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Indonesia seen keeping key rate steady but cutting later this year

BANK Indonesia will likely keep its key rate steady. — WIKIPEDIA.ORG/CEPHOTO, UWE ARANAS

JAKARTA — Bank Indonesia (BI) is expected to keep its benchmark interest rate steady at a policy review on Thursday, but it may begin to follow other Asian central banks by cutting later this year, a Reuters poll showed.

All but three of 22 analysts surveyed predicted Bank Indonesia (BI) will hold the 7-day reverse repurchase rate at 6.0%, where it has been since November.

The other three forecast a trim by 25 basis points (bps), which would be the first rate cut since September, 2017.

A reduction would put BI on the same path as central banks in India, Malaysia and the Philippines who have loosened monetary conditions following the Federal Reserve’s dovish turn.

Hours before BI’s meeting, the Fed, facing fresh demands by US President Donald Trump to cut interest rates, is expected to leave borrowing costs unchanged, but possibly lay the groundwork for a rate cut later this year.

“Now, we believe the stars in the global economic atmosphere are aligned for a BI rate cut,” said Satria Sambijantoro, an economist with Bahana Sekuritas, who is among the minority predicting a cut this week.

He cited even stronger dovish signals from the Fed, prospects of lower oil prices, and a credit rating upgrade from Standard & Poor’s last month as reasons why BI would feel comfortable cutting now.

Most other economists, however, think BI will take time to monitor global markets before cutting.

Trimegah Securities said in a note this week a premature rate cut would hurt the rupiah currency. Anchoring the rupiah was among BI’s main goals behind rate increases last year that increased the policy rate by a total 175 basis points.

“We’ll turn bearish on rupiah and bonds if BI delivers a rate cut too early,” its economist Fakhrul Fulvian said.

Governor Perry Warjiyo in an interview with Reuters last month said that BI will take into consideration global market conditions and Indonesia’s external balance when “considering the room for monetary policy to be more accommodative”.

Warjiyo told Reuters 2019 gross domestic product (GDP) expansion is seen at 5.1%, a fraction below last year’s 5.17% and near the bottom end of BI’s 5.0%-5.4% outlook.

On Monday, the governor told a hearing with parliament he expects global uncertainties to subside in the second half of the year.

Indonesian exports have plunged in recent months as global trade slowed and trade tensions between the United States and China escalated.

At its May 16 policy meeting, BI widened its forecast for the current account gap to 2.5%-3% of GDP this year, from an initial estimate of 2.5%.

All eight respondents who gave a view on the year-end benchmark expect at least one rate cut in 2019. Four predicted the rate would end the year 25 bps below its current level, three saw it 50 bps lower, and one saw the rate 75 bps lower. — Reuters

Car sales pick up in May

Car Sales (May)

How PSEi member stocks performed — June 18, 2019

Here’s a quick glance at how PSEi stocks fared on Tuesday, June 18, 2019.

 

Tobacco-growing areas to receive P15.81B from excise

THE government will release P15.81 billion collected from excise taxes on tobacco products using domestically-grown Virginia, Burley and native varieties to local government units (LGUs) to assist farmers in improving their productivity or shifting to other crops, the Department of Budget and Management (DBM) said in a memorandum order.

Of the P15.81 billion sourced from 2016 excise tax collections, P12.88 billion was generated by from cigarettes, and P2.93 billion by tobacco.

Ilocos Norte generated excise tax from cigarettes of P7.68 billion in 2016, followed by Abra with P1.92 billion; La Union P1.45 billion; and Misamis Oriental P775.4 million.

According to the DBM memorandum signed by officer-in-charge Janet B. Abuel on June 14, the funds will support the promotion of self-reliance by tobacco farmers through cooperative projects; livelihood projects focusing on developing alternative farming systems; post-harvest and secondary processing facilities; and infrastructure projects such as farm-to-market roads.

Under Republic Act 7171, LGUs producing Virginia-type cigarettes are entitled to 15% of the national tax collection.

For non-cigarette tobacco products, Isabela generated P1.426 billion in 2016 excise.

Other provinces generating excise tax in this segment were Abra, Kalinga, Ilocos Norte, Ilocos Sur, La Union, Pangasinan, Cagayan, Nueva Vizcaya, Tarlac, Occidental Mindoro, Misamis Oriental, Maguindanao and North Cotabato.

Under Republic Act 8240, LGUs producing burley and native tobacco are also entitled to a 15% share from the excise generated by these products, with 10% going to provinces and the 90% to cities and municipalities, depending on their share of tobacco production volume.

