Picking up speed

January 22, 2020 | 9:05 am

When the Philippine government enacted the Tax Reform for Acceleration and Inclusion law (TRAIN) in 2018, the momentum that the country’s automotive sector effectively hit a speed bump. Vehicle sales dropped for the first time in seven years as the industry reeled amid imposition of higher automobile taxes alongside accelerated inflation.

During that time, a joint report of the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and the Truck Manufacturers Association (TMA) showed that total sales for 2018 fell 16% to 357,410 units from 425,673 vehicles in 2017, the first drop for the country since 2011 when vehicle sales also dropped by 16% to 141,616 units.

The drop was taken as a sign of falling consumer confidence, as more Filipinos were less likely to commit to lease or loan payment plans for a new car as they struggled to keep up with the soaring prices. So when 2019 saw a resurgence in sales, there is a renewed sense of optimism among the country’s car makers.

Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) President Rommel R. Gutierrez said the auto industry is optimistic about reaching its 410,000 overall sales target for 2019, with CAMPI and TMA accounting for 89% of the projection.

“The year 2019 has been challenging for the industry due to various internal and external factors. Thankfully the industry’s collective efforts, supported by sustained economic growth, have paid off. We will not rest on our laurels as we aim for further growth in the coming months, and hopefully for the whole of 2020,” Mr. Gutierrez said in a statement.

Automobile sales saw a slight bump in 2019, as December sales posted the fourth month of continuous growth, according to a joint report from CAMPI and Truck Manufacturers Association (TMA). Data showed that 369,941 vehicles were sold, up 3.5% year on year, mainly due to improved sales of light commercial vehicles and light trucks.

In fact, the auto industry posted growth every month in 2019, except for a 15% drop in January and a 2.4% drop in August.

For December alone, overall vehicle sales rose by 5.5% to 33,715 units from 31,945 units sold in the same month in 2018.

This followed two months of sales records, with November recording the year’s highest sales of 34,465 units, up 10.3% from units sold in the same month in 2018.

The joint data showed that commercial vehicle sales for 2019, which accounts for 69.5% of the market, grew 5% to 260,744 vehicles from 248,390 in 2018. An 11% and 3.9% rise in sales of light commercial vehicles and light trucks, respectively, offset the lower sales of Asian utility vehicles or AUVs (-15.4%), trucks and buses.

Paving the path for a new decade

The Philippines is bucking the trend seen all over the globe, where car makers are experiencing a continued recession due to a lack of buyers. According to an analysis by experts LMC Automotive, the number of vehicles sold across major global markets dipped to 90.3 million last year, down from 94.4 million in 2018, and the 95.2 million cars sold in 2017.

Factoring in the challenges for the global car industry is the growing pressure from governments and consumers to ditch the traditional internal combustion engine to address the climate crisis. Economic challenges across the globe, such as Brexit and the weakening of economies like China and India, are also causing an impact.

In China, the world’s largest market for vehicles, a sharp slowdown in economic growth and the elimination of tax incentives for electric car purchases caused demand to plummet. The number of vehicles sold dropped 2.3 million from 2018, said LMC.

Meanwhile, even as automakers all over the world are investing billions of dollars into electric vehicles to try to meet tougher emissions regulations imposed by lawmakers, it remains uncertain whether the market can yet afford them.

“Automakers are facing challenges that mean they will have to make changes to business models above and beyond those required by technological reconfiguration,” the IMF said in its October 2019 World Economic Outlook.

For the present, things seem to be sound in the country. Credit and market intelligence experts Fitch Solutions forecasted vehicle sales to sustain its growth in the next few years, according to a report published in December 2018.

“While we expect households and businesses will have adjusted to the higher vehicle excise taxes imposed under the Philippines’ Tax Reform for Acceleration and Inclusion (TRAIN) law in 2019, we believe that unfavorable economic conditions in the form of high interest rates, elevated inflation and a still weak peso will see car sales remain under pressure,” Fitch had said.

The firm added that over the full 2019-2027 forecast period, passenger car sales in the Philippines will average annual growth of 6.5%, to around 205,000 units by the end of 2027. — Bjorn Biel M. Beltran

Advanced technologies and developing preferences

January 22, 2020 | 9:00 am

The automotive industry has entered a new decade, bringing with it innovations from the previous years that have been transforming vehicles across the globe and are set to keep up with the ever-changing preferences of their consumers.

