Philippines Update: January 3, 2018

Philippines Update | January 3, 2018
Authors: Riley Smith

January 4: HLS Committee Call Q1 & HLS Mission to PHL Planning Call #1

January 16: Energy Committee Quarterly Call

January 30-31: 2018 HLS Mission to the Philippines


Local Security Considerations Reason for Extension of Martial Law on Mindanao; Nationwide Expansion Remains Unlikely
The Philippine Congress’s December 13 decision to extend martial law on the southern island of Mindanao until December 31, 2018, was based on local security considerations on the island and does not portend an imminent extension of martial law nationwide.  President Rodrigo Duterte, at the recommendation of Secretary of National Defense Delfin Lorenzana, requested the extension on December 10, citing as reasons the threat posed by homegrown and foreign terrorists and intensified attacks by the New People’s Army (NPA) on remote communities on Mindanao.  The request came shortly after the Government canceled peace talks with the Communist Party of the Philippines (CPP) in late November and just days after Duterte signed a proclamation officially designating the CPP and the NPA as terrorist groups.  When the Philippine Congress voted on the extension of martial law on Mindanao during a joint session on December 13, it passed overwhelmingly 240-27.  The Government had first implemented martial law in response to the takeover of parts of Marawi, the largest Muslim city in the Philippines, located in northern Mindanao, by Islamic State (IS)-inspired militants in May 2017.  Over the course of several months of clashes between the militants and the Armed Forces of the Philippines (AFP), the Government had already extended martial law once, in July.  Had the most recent extension not been granted, martial law would have expired by January 1, 2018.  

Opposition politicians and, according to one survey, a majority of Filipinos have expressed concern over the extension of martial law on Mindanao and the reasons that Duterte gave for requesting the extension.  Specifically, both groups questioned the need to extend martial law through 2018 given that the Government declared Marawi’s liberation from the militants back in October.  In his letter requesting the extension, Duterte said that IS-inspired militants had fled to other areas of Mindanao following the city’s liberation, and that security forces are still hunting for as many as 185 militants.  Despite his justifications, a majority of Filipinos appear to oppose the extension, a reversal of the support that the Government saw for its initial declaration of martial law when fighting first erupted in Marawi.  According to a recent Social Weather Stations survey, 62% of respondents opposed the extension of martial law, and 66% said that they believed that the armed forces could defeat the militants without martial law in place.  Respondents said that they opposed the extension “because the war in Marawi has ended.”  Similarly unswayed by the President’s justifications, a group of opposition lawmakers have challenged the constitutionality of the extension before the Philippine Supreme Court.  Even though the original justification for martial law on Mindanao – the clashes in Marawi – has ended, the Supreme Court is likely to uphold the extension.  The Supreme Court has already sided with the Duterte administration twice on the initial implementation of martial law on Mindanao – first in July 2017 and most recently in early December. 

Duterte’s tendency to make off-the-cuff remarks about his willingness to abrogate the Constitution or extend martial law nationwide has rattled his critics and international investors, though at this time there is little indication that he would be able to follow through on his threats.  Specifically, his citing of the threat posed by a more active NPA raised concerns because of the historical parallels with former Philippine dictator Ferdinand Marcos, who also used the group to justify his declaration of nationwide martial law in January 1972.  While Duterte is popular among the Philippine National Police, his more conciliatory approach to China on issues related to the South China Sea has made him less popular with the AFP, particularly among members of the officer corps.  Duterte would have to count on strong support from the military in order to implement any expansion of martial law beyond Mindanao, and at this time he does not appear to have it.  In remarks this past October, Duterte threatened to suspend the Constitution and establish a revolutionary government in response to a purported conspiracy to destabilize his government.  Despite being a popular notion among Duterte’s supporters, officials from the AFP and the Department of National Defense, including AFP Chief of Staff General Rey Guerrero and Secretary of National Defense Delfin Lorenzana, dismissed the idea.  When asked about the President’s statements, Guerrero reportedly replied, “The talk about revolutionary government is not doing the country any good,” and that, “those talks should be ignored.” 

National Affairs
Despite squabbles, 2017 a productive year
Philippine President Duterte's approval rating rebounds sharply-
TRAIN benefits outweigh higher consumer prices — Palace
Congress to approve business-friendly bills
Marawi: Rising from the rubble
DoF to strengthen local gov’t finances through tax reform
SWS: Majority of Filipinos object to martial law extension in Mindanao
Philippines Extends Martial Law in South for Another Year

Lopez optimistic PH will keep EU-GSP+ preferential status

P72 B ecozone investments on hold, await Palace OK
Philippines population to hit 107 million in 2018
Tax reform fuels bullish sentiment
Business leaders say economy ‘yet to run on all cylinders’
BSP sees December inflation at 2.9-3.6%
Hot money turns around in November

Palace to ensure continuous ERC operations
Lawmakers call for strict monitoring of TRAIN’s impact on prices of fuel
PSALM to sell 2 properties
DENR to simplify mining requirements
Meralco forms unit for electric vehicles
Duterte Coal Tax Will Make Costly Philippines Power Even Pricier

Financial Services
BIR to streamline documentary requirements for MSMEs
BSP readies bank stress test guidelines
Moody’s sees ‘stable’ conditions for PHL banks

