Business groups urge lawmakers to

weigh costs of shifting to federalism

By: Roy Stephen C. Canivel - Philippine Daily Inquirer / 07:31 PM August 12, 2018

Local business groups are worried about the consequences of shifting to a federal form of
government, echoing the woes earlier raised by some of the country’s economic managers.
Seven business groups, including the country’s largest business group the Philippine Chamber
of Commerce and Industry (PCCI), are urging lawmakers to weigh carefully the costs, risks and
uncertainty of the shift.
In a statement on Sunday afternoon, the local business chambers called for “full, open, and
dispassionate dialogues” about federalism, a move that would have far reaching effects in the
country and its future.
The call for dispassionate talks came after a member of the consultative committee urged
President Rodrigo Duterte last week to fire the socioeconomic planning and finance chiefs for
speaking out against federalism.
“We, the undersigned business organizations, appeal to our legislators to weigh carefully the
costs, risks and uncertainty associated with the proposed monumental shift to a federal system
of government,” the statement read.
These groups are the following: PCCI, Cebu Business Club, Employers Confederation of the
Philippines, Financial Executives Institute of the Philippines, Makati Business Club, Management
Association of the Philippines, and Philippine Exporters Confederation.
According to them, they echo the concerns of fiscal and economic experts about the ambiguous
provisions on the division of revenue and expenditure responsibilities between the proposed
federal government and its federated regions.
They cited the alarming cost of federalism, which was flagged to as much as P120 billion in term
of direct costs by the National Economic and Development Authority.
Under those provisions, which call for a 50-percent share of the regions from the national
government’s revenue collections, Finance Secretary Carlos Dominguez III said the government
might incur “a very large” budget deficit.
Asked in a Senate hearing last week what this would do to the country’s credit rating – which
acts a measure of creditworthiness – Dominguez said it would “go to hell.”
The groups worry that this might lead to a fiscal deficit of 6.7 percent of the gross domestic
product, which is way beyond the target of the economic managers.
“We worry about the dire consequences that such fiscal imbalance could have on the economy
and the flagship ‘Build, Build, Build’ program of the current administration,” they said.
The groups commended the transparency of the economic managers and the researchers in the
Philippine Institute for Development Studies “in openly sharing their analysis and airing their
concerns to the public.”
“We support and join their call for a more detailed analysis of the fiscal impact of federalism to
serve as basis for the deliberations in Congress,” they said.
“We encourage full, open, and dispassionate dialogues on this proposed shift in form of
government, keeping in mind its long-term impacts on future generations of Filipinos,” they
added.
They said the business community would be ready to work with the government in the bid for
sustained and inclusive economic growth.

REACTION:

The government proposition of changing the current form of government to federalism should
at least undergo a thorough and distinctive study. Should the present administration push through the
proposed system, they must be prepared in many aspects especially the impact of transition as well as
the cause and effect of the implementation to the economy in general and to the constituents in the
years to come. Changing from one system to the other may vary its effect based on the concrete and
effective planning of experts for a long period of time and massive test to the primary affected. Those
progressive country who are using this kind of system did undergone an intricate situation and
eventually outweigh the scenario using an effective solution and preparedness on the matter and attain
the status they are actually enjoying now. This may be the reason why our present administration opts
to change our present system to a federal system on the notion that those country adopting such
system are progressive and maintaining a stable status in the economy. But that is not the case in our
country, somehow the government officials must see to it that the proposed situation will end up in a
win-win situation for the entire country may it be in the economy aspect and the populace in general.

Hence, I vouch for the transition of the present government system to federal system but the
government should see to it that upon adoption as to implementation of the said system they are
prepared enough to the outcome and come up to better solution in case flaws come in for the benefit of
the general public.

Action on climate change could add $26 trillion to world economy — study
Agence France-Presse / 06:52 PM September 05, 2018

Ambitious action on climate change could contribute an extra $26 trillion to the world economy by
2030, international experts said on Wednesday, urging nations and businesses to step up their
engagement.

