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Senate OK’s proposed P4.1-trillion 2020 national budget on time

By Charmaine A. Tadalan
Reporter

THE SENATE on Wednesday approved on second as well as third and final reading its version of the P4.1-trillion national budget for 2020, putting the spending on track to year-end enactment.

With 22 affirmative votes and no negative vote, the chamber approved Committee Report No. 18, which has differences with House Bill No. 4228, or the “General Appropriations Act for Fiscal Year 2020.”

President Rodrigo R. Duterte certified the bill as an urgent measure, allowing both chambers to do away with the required three-day interval in approving measures on second- and third-reading.

The Senate contingent in the bicameral conference committee will be led by Senator Juan Edgardo M. Angara with the following as members: Senators Panfilo M. Lacson, Cynthia A. Villar, Pia S. Cayetano, Sherwin T. Gatchalian, Christopher Lawrence T. Go, Richard J. Gordon, Imee R. Marcos, Emmanuel Joel J. Villanueva, Ralph G. Recto, Nancy S. Binay, Grace S. Poe-Llamanzares, Franklin M. Drilon, Francis N. Pangilinan, and Risa N. Hontiveros-Baraquel.

The spending plan was approved by the House of Representatives on Sept. 20 and was transmitted to the Senate on Oct. 1. Both chambers are working to prevent a repeat of the nearly four month delay in enactment of the national budget for this year.

Prior to its approval, Mr. Angara, who chairs the Finance committee, moved to increase the P67.31-billion appropriation for state universities and colleges (SUCs) by P1.158 billion and the P1.85-billion budget of the Philippine National Police by P1.529 billion.

“We also provided additional funding for our SUCs to provide for an increase for their research programs, the conduct of sports- and culture-related activities, and new buildings and facilities,” Mr. Angara said during the period of amendments. “The Philippine National Police will also receive more funds: for its efforts to restore peace in the countryside, for the Intelligence and Counter Intelligence activities of the PNP Anti-Kidnapping Group and Internal Security Operations.”

The increase is also intended to fund maintenance of newly procured H125 Helicopter, patrol vehicles, rubber boats and high speed tactical watercraft, newly completed police stations and crime laboratories and provincial mobile force companies, among others.

The chamber also provided additional funding to the Philippine Army, amounting to P920 million for the activation of the first infantry division and a P150 million increase in the Veteran Memorial Medical Center budget for procuring medicines and employing additional workers.

To recall, Mr. Duterte signed the 2019 national budget on April 15 due to an impasse on funding framework between the House and the Department of Budget and Management, and later with the Senate on irregular fund insertions. He vetoed some P95.3 billion appropriations, reducing the 2019 budget to P3.662 trillion.

The budget delay has weighed on economic growth, which slowed to 5.8% in the first three quarters from 6.2% last year against a 6-7% target for 2019.

Both chambers have moved to extend the validity of the 2019 budget until Dec. 31, 2020 to make up for the budget delay and the ban on new public works ahead of the May 13 midterm elections.

House body sees prompt action on POGO tax

THE HOUSE of Representatives ways and means committee expects the proposal to tax Philippine Offshore Gaming Operators (POGO) to be approved without much difficulty in the plenary, the panel’s head said on Wednesday.

“Itong tax on POGO ibababa na ’yan sa floor (We will soon introduce the measure taxing POGOs to the floor). We expect easy, expeditious action in the plenary simply because it doesn’t affect the pockets of ordinary people,” Albay-2nd District Rep. Jose Ma. Clemente S. Salceda, who heads the committee, said in a media forum in Manila.

Earlier the same day, the Bureau of Internal Revenue (BIR) padlocked 11 branches of another POGO — Makati City-based New Oriental Club88 Corp. (NOCC) — for not being registered for tax purposes.

It is the third POGO to suffer this fate after Great Empire Gaming and Amusement Corp. last Sept. 25 and Altech Innovations Business Outsourcing on Oct. 17. Both businesses have resumed operations after making initial payments on their liabilities.

“They’re earning P600 billion… and, actually, what goes to the national government is only P400 million,” Mr. Salceda said of the entire industry, citing estimates.

