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Century Pacific buys more shares in Shakey’s

CENTURY Pacific Group, Inc. is increasing its stake in Shakey’s Pizza Asia Ventures, Inc. (SPAVI) with the acquisition of common shares from the open market.

In a letter to the Philippine Stock Exchange, Inc. (PSE) last week, which was sent to reporters Monday, SPAVI said Po-led Century Pacific had bought 8 million shares in the company priced at P9.50 each.

This increases the company’s ownership of SPAVI to 53.57% after the transaction.

“This purchase represents approximately 0.52% of the company’s total outstanding stock,” the letter read.

Century Pacific is the parent of listed Century Pacific Food, Inc. (CNPF), which manufactures canned food brands such as Century Tuna and Argentina. Century Pacific has been the majority owner of SPAVI since 2016 when it came in with the sovereign wealth fund of Singapore.

In the first nine months of 2019, SPAVI was able to record an 11% growth in net income to P594.13 million, driven by a 9% increase in system-wide sales to P7.43 billion and a 7% climb in net revenue to P5.9 billion.

Shares in SPAVI at the stock exchange gained four centavos or 0.42% to P9.50 each on Monday. — Denise A. Valdez

Adrenaline-fueled

Dragon Ball Z: Kakarot
Sony PlayStation 4/Personal Computer via Stream

DRAGON BALL has a rich, colorful history. From its humble beginnings as a fun, over-the-top anime series created by manga artist Akira Toriyama in 1984, it has evolved into a giant franchise pervading just about every book and cranny of popular culture. And even casual observers know and understand why: Its deceptively simple story of perseverance, heroism, and strength entertains and resonates among a loyal base of followers with otherwise-disparate tastes. It’s filled to the brim with good-natured humor and fun, with epic tales about godly powers and all-too-human frailties. Notwithstanding the countless competition, it has remained a favorite of both the young and young once, and with reason.

The timeless virtue is what Dragon Ball’s latest contribution to its vast videogame library realizes and brings to a brand-new audience. Developed for the personal computer and Sony PlayStation 4 by experienced developer CyberConnect2, Dragon Ball Z: Kakarot is an open-world role playing game cum brawler that seeks to translate the best parts of its source material. Providing bite-sized pieces digestible even to gamers with little to no knowledge of the intellectual property, it retells key parts of the manga’s main story arcs. And, in so doing, it succeeds in presenting an exciting, adrenaline-fueled experience. It’s more than just a tribute to its roots; even as it unabashedly pays homage to its source material, it takes more than enough liberties to keep longtime followers engaged.

In Dragon Ball Z: Kakarot, gamers are thrust into the very heart of the Dragon Ball narrative. They get to play out the most important storybeats of the manga and anime; in the process, they’re treated to a 50-hour jaunt that, pun aside, pulls no punches. Fighting is its bread and butter; lightning-fast kicks, knuckle sandwiches, ki strikes, and energy balls line encounters, with characters sparring and exchanging blows in the sky, on the ground, across environments encompassing the franchise’s stories past. Really, there’s something for everyone to take in, and, unlike other titles with similarly established canon and media, it doesn’t blitz through tales or, conversely, spoonfeed all the details.

Instead, Dragon Ball Z: Kakarot introduces plot elements and characters naturally and in keeping with the spirit of its lineage. Even for habitues who know series minutiae by heart, it comes off as surprisingly fresh. And it’s comfortable in its own skin: It isn’t afraid to cut out parts of the main story arcs that it feels aren’t necessary to its purpose, but makes sure that it nails its presentation in any case. In this regard, it’s certainly helped in no small measure by spot-on and extremely responsive fighting mechanics that underscore the efforts of CyberConnect2, hitherto noted for its work on the .hack and Naruto IPs.

Indeed, Dragon Ball Z: Kakarot draws from its manga and anime inspirations in conveying the trademark frantic energy that envelops its battles; it manages to translate with utter faithfulness all the signature touches of its source material, bells and whistles intact. Very anime-esque cut-ins and callouts are triggered after special moves, with its distinctive personality — and flair — highlighted by the way characters react to, and communicate with (okay, shout at), one another. Better still, these fights are all translated in a manner that feels so natural, no small feat given its sheer scale.