Food & Agriculture
PHL bid against import surge fails to fly at WTO
Pinoy rice farmers may lose $4B under tariff-free Asean
Cebu food security program intensified
Fast-tracking distribution of lands to ARBs empowers the Filipino farmer
DA’s Piñol sticks to PHL rice self-sufficiency goal | BusinessMirror
Sugar Taxes: The Global Picture in 2017
FAO calls for more food investments in Mindanao

Health & Life Sciences
Government to procure P7.5 billion worth of vaccines in 2018

IT-BPM investments plunge 48% in 2017
Telstra, 4 firms keen as 3rd telco
Privacy agency begins data protection drive for LGUs
Duterte wants China telco up and running in 90 days
New govt body aims to build public trust on ‘digital economy’
Online trading platform to boost business growth

Investments in logistics to drive 'Build Build Build'
PH to withdraw application for U.S. aid to focus on rebuilding Marawi
PPP Center focuses on local projects

Old buses, trucks next to be phased out
Manufacturing grows at slower pace in December
Vehicle sales rise 17% in 11 months
National Affairs

Despite squabbles, 2017 a productive year Manila Times 2nd Jan 2018
The year that just ended was a productive year for the Senate, mainly because the senators set aside their difference to pass crucial measures.Se n. Sherwin Gatchalian said members of the majority and minority blocs worked together to achieve critical reforms such as the Free Higher Education Act that will enable millions of students to graduate from college without the burden of high tuition fee cost. “Reforms such as these and not politics are what matters to the lives of our people,” he said Senate Minority Leader Franklin Drilon said the opposition sponsored and authored seven of the 10 bills of national significance that the Senate passed in 2017.

Philippine President Duterte's approval rating rebounds sharply- Nikkei Asian Review 2nd Jan 2018
Philippine President Rodrigo Duterte's approval rating rebounded sharply in the final quarter of the year, after falling in the previous quarter, a survey released Friday by local pollster Social Weather Stations found. According to the survey, 71% of adult Filipinos were satisfied with the job Duterte was doing, 13% were dissatisfied, and 15% were undecided. That gives him a net satisfaction rating of +58 (the percentage of those satisfied minus that of those dissatisfied), a 10-point rise from +48 in the third quarter, the lowest since he became president in mid-2016. Analysts attributed the fall to the deaths of at least two teenagers in Duterte's violent campaign against illegal drugs that has killed thousands of suspected users and peddlers. The fourth-quarter survey was conducted via face-to-face interviews of 1,200 people from Dec. 8 to Dec. 16.

TRAIN benefits outweigh higher consumer prices — Palace 2nd Jan 2018
The advantages of the tax reform law outweigh the impact of higher consumer prices, Malacañang said yesterday as it stressed that the additional revenues would go back to the public in the form of social services and jobs. Presidential Communications Secretary Martin Andanar said the revenues to be generated by the Tax Reform for Acceleration and Inclusion (TRAIN) would go to infrastructure projects that would create new jobs. Andanar was reacting to criticisms that the TRAIN law would further burden the people as it would increase the prices of goods. TRAIN, signed into law by President Duterte last Dec. 19, imposes excise tax on oil of up to P6 over the next three years, and raises taxes on other products including motor vehicles. It also imposes a P6 tax per liter on drinks containing caloric or non-caloric sweetener and P12 per liter tax on drinks containing high fructose corn syrup or combination. The new taxes are expected to raise transport fares, electricity costs and consumer prices. Lawmakers have assured the public that measures would be in place to mitigate the impact of the consumer price hikes, including the giving of substantial allocations to programs designed to help the indigents and the elderly.

Congress to approve business-friendly bills BusinessMirror 1st Jan 2018
Leaders of the House of Representatives vowed to pass early this year all pending measures that would help promote the Philippines as a business-friendly economy. The top priorities include the ease of doing business bill, “Part B” of the Tax Reform for Acceleration and Inclusion (TRAIN), the measure seeking to abolish quantitative restriction (QR) on rice and the bill seeking to amend the 1987 Constitution. The lower chamber is seen focusing on its legislative priorities despite the hearings on the impeachment complaint against Chief Justice Maria Lourdes A. Sereno. House Committee on Trade and Industry Chairman Ferjenel Biron of the Fourth District of Iloilo said the congressional bicameral conference committee tackling the proposal seeking to establish a national policy on ease of doing business will consolidate the Senate and House versions when session resumes on January 15. Biron said the measure is needed to simplify issuances of licenses, clearances or permits to business entities. Earlier, the World Bank released its “Ease of Doing Business Report 2018,” which showed the country’s ranking at 113th, from 99th in the 2017 edition.

Marawi: Rising from the rubble The Straits Times 31st Dec 2017
More than two months have passed since the Philippine government declared victory over a well-armed, well-organised and highly motivated cabal of Muslim militants that laid siege to Marawi. But the lakeside city, a centre of Islamic heritage in the insurgency-wracked southern island of Mindanao, remains half-empty. Although the military has allowed half the city's more than 200,000 residents to return, the devastated half - a sprawling field of debris, unexploded ordnance and booby traps - is still no man's land. Post-conflict assessment teams are putting together a plan to rebuild Marawi. Experts estimate it may take anywhere from 50 billion to 90 billion pesos (S$1.3 billion to S$2.4 billion), but they are not sure how long the rebuilding process will take. A senior military official said the soonest bomb-disposal units can clear the ruins of improvised explosive devices is in April, almost a year from when the militants launched the armed conflict. For now, the multitude whose lives have been upended by the conflict will have to wait until they are allowed to return to a city pulverised into rubble and dust. Even then, what awaits them is more uncertainty, and the ever looming threat that the militants may soon return. Defence Secretary Delfin Lorenzana said in October that six battalions of troops would remain in Marawi amid President Rodrigo Duterte's calls for continued vigilance.