SUPPORTED BY THE SENATE
The committee on Nov. 18 approved House Bill No. 5267, which in its last version proposed to impose a five percent franchise tax on all offshore gaming companies. This will be charged on top of the current two percent gross gaming revenue tax collected by the Philippine Amusement Gaming Corp. (PAGCOR).

This is also in line with the BIR’s Revenue Memorandum Circular No. 102-2017, which provides that POGOs are subject to tax.

The same House measure will also introduce a 15% tax on the salary of an individual, who is a permanent resident of a foreign country, employed by a licensed offshore gaming enterprise. The bill sets at P250,000 the minimum gross annual income for computation of tax levied on foreign nationals engaged in offshore gaming. At present, said employees are not covered by the tax code.

Even as no counterpart measure has been filed in the Senate, Senate leaders have expressed support for the move to tax POGOs

President Vicente C. Sotto III and Senate President Pro-Tempore Ralph G. Recto both replied “yes” in separate mobile phone messages when asked if they would support the House measure.

On New Oriental, the BIR said in a press release on Wednesday that “[r]esults of the investigation showed that NOCC has unregistered branches as certified by the Revenue District Office No. 052-Parañaque City, having the jurisdiction over the said branches, in violation of Section 115 (b) of the Tax Code.”

Talking to reporters, BIR Deputy Commissioner for Operations group Arnel SD. Guballa cited “violation of VAT (value-added tax requirements) and violation of non-remittance of the withholding tax” on the part of New Oriental.

According to BIR estimates, the company had a total of 23,156 foreign nationals in its employment for the taxable year ending last Dec. 31. But the business submitted to the BIR an official list of its foreign workers, totaling just 6,736 for the same period. — Charmaine A. Tadalan and Beatrice M. Laforga

Customs taps standards bureau for tighter watch on imported steel bars

steel bars Laguna

By Beatrice M. Laforga

THE BUREAU of Customs (BoC) and the Bureau of Philippine Standards (BPS) are now coordinating to strengthen examination of imported steel bars after lawmakers launched an inquiry on the alleged smuggling of substandard steel into the country.

Vincent Philip C. Maronilla, BoC assistant commissioner heading the Post Clearance Audit Group, said at a hearing in the House of Representatives on Wednesday that his office has asked BPS for technical help for these examinations. “There’s a close coordination now that’s going to be done with BPS because they’re the primary agency that actually ensures the quality of steel coming in. We actually go by their regulations only,” Mr. Maronilla explained.

He added that BoC is “beefing up its post clearance audit” on imported steel bars as well as cooperate with the Presidential Anti-Corruption Commission on its probe on the matter.

Some importers, he said, may be buying cheaper, substandard steel products but “declare it as complete standard.”

Roberto M. Cola, president of the Philippine Iron and Steel Institute (PISI), said in a telephone interview that while there are importers who bring in substandard steel bars, some local manufacturers have also been producing substandard products.

“It’s both local and importers, most are locally produced, they are coming from local. It used to be imported, ’yung galing (from) China. Ngayon nandito na ’yung mga factory kaya ino-oppose namin ’yung facilities na ’yan kasi bina-ban sa China ’yan eh, marami na ang nagtatayo ngayon (Factories that make substandard steel bars are now here after being banned in China, that is why we oppose them. Many of the operators are now in hiding),” Mr. Cola said also on Wednesday.

He noted that supply of substandard steel bars is “now slowly decreasing” after the government acted on his PISI’s complaint, amounting to about a fourth of products in the group’s “test-buys” in hardware stores nationwide from about 60% previously.

It a report e-mailed to BusinessWorld yesterday, PISI said that substandard steel bars were being sold in at least 44 hardware stores across the country as of September, as indicated by “failed result from the Metals Industry Research and Development Center.”

“Hindi masyado namo-monitor ng government kaya nakalat ’yan, it’s only lately nung nag-complain ng maraming substandard na gumawa sila ng nationwide monitoring (Substandard steel proliferated due to inadequate government monitoring. It’s only lately in the face of complaints that the government embarked on nationwide monitoring),” he said.

Lufthansa Technik says no plans to relocate outside PHL

LUFTHANSA Technik Philippines (LTP) on Wednesday said it has no plans to relocate outside of the Philippines, despite concerns over the proposed Comprehensive Income Tax and Incentives Rationalization Act (CITIRA).

