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Royal Air expands with new routes

By Denise A. Valdez
Reporter

YOUNG homegrown carrier Royal Air Philippines is expanding the number of its commercial flights with routes linking Cebu to Manila, Davao, Puerto Princesa, Cagayan and Caticlan.

By the end of the month, it expects to welcome an Airbus A319, which it plans deploy for flights to Bangkok, Kuala Lumpur, Hong Kong and Singapore.

“We expect the aircraft to be here by end of the month, and work out a few certifications from the Civil Aviation Authority of the Philippines so we can use it by July. We’re generally looking at Clark, Bangkok, Kuala Lumpur, Hong Kong and Singapore,” Royal Air Philippines Chief Executive Officer Eduardo C. Novillas said in a press launch Friday.

“We are looking at having three Airbus aircraft this year, and two for the succeeding year, and two every other year. That’s the plan. Hopefully by six years, we have 10 Airbus aircraft that we plan to operate within the market,” he added.

Royal Air started commercial flights in 2017, when a group of three travel agencies invested in the company, and brought in three 97-seater British Aerospace AVRO 146 RJ-100 series, which comprise the company’s current fleet.

Aside from the new routes out of Cebu, Royal Air operates daily commercial flights from Clark to Caticlan and Puerto Princesa.

“As a locator status in Clark, we enjoy the privilege in Clark, which means we are basically tax-free. Our importations for aircraft parts, aircraft equipment are tax free. That’s why if you’re going to ask, ‘Is your rate competitive?’ I can only say yes, because we translated those incentives to the fares so we can go with the lower fare,” Mr. Novillas said about the affordability of Royal Air fares.

The Royal Air website shows a roundtrip ticket from Clark to Caticlan next month could cost as low as P3,922, inclusive of a free 10 kilogram allowance for baggage. Mr. Novillas said they also offer free snacks and bottled water inside the plane.

“The challenge is we have to let people know who we are, what do we do, and how we can serve them. We are not a legacy airline… We are also not a low-cost carrier… What we can do is we call it a ‘boutique’ type of airline,” Mr. Novillas said.

“We just give a cupcake and a bottled water for free. That’s the basic thing that we have. We also give 10 kilos baggage allowance for free. That’s the branding that we want right now,” he added.

Royal Air also offers free in-flight entertainment through its partner provider, Singapore-based Sapphire.

The bulk or 70% of the company’s revenues come from charter flights.

“As a start-up company, I think more or less it’s going to be the charter that will sustain us. 70% would come from the charter,” he said.

The company currently offers charter flights from Lal-lo to Macau via Tuguegarao, mostly catering to Chinese tourists. It also used to offer charter operations to Kalibo from Taipei and other secondary cities in China.

“We are a product of travel agencies who are very familiar with the China market in terms of charters. That’s the main goal,” Mr. Novillas said.

“The general concept is that we wanted to do charters in the evening, because my experience also from Tigerair Philippines, we do a lot of charters in China. These are mostly Chinese nationals who wanted to go to Boracay. We need a lot of that, so that’s the market,” he added.

The Royal Air chief said the company aims to capture more of the Chinese tourists who are flying out of secondary cities, but are very much attracted to the Philippine beaches.

In the future, Royal Air is also setting sights on flying commercially to Tagbilaran, San Vicente, Lal-lo and Macau.

“We have a (Civil Aeronautics Board)-approved CPCN (Certificates of Public Convenience and Necessity) that’s good for five years. So we can operate domestic and international, scheduled and non-scheduled flights. That’s good until 2023,” Mr. Novillas said.

Brazil rides wave of soybean sales to China as US trade war rages

SAO PAULO — Soybean trading in Brazil has gained momentum in recent days, driven by a wave of Chinese demand, boosting prices and premiums paid at ports amid a weakening of the Brazilian currency, according to analysts.

An estimated 5.5 million tonnes of soybeans have traded over the past few days, and are slated to leave Brazilian ports in June, July and August, according to estimates by the Center for Advanced Studies in Applied Economics (Cepea) issued on Friday.

The boost in trading has been driven by the failure of the Washington and Beijing to resolve their longstanding trade dispute, which made China turn to Brazil for soybean supplies, the analysts said.

Chinese demand also comes at a time when the US dollar hit the highest against the Brazilian currency in more than seven months, boosting the value of Brazilian soybean exports when translated into reais.

“There has been an important, interesting turn of events,” said Lucílio Alves, a Cepea researcher, referring to the escalation of the trade war. With the weakening of the Brazilian currency making imports cheaper from the point of view of the Chinese buyer, demand has shifted there, he said.

The US dollar has risen more than 3 percent against the Brazilian real for the week, reflecting domestic political turmoil and global uncertainties spurred by the trade war.

“Soy prices had been steadily falling [internally] but have now recovered well,” noted the Cepea researcher.

The price for shipping soybeans out of the Port of Paranaguá rose from $326.48 per tonne in early May to $345.68 per tonne free-on-board for shipment in June, according to Cepea.

Paranaguá June port premiums rose to $1 per bushel, the highest value since early December 2018 and more than double the levels seen earlier in the month.

According to T&F Consultoria, Brazilian farmers traded in more than 700,000 tonnes of soybeans on Thursday alone, with half coming from Mato Grosso state.

“Traders are saying the market is very frantic this week,” said Luiz Pacheco, an analyst with T&F Consultoria.

Brazil is at the peak of the exporting season, right after farmers finished collecting the country’s second largest crop in its history, estimated at over 114 million tonnes, according to government data.