The Fourth Industrial Revolution has discharged a lot of advancements that have maximized the function of vehicles and have taken them to a higher level of serving today’s motorists.

Foremost of these innovations are the Internet Of Things (IoT) and artificial intelligence (AI). Sarwat Singh, a senior partner in research and consulting firm Frost & Sullivan, credits the two for unleashing transformation in the automotive sector. In a recent Forbes article, he recognizes these two for “driving unprecedented transformations across vehicle and device connectivity, autonomous driving, electric powertrains, and shared mobility.”

Likewise, IoT and AI are observed by Daniel Newman, principal analyst of research firm Futurum Research, to be working together in bringing out an improved personal driving experience.

“Imagine the car adjusting the seat, mirror, radio, and air-conditioning each time a new driver enters,” Mr. Newman also wrote in Forbes. “Imagine AI that can read your mood and alert you when you seem to be getting sleepy or distracted. It’s something that promises to make your car more comfortable — and the road safer, as well.”

Another notable transformation in vehicles is the emergence of a connected vehicle ecosystem, as seen by Mr. Singh in powertrains, advanced driver assistance systems, connected services, and smart interiors. The development of business models such as freemium and subscription-based services are also observed in line with the establishment of a “highly-networked” environment among automobiles.

Automation has also started to modify the vehicles of the future, and it is expected to go in full force soon. “Car manufacturers, mobility service providers and autonomous technology companies are furiously pushing to be the first to debut their vision of autonomous shared transportation,” the automotive & transportation analyst forecasted.

Electric vehicles (Evs) are standing out as well, offering a cleaner and more efficient choice for motorists. In fact, The Guardian recently reported that automotive analysts in Europe expect 2020 to be the “year of the electric car.” Data firm IHS Markit projects the number of models available in the continent to increase to more than 330 by 2025, while LMC Automotive predicts EV sales to go as many as 540,000 models.

Pulse of Consumers

As much as vehicles are getting advancements, consumer tastes have been refined, as a global survey of 8,000 people by social intelligence company Brandwatch has recently discovered.

First among these is the prominence of quality as the important attribute for choosing a vehicle company, getting 30% of the responses. Affordability followed, with 21%.

“Quality can, of course, mean different things to different people and different markets,” Brandwatch added. “It’s important for auto brands to dig further into this and find out what aspects (security, aesthetics, reliability) are most important for their target audience.”

The firm also pointed out that most of the respondents consider renewable energy as one of the biggest transformative technologies in 2020, although few chose sustainability as an important factor in choosing an auto brand.

“This could be because vehicles that don’t harm the environment are very much still in the minority, and could be seen as too expensive or not practically viable for consumers,” the research firm reasoned out.

Professional services network Deloitte has also delved into the pulse of automotive consumers on critical issues affecting the automotive sector, including the development of advanced technologies.

The findings showed a growing interest in EVs. Most of the countries surveyed have tallied increases in the preference for alternative powertrain technology. Lower emissions and lower operating costs are found to be the top reasons for considering these vehicles.

Interest in autonomous vehicles, however, is “equally split” as most markets still perceive such vehicles to be unsafe. However, a strong majority of consumers in India, China, and South Korea are found to be more comfortable with AVs if they were government-certified.

While trust in traditional automakers to bring AV technology to the market continues to decline in US and Japan, trust in existing technology companies and new players are inching up overall.

Consumers are likewise split on the benefits of connected vehicles, with Indian and Chinese markets “embracing the idea at more than twice the rate than consumers in Germany”. Moreover, respondents have also expressed their concern about privacy and data security, especially regarding the type of entity they would most trust to manage the data being generated and shared by connected vehicles.

The research also spotted resistance among consumers to multimodal mobility. While greater access to mass transit is unanimously preferred as the top means of reducing traffic congestion, “the idea of combining different modes of transportation into a single trip remains largely an occasional behavior for most consumers.” — Adrian Paul B. Conoza

Farm output seen to have improved

January 22, 2020 | 12:35 am

AGRICULTURAL PRODUCTION is seen to have improved in the fourth quarter of 2019 driven by increased spending of Filipinos on food during the Christmas season, and other rice-producing areas filling the gaps for those hit by typhoons in the latter part of the year.

The Philippine Statistics Authority (PSA) is scheduled to report fourth-quarter farm performance today (Jan. 22).

“The fourth quarter of 2019 should see a rising economic growth for the agriculture and food sectors propelled by expenditures on regular and special food items,” Roy S. Kempis, a professor with Pampanga State Agricultural University, said in an e-mail.