This comes as the aircraft maintenance and repair company broke ground for a new hangar at the MacroAsia Special Economic Zone in Villamor Airbase, Pasay City.

“We are not yet looking to relocate because we trust the current process,” LTP President and Chief Executive Officer Elmar Lutter told reporters on Wednesday when asked if the company plans to relocate outside of the Philippines with the expected passage of the proposed CITIRA.

LTP earlier said that it was hoping to continue to enjoy tax-free and duty-free spare parts imports under the proposed CITIRA. This was supported by the Trade department.

“We have reached out to the government and we already handed in our position about the matter,” Mr. Lutter said, noting the Senate has not started deliberations on the CITIRA bill.

The new hangar, which will be known as Hangar 1A, is part of the company’s efforts to expand its capacity in the Philippines.

The 9,000-square meter (sq.m.) hangar is expected to contribute 20% to LTP’s revenues, and will start operations in the fourth quarter of 2020. It will allow LTP to service more aircraft including Airbus A380 aircraft.

Mr. Lutter said the company is allotting $40 million for the facility, which will create 275 new jobs.

“Lufthansa Technik Philippines has always been the country’s forerunner in the MRO (maintenance, repair and overhaul) industry. As we approach our 20th year, it’s about time we showcase the Philippines as an aviation stronghold in Asia-Pacific. The company strongly believes in the ability of the Philippines to be a hub for aviation services in the region, and proof of this is our expansion and continued commitment to the country,” Mr. Lutter was quoted as saying in a statement.

“With the expansion of our facilities and services through the construction of Hangar 1A, we will be opening LTP’s doors to 275 more Filipino workers to help the Philippine MRO industry grow, together with the sustained growth of the Philippine economy,” he added.

The company said it provides maintenance services to various commercial aircraft including Airbus A320, A330, A350, A380, and Boeing B777.

LTP is a joint venture of Hamburg-based Lufthansa Technik AG and Philippines’ biggest aviation support service provider MacroAsia Corporation. It currently employs 3,300 workers in key cities such as Clark, Cebu, Davao, Kalibo, and Puerto Princesa. — Arjay L. Balinbin

SEC approves Vista Land, Cirtek bond offerings

THE Securities and Exchange Commission (SEC) has approved the planned bond offerings of Vista Land & Lifescapes, Inc. (VLL) and Cirtek Holdings Philippines Corp.

In a statement Wednesday, the country’s corporate regulator said it has given the go-signal for VLL to issue P30-billion worth of fixed-rate bonds and Cirtek to issue P2-billion worth of commercial papers.

“The SEC will issue the corresponding orders of registration and permits to sell securities upon the publicly listed companies’ compliance with certain conditions,” it added.

For VLL, the approval was for the company’s bond issuance which will be done in tranches over a three-year period. The first tranche will compose of fixed-rate, Philippine peso-denominated bonds worth P5 billion, which may be oversubscribed to up to another P5 billion.

The issuance will have a 5.5-year tenor, which VLL may redeem in whole at 101% of the principal amount on the third year or at 100.5% on the fourth year.

The offer, if oversubscribed, is expected to raise P9.86 billion for the company, which it will use to “fund the construction and completion of various malls, redevelopment of existing malls and the construction of condominium projects, as well as for general corporate purposes.”

The SEC said VLL is looking to issue and list the bonds on Dec. 12. It has tapped China Bank Capital Corp., PNB Capital and Investment Corp. and SB Capital Investment Corp. as joint issue managers, lead underwriters and bookrunners for the issuance.

For Cirtek, the SEC said the issuance of commercial papers may be done in a lump sum or in tranches within a three-year period.

It said the offer will have three series: a 91-day, P500-million Series A offer; a 182-day, P500-million Series B offer and a 365-day, P1-billion Series C offer.

Overall, the issuance of corporate papers is seen to generate P1.88 billion for Cirtek, which it will use to “refinance existing debt and cover working capital requirements.”

The company may start its offer period upon its receipt of the approval from the SEC. It has selected Multinational Investment Bancorp. as underwriter for the offering.

