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John Eduard Franco

Tighter watch looms on realty loans

By | Property News

BW FILE PHOTOBy Melissa Luz T. LopezSenior Reporter
THE CENTRAL BANK plans to roll out by next year new tools to better monitor lending to the volatile real property sector, according to a senior official of the Bangko Sentral ng Pilipinas (BSP).
A March 19 BSP working paper outlined three new measures designed to tighten watch on banks’ real estate loans.
Titled: “Have Domestic Prudential Policies Been Effective: Insights from Bank-Level Property Loan Data,” the paper found that tighter prudential policies have been effective in tempering growth of new home loans handed out by domestic banks.
The central bank has tightened rules on banks’ real estate exposure as it sought to temper rapid credit growth, which some debt raters have flagged as a possible sign of an overheating economy.
Central bank officials have noted sustained strong demand for commercial and living space in the Philippines, rendering property price increases reasonable and allaying fears of a bubble.
An asset bubble forms due to a perceived rising demand in housing units that drive developers to build more, and is said to “burst” as demand stagnates, leading to an abrupt drop in property prices that could jolt the banking system.
The study, written by Veronica B. Bayangos and Jeremy L. De Jesus, noted the need to build a banking sector resilience index, which is expected to provide a more accurate measure of a bank’s strength. Two other tools are also proposed: a composite vulnerability index of banks, alongside the use of high-frequency and market-based metrics to assess the resilience of the banking sector.
Sought for comment, BSP Deputy Governor Chuchi G. Fonacier said the new index is already in the works.
“The construction of the banking sector resilience index will start this year and is expected to be rolled out next year. We have started construction of the vulnerability index for cross-border risks, we should be able to work on the other risks this year. We expect this to be rolled out also next year,” Ms. Fonacier said in a mobile phone message.
“These are both part of our surveillance tools that will serve as indicators to emerging risks and vulnerabilities of the banking system.”
According to the study: “Market-based indicators are quantitative tools that can be used to gauge the market’s assessment of the resilience of the Philippine banking system.”
“These indicators are based on information from financial markets and are thus timely, reflect expectations of future performance of the banking system and will offer good comparability across countries and through time,” it said.
The BSP currently limits a bank’s real estate exposure to 20% of its total loan portfolio.

Bourse to make sure REIT funds will not be invested abroad

By | Property News

THE PHILIPPINE STOCK EXCHANGE, Inc. (PSE) is moving to tighten rules for Real Estate Investment Trusts (REIT), as it wants to ensure that funds invested in such instruments will not be used for projects abroad.
In a memorandum posted on its Web site last Friday, the PSE proposed to amend Section 4E of the Listing Rules for REITS released in 2010, which outlined the general criteria of companies to qualify for listing.
The amendment states that “a REIT shall not invest in real estate located outside the Philippines without special authority from the Securities and Exchange Commission.”
The corporate regulator earlier identified reinvestment of such funds in the country as a key concern for REIT guidelines that has been raised by the Department of Finance and Bureau of Internal Revenue.
In addition to being reinvested in the Philippines, proceeds from share offerings of REITs must be spent within five years, according to Section 8 of the proposed amendments, titled “Reinvestments.”
The previous listing rules did not impose such limits on the use of proceeds.
The exchange, however, may grant a longer period of investment depending on the nature and magnitude of the project involved.
The PSE also proposed to add Section 6.3, under which REITs will have to disclose via the PSE Electronic Disclosure Generation Technology (EDGE) an annual report on how the proceeds of a secondary share offering have been used.
“The annual report shall be submitted within 30 days following the end of the REIT’s fiscal year and shall be certified by the company’s chief financial officer or treasurer and external auditor. The annual reports shall be regularly submitted until the proceeds have been fully utilized.”
On Continuing Listing Requirements under Section 7 of the proposed listing rules, the PSE wants to remove the statement that the minimum public ownership (MPO) of the exchange shall not apply to REITs. Instead, REITS must comply with the MPO rule indicated under the Implementing Rules and Regulations (IRR) of Republic Act No. 9856, otherwise known as the REIT Act of 2009. Section 8.1 of the IRR states that a REIT must have a public ownership of at least one-third of its outstanding capital stock, owned by at least 1,000 public shareholders, with each owning a minimum of 50 shares. Should REITs fall below the MPO requirement, they will be subjected to a trading suspension of up to six months. In that time they must work on meeting the requirement.
REITs that fail to comply with the REIT law, its IRR and other guidelines set by the PSE will be subjected to the same penalties under PSE rules, including delisting.
The PSE further added a section on relisting prohibition which states that a REIT that has been involuntarily delisted “cannot apply for relisting within a period of five years from the time it was delisted.”
Directors and officers of the delisted firm are also disqualified from becoming directors and officers in other REITs for the same period.
The PSE is accepting comments for the proposed guidelines until March 31. — Arra B. Francia

