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Five MoUs signed at PHL-Indonesia investment summit

THE Philippines-Indonesia Economic and Investment Summit saw the signing of five agreements in the tourism, agriculture and e-commerce industries, Philippine officials at the Jakarta embassy said.

“Most of the business agreements are in MoU (memorandum of understanding) format and basically connecting companies/associations to further their partnership,” economic attaché Alexander J. Araque said in an e-mail in response to queries from BusinessWorld Friday.

The Philippine Business Club, Indonesia (PBCI), Philippine Trade and Investment Center, Jakarta (PTIC-Jakarta) and the Philippine Embassy hosted on June 18 the first Philippines-Indonesia Economic and Investment Summit in Jakarta.

The Summit, organized by the Philippine Chamber of Commerce and Industry (PCCI) and the Indonesian Chamber of Commerce and Industry, marks the 70th anniversary of the two countries’ bilateral and diplomatic relations. It was attended by some 300 businessmen, government officials and diplomats.

The MoUs include a Cooperation Agreement between the PBCI and the Cagayan Economic Zone Authority (CEZA), which Mr. Araque said “aims to promote CEZA to Indonesian investors through the network of PBCI.”

Jet Tech Philippines was also able to close a deal with Satmarindo Group to develop a coconut mill in Sulawesi, Indonesia; while Blue Pearl Travel and Tours partnered with PT Aliyad Destinasi Indonesia.

Fintech company Weepay Processing Corp. signed MoUs with KOIN TOKO Indonesia and PT Passpod Indonesia for e-commerce development and digital tourism, respectively.

The Embassy noted in a June 29 statement that several Philippine firms operating in Indonesia are seeking regional expansion and local partners with the economic integration of Southeast Asian economies.

The Embassy reported that bilateral economic relations between the Philippines and Indonesia has been growing at an average of 3.4% annually over the last five years.

The two largely trade refined copper and copper concentrates, coal, coffee, coffee extracts, crude coconut oil, motor vehicles parts and accessories.

Among those present during the Summit were Philippine Ambassador to Indonesia Leehiong T. Wee, Tourism Secretary Bernadette Romulo-Puyat, Board of Investments Gov. Marjorie O. Ramos-Samaniego, Indonesia Tourism Minister Arief Yahya and Deputy Minister Rizki Handayani.

Also in attendance were PBCI Chairman Antonio B. Capati and Indonesian Chamber of Commerce and Industry Vice Chair Shinta Widjaja Kamdani. — Charmaine A. Tadalan

Cable car study zeroing in on Pasig River, Baguio as possible sites

THE French government, which is conducting a feasibility study on a cable car system in the Philippines, is looking at the Pasig River and Baguio as possible locations, the Department of Transportation (DoTr) said.

Transportation Secretary Arthur P. Tugade told reporters last week about the potential locations.

“Somewhere (over the) Pasig River, basta ma-address lang yung security ng Palasyo (as long as Malacañang’s security concerns are addressed). That’s one… Yung isang pinag-usapan is Baguio (The other one is in Baguio),” he said.

The 450,000-euro feasibility study started in November by French consulting firms MDP Consulting & Engineering and Systra is scheduled to be completed within the year.

The French government offered to fund and do the cable car study “just to show they are interested,” Mr. Tugade said.

Mr. Tugade noted that once the feasibility study is completed, the DoTr may open the construction of the cable car facility to the private sector. He added the French community is interested in taking part in it as well.

“Pwedeng private yun… Yun ang pinipilit ko sa kanila. Maghanap sila (It could be privatized. I’m telling them to find local partners),” Mr. Tugade said.

Earlier, he said he was considering opening cable car lines in Metro Manila to link malls, but he said mall owners have yet to agree to the plan.

He also brought up the idea of opening cable car routes to link Caticlan, Aklan to Boracay to help boosting tourism in the area. — Denise A. Valdez

Western Visayas targets 6.5% in GRDP growth led by agriculture, fisheries

WESTERN VISAYAS is aiming for at least 6.5% growth in gross regional domestic product (GRDP) growth this year, from 6.1% in 2018, with regional officials hoping to focus their efforts on the agriculture and fisheries sectors, which have been affected by the dry spell due to El Niño.