Shares in VLL at the stock exchange climbed 0.03 points or 0.40% to P7.62 each on Wednesday, while shares in Cirtek declined 0.17 points or 3.15% to P5.23 apiece. — Denise A. Valdez

AC Energy raises $400 million from perpetual green bond issue

AYALA-LED AC Energy, Inc. has valued its senior perpetual fixed-for-life green bond issuance at $400 million with a fixed coupon of 5.65% with no step-up and no reset, its listed unit said on Wednesday.

“This represents the first US dollar denominated fixed-for-life green bond ever issued globally,” AC Energy Philippines, Inc. told the stock exchange.

It said the bonds will be issued by AC Energy Finance International Ltd., a wholly owned subsidiary of AC Energy, and will be guaranteed by AC Energy. The bonds will be listed on SGX-ST. They are certified under the ASEAN Green Bonds Standards by the Philippine Securities and Exchange Commission on Nov. 18.

“AC Energy plans to deploy the funds for renewable energy expansion across the Asia Pacific region to include the Philippines, Indonesia, Vietnam, Myanmar, India and Australia, among others,” said AC Energy Philippines, which is 66.34% owned by AC Energy.

The ASEAN Green Bonds Standards is an initiative that facilitates ASEAN capital markets in tapping green finance to support sustainable regional growth and meet investor interest for green investments.

The standards are part of the ASEAN Capital Markets Forum’s broader efforts in developing green finance for the region. They have been developed in collaboration with the International Capital Market Association.

AC Energy is the energy platform of Ayala Corp., one of the country’s largest business groups. It is one of the fastest growing energy companies with more than $1 billion of invested and committed equity in renewable and thermal energy in the Philippines and around the region.

The company aspires to exceed 5 gigawatts of attributable capacity and generate at least half of energy from renewables by 2025.

As of November 2019, AC Energy has a net attributable capacity of over 1,600 megawatts (MW), of which 600 MW is from renewable sources. — Victor V. Saulon

Proudly Promdi brings the spirit of the north to the big city

“RUSTIC” has come to mean a lot of things as the dawn of the new decade approaches. It can mean just plain and simple, and especially if it was made somewhere rural. These days, however, something having a rustic quality means that it was born somewhere away from the prying hands of the city and modernity, and thus, quite pure.

Ken Alonso wouldn’t call himself Proudly Promdi (this is the actual business name) if he didn’t understand that. Mr. Alonso, who calls himself Chief Promdi Officer, takes tapuy and bugnay wine from the provinces up north and makes it his mission to place them on shelves at some of Manila’s finest bars, and even those of the world.

Mr. Alonso took his spirits to Three Little Pigs, a speakeasy in Pasig, on Nov. 20 and presented four cocktails (BusinessWorld had two) made of bugnay wine and tapuy. In case you’re wondering, bugnay is the same as bignay; it’s just a matter of a difference in dialects. Bignay is a fruit from the Antidesma bunius tree, grown over Southeast Asia and some parts of Australia. The juice is quite tart, Mr. Alonso recalls, and so some makers add a bit of sugar during the fermentation process to make the wine. Tapuy, on the other hand, is local rice wine, and Mr. Alonso’s fare are made from sticky rice. He sources this from women winemakers in the north, paying above-market prices. His background in graphic design helps him to repackage the product and sell it in the city as a premier product. Proudly Promdi also operates as a mobile bar, and one can avail of their services during parties for a bit of Filipino flair.

Now, back to the cocktails: the Mestiza was made from bignay wine, mango juice, lemon, basil infused gin, syrup, and rose water. Sans the mango juice, this one tasted very clean, like drinking the smell of old-fashioned soap. Next came TMFT (To My Favorite Tita), made of bignay wine, coconut rum, orange juice, lemon juice, syrup, and soda water. It’s a fitting tribute, because he remembers that his love affair with tapuy started when his aunt got everybody drunk on it during her 25th wedding anniversary. BusinessWorld did not sample the tapuy cocktails and instead had it on the rocks (which according to Mr. Alonso, is perfectly fine).

“Nahihiya sila na ibenta namin (they’re embarrassed that we are selling it),” said Mr. Alonso of his sources. He’s about to change all that. “They still have that perception that they (their products, and maybe by extension, them) don’t deserve to be here.”

“We’re here to say, be proud that it’s made by you.”

