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Outsourcing sector taps ad agencies to lure investors

THE Information Technology and Business Process Association of the Philippines (IBPAP) plans to work with advertising agencies to attract more investment in the outsourcing sector this year.

“Dun naman sa (in terms of) country marketing, we are working with ad agencies who will help us in terms of improving the overall market perception of the country,” IBPAP President and Chief Executive Officer Rey C. Untal told reporters on Monday.

He said the IBPAP board is studying plans to help the industry meet its revised forecast.

The industry cut its revenue and employment targets after a recent slowdown. Based on a study from the Everest Group, IBPAP expects 3.5 -7.5% revenue compound annual growth rate (CAGR) for 2020-22, compared to the 9% set in 2016.

Everest studied the effects of automation, geopolitical shifts, and global protectionist policies on the industry slowdown.

Employment growth was tempered to 3-7% or 1.42-1.57 million full-time employees, compared with the initial 8% projection.

IBPAP is also working on plans to upskill employees by partnering with the Department of Information and Communications Technology and the Department of Science and Technology to create talent development programs.

Mr. Untal said the industry saw slight growth in 2019 from the previous year as it attracted new players and business expansions.

The association continues to request for pending applications for ecozones in Metro Manila to be approved, following a government moratorium on processing new ecozones in the region to promote countryside development.

Mr. Untal said some of the ecozone applications had been approved, but the industry is awaiting more approvals as it anticipate stronger growth. — Jenina P. Ibañez

Receding risks may give BoJ room to tweak guidance

TOKYO — The Bank of Japan (BoJ) could consider watering down later this year its commitment to keep or cut its rock-bottom interest rates, if pessimism over the global outlook continues to recede, sources say.

Any such tweak would be a sign Japan’s central bank is stepping back from the likelihood of expanding stimulus anytime soon, said three sources familiar with the BoJ’s thinking.

“If global economic growth shows clear signs of recovery around mid-year, there may be room to debate modifying the forward guidance,” one of the sources said on condition of anonymity because of the sensitivity of the matter.

The BoJ said in October it would maintain or cut its ultra-low interest rates as long as there were risks the economy would falter before reaching the bank’s elusive 2% inflation goal.

The move was aimed at countering criticism the BoJ was lagging other central banks in responding to overseas headwinds, such as the US-China trade conflict.

Now some BoJ officials want to make their forward guidance on rates less binding, as overseas risks appear to subside, with Washington and Beijing agreeing on a truce in their trade war.

To be sure, no consensus exists within the BoJ yet, given uncertainty over the global outlook and the setback in consumption from last October’s sales tax hike.

Skeptics at the BoJ argue that tweaking the guidance too soon may backfire if subsequent data turn out weak, forcing the central bank to make an about-face that could undermine its credibility, the sources say.

BoJ Governor Haruhiko Kuroda on Tuesday did not rule out the chance of debating a tweak, but set the bar fairly high.

“If risks subside significantly and growth jumps up more than we project now, a review could be debated,” Mr. Kuroda told a briefing. “For now, it’s appropriate to maintain our policy stance based on our current growth and price projections.”

Still, many BoJ policy makers see the rate guidance as a softer commitment than other pledges the central bank has made, such as a promise to keep increasing the pace of money printing until inflation overshoots 2%.

That’s because the rate targets are tools the BoJ hopes to use flexibly in response to swings in the economy. Under yield curve control, the BoJ guides short-term rates at -0.1% and the 10-year bond yield around 0% as its main policy targets.

Leaving room to adjust the policy rates is key to BoJ policy makers worried about the rising cost and shrinking return of its prolonged ultra-easy policy.

“If overseas conditions improve significantly, the language of the guidance may need to change,” a second source said. “It’s not something that will happen immediately, but needs to be considered at some stage.” — Reuters

Samsung may invest $500 million to set up display factory in India

SEOUL/BANGALORE — South Korean flat screen maker Samsung Display plans to set up a factory in India with a $500-million investment as parent Samsung Electronics Co. Ltd. seeks to expand smartphone production there, a regulatory filing showed.

The move would be a boon for India which is vying with nearby rivals such as Vietnam to attract global smartphone firms under the government’s “Make in India” drive.