Those from the outside looking in may find all the fighting, in the air and on the surface, bordering on the ridiculous. Characters are able to fly at super speed, display super strength, and use super powers — and in over-the-top fashion to boot. Those steeped in the lore, however, will find the presentation faithful to the series. More importantly, gamers won’t have any problems with control and execution; whether on the personal computer or on the PlayStation 4 Pro, feedback is swift and free of lags, and the action presented on screen sans any frame drops. And thanks to an intuitive interface that belies the depth of its gameplay, it manages to blend all its elements together. While making use of an uncomplicated combat system, it nonetheless offers a heady and healthy mix of offense and defense via well-crafted melee and ranged options.

Admittedly, Dragon Ball Z: Kakarot is far from perfect. Given how much depth there is in terms of look, feel, and flow of the story and the fighting mechanics, the open-world RPG elements feel vastly underutilized. At times, these wind up lacking any impact at all, as if simply tacked on to prolong the gameplay and artificially add value to the title. Granted, the optional exploration segments do offer variety by way of side quests and character exposition. Still, they come off as being rather redundant and unrewarding in light of the game’s linear narrative.

On the whole, though, Dragon Ball Z: Kakarot exceeds expectations as a brilliant entry to the franchise. Make no mistake; it’s not without its quirks. For what it offers, however, it’s well worth the time and money of gamers faces with countless alternatives.

THE GOOD:

• Properly conveys the series’ over-the-top energy and frantic combat

• Tight fighting mechanics combined with responsive controls

THE BAD:

• RPG/open-world segments feel tacked on

• Sidequests come off as unrewarding

• Character progression far from seamless

RATING: 8.5/10

POSTSCRIPT: Special Reserve Games has pledged to go the extra mile by shipping orders “in a special box to protect our other special box.” The latter is, of course, the Reserve collector’s packaging, styled after those of Nintendo games of yore. The shipper’s box is made of corrugated cardboard with Sarge, SRG’s mascot, gracing the top and on the inside, but with nine “woofs” also spelled out. For Chief Executive Officer Jeff Smith, the design choices reflect the company’s commitment to keep serving customers. “It’s an honor and a privilege to be in this type of position, where we’re delivering high-quality products to great fans, and we get to have fun doing it.”

Meanwhile, Arc of Alchemist is out on digital platforms for the PS4 and Nintendo Switch. Eight add-ons providing characters with costumes, weapons, and weapon skins are currently being offered for free on the PlayStation Network and Nintendo eShop. On mobile, Disgaea 1 Complete makes its debut. The port includes new features, among them an Auto-Battle mode for normal stages and the Item World, Battle Speed Boost options, and access to the Cheat Shop, where customizations on such elements as character buffs and enemy strength are possible. NIS America has enabled cloud support for both iOS and Android versions, allowing for seamless gameplay across the two operating systems.

THE LAST WORD: Idea Factory International will be at PAX East in Boston, Massachusetts later this month. Apart from scheduling meetings with the gaming media to expound on its 2020 release lineup, it’s slated to showcase the highly anticipated three-dimensional shooter Azur Lane: Crosswave on the PS4 at the gaming culture festival.

BSP, Bank Indonesia ink deal on innovation

THE BANGKO SENTRAL ng Pilipinas (BSP) inked a deal with Bank Indonesia to boost their ties in improving payment systems and digital financial innovation.

In a joint statement sent to reporters on Monday, the central banks said their Memorandum of Understanding (MoU) signed on Feb. 1 looks to “provide a framework of closer cooperation between the two central banks” in order to attain a “more secure, efficient and reliable payment system, and to promote digital financial innovation.”

“The MoU signing was held to conclude a bilateral meeting between the two central banks which fruitfully discussed numerous advances in digital economy and central banking, infrastructure financing using market instruments, and sustainable financing frameworks,” the joint statement said.

Among BSP’s initiatives to boost the payment sector is the National Retail Payment System (NRPS) which include a framework and works through interoperable systems.

Under the NRPS is the PESONet which is an electronic fund transfer (ETF) among banks which allows a batch of fund transfers to be credited to the receiver by the end of the banking date. Also within the system is InstaPay, PESONet’s retail counterpart which is utilized for fund transfers for amounts less than P50,000.

BSP Governor Benjamin E. Diokno has said he eyes to have 50% of the volume of transactions done digitally by the end of his term in 2023.

The United Nations-based Better than Cash Alliance report showed that the volume of e-payments usage in the country has already grown to comprise 10% of total transactions in 2018 from a mere 1% in 2013.

Moreover, e-payments also rose in terms of value to comprise 20% of total transactions in 2018 from eight percent in 2013.