Energy regulator OK’s lower FiT-All

By | Property News

THE ENERGY REGULATORY COMMISSION (ERC) has approved a feed-in tariff allowance (FiT-All) of P0.2226 per kilowatt-hour (/kWh) applied to the year 2018, P0.0706/kWh lower than the rate applied for by state-led National Transmission Corp. (TransCo).
In a statement on Monday, the regulator said the approved rate reflects a P0.0337/kWh reduction from the current P0.2563/kWh FiT-All rate.
“The variance is attributed to the discrepancy in the plant capacities used by TransCo and ERC in computing for the FiT-All, among others,” ERC Chairperson and Chief Executive Officer Agnes VST Devanadera said.
She said the regulator made use of the capacity of FiT-eligible plants with approved certificate of compliance, while TransCo used projected FiT-eligible plants for 2018. TransCo’s projection included plants with nomination from the Department of Energy, she added.
“There are other diverging factors, such as the FiT rates and the cost recovery rate, that contributed to the discrepancy in the FiT-All computation,” Ms. Devanadera said.
FiT-All, a uniform charge in pesos per kilowatt-hour, is payable by all electricity users that is calculated and set annually. Distribution utilities, system operator National Grid Corporation of the Philippines, and retail electricity suppliers serve as collecting agents.
The proceeds go to the FiT-All fund, which is being administered by TransCo.
The FiT-All mechanism was established under Republic Act. No. 9513, or the Renewable Energy Act of 2008, which aims to spur development of emerging renewable power sources such as wind, solar, run-of-river hydropower and biomass.
Ms. Devanadera said the new FiT-All rate will be charged to all on-grid consumers supplied with electricity through the distribution or transmission network starting on the immediately succeeding billing period after TransCo’s receipt of the ERC decision.
She said the reduction in the FiT-All would mitigate the impact of the impending increase in basic electricity rates due to the expected rise in demand and dwindling power supply in the coming dry months.
In a mobile phone message sent to reporters, ERC Spokesperson Floresinda B. Digal said the new rate could be reflected in the electricity bill in April or May. She added that the 2018 FiT-All is good until a new rate is determined by the ERC. TransCo has a pending application for a rate of P0.273/kWh for 2019.
Melvin A. Matibag, TransCo president and chief executive officer, said last week that the company had amended its application for the current year to reflect a lower rate of P0.24/kWh as it was able to update its payment backlog to renewable energy developers. — Victor V. Saulon

