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Gov’t imposes cement safeguard duty

By | Property News

THE DEPARTMENT of Trade and Industry (DTI) will impose a provisional safeguard duty on imported cement starting next month, citing the need to prevent putting local producers at a disadvantage.
“With the elements of surge and injury clearly established, DTI is mandated to impose a safeguard duty. DTI is thus imposing a provisional safeguard duty of P8.40 per [200 kilogram] bag, equivalent to about four percent,” Trade Secretary Ramon M. Lopez told reporters in a mobile phone message on Thursday, even as his department noted in a separate statement that cement “is a critical input to infrastructure.”
The administration of President Rodrigo R. Duterte has been implementing a more aggressive infrastructure development program in order to prod overall economic growth to a higher 7-8% clip up to 2022, when he ends his six-year term, from a 6.3% average in 2010-2016.
Citing findings of the investigation, he noted that imported cement surged to more than 3 million metric tons (MT) in 2017 from just 3,558 MT in 2013, while the share of imports by non-manufacturers or “pure” traders increased to 15% from only 0.02% during the same four-year period, he noted.
“Equally important, the industry experienced a sharp decline in income (earnings before interest and taxes) of 49% in 2017,” Mr. Lopez said.
The DTI asked cement manufacturers to maintain their current retail prices, saying it “will closely monitor the selling price of cement manufacturers and ensure that they will not implement increases.”
The order, will take effect Feb. 8, or 15 days after publication in two dailies which Mr. Lopez said is expected today. The safeguard duty will be in effect for 200 days. Mr. Lopez added that DTI has yet to relay its order in writing to the Department of Finance and the Bureau of Customs as the latter will issue the guidelines that will clear the way for actual imposition of the safeguard duty.
Sought for comment, Cristina S. Ulang, First Metro Investment Corp. head of research, said in a mobile phone message that the move would be “[g]ood for the cement companies”, explaining that it “will help them recover.”
She also cited “[p]ositive impact for ‘Build, Build Build’ as it will assure local cement industry financial viability and cement supply reliability by virtue of a level playing field for all local players and imported cement.”
Under Republic Act 8800, or the Safeguard Measures Act of 2000, a provisional duty is imposed under “critical circumstances where a delay would cause damage which would be difficult to repair, and pursuant to a preliminary determination that increased imports are a substantial cause of, or threaten to substantially cause, serious injury to the domestic industry.”
The tariff will be paid in the form of a cash bond that will be deposited with a government bank “while the Tariff Commission undertakes and concludes its formal investigation” within 60-120 calendar days.
Cement importers have opposed the P8.40 per bag tariff, arguing that they earn P8.25 profit from selling a bag of cement.
The Philippine Cement Importers Association, Inc. on Wednesday warned of a possible shortage should the safegard duty push through, saying that even local manufacturers have themselves been importing to fill supply gaps and accounted for about 36% of total cement imports in 2018.
Despite warnings of the new duty’s possible impact on the government’s infrastructure push, Mr. Lopez assured of sufficient supply, noting that domestic capacity amounts to 35 million MT a year against current demand of 25 million MT.
The Trade chief cited the need to increase capacity, given continuous growth of demand which is expected to double by 2025.
He encouraged existing and new players to build additional plants to ensure stable supply in the long-run.
“But relying solely on imports and being at the mercy of global supply and demand situation is risky and irresponsible considering changes in global demand and supply conditions, and will only lead to too much dependence on imports, leading to perennial trade deficit,” Mr. Lopez added. — Janina C. Lim