“With the harvesting over, and considering some producers were hoarding grains, this might be a good time to lock in trades,” Alves said. — Reuters

Omega lambs: New Zealand responds to alternative protein threat

WINDWHISTLE, NEW ZEALAND — At Dave Harper’s family farm in New Zealand’s scenic Canterbury region, a painstakingly bred flock of lambs is grazing, not on grass, but on a field of herbs selected to unlock healthy omega-3 fatty acids in the animals’ meat.

Known as ‘Te Mana lambs,’ they are part of an effort by the island nation to future-proof its agricultural sector from the threat of meat and dairy substitutes based on synthetic proteins or plant-based alternatives.

Aimed at occupying a similar niche as premium Wagyu beef, each Te Mana lamb has a unique number and has been tracked, weighed and scanned since birth.

“We’ve got to tell our story better and we can’t do that unless we collect the information…everything’s got to be right,” said Harper, whose farm hosts the lambs for their final few weeks grazing on chicory herbs after being brought down from the mountainous high country.

The lambs have received millions of dollars in government funding in a joint venture with meat company Alliance Group. Both want to cut the country’s dependence on shipping bulk commodities and move up the value chain into luxury products with burnished ethical, environmental and health credentials.

New Zealand relies on agricultural farming and processing for 8% of its GDP, among the highest in the OECD so has a lot to lose as synthetic food gathers momentum.

With an ideal climate, plenty of arable land and a long farming history, New Zealand is the world’s top dairy exporter, and ranks second and seventh for sheep-meat and beef exports respectively.

“I see this as both an opportunity and threat to New Zealand, depending on how we react to this emerging reality,” New Zealand Agriculture Minister Damien O’Connor told Reuters. “Animal welfare, labor standards, environmental management and food safety systems must be the best in the world.”

DISRUPTIVE THREAT
The global meat substitutes market is predicted to reach $6.4 billion by 2023, according to research firm Markets and Markets, still a tiny fraction of the multi-trillion dollar traditional meat market but growing quickly. Asia, New Zealand’s top agricultural export market, is the fastest growing region.

High-profile investors are pouring in.

Vegan burger maker Beyond Meat Inc, which counts Microsoft founder Bill Gates and actor Leonardo DiCaprio among its backers, saw shares surge after its initial public stock offering, reflecting ravenous investor demand.

Impossible Foods, which makes a meatless plant-based burger and is backed by celebrities like Serena Williams and Katy Perry, this week announced it raised $300 million ahead of a possible initial public offering.

Dairy is also at risk, particularly in the ingredients business, which relies on products such as milk powder and dairy-protein casein in everything from cakes and cookies to salad dressing and chewing gum.

San Francisco-based Perfect Day plans to roll out dairy-like ingredients based on yeast cultures within the next two years, while Ripple Foods is selling a milk substitute, derived from yellow peas, throughout the United States.

New Zealand’s Fonterra, the world’s biggest dairy exporter, has taken note. It made a modest investment — it has not disclosed the exact value — in US-based Motif, a start-up using fermentation technology to create ingredients that mimic milk and egg proteins.

“We’re trying….to position ourselves so if this was to take off and become a huge demand, that we’re well placed to try and tap into it,” said Judith Swales, head of Fonterra’s consumer and foodservice business. “We can’t say that we don’t see an increasing rise in veganism and vegetarianism.”

After safety scares in China and criticism from environmentalists at home, Fonterra has also introduced a ‘trusted goodness’ seal to its products, which it says reflects increased efforts to improve traceability and ensure its grass-fed status and animal welfare meet independent standards.

CHANGES COMING
Still, many animal and environmental advocates say damage from industrial agriculture is unavoidable.

Complaints include the removal of male ‘bobby’ calves from their mothers, methane emissions from animals, and chemical and agricultural runoff polluting New Zealand’s once pristine rivers and lakes.

The government has introduced new requirements for the agriculture sector to slash methane emissions by 10 percent in the next decade, drawing a vocal backlash from farmers who say they have already improved practices significantly. The industry is banking on its clean, green image to capture a niche global pool of consumers willing to pay a premium for ethically produced real meat and dairy.

“There’s going to be people who don’t always want to have the synthetic stuff and having the organic, outdoor pasture fed stuff is definitely going to have a huge part of that market,” said entrepreneur Craig Piggott.

His agri-tech start-up, Halter, has won backing from Silicon Valley venture capitalists, some of whom also invest in synthetic proteins.

North Island-based Halter is in the trial phases of a device, worn around the cow’s necks, that allows farmers to monitor cattle health from an iPad, much like a human fitness tracker.

The device can help to share information with consumers and uses noises and vibrations to direct livestock away from waterways without the need for farmhands, dogs, or fences.

Other agricultural projects, from milk powder with immune-enhancing probiotic properties to farm management and product tracing software, are attracting government research and funding through the Ministry of Primary Industries.

The partly state-funded Primary Growth Partnership plans to spend NZ$726 million ($478 million) on innovative projects in agriculture and horticulture. Te Mana lambs received NZ$12.5 million from the fund for the decade they took to develop with the help of a full-time geneticist and a handful of farmers working to develop a new niche for one of New Zealand’s most famous foods.

“There are some big changes coming,” said Harper, 57, one of the farmers. “We’re going to see more changes in the next 10 or 15 years than we’ve ever seen before.” — Reuters

Two hits, one miss (but it might work for oilier skin)

By Zsarlene B. Chua
Reporter

BECAUSE of the sweltering heat over the past few months, I, who typically include seven to 10 steps in my daily skincare routine, made it my mission to create a simpler routine that is lightweight, that could withstand the heat and yet give me everything my skin needs.