Under the plan, Samsung Electronics will provide 35 billion rupees ($492.31 million) in loans and transfer a parcel of land in Noida for 920 million rupees to its display unit, Samsung India Electronics Private Ltd. said in a filing dated Jan. 3.

Samsung Electronics started making smartphones in Noida on the outskirts of the capital New Delhi in 2018. Last year, it stopped production in China where it had to contend with competition from domestic rivals.

The new display factory will help Samsung Electronics secure local supplies of one of the most expensive smartphone components at a time when the South Korean firm is also struggling to fend off competition from Chinese rivals in India.

Samsung did not disclose further details when contacted by Reuters. Samsung India did not immediately respond to a request for comment.

Samsung, the second-biggest smartphone vendor in India after China’s Xiaomi Corp., saw its market share fall to 20% in the country in the third quarter, from 25% three months earlier, showed data from researcher Counterpoint.

Smaller Chinese rivals Vivo and Realme boosted their share of the market, one of the world’s fastest-growing. — Reuters

Wildfire smoke sparks worries for Australian wine growers

THE DEVASTATING wildfires that swept through the east and south of Australia in recent months could have yet another consequence — spoiling some of the 2020 wine vintage in a country that counts China, the US, and the UK among its biggest customers.

While most vineyards escaped direct damage from the inferno that claimed almost 30 lives and destroyed more than 2,700 homes, some growers are anxious to see if grapes have been contaminated by direct exposure to the choking smoke which has blanketed many rural areas as well as major cities.

The fires destroyed swathes of vines in the Adelaide Hills and pockets of production in New South Wales and Victoria, but the affected area represents just 1% of the country’s vineyards, said Tony Battaglene, chief executive officer of industry group Australian Grape and Wine. Major inland growing areas along the Murray River and in Western Australia have been unaffected, he said.

“The bigger impact is the potential for smoke damage,” he said in an interview Tuesday. But the so-called smoke taint, where grapes develop unpalatable flavors or smells like ash or wet cigar, is hard to measure, and grapes can’t be checked until they start to ripen, which will happen in the coming weeks.

Wildfire smoke has hurt some previous Australian vintages and become a bigger issue in places like California, Oregon, and parts of Canada and South Africa in the past decade. Australia’s La Trobe University is developing early detection tools to help growers assess the damage.

Australia is the fifth-biggest wine producer, according to Wine Australia, and exports about 60% of its output. Shipments were worth $2.89 billion in the year ended September, with mainland China, the US, and UK the top markets.

Even before the fires, this year’s vintage was already suffering from drought. The grape crush could be down from the 1.73 million tons harvested in 2019, and even slump as low as 1.6 million tons, Mr. Battaglene said, supporting prices.

Climate change and fire risks are now being built into long-term planning, with a focus on water conservation and vineyard design, Mr. Battaglene said. Growers are increasingly planting Spanish varietals, more suited to warm climates than the French ones that Australia has traditionally focused on. — Bloomberg

Hyundai reports 6% fall in car sales last year

HYUNDAI Asia Resources Inc. (HARI) car sales dropped 6.1% in 2019 after participating in fewer market segments.

In a statement, the Hyundai distributor said car sales last year reached 33,763 units compared with 35,401 units in 2018.

The company said the decline is “mainly due to the company’s non-participation in some market segments, such as that of the Pick-ups.”

Sales have not recovered from the effects of vehicle taxes implemented at the beginning of 2018, with Hyundai car sales dropping 6% in 2018 from 37,678 units sold in 2017.

December 2019 sales grew 2.9% to 3,163 units compared with the same month last year.

HARI President and Chief Executive Officer Ma. Fe Perez-Agudo said in the statement that the company maintains its position as a preferred brand in the Philippine market.

“We are very excited to start the new decade with the introduction of innovative models that will disrupt certain segments and offer customers more and better choices. We shall also carry on with our aggressive PC (passenger car) and CV (commercial vehicle) network expansion to serve high-growth corridors across the country,” she said.

Passenger car sales fell 10.8% to 17,761 in 2019, while light commercial vehicles slipped 2.6% to 15,095.

Commercial vehicle sales more than doubled to 907 sold last year, compared with 555 in 2018. This was largely driven by Hyundai County bus sales.

