LANDBANK launches new lending program for countryside lenders
STATE-RUN Land Bank of the Philippines (LANDBANK) has launched a new lending program that will assist countryside financial institutions (CFIs) affected by natural calamities, man-made disasters, pests and diseases and outbreaks like the coronavirus disease 2019 (COVID-19) pandemic.
In partnership with the Bangko Sentral ng Pilipinas and the Philippine Deposit Insurance Corp., LANDBANK has rolled out the Countryside Financial Institutions Enhancement Program-2020 Calamity Assistance Program (CFIEP).
The CFIEP will provide additional working capital to CFIs such as cooperative banks, rural banks, and thrift banks affected by extensions or defaults as a result of calamities.
LANDBANK said the program may augment the liquidity of affected CFIs and encourage them to continue lending, particularly to the agricultural sector.
“We hope that the CFIEP will help them recover from the damages and disruptions in their operations, and enable them to restore operational cash flows, thus, allowing them to continue lending to small farmers,” LANDBANK President Cecilia C. Borromeo said in a statement.
The program will be offered by LANDBANK to eligible CFIs at an amount equivalent to 90% of their affected existing portfolio or P10 million per institution, whichever is lower, provided that the loan amount does not exceed the institution’s borrowing capacity.
LANDBANK said the loan will have a 4.5% interest rate per annum, fixed for one year and subject to annual repricing after.
The loan is payable up to five years, with up to one year grace period on principal and interest rates.
“The CFIs are also expected to relend the fund to their affected end-borrowers at concessional interest rates,” LANDBANK said. — Revin Mikhael D. Ochave
How PSEi member stocks performed — May 28, 2020
Here’s a quick glance at how PSEi stocks fared on Thursday, May 28, 2020.
Peso ends sideways on lockdown easing prospects
THE peso closed sideways on Thursday as investors await clearer directions on lockdown measures while continuing to fear further spread of the virus.
The local unit ended trading at P50.69 per dollar yesterday, depreciating by a centavo from its P50.68 close on Wednesday, according to data from the Bankers Association of the Philippines.
The peso opened the session at P50.63 per dollar, which was also its intraday best. Meanwhile, its weakest was at P50.80 versus the greenback.
Dollars traded fell to $765.28 million on Thursday from the $856.48 million on Wednesday.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the slightly weaker peso came amid fears of the continued spread of the virus.
“The peso closed slightly weaker amid bigger increase in COVID-19 (coronavirus disease 2019) cases in the country recently,” Mr. Ricafort said in a text message.
New infections in the country rose by 380 to 15,049 on Wednesday, according to health officials. This is the highest daily jump since the 414 infections logged on April 6.
Meanwhile, deaths rose to 904 while recoveries reached 3,506.
Meanwhile, a trader said the peso’s movement on Thursday was on the back of a wait-and-see approach from the market as guidelines for lockdown measures starting June have yet to be released.
“The peso weakened slightly as investors remained cautious on future quarantine facilities beyond May 31,” he said in an email.
President Rodrigo R. Duterte was expected to make a national address Thursday night to discuss the quarantine measures to be implemented in the country in the coming months.
Earlier, Metro Manila mayors said they will recommend the National Capital Region’s transition from a modified enhanced community quarantine to general community quarantine by June, in a bid to gradually reopen the economy.
For today, Mr. Ricafort gave a forecast range of P50.70 to P50.90 while the trader expects the local unit to trade between the P50.60 to P50.80 per dollar levels. — L.W.T. Noble
Hopes of relaxed lockdown lift Philippine stocks
By Denise A. Valdez, Reporter
LOCAL SHARES ended with gains on Thursday as investors looked forward to the relaxation of the Metro Manila quarantine next week.
The 30-member Philippine Stock Exchange index (PSEi) added 46.44 points or 0.84% to close at 5,570.22, while the broader all shares index picked up 19.54 points or 0.58% to 3,348.66.