While I do like trying out new skincare products, I generally am very careful when picking products because I have sensitive and dry skin which means a lot of products do cause reactions and breakouts so I stick to brands I know usually work for me — that is why I was so excited when Kiehl’s launched its Calendula Serum-Infused Water Cream (P2,650 for 50 ml or P1,750 for 28ml).

The serum-infused water cream is the newest addition to the American skincare brand’s Calendula line which is formulated for people with sensitive skin and/or oily skin.

“Fans of the Calendula line have always asked for a cream product because they already have the basics: a foaming cleanser, a toner, and a mask,” Joan Hwang, senior product manager for Kiehl’s Philippines, told BusinessWorld during the launch at the tail-end of April at the Gallery by Chele restaurant in Bonifacio Global City, Taguig.

The addition of the cream — which functions as both serum and moisturizer in one — completes the Calendula routine, Ms. Hwang explained.

This writer tested the product for almost a full month and added it to my routine (which includes the aforementioned Calendula Toner and the brand’s Daily Reviving Concentrate and Midnight Recovery Concentrate) expecting a cream that would be both lightweight, soothing, and moisturizing all at once. And it does its job perfectly at night — though I do tend to go lighter on applying it during daytime because I feel that it will melt from the heat.

As with most Kiehl’s products, a little goes a long way. It’s texture is a bit reminiscent of the Avene Hydrance Optimale Cream in Gel (P2,200 for 50ml) though the Calendula gel feels a bit more full-bodied and does a better job in hydrating my skin.

Oh, and it smells like a Chupa Chups chocolate lollipop.

Do I like it? Yes, but I don’t think I love it just yet because I am still hesitant over parting ways with my beloved Hortaleza MD Perfecting Cream (P700 for 30ml) which has been my go-to day/night cream for almost 10 years now.

IT’S SKIN POWER
A week after I was given the Calendula gel, I purchased the It’s Skin Power 10 Formula GF Effector (P390 for 30ml) from Althea Korea, a Korean online beauty store. The essence is said to include ginkgo biloba leaf water and licorice extract to provide “hydrating, anti-inflammatory, anti-aging” properties while also “brightening the skin” and restoring the balance of the skin’s “oil-to-moisture” levels, according to the product description on the website.

Those are magic words in my book as I made it a point to start using anti-aging products now that I’ve turned 25.

The essence is so watery-light that at first I used a whole dropper’s worth all over my face twice daily because three drops weren’t cutting it as it gets absorbed really fast.

But after a week, I started using less of the product because, one, I realized how wasteful it is and how much money I’ll have to spend if I use too much product; and, two, it feels like my skin has adjusted and is hydrated enough to only need the usual three drops.

Do I like it? I do, but I do feel I need to use it for a longer period in order to ascertain whether it will work its magic and remove all the fine lines I accumulated because I sleep late on most days.

Does it work? It did hydrate my skin and it did calm a few breakouts (not all).

Is it worth a try? Yes, because it is pretty affordable and is a good introduction to the wonderful world of skincare essences — It’s Skin has a dozen or so essences with different formulations created for different skin concerns.

ALTHEA MILK PEEL CREAM MASK
Finally, the last thing I tried in the past few weeks is the Althea Milk Peel Cream Mask (P490 for 50ml) which I also purchased from Althea Korea. It is said to have both AHA and BHA extracts which gently exfoliate the skin. It also has casein protein from milk “to revitalize and moisturize the skin,” according to the description on the website.

But the biggest selling point of the product is the novelty: it is a clay mask that turns into a whipped cream mask and finally a bubble mask.

Honestly, I bought it because of the novelty and because I’ve been searching for a good exfoliator that won’t irritate my skin for about two years now. I used to use apricot scrubs, then strawberry scrubs, and recently brown sugar scrubs, but never chemical exfoliants like AHA and BHA so I bit the bullet and bought it.

I previously bought a clay mask from L’Oreal because I thought my skin would benefit from its pore-clearing properties but it only irritated my skin and left my skin tight and dry despite buying the hydrating variant, so I don’t have the best experience when it comes to clay masks, but I was incredibly hopeful this would work for me.

Spoiler alert: It didn’t. Like my previous experience, it left my skin irritated and so dry that I needed several swipes of toner just to restore my skin’s moisture balance.

But, hey, I had fun applying it, which should count for something.

While there’s a bit of a learning curve during application. You pump out (which wasn’t easy) a small dollop of the mask before lathering it on your face, and it quickly turns into cream upon application and if you let it sit on your face for a minute (or less), you get a tingly sensation as bubbles form. After popping the bubbles by once again lathering your face, the fun ends and you have to wash your skin and run to your toner because it does not leave your face hydrated.

But my skin is dry so those folks with oilier skin might love this product.

Do I regret buying it? Yes. And so the search for a good chemical exfoliant continues.

Isuzu, Wuerth enter into parts partnership

Isuzu Philippines Corporation executives together with Wuerth executives, during the ‘I LOVE ISUZU’ campaign launch.

STRETCHING the full potential of its parts sales business, Isuzu Philippines Corporation (IPC) entered into a one-year partnership with the Philippine division of the Wuerth Group starting last April 1.

In the partnership, Wuerth will manufacture the Isuzu Silicone Spray (500mL) which removes unusual squeaking sound on window glass run channel and provides good finish on plastic and rubber; the Isuzu Brake Cleaner (500mL), cleans and eliminates dirt and grease on brakes; and the Isuzu Brake Paste (5.5 grams) to prevent unusual noise or squeaking on brakes. Aside from these, Wuerth is also responsible in shipping these products directly to IPC’s dealer network.