The economic benefits offered by a shift to a low-carbon economy have been “grossly” underestimated,
according to the Global Commission on the Economy and Climate, a think tank grouping former heads of
government and top economic and business leaders.

“Bold action could yield a direct economic gain of $26 trillion through to 2030 compared with business-
as-usual. And this is likely to be a conservative estimate,” the commission’s annual report found.

Dynamic action on climate could also generate “over 65 million new low-carbon jobs” by 2030 and avoid
over 700,000 premature deaths due to air pollution, it said.

But policymakers were “not taking sufficiently bold action to escape the legacy economic systems,” the
study found, warning that the window for change was narrow.
“We are at a unique ‘use it or lose it’ moment. Policymakers should take their foot off the brakes and
send a clear signal that the new growth is here,” said the commission’s co-chair Ngozi Okonjo-Iweala,
Nigeria’s former finance minister.

“There are real benefits to be seen in terms of new jobs, economic savings, competitiveness and market
opportunities, and improved wellbeing for people worldwide.”

Such growth would be driven by the interaction between rapid technological innovation, increased
resource productivity and investment in sustainable infrastructure, which is expected to reach $90
trillion by 2030, it said Bold action needed

The shift would involve a change in five key areas: the development of clean energy systems, improved
urban planning, a shift towards more sustainable agriculture, smart water management, and
decarbonizing industry.

“Seizing the economic benefits of low-carbon and resilient growth will only be possible if we act boldly
over the next two to three years,” it said, flagging it as a “critical window” when many of policy and
investment decisions will be taken which will shape the coming decade and beyond.

Urging economic decision-makers to move beyond generic proposals or statements, it called on

governments to put a price on carbon of at least $40-80 by 2020 and to move towards mandatory
climate risk disclosure for major investors and companies.

It also pushed for a much greater emphasis on investment in sustainable infrastructure, with better-
designed cities, buildings, transport, energy, and water systems as well as investment in forests and
wetlands that purify water and offer valuable flood control.

To this end, development bodies and banks should double their collective investment in infrastructure,
aiming to invest at least $100 billion per year by 2020, it said.

REACTION:

Climate change nowadays caused a wide latitude impact everywhere that creates fears and
terror over the horizon leading every country to a massive campaign for prevention and solution to
minimize the damage and deterioration of the nature. In fact, all nations are aware the disastrous
outcome when a nature strike on its own mysterious ways. Nature is indeed changing.
 From my point of view, the natural occurrences that is happening nowadays has something to
do with nature. The scourging heat, the massive flooding, the unending disasters and among others are
the most common effect of dispensing our nature. Mankind are number one perpetrator of all, that lead
businessmen and world leaders to campaign against abusive use of nature and unending deterioration
of the environment.

Hence, I assumed that businessmen worldwide are threaten on the effect of nature on the
ground that whatever investment they have, all will be at stake in an instant once the nature strikes. Our
country somehow is doing its part for the prevention of the said phenomena and giving all out support
in any way they can to help the mother nature to cope up a little to the present situation and give hope
to the future generation. If every individual is responsible in terms of managing its trash and conscious
enough in consuming the given common treasure I am pretty sure we are helping our planet to exist and
survive more to the years to come.

Another 50-bps rate hike seen

By: Doris Dumlao-Abadilla - Philippine Daily Inquirer / 05:22 AM September 06, 2018

The Bangko Sentral ng Pilipinas (BSP) may raise its key interest rates by another 50 basis points (bps) at
its upcoming policy rate setting on Sept. 27, following the unexpected surge in the country’s annual
inflation rate in August, economists said.

The year-on-year inflation rate of 6.4 percent in August exceeded the 5.5-6.2 percent projected range of
the inflation-targeting BSP and was likewise much higher than the consensus forecast of 5.9 percent.
The inflation rate picked up pace from 5.7 percent in July.

“Inflation expectations remain on an uptrend and increases demand pull pressures as consumers and
businesses anticipate elevated prices. The central bank needs to contain runaway inflation expectations
and demand pull pressures. The chances of another aggressive monetary policy action has zoomed as
inflation surged. Another 50 basis point policy rate hike at the Sept. 27 meeting is a real possibility,” ING
Philippines economist Joey Cuyegkeng said in a research note on Wednesday.