“The market went up as investors seem to be optimistic over the anticipated gradual easing of lockdown measures in Metro Manila and other major cities of the country,” Timson Securities, Inc. Trader Darren T. Pangan said in a text message.
President Rodrigo R. Duterte was scheduled to address the nation Thursday night, with most expecting that he’ll announce a relaxation of the Metro Manila lockdown by June 1 following recommendation of city mayors.
Ideally, this would allow increased movement for people and goods as work is set to resume in more sectors and industries.
Mr. Pangan said if the optimism is sustained on Friday, the PSEi may end the week above the 5,600 level.
However, for PNB Securities, Inc. President Manuel Antonio G. Lisbona, the local market seems to still be moving within the 5,400 to 5,600 range.
“The market is still consolidating between 5,400 and 5,600, which implies that there is still some tentativeness or indecision in the market,” he said in a text message.
“There seems to be a resurgence in the number of new cases the past days which if persisting, might force authorities to halt the transition to (a relaxed lockdown) and further delay efforts to restart the economy,” he added.
The Health Department reported this week the highest number of new coronavirus disease 2019 (COVID-19) cases in a single day in more than a month, reaching 350 new cases on Tuesday, the largest since April 6’s 414.
The Philippines’ COVID-19 cases as of Wednesday stood at 15,049, where 10,639 remain active.
But if optimism prevails, Mr. Lisbona said the bulls may push the market above 5,600 on Friday.
Most sectoral indices ended Thursday’s trading in green territory. Financials rose 29.27 points or 2.69% to 1,116.61; property grew 38.07 points or 1.38% to 2,795.90; holding firms improved 22.29 points or 0.40% to 5,595.98; and services climbed 1.44 point or 0.10% to 1,317.14.
On the other hand, mining and oil lost 47.61 points or 1.06% to 4,417.62 and industrials trimmed 9.57 points or 0.13% to 7,190.80.
Some 2.81 billion issues valued at P4.47 billion switched hands on Thursday, rising from the previous day’s 1.51 billion issues worth P5.48 billion.
Advancers outnumbered decliners, 113 against 75, while 39 names ended unchanged. Net foreign outflows increased to P478.14 million from P209.92 million.
Bailouts tied to firms’ ability to raise bank financing
THE government said a proposed equity infusion program for large companies will match whatever amount an individual firm can raise from banks, while program participants cannot declare dividends, must freeze executive pay, and defer spending on non-essentials.
At a forum organized by the Manila Times Thursday, Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said the government’s economic team is planning to help recapitalize large firms deemed strategic which are unable to deal with the economic shock of the coronavirus crisis.
Mr. Chua said the proposed equity infusion program will “match whatever banks will be lending them.”
“For the large firms, we are proposing a time-bound, joint venture (structure) with our GFIs (government financial institutions) and the private sector to provide a targeted (and) time-bound equity infusion to the bigger firms that are strategic, matching whatever banks (are) lending them,” Mr. Chua said during the online forum.
Among the conditions for participating in the program, “they cannot pay dividends, increase their executive pay (or) spend on luxuries or representation and so on. These are in the plans right now,” he added.
According to Finance Assistant Secretary Antonio Joselito G. Lambino II, other details of the recapitalization program are still being drafted.
In a separate forum on May 15, Mr. Chua said firms in the tourism and travel industries could be among those qualified for the program as they were among the hardest-hit “but there are many more that we are hoping to help.”
He also said then that a priority was to “minimize the fiscal risk for the government.”
The recapitalization program is part of the three-phase recovery program proposed by the economic team to Congress.
Several recovery bills are now being discussed at Congress including the CREATE bill or the Corporate Recovery and Tax Incentives for Enterprises Act, which calls for an immediate reduction in the corporate income tax to 25% this year from 30%.
For smaller firms, Mr. Chua said government-backed loans through PhilGuarantee will help small and medium enterprises obtain easier access to credit while the wage subsidy program helped them retain their employees during the lockdown period.
He said the economic team is also hoping to deploy the capital of state-owned banks, which will act as wholesale banks for smaller banks, rural and thrift banks, among others, to facilitate micro firms’ access to credit.