In 2020, HARI anticipates a continued surge in commercial vehicle sales as it expects government programs to improve public transportation to drive demand.

Last year, HARI launched its Class 1-3 modern jeepneys, which have been granted certificates of compliance by the Department of Transportation.

The government in November said that roadworthy older jeepneys may continue to operate after 2020. Its modernization program to phase out and replace old jeepneys has been criticized for its costs to jeepney drivers.

“For 2020, you can trust that Hyundai will continue to exceed customer expectations with newer models, innovations in After-Sales, and more convenient ownership, and relevant CSR engagement through H.A.R.I Foundation, Inc.’s flagship programs in health, education, and environmental sustainability,” Ms. Agudo said.

“Ultimately, we want to be an integral part of our customers’ lives as we give them better products, better services, and better journeys,” she added. —Jenina P. Ibañez

Malaysia cuts policy rate

BANK NEGARA Malaysia cuts its overnight policy rate by 25 basis points. — WWW.FACEBOOK.COM/BNM.OFFICIAL

MALAYSIA’S CENTRAL BANK unexpectedly cut its benchmark interest rate Wednesday, the latest emerging market to ease monetary policy amid an uncertain global economy.

Bank Negara Malaysia (BNM) reduced the overnight policy rate to 2.75%, a 25-basis-point cut predicted by only two of the 26 economists surveyed by Bloomberg. The rest expected no change.

Bank Negara is seeking to bolster Malaysia’s economy after it started showing signs of strain from the global slowdown last year. The move “is a pre-emptive measure to secure the improving growth trajectory amid price stability,” the central bank said in an e-mailed statement.

Malaysia follows emerging markets like Turkey and South Africa that kicked off the year with rate cuts. Next up is Bank Indonesia, with 29 of 34 economists expecting it to keep rates on hold Thursday, though the bank’s governor said Wednesday it will keep policy accommodative.

Emerging markets have kept relatively more space for monetary policy easing, while some of the world’s biggest economies — including in China, Japan, Europe, the UK, Canada, and India — all have negative real interest rates. That space for emerging markets could narrow this year, though, as the Federal Reserve and other major central banks are seen keeping policy on hold.

Wednesday’s move brings Malaysia’s benchmark rate to its lowest level since May 2011. The central bank lowered its key rate once last year and reduced the statutory reserve ratio requirement in November as growth in the third quarter slipped to its slowest pace in a year.

In its statement, BNM cited downside risks to growth, including “uncertainty from various trade negotiations, geopolitical risks, weaker-than-expected growth of major trade partners, heightened volatility in financial markets, and domestic factors.”

“We think the cut is important in January to stimulate the economy,” said Muhammad Zafri Zulkeffeli, an economist at MIDF, one of the two analysts to correctly predict the rate cut. “Because the government forecasts GDP (gross domestic product) growth to be 4.8% in this year, while the consensus is lower than that, so you need something to boost the economy this year.”

Growth has shown more recent signs of recovery after a lackluster year confronting external risks. December’s manufacturing PMI signaled an expansion in factory output for the first time in 15 months. Industrial production grew at a five-month high of 2% in November from a year ago.

“It looks like BNM might have taken the window of opportunity of relative global market calm to slot in a preemptive cut, in order to have a shooting chance at reaching what is, to us, a fairly optimistic growth rate this year,” said Wellian Wiranto, an economist at Oversea-Chinese Banking Corp. in Singapore.

MARKET MOVES
The ringgit gained 0.2% after the rate decision, while the benchmark FTSE Bursa Malaysia KLCI index extended its drop to 0.6%. The yield on 10-year government bonds declined three basis points Wednesday.

Euben Paracuelles, chief Asean economist at Nomura Holdings, Inc. in Singapore, was the other analyst to correctly predict Wednesday’s move. He said it was likely to be Bank Negara Malaysia’s only cut this year.

“That’s my baseline. They don’t do back-to-back cuts,” Paracuelles said. “They’ll let this feed through the economy, and then reassess after a while.”

Inflation was 0.7% in 2019, below the official forecast of 0.9%, as transport costs fell due to a blanket subsidy for petrol. The government is forecasting 2% inflation this year.