In a separate research note, Japanese investment house Nomura said the higher-than-expected pickup
in August headline inflation could “further stoke inflation expectations, raising the risk of BSP hiking
again by a relatively aggressive 50 basis points this month, with possibly more to come.”

The Nomura research note, written by economists Euben Paracuelles and Charnon Boonnuch, said the
drivers of inflation had broadened and appeared to have continued to do so last month.

“This would be seen by BSP as a sign of more second-round effects, thus warranting a monetary
response,” the research said.

The pickup in core inflation was also seen in line with Nomura’s long-held view that strong domestic
demand conditions were resulting in a stronger pass-through from supply-side effects, such as the
impact of recent tax reforms and higher oil prices.

“In addition, contagion effects from other EMs (emerging markets) may also add to pressures on the
currency, which we think was a key driver of the last 50-bp hike, with BSP citing further Philippine peso
weakness having the potential to add to upside risks on inflation. All this strengthens the case for more
rate hikes than we currently forecast,” the research said.

Prior to the release of the August inflation data, Nomura was expecting a rate hike of only 25 basis
points this September and another 25 basis points in November.

For his part, Cuyegkeng expects inflation to remain high for the rest of the year with the September
inflation rate likely to remain above 6 percent. He sees the full-year average inflation at 5.1 percent,
significantly higher than the BSP’s inflation target range of 2-4 percent. The BSP has so far raised interest
rates by a total of 100 basis points this year, the last of which was a 50-basis point hike in August that
brought the overnight borrowing rate to 4 percent.

REACTION:

Presently, inflation is the most common headlines of our country be it on radio, television, and
newspapers. Long before, the Filipino people are not into it and they really don’t care the status of our
economy, its cause and effect, same with its advantage and disadvantage it bring to each and every one
of us. But due to the inflation effect, even the ordinary people are interested the ups and downs of the
economy on the ground that at most, they are the primarily affected and the easiest target of the
movement it may end up. Inflation is the determinant factor whether a particular country is performing
its designated tasks well or they are failing endlessly. For this year, our country’s expectation for
inflation shoot up far way beyond its ceiling which caused dismay to the investors and business sectors
that they inclined the government to come up to a better solution to end up in a win-win situation to
everybody momentarily.

Hence, the government should come up to a best solution (if not best, at least better) to
minimize the fast-changing inflation we undergo right now, not just to help the majority people but for
the benefit of every body in the years to come. I am afraid if this current situation will continue, our
country might not cope up to this kind of situation and the investors might come up to an idea to end up
their current ties to our business sectors that will create instability to all of us.

Tighter watch on rice imported by NFA set to

temper food inflation
By: Ben O. de Vera - Inquirer Business / 06:56 PM September
05, 2018

In response to the over nine-year high inflation rate of 6.4 percent last month, the country’s economic
managers on Wednesday approved “immediate” reforms to temper food prices, including tighter watch
on rice imported by the state-run National Food Authority (NFA).

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo told a press conference that if
this mix of immediate and long-term measures will be implemented this month, the headline inflation in
August would already be the peak.

Among the joint recommendations of the Economic Development Cluster during the meeting led by
Finance Secretary Carlos G. Dominguez III, Budget Secretary Benjamin E. Diokno, Socioeconomic
Planning Secretary Ernesto M. Pernia ,and Agriculture Secretary Emmanuel F. Piñol was forming a
monitoring team for the surveillance of rice from ports to NFA warehouses and retail outlets.

Guinigundo noted that there were reports of diversion of rice from NFA warehouses to some other end
users, hence end up as commercial rice instead of the NFA making them available in retail outlets.

The monitoring team will be led by the NFA, the Department of Trade and Industry, the National Bureau
of Investigation, the Philippine National Police, and farmers’ groups.

Since it has police powers, it would be up to the NFA to slap sanctions or penalties on those found taking
advantage of the rice supply, Guinigundo said.