The BSP is positive that initiatives including the QR PH as well as the EGov Pay Facility, which allows payments to some government agencies online, will help boost digital transactions and promote a more cash-lite Philippines. — LWTN

How PSEi member stocks performed — February 3, 2020

Here’s a quick glance at how PSEi stocks fared on Monday, February 3, 2020.

 

Senate panel threatens NGCP with franchise review

THE Senate Committee on Energy on Monday found sufficient grounds to recommend the “review and revocation” of the franchise granted to the National Grid Corp. of the Philippines (NGCP).

The panel also agreed to proceed with the franchise review, should the NGCP fail to subject its operations to the mandatory audit, which it not done since 2017.

“Based on the documents and based sa sagot nila, merong basis tayo (based on the answer we got, there is basis for the action) and this is the violation of the constitution,” Senator Sherwin T. Gatchalian said in a briefing Monday. He noted this will be subject to the validation by the Department of Energy (DoE).

Mr. Gatchalian cited the appointment of foreign nationals to executive or managerial positions, which violates the Constitution.

“Nakita natin na ’yung Chief Technical Officer na siyang may control ng lahat ng grid from Luzon, Visayas, and Mindanao ay nasa isang dayuhan (A single foreign national was made chief technical officer with control over the Luzon, Visayas and Mindanao grids),” Mr. Gatchalian said.

Senator Richard J. Gordon during the hearing presented documents that showed a certain Wen Bo is among the signatories of a 2011 contract, representing the NGCP as its Chief Technical Officer.

The 1987 Constitution, under section 11 of article 12, provided that all “executive and managing officers of such corporations or associations must be citizens of the Philippines.”

The Department of Energy disclosed it has tried over the years to audit the NGCP, but was repeatedly denied. Energy Secretary Alfonso G. Cusi said during the hearing that the audit is necessary to assess the vulnerability of the transmission grid.

Mr. Gatchalian threatened the NGCP with a franchise review if it continues to reject an audit.

“You know well the parameters of your franchise. So in any case, I have a very simple deal for NGCP — allow the inspection or else we will proceed reviewing your franchise because there was clearly a violation of the Constitution. I have a very simple deal,” Mr. Gatchalian said in the hearing.

The NGCP said it is open to the audit, provided that it is conducted by the Energy Regulatory Commission (ERC), as provided under the concession agreement and Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA).

“We’re open to that (audit) as we’ve always said. But, of course, we want it done under the proper parameters,” NGCP Spokesperson Cynthia P. Alabanza said in a chance interview.

Ms. Alabanza said that when NGCP’s broadband assets were in question, the Department of Information and Communications Technology had been allowed to inspect.

“Now, if they want this thing, we’re going to do it but under the ERC, which is the body tasked to (do) that,” she said.

ERC Chairperson and Chief Executive Officer Agnes VST Devanadera, said the agency is concerned only with matters related to rate-setting and grid security, but noted the terms of reference (ToR) for the NGCP audit are being prepared.

“We cannot be going too far. Our ToR is based on that, but with the discussions now, personally, we may have to remove from the ToR the national grid security or cybersecurity (mandate) because that requires a very special skill,” Ms. Devanadera said in a separate interview.

“So we should probably have two contracts — one for cybersecurity and the usual ToR for the review of the NGCP as a system operator.”

She said the oversight of NGCP “is not the usual grid security that we know of.” She said the cybersecurity aspect contemplated during the Senate hearing require “a very highly specialized” body.

Ms. Devanadera said once the ERC finalizes the ToR for a third-party audit of the NGCP, the commission should be able to tap an entity to perform the review by the first quarter.

She said the new ToR is needed to correct a flaw in the previous practice where the NGCP provides the funds, conducts the bidding, and awards the contract for the review. She said it was only in this year’s budget that ERC was able to obtain funding to procure a third-party auditor of grid operations. She said the financial aspect could be performed by a third-party finance auditor. — Charmaine A. Tadalan

Global face mask market tightens amid dwindling domestic supply — Trade dep’t

THE Department of Trade and Industry (DTI) said it is encountering difficulties in sourcing 5 million face masks from overseas with domestic inventories running out.

Major drugstores and wholesalers’ supplies have been dwindling due to the spread of novel coronavirus outside of China, Trade Secretary Ramon M. Lopez said in a statement Sunday.

“We ordered on Friday the Philippine International Trading Corporation (PITC), an attached agency of DTI, to start sourcing 5 million masks, to augment the local supply, especially the needs of the Department of Health (DoH) and other health workers,” he said.