Hot money turns around in 2018

By | Property News

REUTERSBy Melissa Luz T. LopezSenior Reporter
MORE FLIGHTY FOREIGN FUNDS entered the Philippines in 2018, beating the central bank’s expectation of a net outflow as investor optimism rebounded just before the year ended.
December saw $278.11 million in foreign portfolio investments net inflows, marking the second straight month of net inflows even if it was less than November’s $832.07 million and the year-ago $456.93 million, the Bangko Sentral ng Pilipinas (BSP) reported on Thursday.
These investments are referred to as “hot money,” as these funds enter and leave the country with ease.
Foreigners invested $1.58 billion for the month, but this was offset by $1.302 billion in withdrawn funds.
The December figure brought the full-year total to a $1.204-billion net inflow, marking a turnaround from 2017’s $195.4-million net outflow.
This is the biggest hot money inflow recorded since 2013, which saw $4.225 billion foreign funds retained in the local economy.
Last year’s net inflow even beat the $100-million net outflow expected by the central bank.
“This may be attributed to the large investment in a holding company… accompanied by investors’ optimism over the passage of the first phase of the government’s tax reform program,” the BSP statement read.
San Miguel Corp. raised P39.19 billion (about $744 million) in fresh capital in November through a follow-on offering for its subsidiary, San Miguel Food and Beverage, Inc.
On the other hand, the Tax Reform for Acceleration and Inclusion law took effect Jan. 1, which reduced personal income taxes while raising more revenues from additional levies on fuel, cars and sugar-sweetened drinks, to name a few.
Total inflows reached $16.034 billion this year, partly offset by $14.83 billion in outbound funds.
The largest inflows were recorded in the first quarter at $5.1 billion, which saw big-ticket share sales from Petron Corp. at roughly $500 million as well as a $400-million tender offer by port operator International Container Terminal Services, Inc.
About 71.4% of portfolio flows went to shares of listed companies, involving transactions that yielded net outflows worth $1.3 billion.
Foreign investors placed a fifth of their bets on peso-denominated government securities, which yielded a $1.2-billion net inflow. Other peso-denominated debt papers fetched $1.3 billion worth of investments, while peso time deposits received less than $1 million.
The United Kingdom, United States, Singapore, Netherlands and Hong Kong were the five biggest sources of hot money in 2018, while 78.8% of the outflows went to the US as investors regard it as safe haven.
Jonathan L. Ravelas, chief market strategist at BDO Unibank, Inc. pointed out that the hot money flows mirrored the movement of the Philippine Stock Exchange, coming from a roughly “10-month rout” for emerging markets.
“Eventually, the stock market recovered from the lows of the year and ended higher,” Mr. Ravelas said in a telephone interview when asked for comment.
Local financial markets took a beating last year as the Philippines reeled from surging inflation, which pushed yields up and sentiment down.
Michael L. Ricafort, economist at the Rizal Commercial Banking Corp., also noted that portfolio flows started to improve in November as inflation had “already started to ease from the near-decade high of 6.7%. Interest rates have also eased, with bond yields now on a decline.”
“Philippine economic and credit fundamentals remained solid, as partly attested by the affirmation of the country’s credit ratings as well as economic growth at six-percent levels in 2018 — among the slowest in three years partly due to higher inflation, but still among the highest/fastest in Asia/ASEAN — a sign of resilience,” Mr. Ricafort said.
BDO’s Mr. Ravelas also noted that 2019 will likely turn out to be a better year in terms of attracting more investments, saying: “With the stock market closer to 8,000 and the peso at the low-P52 level, it shows that you’ve seen the risks in 2018.”
“The water in the river is clear, investors are now willing to jump in.”
The BSP forecasts a $200-million net outflow for 2019, according to projections adopted in November last year.

