to proceed with its separate project. Both groups plan to build an integrated LNG facility.

Mr. Gatchalian identified the possible new participants as Gen X Energy, a company backed by an affiliate of Blackstone, an energy company that invests in projects in Asia. He said the foreign firm is the partner of MacroAsia.

Mr. Gatchalian also named Chevron Corp., which is partnering with Japanese trading house JERA Co., Inc. and shipping line NYK Line.

He also said Cheniere Energy, Inc., an LNG company based in Texas, as “looking around” for a possible partner. Representatives of these companies have visited his office.

“I think they are seeking, unang una (first of all), they are seeking for guidance, and then second they’re also seeking to get some opinion regarding legislation kasi alam din nila walang legislative framework ito (because they also know this does not have legislative framework),” the senator said.

Asked about what the prospective LNG project developers want to see in a proposed LNG law, he said: “Basically, typically ang nakukuha kong (what I am getting as) feedback from them is competition. They should be able to compete and looking at how many interested parties, talagang (surely) we have to make sure that competition is vibrant in the industry.” — Victor V. Saulon

US-China tensions, GDP data dampen sentiment

By Arra B. Francia
Senior Reporter

LOCAL SHARES fell last week, as a combination of tensions from the US-China trade war, weak economic growth data, and the MSCI rebalancing took a toll on investor sentiment.

The Philippine Stock Exchange index (PSEi) shed 0.75% or 59.77 points to 7,854.39 on Friday. On a weekly basis, it was down by 3.39% or 275.54 points.

Net foreign selling stood at P3.95 billion compared to P293.08 million in net inflows seen in the previous week.

“The disappointing second quarter GDP (gross domestic product) data and the MSCI rebalancing continued to haunt the local market,” Philstocks Financial, Inc. said in a market note on Friday.

Investors started last week with already weak sentiment from US markets, as US President Donald J. Trump called China a currency manipulator as it devalued the yuan. This came after Mr. Trump threatened to impose higher tariffs on $300-million worth of Chinese imports.

The lower July Philippine inflation print, released last Tuesday, failed to boost sentiment as the main index continued to perform lower on that day. The Philippine Statistics Authority (PSA) reported that inflation eased further in July to 2.4%, the slowest in 31 months. This is slower than June’s 2.7% and July 2018’s 5.7%.

The PSEi saw temporary relief on Wednesday as local investors supported its movement, even as net foreign buying persisted.

Disappointing second quarter GDP data greeted investors on Thursday, as the PSA announced that the Philippine economy grew by 5.5% in the April to June period. This is the slowest expansion seen in more than four years or 17 quarters.

Socioeconomic Planning Secretary Ernesto M. Pernia blamed the El Niño phenomenon, heightened US-China trade war, and the election ban on construction activities for the slowdown. The delayed passage of the national budget also affected growth, he said.

Meanwhile, the Bangko Sentral ng Pilipinas (BSP) on Thursday decided to cut interest rates by 25 basis points, as widely expected, on the back of easing inflation. The overnight reverse repurchase rate now stands at 4.25%, while the overnight deposit and lending rates are now at 3.75% and 4.75%, respectively.

The BSP also cut its inflation forecast for 2019 to 2.6% from the downward-revised 2.7% adopted during its June 20 review. It further reduced 2020’s forecast to 2.9% from 3% before.

Last week also saw the second rebalancing on MSCI Emerging Markets index, where it raised the weighting of China shares. The third and final weighting will be implemented this November. Fund managers who track the MSCI indices are seen to adjust their portfolios accordingly.

Local financial markets are closed today for the Islam holiday Eid al-Adha.

Faster PEZA approvals urged amid POGO worries

THE GOVERNMENT needs to address the bottlenecks in the economic zone accreditation process in anticipation of a possible slowdown in online gaming investment following a crackdown on the industry in China, Colliers International Philippines said.