DoF to strengthen local gov’t finances through tax reform BusinessWorld 28th Dec 2017
THE DEPARTMENT of Finance (DoF) is moving to further strengthen local government finances — this time including through tax reform — to reduce these units’ dependence on annual national government doleouts. “There is a much needed balance here: LGUs must build their revenue base to fund their projects, and the effect on the national government’s fiscal space as a result of continued dependence of LGUs on national transfers,” Finance Undersecretary Antonette C. Tionko said of local government units (LGUs) in a press release on Wednesday. She said that LGUs rely on Internal Revenue Allotment (IRA) — their annual share in national taxes — to fund up to 99% of their operations and programs. Ms. Tionko noted that the Finance department is also preparing property valuation and taxation reforms under the third package of the comprehensive tax reform program.

SWS: Majority of Filipinos object to martial law extension in Mindanao 23rd Dec 2017
Majority of Filipinos oppose the extension of martial law in Mindanao, according to a survey conducted by Social Weather Stations, with most of respondents saying troops can suppress militants in the insurgency-plagued region without military rule. According to an SWS survey — which polled 1,200 Filipinos on December 8 to 16 — 62 percent of respondents agreed that martial law in Mindanao should not be extended “because the war in Marawi has ended.” Opposition to the extension of martial law in Mindanao beyond Dec. 31, 2017 was highest in Metro Manila at 67 percent, followed by Balance Luzon at 63 percent, Mindanao at 62 percent and Visayas at 55 percent. A majority of those polled by the SWS (66 percent) believed that the Armed Forces of the Philippines can defeat terrorists in Mindanao like the Maute group and Abu Sayyaf bandits even without martial law.

Philippines Extends Martial Law in South for Another Year The New York Times 14th Dec 2017
The Philippine Congress on Wednesday approved a request from President Rodrigo Duterte to extend martial law on the southern island of Mindanao for another year, which the president said was needed to fight armed groups there. Mindanao was placed under martial law in May, after local militants backed by the Islamic State seized the city of Marawi. After months of fighting, the government declared victory there in October. But Mr. Duterte said Friday that a yearlong extension of martial law was needed to ensure the “total eradication” of militancy in Mindanao, an impoverished region where various armed groups have been active for decades. Both houses of Congress approved Mr. Duterte’s request overwhelmingly, despite opposition lawmakers’ warnings that martial law was no longer needed and that to extend it risked eroding constitutional values. The martial law edict gives the military widespread powers, including the ability to carry out warrantless arrests and set up roadblocks and checkpoints. The president’s request for an extension came shortly after he halted efforts to reach a peace deal with the underground Communist Party of the Philippines, whose armed unit, the New People’s Army, has stepped up attacks in remote communities on Mindanao and elsewhere.


Lopez optimistic PH will keep EU-GSP+ preferential status Rappler 2nd Jan 2018
After his meeting with a European Union (EU) trade official, Trade Secretary Ramon Lopez voiced optimism about the likelihood that the EU will retain the Philippines among the countries enjoying perks under the EU General System of Preferences Plus (GSP+) program. "Overall message is we are optimistic they would like to engage us," he said on Monday, December 25.


P72 B ecozone investments on hold, await Palace OK 3rd Jan 2018
About P72.4 billion worth of economic zone development projects are still on hold as of end-2017 as proponents await the presidential proclamations of these sites before starting construction and operation. “We have 37 pending (applications), plus five from the previous administration, so 42 projects remain pending,” Philippine Economic Zone Authority (PEZA) manager for promotion and public relations Elmer San Pascual revealed. He said the proposed economic zones have a combined investment amount of P72.4 billion. “It’s just the first year in office of President Duterte, so he has new people in the Palace. We are trying to understand the reason. One is they have new people in the Palace who are still learning the processes and then the Palace also has new requirements,” PEZA director general Charito Plaza said. Plaza last year raised concern over the delays on the proclamation of new economic zones that have resulted in applications piling up at the Office of the President. Under the current administration, PEZA said 35 ecozone applications with a total investment cost of P37.58 billion  have been proclaimed. These were composed of 26 information technology (IT) centers, four IT parks, four manufacturing economic zones and one agro-industrial economic zone. Plaza said locator industries are waiting for their respective sites to be proclaimed first before commencing with the construction and operation of their facilities.

Philippines population to hit 107 million in 2018 3rd Jan 2018
From 105.53 million last year, the country’s population will rise to 107.19 million by the end of 2018, the Commission on Population (PopCom) said yesterday. Citing projections by the Philippine Statistics Authority based on the latest census in 2015, PopCom executive director Juan Antonio Perez III said the population was estimated to grow to 107,190,081 by Dec. 31 from 105,377,586 in 2017. Perez said the increase would be boosted by some 1.8 million babies expected to be born this year, representing a growth rate of 1.69 percent. According to Perez, the lifting of the temporary restraining order  of the Supreme Court on contraceptives will not have a direct impact on the population this year.