Tax bureau lines up priorities for this year

By | Property News

THE BUREAU of Internal Revenue (BIR) has laid out its priority programs for attaining its P3.018-trillion collection goal for this year.
Revenue Memorandum Circular 5-2019 spelled out 19 priority programs to help the bureau achieve its revenue target.
Items on the list included implementation of the fuel marking program, part of Republic Act No. 10963 — or the Tax Reform for Acceleration and Inclusion (TRAIN) Act — that was not implemented even as the law itself took effect a year ago; optimization of the Internal Revenue Integrated System (IRIS); the TRAIN law Implementation Program; and implementation of RA 11032, or the Ease of Doing Business and Efficient Government Service Delivery Act.
“These priority programs are comprised of continuing priority programs from the previous year, and new undertakings, taking into account current developments in tax administration, such as the passage of the next phase of the Tax Reform Acceleration and Inclusion program, and the ongoing institutionalization of the various policies and guidelines in support of Republic Act No. 11032… and Republic Act No. 10173 (Data Privacy Act), as well as the results of the BIR Strategic Planning Sessions participated in by the Bureau’s top officials,” the circular read.
“All Bureau offices are therefore enjoined to align their activities and projects to the CY (collection year) 2019 Priority Programs, to ensure the achievement of the BIR’s CY 2019 Collection Target and the fulfillment of the Bureau’s mandate.”
The BIR raked in P1.801 trillion as of November, 11% more than the P1.621 trillion recorded in 2017’s comparable 11 months. That was 88.15% of the P2.043-trillion downward-adjusted 2018 revenue target.
This year’s target is 47.72% greater than that of 2018.
The BIR will draw up implementing guidelines for the marking of locally refined fuel and the testing of the presence of the markers in fuel stations nationwide.
Finance Undersecretary Antonette C. Tionko said on Friday last week that the Finance department expects the fuel marking program — designed to curb fuel smuggling — to be launched next month.
“For the fuel marking, the team that’s doing it is actually going already to the refineries. So that’s ongoing now. Hopefully by next month, February first week, we will launch it already,” Ms. Tionko said on Monday.
The delayed implementation of the fuel marking program, as well as the electronic invoicing and e-sales reporting — both initially scheduled for 2018 — were the reasons for the P26-billion downgrade of the overall 2018 revenue target to P2.846 trillion.
Moreover, the tax bureau seeks to pilot its electronic tax information system IRIS in the Makati City Revenue Region and the Large Taxpayers Service.
The BIR will also implement the Ease of Doing Business law, which shortens transaction processing time in transactions, as well as a single-window policy in the processing of applications of new business registration at revenue district offices (RDO).
The revenue agency will also ensure “strict compliance with new tax policies and tax payments/remittance system” under the TRAIN law, and at the same time “clarify certain issues raised in the implementation of the TRAIN law by issuing the appropriate revenue issuance.”
Other continuing programs to attain BIR’s collection targets include: imposing sanctions on delinquents via the Run After Tax Evaders and the Oplan Kandado program; intensified audit and investigation; enhanced implementation of the Arrears Management Program in the Regional Offices; broadening of the tax base by five percent; increase tax compliance by five percent through the Tax Account Management Program; implementation of the e-invoicing and e-sales reporting; massive tax education campaign; information and communications technology solutions for improved taxpayers service; sustained compliance with the Data Privacy Act; data sharing agreements with other government agencies; action on administrative cases against erring revenue officials and employees; expedite recruitment of new personnel and promotion of qualified employees; capacity building enhancements for BIR officials and employees; and the 100% utilization of budget appropriations. — Elijah Joseph C. Tubayan

Central bank, competition watchdog warn vs move to raise prices of farm goods

By | Property News

REUTERSTHE CENTRAL BANK and the competition watchdog cautioned against moves to raise prices of agricultural products at a time of improved food supply, saying this could disrupt inflation’s slowdown, faster economic growth and healthy sectoral competition.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said monetary authorities are “concerned” about the potential impact of raising prices of farm goods artificially, noting this could drive up food prices anew after sharp declines in recent weeks. Last week, Agriculture Secretary Emmanuel F. Piñol advised poultry growers to raise chicken farmgate prices by P10 weekly amid increased supply due to imports.
Mr. Guinigundo said this had a “potential inflationary impact,” adding that abundant food supply should be viewed positively.