The economic team also instructed to “immediately” release nationwide the 4.6 million sacks of rice
already available in NFA warehouses.

“We also expect approximately two million sacks of rice previously contracted to be delivered before
the end of September. In addition, the NFA Council authorized the importation of five million sacks that
will be arriving over the next one and half months and another five million sacks will be imported early
next year,” the economic managers said.

“To address the reported shortage in Zamboanga, Basilan, Sulu, and Tawi-tawi, 2.7 million sacks will be
allocated to these areas. In addition, harvest has also started in many parts of the country, with the
projected harvest for 2018 of 12.6 million metric tons of rice, the equivalent of 252 million sacks,“ they
added.

REACTION:

Today, our country is facing instability in the economy due to inflation crisis we are into. The
rampant shortage of rice is one factor to said instability and creating chaos to most part of our country
that gives some of our businessmen to take advantage of the situation by monopolizing the distribution
of NFA rice bearing in mind that it is the most affordable and fast-moving goods to the consumers. The
occurrence is manageable if
 PH economic managers do not seem serious in dealing with inflation — Villanueva

By: Darryl John Esguerra 01:46 PM September 06, 2018

Senator Joel Villanueva on Thursday alleged that the recent inflation hike to a new nine-year high of 6.4
percent in August seems to show that the country’s economic managers are “not on top of the issue.”

“We cannot wait for prices to get further out of control. The economic managers do not seem to be
serious in dealing with the problem,” Villanueva said in a statement.

Data released by Philippine Statistics Authority (PSA) on Wednesday showed that inflation clocked in at
6.4 percent in August, the highest in over nine years since inflation came in at 6.6 percent in March
2009.

The senator also said he is considering to join the call to suspend the excise tax on fuel products to tame
the price surge of commodities in the market.

“So now, we are considering the option of joining our colleagues in reversing the fuel excise tax to at
least temper this runaway price surge,” he said.

“We also reiterate our consistent call to liberalize the entry of cheaper rice and to lower VAT to address
this inflation debacle,” he added.

Earlier, Budget Secretary Benjamin Diokno called on the government to deliver inflation-mitigating
measures with “greater sense of urgency.”

REACTION:

The current issue that is too obvious in our country is inflation. Everywhere you can hear the
news about inflation in t n
 Market volatility turning PH investors risk averse, say financial regulators
By: Daxim L. Lucas - Reporter Philippine Daily Inquirer / 04:50 PM August 14, 2018

Local investors have shifted their assets to more conservative ones due to higher volatility in interest
rates as well as rising threats to the growth of the global economy, according to a group composed of
the heads of government financial agencies.

The Financial Stability Coordination Council (FSCC) also said it examined various proposals to
“strengthen long-term finance, enhance valuation practices for market instruments, as well as
broadening its communication initiatives” to sustain the growth of the Philippine economy and support
the government’s infrastructure development initiatives.

Its executive committee is composed of the principals and the most senior officers from the Bangko
Sentral ng Pilipinas, the Department of Finance, the Bureau of the Treasury, the Insurance Commission,
the Philippine Deposit Insurance Corporation and the Securities and Exchange Commission.

“Financial markets are extraordinarily volatile this year and the FSCC continues to assess the possible
impact to the Philippines of changing macro-financial conditions,” FSCC chair and BSP Governor Nestor
Espenilla Jr. said.

The FSCC issued this statement after its quarterly meeting on Tuesday to assess potential risks to the
stability of the local financial system.

Espenilla said the challenge facing policymakers “is to intervene early enough” so that systemic risks do
not build up “but not too early that they derail [the country’s] growth momentum.”

“We continue to be cognizant of this delicate balance, nurturing innovations and ideas while providing
appropriate prudential oversight,” he said.

The central bank chief’s statement stressing balance comes amid persistent criticism that monetary
authorities took their time before acting more forcefully against incipient inflationary threats at the start
of the year. This resulted in the ongoing surge of consumer prices that has brought the inflation rate of
5.7 percent in July to its highest level in at least five years.

