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BSP excludes interbank borrowings from reserve requirement to free up more funds

THE BANGKO SENTRAL ng Pilipinas (BSP) has moved to free up more funds for lending to productive activities, this time by removing interbank borrowings from classification as deposit substitutes subject to the reserve requirement.

The BSP said in a press release on Friday that its policy-making Monetary Board has formally adopted the new definition of “deposit substitute” under Section 95 of

its charter (Republic Act No. 7653 enacted in June 1993), as amended by RA 11211 (enacted last Feb. 14) which further strengthened the central bank.

Section 95 of RA 7653, or the new BSP Charter, defined a deposit substitute as an alternative form of obtaining funds from the public, other than deposits, through the issuance, endorsement or acceptance of debt instruments for the purpose of relending or purchase of other receivables and obligations.

With RA 11211, the same provision now clarifies that the phrase “obtaining funds from the public” with a narrower definition of 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 explained in its statement on Thursday, citing as examples interbank borrowings, repurchase agreements with financial counterparties as well as bonds issued to financial intermediaries.

“The exclusion of these types of borrowings from the reserve base of banks and quasi-banks will result in freed-up liquidity for lending or investment activities,” it added. “It also facilitates the flow of funds within the financial system which may help reduce intermediation costs and, in turn, support economic activity.”

Sought for comment, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion welcomed the move, saying in a mobile phone message: “This is good to help raise liquidity in the market.”

“Certain borrowings now will no longer be subject to reserve requirement, thus freeing up more of these instruments for lending and other economic expansion activities,” Mr. Asuncion added.

“Higher liquidity means more opportunities for lending and investment activities for financial institutions, helping the economy expand and growth.”

The move follows cuts totalling four percentage points in banks reserve requirement ratio (RRR) this year, after 2018’s cumulative two-point reduction, with each cut estimated to inject more than P100 billion into the financial system. Starting next month, the RRR will be 14% for universal and commercial lenders as well as non-bank financial institutions with quasi-banking functions, and four percent for thrift banks, while the RRR for rural banks will remain at three percent.

BSP Governor Benjamin E. Diokno told reporters on Thursday that monetary authorities are now watching how fast previous policy moves — including a cumulative 75 basis point reduction in benchmark interest rates to 3.5%, four percent and 4.5% for overnight deposit, overnight reverse repurchase and lending, respectively — are being reflected in the market.

He said it takes up to nine months to see the results of monetary policy adjustments and that he remains committed to cutting the RRR to single digit when he ends his term in 2023.

Latest available BSP data showed that domestic liquidity picked up by 7.7% year-on-year in September to P12 trillion, compared to the 6.3% growth recorded in August. — with Luz Wendy T. Noble

S&P sees improved profitability overall for Philippine banks

GOOD treasury gains will help the Philippine banking sector improve profitability in 2020 despite successive cuts in benchmark interest rates by the Bangko Sentral ng Pilipinas (BSP) that could ease loan yields and moderating credit growth, S&P Global Ratings said in a report.

In a Nov. 18 Global Banking Country-by-Country Outlook 2020 report e-mailed to journalists on Friday, S&P Primary Credit Analyst Nikita Anand said: “Although reduced interest rates will lower loan yields, albeit with a lag, we believe the banking sector’s profitability will benefit from good treasury gains,” in reference to reductions in benchmark interest rates totaling 75 basis points this year.

The BSP kept monetary policy steady in its Nov. 14 policy review and is expected to maintain settings in its last policy meeting for the year on Dec. 12.

It increased policy rates by a cumulative 175 bps last year in the face of surging inflation that averaged a near-decade-high 5.2% for 2018.

“Banks had passed on the policy rate increases from last year to some extent, which is seen in the higher margins and delinquencies. Loan yields will start to trend down along with cost of funds as banks pass on the recent policy rate cuts,” the report read.

S&P said it expected the remaining increases in policy interest rates to be dialed back by next year.

Monetary authorities have also slashed banks’ reserve requirement ratio (RRR) by a total of 400 bps this year after 200-bps cuts in 2018.

“RRR cuts will also help banks improve their profitability in a falling interest rate environment. In our opinion, banks will channel these freed-up funds to grow or pay-down high-cost time deposits, any of which will improve net interest margins.”

And while S&P expects “credit growth to be 10-12% in 2020, compared to 15% in 2018, due to slight deterioration in macroeconomic conditions… [p]olicy rate cuts could spur demand and RRR reduction will provide additional liquidity.”