“It’s not a concern. We are encouraged by it because if you have a lot of food supply, and logistics are in order, then that is positive for inflation,” he said at the sidelines of a forum hosted by the Foreign Correspondents Association of the Philippines yesterday.
The BSP is seeing a rosier economic picture this year, with inflation seen settling at 3.2% this year from 5.2% in 2018. Prices will be “manageable” and within the 2-4% target in 2019 as global oil prices decline, food supply normalizes, and the peso stabilizes.
Scarce food supply, particularly rice, drove up consumer prices for most of 2018 to hit a nine-year peak of 6.7% before finally slowing since November.
On the other hand, Mr. Guinigundo said he is confident that the Philippine economy will pick up steam to hit the government’s 7-8% growth target.
“Inflation is down, consumption expenditure is expected to be more robust than in 2018. Investments will also be encouraged by the fact that you have a good price stability picture. Government spending continues to be strong, particularly on infrastructure and human capital development,” the central bank official said.
“I think at least 7% is doable in 2019.”
The economy grew by 6.3% from January-September last year, versus an already slashed growth goal of 6.5-6.9%. Mr. Guinigundo said he does not expect the delayed passage of the 2019 budget to pull down growth significantly, while election-related spending should give a one-time boost.
Citing data, the 2016 elections added 0.3% to economic growth in 2016. The BSP official, however, said the midterm polls will likely have a lower impact as it involves smaller operations.
Mr. Guinigundo also said that the BSP will keep inflation on a “very tight leash,” which in turn should prompt greater household spending to perk up domestic activity.
A global economic slowdown would also keep prices at bay, even as upside risks to prices persist in the form of a faster-than-expected rate hikes abroad as well as higher domestic power rates and proposed increase in taxes on alcoholic drinks.
Market economists have been more bullish towards 2019 prospects, with most analysts pencilling in a faster growth rate with inflation concerns now out of the way.
COMPETITION CONCERN
On the other hand, the Philippine Competition Commission (PCC) said it could investigate reports farm producers could hike prices in unison.
“We are considering,” Orlando P. Polinar, director of the Competition Enforcement Office told reporters when asked if the watchdog will look into the reported move.
“Any conduct that is inconsistent with the PCA (Philippine Competition Act of 2015) will be investigated,” he said in a press briefing earlier in the day.
“As enforcement office, our main concern is really to look at what’s the problem and what’s causing it.”
Referring to his meeting with poultry farmers, Mr. Piñol said: “I left them with the appeal that once and for all, they should agree among themselves to protect themselves… So my suggestion a while ago is that they should agree to increase the farmgate price by at least P10 every week until such time that it hits a level where they are not losing money.”
Mr. Polinar said the PCA has no jurisdiction over government offices, even as he said that anyone who participates in or guides a cartel is not exempt from prosecution.
“For government offices, we have advocacy work. We can make suggestions and comments on policies that will ensure [policies will] be consistent with robust and healthy competition in the market,” he added.
The PCC last week reminded the DA that its proposal was anticompetitive and illegal while encouraging producers to independently adjust their own prices or output.
At the same time, Mr. Polinar explained that the PCA is designed to aid marginalized sectors.
“… [T]he PCA has bias in favor of the smaller players, especially the marginalized sectors, so let’s see,” the PCC official said.
“We are not ready at this point to say whoever is causing it or what exactly is the nature of the problem of the market…”
Poultry raisers welcomed any investigation, challenging the PCC to look into the discrepancy between farmgate and retail chicken prices.
“In any case we welcome any investigation. We also would want — since the PCC is also interested in agriculture — that they look into the retail establishments. We are suffering, and yet in the retail prices are going up,” United Broilers Raisers Association President Elias Jose M. Inciong said in a telephone interview on Thursday.
He also defended the industry, saying: “If we are a cartel, we will not be losing money and if we are a cartel, we will not be coordinating with government.”
“What happened was there was just an agreement to inform what was the size of the chicken inventory. You cannot fix prices when the other poultry producers are not members,” he added.
AS of Jan. 8, the volume of imported chicken increased by 50 million kilograms (kg) from a year earlier.
The PCC said it will review the volume of imported chicken as it might exceed the domestic market’s absorptive capacity. — Melissa Luz T. Lopez and Janina C. Lim