Tax reform fuels bullish sentiment January 2, 2018 Business World 2nd Jan 2018
“The market may be able to sustain its optimism going into 2018 on the back of expectations the TRAIN (Tax Reform for Acceleration and Inclusion) will be a boost. The year’s growth narrative is seen to focus on public and private infra[structure] spend[ing] as the former (public sector) ramps up its ‘Build, Build, Build’ push and the latter (private sector) enjoys the perks of more spending cash in light of the higher income tax threshold,” Mr. Calaycay said in an e-mail, even as he cautioned that tax reform could raise the prices of some basic goods. To be sure, not everyone is aboard the tax reform train. Abacus Securities, Inc. has a muted view for local stocks because the higher excise taxes that come with the new law could hurt household spending, which accounts for more than two-thirds of the economy.

Business leaders say economy ‘yet to run on all cylinders’ January 2, 2018 Business World 2nd Jan 2018
A STABLE ENVIRONMENT helped the economy rev up in 2017, and business groups now believe tax reform, further ease of doing business, lifting of foreign investment restrictions and increasing the pace of infrastructure development should help spur the country’s growth momentum further. The Philippine economy has kept its growth pace above six percent since 2012 — with 2013 recording 7.1% — but business leaders said that it needs to expand by an even faster clip to keep up with competitors in the Association of Southeast Asian Nations (ASEAN). Gross domestic product grew by 6.7% in 2017’s first three quarters against the government’s 6.5-7.5% full-year target and 2016’s actual 6.9%. “The Philippine economy maintained its high growth rate, low inflation, stable exchange rate environment in 2017 with domestic and foreign investment levels at record levels,” John D. Forbes, senior adviser of the American Chamber of Commerce of the Philippines, said in an e-mail. “But the country’s economic engine has yet to run on all cylinders.”

BSP sees December inflation at 2.9-3.6% BusinessWorld 30th Dec 2017
INFLATION likely steadied in December from a month ago despite higher fuel and rice prices, the Bangko Sentral ng Pilipinas (BSP) said on Friday, enough to keep the full-year pace well within expectations. Price increases for basic goods and services may have logged between 2.9-3.6% this month, based on estimates made by the BSP’s Department of Economic Research. This matches the forecast range given for November when inflation actually settled at 3.3%, marking a decline after four straight months of rising rates. This also compares to a 2.6% reading in December 2016. Despite the uptick, the inflation forecast still settles comfortably within the 2-4% target band set by the monetary authority. The Philippine Statistics Authority will release December and full-year inflation figures on Jan. 5, 2018.

Hot money turns around in November BusinessWorld 18th Dec 2017
MORE FOREIGN FUNDS entered the Philippines in November as investors drew optimism from tax reform progress in Congress as well as increased interest following the Association of Southeast Asian Nations (ASEAN) summit here, the central bank said. Foreign portfolio investments logged a $107.71-million net inflow last month, a turnaround from $563.42 million in net outbound funds recorded in October as well as outflows worth $607.31 million a year ago, data from the Bangko Sentral ng Pilipinas (BSP) showed. These flighty investments are often called “hot money” as these enter and leave the country with ease.


Palace to ensure continuous ERC operations 2nd Jan 2018
Malacañang allayed fears that the suspension of the commissioners of the Energy Regulatory Commission (ERC) would paralyze the power regulator and lead to blackouts. Presidential spokesman Harry Roque said Tuesday the administration is studying ways to prevent the disruption of the operations of ERC, which is mandated to ensure reasonable electricity prices and to promote competition in the power industry. He said one of the possible options is the appointment of officers in charge (OICs) that would take over the functions of the four suspended commissioners. "The declaration of (Chief Presidential) Legal Counsel (Salvador) Panelo regarding OICs is one of the possibilities. What is clear is the ERC cannot be paralyzed because the body plays a very important role," he added. Roque assured the public that President Duterte would do something to avert a power sector paralysis. Last month, the Office of the Ombudsman suspended the four ERC commissioners for a year over allegedly anomalous power supply contracts with 38 firms.

Lawmakers call for strict monitoring of TRAIN’s impact on prices of fuel BusinessMirror 2nd Jan 2018
The House of Representatives is calling for the creation of an interagency body that would monitor the movement of oil prices to make sure consumers will not be taken advantage of once the impact of TRAIN—or the Tax Reform for Acceleration and Inclusion Act—is felt. Also, leaders of the lower chamber warned oil companies that Package 1-A of TRAIN, or Republic Act 10963, should not have caused price spikes this early even if it took effect on January 1. Deputy Speaker Romero S. Quimbo of  the Second District of Marikina said oil companies can be held liable for economic sabotage if proven guilty of profiteering. Earlier, the Department of Finance said the increase in the prices of fuel is not expected to take effect on January 1, as it takes a few days for the 2017 oil stock to be used up, noting that “oil-price increase done by companies on January 1 might be considered profiteering.”

PSALM to sell 2 properties 1st Jan 2018
State-run Power Sector Assets and Liabilities Management Corp. (PSALM) will sell its two properties this year to reduce its financial obligations. PSALM has invited bidders for the sale of its Manila Thermal Power Plant property in Paco, Manila and its Bauang Diesel Power Plant land in Payocpoc Sur, Bauang, La Union on an “as is, where is” basis. Alzona said a pre-bid conference was conducted on Dec. 21, 2017 while the deadline for submission of bids is scheduled on Jan. 24. Under the sale, the state-run firm said bidders have the option to submit a bid on any of all the assets since the evaluation and award would be undertaken on a per asset basis. PSALM is the entity created by the Electric Power Industry Reform Act (EPIRA) of 2001 to privatize government-owned power assets. In addition to power assets, the law also directed PSALM to take ownership and implement a sale or privatization program for real estate and all other disposable assets.