“Passing of key infrastructure projects will also support credit growth via the multiplier effect until 2022,” the report read further. — L. W. T. Noble

Duterte disappointed with pace of major projects

By Charmaine A. Tadalan, Reporter

PRESIDENT Rodrigo R. Duterte on Thursday expressed disappointment with the perceived slow progress of big-ticket infrastructure projects after economic officials said earlier that a little more than half of the expanded list would be completed 2022 when he ends his six-year term.

“Two years na lang. Anong magagawa ko sa two years? Mag-iiwan ako ng mga projects na hindi talaga matapos (I have two years left in my term. What can I accomplish in two years? There are projects that I will leave unfinished),” Mr. Duterte said during his visit at the Taguig City Center for the Elderly on Thursday evening. A transcript of his speech was published on the Presidential Communications Operations Office Web site.

“So pagdating niyan, mag-alis ako, puro naumpisahan, sabihin ng mga tao, sabihin ng mga kalaban mo, ‘O tingnan mo Duterte, umalis. Tignan mo ‘yung mga projects, iniwan. (So, come 2022, I will step down with projects begun and people will say — especially my opponents — ‘Look at Duterte, he stepped down; look at the projects he left behind).”

The remarks followed his administration’s revision of its Infrastructure Flagship Program (IFP) to include more public-private partnerships (PPP) and remove those deemed no longer feasible. The Duterte administration began its term in in mid-2016 by putting PPP in the back seat as a project financing mode — even as some conglomerates and foreign chambers had expressed concern with the change — in favor of state appropriations and official development assistance (ODA), arguing that PPP projects have been slow to start. PPPs have been largely relegated to local projects.

The administration was recently criticized by Senate Minority Leader Franklin M. Drilon, who described implementation of “Build, Build, Build” as a “dismal” failure. Mr. Drilon made the statement after learning that only nine out of the 75 projects on the original flagship infrastructure list have begun more than halfway into Mr. Duterte’s term.

The list now consists of 100 projects, including 29 PPP projects — up from nine originally. Fifty-six projects in the new list are expected to be completed by 2022. The National Economic and Development Authority estimated the revised IFP to cost around P4.2 trillion. The latest list has 22 projects, worth P167.95 billion, to be funded by the national budget; 49 others costing P2.31 trillion to be funded by ODAs and 29 PPP projects that will cost the government P1.77 trillion.

Under former President Benigno S.C. Aquino III, the government awarded 12 infrastructure projects under PPP — his administration’s preferred mode of project funding as it kept state spending at bay in order to achieve higher credit ratings. Only three on that list were completed when Mr. Aquino stepped down in mid-2016: Daang-Hari SLEX Link Road (Muntinlupa-Cavite Expressway) Project, the Automatic Fare Collection System and the PPP for School Infrastructure Project Phase I.

Sought for comment, the European Chamber of Commerce of the Philippines President Nabil Francis said much depends on enactment before yearend of the proposed P4.1-trillion national budget and resolving right-of-way issues that have plagued many major infrastructure projects.

“The ECCP recognizes that infrastructure development is key to economic progress. Hence, we support the current administration’s commitment to improve the state of the country’s infrastructure through its flagship ‘Build, Build, Build’ program and other key infrastructure projects,” Mr. Francis said in a mobile phone message on Friday.

“To avoid further delays, the ECCP also urges the government to pass the national budget on time to facilitate the roll-out of the pipeline especially the big-ticket items. The chamber also trusts the government’s efforts to address right-of-way issues and other concerns that may have caused bottlenecks in infrastructure projects.”

Farmers rue broken promises on rice import ban

FARMERS said the government has been inconsistent in its policy statements after it backed down from an earlier announcement suspending rice imports in order to prop up farmer incomes during the harvest.

“President (Rodrigo R.) Duterte announced the stoppage of imports during harvest time as early as July 2019 in a dialogue with farmers in Ilocos Sur, but his directive was not followed. Instead, imports ballooned to 3 million tons, or more than double our import requirements for the year,” Federation of Free Farmers (FFF) National Manager Raul Q. Montemayor said in a statement.

“His recent order to suspend imports while farmers are harvesting seems to have been ignored or reversed again,” he added.