Hanjin PHL may need 8 years to recover

By | Property News

WWW.HHIC-PHIL.COMBy Melissa Luz T. Lopez, Senior Reporter
THE government is looking into having other foreign white knights to acquire Hanjin Heavy Industries and Construction Philippines (HHIC-Phil), with an initial eight-year rehabilitation plan on the table.
An Olongapo City court granted HHIC-Phil’s petition to enter into corporate rehabilitation on Monday. Citing initial data, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo told reporters that Hanjin has been given an eight-year window to get back on its feet, starting with a three-year grace period in order to turn around its operations.
“Based on the initial information that we got, it will take eight years — three years grace (period) and five years to repay the obligations. To the extent that you have a market and the facility continues to operate, then the issue of cash flow will be addressed,” Mr. Guinigundo said at the sidelines of the Foreign Correspondents Association of the Philippines forum yesterday.
“If you have the cash flow, you can pay your workers, creditors, suppliers. That is assuming that the rehabilitation framework is going to work.”
Defense Secretary Delfin N. Lorenzana revealed another option being considered for Hanjin, saying that authorities are also open to expanding talks with companies from the US, Japan, Korea and Australia to buy the embattled shipbuilder based in Subic Bay.
“We talked about that with the economic managers with the President. There are several proposals like opening it to other countries as well… if they want to take over. The Navy also suggested why not the Philippines take over so that we’ll have a naval base there and have a shipbuilding capability,” Mr. Lorenzana told reporters.
The Philippine Navy is set to order 20 ships abroad in the next 10 years, he added.
An official of HHIC-Phil said on Tuesday that the company expects to return to profit three years after the entry of an investor, provided that they will be given a $12-million monthly infusion to take care of its debts and provide operating capital.
CHINA TAKEOVER OPPOSED
In the same forum, Supreme Court Associate Justice Antonio T. Carpio warned against plans to allow Chinese companies to acquire Hanjin’s massive Subic shipyard, saying that it could weaken the country’s territorial claims further.
The Board of Investments has said that two Chinese shipbuilding firms have expressed interest to take over the South Korean firm’s operations in the Philippines. This would entail acquiring HHIC-Phil’s assets as well as its outstanding debts, which stand at $412 million across five local banks and another $900 million with South Korean lenders.
“I agree with Admiral Pama and Commodore Agustin. China claims our West Philippine Sea, our islands, and if we allow the Chinese to operate the shipyard in Subic, then they can monitor everything that we do,” Mr. Carpio said.
“Why do we allow the Chinese to take a foothold in Subic when it is also our naval base, when they are trying to seize the West Philippine Sea just across? It doesn’t make sense.”
Mr. Lorenzana earlier bared that the Philippine Navy is also considering to take over Hanjin, with no less than President Rodrigo R. Duterte “open” to the idea. Another plan is to acquire a stake and eventually sell the shipyard to private firms.
Sought for comment, Finance Secretary Carlos G. Dominguez III said he has “not received the full proposal” so far, but that they will be gathering relevant information to explore options. For his part, Presidential Spokesperson Salvador S. Panelo said it remains “just a proposal,” but added that it may be a potential source of income for the state as well.
Mr. Lorenzana said all proposals are being considered, with the Cabinet likely to form a technical working group to study these further.