“We hope to be able to reach a growth rate higher than 6.5% because that is what we need in order to make a dent in the economy,” said National Economic and Development Authority (NEDA)-Region 6 Director Ro-Ann A. Bacal as she presented last week the 2018 regional socio-economic report.

“Meaning with the 6.5, you know that the economy is robust, you know that money is circulating around the economy and that business is doing good, not for all business but generally, that would be the situation,” she said.

Ms. Bacal said to hit this year’s growth target, efforts must be focused on the Agriculture, Hunting, Forestry and Fishing (AHFF) sector.

She noted that the 6.1% growth in 2018 was slower than the 8.6% in 2017 due to a decline in AHFF, which accounts for 17.2% of total GRDP.

“In the case of the agriculture sector, I’m really disappointed knowing that my counterpart is doing her best. Department of Agriculture (DA) Regional Director Remelyn R. Recoter is going around exerting so much effort to reach out to local government units. We just hope that we will do better this year although we have a problem with El Niño,” she said.

Partial data as of June 14 from the regional office of the DA indicates that losses due to El Niño amounted to more than P1.4 billion, with rice farmers sustaining the most damage at over P1.16 billion.

Losses for corn and high-value crops were at P246.34 million and P48.48 million, respectively.

The dry spell also affected the fisheries and livestock and poultry sectors.

Jimmy G. Eledia Jr., DA-Western Visayas focal person for disaster risk reduction and management, said the department is still waiting for reports from some provinces and municipalities. — Emme Rose S. Santiagudo

SC rejects appeals of CTA Deutsche Knowledge ruling

THE Supreme Court (SC) rejected appeals from the Bureau of Internal Revenue (BIR) and Deutsche Knowledge Services Pte. Ltd., a subsidiary of Deutsche Bank Group in Singapore, thereby upholding a Court of Tax Appeals (CTA) ruling partially granting the company’s refund claim worth P51.7 million.

In a two-page notice of resolution dated June 3, the SC second division ruled that the CTA en banc did not commit “any reversible error in dismissing the petitions outright for lack of jurisdiction.”

“The CTA EB (en banc) correctly found that the parties’ failure to file their respective motions for reconsideration from the CTA Division’s Amended Decision rendered their petitions for review dismissible on the ground of lack of jurisdiction,” the court ruled.

Deutsche Knowledge sought a refund on unutilized excess input value-added tax attributable to zero-rated sales for April to December 2010 in the amount of P119.8 million but the CTA third division in May 2015 partially granted its claim allowing only the refund of P53 million.

The company and the BIR filed motions for partial reconsideration and the CTA amended its decision, reducing the amount to P51.7 million.

Both parties filed a petition for review before the CTA en banc.

The court, however, in its decision dated Oct. 18, 2017 said the petitions were “procedurally flawed” which prevented it from acquiring jurisdiction over the case, saying the parties immediately filed their appeal to the court en banc instead of filing motions for reconsideration over the amended decision.

The CTA cited Section 1, Rule 8 of the Revised Rules of the CTA (RRCTA) which said that a petition for review of a decision or resolution of a court in division must be preceded by the filing of a motion for reconsideration or a new trial before the division.

It also noted a previous Supreme Court decision which said that for the CTA en banc to take cognizance of a petition for review, Section 1, Rule 8 of the RRCTA must be followed and the same applies to amended decisions.

“The foregoing is concise yet clear. There are no other qualifications or conditions set by the High Court in applying the provisions of the RRCTA in cases of Amended Decisions,” it said.

The motions for reconsideration were also denied by the CTA en banc for lack of merit. — Vann Marlo M. Villegas

Murang Kuryente joins calls to amend EPIRA law

ADVOCACY group Murang Kuryente has joined in the call to review Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA) in view of recent developments in the forging of power supply agreements (PSAs).

This came after Manila Electric Co. (Meralco) stayed firm on its position that its affiliate generation companies (gencos) can bid to supply power to the distribution utility.