On Tuesday night, Mr. Duterte said he ordered the suspension of rice imports during the ongoing harvest, which runs from late September to mid-December. The order was inended to address the 17% collapse in farmgate prices during the nine months to September.

Prices realized by farmers for their crops have softened since before the implementation ofthe Rice Tariffication Law in March, which liberalized imports.

The Agriculture department has estimated 2019 rice imports of about 3.72 million metric tons (MT).

The suspension was later withdrawn after Agriculture Secretary William D. Dar, Executive Secretary Salvador C. Medialdea and Finance Secretary Carlos G. Dominguez III met Wednesday evening.

He also condemned government officials’ focus on “palliative and band-aid solutions” to address the problems faced by Filipino rice farmers.

Mr. Dar said Mr. Duterte gave three directives during the Wednesday meeting to help affected rice farmers, which include stricter requirements for issuing sanitary and phytosanitary import clearances (SPSIC), the increase in the buffer stock to 30 days from 15 days via increased procurement from farmers by the National Food Authority (NFA), and a new P3-billion annual allotment over two years to provide cash assistance to rice farmers.

On the increase of buffer stock, Mr. Montemayor said, “even if NFA had the money, it will not have enough warehouse space to store a 30-day buffer stock. Besides, most farmers will simply not be able to sell to the agency because they cannot comply with the NFA’s stringent requirements for moisture content, cleanliness and quality.”

The NFA serves as a buyer of last resort when traders offer low prices to farmers, with the agency posting a support price of P19 per kilo. In recent months, however, the limits of the support price system were exposed after private traders in some provinces offered single-digit buying prices, while the NFA turned out to have limited funds, insufficient for purchasing a significant portion of the harvest.

Mr. Montemayor said the P3-billion annual cash assistance for two years is also not enough to help the farming population of 2.5 million farmers, since the allotment can only help 600,000 rice farmers per year, with each to receive P5,000, insufficient compensation for what he estimates is the loss of about P30,000 in income by each farmer since prices their collapse.

Mr. Montemayor also said that a stricter SPSIC issuance process will only be a temporary solution since importers will eventually comply, leaving no legal reason to deny permit applications.

“SPS measures are intended to protect our crops from pests and diseases that may come with imported rice, and to ensure that foreign rice is safe to eat. They are not intended to stop or control imports. They have to be science-based and must be applied uniformly,” he said.

“Otherwise, the DA (Department of Agriculture) runs the risk of being sued in court by importers for not following the law, or subjected to disputes in the World Trade Organization (WTO) by rice exporting countries,” he said. — Vincent Mariel P. Galang

Innovative-startup law IRR signed

THREE government agencies signed Friday the implementing rules and regulations (IRR) for the Innovative Startup Act or Republic Act 11337, which provides tax breaks and removes registration barriers for startup companies.

In a statement, Trade Secretary Ramon M. Lopez said that the next step for the government is to establish a one-stop shop to be known as the Startup Business One-Stop Shop (Startup BOSS), which will offer end-to-end registration for startups.

“We will coordinate as well with respective Local Government Units (LGUs) and other agencies through our field offices for the processing of application of permits and licenses,” he said.

Mr. Lopez of the Department of Trade and Industry (DTI) and his counterparts from the Department of Science and Technology (DoST) Secretary (Fortunato T. dela Peña), and Department of Information and Communications Technology (Gregorio B. Honasan II) signed the IRR at the conclusion of the First Philippine Startup Week.

The Innovative Startup Act, which President Rodrigo R. Duterte signed on April 26, qualifies for incentives “any person or registered entity in the Philippines which aims to develop an innovative product, process, or business model.”

“This law will also help create new jobs, improve production, and advance innovation and trade,” Mr. Lopez said.

The three departments will develop the Philippine Startup Development Program (PSDP), which will outline programs, benefits, and incentives for startups and startup enablers, Mr. Lopez said.

“We will also coordinate with the Philippine Economic Zone Authority (PEZA) on the creation of Philippine Startup Ecozones to spur the growth and development of startups and startup enablers. Further, we will work with the Board of Investments (BoI) on a Startup Investment Development Plan (SIDP). This plan will develop short, medium, and long-term strategies to spur investment in, and promote the growth and development of startups and startup enablers,” he added.

The agencies are also in charge of the Startup Grant Fund “to provide initial and supplemental grants-in-aid” for qualified startup applicants.