There’s a bit of hitch on the road here — the products that Mr. Alonso sources are still in the process of getting Food and Drug Administration approval. The process takes building a formalized and clean facility to ensure consistency, and, yes, he’s aware of that alcohol poisoning incident from another company. “Hopefully by next year, these will be exportable products.”

It won’t take away from the rustic quality we’re coming to love: “We’re not going to commercialize it on a grand scale like the big suppliers. In a way, you’re trying to make it a premium product.

Mr. Alonso then began to touch on his childhood, which was the source of the company’s name, Proudly Promdi. While he grew up in the city (he has a boys’ school accent), he said that he was a bit embarrassed growing up that his parents were not city folk. But then, “I realized growing up, why should you be hiya (embarrassed)? There’s so many things that you should be proud of.” — Joseph L. Garcia

Indian firm CarDekho Group acquires Carmudi Philippines

INDIAN automotive technology company CarDekho Group has acquired local automotive website Carmudi Philippines, Inc.

CarDekho in a statement Monday said it is expanding across South East Asia, tapping the Philippine company after expanding to Indonesia with OTO.com in 2016.

With this acquisition, the statement said, CarDekho’s technologies are expected to upgrade the buying and selling website experience for Carmudi. The companies are also expected to introduce new products and innovations.

“CarDekho’s backing is a major boost for Carmudi Philippines as we continue to strengthen our position as one of the top automotive platforms in the country. This means added enhancements in technology, processes, and platform experience,” Carmudi Philippines chief executive officer Cholo Syquia said.

“Carmudi is already known for quality listings, powerful search, and one-stop convenience but the collaboration with CarDekho is how we push potential for our site visitors. We are keen for buyers and sellers to experience the difference and benefits right away.”

Carmudi Philippines employees will retain their current standing.

Founded in 2008, CarDekho is one of India’s largest automotive platforms, with its business focused on new and used car selling across multiple websites.

They also operate motor and health insurance at InsuranceDekho.com, and offer specialized portals like TyreDekho and TrucksDekho.

“The group has digitized the entire Indian automotive ecosystem by leveraging on content, digital migration, advanced technologies, and partnerships with various automotive manufacturers,” the company said.

CarDekho is the flagship portal and subsidiary of software development company GirnarSoft. — Jenina P. Ibañez

Yields on BSP’s term deposits decline on hints of more easing

YIELDS ON term deposits declined on Wednesday after the central bank chief said a rate cut before the year ends is still possible and following the fresh liquidity expected from the revision of the definition of deposit substitutes.

Tenders for the Bangko Sentral ng Pilipinas’ (BSP) term deposit facility (TDF) totaled P180.328 billion, barely filling the P180 billion on the auction block, central bank data showed.

This also beat the P171.972 billion in bids the BSP received last week for the P150 billion on offer.

Banks’ tenders for the seven-day term deposits amounted to P62.442 billion, failing to fill the P70 billion on offer and also down from last week’s P63.72 billion in bids for the P50 billion on the auction block.

Yields for the tenor ranged from 4.07% to 4.45%, a wider range from last week’s 4.15-4.3456% band. This resulted in an average rate of 4.2508%, higher by 1.34 basis points (bps) from last week’s 4.2374%.

Meanwhile, the 14-day papers attracted bids totaling P53.975 billion, going beyond the P50 billion on offer and also surpassing the P47.465 billion in tenders seen last week.

Lenders asked for returns ranging from 4.14% to 4.4566%, a wider margin versus the 4.25-4.5% range seen on Nov. 20. The average rate for the two-week papers dipped to 4.3424%, down 1.09 bps from last week’s 4.3533%.

For 29-day deposits, tenders hit P63.911 billion, beyond the central bank’s P60-billion offer and also higher than the P60.787 billion in bids seen last week for the P50 billion up for auction.

Rates for the one-month tenor ranged from 4.19% to 4.5%, a wider band versus the previous auction’s margin of 4.29% to 4.45%. Following this, the one-month paper’s rate averaged at 4.3324%, lower by 2.68 bps from last week’s 4.3592%.

The TDF is the BSP’s main tool to shore up excess liquidity in the financial system and to better guide market interest rates.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said fresh signals from the BSP on possible monetary easing affected TDF yields.