DENR to simplify mining requirements 1st Jan 2018
As a response to the mining sector’s commitment on responsible minerals development, the Department of Environment and Natural Resources is pushing for a faster processing of permits for the extraction of mineral deposits in the country. “We will streamline administrative processes in evaluating and issuing mineral agreements, exercise transparency in receiving contributions from the mining industry, and encourage investments in minerals processing, among others,” Environment Secretary Roy Cimatu said. Cimatu’s response is a commitment to the recent undertaking of the government and the mining industry, through the Chamber of Mines of the Philippines (COMP), that would promote responsible minerals development. The proposal to rationalize requirements for various mining application permits is also in line with President Duterte’s call to reduce red tape in the government. The streamlining applies to applications for Exploration Permit (EP), Mineral Production Sharing Agreement (MPSA), Declaration of Mining Project Feasibility (DMPF), Mineral Processing Permit (MPP), Industrial Sand and Gravel Permit (ISGP), Operating Agreement (OA), and Deed of Assignment for MPSA (DOA).

Meralco forms unit for electric vehicles BusinessMirror 19th Dec 2017
THE Manila Electric Co. (Meralco) said it has formed a unit that will maintain and operate transportation service networks utilizing electric energy. In a disclosure to the stock exchange on Tuesday, the utility firm said the new subsidiary will cater to charging stations, batteries and vehicles utilizing electric energy and other alternative energy sources. Meralco Senior Vice President William Pamintuan said the unit, which has no name yet, will be 100-percent owned by Meralco. However, the utility firm may consider taking in partners in the future. “There’s no target yet, but we plan to put up charging stations, electronic vehicles and provide EV [electric vehicle] public shuttles. The intention really is to support EV ecosystem. Meralco earlier partnered with Japanese multinational engineering and electronics firm Hitachi Ltd. for a battery-storage project. The partnership involves the installation of two units of one megawatt (MW) lithium-based battery energy storage system (BESS) to Meralco’s distribution network.

Duterte Coal Tax Will Make Costly Philippines Power Even Pricier 14th Dec 2017
Electricity prices in the Philippines, already among the highest in Southeast Asia, will probably rise after President Rodrigo Duterte signs legislation next week boosting taxes on coal, the nation’s main fuel for power plants. Semirara Mining and Power Corp., a power generator that’s also the country’s largest coal producer, expects electricity rates to jump 3 centavos per kilowatt-hour next year, when the tax plan’s provision for a 50 peso ($1) per metric ton excise tax takes effect, Chief Executive Officer Isidro Consunji said by phone. The Senate and the House of Representatives ratified the tax bill Wednesday night, resolving last-minute issues with a plan that will remove the excise-tax exemption for local producers and boost the levy next year from the current 10 pesos. The new tax doubles to 100 pesos per metric ton in 2019 and rises to 150 pesos in 2020. Coal-fired power plants accounted for 48 percent of total power generation in 2016, at 43,303 gigawatt hours, followed by renewable energy at 24 percent and gas-fired plants at 21 percent, according to Department of Energy data. In terms of installed capacity, coal plants account for 35 percent, with renewable energy at 32.5 percent.

Financial Services

BIR to streamline documentary requirements for MSMEs Manila Bulletin 2nd Jan 2018
The Bureau of Internal Revenue (BIR) has assured the Department of Finance (DOF) that it will work double-time on streamlining processes for the documentary requirements of micro, small and medium-scale enterprises (MSMEs) renewing business permits following the congressional approval and implementation of the first package of the tax reform law. In a statement, BIR Commissioner Caesar Dulay said cutting down the requirements needed to register or renew permits for businesses is now ongoing at the bureau.

BSP readies bank stress test guidelines BusinessWorld 22nd Dec 2017
THE BANGKO SENTRAL ng Pilipinas (BSP) will soon prescribe standards on the conduct of stress tests by banks, as part of efforts to improve risk management protocols and recovery plans, especially for “too-big-to-fail” lenders. As a rule, banks must conduct stress tests regularly to check how their balance sheets would hold up amid a funding crunch, in the process exposing potential weaknesses. “Stress testing allows banks to prepare for events with severe financial impact,” the BSP’s policy-setting Monetary Board said in a statement yesterday, noting that the new guidelines are aimed at further strengthening risk governance and boosting the safety and soundness of the banking system. A bank’s board of directors is also expected to consider the results of regular stress tests in capital and liquidity planning, setting of risk appetite levels and planning business continuity measures in order to mitigate potential risks. Banks have two years from the date the circular takes effect to streamline internal mechanisms and comply with the new standards.