“DTI will administer in coordination with the National Development Co. (NDC) a Startup Venture Fund (SVF) to be used to match investments by selected investors in startups based in the Philippines,” Mr. Lopez said.

Under RA 11337, the programs, benefits, and incentives include full or partial subsidies for business registration, application, and permit processing costs; endorsement of the host agency for the expedited or prioritized processing of applications with other government agencies; full or partial subsidy for the use of facilities, office space, equipment, and services provided by government or private institutions; full or partial subsidy in the use of repurposed government space and facilities of the host agency as the registered business address; and grants-in-aid for research, development, training, and expansion projects. — Arjay L. Balinbin

NEDA says innovation law ready for implementation next year

INTERAKSYON

THE Philipine Innovation Act will be ready for implementation next year with the National Economic and Development Authority (NEDA) finalizing the law’s implementing rules and regulations (IRR), NEDA’s director-general said.

Speaking during the 2019 Data Analytics Summit on Thursday, Socioeconomic Planning Secretary Ernesto M. Pernia said the government will create a National Innovation Agenda Strategy Document (NIASD) to set the long-term goals, provide a road map and identify priority areas in innovation.

“NEDA is currently finalizing the IRR of the law so that the organizational set-up can be in place by next year,” Mr. Pernia said.

The law, also known as Republic Act (RA) 11293, was signed on April 17, and acknowledges science and technology as “essential for national development” and encourages research, innovation and invention, among others.

The IRR will be drafted by NEDA along with the Department of Science and Technology (DoST) and the Department of Trade and Industry (DTI) to “ensure the effective implementation” of the law.

Under the law, a National Innovation Council (NIC) will also be established to set innvation priorities and long-term strategy.

A “revolving” P1 billion from the national’s budget will be earmarked for the Innovation Fund to finance enterprises “developing innovative solutions.”

The council will be chaired by the President while the current NEDA director-general will act as a vice-chair.

Mr. Pernia said that the Philippines could take advantage of technology such as data analytics to offer solutions as well as create new goods and services.

“The IT-Business Process Outsourcing or BPO industry, for example, has contributed about 10% to GDP and (accounts for) 15% of formal employment,” he said.

He said data analytics… help many sectors including health care by providing better patient care. They can also supercharge agriculture by providing the basis for new farming methods and help businesses make data-driven decisions.

He also said that the recently-signed Philippine Innovative Start-up Act will help entrepreneurs in establishing technology-based start-ups.

However, Mr. Pernia said the Philippines “still has a long way to go” in terms of innovation and adopting new technology.

“Our infrastructure, IT (information technology) networks, and workforce need an upgrade to be able to operate efficiently within the realm of new technologies,” he said.

Meanwhile in a separate forum, Mr. Pernia reminded the government to continue promoting creativity and helping preserve Filipino culture to boost the “creative economy”.

In a 2014 study by a government think tak, creative industries accounted for 4.3% and 5.4% to gross domestic product in 2008 and 2009, respectively. — Beatrice M. Laforga

ERC notes incomplete compliance for Mindanao WESM participants

THE Energy Regulatory Commission (ERC) told power distribution utilities (DUs) and other participants of the Wholesale Electricity Spot Market (WESM) in Mindanao to comply with the requirements after noting a delay in the completion of their registration.

ERC Chairperson and Chief Executive Officer Agnes VST Devanadera said that based on the results of the WESM Mindanao readiness assessment meetings, there was a delay in the full registration despite the mandatory membership by Mindanao’s trading participants.

“The ERC enjoins full compliance with the WESM Rules to avoid recurrence of Manual Load Dropping (MLD). Otherwise, the Commission shall be constrained to impose the necessary fines and penalties on the DUs for failure to comply with the WESM directives,” she said in a statement on Friday.

She also directed the distribution utilities in Mindanao to comply with all the WESM prerequisites, and to strictly follow the interim Mindanao dispatch protocol (IMDP).

The readiness assessment meetings, which are led by the Department of Energy (DoE), also noted the low turnout of participation in the trial operations program and incidents of manual load dropping despite over supply of generating capacity in the region resulting from the DUs’ non-compliance with the IMDP.

The ERC said the completion of the WESM registry for Mindanao’s trading participants and their active participation, particularly the DUs, are essential to the forthcoming commercial operations date of electricity trading in Mindanao. The commission said the exercises are a must in ensuring that the participants are ready for the spot market environment.