“The issue that we have right now is we need more PEZA (recognized) space… What the government can do is hasten approvals or make it faster,” Richard T. Raymundo, managing director of Colliers, told BusinessWorld after the firm’s Second Quarter Property Market Briefing on Friday.

He was referring to the Philippine Economic Zone Authority’s (PEZA) accreditation process, which allows developers and locators to qualify for investment incentives. PEZA typically endorses a site for incentives, but the final step is a proclamation of economic zone status by the Office of the President.

Mr. Raymundo estimated that for this year, Metro Manila has about 700,000 square meters (sq. m.) of new office supply due to be built, with about 225,000 sq.m. PEZA-compliant. Of the PEZA-approved space, 163,000 sq.m. is pre-leased, leaving only 62,000 sq.m. in PEZA-approved space remaining.

“Ang liit (It’s not enough), so we need more buildings which are completing this year to be PEZA-accredited. That’s how they can help because there is demand. It is still growing,” he added.

He said faster processing is one way to address the possible fall-off in business from the Philippine Online Gaming Operator (POGO) sector, after China signaled a crackdown on cross-border gambling and complained of illegal recruitment and poor work conditions for its nationals in the Philippines.

The Chinese embassy in particular zeroed in on a plan by the gaming regulator to cluster POGO firms in designated hubs that will be “self-contained,” which the embassy said might violate its nationals’ rights.

Mr. Raymundo said that the POGO industry is a “big force” that drives the property market since these companies are about 30% to 35% of the office market while making up a large portion of the foreign take-up in the residential market.

He said he does not expect a “pack up and go” scenario for POGOs in the event of a crackdown, but rather a slowdown in future take-up due to firm contracts already signed.

He said space that may be vacated by departing POGOs can be taken up by other occupiers amid strong growth all over the economy.

“The upside is maybe this is an opportunity for the traditional (office tenants)… to start (occupying) these buildings because there is still demand,” he added.

Colliers reported that deals with traditional and non-outsourcing firms hit 271,000 sq.m. in the first half of 2019, up 22% year-on-year. — Vincent Mariel P. Galang

Antique Airport contractor to hire more labor, work longer hours

THE DEPARTMENT of Transportation (DoTr) said it is expediting development works at the Antique Airport, adjusting the completion timeline to June 2020, after asking the contractor to hire more workers and work longer hours.

“We have requested the contractor to fast-track the development of the Antique Airport to efficiently serve the region. To do this, we need the augmentation of workers and equipment, and extend the working hours from 8 to 12 hours,” Transportation Undersecretary for Aviation Manuel Antonio L. Tamayo said in a statement Sunday.

Works at the Antique Airport, which started in December last year, were originally scheduled to finish in August 2020. These cover the construction of a new passenger terminal building, apron, taxiway, fire station building, power house, administration building, perimeter and security fence, vehicle parking area and staff house.

The DoTr said the adjusted timeline comes after an inspection of the works on Aug. 3, where it found the development has progressed 12% since December.

Antique Representative Loren B. Legarda joined the inspection, and asked the DoTr and the contractor to submit to her office the master plan for the project within two weeks.

“(Adjustments were made) to extend the airport’s runway from 1,430 meters to 1,800 meters in order to accommodate jet operations. (Ms.) Legarda has pledged to work on the additional funding of at least P150 million for the runway extension,” the DoTr said.

It added Ms. Legarda’s son, Solar Para Sa Bayan Corp. President Leandro L. Leviste, “committed to provide” a solar panel system for the airport for free.

“We will ensure that this airport will be upgraded on or before its target date so that we may deliver to the people of Antique the service and facility that they have long been yearning for,” Transportation Secretary Arthur P. Tugade said in the statement.

Antique airport resumed commercial operations in December with a flight operated by Philippine Airlines (PAL) linking the destination to Clark International Airport.

Antique Airport is a principal class 2 gateway and the only airport in the province of Antique. — Denise A. Valdez

How PSEi member stocks performed — August 9, 2019

Here’s a quick glance at how PSEi stocks fared on Friday, August 9, 2019.