“The individual shares of the beneficiary LGUs were computed based on their respective volumes of production and trade acceptances, as reflected in the certifications issued by the National Tobacco Administration and endorsed by the Department of Agriculture,” the DBM said in its memorandum.

Finance Secretary Carlos G. Dominguez III has said that the Department of Finance (DoF) will work with the top tobacco producing regions to allot funds for crop diversification. The DoF and the Department of Health aim to reduce if not eliminate the use of cigarettes by increasing the excise tax per pack to P60 from P35.

“We will work with the four tobacco producing provincial local government units (LGUs) who collectively receive about P15 billion annually as their share of the tobacco tax, to allocate funds for crop diversification,” Mr. Dominguez said. — Reicelene Joy N. Ignacio

Japan tapped to help upgrade PHL ship building capability

THE Maritime Industry Authority (MARINA) said it signed an agreement with a Japanese industry association to help build the capacity of Philippine shipbuilders.

The regulator signed a memorandum of understanding (MoU) with the Japan Ship Machinery and Equipment Association (JSMEA) Tuesday, formalizing the current cooperation arrangements to support Philippine shipbuilders.

“We truly appreciate the commitment of Japan in engaging with us in the maritime industry such as in education, local shipbuilding and ship repair. With its latest technologies and strategies, Japan has been offering the Philippines sufficient machinery, technical skills and effective solutions to problems in our maritime industry,” MARINA’s officer-in-charge, Vice Admiral Narciso A Vingson, Jr., a former Armed Forces deputy chief of staff, said at the signing ceremony in Pasay City.

“…we are confident that this cooperation agreement will aid us in building a solid shipbuilding and ship repair (industry), which will generate jobs for millions of Filipinos, opportunities for partnership and investment between Filipinos and Japanese and provide readily available quality materials for local shipbuilding,” he added.

The MoU will cover the exchange of information on maritime trade, shipbuilding and ship equipment between the two parties and regular dialogues with member companies of JSMEA.

“After the MoU signing… we will conduct a mutual exchange of (information on) potential opportunities with MARINA every year,” JSMEA Chairman Shinzo Yamada said.

Mr. Vingson said the goal of the agency is to continue growing the shipbuilding industry, with the Philippines the fourth largest ship producer in the world by gross tonnage.

“We have just launched it, a 10-year development plan particularly for shipbuilding. Before, we only build ships of about 500 gross tonnes. But now, we are envisioning to build more than that… 50,000 gross tonnes or more,” he told reporters.

“We are building ships for other countries. It is only situated here, but it is owned by multinational (companies)… We just provide the labor force. But if we can encourage our local shipyard to help their own, facilitated by the government, I think we can build our own shipyard,” Mr. Vingson added.

He said with the cooperation agreement with JSMEA, he expects a boost in the capacity building of local shipbuilding companies. “So once we have to start building our own, it’s investment and job opportunities,” he said. — Denise A. Valdez

Davao water project to hit peak construction phase in late 2019

DAVAO CITY — The construction of the P12-billion bulk water project in the city is set to peak in late 2019 with the joint venture implementing it starting to look for more workers.

“Peak (of construction) would be sometime late this year and early next year with (demand for) up to 1,000 workers,” according to Cirilo C. Almario III, general manager of Apo Agua Infrastructura Inc., a consortium between the Aboitiz Equity Ventures and the JV Angeles Construction Corp., in an e-mail sent to BusinessWorld.

At present, the number of workers is currently about 170, but Mr. Almario said the construction phase has just started.

Mr. Almario said the company is not expected to have difficulty looking for workers because there is adequate manpower in the host communities.

When the project is completed by 2021 as scheduled, he said another set of people will be hired to operate the facility. “Priority will still be those from the host barangays but they would have to be qualified,” he said.

The National Economic and Development Authority (NEDA) has said that the construction sector will become the major growth driver of gross regional domestic project to between 10.5% and 11% from 8.6% last year.

However, Maria Lourdes D. Lim, NEDA regional director, said growth in the sector will depend on how fast the projects, including those funded by government under its “Build, Build, Build” program, can hire quality workers amid a shortage of construction workers.

Ms. Lim said the government and private sector have discussed the need to hone the skills of workers to meet the standards required by the employers. Among the key interventions is to tap the Technical Education and Skills Development Authority (TESDA) to come up with a training module for these workers.