Silicone Spray / Brake Paste

Isuzu’s commitment to be a reliable partner strengthens by offering only high-quality products manufactured by Wuerth, one of the leading quality brands for assembly technology. Isuzu guarantees that through these new products, customer satisfaction will increase. Isuzu vehicle parts and cleaning items will be available at Isuzu dealerships, making it a one-stop shop to offer customer convenience.

The German-based Wuerth Group, founded in 1945, is a worldwide wholesaler of chemicals, electronic and electromechanical components, installation material, and automotive hardware. Its time-tested automotive parts-related products have passed the stringent standards of both IPC and Isuzu Motors Limited in Japan. As such, IPC guarantees that all its authorized dealers across the country use only genuine parts, accessories and lubricants in its trucks and light commercial vehicles.

Why social enterprises need to be nurtured

By Vincent Mariel P. Galang
Reporter

“Ten Filipino Social Enterprises were introduced to potential investors, which are part of the Innovation for Social Impact Partnership (ISIP), a three-year project that aims to accelerate and sustain the capacity of social enterprises.”

IN boosting social enterprises, the project is contributing to the country’ attainment of the Sustainable Development Goals. It is co-implemented by the United Nations Development Program (UNDP), the Philippine Development Foundation (PhilDev), and the Australian embassy in the Philippines.

“I have to say, in the Philippines, the culture of creativity, is so strong. Someone can look at the situation, and think abstractly, and then find a solution. The second element is the demographics in the Philippines,” Titon Mitra, resident representative of UNDP Philippines, said during the press conference to introduce the enterprises.

“So, if you marry the culture of creativity with the demographics, you could see the huge potential,” he said. “Third factor, and this is what we are trying to address, is just the sheer volume of start-ups in the Philippines. There [are] 164,000 social enterprises, the problem, however, only 10% of those will succeed and become viable, bankable businesses with real growth, and that is what we are trying to beginning to address.”

Emil Benjamin B. Tapnio, program director of PhilDev said the idea is to support social enterprises for them to be able to scale up. Collectively they will be able to attain and sustain the UN Sustainable Development Goals, he added.

“We specifically focused in social enterprises because we thought, in a country such as the Philippines, a developing country, we need businesses that will provide solutions to societal problems,” he said.

The social enterprises introduced during the Social Enterprise Showcase held on May 10 in Makati City were: Bambuhay, a company that creates inclusive and eco-friendly solutions through the use of bamboo to help the plant and create opportunities by empowering marginalized communities; Cleaning Lady, a cleaning services provider for those living in condominiums in Metro Manila, hiring unemployed mothers in underserved communities; Coffee for Peace, a company that uses coffee production as a tool to promote harmony among communities; Fame, which offers a tracking and monitoring system for fisherfolks; Gaz Lite, which offers a way to address energy poverty in the country.

Rounding out the list are Hiraya Water, a water management start-up building new solutions that are able to address inefficiencies in the water sector; Solar Solutions, a company that creates community development and disaster management system tied to community scale electrification and social enterprise; Taxumo, a company that provides a platform for automating, computation, filing and payment of taxes for small businesses, self-employed professionals, and freelancers; Uproot, which works with local communities to help them g row fresh produce without requiring to have the skills of a farmer; and Virtualahan, a tech social enterprise that promotes inclusion of persons with disabilities (PWD) to be able to excel in the workplace.

These companies were chosen from about 200 companies, and were trained under a six-month program, which involved series of training programs to access markets, talent, capital, and business guidance to upgrade their social impact, through the Social Impact Accelerator of the partnership. The P107-million fund from the Australian embassy will be used for three years, targeting to help about 50 social enterprises.

“Australia and the Philippines have had a long-standing relationship. Our diplomatic relationship extends nearly 75 years, and we are about to celebrate our 75th anniversary of that relation in 2021, but in terms of our development partnership, that is about 50-years old, as well. It’s a long-standing relationship and partnership we have with the Philippines,” Steven J. Robinson AO, Australian Ambassador to the Philippines said.

“We believe that by targeting micro, small, and medium enterprises, that actually creates some social impact. We can really assist through this ISIP project and create opportunities for Filipino people,” he added.

Mr. Tapnio said preparation is underway for the next call for the new batch of SEs to be added to the program.

“Based on the learnings from how do we run the first batch, we are going to implement it to the second batch. For the second and third batch, we are taking 20 each, so 20 social enterprises this year and 20 next year,” he said.

Yields on gov’t debt end flat on RRR cut

YIELDS ON government securities (GS) traded on the secondary market were flat last week amid ahead of the central bank’s decision to cut big banks’ reserve requirements in tranches.

On average, GS yields inched down by 1.9 basis point (bp) week on week, according to the PHP Bloomberg Valuation Service (BVAL) Reference Rates as of May 17 published on the Philippine Dealing System’s website.

“Most of the short-term Philippine interest rate benchmark yields (PHP BVAL yields) mostly lower for the third straight week, by as much as -0.09, after the latest -2 percentage points cut in reserve requirement ratio (RRR) of large banks (or additional peso liquidity infusion/money supply of about +PHP180 billion into the financial system, which fundamentally reduce the price of money or interest rates)…,” said Michael L. Ricafort, economist of the Rizal Commercial Banking Corp. (RCBC).

He noted the easing in short-tenored debt papers while most medium- to long-term notes corrected.

“[T]he cut in RRR in tranches…would already lead to some easing in some local interest rate benchmark tenors, especially if short-term tenors ease further (leading to some normalization of the local yield curve), as the markets already anticipate the staggered increase/improvement in the supply of peso funds in the financial system starting about two weeks from now, and about a month and two months thereafter,” Mr. Ricafort said.