Gov’t mulls takeover of Hanjin’s shipyard

By | Property News

HTTP://WWW.HHIC-PHIL.COMOPTIONS for a resolution of debt troubles of Hanjin Heavy Industries and Construction Philippines (HHIC-Phil), which has entered rehabilitation, now include a possible government takeover of its facilities in Subic Bay Freeport in Central Luzon, the country’s Defense chief said on Wednesday.
Wednesday also saw a senior central bank official saying that banks may have to be more “proactive” in monitoring the financial condition of borrowers to which they have significant exposure, while a HHIC-Phil official said the company could return to profit three years from the entry of an investor.
During Senate deliberations on the proposed Department of National Defense 2019 budget, Defense Secretary Delfin N. Lorenzana said he posed the idea to President Rodrigo R. Duterte on Tuesday evening, adding that the latter was “very receptive” to the idea.
“While we sympathize with the financial woes of Hanjin, we are excited really by this development because we see the possibility of having our own shipbuilding capacity in the Philippines, especially large ships like what’s being built in Hanjin’s shipyard in Subic,” Mr. Lorenzana said.
“And so, the Flag Officer-in-Command Admiral (Robert A.) Empedrad reached out to me — I think yesterday or the other day — and I said, ‘why not we takeover the Hanjin [facility] and give it to the Navy to manage?’” he recalled.
“And so I brought this idea to the President last night and he’s very receptive to the idea. Although the Secretary of Finance… (Carlos G.) Dominguez (III) is also thinking of… how the local banks can recoup their investment there…”
Presidential Spokesperson Salvador S. Panelo declined to comment when asked to verify the development.
The South Korean shipbuilder’s debts to five of the country’s biggest banks have been estimated to total some $412-million.
Trade Undersecretary and Board of Investments managing director Ceferino S. Rodolfo said last week that two Chinese shipbuilders have expressed interest in acquiring HHIC-Phil.
Mr. Empedrad told senators in the hearing that the Philippine Navy “cannot take over totally the entire Hanjin [shipyard] but a portion probably…”
Senate Majority Leader Juan Miguel F. Zubiri proposed for management of the shipbuilding facility to be given to a private entity while the government takes a majority stake. “Instead of using funds to (buy ships) abroad, we are earning. Filipinos are building our ships and it’s under the control of the Department of National Defense. I think it’s a win-win solution,” he said.
Senator Panfilo M. Lacson, one of the Senate Finance committee’s vice-chairmen, said the P75 billion added to the Department of Public Works and Highways 2019 could help cover the government takeover. “There’s… P75 billion in the proposed budget… What if the government will just take over Hanjin[’s shipyard] and then bid out to possible partners, private entities, then let the Philippine Navy partner with private entity?” Mr. Lacson said.
MORE ASSURANCES
The local banking sector will not reel from HHIC-Phil’s $412-million loan default, the central bank said on Wednesday, even as one of its senior officials flagged the need for lenders to be more “proactive” in vetting huge loans.
The Bangko Sentral ng Pilipinas (BSP) moved anew to calm markets, assuring that the five banks with big loan collectibles from the South Korean shipbuilder have what it takes to remain on solid ground.
“[B]ased on the results of the BSP’s stress-testing exercise, an assumed write-off of the loan exposures to Hanjin will have minimal impact on the industry’s CAR (capital adequacy ratio),” BSP said in a statement.
Industry-wide CAR stood at 15.36% as of September 2018, well above the eight percent global standard and the central bank’s 10% requirement, while liquidity coverage was more than enough at 157.6%, data showed.
The Rizal Commercial Banking Corp. (RCBC) had the biggest exposure with $145 million lent to HHIC-Phil, followed by the state-run Land Bank of the Philippines with $85 million; the Metropolitan Bank & Trust Co. (Metrobank) with $70 million; BDO Unibank, Inc. with $60 million and the Bank of the Philippine Islands (BPI) at $52 million.
“Based on the latest data, the BSP is confident about the local banks’ ability to manage this specific challenge. They are also equipped to handle the negotiations required to complete Hanjin’s corporate restructuring while remaining compliant with prudential regulations,” the central bank added.
Asked whether banks will need to tighten lending standards after Hanjin’s case, BSP Deputy Governor Chuchi G. Fonacier replied in a text message: “Partly yes, and partly on really being proactive in monitoring the financial condition and other developments of their borrowers, especially those with large exposures.”
CREDIT RATER WATCHES
In a separate statement on Wednesday, international debt watcher Fitch Ratings said that Philippine banks will not be shaken by HHIC-Phil’s problem debts, but noted that lenders with “more significant exposure” could see some pressure on their credit rating.
Referring to RCBC’s exposure to HHIC-Phil, Fitch noted that “[t]he full amount exceeds its 2017 net profit, and provisioning on these loans could result in the bank reporting at least one quarterly loss, implying some risk of capital impairment, although we do not expect the bank to set aside the full amount of its exposure.”
“The exposure of the three largest banks — BPI, BDO and Metrobank — is more manageable relative to their loan books and pre-provision profits,” the credit rater added.
“The sector- and company-specific causes suggest this case is unlikely to indicate broader stress across banks’ loan books…”
‘OPEN TO ANY TIE-UP’
A HHIC-Phil executive, who asked not to be named, said by phone on Tuesday that the company expects to return to profit three years after the entry of an investor.
“We really see ourselves profiting after three years. We just have to be funded $12 million monthly,” the source said. “We’re open to any tie-up as long as the company can take care of the debt and provide for the operating capital.”
Among others, HHIC-Phil is banking on developments like the United Nations International Maritime Organization’s policy to cut the sulfur content of ship fuel to 0.5% from the current 3.5%. “That policy will take effect in 2020 and we can really make profit from that as there is only a small number of ships that meet that requirement,” the executive said. — Camille A. Aguinaldo, Melissa Luz T. Lopez and Janina C. Lim