Mr. Almario said the company is “positive” it can complete the project on schedule by the first half of 2021, when it is due to start delivering about 300 million liters of potable water a day to the Davao City Water District, the city’s water provider.

“Right now, we are (building) the water treatment facility in the Tamugan River site where we will be putting up the intake facility and in the third or fourth quarter, we will start with the pipe laying all across the city. This is the peak construction phase,” he said. — Carmelito Q. Francisco

Regional energy project backed by USAID, ADB to unlock private investment

THE ASIAN Development Bank (ADB) and the United States Agency for International Development (USAID) signed Tuesday an agreement to mobilize about $7 billion worth of investment for energy projects in Asia and the Pacific.

USAID Asia Bureau Acting Assistant Administrator Gloria Steele said with the targeted investment, the agencies hope to increase the capacity of deployed energy systems by six gigawatts, and increase regional energy trade by 10% over the next five years.

“What we would like to do is to use the resources to get the private sector to engage in the energy sector in their region. And through their engagement, we want to mobilize investments from the private sector, from businesses,” Ms. Steele said during the news conference Tuesday at the ADB office in Ortigas Center.

Director General of ADB’s Strategy, Policy, and Review Department Tomoyuki Kimura said the projects to be funded will “focus on clean energy, renewable energy and also energy access for all.”

For the Philippines, among other priority countries in the Indo-Pacific region, this would mean an expansion of renewable energy projects.

Asked if the ADB has found prospective investors here, Yongping Zhai, chief of the Energy Sector Group under the ADB’s Sustainable Development and Climate Change Department, replied positively, adding: “We are looking at expanding clean energy and renewable energy in the Philippines.”

Mr. Zhai added that liquefied natural gas remains a viable option for the country to diversify its power mix.

“LNG and gas will be important to make the process clean; otherwise the share of coal will increase,” Mr. Zhai told reporters yesterday.

Mr. Zhai said the financing will be tapped via partnerships with the private sector.

These investments, in turn, will help mobilize other sources of finance. The ADB will focus on providing technical assistance.

“ADB will continue using our resources but with this additional resources from USAID, we will expand and strengthen the design of our projects, institution-side and capacity-side,” Mr. Zhai added.

Mr. Kimura noted that the deal will serve as a “useful instrument” for ADB to achieve its commitment in its Strategy 2030 to mobilize private sector financing, particularly for infrastructure intended for various sectors.

“We have actually a commitment to achieve a leverage range of 2.5, which means whenever we provide $1 of our money, we mobilize $2.5 particularly from the private sector,” Mr. Kimura added.

The initiative was launched yesterday and will be given five years to achieve the objectives under the agreement.

In 2018, ADB made commitments of new loans and grants amounting to $21.6 billion.

For the energy sector, ADB’s annual funding averages around $5 billion, according to Mr. Zhai, noting that half is allocated for clean and renewable energy while the remaining half is for putting up transmission lines and execution systems. — Janina C. Lim

US firms continue to look at Mindanao for possible investment

By Maya M. Padillo
Correspondent

DAVAO CITY — US Ambassador Sung Kim said US companies are continuing to look at Mindanao as possible destination for investment, citing the US companies planning to participate in the upcoming Davao Investment Conference 2019 (Davao ICON 2019).

“I know that a couple of US companies will be participating in Davao ICON so they continue to be interested. In fact we have a very active American Chamber of Commerce chapter here in Mindanao and we recently met them in Manila and they said there is still strong interest for Mindanao,” he said.

Mr. Kim added that these companies were not put off by travel advisories and do not view the security situation as a factor in investing in Mindanao.

“It should be mentioned that for any government their top responsibility is to protect their citizens… we will continue to look at the situation and see if any updating is necessary,” he said.

Mr. Kim reiterated the long history of investment by the US in the Philippines, noting that some firms are interested in Mindanao to help create jobs for young Filipinos.

He also said Mindanao is a natural place to invest for US firms because many US agencies are active there.

He also described the trade relationship with the Philippines as a long-running and mutually beneficial economic partnership.

He cited US companies like Coca-Cola and Procter and Gamble (P&G) that have operated in the Philippines for 100 years and continue to do well.

Mr. Kim also said the largest exporter on the Philippines is semiconductor firm Texas Instruments, while the largest employer in the Philippines is BPO firm Concentrix. He also said some of the biggest taxpayers in the Philippines are US companies.

“I hope that we will be able to continue and expand an investment relationship,” he said.