DoF estimates P22.5B/year foregone from illegals

By | Property News

‘We have to go after these guys because they are not paying taxes, simple.’ — Finance Secretary Carlos G. Dominguez IIITHE FINANCE DEPARTMENT is pressing for a more aggressive campaign against unregistered foreign workers in Philippine offshore gaming operations (POGO) in the belief that the government has been missing out on P22.5 billion in income taxes yearly.
In a statement, Finance Secretary Carlos G. Dominguez III gave a March 29 deadline for an inter-agency task force to draw up the list of foreigners employed by POGO firms.
“There are still gaps in the numbers and we need to close those gaps. In our computations, there is at least P22 billion a year not being collected in the income taxes from these POGO workers who could possibly exceed 100,000 in number,” Mr. Dominguez was quoted as saying during the body’s meeting last week.
A POGO is a business that provides games, takes bets and pays winners through an online gaming account.
Preliminary Bureau of Internal Revenue (BIR) data showed there are 33,000 foreign workers employed by 64 POGO companies, out of 205 service providers operating here. This means an average of 515 foreigners per POGO unit, or about 103,000 for the entire sector, said BIR Deputy Commissioner Arnel S.D. Guballa.
News reports back in China — which is among the biggest source of POGO workers here — cite an average monthly pay of 10,000 yuan or P78,000. Mr. Dominguez said this translates to P18,750 in monthly taxes per worker, computed at 25% average rate for foreigners, or P22.5 billion yearly.
This is in contrast to Philippine Amusement and Gaming Corp. (Pagcor) reports that POGOs pay foreign workers about P35,800 per month. The Finance chief said this was not attractive enough to lure foreign nationals to work here.
“We have to go after these guys because they are not paying taxes. Simple,” Mr. Dominguez said.
The Finance department has asked Pagcor to require POGOs to register with the BIR before they are given a license to operate here.
Some lawmakers have cited the increasing presence of foreign POGO workers — many of them Chinese — saying they appear to be taking away jobs that can otherwise be performed by Filipinos.
Chinese POGO workers are seen to be driving demand for residential properties, particularly in the Manila Bay area.
The task force is composed of representatives of Pagcor, Department of Labor and Employment (DoLE), the Securities and Exchange Commission, the Bureau of Immigration (BI), as well as regulators of economic zones in the country.
Preliminary figures show that DoLE has handed out 54,241 alien employment permits, while the BI has granted 59,000 working visas and 83,700 special working permits to foreigners. — Melissa Luz T. Lopez