Moody’s sees ‘stable’ conditions for PHL banks BusinessWorld 14th Dec 2017
THE PHILIPPINE banking system will remain “stable” in 2018, Moody’s Investors Service said, noting that conditions will steady across all indicators on strong macroeconomic footing and improving asset quality. In a Dec. 12 report, the global debt watcher gave a “stable” outlook for the Philippine banking sector next year, in line with expectations across Asia Pacific. The industry will benefit from “synchronized global recovery and moderate credit growth,” according to Eugene Tarzimanov, vice-president and senior credit officer for Moody’s Financial Institutions Group. The Philippine economy expanded by 6.7% in the nine months to September, faster than Moody’s 6.5% forecast for the entire year and keeping within the government’s 6.5-7.5% growth goal. The Philippines holds a “Baa2” rating — placing the country a notch above minimum investment grade — with a “stable” outlook from Moody’s which was affirmed in June.

Food & Agriculture

PHL bid against import surge fails to fly at WTO Business Mirror 15th Dec 2017
THE Philippines’s request for a scheme that would protect agriculture from harmful import surges did not merit a draft decision from the World Trade Organization (WTO), effectively sending home the country’s negotiators from Argentina empty-handed. As the 11th WTO Ministerial Conference (MC11) reached its conclusion, 164 member-countries failed to come up with a firm ministerial decision on agriculture as they expressed divergent views on issues, such as special safeguard mechanism (SSM) and public stockholding (PSH).

Pinoy rice farmers may lose $4B under tariff-free Asean BusinessMirror 1st Jan 2018
Filipino farmers could incur losses of as much as $4 billion under a zero rice-tariff trade regime within the Asean, according to a recent study of the Organisation for Economic Co-operation and Development (OECD). In the study, titled “Market implications of the integration scenario of Southeast Asian rice markets,” authors Gen Furuhashi and Hubertus Gay projected the outcomes of rice trade within the Asean region under two scenarios by 2025: a zero-tariff regime and a fully integrated market. The authors noted that, under a zero-tariff regime, rice farmers in the Philippines would incur production losses of at least $2.082 billion, while under a fully integrated market they could lose $3.966 billion. The value of the country’s rice production is estimated at $6 billion annually. The country is still importing rice, with the tariff imposed of on rice coming from other Asean member-countries set at 35 percent.

Cebu food security program intensified Manila Bulletin News 1st Jan 2018
The Cebu provincial government vowed to continue to provide equipment for programs involved in the improvement and progress of the agricultural sector here. This came after Governor Hilario Davide said his goal is to achieve the food security agenda for the entire province. A projection of 1.4 million Filipinos will be at risk of hunger by 2030 and another 2.5 million, 20 years later. This, due to lower agricultural production caused by climate change.

Fast-tracking distribution of lands to ARBs empowers the Filipino farmer Manila Bulletin News 30th Dec 2017
The thrust of President Rodrigo Duterte’s administration to fast-track the distribution of lands to agrarian reform beneficiaries (ARBs) has empowered Filipino farmers to become landowners in the near future. Free land distribution, at the core of genuine and comprehensive agrarian reform, is one of the six sector outcomes and legislative agenda backed by the Department of Agrarian Reform (DAR) in President Duterte’s 2017-2022 Philippine Development Plan (PDP).

DA’s Piñol sticks to PHL rice self-sufficiency goal | BusinessMirror BusinessMirror 26th Dec 2017
The year 2017 could have proven itself as one of the memorable years for the agriculture sector in the early years of the Duterte administration. For one, the Department of Agriculture (DA) is still on its quest to achieve rice self-sufficiency for the Filipinos. And this year might be one of the closest years that the country could achieve that feat, based on government estimates. For Agriculture Secretary Emmanuel F. Piñol, there’s only one test to gauge on how he and his department fared well with these issues: sufficient and affordable food supply. And as 2017 closes its curtains, the agriculture department continues the show what Duterte wants to provide next year: a food- secure nation. “Again, as I have said, guided by the directive of the President, we will focus on what the Filipino people need,” Piñol said. For example, Piñol added, the DA will now begin to implement its dairy program next year that seeks to boost the local milk production to meet at least 10 percent of the total annual requirement by the end of Duterte’s term. Furthermore, Piñol emphasized that the DA will rollout programs that would seek to boost local production to meet the increasing domestic demand for commodities, such as coffee and onion, next year.

Sugar Taxes: The Global Picture in 2017 Beverage Daily 21st Dec 2017
Sugar taxes have continued to gain momentum in 2017, but the introduction of new legislation is rarely straight-forward. We take a look at countries around the globe where sugar taxes have been making headlines this year. The concept of sugar taxes (usually specifically on sugar-sweetened beverages) attracts strong feelings both for and against. Proponents see taxes as a way to tackle the growing obesity crisis by curbing consumption, encouraging manufacturers to reformulate and create a revenue stream for public health initiatives. Opponents, however, say there is little evidence that such measures are effective, that they costs jobs in the industry and that they simply push sales into other regions.

FAO calls for more food investments in Mindanao 14th Dec 2017
The Food and Agriculture Organization of the United Nations (FAO) is calling for increased investments in the country, particularly in Mindanao, to address food security, rural development, resilience-building and peace in the area. As the organization celebrates its 40th year in the country, FAO representative in the Philippines Jose Luis Fernandez said global hunger is on the rise again after a decade-long steady decline. Fernandez said investments in the systems that address the most basic needs of people should remain a priority. “We cannot solve poverty, hunger, lack of education, ensure good health for all, achieve lasting peace and build sustainable cities when access to food and livelihoods, especially in rural areas, are not fully addressed,” he said. Over the past 40 years, FAO has implemented more than 400 national projects in the Philippines, reaching over 500,000 farming and fishing families or over 2.5 million people. FAO continues to focus on strengthening the country’s food and nutrition security, increasing the sustainability and competitiveness of agricultural production, including fisheries and forestry.