WESM in the Mindanao grid was launched on June 26, 2017 pursuant to the DoE’s Department Circular No. DC2017-05-009 dated May 4, 2017. The circular aimed to provide sufficient time for the market operator, system operator, and WESM participants to prepare and familiarize themselves with trading operations.

Before the target declaration of WESM’s commercial operations date, the DoE circular also requires the National Grid Corporation of the Philippines (NGCP) and the WESM participants to implement the interim Mindanao dispatch protocol.

The DoE holds regular WESM Mindanao readiness assessment meetings in coordination with the Philippine Electricity Market Corp. (PEMC) and the market operator, and the NGCP system operator and other concerned agencies to ensure market preparedness.

Earlier this month, the Independent Electricity Market Operator of the Philippines (IEMOP) said up to 94% of the expected participants in the Mindanao WESM in have submitted their applications for registration.

At present, 90 out of 106 expected facilities have yet to complete their requirements for participation in the spot market, according to IEMOP, the independent market operator and provider of market services and management.

Upon the launch of WESM Mindanao, economic scheduling of power plants will be implemented to meet the demand requirements for any given interval. WESM will also provide an alternative venue for generators and customers to buy or sell electricity, which is expected to attract more investment to the region.

No date was given on the launch of WESM Mindanao.

The market operator said to date, the electricity market has a total of 274 registered participants in Luzon and Visayas. These are composed of 126 generation companies, 17 distribution utilities, 71 electric cooperatives, 56 directly connected customers, and four wholesale aggregators.

Established in September 2018, IEMOP has pledged to ensure the readiness of the Mindanao participants before the market’s “go-live” implementation.

After the transition into the independent market operator, PEMC retained its role as the governing body of the WESM. IEMOP said the governance body has strengthened the culture of compliance among market participants and secured a level playing field for WESM members, including those in Mindanao. — Victor V. Saulon

NFA palay acquisitions 11.52 million bags in year to date

THE National Food Authority (NFA) said it has procured 11.52 million bags of palay, or unmilled rice, as of Nov. 20, amid the ongoing rice harvest.

“As of Nov. 20, the food agency has already procured a total of 11.52 million bags of palay from local farmers nationwide,” NFA said in a statement, for a daily average of 125,754 bags per day.

“We try to accommodate all farmers who sell their harvest. We have 642 buying stations which are strategically located across the country to accept their produce,” NFA Administrator Judy Carol L. Dansal said.

Ms. Dansal said that she is also confident of achieving the agency’s target of 14.46 million bags before the main harvest for the year ends. The harvest started late September and will end mid-December. She said that as of Nov. 20, the agency has hit 80% of the target.

“The main crop traditionally yields 70% of total annual production… We are hopeful, our target will be attainable,” she said.

The NFA’s buying price is P19 per kilo of palay, taking into account the Equivalent Net Weight Factor (ENWF) which factors in moisture content, purity and discoloration and damage to the palay.

A year earlier, the NFA procured 1.15 million bags between October and December. This year, procurement in October and most of November has exceeded this total at 4.67 million bags.

The NFA said it sold 13.17 million bags of rice in the year to date ending Nov. 20, via 20,196 outlets across the country, at P27 per kilo.

It is also conducting mobile sales to various markets, while also selling to government institutions like the Bureau of Corrections (BuCor), Bureau of Jail Management and Penology (BJMP), an d theDepartment of Social Welfare and Development (DSWD).

“In addition, the NFA conducts tagpuan (meeting place) rice sales through community-based outlets in areas which are not serviceable by the regular NFA outlets. As of Nov. 20, the food agency has sold 78,375 bags of rice through various tagpuans nationwide,” the agency said. — Vincent Mariel P. Galang

Airbus sees Philippine demand for bigger single-aisle aircraft

HAMBURG, Germany — Airbus SE said Philippine demand for air travel is expected to grow 7% a year, expanding the market for larger single-aisle aircraft like its A321, with the size of the operating fleet needed to serve such demand tripling to about 600 planes by 2038.

“I think that we must be prepared for more sales campaigns in the Philippines because the Filipino carriers will need to increase their fleet,” Aymeric Dupront, head of Airbus’s airline marketing in Southeast Asia, Japan, India and Israel, told reporters here.

He said Airbus sees “7% traffic growth” in the Philippines each year. “This means that traffic is bound to triple between now and 20 years from now, and that is 2038,” he added.