“TDF auction yields were mostly slightly lower week-on-week after BSP Governor [Benjamin E.] Diokno signalled possible cut in local policy rates on the next monetary policy-setting [meeting] after earlier signals of no more rate cuts for the rest of 2019,” he said in a text message.

He added that the lower yields also came after the central bank’s exclusion of interbank borrowings in deposit substitutes.

“Auction yields were also lower after the BSP decided to redefine…deposit substitutes to exclude interbank borrowings, effectively not subjecting interbank borrowings to reserve requirements, thereby freeing up more peso funds for loans and investments,” he explained.

Meanwhile, UnionBank of the Philippines, Inc. chief economist Ruben Carlo O. Asuncion noted that players seem to be opting for shorter tenors.

“It looks like trust entities are preferring shorter tenors at this point when liquidity still remains a challenge. The oversubscription of the recent auction indicates clearly the higher demand and the anticipation of the need to be more liquid as the year ends,” he said in an e-mail.

Mr. Diokno said on Monday that a rate cut on Dec. 12 — the BSP’s last policy meeting for the year — is still possible, depending on conditions.

“The BSP will always be data-dependent so we will evaluate…every time we have a policy meeting,” he said.

When asked about an S&P Global Ratings report which said the credit watcher is expecting another 25-bp cut from the central bank on top of the 75 bps in cuts done this year, Mr. Diokno said: “Pwede ’yun, pwede ’yun (It is possible).”

Before this, Mr. Diokno had said the central bank has “already done enough” for the economy and that the current monetary policy “remains appropriate.”

Benchmark policy rates currently stand at 3.5% for the overnight deposit facility, four percent for overnight reverse repurchase and 4.5% for overnight lending.

The central bank last week said its policy-making Monetary Board adopted the new definition for deposit substitutes under Section 95 of its charter that has been amended by Republic Act (RA) 11211 or the New Central Bank Act enacted in February.

With RA 11211, the same provision now defines that the phrase “obtaining funds from the public” means those that involve borrowing from at least 20 lenders at any one time that are individuals or companies which are not financial intermediaries.

“This means that borrowings from banks, quasi-banks and other financial intermediaries are no longer considered deposit substitutes which are subject to reserve requirements,” the BSP said in a statement last week, citing as examples interbank borrowings, repurchase agreements with financial counter-parties, as well as bonds issued to financial intermediaries.

“Ang implication ’nun (Its implication) is I think we released about P28 billion into the financial system,” Mr. Diokno said when asked about the revision, noting that they will monitor how the financial market will respond to the change.

Latest BSP data showed domestic liquidity picked up 7.7% year on year in September to P12 trillion, compared to the 6.3% growth recorded in August.

On the other hand, bank lending was still flat in September despite the BSP’s moves to ease policy earlier this year. Data showed outstanding loans of universal and commercial banks increased 10.5% year on year in September, an expansion unchanged compared to the August print. Inclusive of reverse repurchase agreements, bank lending grew 10.2% in September, slightly picking up from the 10% seen the previous month

The central bank will release October liquidity and bank lending data on Nov. 29. — L.W.T. Noble

Singapore’s Grab introduces pilot motorbike-hailing service in Malaysia

GRAB has launched a motorbike-hailing service in Malaysia. — REUTERS

KUALA LUMPUR — Ride-hailing firm Grab has launched a pilot program for motorbike hailing in Malaysia, barely a month after regional rival Gojek was given the green light to begin limited operations in the country.

The Singapore-based company, a dominant player in Southeast Asia after it acquired Uber’s business in the region last year, said on its website that the move was in line with the government’s effort to test out the service.

Grab is backed by familiar names in technology sector including SoftBank Group Corp., Microsoft Corp, Toyota Motor Corp and Uber.

Malaysia said earlier this month that it will allow motorbike-hailing services such as Indonesia’s Gojek to operate on a limited scale for six months from January next year as pilot schemes to measure demand for the service.

The six-month programme would allow the government and participating firms to gather data and evaluate demand while officials work on drafting legislation to govern bike-hailing.

Grab said the pilot service — limited to Klang Valley, Malaysia’s most developed region, where the capital Kuala Lumpur is located — will also include food delivery. The company is recruiting pilot drivers until next Monday.