For Rolando T. Dy, Executive Director of the University of Asia and the Pacific Center for Food and Agribusiness, he said fourth-quarter farm output could have grown between “1.5 to 2%.” However, he did not specify factors that might have led to this.

The Agriculture department said output growth likely hit 2.5 to 3% last quarter due to productivity increase plus the support from the department.

In the third quarter of 2019, farm production grew 2.87% versus the downward-revised year-ago print of 0.87% and the second quarter’s contraction of 1.27% as gains in most of the sub-sectors offset the drop seen in palay output, which accounted for 15% of the total value of production.

The third-quarter print was the fastest farm production growth in more than two years or since the 6.2% growth in the second quarter of 2017, and was the best third-quarter output growth since the 3% recorded in 2016.

This brought nine-month agriculture output growth to 0.77%. This compares to the 2.5-3.5% target range for farm output growth under the 2017-2022 Philippine Development Plan.

In 2018, farm production grew 1.8% in the fourth quarter, which brought full-year agricultural output growth to 0.56%, Philippine Statistics Authority (PSA) data showed. This is well below the Department of Agriculture’s (DA) 2.5% goal for that year.

Mr. Kempis said the livestock and poultry industries mainly benefitted from the increase in consumers’ food spending.

However, he noted that overall, the performance of both industries “is expected to have declined significantly because of the ASF (African Swine Fever), while the latter only affected the areas immediately surrounding the NCR (National Capital Region), the demand for pork and processed pork products could have been tempered even in areas in the Visayas and Mindanao.”

ASF is a viral disease affecting only domestic and wild pigs. Outbreaks in the country started in July 2019, according to a report submitted by the DA to the World Organization for Animal Health.

Data from the Bureau of Animal Industry showed pigs culled already reached 147,334 heads as of Dec. 15, of which 18% were infected by the virus. Total barangays affected totaled 612 from the provinces of Bulacan, Pampanga, Nueva Ecija, Aurora, Tarlac, Rizal, Cavite, Pangasinan, and in Metro Manila.

Mr. Kempis also noted that the rice damage caused by typhoons that hit the country at the end of 2019 may have been offset by the output of other rice-producing provinces.

“Although Typhoon Tisoy and Ursula may have challenged this, palay harvests in non-affected areas can still contribute to a good harvest of this staple food,” he added.

Data from the DA showed agricultural damage due to calamities in 2019 reached P16 billion, lower than 2018’s P34.45 billion.

Specifically, for the fourth quarter, Typhoon Nakri (locally known as Typhoon Quiel) caused farm damage of about P334.207 million; Typhoon Kalmaegi (locally known as Typhoon Ramon), led to estimated damage of about P26.607 million; Typhoon Kammuri (Typhoon Tisoy) caused P3.7 billion worth of production loss; and Typhoon Phanfone (Typhoon Ursula) caused P3.05 billion worth of damage. — Vincent Mariel P. Galang

No turning point in sight as IMF predicts sluggish global growth

January 22, 2020 | 12:34 am

WASHINGTON/DAVOS — Global growth appears to have bottomed out but there is no rebound in sight and risks ranging from trade tensions to climate shocks makes the outlook uncertain, a top International Monetary Fund (IMF) official said on Monday.

For 2020 and 2021, the IMF trimmed back its global growth forecasts, mostly due to a sharper-than-expected slowdown in India and other emerging markets, even as it said that a US-China trade deal added to hopes the activity was bottoming out.

With trade wars weighing on exports and investment, the global economy expanded by 2.9% last year, its slowest pace since the global financial crisis, despite near synchronized central bank easing that added half a percentage point to global growth.

“We have not reached a turning point yet,” IMF Managing Director Kristalina Georgieva told a news conference on the eve of the annual meeting of the World Economic Forum (WEF) in the Swiss ski resort of Davos. “The reality is that global growth remains sluggish.

“Just in the very first weeks of the new year we have witnessed increased geopolitical tensions in the Middle East and we have seen the dramatic impact that climate shocks could have. We saw them in Australia as well as parts of Africa.”

The IMF now sees growth at 3.3% this year, below its October projections of 3.4% and also cut the 2021 forecast to 3.4% from 3.6%.

The reductions reflect the IMF’s reassessment of economic prospects for a number of major emerging markets, notably India, where domestic demand has slowed more sharply than expected amid a contraction of credit and stress in the nonbank sector.