Raw sugar output rises amid falling prices, demand

SUGAR PRODUCTION in the third week of May rose 3.12% year-on-year, the Sugar Regulatory Administration (SRA) said.

SRA said raw sugar production was 2.054 million metric tons (MMT) by the third week, up from 1.992 MMT a year earlier. This is equivalent to 41.092 million 50-kilo bags, compared with 39.847 million a year earlier.

The crop year for sugar starts every September and ends in August.

Demand for raw sugar declined 15% to 1.515 MMT.

Total sugarcane milled decreased 5.25% year-on-year to 21.562 MMT.

Refined sugar output fell 4.9% year-on-year to 764,412.4 MT.

The millgate price fell 16.6% to P1,502.9 per 50-kilo bag. The retail price was stable at P45 to P53 per kilo.

For the remaining months of sugar production, SRA Board Member and Millers’ Representative Roland B. Beltran said that production is still growing, but possibly in lower increments.

Maliit na lang talaga (The increases will be smaller)… Marami nang tumigil ng pagmi-mill… (many mills have stopped processing sugar) More or less, halos pareho lang ng last year (we’re expecting little change from last year),” Mr. Beltran said.

Crop year 2017-2018 ended with raw sugar output of 2.083 MMT, down 16.67%. Refined sugar production decreased 3.73% to 926,677.4 MMT.

The food sector has been calling for sugar prices to fall and for the sector to be liberalized along the lines of rice tariffication, which allows the commodity to be more freely imported while the government collects tariffs on the inbound shipments. — Vincent Mariel P. Galang

Fertilizer prices rise in May — PSA

THE AVERAGE price of four grades of fertilizer increased year-on-year in May, the Philippine Statistics Authority (PSA) said.

The average price of Urea fertilizer increased 14.3% year-on-year to P1,148.20 per sack, but fell 0.5% compared with the previous month.

Month-on-month, prices fell in 10 regions. The highest price recorded was in the Autonomous Region in Muslim Mindanao (ARMM) at P1,402.5, while the lowest price was in the Ilocos Region at P1,028.75.

The price of complete fertilizer rose 4.4% year-on-year to P1,154.12, and rose 0.3% month-on-month.

Price increases were recorded in eight regions. The highest price of P1,442.5 was in ARMM. The lowest was P1,040.19 in South Cotabato, Cotabato City, Cotabato Province, Sultan Kudarat, Sarangani and General Santos City (SOCCSKSARGEN).

The price of ammosul fertilizer rose 7.2% year-on-year to P631.88. It rose 0.1% from a month earlier.

Seven regions recorded higher prices during the month. The highest was in ARMM at P963.75, while the lowest was in Davao Region at P550.25.

The price of ammophos fertilizer increased 8.3% year-on-year to P997.06, but fell 0.1% against the previous month.

Prices fell in six regions, with the highest in ARMM at P1,265, and the lowest P928.13 in the Ilocos Region. — Vincent Mariel P. Galang

NEA claims 13M new rural power connections since 2016

THE National Electrification Administration (NEA) said it achieved its short-term goal of connecting 13 million additional households ahead of the 50th anniversary of the Rural Electrification Program in August.

It said the percentage of energization across 121 areas served by energy cooperatives (ECs) rose to 91% in April 2019 from 80% in June 2016, for an new-connection average growth of 275,238 or 2% increase per half.

“Our relentless efforts with respect to providing electricity to rural and remote areas of the country and usher in a bright future for our fellow Filipinos have borne fruit. This is another milestone in the golden year of the Rural Electrification Program,” NEA Administrator Edgardo R. Masongsong was quoted as saying in a statement Tuesday.

NEA is a unit of the Department of Energy and is in charge of implementing the Rural Electrification program and improve the technical capacity and financial viability of power cooperatives. — Janina C. Lim

Davao Gulf shellfish found to be microplastics-free

DAVAO CITY — The fisheries bureau said a study has found no microplastics in green mussels from the Davao Gulf.

Fatma M. Idris, regional director of the Bureau of Fisheries and Aquatic Resources, said Jose B. Isagani Janairo of De La Salle University conducted the study in coordination with the Department of Science and Technology (DoST).

The study found that the sample from Davao Gulf did not turn up any indication of microplastics.

The bureau added that the presence of Red Tide toxins in Balete Bay in Davao Oriental means mussels and other shellfish from the area are still not safe to eat.

She called on residents of the region must do their part to “save the ocean to save our future. No to throwing of garbage to sea, oceans and rives.” — Carmelito Q. Francisco