YouTube denies report of plans to cancel comedies, dramas

By | Property News

YOUTUBE has denied that it is canceling high-end dramas and comedies on its paid service platform, refuting the claims made in a report earlier on Sunday.
A Bloomberg report said, citing sources, that the platform has stopped accepting new pitches for high-budget scripted shows and that it had canceled high end dramas and comedies.
YouTube, owned by Alphabet Inc.’s Google, has several high-end dramas and comedies currently in production and will soon reveal new and returning series, a YouTube representative told Reuters late on Sunday in an e-mailed statement.
The platform also denied that its head of original productions Susanne Daniels and a former MTV executive hired by YouTube in 2015, is looking to move on from her position.
“While it’s strangely flattering to be the topic of Hollywood gossip, please know I am committed to YouTube and can’t wait to unveil our robust slate of new and returning originals,” Ms. Daniels was quoted as saying in the statement.
CANCELLATIONS
The Bloomberg report says that YouTube has canceled plans for high-end dramas and comedies, a pullback from its grand ambitions for a paid service with Hollywood-quality shows.
The Google-owned business, said Bloomberg, has stopped accepting pitches for expensive scripted shows, quoting people who asked not to be identified because the decision hasn’t been announced. The axed programs include the sci-fi drama Origin and the comedy Overthinking with Kat & June, prompting their producers to seek new homes for the shows, the people said.
Bloomberg said it sources said the retreat from direct competition with Netflix, Inc. and Amazon.com, Inc.’s Prime Video service reflects the high cost — in billions of dollars — needed to take on those deeply entrenched players, even for a rich tech giant like Google. YouTube generated more than $15 billion in ad sales last year without a huge slate of glitzy productions and concluded its money is better invested in music and gaming.
“In some ways, they never really went all-in on the strategy,” said Anthony DiClemente, an analyst at Evercore ISI. “That’s like bringing a butter knife to a gun fight.”
SHIFT TO FREE
The strategy change, first reported last November by the Hollywood Reporter, means all YouTube shows will eventually air for free. The company is still working out release strategies for the shows, the people said.
The shift also raises questions about the long-term future for Ms. Daniels, YouTube’s head of original productions since 2015. She was brought in to boost the volume and quality of YouTube’s original programming and is now looking to move on, according to people with knowledge of her thinking.
A respected TV industry veteran, Daniels joined the company to develop and produce original shows aimed at making the YouTube Red subscription service a viable competitor to Netflix, Amazon and Hulu. Now, those efforts are more focused on programs like Kevin Hart’s What the Fit, with the comedian cheerleading in track pants.
UPHILL FIGHT
While Netflix transformed itself from a DVD-delivery service into one of Hollywood’s largest studios, other technology companies have announced grand plans to make movies and TV only to retreat after a couple of years. Microsoft Corp. created a Los Angeles studio and ordered a show based on its popular game Halo, but shut down before the series came out. Yahoo lost $42 million on a trio of original series, including Community, and then scrapped its plans as well.
Apple, Inc. will announce its first slate of original series on Monday, and analysts are already asking if the company has the stomach for Hollywood.
YouTube’s shift marks at least the company’s third reboot in the past decade and underscores what Hollywood executives see as the technology industry’s capricious approach to entertainment. In 2012, it paid producers and celebrities to create YouTube channels to bring more high-end original shows to a site then associated with cat videos and pranks. The company doubled its investment a year later, but then ended the program.
WB ROOTS
Daniels’s arrival signaled a new approach. She joined YouTube from MTV and previously ran television networks Lifetime and the WB, now known as the CW. At the WB, Ms. Daniels shepherded the hit shows Buffy the Vampire Slayer and Dawson’s Creek.
Ms. Daniels commissioned more than two dozen shows, at first funding talent born on the video site, like Swedish vlogger PewDiePie. She also mixed in more traditional Hollywood talent, like actress Kirsten Dunst and Doug Liman, the director of The Bourne Identity.
YouTube’s biggest success under Daniels was Cobra Kai, a TV series derived from the movie The Karate Kid. The show was the most popular program on any streaming service the week it debuted, according to Parrot Analytics. And the company is negotiating for a third season, the people said.
The originals that will still exist on YouTube will now shift from the paid service to YouTube’s free version, where they will live alongside video blogs, makeup tutorials and toy “unboxing” videos.
YouTube Red, meanwhile, has been rebranded as a paid music service. The company has ordered short-form series highlighting emerging artists Maggie Rogers and Gunna, and Ms. Daniels has some oversight of those shows. But no programs can be approved without input from YouTube music boss Lyor Cohen. He vetoed a documentary about the Jonas Brothers, a pop trio, the people said, and the project landed at Amazon.
“Just because a big tech company wants to get into media, that doesn’t mean it’ll be successful,” said Rich Greenfield, an analyst with BTIG Research. — Reuters/Bloomberg