The IMF also said it marked down growth forecasts for Chile due to social unrest and for Mexico, due to a continued weakness in investment.

The Fund said that an easing of tensions between the United States and China, which had stunted GDP growth in 2019, had boosted market sentiment, amid “tentative” signs that trade and manufacturing were bottoming out.

BOOST FOR CHINA, NOT US
The Fund’s cautious outlook assumes that there are no additional flare-ups in US-China trade tensions but Ms. Georgieva warned that the root cause of the problem is not yet fixed.

“The underlying causes of trade tensions and the fundamental issues of reform of the trade system are still with us.”

The IMF upgraded China’s 2020 growth forecast by 0.2 percentage point to 6.0% because the US trade deal included a partial tariff reduction and canceled tariffs on Chinese consumer goods that had been scheduled for December. These tariffs had been built into the IMF’s previous forecasts.

But the Fund did not give a boost to its US growth forecast for China’s pledges to increase purchases of U.S. goods and services by $200 billion over two years. Instead, the IMF said 2020 US growth would be 0.1 percentage point lower than forecast in October, at 2.0% because of the fading stimulus effects from 2017 tax cuts and the Federal Reserve’s monetary easing.

Euro zone growth also was marked down 0.1 percentage point from October, to 1.3% for 2020, largely due to a manufacturing contraction in Germany and decelerating domestic demand in Spain.

India saw a sharp, 1.2 percentage point cut to its 2020 growth forecast to 5.8%, the IMF’s biggest markdown for any emerging market, because of the domestic credit crunch. Monetary and fiscal stimulus is expected to lift India’s growth rate back to 6.5% in 2021, although this is still 0.9 percentage point lower than forecast in October.

Other emerging markets saw forecast downgrades, the IMF said, including Chile, which has been hit by social unrest. Mexico will grow just 1.0% in 2020, down from 1.3% forecast in October. — Reuters

International monetary fund’s economic growth projections for select major economies

January 22, 2020 | 12:34 am

IMF keeps growth forecast for PHL

January 22, 2020 | 12:33 am

THE International Monetary Fund (IMF) maintained its growth forecast for the Philippines for this year, despite lowering global growth projections.

“The Philippines continues to be one of top performers in economic growth in the region. The IMF’s growth forecast for the Philippines remains unchanged at 5.7% in 2019,” IMF resident representative to the Philippines Yongzheng Yang said in an e-mail to BusinessWorld.

“We think growth will pick up to 6.3% this year, supported by strong domestic demand, including the continued scaling up of public investment and robust consumption,” he added.

If realized, the 2019 and 2020 growth projections of IMF are short of the government’s 6-6.5% growth target for 2019 and the 6.5-7.5% target for 2020 and 2021.

In its World Economic Outlook (WEO) Update released on Monday, the IMF estimated global growth to jump from an estimated 2.9% last year to 3.3% in 2020, and to 3.4% for 2021. The projections for 2020 and 2021 are 0.1 percentage point and 0.2 percentage points lower than those in the October WEO.

Sought for comment about IMF’s growth forecast for the country, UnionBank of the Philippines, Inc., Chief Economist Ruben Carlo O. Asuncion said: “IMF has maintained its forecasts for the Philippines because they see that the country has undertaken what has been needed for the economy to expand consistently, i.e., the investment in infrastructure development and socio-economic services.”

At the same time, the IMF downgraded its growth forecast for ASEAN-5, comprised of Philippines, Malaysia, Indonesia, Thailand, and Vietnam, to 4.8% in 2020 and 5.1% in 2021. Both projections are 0.1 percentage point lower than the WEO forecast in October.

“After slowing to 4.7% in 2019, growth in ASEAN-5 countries is projected to remain stable in 2020 before picking up in 2021,” IMF said. “Growth prospects have been revised down slightly for Indonesia and Thailand, where continued weakness in exports is also weighing on domestic demand.”

Mr. Asuncion said the IMF may have reiterated that “global growth prospects is seemingly recovering but tentative and sluggish with no evident turning point yet.”

“This may probably have been the basis for the ASEAN-5 assumption that is largely composed of trade-based economies,” he added.

The Philippine Statistics Authority is set to report the fourth-quarter gross domestic product (GDP) growth on Thursday. Average growth in the first three quarters was at 5.8% after the 6.2% pace logged in the third quarter. — Luz Wendy T. Noble

Offshore bond issuances likely within 1st semester

January 22, 2020 | 12:32 am

THE Bureau of the Treasury could offer all its offshore bond issuances within the first half of the year after successfully securing all the necessary approvals, a top official said.