Health & Life Sciences

Government to procure P7.5 billion worth of vaccines in 2018 2nd Jan 2018
The Duterte administration is set to buy P7.5 billion worth of vaccines this year, prompting warnings from senators to ensure that these are safe to prevent a repeat of the Dengvaxia vaccine controversy. Based on documents submitted by the Department of Health (DOH) to the Senate, full immunization for infants covers inoculations against hepatitis, polio, pneumonia, measles, mumps and rubella. Senate President Pro Tempore Ralph Recto warned there should not be a repeat of the P3.5-billion Dengvaxia controversy. There were about 830,000 children inoculated with Dengvaxia since April 2016. The vaccination program was suspended when an advisory went out saying that vaccine could trigger life-threatening complications to children who have not yet contracted dengue. Plunder charges have been filed against former president Benigno Aquino III and other officials of the previous administration over the purchase of the vaccine.


IT-BPM investments plunge 48% in 2017 1st Jan 2018
New information technology and business process management (IT-BPM) investments registered under the Philippine Economic Zone Authority (PEZA) plunged by nearly half in 2017 as a deluge of concerns have taken its toll on the industry. PEZA director general Charito Plaza said total IT-BPM investments for 2017 plummeted by 48 percent to P15.57 billion from P30.44  in 2016. The decline came as no surprise as the sector has been plagued with a number of hurdles over the past year. In late 2016, the industry took a setback with President Duterte’s rhetorics and anti-US pronouncements, while the Trump administration’s protectionist stance early in 2017 prompted a wait and see attitude among investors. Clashes between Filipino government troops and Islamist militants in Marawi City, which led President Duterte to declare martial law in Mindanao since last May 23, as well as  the Resorts World Manila attack last June that resulted to the death of at least 37 people, have likewise caused anxiety among IT-BPM investors. Lastly, the sector also took a hit with the planned removal of its incentives by the government under the first package of the tax reform plan. 

Telstra, 4 firms keen as 3rd telco Malay Business Insight 22nd Dec 2017
Five foreign firms including China Telecom and  Australia’s Telstra have expressed interest to join the bidding next year of the country’s  mobile frequencies and become a third telecommunication player that would compete with incumbent telcos PLDT Inc. and Globe Telecoms Inc.  Eliseo Rio, officer-in-charge secretary of the Department of Information and Communication Technology, said  other telecom firms from Japan, Korea and the United States are also keen to enter the Philippine telecom market.  These foreign companies are required to partner with any of the local telecom firms to meet the 60 -40 foreign ownership limit, Rio said. The third player has to invest $2.7 billion to roll out telecom infrastructure nationwide to compete with the incumbent telcos which are also expanding their mobile and fixed networks. 

Privacy agency begins data protection drive for LGUs The Manila Times 20th Dec 2017
The National Privacy Commission (NPC) has launched a nationwide campaign to assist local government units (LGUs) in complying and reaping the benefits of the Data Privacy Act of 2012. Speaking to local government executives and representatives from Region 11 (Davao Region) at the LGU Data Protection Officers’ (DPOs) Assembly at Marco Polo Davao hotel in Davao City last week, Privacy Commissioner and Chairman Raymund Enriquez Liboro underscored the importance of systematic compliance. He said it would foster greater trust in the way local governments work among businesses, executives and the general public.

Duterte wants China telco up and running in 90 days The Manila Times 20th Dec 2017
President Rodrigo Duterte has ordered government regulatory agencies to speed up the entry of China Telecom, saying the Chinese firm should be operating in 90 days or less. “I have instructed the DICT and the NTC to fast-track the entry of the third telecom player to foster competition in the market. I want this implemented during the first quarter of 2018,” Duterte said, referring to the Department of Information and Communications Technology and the National Telecommunications Commission.

New govt body aims to build public trust on ‘digital economy’ The Manila Times 20th Dec 2017
The National Privacy Commission has assured the public that the Philippines has the “strictest” law in the world when it comes to personal data protection, amid concerns over proposals to implement a national identification (ID) system. Privacy Commissioner Raymund Liboro on Tuesday said the agency was formed in March 2016 to implement the Data Privacy Act of 2012 or Republic Act 10173. “It’s a 21st-century law for 21st-century concerns and challenges,” Liboro said during a roundtable discussion with The Manila Times editors and reporters.

Online trading platform to boost business growth The Manila Times 18th Dec 2017
The Philippines should prepare local exporters to participate in an online trading platform to help their businesses grow as they work together to achieve an export target of between $122 billion and $131 billion by 2022, a Trade official said. Department of Trade and Industry-Export Marketing Bureau Director Senen Perlada is encouraging exporters to innovate more and collaborate with the government in seizing opportunities and dealing with the challenges posed by the digital economy. “How are they going to participate in a so-called electronic world trade platform where SMEs (small and medium enterprises) will be able to actually trade between and among themselves? It’s going to be a consumer-to-consumer platform,” Perlada said.