Along with the inflation rate, local interest rates have also been on the uptrend while the peso has lost
ground against the US dollar since the start of the year due, in part, to rising interest rates in developed
nations, which has attracted mobile capital back overseas.

The FSCC communique noted that different jurisdictions have different definitions for financial stability,
but all of them share the common feature that a well-functioning financial system is essential to
financial stability.

“The focus of the FSCC is consistent with this broad view as it considers various cross-cutting issues that
may impact on the Philippines financial market,” the group said.
REACTION:

ING cuts growth projection for PH to 6.3% in 2018

By: Doris Dumlao-Abadilla - Reporter Philippine Daily Inquirer / 05:37 AM August 11, 2018

Dutch financial giant ING has tempered its growth outlook for the Philippines this year to 6.3 percent
from 6.8 percent following a disappointing second quarter GDP (gross domestic product) report.

The bank, however, stressed the slowdown was not worrisome as domestic demand remained robust.

Despite slowing growth, ING expects the Bangko Sentral ng Pilipinas (BSP) to continue its interest rate-
tightening cycle. ING sees another 25-basis point hike in the BSP’s overnight borrowing rate in the fourth
quarter, to be followed by another 50-basis point increase in 2019.

“The BSP is not done with raising rates. Inflation has yet to peak, as implied by BSP’s upward revision of
this year’s and next year’s inflation forecasts to 4.9 percent (from 4.5 percent) and to 3.7 percent (from
3.3 percent), respectively,” ING senior economist Joey Cuyegkeng said in a research note.

As the country’s seven-month inflation average was only 4.5 percent, he said the BSP’s inflation forecast
for 2018 implied that inflation would still peak in the coming months and that it could average 5.5
percent in the next five months.

“Inflation expectations are unlikely to stabilize anytime soon. Further monetary tightening would be
needed to ensure that such expectations be well-anchored,” Cuyegkeng said.

On Thursday, the BSP raised its overnight borrowing rate by 50 basis points, in line with market
consensus, to 4 percent.

Meanwhile, Cuyegkeng said domestic demand remained strong, having expanded by 10 percent in the
second quarter.

The 6-percent GDP growth in the second quarter underperformed the market consensus of 6.6 percent
and the government’s target range of 7-8 percent.

ING had expected GDP growth to slightly pick up from last year’s 6.7 percent to 6.8 percent. Economic
managers said the slower-than-expected growth in the second quarter was partly due to the impact of
the shutdown of tourist hotspot Boracay Island and the suspension order on a number of mining firms.

Business and government spending both accelerated along with investment in construction and durable
equipment, on the back of infrastructure spending and capacity expansion that was consisted with
strong importation of capital goods in the second quarter, Cuyegkeng said.

However, he noted that year-on-year growth in household spending had moderated to 5.6 percent from
6 percent in the same period last year.
“High inflation and weak agriculture production (up by only 0.2 percent year-on-year in second quarter
from 6.3 percent last year) weakened purchasing power and restrained household spending but the 6-
percent growth is still respectable,” he said.

The moderation in household spending is also seen in slower manufacturing growth of 5.6 percent in the
second quarter from 8 percent last year.

REACTION:

FDC 7B H1 net income up 45%

By: INQUIRER.net BrandRoom - @inquirerdotnet 02:44 PM August 17,
2018

The Gotianun family-led Filinvest Development Corporation (FDC) reported first half net income of
Php7.2B, a 45% increase vs. the same period in 2018. Majority of revenues, or 44%, were contributed by
the property business – which includes both the real estate and hotel groups. Banking (38%), power
(11%) and sugar (6%) contributed the balance.

The property segment was the main contributor to the group’s formidable growth. Commercial lot sales
at Filinvest Alabang Inc. led to 85% growth in revenues and 152% growth in its net income. The hotel
segment also played a solid role in the property group’s 1H performance, reporting 27% revenue
growth. FLI delivered robust 28% growth in its rental revenues as its recurring income portfolio reached
595,000 square meters of gross leasable area (GLA) to date.