Mr. Dupront said “more than 200” aircraft are needed to service the Philipine market today, both for domestic and international flights.

“Over the next 20 years, we see this need to triple to 600 aircraft. The traffic, if you do the math, will actually more than triple or almost quadruple, so what we see is a trend for bigger aircraft, bigger single-aisle aircraft like the A321,” he said.

He said the Airbus fleet in the Philippines consists of about 132 aircraft, most of them from the A320 family of single-aisle twin-engine jets, of which the A321 is a high-capacity version seating up to 236 passengers. His view of the market is that the “fast pace” of passenger growth will drive all Philippine carriers to acquire larger single-aisle aircraft.

“The A321neo has been selected by all the carriers in the Philippines, and that’s the first target for deliveries for the years to come for the Filipino carriers,” he said, referring to the model version with the New Engne Option, which promises greater efficiencies compared with older versions of the A320 family of jets.

Asked about the drivers of air traffic growth in the Philippines, he said: “What we see is the very fast rise in three things: the population, first of all; the rise of the middle class, and middle class is the bulk of the passengers for air transport; and third thing is the rise of the economy and this results in this 7% domestic traffic growth.”

Reporters were in Hamburg to witness the turnover of a new Airbus jet to Malaysia’s AirAsia Group Bhd, the first of an order of up to 353 A321neos.

Philippines AirAsia, Inc. Chief Executive Officer Ricky P. Isla has said the low-cost carrier is itself currently in the process of “concretizing plans to purchase an A321neo” from Airbus.

Mr. Isla said that investing in larger additional aircraft will be “advantageous for any airline in a slot-constrained environment,” especially at Manila’s Ninoy Aquino International Airport.

He also noted that the A321neo, which has 50 more seats compared to the previous A320neo, provides “opportunities to offer even lower fares to flying guests.”

Other features of the A321neo include lightweight and slimline seats with a mobile phone or tablet holder; three rows with a seat pitch of 37” or above; three additional rows equipped with hot seats; USB power in every seat; and Rokki WiFi providing entertainment, shopping, and Internet speeds of up to 10MB/s.

Airbus said that the A320 family received a total of 7,000 orders from at least 110 customers globally as of the end of October. — Arjay L. Balinbin

Philex says Silangan timetable could slip if no financing by first half of 2020

BAGUIO CITY — Philex Mining Corp. said the initial stages of development of its Silangan gold and copper project in Surigao del Norte could be delayed if it canot raise $350 million in financing by the first half of 2020.

“Depende pa din sa availability of funds pero for sure if by 2020 wala pa yung initial money for early works, the timetable will move (It depends on the availability of funds but for sure if by 2020 there is still no initial money for early works, the timetable will move),” Philex Mining President and Chief Executive Officer Eulalio B. Austin, Jr. said on the sidelines of an event here.

“Supposedly, in our timetable, we need $350 million to come in the first half of 2020. That’s why we need to talk to our investors,” he noted.

The company is targeting to finalize its list of possible investors by December.

Mr. Austin said that the search for investors is challenging due to the regulatory climate, including the ban on open pit mining, and a moratorium on the issuance of new mining permits.

“For us, we can only talk about the track record of Philex Mining. For more than 60 years in operation, we have been advocates of principled mining and we have the full trust of the community in Surigao,” he said.

Philex appointed J.P. Morgan to advise on equity investment and Mizuho Finanical Group for project financing.

“Our financial advisor is looking into companies that have already some investment in mining so that during due diligence, medyo madali lang (it will be easier),” Mr. Austin said, adding that the company is open to any party that can help get the project going before its Padcal mine in Benguet ceases operations.

The Silangan mine has three deposit areas, Boyongan, Bayugo, and Kalayaan, with the latter a joint venture with Manila Mining Corp. This might be Philex Mining’s biggest source of revenue after the 61-year-old Padcal project closs in 2022.

The total estimated capital expenditure for the development of the first phase of the project, Boyongan, is $750 million. It has an estimated mine life of 22 years and is designed to produce four million tons per year. Target date for commercial operations is July 2022.

The operation of the Silangan mine was originally set to begin in 2018, but has been moved to 2022 due to the ban on new open-pit mining introduced in 2017. It has since shifted to underground sub-level cave mining, which was approved by the Environment department through the Mines and Geosciences Bureau (MGB) as announced by the company on Oct. 10.