PITC however found that suppliers overseas also have limited stocks of the N88 surgical mask due to a global surge in demand.

The US, Pakistan, India and some European countries replied to PTIC’s inquiries that they have limited stocks. The replies of Thailand and Vietnam are being awaited.

In the meantime, Mr. Lopez said he spoke with the sole domestic mask producer MedTecs International Corp. Ltd., which committed to supply two million masks per month as needed.

MedTecs is supplying 100,000 masks this week, and 400,000 units in each succeeding week. Mr. Lopez said the masks will be sold to drugstores.

“While they produce at a limited capacity (80,000 pieces per day), MedTecs is now airfreighting more machines to increase their production capacity,” Mr. Lopez said.

He said the department is also looking to expand domestic production.

“We have also intensified engagements to match parties with core capabilities that can extend to production of masks — including foreign companies in the country that have the technology, local companies that can readily provide factories and workers, and local producers in garments and sanitary paper or cotton-based products,” he said.

He said that the department continues to monitor prices and supplies to ensure that mask prices are within the Department of Health’s (DoH) prescribed range. The prices of disposable face masks, according to the DoH price list, should range between P1 to P8 per piece.

MedTecs recently donated 500,000 surgical masks to victims of the phreatic Taal volcano eruption. — Jenina P. Ibañez

Palace eager to clarify reasons behind Rio resignation from DICT

MALACAÑANG said it will look into alleged irregularities at the Department of Information and Communications Technology (DICT) which reportedly led Undersecretary Eliseo M. Rio, Jr. to resign.

According to a news report Monday, Mr. Rio resigned after questioning disbursements from the DICT’s “confidential funds.”

In an interview on ANC, Mr. Rio clarified that he has no first-hand knowledge of any such disbursements in his department.

“That was in the news, but I said I have no first-hand knowledge on whatever anomaly. That report did not come from me. What I said… is that as far as I am concerned, the DICT (does not have) any confidential or intelligence funds because it is not in its mandate to conduct intelligence activities,” he said.

He said that he has been working in government since his Army days. “I’m 75 years old. I thought it’s now time to really spend time with my family,” he added.

Asked if there are other factors behind his resignation, he said: “Secretary Honasan (Gregorio B. Honasan II) also knows that we are (among the) people… that could not work together, so I said I might as well give him the chance, give Secretary Honasan a free hand without any interference from my part.”

He said President Rodrigo R. Duterte has not yet accepted his resignation. “Not yet. That’s why I cannot really come up with more details on my resignation until the President accepts it,” he explained.

The President’s Spokesperman Salvador S. Panelo told BusinessWorld in a phone interview Monday that Mr. Rio should personally inform the President if he has discovered irregular transactions.

“If he discovered some irregularities, then he should have told the President about that. Why should he resign?” Mr. Panelo said.

“He doesn’t have to resign. Kasama sa trabaho niya na may madiskubre siya na mga anomaly (It’s part of his job to discover anomalies),” he added.

Mr. Panelo also said that the Palace will look into whatever irregularities may emerge. “Yes. Malacañang is always serious and interested in any anomaly or irregularity that is brought to its attention,” he said.

Mr. Rio, a retired Army general, has held various positions in government since 1968. He started at the Armed Forces of the Philippines’ Research and Development Center. He became commissioner of the National Telecommunications Commission in 2001 and was appointed DICT undersecretary in 2016. — — Arjay L. Balinbin

BSP rate cut seen as more likely in March — HSBC

THE Bangko Sentral ng Pilipinas (BSP) is more likely to cut key policy rates in March rather than this month due to stronger fourth quarter economic growth and the uptick in December inflation, HSBC Global Research said.

“We expect the BSP to cut its policy rate by 25 basis points (bps) to 3.75% sometime in 1Q20, but we believe there is a higher likelihood that the cut comes in March and not in February,” HSBC Global said in a report sent to reporters Monday.

A BusinessWorld’s poll last week had 10 out of 13 analysts of the view that the BSP is likely to cut rates at the Feb. 6 Monetary Board meeting amid emerging upside risks to inflation.

BSP Governor Benjamin E. Diokno has said that the central bank is looking to cut rates by around 50 bps in 2020 in order to continue dialling back the 175 bps worth of rate cuts in 2018, when inflation was soaring.