“Meralco may be correct in saying that there is no legal impediment to their own gencos bidding for PSAs within its franchise area, but that does not prove what they want to do is ethical, given the obvious conflict of interest. But if what they say is true, then we need to amend the law to prevent this practice,” said Gerard C. Arances, Murang Kuryente spokesperson, in a statement on Sunday.

He said he was calling on the Department of Energy (DoE) and the Energy Regulatory Commission (ERC), “to ensure that the least cost electricity rate is selected.”

“We hope that they will be vigilant regulators and not let the vested interests of the energy sector take over,” Mr. Arances said.

The Supreme Court ruled earlier this year that all PSA applications submitted by distribution utilities to the ERC on or after June 30, 2015 are to comply with the competitive selection process (CSP) based on the DoE’s 2018 department circular.

On June 13, Energy Secretary Alfonso G. Cusi initiated coordination with Meralco, the country’s largest electricity distributor, for the timely conduct of its CSP, as mandated in the court decision.

Under the CSP, electric cooperatives and distribution utilities must invite bids for the contract of its power supply to ensure transparency and fair competition.

Power consumer advocacy group Murang Kuryente has been calling on Congress to amend EPIRA, the law that restructured the country’s energy sector, to prevent claims of collusion between gencos and distribution utilities. — Victor V. Saulon

The essence of digital trends

We continue to see how technology disrupts traditional business models, resulting in new trends, products, and services, as well as how it dramatically transforms customer behaviors. Technology and innovation are considered great enablers, with the potential to rapidly remake the way we live, work and play. Yet, nearly all of today’s greatest disruptions have one common element — at their very core, these innovations are again empowering people.

Centuries ago, business transactions happened between individuals. Consumers and vendors had control and flexibility to transact within their limited geographically-based market, as in a village. Contrast this with the industrial revolution. Power shifted to the hands of companies with the technology, machines and infrastructure to operate mass production facilities. Fast forward to the present — the digital revolution returns the power to ordinary consumers and vendors through an unprecedented level of control and flexibility, direct peer-to-peer transactions, and a wealth of information and content to empower their own lives at a personal level within a vast global arena.

SOME COMMON ATTRIBUTES OF DIGITAL TECHNOLOGY
Most people grew up in a culture with pre-defined norms, e.g. one works eight hours, earns a wage, and spends these wages at a physical store operated by a business or company. However, this was one of the first paradigms to go out the window with the rise of technological platforms that now provide an incredible level of control and flexibility to people over the use of their time, assets, resources, and the work and services they provide.

Take the sharing economy, where digital platforms facilitate the exchange of goods and services among peers, allowing those in a network to transact directly with each other at the time and engagement level of their own choosing. Online platforms have made it much easier for those who wish to monetize their assets, time or skills at their own convenience. This has also led to the rise of the gig economy, where freelancers can work and earn on their own terms on a project basis. Consumers can cater to each other in this peer-to-peer setup, developing reputations that can be defined by reviews provided by fellow consumers to reward high performers.

Blockchain, the technology behind cryptocurrencies, is commonly described as a tamper-proof digital record that can securely exchange and track assets on an end-to-end process. Blockchain is another example of peer-to-peer setups among users. Due to their ability to facilitate transactions on a secure platform, blockchains have the potential to displace intermediaries, allowing consumers and vendors to independently transact with each other online without a third-party to facilitate payment.

Online shopping also allows consumers the privilege of purchasing goods any time by almost completely automating the sales process. Research by Gartner in their Customer Experience Summit 2018 predicts that by 2020, 25% of customer service operations will integrate chatbot technology or virtual customer assistants (VCA) into their channels, automating self-service while still providing the ability to escalate complex situations to a human agent.

Information dissemination, or how easily an individual can share information, is best seen in the context of social media. This technology empowers an individual with the ability to create, publish, and share information on public platforms any time a connection is provided.

Dissemination is no longer confined to small groups with access to broadcast media. The connectivity of these platforms is further enabled by mobile devices, allowing anyone to create and share content, amplifying their voices to anybody who would want to listen. Some creators take this ability a step further and make a name for themselves in social spaces, giving rise to viral popularity. While many talents have been brought to light from obscurity thanks to these platforms, their brands’ resulting products and services are more easily provided at a flexible pace they can dictate for themselves.