“The trajectory of headline inflation will be dependent on global oil and commodity price developments and the timing of the lifting of the domestic retail fuel price ceilings,” the central bank said in its statement. “Underlying inflation is expected to remain broadly stable, reflecting the continued expansion in economic activity and the absence of strong demand pressures.” — Bloomberg

Uber sells Indian Eats business to Zomato to cut losses

BENGALURU — Uber has sold its loss-making online food-ordering business in India to local rival Zomato in exchange for a 9.99% stake in the start-up backed by China’s Ant Financial.

Since launching in India in 2017, Uber Eats has struggled to gain market share and is a distant third to Tencent Holdings backed Swiggy and Zomato. All three have spent heavily on deals and discounts to attract customers in a highly competitive market.

The deal will allow San Francisco-based Uber to cut its losses and yet keep a stake in a market expected to be worth $15 billion by 2023.

“For Uber, the deal means redefining competence,” independent brand consultant Harish Bijoor said. “It should stick to what its competence is, in terms of being an aggregator of cabs.”

Uber Eats’ India operations contributed just 3% of gross bookings for the business globally, while accounting for a quarter of its adjusted operating losses, Uber said. It did not say how much those losses were or disclose financial details of the deal.

Zomato, valued at around $3 billion after raising money from Ant this month, reported a loss of $294 million for the year ended March 2019. Swiggy made a loss of $330 million.

Uber, which has promised to be profitable at an operational level by the end of 2021, has been trying to sell the India Eats business for a year, three sources familiar with the talks told Reuters.

It earlier held talks with Swiggy for a similar deal but those fell through due to valuation and regulatory issues, two of them said.

Uber and Swiggy did not respond to requests for comment.

Zomato said in a blog post buying the Eats operations would make it “the undisputed market leaders in the food delivery category in India.”

Uber Eats in India will discontinue operations and direct restaurants, delivery partners and users to the Zomato platform from Tuesday.

Zomato’s orders per month should go up by 10 million from the 38 million-40 million it was clocking before the deal, a source familiar with the deal said.

Still, the acquisition doesn’t guarantee that all Uber Eats customers will switch to Zomato. Online food delivery customers tend to favor companies offering the best deals, market research shows.

Uber Eats, which pulled out of South Korea earlier this year, said it will continue to operate in Bangladesh and Sri Lanka.

“India remains an exceptionally important market to Uber and we will continue to invest in growing our local Rides business,” said Dara Khosrowshahi, Uber’s chief executive officer. — Reuters

IBM proposes artificial intelligence rules to help eliminate bias

IBM called for rules aimed at eliminating bias in artificial intelligence (AI) to ease concerns that the technology relies on data that bakes in past discriminatory practices and could harm women, minorities, the disabled, older Americans and others.

As it seeks to define a growing debate in the US and Europe over how to regulate the burgeoning industry, IBM urged industry and governments to jointly develop standards to measure and combat potential discrimination.

The Armonk, New York-based company issued policy proposals Tuesday ahead of a Wednesday panel on AI to be led by Chief Executive Officer Ginni Rometty on the sidelines of the World Economic Forum in Davos. The initiative is designed to find a consensus on rules that may be stricter than what industry alone might produce, but that are less stringent than what governments might impose on their own.

“It seems pretty clear to us that government regulation of artificial intelligence is the next frontier in tech policy regulation,” said Chris Padilla, vice-president of government and regulatory affairs at International Business Machines Corp. (IBM).

The 108-year-old company, once a world technology leader, has lagged behind the sector for years. In its fight to remain relevant, IBM has pegged its future on newer technologies like artificial intelligence and cloud services. But it’s yet to show significant revenue growth from those areas.

The IBM recommendations call for companies to work with governments to develop standards on how to make sure, for instance, that African-Americans are guaranteed fair access to housing despite algorithms that rely on historical data such as zip codes or mortgage rates that may have been skewed by discrimination. In the US, that would likely occur through the National Institute of Standards and Technology within the US Department of Commerce.

Rometty is hosting the panel, which includes a top White House aide, Chris Liddell, Organization for Economic Cooperation and Development Secretary-General Jose Angel Gurria and Siemens AG CEO Joe Kaeser.