Philippine GDP growth seen slowing

By | Property News

By Elijah Joseph C. TubayanReporter
PHILIPPINE economic growth will likely slow up to this year, according to latest estimates of a macroeconomic surveillance organization for the Association of Southeast Asian Nations (ASEAN) Plus 3 economies and HSBC Private Bank.
AMRO TRIMS FORECASTS
The ASEAN+3 Macroeconomic Research Office (AMRO) trimmed its Philippine GDP growth projections for 2018 and 2019.
AMRO sees gross domestic product (GDP) growth settling at 6.4% in 2018 and 6.3% in 2019 based on its January update of the ASEAN+3 Regional Economic Outlook (AREO) published on Wednesday.
This is slightly down from the 6.5% and 6.4% estimates for those years in AMRO’s October report.
If realized, growth will slow from the 6.7% logged in 2017.
This compares with the ASEAN+3 estimated average of 5.3% for 2018, down from 5.4% previously, and 5.1% for 2019, which was kept from the previous report.
AMRO’s inflation forecast for the Philippines in 2019 was also revised to three percent from 4.3%. This will moderate from the 5.2% inflation clocked in 2018, which breached the central bank’s 2-4% target range.
It is also faster than the region’s two percent and 2.2% average inflation estimates for 2018 and 2019, respectively — changed from 2.1% and two percent forecasts for the same respective years.
“Amid moderate growth performance with inflation starting to ease, some economies in the region have kept their interest rates on hold during their most recent policy meetings,” the report read, noting that “[t]he Philippines maintained the policy rate at 4.75%, following four rate rises since May, as the peso has strengthened slightly while inflation has started to moderate.”
Headline inflation reached a peak of 6.7% in September and October 2018, the fastest pace in nine years. The overall rise in prices of widely used goods slowed to six percent in November and eased further to 5.1% in December.
The surge in consumer prices has been blamed for slower-than-expected economic growth, traced to higher and new excise taxes on select goods and high world fuel prices.
Malacañang in September issued orders removing non-tariff barriers and streamlining procedures for food distribution.
The Bangko Sentral ng Pilipinas (BSP) raised interest rates by a total of 175 basis points in five Monetary Board meetings from May to November, and kept policy rates steady in its final meeting for 2018 in December.
GDP growth averaged 6.3% in the first three quarters of 2018, against the government’s downward-adjusted target of 6.5-6.9% for that year. For 2019, the target is at 7-8%.
AMRO’s latest forecasts compares with the World Bank’s 6.4% and 6.5% for 2018 and 2019 respectively, the Asian Development Bank’s 6.4% and 6.7% estimates for 2018 and 2019, respectively, the International Monetary Fund’s (IMF) 6.5% and 6.7% for the same years, and 6.7% of the Organization for Economic Cooperation and Development for both years.
Moreover, AMRO said in a separate blog post that the ASEAN+3 area — consisting of the 10 ASEAN members plus China, Japan and South Korea — faces a “high likelihood” of “high impact” risk from further escalation of the US-China trade conflict.
But it also noted that the area “has done well and remains the fastest growing region in the world”, with “most economies… growing at close to or slightly above potential with subdued inflation.”
The Philippines, along major ASEAN economies such as Indonesia, Malaysia, Thailand, and Korea “continue to have relatively strong external positions with adequate reserves and current account balances that are either in surplus or in small deficit,” AMRO said.
The regional surveillance body said that countries should rain vigilant for potential downside risks.
“For economies facing strong external headwinds and spillovers, policy makers have preemptively tightened monetary policy to help assuage market concerns. On the fiscal front, prudent public finances have allowed fiscal policy to play a crucial countercyclical role, helping to support growth. However, with the narrowing fiscal space, authorities would need to reprioritize spending to support structural reforms and growth,” AMRO said.
“Policy makers should continue to remain vigilant, with no room for complacency. Longer term structural reform agenda should also be pushed ahead, such as in building capacity and connectivity to foster resilience and enhance future growth prospects,” it added.
HSBC CITES RESILIENCE
For HSBC, Philippine GDP growth will ease slightly this year due to higher interest rates even as private consumption is seen to remain strong.
HSBC projects GDP growth to moderate to six percent this year from the 6.2% projected for 2018.
“We anticipate the economic growth in the Philippines to stay relatively resilient, in line with the synchronized global slowdown scenario,” HSBC Private Banking Chief Market Strategist in Asia Fan Cheuk Wan said in a press conference on Wednesday.
For this year, the private lending unit of the HSBC Group expects the BSP to “approach the end of its tightening cycle” by hiking its benchmark rates by 25 basis points in the first quarter.
“We still have the excise tax increase. This will continue to underpin inflation concerns at the beginning of the year,” Ms. Fan added. “But after a Q1 BSP rate hike, and with the impact of the oil price correction of last year… we will start to see easing inflationary pressures in the Philippines.”
HSBC projects local headline inflation clocking in at 3.8% for whole-year 2019, well within the BSP’s 2-4% target band.
It also expects the “Philippine Stock Exchange index to recover to 8,600 by the end of 2019 after the sharp correction last year.” — with Karl Angelo N. Vidal