Another aspect worth considering is how technology and disruption elevate the capability and potential of today’s workforce. With automation and artificial intelligence set to replace repetitive jobs (such as data entry, assembly line manufacturing and cashier sales), technology is giving room for the individual to develop new skills and competencies. Carl Frey and Michael Osborne in the 2017 study The Future of Employment: How Susceptible are Jobs to Computerization predict that 47% of existing jobs in the US will be at high risk of automation in the future. This gives the employees previously holding these jobs the incentive to pursue their passions or engage in creative, imaginative and strategic work. Though automation rendered and will continue to render certain jobs obsolete, history shows us that it also introduces new forms of employment.

THE INFORMED, EMPOWERED CONSUMER
Modern consumers are better equipped to consume greater amounts of data to make informed decisions. These decisions are often disseminated through social media, which in turn, can potentially influence fellow consumers. This level of awareness raises the standards consumers apply to their customer experience, resulting in a demand for personalization in a company’s marketing efforts.

According to Anjali Lai, lead author of 2016 report Forrester’s Empower Customer Segmentation in Asia Pacific, “The power has shifted from the business to the customer. Consumers have rising demands and a new understanding of speed, the brand relationship and personalization, and these new levels of expectation and standards of customer experience have upended traditional business models.”

This poses the question of how companies can adapt to meet the demands and expectations of modern consumers.

INDUSTRY OPPORTUNITIES
In the digital age where change is constant and innovation is key, companies who respond fastest gain the most traction. To remain competitive and relevant in the market, companies need to reinvent themselves by maximizing the opportunities that emerging technologies bring. To begin transforming a traditional business model and adapting to technological disruptions, companies can start by asking themselves four important questions:

1. Who is their customer?

2. What experiences are important to their customers?

3. How can their business model support these experiences?

4. What digital tools can enable their business model?

While today’s consumers are empowered by technology, companies will find that adopting and properly utilizing digital tools will help them improve the overall customer experience. Digital technology also allows them to relate data to customers on a micro level, providing more resources than ever to aid in their anticipation of the customer’s needs.

According to the EY Megatrends report, delivering rich customer experiences has the potential to generate more income and improve profit margins. Companies will have more to gain from listening to customers and tailoring their services to their needs. By leveraging digital platforms, adding value, providing a more personal and engaging customer experience, and creating a seamless balance of automated and personal touch points, companies have the opportunity to turn consumers into loyal stakeholders, and potentially, even into voluntary endorsers on social media and other platforms.

As we said at the beginning of this article, digital technology and platforms are once again empowering customers and individuals. Companies need to understand that while innovation will clearly be a key driver of future competitiveness, the ability to more closely engage today’s empowered customers by providing fresh, dynamic and bespoke experiences may prove to be the greater challenge.

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.

 

Ramil C. Cantoneros is a Senior Manager in the Advisory Services of SGV & Co.

ARTA to get lessons from Malaysian counterpart

THE ANTI-RED Tape Authority (ARTA) will be working in “close coordination” with its counterpart-agency in Malaysia, the Malaysia Productivity Corporation (MPC), to learn from the latter’s successes in improving productivity and competitiveness.

“Malaysia, in the late ‘80s, was lagging behind the Philippines. Now, they’re almost a first-world country,” ARTA Officer-In-Charge and Deputy Director-General (DDG) Ernesto V. Perez said in a statement on Wednesday last week.

“The Philippines intends to learn from Malaysia’s journey in reducing red tape. [We] will be in close coordination with the Malaysia Productivity Corporation in doing so,” the office of Mr. Perez told BusinessWorld in separate phone message.

Mr. Perez recently attended dialogue and discussions in Malaysia organized by the World Bank and the MPC.

“The Authority, together with OIC-DDG, were able to gain insights on the good regulatory practices of Malaysia when it comes to the improving the productivity and competitiveness of the country,” his office said.

In his statement, Mr. Perez said the Philippines intends to adopt some of the best practices in regulatory governance from other countries.

Among these best practices is setting up a management system for ensuring regulatory quality.