PHL ‘out of the woods’ with inflation

By | Property News

By Melissa Luz T. LopezSenior Reporter
THE PHILIPPINES appears “out of the woods” as far as inflation is concerned, with the overall rise in prices of basic goods seen consistently lower until the last few months of 2019, a senior central bank official said, although rising oil prices and the impact of severe weather may be disruptive.
The Monetary Board decided to keep the key policy interest rate unchanged at 4.75%, remaining at a decade-high.
New Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said current settings remain “appropriate,” even as inflation has eased further.
The BSP also scaled down its inflation forecast for the year to three percent, well within the 2-4% target band after overshooting with 5.2% in 2018. Central bank officials are now confident of staying on target, citing four straight months of easing inflation from the nine-year-high 6.7% hit in September and October.
“The downward trajectory will continue in 2019, but in 2020 it will be generally stable at around three percent,” BSP Deputy Governor Diwa C. Guinigundo told reporters. “It has stabilized, and the negative base effects shall have dissipated by maybe up to the third or fourth quarter of the year.”
Price increases averaged 4.1% for the first two months, with February’s 3.8% marking the first time in a year that inflation settled back on target.
The BSP said supply conditions for rice and other food items have since returned to normal after causing price spikes late last year, on top of rising world crude oil prices as well as the impact of additional levies imposed under Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion Act.
Prior to Thursday’s Monetary Board decision, Mr. Diokno said he saw room to ease policy settings amid declining inflation.
“As far as the information that we have today is concerned, I think we are out of the woods. But given that we only have two observations — 4.4% and 3.8% — our year-to-date is still above four percent. But looking at the forecast of three percent, it looks like we are out of the woods,” Mr. Guinigundo added.
On the flip side, the BSP official said monetary authorities cannot rest easy just yet, adding that it would be unwise to slash interest rates swiftly.
“El Niño could be prolonged. Two, oil prices seem to be acting up again. These are the wild cards,” Mr. Guinigundo said.
“Kaya mahirap na bumaba na magbaba na tayo ng RR, magbaba na tayo ng policy rate (It will be risky to just reduce the reserve requirement and the policy rate),” he added.
“That would be imprudent, we have to be very careful.”
Latest estimates by the country’s weather bureau showed a high probability of El Niño lasting until at least August, with a severe dry spell expected by April. The Philippine Atmospheric, Geophysical, and Astronomical Services Administration said on Friday that while the current El Niño was weak, “varying impacts are present and becoming severe.”
The BSP increased benchmark interest rates by cumulative 175 basis points last year to rein in inflation expectations. Market watchers now see the BSP’s May 9 policy meeting — this year’s third monetary policy review — as setting the stage for the first of successive rate cuts.

Manila eyes more opportunities to link up with Belt and Road

By | Property News

THE PHILIPPINES is gearing up to secure additional funding support from China for local infrastructure projects, with the two economies enjoying deeper investment ties amid growing “mutual trust.”
The economic team of President Rodrigo R. Duterte flew to Beijing last week for a series of meetings with Chinese officials, where the two parties explored opportunities for increased economic interaction.
Bilateral ties are expected to improve further with “political mutual trust continuously increasing,” Chinese Commerce Minister Zhong Shan was quoted as saying in a statement sent by the Department of Finance (DoF).
Mr. Zhong added that there is “enormous room” for further cooperation, which has significantly expanded after Mr. Duterte’s October 2016 visit to Chinese President Xi Jinping.
China has been among the biggest sources of official development assistance (ODA) for the Philippines’ “Build, Build, Build” infrastructure pipeline.
Chinese officials said there are more opportunities lined up under the Belt and Road Initiative.
Mr. Duterte is set to attend the second Belt and Road Forum for International Cooperation in April, the DoF said.
“We look forward to implementing more strategic infrastructure projects supported by highly concessional financing from China,” Finance Secretary Carlos G. Dominguez III said in the statement.
So far, the Philippines has secured Chinese credit for four construction projects. These are the Binondo-Intramuros and Estrella-Pantaleon Bridges that involve a $63.13-million grant, $52.09-million ODA financing for the Chico River Pump Irrigation Project and $211.21 million for the New Centennial Water Source-Kaliwa Dam project.
Moreover, the Subic-Clark Railway Project in Luzon, Mindanao Railway Project, Davao-Samal Bridge Project and the Panay-Guimaras-Negros Interisland Bridge Project are being considered for Chinese funding.
Last week’s visit to Beijing also included a non-deal investor road show plus a Philippine Economic Briefing before some 500 prospective investors there.
Filipino businessmen accompanying Philippine government officials for a fresh pitch to Chinese investors included Jollibee Foods Corp. Chairman Tony Tan Caktiong; GT Capital Holdings, Inc. Vice-Chairman Alfred V. Ty; LT Group, Inc. President Michael G. Tan and Udenna Corp. Chairman Dennis A. Uy, according to the government’s Investor Relations Office. — Melissa Luz T. Lopez