Sugar next on government’s deregulation list after rice — Diokno

By | Property News

PEXEL.COMTHE GOVERNMENT will move to open up sugar imports this year to make the industry more competitive, the state Budget chief said, explaining that President Rodrigo R. Duterte’s administration wants to do the same for other food items.
“We have to deregulate most of the agricultural sector. That’s the direction now of the government, like freer importation of all food products,” Budget Secretary Benjamin E. Diokno said in a media briefing on Wednesday.
Following the proposed rice tariffication law — which will replace import quotas with a regular tariff scheme in a move estimated to slash P7 per kilogram (/kg) off this staple’s retail prices and inflation by 0.7-0.8 percentage point — that now awaits signing into law by Mr. Duterte, the government will now focus on removing hurdles to sugar trades.
“Next is sugar. That’s bloodier than rice. It’s one of the inputs to our potential exports. All the commodities, it turned out… were so restrictive with respect to agriculture,” the Budget chief explained.
“We plan to deregulate or relax that industry. That puts pressure on the domestic economy to compete,” he added, noting that local prices of sugar are “still expensive compared to the global rate.”
Sugar import permits are currently coursed through planters’ groups and traders, a process that incurs additional costs to the detriment of consumers.
Philippine Statistics Authority (PSA) and Sugar Regulatory Administration (SRA) show prevailing retail prices at P60/kg for refined sugar, P50/kg for washed sugar and P48/kg for raw sugar. Those prices compare with refined sugar’s P55.03/kg, washed sugar’s P50.16/kg and raw sugar’s P47.10/kg in January last year.
Production of locally produced sugar has also been declining, to 2.08 million metric tons (MT) in crop year 2017-2018 from 2.5 million MT in crop year 2016-2017.
Industry group Philippine Food Processors and Exporters Organization Inc. is projecting a 1 million MT shortfall of sugar in 2019.
Sugar was among the drivers of inflation in 2018 that hit nine-year highs, prompting the SRA to import 150,000 MT of the produce. The Department of Agriculture has also indicated that it is open to importing 100,000 MT more this year if supply is inadequate.
Malacanang in September last year issued orders removing non-tariff barriers and streamlining procedures to ease food distribution and boost supply.
Moreover, Mr. Diokno said that meeting its economic growth and poverty rate targets would depend on the performance of the country’s agriculture sector.
“If agriculture would grow by four percent, the economic growth target of 7-8% is really doable. In 2018 it is projected to hit at least 6.5%,” Mr. Diokno said.
Latest PSA data show production of agriculture — which has historically contributed about a tenth to gross domestic product (GDP) and accounted for a fourth of employed persons — edged up by a nearly flat 0.15% in 2018’s first three quarters, compared to 4.64% in 2017’s comparable period and the 2.5-3.5% annual target for the sector under the 2017-2022 Philippine Development Plan.
Agriculture Secretary Emmanuel F. Piñol said last week that he expects the sector to have turned in one-percent growth for the entire 2018 — due to storms that battered farms — after expressing confidence in late December that two percent would be “doable”.
The PSA will report fourth-quarter and full-year 2018 GDP growth on Thursday next week and agriculture’s performance for the same periods days prior.
GDP growth averaged 6.3% in the first three quarters of 2018, short of the downward-adjusted 6.5-6.9% target for 2018. For 2019-2022, the target is 7-8%.
“We really have to focus on mechanization, we have to focus on adopting high-quality seeds, more irrigation… We have to show farmers that these things can really make a difference,” Mr. Diokno said.
“The country’s growth is domestic-driven as we invest heavily in the ‘Build, Build, Build’ program and as we invest heavily in our human capital,” he added.
“Agriculture is the weakest link. That’s also bad in our desire to reduce poverty to 14% by 2022” from 21.6% in 2015. — Elijah Joseph C. Tubayan

Chelsea Logistics secures PCC nod for Trans-Asia acquisition

By | Property News

CHELSEA”>CHELSEA Logistics Holdings Corp. (CLC) on Wednesday said the Philippine Competition Commission (PCC) has cleared its proposed acquisition of Trans-Asia Shipping Lines, Inc.
In a disclosure to the stock exchange, CLC said it received the PCC decision saying it will “not take further action (on the transaction)… on the basis of the conditions provided in the Undertaking submitted by the Company.”
As part of the conditions, CLC agreed to have the PCC monitor the passenger and cargo rates, as well as explain “extraordinary rate increases” in critical routes.
The listed firm will also submit semi-annual reports on passenger and cargo trips in critical routes, and maintain service quality in passenger and cargo services using a customer satisfaction index developed by third party monitor.
Last October, the PCC started a Phase 1 review of the 2016 deal between CLC and Trans-Asia after initially voiding it on the grounds of their failure to notify the competition watchdog.
The nullification of the deal resulted to the PCC’s approval of CLC’s acquisition of a stake in KGLI-NM Holdings, Inc., which owns 2GO Group, Inc. The PCC had earlier said the Trans-Asia transaction initially raised competition concerns, as both 2GO and Trans-Asia were owned by businessman Dennis A. Uy’s Udenna Corp.
SHARE OFFER WITHDRAWN
At the same time, CLC said it will no longer proceed with the offering of three million preferred shares with an oversubscription offer of up to two million preferred shares after “careful consideration” of its business strategies.
CLC said it has withdrawn its listing application for the share offer.
The application was filed with the Securities and Exchange Commission last September. In its filing, CLC said then it would sell the five million preferred shares at P1,000 each, to fund its expansion and acquisitions.
In the nine-month period, CLC saw a 72% decline in its net income to P43.013 million. — Denise A. Valdez