“Learning from the experience of the Malaysia Productivity Corporation, there is an urgent need to establish the Regulatory Management System in the country to address regulatory quality for proposed regulations and excessive undue regulatory burden of existing regulations,” the agency said.

“We also need to streamline mechanisms to address investor grievances at the early stages for investment retention and expansion. ARTA, in coordination with the whole-of-government, needs to provide enabling conditions to facilitate ease of doing business and efficient government service delivery in the country.”

The anti-red tape body also noted that there are significant areas being considered by the business sector in terms of investment and reinvestment such as the “political stability and security as well as the legal and regulatory environment of the country.”

“Businesses are often discouraged to invest and reinvest when there are adverse regulatory changes, sudden arbitrary changes, breach of contract, expropriation, and abuse of authority in the country,” ARTA said.

“Having identified these, we are therefore guided in identifying the areas that we need to touch on in terms of crafting reforms and designing programs, gearing them towards the end goal of improving the business climate of the country.”

Malacañang announced last Friday President Rodrigo R. Duterte’s appointment of Jeremiah B. Belgica as ARTA director-general.

It took more than a year for the President to appoint an ARTA chief since he signed the Ease of Doing Business Law in May 2018.

With Mr. Belgica’s appointment, the implementing rules and regulations of the Ease of Doing Business Law can now be issued. — Arjay L. Balinbin

BI drafting rules for pre-arranged employment visa

THE BUREAU of Immigration (BI) has started drafting guidelines for the issuance of Pre-arranged Employment Visa, also called a 9g visa, to foreigners coming to the Philippines for work.

“We’re studying how to give an option to foreign nationals to apply for a working visa before they come here to the Philippines. Currently, the procedure is that they enter here using the tourist visa and if they decide to work here, they will apply for the conversion of their tourist visa to a working visa,” BI Spokesperson Dana Krizia M. Sandoval said in an interview with BusinessWorld.

“In the future, we would like them to have options for them to apply for a working visa before working here so everything has been arranged before they come to the Philippines,” she added.

The move comes amid the government’s inter-agency efforts to better regulate and tax working expatriates, including the growing number of foreigners employed by Philippine Offshore Gaming Operators (POGOs).

BI is working with the Department of Labor and Employment (DoLE) on the guidelines, which will also be supplementary to the Joint Guidelines No. 01 issued by the BI, DoLE, Department of Justice (DoJ), and the Bureau of Internal Revenue (BIR) last May 1.

Joint Guidelines No. 01 governs work permits released to foreign nationals, which are the Special Working Permits (SWP), Provisional Working Permits (PWP), and Alien Employment Permits (AEP).

DoLE has the authority to issue an AEP, valid for at least one year, while SWPs and PWPs, with a six-month maximum validity, are given by the BI.

A foreigner must have an AEP in order to apply for a 9g visa, which is issued by the BI. A 9g visa is valid within the duration of the foreign workers’ AEP.

Ms. Sandoval said the 9g visa rules will be released within the year.

“It’s actually in the last phase already. We’re fast-tracking it because it’s one of the main concerns of the government, which is to ensure the tightening of the regulations of foreign nationals to make sure they are compliant with all our laws,” she said. — Gillian M. Cortez

Malacañang suggests 14th month pay law be made conditional

SENATOR VICENTE C. Sotto III’s proposal requiring private employers to give a 14th-month pay will be beneficial to the labor sector, according to Malacañang, but stressed that there should be exemptions to avoid the closure of companies that cannot afford it.

“Matutuwa ‘yong mga empleyado…. Kaya lang ang problema doon baka naman iyong ‘di naman gaano kalaki ang income, corporate income, syempre magrereklamo ‘yon (Employees will be happy… But the problem is, for those that do not have a substantial corporate income, of course they will complain,” Presidential Spokesperson Salvador S. Panelo told BusinessWorld in an interview on Tuesday last week.

He said provisions should be made as to who can avail of exemptions.

Mr. Sotto re-filed last Monday his Senate Bill No. 10, also known as An Act Requiring Employers in the Private Sector to Pay 14th Month Pay, ahead of the opening of the 18th Congress on July 22.