“Weaker peso exchange rate partly caused the slight upward correction in most of the long-term PHP BVAL yields on a week-on-week basis, amid some profit-taking in the local stock market (in reaction to the profit-taking in the US/global stock markets, after US and China imposed higher tariffs on each other’s goods),” he added. — Carmina Angelica V. Olano

Meanwhile, a bond trader said the RRR cut led to profit-taking.

“The policy adjustment was widely expected. The decision to do it in tranches prompted profit taking among dealers,” the trader said.

Last Thursday, the Bangko Sentral ng Pilipinas (BSP) fired off a 200-bp phased reduction in big banks’ RRR from 18% to 16%. This was a week after it slashed benchmark interest rates by 25 bps in the face of easing inflation and slowing economic growth.

The cut will be implemented in three stages for universal and commercial banks: 100 bps effective May 31, 50 bps effective June 28 and 50 bps effective July 26.

This move follows a cumulative 200-bp cut in big banks’ RRR last year to 18%, which BSP Governor Benjamin E. Diokno had described in his first press briefing last March as still “really high.”

The BSP estimates that each percentage point cut in banks’ reserves will unleash some P90-100 billion into the economy.

Meanwhile, the peso plunged further against the dollar on Friday to hit a seven-week low as market participants responded to the RRR cut, ending the week at P52.63 against the P52.48 finish on Thursday. This was the peso’s worst close since it ended at P52.75 versus the dollar on March 28.

As for external factors, the US-China trade war escalated anew as the US imposed higher tariffs on Chinese goods, causing China to retaliate. The US hiked its tariffs to 25% from 10% on $200 billion of Chinese goods. In return, China hit back by raising its tariff rate on $60 billion worth of US imports to 20%-25% from 10%.

Treasury bills (T-bill) eased across the board, led by the 91-day debt papers which yielded 5.514%, down 9.1 bps from week-ago levels. The 182-day and 364-day T-bills went down 8.1 bps and 8.9 bps to yield 5.784% and 5.968%, respectively.

Bonds at the belly of the curve climbed, except for the two-year Treasury bond (T-bond) which closed at 5.794%, down 0.4 bp. The three- and four T-bonds yielded 5.758% and 5.740%, up 1.3 bp and 1.9 bp, respectively. Similarly, the five-, seven-, and 10-year papers’ rates went up 2.1 bps, 2.2 bps and 4.2 bps week-on-week to 5.739%, 5.763%, and 5.788%, respectively.

Yields on longer-term debt papers declined, with the 20- and 25-year T-bonds quoted at 5.951% and 6.046% on Friday, down 0.3 bp and 6.3 bps, respectively, from a week ago.

For this week, the bond trader expects yields to “trade sideways with downward (yields) bias as market players continue to digest everything that’s happening,” citing the local RRR and benchmark policy interest rate cuts, as well as the escalating US-China trade dispute.

For RCBC’s Mr. Ricafort, “short-term local interest rate benchmarks would continue to ease, in anticipation for the effectivity date of the first tranche of the RRR cut… The markets have the tendency to price in/factor in these positive developments in advance, in terms of some further downward adjustments in local benchmark yields in the coming week, in anticipation of upcoming increase in domestic liquidity/supply of peso funds in the financial system.

“Most long-term PHP BVAL yields could resume their easing trend once the peso exchange rate against the US dollar starts to stabilize, at the very least,” he added. — Carmina Angelica V. Olano

Shares to decline further on US-China trade war

By Arra B. Francia
Senior Reporter

LOCAL SHARES may dive further in the week ahead as foreign investors continue their sell-off in the face of the ongoing trade war between the United States and China.

The benchmark Philippine Stock Exchange index (PSEi) jumped 1.45% or 108.66 points to close at 7,583.82, snapping a five-day losing streak. The main index fell 2.04% on a weekly basis due to weakness in the industrials and holding firms counters, which dropped 4% and 3.8%, respectively.

Net foreign outflows averaged at P1.46 billion during the four-day trading week, much higher than the P541 million recorded the week before. Turnover was also significant at P8.92 billion, 27% higher from the week prior.

“Several external factors continue to spook investors, the ongoing trade war which has been seen as a cause for slower global economic growth is the biggest concern,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market report.

Mr. Mangun noted that while the trade war will have only a minimal impact on the Philippines, negative sentiment from regional markets has “taken its toll on foreign and local investors in the PSE.”

Online brokerage 2TradeAsia.com said markets may have to get used to volatility given the ongoing trade spat.

“Hopefully, both (US and China) will agree to work on terms conducive to consumer and corporate spending, with the greater goal of enhancing trade. For now, markets may need to get used to this volatility, until both realize their unique competitive advantage that complements the others,” 2TradeAsia.com said in a weekly market note.

The company also noted that investors will look at what the House of Representatives will focus on during the resumption of their session on Monday. There will be interest about tax reform, especially the reduction in corporate income taxes and the rationalization of other fiscal incentives.

“Investors will also check how government would map out its timeline on infra rollout, with the onset of the rainy season in the third quarter. Accelerated construction pace appears more likely in fourth quarter, especially with more funds available for lending from BSP’s (Bangko Sentral ng Pilipinas) three-phased cut in reserve requirement,” the online brokerage said.

On a technical note, Mr. Mangun said that the PSEi’s break below the 7,500 level will push it lower to the next strong support of 7,000.

“The best case scenario is for it to hold its support at 7,500 for the next few weeks as foreign funds flow out. This will only happen if local investors pick up the slack and buy shares as they are at very attractive levels,” Mr. Mangun said.