The central bank reduced rates by 75 bps in 2019 to 4% for overnight reverse repurchases and setting overnight deposit and lending rates at 3.5% and 4.5%, respectively.

“Overall, 50bp of rate cuts are still very much in store in the Philippines in our view — it’s only a matter of timing,” HSBC Global economist Noelan Arbis said in a separate report on Feb. 3.

Mr. Diokno said monetary authorities are considering rate cuts as early as the first quarter depending on the conditions and key economic data. The Monetary Board will have two policy meetings in the quarter — on Feb. 6 and March 19.

HSBC Global said an “immediate rate cut” is unlikely needed given the GDP rebound in the fourth quarter and given that the BSP had just cut the reserve requirement ratio (RRR) for banks by 100 bps in December.

“Inflation surprised to the upside in December and January inflation poses some upside risks. Moreover, Q4 GDP growth showed that the economy is back to growing at a fast pace, which suggests limited need for an immediate rate cut,” the report said.

The economy expanded by 6.4% in the fourth quarter, picking up from the 5.6%, 5.5%, and 6% seen in the preceding quarters. Despite this, the 5.9% average growth in 2019 failed to meet the low end of the government target range of 6%.

In 2020 and 2021, the government set a 6.5% to 7.5% target range for growth, hoping that the 2020 budget as well as carryover spending from the delayed 2019 budget will drive the indicator via a boost to infrastructure spending.

December inflation was the highest in six months at 2.5% mainly due to a pickup in food prices. Food price growth eased from 5.1% a year earlier but was up from 1.3% in November.

In January, HSBC Global expects headline inflation to rise by 2.7%, matching the 2.7% consensus in BusinessWorld’s poll last week.

If realized, January will mark the third consecutive month of stronger inflation, although it will be lower than the 4.4% reported in January 2019 and remaining within the 2-4% BSP target for the year.

“We saw higher food prices at the start of the year as a result of higher rice prices globally, partly due to a drought in Thailand, and the Taal Volcano eruption, which disrupted livestock supply in some parts of Luzon,” HSBC Global said.

The Philippine Statistics Authority will report official January inflation data on Wednesday.

HSBC Global also believes that though inflation is likely to rise in the coming months, it will still be well within the BSP’s target range for 2020.

Mr. Arbis said that the RRR reductions have yet to be fully absorbed by the financial markets, which could make the BSP opt to hold rates for now and take a wait-and-see approach.

“It will take time for its impact to be fully felt in the financial system, and we see the most prudent action being to fully assess those impacts before engaging in additional monetary easing at this time,” Mr. Arbis said.

The RRR is currently set at 14% for big banks while thrift and rural banks’ reserve requirements are at 5% and 3%, respectively.

The Monetary Board likewise reduced RRR for nonbank financial institutions with quasi-banking functions to 14%.

Mr. Diokno has reiterated that he will push to bring down RRR for banks to single digits by the end of his term in mid-2023. — Luz Wendy T. Noble

Cagayan port touted as improving connectivity with Babuyan chain

THE government on Monday inaugurated the Port of Claveria in Cagayan, which it hopes will boost transport connectivity between the far north of Luzon and islands beyond.

Transportation Secretary Arthur P. Tugade and Philippine Ports Authority (PPA) General Manager Jay Daniel R. Santiago led the inauguration of the Port of Claveria in Taggat Norte, Claveria, Cagayan, the Department of Transportation (DoTr) said in a statement.

The port development project “aims to help address the need of the region for an efficient network that integrates land, sea and air transport systems,” it added.

The project is part of President Rodrigo R. Duterte’s “Build, Build, Build” program.

“Upang ipakita ang aking pagmamahal sa Claveria, dalawang proyekto ang antimanong naplano namin. Una ‘ho ’yung puerto na papasinayaan natin ngayon. Nang sa gayon ang paglalakbay mula Claveria hanggang Calayan ay mabigyan ng mobility at convenience. Ang pangalawang proyekto ‘ho ay ‘yung lighthouse sa Pata. Siguro bago matapos ang 3rd quarter ay paparito ako ulit upang i-inaugurate yung Pata Lighthouse (Our love for Claveria manifests in two projects — the first is this port, which will ease the journey to Calayan and make it more convenient. The second project is the Pata lighthouse which I expect to inaugurate by the third quarter),” Mr. Tugade said in his speech.

He was referring to Calayan in the Babuyan Islands.

The department said apart from connecting the islands, the port will also help economically integrate upland and lowland communities, thereby boosting trade and industry.