 

CTA rejects Hedcor appeal of refund ruling

THE COURT of Tax Appeals (CTA) denied a motion for reconsideration filed by Hedcor, Inc. over the denial of its 2011 tax refund claim amounting to P50.66 million, citing lack of merit.

In a five-page resolution dated July 10, the court, sitting en banc, upheld its February 2019 decision which denied the petition of the hydropower generation company.

The court said the firm did not comply with the prescribed period stated in the Tax Code for filing its petition before the CTA.

Section 112 of the National Internal Revenue Code (NIRC) of 1997 states that a taxpayer has two years to file an administrative claim for a refund before the Bureau of Internal Revenue (BIR).

The BIR, meanwhile, has 120 days to decide on a claim. If not acted upon in 120 days or in case of denial or partial grant of a claim, a taxpayer is given 30 days to file a petition before the CTA.

The appellate court said Hedcor “erroneously appealed” the December 1, 2014 letter of the BIR which denied its administrative claim because it was already beyond the prescribed 120-day period. It also said petitioner did not elevate to the CTA the inaction of the BIR during the 30 days after the 120-day period.

“A claim for unutilized input value-added tax is in the nature of a tax exemption. Thus, strict adherence to the conditions prescribed by the law is required of the taxpayer,” the court ruled.

“Refunds need to be proven and their application raised in the right manner as required by law. Here, noncompliance with the 120+30-day periods is fatal to petitioner’s judicial claim for refund,” it added.

In the February decision, which upheld the dismissal by the second division on jurisdictional grounds, it found that Hedcor had until June 14, 2013 for the first quarter, August 30, 2013 for the second quarter, March 1, 2014 for the third quarter, and April 7, 2013 for the fourth quarter of 2011 to elevate the claim to the CTA due to inaction of the BIR.

However, a petition for review was only filed on Jan. 9, 2015 before the court.

The decision was written by Associate Justice Esperanza R. Fabon-Victorino. — Vann Marlo M. Villegas

Davao City hotels gearing up for Kadayawan Festival crowd

KADAYAWAN, Davao City’s biggest annual festival, draws a bigger crowd than the Christmas and dry-season holiday seasons, and hotels here are all set for the visitor surge during much of August.

“I talked to officials of some of the hotels. They said they are fully booked. We are very happy with it kasi paakyat ang bilang ng mga turista sa atin (because the number of tourists is increasing),” said City Tourism Office head Regina Rosa D. Tecson in an interview.

Davao City took in more than one million tourists in the five months to May, and Ms. Tecson said the city is on track to hit the three million target for the year.

In 2018, the city had 2.4 million visitors, up from two million in 2017.

The Royal Mandaya Hotel, one of the oldest and biggest in the city with 181 rooms, is fully-booked for August, according to General Manager Benjamin J. Banzon.

“Kadayawan is one of the highlights for the hotels in Davao because the stay of the guests, which average two nights and three days (for most of the year). During Kadayawan, their stay becomes four nights and five days. The Royal Mandaya Hotel now has no more available rooms,” Mr. Banzon said.

Most hotels prepare special attractions and menus for the Kadayawan, highlighting Davao’s attractions.

The Seda Abreeza said it will highlight its partnership with the Philippine Eagle Foundation and display a preserved eagles, named Diola, at the hotel lobby to help raise environmental awareness.

Seda Abreeza is also offering a number of specialty drinks, dishes, and spreads with Davao’s top products, including chocolate, Malagos cheeses, durian, mangosteen, pomelo and tuna.

Park Inn by Radisson Davao General Manager Emelyn M. Rosales said a majority of expected guests are Filipinos from the key feeder cities like Manila and Cebu.