Investments in logistics to drive 'Build Build Build' 3rd Jan 2018
The Department of Finance (DOF) has urged corporate giants in the logistics industry to help micro, small and medium enterprises (MSMEs) take advantage of the benefits of state-of-the-art distribution network. Finance Secretary Carlos Dominguez III said the government needs the full support of the private sector in investing in infrastructure projects such as the logistics facility that Fast Logistics has just built for Unilever Philippines in Cabuyao, Laguna. He explained the Duterte administration has anchored its strategy of rapid economic expansion on an ambitious Build Build Build infrastructure program to pull down the cost of transporting goods, improve linkages across the archipelago, encourage efficient agriculture and clear the way to inclusive growth. The state-of-the art warehouse was built and fully engineered by Fast Logistics to speed up the sorting and distribution of Unilever products and was designed to accommodate various transport vehicles needed to ensure fast delivery. He said inefficient infrastructure adds to production costs and diminishes competitiveness, leads to high food prices for urban consumers and worsens poverty.

PH to withdraw application for U.S. aid to focus on rebuilding Marawi CNN Philippines 19th Dec 2017
The Philippines will withdraw its application for a second grant from an independent U.S. government aid group, Malacañang said Tuesday. Presidential Spokesperson Harry Roque said the government's economic managers, along with Foreign Affairs Secretary Alan Peter Cayetano, chose to cancel the country's application to the Millennium Challenge Corporation (MCC) in order to focus all "our resources, attention, and energies," to the rehabilitation of war-torn Marawi. He added, the decision has nothing to do with the country's failure this year to meet the MCC's standards on rule of law and curbing corruption. It was the first time in four years that the country failed to meet the rule of law and control of corruption standards required for its income group, data from the MCC show. The MCC selects countries eligible for aid based primarily on their scorecards, as it requires aid recipients to commit to good governance, economic freedom, and investments in their citizens. The MCC is an independent agency of the United States government. This year, out of 20 indicators, the Philippines failed in eight, the others being health expenditures, primary education expenditures, and ease of doing business.

PPP Center focuses on local projects BusinessWorld 19th Dec 2017
THE Public-Private Partnership (PPP) Center plans to focus next year on water-related local government works amid the current government’s decision to use official development assistance (ODA) and state funds more for construction of big-ticket projects. “There really has to be more attention on projects for local governments. The biggest sector that we have really is the water and sanitation,” PPP Center Executive Director Ferdinand A. Pecson said during a year-end press briefing yesterday at the agency’s headquarters in Quezon City. At the same time, he said most projects that the center is looking at “still have to pass the feasibility studies stage.” Asked how many projects the agency hopes to roll out next year, PPP Center Deputy Executive Director Eleazar E. Ricote replied: “Five to eight water-related projects in local government units (LGUs) and local districts, including unsolicited proposals.” Mr. Pecson said they may even bundle up similar projects of various LGUs to make them more attractive to prospective investors. However, the PPP chief said that local governments’ limited capacity remains a constraint in undertaking otherwise vital development projects.


Old buses, trucks next to be phased out 3rd Jan 2018
Old and dilapidated trucks and buses will be the next to be banned from roads as part of the public utility vehicle modernization program, which kicked off at the start of the year with the gradual phaseout of old jeepneys. Thomas Orbos, undersecretary for Road Transport and Infrastructure of the Department of Transportation (DOTr), said they are now in talks with truck owners and bus operators nationwide for the eventual phaseout of their units not compliant with Euro 4 standards for engines. Orbos said they have created a technical working group to thresh out ways of ensuring a smooth phaseout of trucks and buses with questionable roadworthiness or are deemed pollutants. Asked about the timetable for the phaseout of old trucks and buses, Orbos said he could not tell yet but stressed it should be done immediately or at least within the year. Just like the procedure for jeepneys, old trucks and buses will not be immediately removed if they pass the roadworthiness test of the DOTr. The government has set a two- to three-year transition period for the full modernization of public utility vehicles.

Manufacturing grows at slower pace in December 3rd Jan 2018
The local manufacturing sector expanded at a steady but slightly slower pace in December due to a slowdown in export orders and continuing input cost pressure, according to latest data of the Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI). The latest reading of the Nikkei PMI came in at 54.2 in December, marginally down from 54.8 in November, still pointing to a solid improvement in the health of the sector as a reading below 50 indicates worsening business conditions. IHS Markit, the firm that collected data for the index, noted that while the growth in output and new orders were slower in December compared with the previous month, the PMI remained above the 2017 average. Export sales, it said, registered the weakest expansion in four months. As such, domestic demand continued to be the main growth driver in December. Philippine manufacturers also continued to feel the pinch of input cost inflation as they continued to stock up on raw materials, in turn putting more pressure on supply chains. Higher input costs were attributed to increased raw material prices, weaker exchange rate, custom tax hikes and supply shortages.

Vehicle sales rise 17% in 11 months 14th Dec 2017
Philippine automotive sales maintained its speed in November, fueling a robust double-digit acceleration in 11 months to remain on track in finishing the year on a high note. In a report released yesterday by the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) and the Truck Manufacturers Association (TMA), vehicle sales in November posted a 23.8 percent increase to 40,799 units from 32,966 units in the same month last year. "November sales result is higher than the month of October because of increased sales of major assemblers and distributors," CAMPI president Rommel Gutierrez said. For the 11-month period ending November, combined vehicle sales of CAMPI and TMA members reached 380,179 units or 16.8 percent higher compared to 325,468 units in the same month last year. CAMPI and TMA have set a full year target of 400,000 unit sales this 2017.