The economic team has proposed a P170 billion stimulus program to help the economy get back on track, which includes P50-billion in capital infusions for state-owned banks, and the rest to support additional funding for guarantee loans, mass hiring of contact tracers and the equity infusion program. — Beatrice M. Laforga
House panel approves P1.5 trillion stimulus substitute bill
By Genshen L. Espedido
THE House of Representatives’ Defeat COVID-19 Committee on Thursday approved a substitute measure to House Bill 6709 which calls for a P1.5-trillion spending program over three years to address slowing economic growth and create jobs.
Also known as the proposed COVID-19 Unemployment Reduction Economic Stimulus (CURES) Act of 2020, the measure targets increased spending on readily-implementable health, education, agriculture, local roads and livelihood spending items.
The proposed law will support the construction of barangay health centers, municipal and city hospitals, digital equipment for testing, “tele-health” services and e-prescription systems, post-harvest facilities, and food depots, among others.
Other eligible infrastructure projects include walking or bicycle lanes; bridges across creeks and irrigation canals; evacuation centers and disaster emergency facilities; and roads going to tourist sites, beaches, mountain parks, new business districts or economic zones, and hubs for small and medium-sized enterprises.
Also qualifying for funding are farm-to-market roads, roads connecting communities to schools and health facilities; the Enhanced Sustainable Livelihood Program of the Department of Social Welfare and Development (DSWD), the Enhanced TUPAD Program and Barangay Emergency Employment Program of the Department of Labor and Employment (DoLE), and access to credit and financing for micro, small and medium-scale enterprises.
An initial P500 billion of the CURES Fund will be released in the first year of the 2020–2022 economic stimulus period and employment program, with P500 billion more for release in the second year, and the remaining P500 billion in the third year.
After the third year of the program’s implementation, the bill allows for Congress to enact legislation either extending or terminating CURES. Post-termination, surplus funds will be placed at the disposal of the following year’s national budget.
Infrastructure projects will be undertaken “in conjunction” with the Balik Probinsya, Bagong Pag-Asa program, which was authorized by President Rodrigo R. Duterte via Executive Order (EO) No. 114, with the objective of decongesting Metro Manila.
“We seek to end the unemployment problem through massive investment on public infrastructure, which we describe as shovel-ready projects. This strategy, at the same time, aims to provide a solid impetus to the government’s Balik-Probinsya program by creating jobs in the countryside,” House Majority Leader and Leyte Representative Ferdinand Martin G. Romualdez said in a statement Thursday.
The committee also approved the substitute measure to House Bill 6623 or the Better Normal for the Workplace, Communities, and Public Spaces Act of 2020, which requires social distancing and the use of face masks in public under the so-called new normal.
Under the bill, gatherings and the flow of people in public markets, parks and plazas will be “highly regulated.”
The operation of motorcycle taxis will remain suspended to prevent the spread of the virus through shared helmets and close physical contact between the rider and passengers.
The bill also seeks to suspend classes and other school activities until further notice “without prejudice to the academic freedom and levels of autonomy of institutions of higher learning,” provided that no student is unreasonably penalized for their inability to participate in online learning.
Restaurants may reopen with take-out and delivery service only, while malls and other commercial establishments must limit the number of people inside their premises and enforce contact-less sales and customer service.
A substitute measure to House Bill 6707 which seeks baseline COVID-19 testing for the vulnerable members of society was also approved by the panel.
The measure requires the Philippine Health Insurance Corp. (PhilHealth) to shoulder the cost of testing for vulnerable members of society who shall undergo baseline testing to detect COVID-19 infection.
All three bills are awaiting second reading at the chamber.
DTI says Price Act fines do not deter violations
THE Department of Trade and Industry (DTI) said Thursday it will seek amendments to the Price Act to upgrade the prescribed fines for price manipulation and other violations.
Trade Undersecretary Ruth B. Castelo said at a Senate hearing that fines prescribed by the law, ranging from P5,000 to P2 million, are sufficient to deter violations.