The analyst placed the PSEi’s support from 7,500 to 7,640, with resistance from 7,800 to 7,900.

How PSEi member stocks performed — May 17, 2019

Here’s a quick glance at how PSEi stocks fared on Friday, May 17, 2019.

 

Jeju Forum and smart cities

ON May 29-31, the big “Jeju Forum for Peace and Prosperity” conference will be held at the International Convention Center Jeju, South Korea. It is an annual international and geographical platform to discuss diplomatic, economic, political and cultural subjects that include the North-South Korea relations, Korea-China-Japan-US relations and many more.

A unique topic, “Smart Cities and Startups — Opportunities for Business Innovation” will be discussed in the afternoon of May 30, the panel sponsored by the Friedrich Naumann Foundation for Freedom (FNF).

FNF is a German political foundation whose main advocacies are economic freedom, human rights and rule of law. Business startups can only prosper if there is economic freedom, private enterprises are not burdened with too many taxes, regulations and restrictions, they focus their resources innovating and dealing with their customers, suppliers and competitors. Human rights would include labor rights, employer rights, and other policies that remove various discrimination based on gender, race and other factors. And rule of law protects private investments from the dangers of state nationalization, expropriation, price control and related confiscatory policies.

To introduce the topic and its importance in today’s modernization will be Christian Taaks, Head of FNF Korea Office. To introduce the speakers and moderate the panel will be Waltraut Ritter, Founder of Knowledge Dialogues in Hong Kong. The three panel speakers will be Marc Bovenschulte, Director of the Institute for Innovation and Technology in Germany; Sofia Ramirez, Business Developer of Hawa Dawa in Germany; and Whang Ji Eun, Professor at the University of Seoul in Korea. Panel Rapporteur will be Pimrapaat Dusadeeisariyakul, Program Manager of FNF Thailand.

Jeju island itself can be considered a “smart city/province” as it is a self-governing province of S. Korea. Its main economic base is tourism so they allow visa-free entry for citizens of many countries including the Philippines, unlike landing in Incheon airport where a strict Korean visa is required.

Talking of islands and the Philippines as an archipelago of more than 7,500 islands and islets, one infrastructure project in the country that fascinates me is the Cebu–Cordova Link Expressway (CCLEx), aimed at connecting the southern part of Cebu City with Cordova in Mactan island and reducing travel time to Mactan-Cebu International Airport (MCIA).

CCLEx is an 8.5 kilometers tollroad including viaduct and causeway, 27 meters wide and a cable-stayed bridge 145 meters high. Its proponent is Metro Pacific Tollways Corp. (MPTC) costing about P30 billion in a pure integrated PPP scheme. So MPTC will build and finance it, then do the operation and maintenance (O&M) when it is completed and opened to the public in 2021. Meaning no additional public debt, and taxpayers from Luzon, Eastern and Western Visayas, Mindanao will not be burdened with paying its construction cost if it was under the ‘hybrid PPP’ scheme of the administration. Only those who use that expressway will pay for its construction cost and O&M, applying the users-pay principle, not all-taxpayers-pay scheme.

I spoke with the Managing Director of Norconsult Mgt. Services Phils. Inc., Mr. Director Rodolfo T. Azanza Jr. Norconsult is the Independent Consultant of the Grantor, Cebu City and Cordova City. They are upbeat about the potentials of this new project and will greatly decongest heavy traffic in the two existing bridges between Mandaue City and Mactan island.

Smart cities and provinces would include faster mobility of people and goods across islands and traffic-gridlocked cities. Where there is faster and greater mobility, there is greater economic freedom enjoyed by the people.

 

Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers

minimalgovernment@gmail.com

The real reasons behind NAIA’s runway congestion

Through the peak summer months and especially during the Holy Week, social media sites were flooded with tirades about delayed flights, delayed landings and long waiting times in the taxiways resulting from NAIA’s runway congestion.

For those who don’t know any better, blame is pinned on the Manila International Airport Authority (MIAA) for sheer ineptitude. MIAA is the easy target. But as someone who has a bit of understanding of the aviation industry, I know that the cause of runway congestion is not so simplistic — it is in fact a confluence of multiple reasons. I recently looked deeper into the issue.

In the first place, we must recognize that runway management and aerospace traffic are handled by the Civil Aviation Authority of the Philippines (CAAP), not by MIAA. MIAA’s jurisdiction is confined to land-side management which includes all operating systems within the airport terminal. But, yes, the operations of both CAAP and MIAA have an impact on the on-time performance of airlines.

So what causes runway congestion?

Runway traffic management at NAIA is governed by a system designed by the Airport Coordination of Australia (ACA). ACA is a private firm which was engaged by CAAP to optimize the operating capacities of both runways. ACA’s system calls for 40 movements (take-offs and landings) per hour for both runway 06/24, which services larger aircrafts, and the perpendicular runway 13/31, which services lighter aircrafts. The ACA plan specifies the time spaces between aircraft movements, which runway and exitways to use and which taxiways to traverse. It is a well crafted plan that serves as CAAP’s basis for its daily aircraft movement schedule.

Everything should work without a hitch if conditions were perfect. But the reality is that one untoward event can cause an escalating domino effect of delays throughout the day. There is never one reason for delays – it is always a combination of several causes. These are the most common:

Delays in the arrival of turn-around aircrafts. To maximize profits, most airlines deploy their planes to a particular destination several times a day. Theoretically, the time it takes between flights to clean, refuel and reload the aircraft is 45 minutes. The reality, however, is that some airlines allot only 20 to 25 minutes, just so they can squeeze another return flight for the day.