Grab already operates GrabBike in other markets like Thailand, Vietnam and Indonesia. — Reuters

Intel and MediaTek partner on laptops with 5G modems for 2021

TAIWAN’S MediaTek Inc. has announced a partnership with US chipmaking giant Intel Corp. to supply future Intel-powered PCs with fifth-generation networking modems from the start of 2021.

The agreement marks a small step toward a big change in the way computing is done, as 5G promises to revolutionize both the speed and availability of cellular networks, creating dense coverage with bandwidth comparable to current Wi-Fi standards and beyond. Mobile computers stand to benefit greatly from this upgrade, and US PC vendors Dell Inc. and HP Inc. have both been named by MediaTek among the likely first customers for the 5G-enabled, Intel-powered laptops that are to come.

In July, Intel agreed to sell its cellular modem business to Apple Inc. for $1 billion, which the Cupertino, California company will use to speed up and improve design efforts around a 5G chip for its 2020 iPhones. Without its own in-house development, Intel has to license 5G technology in and MediaTek has been deemed the best option, sidestepping more direct rival Qualcomm Inc. and the sanction-laden Huawei Technologies Co.

As the dominant provider of processors for desktop and notebook computers, Intel is in a position where it can dictate when the broad majority of laptop PCs embrace the addition of 5G connectivity, and the timeline set out from this MediaTek partnership suggests that it’s a little over a year away. — Bloomberg

How good is Château Lafite Rothschild’s Chinese wine, Long Dai?

By Elin McCoy, Bloomberg

WHAT’S THE ultimate status wine in China? Famed Bordeaux first growth Château Lafite Rothschild. That’s why the company’s first wine made in China is such a big, big deal.

The cabernet blend labeled Long Dai debuted at the company’s winery in Qiu Shan Valley, in China’s northeastern Shandong Peninsula, in September. It won’t arrive in the US until 2020, and only 100 cases will be imported. They’ll be available at a few top shops and restaurants, but the majority of the 2,500-case inaugural release will be sold in China.

So when Lafite Chief Executive Officer Jean-Guillaume Prats brought a sneak preview bottle to New York for me to try, my taste buds were primed.

THE TASTE
I won’t keep you in suspense. The quality of this first vintage of Long Dai, 2017, is impressive. It doesn’t taste like any other luxury Chinese red I’ve tried. Most of them have been big, plush, ripely fruity reds that seem almost sweet. Long Dai, by contrast, is very dry and subtle. It’s refined and restrained, echoing the polished, elegant style of Lafite, though it’s not at the level of a first growth.

The mineral notes and freshness of this three-grape blend (cabernet sauvignon, cabernet franc, and marselan) reminded me of a bright, stylish cool-climate cabernet from somewhere like Australia’s Margaret River, or maybe a delicious fourth or fifth growth Bordeaux. Marselan, in case you’re wondering, is a French cross between cabernet sauvignon and grenache that’s planted around the globe and highly popular in China. Lafite Chairman Saskia de Rothschild calls it “a grape that has an incredible capacity of adaptation to any terroir.”

Aged in barrels made at Lafite’s own cooperage in France, Long Dai has sophisticated, nuanced aromas and lightly spicy, savory fruit flavors that almost seem juicy. It perfectly balances fruit, acidity, tannin, and alcohol, and has a long, silky texture. The wine is surprisingly appealing even at this young age, though if you do, Prats advises putting it in a decanter for an hour before serving.

The name Long Dai, taken from the ancient Dai Temple at the foot of Mount Tai, a sacred nearby peak, was chosen in tribute to local history.

Inevitably the wine will be compared with the Chinese red LVMH launched several years ago, the rich, powerful, sumptuous Ao Yun (whose name means “flying above the clouds”). The two wines don’t taste much alike, as you might expect, considering the wineries are more than 3,000 kilometers apart and the vineyards totally different in altitude and terroir.

Both are among the very best Chinese wines I’ve tasted, though they’re completely different in style. Ao Yun, a blend of mostly cabernet sauvignon with about 10% cabernet franc, is bolder, more dramatic, and intense, with tons of tannin. It has more richness and impact — more like a Napa cabernet. Long Dai has more elegance, balance and subtlety, and a more quiet power. The marselan in the blend softens the tannins and adds a spicy note and aromas of violets. As the vines get older, there will be more complexity.