Finance dep’t downplays record current account gap

By | Property News

THE RECORD current account deficit incurred in 2018 remains “financeable” as the government expects continued investment inflows from abroad, the Department of Finance (DoF) said.
Market watchers should not be too alarmed despite the current account posting an all-time-high $7.9-billion deficit last year, more than three times the $2.2-billion gap in 2017 and shooting past the $6.4-billion projection of the Bangko Sentral ng Pilipinas (BSP).
The current account provides a snapshot of the country’s economic interaction with the rest of the world, covering trade in goods and services; remittances from overseas Filipino workers; profit from Philippine investments abroad; interest payments to foreign creditors; as well as gifts, grants and donations to and from abroad.
A deficit means more funds went out than what came in.
The BSP attributed last year’s record deficit to a surge in imports of raw materials and capital goods, which economic managers attributed to the robust infrastructure pipeline of the Duterte administration.
However, the DoF said inflows from service trade and strong foreign investments should help offset outflows.
“The current account remains financeable even as the deficit rose to 2.4% of GDP (gross domestic product) in 2018. Foreign investors and lenders find the country an attractive investment destination,” the Finance department said in an economic bulletin published yesterday, noting that these will “finance local investment.”
The gap in goods trade ballooned to an equivalent of 18.4% of GDP last year, coming from a milder 12.4% in 2017.
Helping offset these outbound fund flows were inbound payments for business process outsourcing, offshore earnings of Filipino investors and remittances from Filipinos working abroad.
“Maintaining good fundamentals by keeping the twin deficits — budget and current account — manageable thru maintaining interest rates at the level that raises both the volume of savings and investments will enable the country to sustain rapid economic growth in the medium term,” the DoF said.
For 2019, the BSP expects the current account gap to balloon further to an $8.4-billion deficit, equivalent to 2.3% of GDP. — Melissa Luz T. Lopez

TransCo reduces proposed 2019 feed-in tariff allowance

By | Property News

THE National Transmission Corp. (TransCo) has asked the Energy Regulatory Commission (ERC) to reduce by around 3 centavos the feed-in tariff allowance (FiT-All) it will be collecting from consumers for 2019, its top official said.
“We requested ERC to make an adjustment to the [FiT-All] from our original application ‘nung (in) 2018,” Melvin A. Matibag, TransCo president and chief executive officer, told reporters last week.
He said TransCo’s manifestation to amend its previous application was submitted on March 6 requesting the 2019 rate to be P0.240 per kilowatt-hour (/kWh).
Based on TransCo’s application submitted to the ERC in July last year, it was seeking approval for a FiT-All of P0.273/kWh for 2019.
“So may (there will be) rate reduction.”
He said TransCo applied for the reduction because it was able to reduce its payment backlog to renewable energy developments.
He added that the company was also on its way to fully cover its buffer fund.
“P200 million na lang as we speak… para on time na kami (P200 million remains as we speak… for us to be updated with payment),” Mr. Matibag said when asked about the amount that TransCo has yet to pay developers.
“Starting May on-time na; wala na kaming backlog (we will be updated in our payments; we won’t have any backlog),” he added.
The amended application comes as TransCo awaits the approval of its FiT-All application for 2018, amounting to P0.2932 per kWh.
INSTALLATION TARGET RAISED
In May 2018, the ERC authorized the collection starting in June 2018 of a FiT-All for 2017 equivalent to P0.2563/kWh, or an increase of P0.0733/kWh from the previous P0.1830/kWh.
Calculated annually, the FiT-All is a uniform charge that is applied to kilowatt-hours billed to consumers who are supplied with electricity through the country’s distribution or transmission network.
The uniform charge is paid to developers of renewable energy power plants.
The FiT-All mechanism was established under Republic Act No. 9513, or the Renewable Energy Act of 2008, which aims to jump-start the development of renewable energy sources such as wind, run-of-river hydropower, solar and biomass.
The collected amount is managed by TransCo before the fund is paid to developers. The FiT-All has been added to the monthly bills of electricity users starting in 2016.
TransCo previously said that unpaid FiT for renewable energy developers had accumulated in part after the Department of Energy increased the installation target for solar power projects to 500 megawatts (MW) from 50 MW. This left more developers billing TransCo for their guaranteed FiT.
The backlog was also worsened by the delay in the approval of the rate of FiT-allowance collected from electricity users, which TransCo applies for every year. — Victor V. Saulon