“Hindi natatakot ang tao (People are not daunted) because they can always pay P10,000 and then commit the violation again, especially big retail stores,” Ms. Castelo said.
The Department recommended a minimum fine of P50,000 and the maximum to P2 million for price manipulation and P3 million for violating price ceilings.
Republic Act No. 7851 currently penalizes individuals found guilty of hoarding, profiteering and cartel activity with five to 15 years’ imprisonment plus a fine of between P5,000 and P2 million.
Violators of price ceilings are currently liable to be sentenced to one to 10 years’ imprisonment and a fine of between P5,000 and P1 million.
Ms. Castelo said there may be a need to reconsider the suggested retail price (SRP) and make it mandatory to allow the DTI to apprehend retailers selling above the SRP.
The law “does not give us authority to apprehend, penalize or catch violators,” she said.
“We don’t know if we need to change the term suggested or make it mandatory at least for basic and prime goods.”
The committee was tackling Senate Bill No. 1454, which seeks to expand coverage of goods that are subject to automatic price controls, to include personal protective equipment and medical devices.
The bill also proposes to consider an epidemic, pandemic or any form of public health emergency as among the conditions that would trigger automatic price controls.
Ms. Castelo proposed to include other basic commodities in preparation for disasters that may hit the country. She also proposed to include prime commodities to those subject to automatic price controls.
She said a new crisis may erupt which will force further amendments. “In preparation for the big one, ‘yung mga emergency na darating sana (and other emergencies that may take place) we’ll be ready,” she said. — Charmaine A. Tadalan
Special session proposed to pass CREATE bill, other critical measures
A LEGISLATOR has asked President Rodrigo R. Duterte to seek a special session of Congress in order to pass “critically-needed” measures to boost the economy, such as the proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE).
In a statement Thursday, Albay Representative and House Ways and Means committee chairman Jose Maria Clemente S. Salceda said that the House intends to pass its stimulus recovery program before it adjourns, and that it has already “done its duty of passing the old version of CREATE, which is CITIRA (Corporate Income Tax and Incentives Rationalization Act), and will in fact adopt the Senate version if they pass it on Monday or Tuesday next week.”
“We have to get both of these measures done now. I would of course prefer to have them approved for the President’s signature next week, but if we cannot, the best alternative is a special session,” he said.
The CREATE bill is the revised form of CITIRA, which accelerates the timetable for reducing the corporate income tax to 25% from the current 30%.
The tax rate will be further reduced by 1 percentage point annually beginning 2023 until 2027. In CITIRA, the bill proposed to gradually reduce the rate until it hits 20% in 2029.
The tax reductions were accelerated due to the coronavirus disease 2019 (COVID-19) crisis. The bill is now positioned as a means of attracting investment from foreign companies looking to move out of China.
Mr. Salceda estimates that about $12 billion in foreign investment has been foregone due to the two-year delay in passing corporate tax reform legislation, which was approved by the Cabinet in January 2018. He added that a delay in the passage of an “adequate” economic recovery plan costs the economy up to P100 billion in new economic activity every week.
“Every single week that we are unable to pass an economic stimulus plan and the corporate tax reform costs us hundreds of billions of pesos in foregone opportunities every week. At that rate, hindi na po kayang palagpasin pa hanggang July (It cannot wait beyond July). June is the time to get them enacted, so that we can still reap the benefits in the second half. Kami po sa House (We in the House) are confident that if we have to, we can get both approved by June 3. If the Senate cannot, the President should extend session and not terminate until they get both passed,” he said.
Finance Secretary Carlos G. Dominguez III said that the tax reform package entrusts in the private sector the funds and resources needed to “fire up the economy and quickly bring back the country to the path of high and inclusive-growth.”
“There is no better time to reform our corporate income tax system, and modernize our fiscal incentives system than now. This could be the most important economic reform in decades. As statements of our partners in industry and civil society show, the economy can no longer bear any delay in this reform. Now is the best time to do it,” Mr. Dominguez said in a statement Thursday.