Mr. Santiago said: “Nakita natin na kulang na kulang ang connectivity natin sa northern Philippines. Kinakailangan talagang magkaroon tayo ng mga pantalan dito para magkaroon ng accessibility doon sa mga Northern Islands natin (We have seen how limited connectivity is in the northern Philippines. We need more ports to access our northern islands.)”

Mr. Tugade announced last month the formal launch of the newly-developed Salomague Cruise Port in Cabugao, Ilocos Sur, which serves as an alternate cruise port for Region I.

Bloomberry Cruise Terminals, Inc. (BCTI), in collaboration with the Philippine Ports Authority (PPA), facilitated the completion of the Salomague cruise port’s terminal facilities.

According to the 2019 Annual Report of the DoTr, the administration has completed a total of 317 commercial and social or tourism port projects.

Among the projects completed last year are Davao del Sur’s Malalag Port, General Santos City’s Makar Port, Davao City’s Sasa Port, Bohol’s Tubigon Port, Southern Leyte’s Limasawa Port, and Misamis Oriental’s Opol Port. — Arjay L. Balinbin

Kennon Road rehab to be offered as PPP; toll road setup seen as ‘sustainable’

THE Department of Public Works and Highways (DPWH) hopes to modernize Kennon Road by offering its rehabilitation to toll-road operators as a Public-Private Partnership (PPP), the PPP Center said.

In a statement Monday, the PPP Center said the process includes the preparation of the feasibility study and the approval of documents by the second quarter.

“Bid submission is set to happen in the first quarter of 2021 with both the Notice of Award and Contract signing as well as ground breaking by mid-2021,” the PPP Center said.

“The private sector is expected to provide solutions to identified disaster prone sites within the project site, replace the existing bridges with the current 10T capacity, put up a toll system and operate and maintain the Kennon Toll Road,” it added.

The PPP Center said various private firms are interested in the project based on recent market-sounding exercises.

“Undertaking the operation and maintenance of the Kennon road will ensure the sustainability of the project,” PPP Center Executive Director Ferdinand A. Pecson said.

DPWH Secretary Mark A. Villar said: “We look forward to partnering with the private sector to deliver the requirements of the project. Kennon Road is a rather difficult project, but we look forward to the efficiencies and expertise of the private sector to build it.”

Kennon Road was closed in September 2018 for rehabilitation work following damage from landslides and typhoons. — Arjay L. Balinbin

Assessment and 2019 nCoV

The Department of Health (DoH) confirmed on Thursday, Jan. 30, the first case of novel coronavirus (2019-nCoV) in the Philippines. This alarmed many Filipinos.

Yesterday, I heard on the radio that the DoH reported the first death in the Philippines due to epidemic. It was the first confirmed death outside of China due to 2019 nCoV. This prompted the government to order a travel ban for foreigners coming from China to the Philippines.

The news was so alarming and some people may be freaking out. But according to the DoH, we should all be calm. What we need to do is practice good personal hygiene such as regular hand washing, as a preventive measure. Aside from this, we should start wearing surgical masks when going around crowded areas, or if possible, avoid crowded areas.

In most cases, if we do not know what to do, the tendency is to panic. The same thing may also happen when you receive an assessment from the BIR, especially if the amount is enormous.

But being calm and knowing what do is the key to handling the assessment.

The first thing you should do is to evaluate whether the assessment is valid. For an assessment to be valid, some of the factors that you should determine is if whether the assessment was issued within the prescriptive period; the BIR followed due process; and the Final Assessment Notice (FAN) and the letter of demand (FLD) must comply with the requisites provided under the existing tax laws, among others.

The FAN and FLD must be issued by the Commissioner or his duly authorized representative. It must also state the facts, the law, rules and regulations, or jurisprudence on which the assessment is based. Otherwise, it shall be considered void.

The FAN contains the name, address, and tax identification number (TIN) of the taxpayer; kind of tax; period covered; basic tax assessed, surcharge, interest and compromise penalty, if any; and the date when such deficiency tax must be paid (which is normally 30 days from the date of mailing or release thereof). This information, however, is not sufficient to comply with the requirement under tax law that the taxpayer must be informed in writing of the law and the facts on which the assessment is based, otherwise the assessment is void. The objective of this provision is to ensure that the taxpayer can properly evaluate the correctness of the assessment.