Labor Secretary Silvestre H. Bello III said in a media interview last Tuesday that the bill requires further study in Congress, noting that the enforcement of this measure should be subject to the capability of an employer because many private companies are already having trouble covering the 13th-month pay.

The bill proposes that the 13th-month pay be released “not later than June 14th and the 14th-month pay shall be paid not later than December 24th of every year…”

“The 13th month pay is gobbled up by Christmas expenses. We need extra earnings in the middle of the year to help ordinary workers in school and medical expenses,” he said.

Mr. Sotto has also clarified that Senate Bill No. 10 contains “exemptions.” — Arjay L. Balinbin

Pag-IBIG Fund sustains ‘best year’ 2018 momentum with record P37-B housing loans in 2019 H1

THE HOME Development Mutual Fund (Pag-IBIG Fund) released P37.07 billion in home loans in the first half of 2019, up 13% from P32.70 billion in the same period last year, and the highest in any first semester record. “Pag-IBIG Fund’s performance in the first six months of 2019 stands out as the best so far. Bigger loan releases and increasing number of borrowers,” Secretary Eduardo D. del Rosario, who heads the Pag-IBIG Fund Board of Trustees Housing and the Urban Development Coordinating Council, said in a statement last week. The Jan-June loans were released to 41,746 members, also a record-high. Of the total, P4.52 billion were for socialized housing loans secured by 11,894 members from the minimum-wage and low income sectors. Pag-IBIG Fund said another P21.7 billion worth of approved loans during the first half are ready for release to 10,511 members upon submission of post-approval requirements. “In 2018, we achieved our best year yet. Demand for our home loans last year was at its highest as the amount released for the whole year increased 16% to P75.31 billion while the number of borrowers rose 12% to 90,375. We are thankful because with the unending support of our members and industry partners, the double digit growth continues for the first half of 2019,” said Pag-IBIG Fund Chief Executive Officer Acmad Rizaldy P. Moti. He noted that the growing demand for home loans can be attributed to the agency’s “lowest-ever interest rates, high loan-to-appraised value ratio, long repayment period and much improved insurance terms.”

Manila City gov’t has accumulated over P100M in unutilized development fund

THE COMMISSION on Audit (CoA) has cited the Manila City government for failing to fully utilize its development fund (DF), which in 2018 alone amounted to P18.517 million. CoA said in its 2018 annual audit report that one of the reasons for not maximizing the development fund is the savings or unexpended balances, which were not re-appropriated to eligible development projects. “The previous year’s audit of the 20% DF (development fund) disclosed a total savings/unexpended balances of P17,744,639.34 for the implementation of development projects from CYs 2011 to 2016. In CY 2017, additional savings/unexpended balance amounting to P772,541.76 were noted,” said the report. The state auditors also noted that in the previous 24 years, development projects worth P95.408 million, which include road improvement and flood control projects, urban greening, and construction of house units, remained unimplemented. CoA said the failure to implement these projects “could pose risk that the desired socio-economic development as envisioned by the City will not be totally achieved.” The auditing agency also reported that the lack of proper planning resulted in the delay of the 47 awarded projects and non-procurement of 10 projects. — Vince Angelo C. Ferreras

CoA warns MIAA over disallowances with P167M in unrecovered amount

THE COMMISSION on Audit (CoA) warned the Manila International Airport Authority (MIAA) against granting loans to officers and employees which are not within prescribed rules, citing P167-million worth of uncollected disallowances as of Dec. last year. According to the CoA 2018 annual audit report, MIAA personnel who were issued with notice of disallowances (ND) from 1995 to 2000 but did not return the money were no longer connected to the agency. “Most of the persons liable for the ND’s covering the years 1995 to 2000 are already separated from service. There were minimal settlements in CY 2018 which were collected from the separation pay of some person’s liable who retired from service during the year,” said the report. The COA report said the MIAA management explained that the personnel in the NDs from 1995 to 2000 were not able to settle their disallowances “because at that time there were no Notice of Finality Decision and COA Order of Execution issued by COA.” It added, “Likewise, records/documents pertaining to the NDs in 1998 and prior years, can no longer be located.” — Vince Angelo C. Ferreras

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