THE BACK STORY
I first heard rumors about Lafite’s plan to make wine in China more than a decade ago. Over lunch recently at New York’s Gabriel Kreuther, Prats filled in the timeline from idea in 2008 to the release of the first bottle this year. Lafite is no newcomer to making wine outside Bordeaux. Its parent company, Domaines de Barons de Rothschild (Lafite), has projects in France’s Languedoc, Argentina, and Chile. So in some ways it was no surprise it would want to capitalize on the name in the fast-growing wine market of China, where the brand remains a shining star. In 2009, DBR started exploring a 400-hectare zone in the hilly land in Penglai, near the coast in Shandong province. At first the company partnered with CITIC, the Chinese government investment agency, but since 2016 it’s been going it alone. (CITIC, Prats says, decided to concentrate on its solely owned core businesses and sold its 30% share to DBR, but its construction arm built the winery.)

Prats already had plenty of experience making wine in China before joining DBR in 2018. As head of Estates and Wines for Moët Hennessy from 2013, he oversaw LVMH’s Ao Yun project in Shangri-La, in the remote mountains close to Tibet, whose first vintage appeared in 2016. At the same time, he established Moët Hennessy’s Domaine Chandon sparkling wine facility in Ningxia.

Why Shandong for the Lafite experiment? “In every wine region there are challenges,” Prats explains. “In Ningxia, the cold from the Gobi desert means you have to bury the vines in winter. In Shangri-La, it’s logistics, getting skilled people and equipment to a remote mountain location. In maritime Shandong, summer rain and humidity are a problem, but it has a long tradition of viticulture.” Luckily, global warming is making the region drier and warmer.

The team dug nearly 500 soil pits to see which part of the property would be best for vines. They settled on 30 hectares with thin soil over granite bedrock in a spot where cool coastal breezes could modify that humidity. In 2011 they planted vines on 360 terraces. But it wasn’t until the 2017 vintage that they were happy with the wine. The company expects to double its 2,500-case output in four or five years.

THE LAFITE CONNECTION
What also took time, Prats says, was obtaining “the right protections.” That included registering the brand and working on ways to prevent counterfeits, a constant problem for Lafite in China. Several years ago, a senior Chinese government official estimated that half the Lafite in the country was fake, much of it blended and bottled on boats moored in international waters off the Chinese coast.

That’s why all the Long Dai wine from rejected early vintages was sent to be distilled into spirits, according to Prats. Tight secrecy surrounded the name and label, which looks similar in typeface and design to Château Lafite’s. Even the staff at the winery didn’t know the name until last July. The bottle carries several counterfeit protections, including NFC tracking built into the capsule, a label that can’t be removed, and the DBR five-arrow motif embossed in the glass.

De Rothschild and Prats clearly have serious ambitions for Long Dai, which already stands out as more interesting than the other reds in the Lafite portfolio made outside Bordeaux. Prats lays out Lafite’s goal in China: to create a great estate whose wines will be an endorsement of the country’s wine-producing potential. “That Lafite is there bestows a powerful imprimatur,” he says. “We have the privilege to help educate and grow the Chinese market for domestic wines.”

China has emerged as an up-and-coming wine giant in the past two decades, though consumers still regard the growing number of local wines as mediocre. But the domestic wine industry — and Lafite — want to get them excited about the country’s wines. The potential is huge: According to IWSR data, China is the world’s second-largest wine market by value and fifth-largest by volume.

For now, the Lafite connection is key. Tailor-made for domestic tourism, Domaine de Long Dai incorporates a replica of Château Lafite’s circular barrel cellar, though the pillars are painted bright red. Copies of family portraits hang in the great hall that will be used for entertaining. The winery will be open to visitors by appointment at the end of the year.

“We always have Lafite at the back of our minds,” says de Rothschild, who succeeded her father as Chairman of Domaines de Rothschild (Lafite) last year. “We were looking for a similar subtlety and complexity from the birth of Long Dai.” But this, she adds, is just the beginning. As the bottle’s back label says, “Welcome to Chapter One.”

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