To comply with the provision of the tax law, the FAN is issued together with the FLD. The FLD contains details of the assessments and explains why the taxpayer is liable for such deficiency taxes. The definite amount of tax liabilities and date for payment thereof are also critical for an assessment to be considered valid.

In the case decided by the Supreme Court (SC) (G.R. No. 128315, June 29, 1999), the SC emphasized the importance of indicating the definite due date for payment of an assessment. According the SC, “[a]n assessment contains not only a computation of tax liabilities, but also a demand for payment within a prescribed period. It also signals the time in which penalties and interests begin to accrue against the taxpayer. To enable the taxpayer to determine his remedies thereon, due process requires that it must serve on and received by the taxpayer.”

The SC decision was also cited by the Court of the Tax Appeals (CTA) when it rendered a recent decision in the CTA Case no. 9046. The CTA invalidated a BIR assessment due to the absence of the specific period on which the assessment should be settled. In its ruling, the CTA found that “to be considered valid, the FANs must not only indicate the legal and factual bases of the assessments but must also state a clear and categorical demand for payment of the computed tax liabilities within a specific period. The requirement to indicate a fixed and definite period or a date certain within which a taxpayer must pay the assessed deficiency tax liabilities is indispensable to the validity of the FAN.”

It is also equally important that the assessment contain a definite amount of tax liabilities. The term “definite” is defined as “having distinct or certain limits; free of all ambiguity, uncertainty or obscurity.” Given this definition, the question is, if the assessment contains a specific amount of tax liabilities but final amount may be adjusted depending on the date of payment of such liabilities, would you consider this a definite liability?

Most people would probably say “yes,” since the amount is determinable. If the debt is subject to interest, the amount is normally being adjusted depending on the date of payment. But the same seems not applicable to tax liabilities.

In CTA Case No. 9609, dated Jan. 15, 2020, the CTA invalidated assessment since the amount of tax liabilities is deemed indefinite. The amount will remain indefinite if the tax due is still subject to modification, depending on the date of payment. In this particular case, the FLD received by the taxpayer contains a statement that the interest will have to be adjusted if paid beyond Nov. 20, 2015. While the FLD provided for the computation of the tax liability, the CTA ruled that the amount is deemed indefinite since the tax assessment is still subject to modification or adjustment, depending on the date of payment by the petitioner.

Staying calm and knowing what do is the key to handling the assessment. The first thing you should do is to evaluate whether the assessment is valid. You could also seek the advice of experts to properly guide you.

Both the 2019 nCoV and assessment may be alarming and might even cause death. But to overcome the worst, we need to learn how to respond to every situation. As Charles Swindoll once said, “Life is 10% what happens to me and 90% how I react to it.”

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

 

Edward L. Roguel is a partner of Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com

Post RTL: Rice can be profitable

This article is an update of a previous article published under MAP insights in BusinessWorld on Aug. 31, 2017. The objective is to provide new insights after the passage of the Rice Tariffication Law (RTL) in early 2019.

In 2015, the Philippine Rice Research Institute (PhilRice) and the International Rice Research Institute (IRRI), with funding support from the Department of Agriculture (DA), released a landmark six-country study of rice production in Asia.

The study was titled “Benchmarking the Philippine Rice Economy Relative to Major Rice-Producing Countries in Asia.” Comparative studies were done in sites representing irrigated and intensively cultivated areas in six countries: the Philippines, China, India, Indonesia, Thailand, and Vietnam.

The selected sites have similar climatic conditions: all are irrigated with at least two crops a year. Of the six countries, three are global exporters — India, Thailand, and Vietnam. Three are large importers — China, Indonesia, and the Philippines.

To summarize:

YIELD COMPARISON
The Philippines is third to last after Thailand and India in high-yield season (dry season crop in the Philippines). It is 34% lower than highest yielder Vietnam (5.68 tons/hectare (ha) vs. 8.56 tons/ha).

The Philippines is lowest in low-yield season (wet season in the Philippines). It is 39% lower than that of Vietnam (3.84 tons/ha vs. 6.33 tons/ha).

FARM COST COMPARISON
Yield affects unit farm costs. For the high-yield season, the Philippines recorded the third highest farm cost of P11.13 per kilogram (kg) compared to Vietnam’s P5.14/kg, Thailand’s P9.07/kg, and India’s P9.27/kg. In effect, the Philippines is uncompetitive with rice exporters

In the low-yield season, the Philippines’ cost is the second highest after Indonesia. It is, however, two times that of Vietnam, and 1.6 times higher than Thailand’s.