IBM also suggests that companies appoint chief AI ethics officials, carry out assessments to determine how much harm an AI system may pose and maintain documentation about data when “making determinations or recommendations with potentially significant implications for individuals” so that the decisions can be explained.

Spearheading the AI regulatory debate gives IBM a chance to come back into the spotlight as a leader in cutting-edge technology, a position it hasn’t held for years.

The AI proposals are intended to stave off potential crises that could enrage customers, lawmakers and regulators worldwide — similar to what happened with Facebook, Inc. in the Cambridge Analytica data scandal, when the personal data of millions of Americans was transferred to the political consulting firm without their knowledge.

“I don’t think we’re yet in the same place on AI,” he said. “So I don’t think it’s too late to try this approach.”

Concerns about AI and machine learning — software tools that use existing data to automate future analysis and decision-making — range from identifying faces in security-camera footage to making determinations about mortgage rates. AI is central to the future of many technology companies, including IBM’s, but has spurred worries that it could kill jobs and spread existing disparities in areas such as law enforcement, access to credit and hiring.

IBM has been working with the Trump administration since last summer on its approach to AI regulation. Earlier this month, the White House issued guidelines for use of the technology by federal agencies, which emphasized a desire not to impose burdensome controls. Last week, a bipartisan group of US senators unveiled a bill designed to boost private and public funding for AI and other industries of the future.

The European Union is considering new, legally binding requirements for developers of artificial intelligence to ensure the technology is developed and used in an ethical way. IBM advised a European committee of academics, experts and executives that recommended avoiding unnecessarily prescriptive rules.

The EU’s executive arm is set to propose that the new rules apply to “high-risk sectors,” such as health care and transport. It also may suggest that the bloc update safety and liability laws, according to a draft of a so-called white paper on artificial intelligence obtained by Bloomberg. The European Commission is due to unveil the paper in mid-February and the final version is likely to change.

While Rometty has touted the growth potential for new offerings in cloud services, the company’s third-quarter earnings report in October missed Wall Street estimates. It was IBM’s fifth-consecutive quarter of shrinking sales despite its July acquisition of open-source software provider Red Hat, designed to bolster its hybrid cloud-services strategy. The company is set to report fourth-quarter results Tuesday at the market close.

Padilla said compliance with standards could become a selling-point for companies and perhaps help lower their legal liability.

“If we take a just-say-no approach, or we just wait, the chances are higher that governments will react to something that happens,” he said. “Then you will get more of a prescriptive, top-down regulation.” — Bloomberg

AirAsia set to fly to Zamboanga, General Santos and Dumaguete

PHILIPPINES AirAsia, Inc. is set to launch three more domestic routes this year in response to the growing volume of passengers in Zamboanga City, General Santos City, and Dumaguete City.

A news release on Wednesday from the city government of Zamboanga quoted the company’s chairman, Joseph Omar A. Castillo, as saying that the low-cost carrier is opening its services in the city because it believes in the leadership of the local officials.

“We believe in the plans and programs of the city that it is one of the leaders in Mindanao that can push for economic development in this part of the region,” he was quoted as saying in a press briefing there.

The city is led by its Mayor Maria Isabelle Climaco-Salazar and Vice Mayor Rommel S. Agan.

Mr. Castillo said the company, which operates under the trade name AirAsia Philippines, considers Zamboanga City as a market that it “cannot miss,” noting that there has been an increase in the volume of airplane passengers travelling to the area.

The Zamboanga City government said further that the low-cost carrier “will open two flights” daily from the city to Manila beginning March 15. An 8320 aircraft, which has a capacity of 180 passengers and a single class accommodation, will be serving the Zamboanga-Manila route.

It added that the airline company will also be opening routes in General Santos City and Dumaguete City this year.

Mr. Castillo was also quoted as saying that airfares for Zamboanga-Manila flights could go down as what has been observed in other destinations, especially in Bacolod City where fares went down by 25%. The route was opened in October last year.

The company announced early this month that it was increasing the frequency of its flights in high demand domestic and international destinations this year.