Should an airline be unable to meet its tight 25 minute turn-around time, its arrival back to NAIA would inevitably be delayed. This, in turn, will cause a ripple effect of delays for that particular leg throughout the day with night flights being the most severely affected. The situation could be avoided if the airline had back up aircrafts to assume the on-time schedule of the flight. Most airlines do not have such provisions.

Operational problems of airlines are another reason. It is not uncommon for airlines to wait for passengers caught in long cues in immigration or security. Neither is it uncommon for them to wait for substitute cabin crew when those originally scheduled for the flight are held up for whatever reason. Again, the late take off of one aircraft affects the subsequent flights scheduled for the day.

Lightning alerts and gusty winds also cause CAAP to temporarily close the runway. So do mishaps on the runway like the Xiamen Airline crash last year.

In runway management, there is such a thing as “flight separation” or the time it takes between one aircraft movement to the other. With the rapid runway exits now in place and the installation of the new Communications, Navigation, Surveillance / Air Traffic Management System (CNS/ATM), flight separation should be confined to no more than two and a half minutes. The reality is that this extends to three and a half minutes on some occasions as traffic controllers wait for aircrafts to completely steer clear of the runway.

General aviation is another cause. General aviation includes private jets of politicians, the armed forces and business tycoons as well as delivery flights containing light cargo. All general aviation flights have been diverted to Sangley since 2016. However, emergency situations cannot be avoided. There are instances where private planes, particularly that of government officials, must land in NAIA. MIAA claims that this happens only about two times a day.

The reasons for delays mentioned above are not unique to NAIA. They occur in all airports. The problem is that NAIA only has two runways to accommodate the entire load of aircraft movements while other airports have a third and fourth runway to serve as back-up. With a third runway, CAAP could easily re-channel take offs and landings to an alternative runway and avoid waiting times. Unfortunately, CAAP is constrained with the two runways that NAIA has.

Fact is, the over-stressed NAIA is already operating at 45% above its true capacity having processed 293,981 movements last year carrying 45.3 million passengers. The only solution is an entirely new airport to relieve the stress on NAIA. That is why San Miguel’s airport in Bulacan cannot come soon enough. But this is another story.

If disgruntled passengers must really lay blame, they should fault the Arroyo and Aquino administrations for not building an alternative airport soon enough to absorb Manila’s ever increasing air traffic. Both administrations have committed a sin of omission and we have to suffer the consequence as a result of it.

The inconvenience caused by the Holy Week rush has opened a Pandora’s box of issues against MIAA. For one, it was said that the reason for runway congestion was the damage on taxiway Charlie due to poor preventive maintenance and the prolonged digging at the edge of runway 06/24.

I looked into the matter and discovered that neither repairs were unforeseen nor done in haste. They were pre-programmed repair works that all parties, including the airlines, were fully cognizant of. The repair works did not delay flight movements at all. In the case of runway 06/24, the unaffected portion of the runway (its useable span) was still well within ICAO’s standards.

Repairs of runway 06/24 involves overlaying its surface with cement to absorb the weight of new generation heavy aircrafts. On the other hand, the repair of runway Charlie involved repaving a rut that appeared due to wear and tear. It would be a bigger sin of omission if MIAA ignored these maintenance needs altogether. Accidents could happen. If anything, we should appreciate MIAA‘s preventive timely maintenance practices.

It was also said that MIAA management is one characterized by unprofessionalism and patronage where those who cover-up the failures and omissions of the higher ups are insulated from sanctions while those who don’t are made to bear consequences. As someone who has covered the NAIA beat for nearly ten years, I can attest that this could not be further from the truth.

I count MIAA General Manager Ed Monreal to be a professional and expert in his field, what with 37 years experience in the airline industry. He is no lightweight and certainly more qualified than the GMs that preceded him. His working style is one more akin to an Ayala or San Miguel executive rather than a government bureaucrat. I have seen him in action during the Xiamen Air crash last year. He acted decisively, took charge and took responsibility.

Suffice to say that stupidity and ineptitude do not pass Monreal’s purview no matter how much one patronizes him. He is way too sophisticated to give in to flattery. He demands as much of his people as he does himself. I have spoken to his executives on many occasions and although they are driven hard, they appreciate Monreal’s purpose-driven style. He enjoys credibility amongst his people as he is both a hands-on manager and one fully aware of the aviation industry’s many complexities. A clueless political appointee he is not. Monreal is the real deal.

This is why I also find ludicrous the allegation that MIAA revokes take-off and landing slots from airlines should they refuse the corruption overtures of MIAA executives. It is absurd because MIAA has little sway on airline slotting. It is in fact the ACA, CAAP and Civil Aeronautics Board who approve the slotting. MIAA’s role is simply to make sure that there are terminal gates and baggage handling capacities available to handle the flight.

There is a standing rule, however, that should airlines not utilize 80% of their allowable slots, it will be taken away from them and awarded to other airlines who will actually use it. This is to make sure that the airport capacity is fully optimized.

There was also an assertion that MIAA executives have a monopoly of the white taxi franchise in the airport. It should be known that no such franchise exists. Operations of white taxis are open to the public. So this, too, is false.

I can understand how some people who have been inconvenienced by runway congestion can take their revenge on social media, radio, print or television with vile, vitriol and half-truths. But we must base our attacks on facts and the realities on the ground. Sure, MIAA has many shortcomings, but I stand in their defense because the allegations hurled against them are false and unfair.

Again, at the heart of our woes is the fact that NAIA has two runways with volume that necessitates four. The fact that the authorities are able to make it work is in itself an incredible challenge. Instead of spite, the airport authorities should be commended for not allowing NAIA to implode under its own weight.