Nueva Ecija in Central Luzon is the “gold standard” when it comes to high-yield rice production. The study reports that the high cost of producing palay (unmilled rice) in Nueva Ecija is due to the high labor requirement in manual transplanting (25 man-days) and harvesting and threshing (21 man-days). Vietnam, by contrast, which has the lowest production cost, uses direct seeding (two man-days) and combine harvesters (two man-days) resulting in increased productivity and higher efficiency.

This labor differential of 42 man-days translates to a cost-disadvantage for the Philippines of about P13,000/ha per season, or P2.30 to P3.40/kg.

The study also noted higher milling efficiency in rice-exporting countries leading to fewer broken grains and higher milling recovery. This is due to rice varieties that have similar grain size.

Are there solutions in the horizon for irrigated rice in the Philippines? SL Agritech, a leading hybrid seeds provider, claims this is possible.

In Nueva Ecija, hybrid users average 8.5 tons/ha in the dry season and seven tons/ha in the wet season. Exception farmers make over 10 tons/ha. The farm cost with mechanization can be reduced to P50,000/ha. This means an average farm cost of P6/kg and P7/kg, respectively, making it cost-competitive with Vietnam and Thailand in the dry season and with Thailand in the wet season.

By 2022, the Philippines will have a small surplus of 200,000 tons. However, using a buffer stock of, say, 60 days, the total requirement would be around 2.1 million tons. Sufficiency will not be reached at those yield assumptions and per capita demand.

Since rice demand declines with higher incomes and hoping that government achieves its poverty target of 14% in 2022 from 21.6% in 2015, it is possible to achieve sufficiency at high yields and lower per capita demand of below 100 kg. The high yield assumes adequate supply of water and good irrigation efficiency. Strategically, there is a need to consider benefit-cost trade-offs of public investments in other crops for poverty reduction.

POST RICE TARIFFICATION LAW
The Rice Tariffication Law (RTL), with a budget of P10 billion per year, including P5 billion for farm mechanization, opens windows of opportunity.

But “new” paradigms must proliferate.

1. High impact farm mechanization is possible with farm consolidation, or better.

2. Value chain upgrading across the chain.

Competitive rice farming can learn from existing models.

Malaysia has the largest rice estate with 4,000 ha in Perak state. It is fully integrated, from land preparation to harvesting to milling. It is being operated for small farmers by FELCRA.

In the Philippines, there are three operating models:

1. Piddig, Ilocos Norte. A coop-based LGU-supported model with full range of interventions from soil analysis and irrigation schedule to optimize water use, full fertilization and mechanization, rice milling and marketing of 1,000 consolidated one-hectare farms

2. Alang Alang, Leyte. The Chenyi group of Rachel and Patrick Renucci, private investors. Through the Partnership program, Chen Yi organizes the farmers by providing low-interest loans in kind: fertilizers, pesticides, and one kind of high-yielding seed. Chen Yi also extends high-tech planting and harvesting equipment to all farmer members of the Partnership program, thereby increasing the quantity and the quality of their palay and better farm prices.

3. Nation-wide rice farms clustering by SL Agritech. It is promoting agri entrepreneurs who have track records of achieving high yields up to 10 to 15 tons per hectare.

Thus far, the average income for the models has surpassed poverty threshold of P120,000 per family of one hectare farms. And competitive at that.

Under RTL, can the Philippines expand the operating models and succeed?

What is the missing link? Integrated value chain-based management system. To do this one must engage:

1. LGUs in rice producing provinces. The LGUs should build a team of expert consultants. The LGUs lead in farm consolidation.

2. Investors to bring technical expertise and value chain familiarity. But to enter the area, the LGU must be in full support of farm consolidation.

Meanwhile, the Department of Agriculture’s Hybrid Rice Program will establish three pilot hybrid rice farm clusters in Regions 3, 6, and 11 where the government will extend subsidies amounting to P30 million. Each cluster will consist of 100 hectares, to be managed by farmers’ cooperatives to realize the agriculture department’s vision of turning planters into “agripreneurs.”

Farm consolidation is voluntary for small farmers. But the message is this: rice can be profitable and competitive when farms have economies of scale.

This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines.

 

Rolando T. Dy is the Co-Vice-Chair of the MAP AgriBusiness Committee, and the Executive Director of the Center for Food and AgriBusiness of the University of Asia & the Pacific.

map@map.org.ph

rdyster@gmail.com

http://map.org.ph

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