Deputy Treasurer Erwin D. Sta. Ana said on Tuesday that the Treasury has already received the needed approvals for all their commercial issuances in the international capital markets.

Aside from the euro-denominated issuance that was announced on Monday, Mr. Sta. Ana said they will likely tap other bond markets, with dollar, panda and samurai bonds also on the table.

Asked if all offshore issuances will be done within the first semester, he said “that’s a strategy that we are actually forming at this time… That’s a possibility…but that remains subject to market conditions, of course.”

However, the Treasury has yet to set a timetable for all of its offshore issuances, including the euro-denominated bonds.

“It’s really more on whether it’s opportunistic for us to actually go out. We’re ready anytime,” Mr. Sta. Ana told reporters.

For the dollar-denominated bond offer, he said they can issue these papers “back-to-back” with the euro bonds, but they are still coordinating with Finance Secretary Carlos G. Dominguez III on the matter.

“We can do some sort of a back-to-back, also just do a wait-and-see or monitor the US market some more. There have been lots of issuances in that space so we’ll see from a supply perspective whether it’s time to go. So it’s really more of timing now,” he said.

Meanwhile, he said that they are considering returning to the samurai debt market since the bonds they issued back in 2010 will mature this year.

Sought for comment, a bond trader said offshore bond issuances should be launched as early as possible “because rates are not coming back to where it was a month ago given the developments.”

EURO BONDS
Meanwhile, Mr. Sta. Ana said they still need to determine the size of its planned euro bond issuance but based on initial feedback, there are more interested investors for the three-year and nine-year tenors.

“Based on the initial feedback, I think there are a group of investors that are more leaning towards the three, and there is a more mainstream kind of fund investor group in the nine-year (tenor),” Mr. Sta. Ana said.

Mr. Sta. Ana said the volume size will be based on the order book they will receive but they are still planning to do a benchmark size issue, which is around $500 million or $1 billion for the two tenors.

“At the minimum, if you look at benchmark size for ($500 million) each, yes, ($1 billion). We also can upsize if there’s ample demand. So that’s left to be seen,” he added.

“Actually we had successful calls with select investors and updates from the banks indicate good, well, a highly successful initial feedback from investors, not only in Europe, but also in Asia. So, we have seen a diverse order book so far. Although, that’s just initial expressions of interest. So we will decide later this afternoon whether we are issuing or we are really executing the trading within the day,” he said on Tuesday.

Moody’s Investors Service on Tuesday assigned Baa2 senior unsecured ratings for the euro-denominated dual-tranche bond offerings, which mirrors the country’s sovereign credit rating.

On Monday, S&P Global Ratings assigned a BBB+ rating to the proposed issuance, while Fitch Ratings gave it an expected rating of BBB, also at par with their ratings on the Philippines.

UBS, Citigroup, Standard Chartered Bank, and Credit Suisse will be the joint lead managers and joint bookrunners for the transaction, Reuters said on Monday.

The government returned to the European market in May last year after 13 years, raising €750 million ($852 million) via an offer of eight-year euro bonds, which carry a coupon rate of 0.875%.

The Treasury is programmed to borrow $3.7 billion from external sources this year. This will help finance the government’s P4.1-trillion budget this year, which is 12% higher than last year’s spending plan. — Beatrice M. Laforga

AMLC wants power to issue subpoenas

January 22, 2020 | 12:31 am

THE Anti-Money Laundering Council (AMLC) is seeking to have the power to issue subpoenas, as part of its efforts to go after financial crimes.

“We’re proposing the enhancement of investigating powers of AMLC. Particularly, we want our investigators and our office to have a subpoena power through the AMLC,” Matthew M. David, officer-in-charge of the AMLC Secretariat, said in a press chat at the central bank on Friday.

Aside from subpoena powers, the watchdog is also proposing amendments to the Anti-Money Laundering Act (AMLA) to include crimes related to tax evasion and terrorism financing.

In an e-mailed response to BusinessWorld, an AMLC representative said under current regulations, they cannot compel persons not covered by their jurisdiction to produce and submit information and documents.

“Currently, the AMLC investigates money laundering and terrorism financing and gathers evidence through inquiry or through requests for assistance from law enforcement,” the watchdog explained in an e-mail.