Ricardo “Ricky” P. Isla, AirAsia Philippines chief executive officer, said the move is in line with the carrier’s vision of allowing its guests to tick-off more destinations from their travel bucket list.

AirAsia Philippines operates more than 500 weekly domestic and international flights from its hubs in Manila, Clark, Cebu and Kalibo.

Among the flights that will have increased frequencies are those from Clark to Iloilo and vice-versa, which will have daily flights. Flights from Cebu to Kuala Lumpur, Malaysia and vice-versa will increase to four times a week.

Starting on March 29, the airline will have daily flights between Cebu and Puerto Princesa. Flights from Clark to Tacloban and vice-versa, will be four times a week.

AirAsia operates in Malaysia, Indonesia, Thailand, the Philippines, India and Japan. Its services include hotels, holidays, activities and online shopping, as well as integrated logistics and digital financial services. — Arjay L. Balinbin

Indonesia set to tighten scrutiny of insurers

WITH INDONESIA’S oldest life insurer tottering on the brink of collapse following years of alleged mismanagement, authorities plan to tighten surveillance of the industry by overhauling regulations and setting up a rescue agency.

The government plans to draft an omnibus law for the financial industry, including insurance, as some of the existing rules are “ancient and inadequate,” Finance Minister Sri Mulyani Indrawati told reporters in Jakarta on Wednesday. As the crisis at state insurer PT Asuransi Jiwasraya has hurt investor confidence, formulation of the new law “is of the highest priority,” she said.

Indonesian authorities are under pressure to rescue scandal-hit Jiwasraya after it failed to pay some of its 7 million-plus clients following claims of mispricing, reckless investment activities, aggressive window dressing and liquidity pressure. The government has placed another pension and insurance firm, PT Asabri, under a watch list following significant erosion in the value of its stock market investments.

“We feel that the framework for managing and preventing crises is not perfect,” Ms. Indrawati said. It’s time to review the current approach which defined systemic risk as only applying to banks, she said.

A panel of experts will be formed to provide inputs for the omnibus law that will be key to restoring faith in the insurance industry, she said.

“If we identify a situation, in which an authority must take action, it turns out that the legal basis is not there or it’s inadequate,” Indrawati said.

The government may need to revise the laws on prevention and management of financial system crises, as well as the regulations governing Bank Indonesia, the Financial Services Authority, the deposit insurance agency and the banking industry, Ms. Indrawati said.

The crisis at Jiwasraya prompted the parliament this week to set up a working committee to study the problems at troubled private and state-run insurance firms as well as banks and propose solutions.

It will review the performance of Jiwasraya, PT AJB Bumiputera 1912, Asabri, PT Taspen and PT Bank Muamalat Indonesia.

Jiwasraya is expected to receive a government bailout after an audit last year showed the insurer had negative equity of 27.2 trillion rupiah ($2 billion). Indonesia had 151 insurers at the end of November with total assets of more than 1,345 trillion rupiah, official data show. — Bloomberg

France’s Paul Bocuse restaurant loses Michelin star after chef’s death

PARIS — The flagship restaurant of celebrated French chef Paul Bocuse, who died nearly two years ago, has lost its coveted Michelin three-star rating for the first time in over five decades.

Bocuse combined a passion for food with a nose for self-publicity that brought him fame and fortune beyond his native France.

“Although we are upset by the inspectors’ judgment, there is one thing we never want to lose, and that is the soul of Paul,” the Bocuse family and his restaurant said in a statement.

L’Auberge du Pont de Collonges, near Lyon in France’s gastronomic southeast, was the nerve-center of his culinary empire and originally belonged to his father.

The chef’s Bocuse d’Or organization said on Twitter it offered its “unwavering support to Maison Bocuse” after the withdrawal of its third star.

L’Auberge du Pont de Collonges acquired its first Michelin star in 1961 when Bocuse was helping his father build up the business. After his father’s death he took it to the top three-star status in 1965.

The Michelin Guide has awarded the restaurant two stars in its 2020 guidebook, the Bocuse family said.

Representatives for the guide said the restaurant remained “excellent, but no longer at the level of three stars.” — Reuters

How PSEi member stocks performed — January 22, 2020

Here’s a quick glance at how PSEi stocks fared on Wednesday, January 22, 2020.

 

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