“We target around 80% (occupancy rate), ending the month. We have prepared some room and food and beverage promotions for the period of Kadayawan,” Ms. Rosales said. — Maya M. Padillo

Parañaque City launches permit express lane system

THE Department of Interior and Local Government (DILG) said Parañaque has launched an express lane to expedite dealings with companies doing business with the city.

Project Express Lane Operation (ELO) 2.0 will help ensure that new applications and renewals for business permits take three days or less, Local Government Secretary Eduardo M. Año in a statement Sunday.

Mr. Año also added that the new process requires a maximum of two signatories.

“We are pleased to partner with the City Government of Parañaque led by Mayor Edwin L. Olivarez on this project and we hope that other LGUs will follow and replicate this system. It brings together several innovative IT solutions into their pioneering Concierge system, effectively redefining what it means to be business-friendly,” said Mr. Año.

He added, “Mas mabilis na proseso, mas maraming investments sa LGUs. At mas maraming investments, mas maraming government services para sa mga tao at mas uunlad rin ang ating mga lokalidad. (The faster the processes, the more investments LGUs will take in. And with higher investments, LGUs can offer more services and ensure more development.”

The DILG noted that Project ELO 2.0 will also feature the first computerized Occupational Permit system which shortens the process of applying for occupational or work permits to four steps as opposed to the previous 10 steps.

Parañaque City also installed Smart Kiosks, a self-service system that prints out application forms for business permit renewals and statements of account for quarterly payments of business taxes and fees.

“The DILG will continuously capacitate our LGUs to be partners in national development by helping them become more business-friendly and competitive. The remaining 20% of LGUs who have yet to establish their BOSS (Business One-Stop Shop) and streamline their process should, therefore, be up to the task of simplifying their business permit application process in order to encourage more investments in their areas,” Mr. Año said. — Vince Angelo C. Ferreras

DoF sees inflation falling further as food prices ease

FINANCE Undersecretary Gil S. Beltran said inflation is expected to ease further in the second half, bringing the 2019 average towards the lower end of the 2.7-3.5% target band for the year.

The 2.7%-3.5% band is the inflation assumption issued by the Development Budget Coordination Committee (DBCC).

“(It will depend) upon oil prices because inflation is also affected by petroleum products but food items will continue to go down because it has happened for the last five or six months. [As for whether it will hit the DBCC assumption] it will be more towards the lower end” Mr. Beltran told reporters during a press briefing late Wednesday.

The Philippine Statistics Authority (PSA) reported that headline inflation in July slowed to 2.4% from 2.7% in June and 5.7% a year earlier, the lowest level in 31 months, or since the 2.2% inflation recorded in December 2016.

The July result matched the 2.4% median estimate in a poll of 17 economists which BusinessWorld conducted a week before the official data came out.

The Bangko Sentral ng Pilipinas (BSP) Monetary Board on Thursday cut its 2019 inflation forecast to 2.6% from already-downward-revised 2.7% which it adopted in its June 20 review, while slashing next year’s forecast to 2.9% from 3% previously.

For the August inflation outlook, Mr. Beltran said the Department of Finance “hopes” it will be lower than the July level. — Beatrice M. Laforga

Tax Appeals court rules against BIR after assessment by unauthorized officer

THE Court of Tax Appeals (CTA) affirmed the cancellation of the P151.3 million alleged tax deficiency of an oil trading firm after it was assessed by an unauthorized revenue officer (RO).

In a 23-page decision, the court, sitting en banc, denied the petition for review filed by the Bureau of Internal Revenue (BIR) against the 2017 decision and 2018 resolution of its third division, which cancelled the tax deficiency assessments of Royal Class Trading and Transportation Corp., which trades petroleum products of Pilipinas Shell Petroleum Corp and Petron Corp.

The court said the RO who finished the assessment against the firm was only assigned through a 3rd Indorsement Letter in 2013 and not through a Letter of Authority (LoA) which is required under the National Internal Revenue Code.