The AMLC said the law does not include tax crimes, which are among the designated category of offenses related to money laundering set by international standard-setting body Financial Action Task Force (FATF).

One of the recommendations under the Asia/Pacific Group on Money Laundering’s (APG) latest Mutual Evaluation Report is to amend legislation that will allow AMLC to have comprehensive investigative powers. These include allowing AMLC to “search, seize, take witness statements, and use special investigative techniques when conducting terrorism financing investigations.”

APG is the regional unit of the FATF.

“Failure to implement key recommended actions of the Mutual Evaluation Report will result to the Philippine’s automatic referral to the International Co-operation Review Group (ICRG) or to ‘gray-listing,’” AMLC said.

If a country is in the FATF’s gray list, it means it is considered as a high-risk and non-cooperative jurisdiction. The Philippines was previously removed from the FATF’s gray list in 2013.

In October, Bangko Sentral ng Pilipinas Governor and AMLC Chairman Benjamin E. Diokno said that the country is currently under a one-year observation period and is required to submit a report on the implementation of the recommendation.

“We cannot afford to have the Philippines in the FATF’s list of high-risk and non-cooperative jurisdictions. Hence, we should be very strategic in our focus for the next 12 months,” he said at that time.

The AMLC said amendments to the AMLA and the Human Security Act (HSA) should take effect by June 2020 “to provide enough time for the country to implement them before the 12-month observation ends in October 2020.”

AMLC has so far frozen over P1 billion worth of assets and seized P600 million from January 2018 to July 2019, in the course of investigations into money laundering and terrorist financing. It was in 2018 when the amended Implementing Rules and Regulations (IRR) of the AMLA were implemented. — Luz Wendy T. Noble

DoF finds ‘onerous’ terms in Chevron lease deal

January 22, 2020 | 12:09 am

THE Department of Finance (DoF) said on Tuesday that the lease contract between a unit of a state-led corporation and privately owned Chevron Philippines, Inc. contains “onerous” provisions as the oil firm is paying lower-than-market rental fees on a government property in Batangas.

In a statement, DoF said data from the National Development Co. (NDC) showed that Chevron had been paying a monthly rental fee of 74 centavos per square meter (sq.m.) on a 120-hectare or 1.2 million sq.m. property, or significantly lower compared with the monthly fair market rental value of P17.90 per sq.m.

“Under the terms of its lease contract with the NDC subsidiary Batangas Land Co., Inc. (BLCI), Chevron has been paying a miniscule rental fee to the government for the 1.2 million sq.m. industrial park in San Pascual, Batangas that it uses as an oil import terminal,” it said.

Finance Secretary Carlos G. Dominguez III, who is an NDC board member, described the deal as another “government contract with onerous provisions.”

It said the P10.66 million that Chevron pays yearly since 2010 accounts for just 4% of the suggested P257.76 million yearly payments if based on the current fair market rental rates.

Based on its assessment, the DoF said the property has a current market value of P4.9 billion to P5.3 billion. But Chevron has paid a total of P146.51 million for over 44 years from 1975 to 2019, which is around P3 million a year, in addition to real property taxes that the company pays under the agreement.

The payment translates to a rental yield of 0.2% of the property’s value, it said.

“Based on current standards that the state imposes on similar contracts, to have a rental yield of less than 1% is surely grossly disadvantageous to the government and the Filipino people,” Mr. Dominguez was quoted as saying.

Despite the increase in the yearly rental payments to P10.66 million starting in 2010, the amount is still “way below” market rates in the province, the DoF said.

“If the amount is adjusted to current fair market rates, the rental rate by now should be above P20 million a month or P257.76 million annually,” the statement added.

“We have to implement a totally transparent method of getting the best deal for the rental of all government property,” Mr. Dominguez told reporters in a Viber message Tuesday.

The DoF said that the supposed onerous items were found when the DoF-attached agency Privatization and Management Office (PMO) compared the lease terms of the BLCI-Chevron deal with the fair market value of the land in the Batangas area, based on NDC’s appraisal reports and the asset pool of the PMO.

A representative of Chevron, formerly Caltex (Philippines), Inc., said the company would issue a statement “once available.” — Beatrice M. Laforga

ALI says land deal ‘beneficial’ for UP but market fears persist

January 22, 2020 | 12:08 am

By Denise A. Valdez, Reporter

AYALA LAND, Inc. (ALI) said it is open for a probe of its contract with the University of the Philippines (UP) for the UP-Ayala Land Technohub project following allegations of underpayment by Malacañang.