On this corner next week, read about how MIAA is keeping the airport facility afloat despite its backbreaking volume.

 

Andrew J. Masigan is an economist

Election outcome

The Duterte administration won big in the midterm elections. Although the full tally still has to be completed, with 94.39% of voters already accounted for, the likelihood is that the opposition will suffer a shutout in the senatorial elections.

The lone opposition candidate who still has a slim chance of landing 12th to earn a Senate seat is Bam Aquino. But he is currently ranked 14th, and he trails Nancy Binay, who currently occupies the 12th position, by about 119,000 votes. In a better position to beat Binay is JV Ejercito who is slightly ahead of Aquino in the ranking.

What can be the reasons why the administration candidates won big and why the opposition lost heavily? Suffice it to say that Rodrigo Duterte and his administration enjoy high trust and performance ratings, based on the surveys of Pulse Asia and Social Weather Stations (SWS).

Even on critical issues that one would have thought the administration is vulnerable — for example, on fighting inflation, foreign policy, and eradicating graft and corruption — it still received positive satisfaction. The SWS national survey in the first quarter of 2019 showed that the administration had a net score of +22 (with 53% satisfied against 31% dissatisfied) with regard to fighting inflation. With respect to defending Philippine sovereignty in the West Philippine Sea, the administration had a net score of +40 ((with 60% satisfied and 20% dissatisfied). On eradicating graft and corruption, the administration’s score was +41.

The conditions simply do not favor the opposition. Optimism is high (+40 as of end 2018, according to SWS); economic fundamentals remain good, even resulting in a credit rating upgrade; economic and social reforms are being put in place (tax reform, removal of quantitative restrictions on rice leading to lower food inflation, universal heath care, ease of doing business, etc.); and poverty has been reduced by six percentage points between 2015 and 2018.

In this light, it would have been most difficult for the opposition parties and followers to take the stance of “extreme opposition.” It goes without saying that victory (or defeat) is a function not only of the victor’s strength but also of the loser’s weaknesses. It is high time the opposition reexamined strategy and tactics. A friend of mine in the opposition, a social democrat, has this to say: “Saul Alinksky’s Principle No. 1: Start where the people are.”

The appropriate forms of struggle and slogans are defined by prevailing conditions. Hence during unfavorable conditions, the suitable strategy and tactics are mainly defensive, not offensive.

To illustrate, the Communist Party of the Philippines and the National Democratic Front (CPP-NDF) raised demands during the peace talks that were impossible to attain — having a coalition government and releasing of all political prisoners. Come to think of it, Duterte appointed several personalities from the Left to Cabinet positions, and released the senior leaders of the CPP. Yet, the talks collapsed in the middle of the CPP-NDF’s aggressive posturing. A hostile military has taken advantage of the cancellation of the peace talks to launch a brutal attack that targets the Left’s legal and political infrastructure.

On the other hand, the Moro Islamic Liberation Front (MILF) has successfully negotiated peace with the Philippine government and has obtained the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM). BARMM, from the Moros’ viewpoint, still falls short of their aspiration for independence, but for them, it is still a huge step forward. The MILF has achieved its goal by adopting a subdued strategy.

The so-called Yellow opposition, on the other hand, engaged the Duterte administration in a sharply polarized struggle. Thus, even in relation to a critical reform like the comprehensive tax reform (which on paper was part of the reform agenda of the previous Ninoy Aquino administration) the Liberal Party and its allies opted to block it. The ground for opposing tax reform was mainly partisan, not economic or technical. The opposition mistakenly thought that the controversial tax reform would spell political defeat for Duterte. As the SWS survey showed, even on controversial issues like fighting inflation (the opposition attributed the elevated inflation rate last year to tax reform, when in fact it was principally brought about by the rice crisis), the Duterte administration received a net positive rating.

A couple of lessons stand out here. First, reformists, even if they belong to the opposition, should take advantage of any opening (in this case, a popular administration) to obtain crucial and hard reforms. The struggle for reforms must be pursued relentlessly whatever the political circumstances, for ultimately the people benefit from such reforms. How to win the reforms will vary depending on concrete conditions, but the reform struggle cannot take a pause just because we hate those in power.

Pursuing reforms despite being in the opposition does not in any way suggest capitulation. The opposition should continue resisting policies like human rights violations that run counter to our values.

Second, politicians, who fear losing votes, should not worry either about sponsoring or championing politically difficult reforms. Senators Cynthia Villar and Sonny Angara have been reelected to the Senate in convincing fashion despite being the sponsors of rice tariffication and comprehensive tax reform, respectively. Although being endorsed by Duterte, both of them would have still won on the basis of their own attributes.

The myth that national politicians will be defeated in national elections by sponsoring taxes has been shattered. Senator Ralph Recto once lost in the Senate race, and this was blamed on his being the sponsor of the law that increased the value-added tax (VAT) during the questioned presidency of Gloria Arroyo. This is a mistaken view. Recto lost not because of his VAT sponsorship but because of his association with an unpopular, bad president. (Arroyo’s other candidates, not only Recto, were defeated in the midterm elections.)

This lesson is not lost on Angara and Villar. To be sure, Senator Angara has gained much confidence in light of his electoral victory, which will lead him to champion the pending bills to increase substantially the excise taxes on tobacco and alcohol. Senator Villar is expected to follow through the reform on rice tariffication. The challenge is to provide the credible support for the rice farmers and to modernize Philippine agriculture. She has shown “skin in the game,” a quality that makes a heavyweight politician.

 

Filomeno S. Sta. Ana III coordinates the Action for Economic Reforms.

www.aer.ph

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