“(A)ll audit investigations must be conducted by a duly designated RO authorized to perform audit and examination of taxpayer’s books and accounting records, pursuant to an LoA. In other words, in case of re-assignment or transfer of cases to another RO, it is mandatory that a new LoA shall be issued with the corresponding notation thereto,” it said.

The CTA said the lack of new LoA in reassigning the case means the new officer continuing the investigation has no authority.

“Consequently, the subject tax assessments, which came about as a result of his examination of the books of account and accounting records of Royal Class for taxable year 2007, are void. It must be emphasized that a void assessment bears no valid fruit, and thus, it cannot attain finality,” the court said.

Initially, an LoA was issued in 2008 authorizing an RO to assess Royal Class. However, the 2010 Indorsement Letter directed a new RO to continue the investigation of the previous officer assigned, who was transferred to another district.

The BIR claimed that reshuffling of officers is a “natural occurrence of things” stated in Section 17 of the Tax Code and the RO indicated in the LoA “need not be the one to complete the audit.”

The tax appellate court, however, said it only states the power to assign or reassign officers but nothing on the discarding of an LoA.

“In other words, there is nothing in the law which prohibits the issuance of a subsequent LoA authorizing another RO, or new set of ROs, to continue the examination of books of account and other accounting records of the concerned taxpayer,” it said.

It also denied the claim of the bureau on the applicability of Revenue Memorandum Order No. 44-2010, withdrawing beginning June 1, 2010 a rule requiring the revalidation of LoAs after the failure of revenue officers to complete audits within the prescribed period.

The court said there was no revalidation of an LoA in this case and even if there was, the Indorsement Letter was issued in February, months prior to the effectivity of the order.

The decision was written by Associate Justice Erlinda P. Uy. — Vann Marlo M. Villegas

Project management in the transformative age

New platforms and drivers of productivity are creating new possibilities at unprecedented speeds, with steady advances in robotics, cognitive technologies and intelligent automation. To remain relevant and competitive, businesses are looking to implement digital strategies to keep up with the speed of change.

However, while disruption has become the new buzzword to reflect the new trends challenging traditional business paradigms, the truth is that the fundamental changes in business models across industries convey a deeper shift that can be better described as “transformative” instead of disruptive.

One of the defining traits of the transformative age besides the speed of change is the increasing dependence on connectivity. As Norman Lonergan, EY Global Vice Chair of Advisory puts it, “the transformative age goes beyond mere disruption, and is instead about being connected, whether to interfaces, data, experiences, or people.”

Local businesses are already being recognized for using digital technologies that have transformed the market and for leadership in their digital transformation efforts, such as through the International Data Corp. (IDC) Digital Transformation Awards. Efforts are being taken to address the technological needs of many organizations and future-proof various businesses ranging from real estate, hospitality, restaurants, and infrastructure. A Microsoft/IDC Asia Pacific white paper, ‘Unlocking the Economic Impact of Digital Transformation in Asia Pacific,’ predicts that by 2021, digital transformation will add an estimated $8 billion to the Philippines’ GDP and increase its annual growth rate by 0.4%.

CHALLENGES OF DIGITAL TRANSFORMATION
To successfully lead their organizations through digital transformation, leaders will need to be well-versed in all aspects of the business environment, have the foresight to anticipate change, and integrate the disparate parts of a company. It’s certainly no easy feat. While 80% of organizations are undergoing digital transformations, only 25% of digital transformation projects result in real benefits. This is according to the Project Management Institute (PMI), a leading non-profit professional association. Since ownership of digital efforts should cut across the C-Suite and the different groups within a company, company leaders, IT, and project managers must all partner for optimum results while maintaining a broad view of the organization.

Digital transformation projects can be especially challenging for global organizations or financial services companies. These often have legacy technology, third-party partners that contribute to the company’s complexity, and ingrained ways of conducting business. While smaller, digital-oriented startups merely have to execute their digital strategy, larger companies will need to take extensive current operations through digital transformation.