In a statement late Monday, the property arm of the Ayala group said it “(welcomes) a transparent review and assessment of our partnership with UP” as it “(believes) this development has been fruitful and beneficial for UP, ALI and the community.”

Contrary to figures cited by Presidential Spokesperson Salvador S. Panelo that ALI is paying less than P20 per square meter (sq. m.) for its 25-year contract with UP, the company said UP will be getting P171 per sq. m. per month for the partnership.

The value comes from ALI’s P4.23-billion lease payment covering 25 years — P1.1 billion from 2008-2018 and P3.13 billion from 2019-2033 — and the P6 billion construction cost for the 16 commercial buildings within the complex. This is equivalent to a total of P10.23 billion payment from ALI to UP for the partnership.

Divided by the 20 hectares (200,000 sq. m.) that ALI said is “developable” within the 37-hectare Quezon City property where Technohub stands, and the 25 years (300 months) covered by the contract, the total payment is P171 per sq. m. per month.

“After 2033, UP as owner, will receive 100% of the buildings’ rent. UP also continues to own the land which has appreciated in value since the start of the partnership,” ALI said.

“Over the 25-year term of the lease, UP will receive the following: 1) lease payments and 2) buildings. This totals P171/sqm/month,” it added.

Despite the clarification, shares in ALI and its parent Ayala Corp. (AC) at the stock exchange continued slumping on Tuesday. Shares in ALI lost one centavo or 2.47% to close at P39.50 each, while shares in AC gave up 35 centavos or 4.67% to P715 each.

PNB Securities, Inc. President Manuel Antonio G. Lisbona said investors are worried other contracts between Ayala-led firms and the government will also be scrutinized. “If any more are found to be ‘onerous’, the company’s income could be threatened,” he said in a text message Tuesday.

AC’s water arm Manila Water Co., Inc. is also alleged by the government of having an onerous contract. A new contract is currently being drafted by the government.

“How long this will last is anybody’s guess at this point, unfortunately. You can bet though that all the business groups that have government contracts are now reviewing these carefully,” Mr. Lisbona added.

But for Philstocks Financial, Inc. Research Associate Piper Chaucer E. Tan, since much of the decline is brought by negative sentiment, he believes its impact on AC and ALI shares are short-lived.

“I think that would be temporary. Kasi kung makikita mo, Technohub, isa lang naman yan sa maraming projects ng Ayala Land [I think that would be temporary. Technohub is just one of the many projects of ALI],” he said in a phone call Tuesday.

“Kung magkaroon man ng clarity on a compromise parang sa water… yun yung underlying catalyst for Ayala Land [If there will be clarity on a compromise like what was done for water concessionaires… that is an underlying catalyst for ALI],” he added.

Meanwhile, Presidential Legal Adviser Salvador S. Panelo said he would recommend the investigation of the contract between UP and ALI, adding that the deal is “onerous.”

In a television interview, he said he would be making the recommendation to President Rodrigo R. Duterte after ALI disclosed on Monday that UP will be receiving P10.23 billion by 2033 or 25 years after the company leased the property in 2008.

“I will recommend to the President pag-aralan natin ito mukhang kawawa na naman ang gobyerno dito (We need to study this because it appears that the goverment is again the aggrieved party in this),” he said.

“For 25 years I think they will be getting about P48 billion, while UP will be getting (P10.23 billion) according to them and you must remember that 25 years in a building, I think that should be demolished already. By that time, it is not that worth[y]. It is not that valued anymore,” Mr. Panelo said.

“Definitely lugi ang gobyerno dito (The government is on the losing end here),” he added. — with Gillian M. Cortez

JoyRide readies more bikers despite plan to stop motorcycle taxis

January 22, 2020 | 12:07 am

By Arjay L. Balinbin, Reporter

JOYRIDE is bent on deploying more bikers until it reaches the 10,000 cap despite the government’s plan to terminate the pilot program that allowed the operation of motorcycle taxis, an official of the ride-hailing firm said.

“We will await the final decision of the TWG (technical working group). In the meantime, we would like to continue to hasten the activation of our bikers based on the guidelines of the TWG so that we can serve the riding public until such time that we are told that this program will no longer push through,” JoyRide Vice-President for Corporate Affairs Jose Emmanuel “Noli” M. Eala told BusinessWorld late on Monday.

He was reacting to the announcement of the TWG on Monday that its members had agreed to terminate the pilot test, which was supposed to run until March.