Philex Mining is one of the three local units of Hong Kong-based First Pacific Co. Ltd., the two other being PLDT, Inc. and Metro Pacific Investments 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, which is controls. — Vincent Mariel P. Galang

SMC pilot-testing road made from recycled plastics

SAN MIGUEL Corp. (SMC) said it conducted pilot tests on the first road in the Philippines made from recycled plastics, to help address the country’s plastic waste problem.

“What we want to achieve is to help address an important environmental issue, and that is plastic waste. We want to create a sustainable use for waste plastics so that they don’t end up in landfills and our rivers and oceans,” SMC President Ramon S. Ang said in a statement.

The test site occupies 1,500 square meters (sq.m.) at the company’s logistics center in General Trias, Cavite. The site is normally a marshalling area for trucks containing heavy loads and heavy equipment, and can be expected to demonstrate the materials’ resistance to wear and tear.

About 900 kilos of plastic waste equivalent to 180,000 sachets and plastic bags were used, serving as binder with bitumen for the production of asphalt. The added plastics can help make roads last longer than those usinge conventional asphalt.

Its partner in the development of the recycled plastics road is Dow, Inc., a US materials science company.

Further tests will be conducted in SMC’s other facilities and major infrastructure projects.

Last week, SMC said it will start using biodegradable plastics for its packaging.

It will be using plastics developed by the Philippine Bioresins Corp., which can be 64.65% degraded in two years, compared with 4.5% for other plastics over the same period.

The Department of Science and Technology (DoST) has issued the product an Environmental Technology Verification certificate.

SMC also dropped its Purewater bottled water business Purewater in 2017.

SMC fell 1.94% to P156.90 on Friday. — Vincent Mariel P. Galang

Grab won’t dispute PCC’s P23.45 million fine, refund order

RIDE-HAILING firm Grab Philippines said it will not dispute the fine imposed by the antitrust regulator for breaching its initial pricing commitment.

The Philippine Competition Commission (PCC) ordered Grab Tuesday to pay a P23.45 million fine, P5.05 million of which should be refunded to consumers.

“Grab will abide by the PCC’s order to pay a P23.45 million fine, of which P5.05 million will go to our consumers; and recognizing the value of our tens of thousands of driver-partners, the entire fine will be borne solely by Grab, as it has with those which have been imposed in the past and in any of our markets,” President Brian P. Cu said in a briefing.

Mr. Cu said around 3 million Grab consumers who booked rides from February to May 2019 will receive an average refund of P1.50.

“(T)he average…a passenger will get is around P1.50. There are some that will get below a peso, there are others who will get over a hundred pesos, depende po ‘yon kung magkano at gaanong karaming trips tinake niyo (depending on how much they paid or how many rides they booked),” he said.

“We are firming up the disbursement procedures and we will inform our consumers within the time frame mandated by the PCC. Moving forward, Grab will work closely with the PCC in fulfilling its new set of voluntary commitments,” he added.

The amounts will be disbursed to the GrabPay Wallets of consumers within 60 days from Nov. 14.

Grab, meanwhile, has to pay to the government fines of P11.3 million and P7.1 million for the first and second quarter, respectively.

Mr. Cu also said that the fines will be paid out of a Grab contingency fund, with the payouts expected to affect the budgets of programs like driver inventives and promotions.

“None of these will be passed on to consumers or drivers,” he said.

Mr. Cu also maintained that the company has not overcharged passengers because it has always complied with the fare matrix set and approved by the Land Transportation Franchising and Regulatory Board.

“And while Grab has always operated within this legal fare structure, however, there are current market conditions affected by uncontrollable factors — such as the supply of transport network vehicle services, booking demand, and traffic conditions — that have hindered us from maintaining the fare-in-range set by the PCC,” he said.

The PCC also announced Tuesday the approval of Grab’s undertaking, a condition for its acquisition of Uber’s Philippine operations.

In the undertaking, which took effect on Nov. 1 and will apply for a year, Grab is to provide refunds to its customers for breaching the 22.5% ceiling on the average fare increase per month before its acquisition of Uber’s Philippine operations, after Uber withdrew from a number of markets in the region.

PCC Chairman Arsenio M. Balisacan said the undertaking prevents Grab from “behaving like a monopolist to the detriment of the riding public.”

Grab may ask to be freed of the undertaking if a competitor enters the market and builds at least a 20% market share or two or more players seize a combined 30% market share. — Vann Marlo M. Villegas

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