Some of the challenges that arise due to the nature of transformation projects are resource allocation and priority in staff selection when weighed against ongoing operations. Another one is the impact of the transformation on the organization’s people, of whom many will be participants in the transformation effort. Transformation projects may result in changes to an organization’s structure, business processes, workplace location, or workforce, which, in turn, may trigger a natural human tendency to resist change. Addressing this human side of change is a key factor in ensuring that the results of any transformation project will endure. Further challenge comes from the scale of transformation projects, with diverse stakeholders both internal and external that will have varied, and sometimes, competing interests.

STRATEGIES FOR SUCCESSFUL TRANSFORMATION
These challenges can be addressed through the principles used to manage a transformation journey. By choosing the approach that best addresses the needs of the project, organizations will help minimize risks, control costs, and increase value. Murat Bicak, PMI senior vice president of strategy, shares the following strategies for successful digital transformation.

Set clear goals and ROI metrics. There are several organizations that may still be confused about what it means to transform into digital. The effort encompasses more than the IT organization, and involves more than just digitization, according to Bicak. It is more about the business-wide use of emerging digital technologies to transform business processes and bring more value to both stakeholders and customers.

Ensure that C-Suite sponsors are actively involved in projects. Inadequate sponsor support is one of the leading causes of project failure, according to the PMI. Conversely, the most common reason that transformative strategies succeed is strong support and buy-in from leadership. Executives can be more effective by staying connected with the program, helping navigate challenges, communicating its role, and advocating the program.

Elevate the role of the project manager. The project manager role is evolving from that of an operational role to a strategy delivery role. Project managers are expected to bring forward expertise on innovation, strategy, and communication. Bicak adds that technical skills are only part of what project managers will need to lead digital transformation efforts, along with strategic business management and leadership.

The essence of project management is the application of knowledge, skills, tools, and techniques to project activities in order to meet project requirements. It can be said that the rigor, discipline, standardized methodologies, and common language for complex change initiatives from project management can help increase the odds of success when applied to digital transformation. Investing in project management professionals by providing them with the tools, training, and skills they need to make their organizations as effective as possible will be key to driving the value delivery mindset needed for a successful project.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the authors and do not necessarily represent the views of SGV & Co.

 

Evert De Bock is an Advisory Principal from SGV & Co.

Anti-corruption body to probe flagged agencies

By Arjay L. Balinbin
Reporter

THE Presidential Anti-Corruption Commission (PACC) will investigate officials and employees of government agencies that were recently flagged for corruption, Chairman Dante L. Jimenes said by telephone on Friday.

Among the agencies are the Bureau of Internal Revenue, Bureau of Customs, PhilHealth and Philippine Charity Sweepstates Office, he said.

The law mandates PACC to fight corruption in various government institutions and ensure public officials behave in a manner that is worthy of public trust.

“All of them,” Mr. Jimenez said when asked which agencies will be probed, adding that they would zero in on the main tax agencies, the charity office and the national insurance provider. He added PACC would prioritize officials who volunteer for a lifestyle check.

President Rodrigo R. Duterte in his annual address to Congress last month decried persistent government corruption. He said the recent uncovering of massive fraud perpetrated against the public health insurance system proves that corruption is pervasive.

“Huge amounts of medical funds were released to cover padded medical claims and imaginary treatment of ghost patients. I am grossly disappointed,” he said.

Mr. Duterte also claimed to have fired and caused the resignation of more than a hundred officials and appointees of government “without regard to relationship, friendship and alliance.”

The president likewise vowed to pave the way for the removal of corrupt officials at the Bureau of Customs, where more than 60 people are under investigation for corruption.

Mr. Duterte later suspended lotto operations nationwide for alleged corruption, only to restore them four days after because the operations were found to be above board.

Mr. Jimenez said billions of pesos have been lost to corruption. “Number two, we want to look at their systems and their organization setups,” he said.

The PACC chief said they would submit reports to the president. “It will take time because of the sheer number of government agencies.”

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