JoyRide (We Move Things Philippines, Inc.) now 10,000 bikers, with 4,000 of them already on Metro Manila roads.

The termination comes after one of the motorcycle taxi firms filed a lawsuit questioning the TWG’s policy that limits the number of bikers in Metro Manila and Metro Cebu.

Transportation Assistant Secretary for Communications Goddes Hope O. Libiran told BusinessWorld in a phone message on Tuesday that the body will be meeting with stakeholders this week to hear their sentiments on the recommendation before it makes its final decision on the matter.

“We are yet to meet tomorrow to discuss, but we are considering the sentiments of the Senate and our stakeholders,” she said.

“If we will extend, we don’t want the atmosphere of cases to continue. Dapat sumunod sila sa cap and sa specified locations lang (They should follow the cap and operate only in specified locations),” the official added.

As for the latest number of JoyRide bikers, Mr. Eala said: “As of now, we have a total of 10,000 bikers registered with the TWG as required of us. Out of the 10,000 bikers that we have, 4,000 have already been activated. We are confident that we will be able to activate the entire 10,000 in the next four weeks.”

He said JoyRide’s daily passengers have been growing in number “exponentially.”

“We are happy to report that our numbers are very encouraging. We have increased the number of our passengers exponentially in the last four weeks,” he said.

He also said the company is hoping that the TWG would reverse its decision on the pilot program.

“We have always followed the guidelines of the TWG and, of course, we have invested substantially in this business, believing that there’s going to be a three-month pilot extension,” he said.

“We are hoping that the three-month extension will be continued, and we will run through the course because of the investments that have been made by JoyRide. But again, as we have already said and we have consistently mentioned, we will abide by whatever the rules given to us by the TWG. We are hoping that they will favorably consider continuing with the pilot implementation,” he added.

NLEX keeps top credit rating on fixed rate bonds

January 22, 2020 | 12:06 am

A TYPICAL section of NLEX near the Santa Rita interchange in Guiguinto. Street lights can be seen on the middle of a road from where a grass median was located before the widening project in 2016. — *WIKIPEDIA.ORG*

NLEX Corp. has maintained the highest credit rating given by a local debt watcher for its outstanding issuance worth P13 billion.

Philippine Ratings Services Corp. (PhilRatings) said in a statement yesterday it has again given NLEX Corp. a credit rating of “PRS Aaa” for its outstanding fixed-rate bonds.

The PRS Aaa rating is the highest PhilRatings gives to obligations that it believes have minimal risks. It means the issuer is perceived to have an “extremely strong” capacity to meet its financial commitments.

The rating given to NLEX Corp. was also given a stable outlook, which means the debt watcher expects it will not change in the next 12 months.

PhilRatings said to give the rating, it considered NLEX Corp.’s strong cash flow, conservative capital structure supported by retained earnings, well-managed toll franchise and resilient demand from the public for its services. But it also said political pressures that may cause further delays in the adjustments of its toll rates were accounted for.

“Traffic volume has consistently increased year-on-year, fueling the company’s revenues… This sustained profitability has translated to healthy cash flows and a robust equity base,” the debt watcher said.

It noted NLEX Corp.’s total revenues as of end-September 2019 stood at P11.2 billion, up 15% from in the same period in 2018. It added the company’s cash flow debt coverage ratio was “more than adequate” at 8.73x.

“The company has maintained a relatively conservative level of debt to finance its operations. Debt to equity ratio stood at 1.11x while its capitalization ratio was at 52.69% at the end of September 2019. These are seen to remain stable or even improve as NLEX Corp. continues to strengthen its equity position through retained earnings,” PhilRatings said.

NLEX Corp. currently operates the North Luzon Expressway and the Subic-Clark-Tarlac Expressway under concession agreements with the government, which supposedly guarantee periodic toll adjustments for the company. However, government approval on the increases are still pending.

But PhilRatings said despite this, NLEX Corp. is able to record a net income of P4.6 billion in the first nine months of 2019, growing 8% year-on-year. “(The company) has efficiently operated its concessions and completed expansion projects with the increase in traffic volume as its main revenue driver,” it said.

NLEX Corp. is under Metro Pacific Investments Corp., one of three Philippine subsidiaries of Hong Kong’s First Pacific Co. Ltd., the others being PLDT, Inc. and Philex Mining Corp.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., maintains an interest in BusinessWorld through the Philippine Star Group. — Denise A. Valdez

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