Mr. Dominguez said that 5% CIT reduction is expected to reduce government revenue by P42 billion in the second half of the year if CREATE is implemented by July, and by another P625 billion over the next five years. The tax cuts are expected to fuel economic activity as businesses, especially micro, small and medium enterprises (MSMEs), retain more funds to support their operations and keep employees at work.
Business groups on Thursday expressed their support for the immediate passage of CITIRA, saying that the measure will be a “life-restoring boost to market confidence, providing the most direct, cost-efficient and instant relief to businesses suffering from business reverses due to COVID-19.”
“The instant 5% tax savings by July is a direct infusion of financial assistance to businesses, giving them more resources to retain employees and to keep up with financial difficulties. As an investment- attracting move, the CIT cut drastically alters, for the better, the financial prospectus of the Philippines,” according to the joint statement of 32 groups.
Aside from the tax cuts, CREATE also extends the sunset period for current incentive recipients from two to seven years; lengthens the effectivity to five years of the net operating loss carryover (NOLCO) for non-large taxpayers from the current three years; and grants discretion to the Fiscal Incentives Review Board (FIRB) to recommend to the President longer incentives and additional non-fiscal incentives for critical investments.
“We humbly request the Senate and the House of Representatives to move quickly and decisively to push CREATE forward and ensure its passage urgently, ideally before Congress adjourns on June 3. Any further delay comes at the risk of losing more jobs and hemorrhaging more investments,” according to the joint statement. — Genshen L. Espedido
Higher demand seen likely to pull up June WESM prices
PRICES at the Wholesale Electricity Spot Market (WESM) are likely to increase with demand expected to pick up as industries and commercial establishments set to resume operations in June, its operator reported.
Based on the projection of the Independent Electricity Market Operator of the Philippines (IEMOP), the trading price may rise to as much as P4.27 per kilowatt-hour (kWh) next month when businesses in Luzon and the Visayas are expected to restart 70% of their operations under general community quarantine (GCQ).
It projected peak demand at 13,368 megawatts (MW), against a stable average daily supply of 14,970 MW.
“With an increase in demand, we need more production from the next available plant. Given ‘yung offer behavior na nakikita namin ngayon (Based on the offer behavior we are seeing), the projected price with this kind of aggressive demand… tataas ng kaunti (will slightly increase) to P4.27,” IEMOP Chief Operating Officer Robinson P. Descanzo told reporters.
Between March 26 and May 26, IEMOP recorded an actual average price of P1.77/kWh with average daily supply at 13,340 MW and peak demand at 11,567 MW.
Should only 60% of industrial and commercial operations resume in June, the price is expected to settle at P1.85/kWh, or P0.11 less than the average price in May, with peak demand at 12,153 MW and the same stable average supply.
IEMOP assumed a stable supply in the month due to the expected increase in the contribution of hydropower plants in the generation mix and cooler temperature.
The outlook also considered a scenario of a power plant outage resulting in the loss of over 1,000 MW.
During the enhanced community quarantine (ECQ) between March 15 and May 15, power demand declined 15% to 10,053 MW from the pre-lockdown levels.
After most of the country transitioned into a more-relaxed quarantine on May 16, demand almost returned to the level recorded between Feb. 26 and mid-March, which was about 11,144 MW.
“Overall, during the ECQ period, bumaba iyong demand natin (demand fell) by almost 15% compared to the pre-ECQ levels. Then in the post-ECQ period nag-increase na gradually ‘yung demand (demand increased gradually),” Mr. Descanzo noted.
Meanwhile, power supply fell by 200 MW in May following multiple power plant outages and the transit of Typhoon Ambo.
This led to a tighter supply margin of 2,356 MW with supply at 13,226 MW and a total system requirement, or the combination of demand and reserve levels, of 10,870 MW. This compares with April’s 3,789 MW margin.
Coal remains the most utilized energy source during the quarantine despite a lower utilization level of 53%, compared with 70% of capacity used before entering the lockdown phase. — Adam J. Ang