Banking subsidiary EastWest Bank’s Q2 income was at Php1.3B, 35% higher than Q1 income. EastWest
posted net income of Php2.2B in 1H 2018, a decline of 11% versus the previous year due to the lower-
than-expected results of EastWest subsidiary EastWest Rural Bank (EWRB). Excluding its EWRB business,
EastWest’s net income increased by 12% year-on-year.

FDC Utilities, Inc. (FDCUI), FDC’s power subsidiary, also made a solid contribution to the Filinvest group’s
1H 2018 performance as its 405MW clean coal power plant in Misamis Oriental saw higher demand
from customers. FDCUI’s main power asset reported 33% growth in regular energy sales to Mindanao
distribution utilities vs. the same period last year.
Property values have increased in Filinvest City, the 244-hectare CBD in South Metro Manila, due to the
accelerated build up in the estate where gross floor area has increased by 45% since the end of 2014.
The strategic value of the property is expected to be further enhanced by the completion of the NLEX-
SLEX link which will make the city highly accessible from Quezon City and Clark.

Higher hotel revenues were the result of improved occupancy rates across all hotel properties as well as
increased revenues from Mimosa Golf Clark. Under FDC subsidiary Filinvest Hospitality Corporation
(FHC), the firm has four properties in its portfolio, or 1,591 rooms under both the Crimson and Quest
brands. When the island of Boracay is reopened to visitors in the last quarter of 2018, FHC will unveil its
newest property, Crimson Resort and Spa Boracay, which will add another 192 rooms. The group now
has 1,700 additional rooms in the planning and construction stages across eight new hotels, including
two additional Quest properties in Tagaytay and San Mateo.

With its share of the 201-hectare Filinvest Mimosa+ Leisure Estate (the former Clark Mimosa Estate),
FDC is poised to take a strong position in the leisure development arena. Under FHC subsidiary Mimosa
Cityscapes, Inc., the group has a provisional license granted by the Philippine Gaming and Amusement
Corporation (PAGCOR) for a casino integrated resort in Filinvest Mimosa+. More than US$200M has
been allotted to the project, which includes a casino, lifestyle mall, five-star hotel and events venue.

Real estate subsidiary Filinvest Land, Inc. (FLI) reported first half net income of Php2.9B, 9% higher than
the same period last year on the back of a 6% increase in total revenues. This is attributed to a major
expansion in rental properties as well as continued strong demand for its retail and office space.

FLI now operates 23 office buildings totaling 356,000 square meters of GLA and its retail GLA stands at
239,000 square meters. There are ten other buildings in the pipeline, for a total of 296,000 square
meters of GLA, which includes the substantially completed Cebu Cyberzone Tower Two in Lahug, Cebu
City. FLI has several retail developments in the pipeline that will complement the firm’s residential and
office projects, including the landmark Il Corso mall in the Cebu South Road Properties, which is to be
completed by the end of 2018. The company is on track to meet its target of 1 million square meters of
GLA by 2019 and has plans of reaching 1.5 million square meters by 2022.

“The bank continues to be strong in the consumer segment where it has the third largest car loan
portfolio and the fifth largest credit card portfolio,” shared Jonathan T. Gotianun, FDC Chairman.
Excluding EWRB, EastWest’s consumer loan portfolio, composed of auto, home and personal loans, grew
13%. “But we do look forward to the second half of 2018 as we are once again able to help DepEd
teachers,” Gotianun added. Until late June 2018, the lending program to public school teachers under
the Automatic Payroll Deduction System (APDS) was suspended as the Department of Education worked
on the new guidelines. While the new guidelines are out and credit is now available to teachers, rural
and thrift banks continue to work with the Department of Education on the final interpretation of the
provisions in the General Appropriations Act of 2018.

The Filinvest group is part of a “superconsortium” of the Philippines’ seven largest conglomerates that
submitted an unsolicited bid to transform the Ninoy Aquino International Airport (NAIA) into a regional
airport hub and ensure that NAIA has the capacity to meet continued growth in passenger traffic in and
out of the growing economies of the Philippines and region. FDC has also expressed interest in the
bidding for the operations and maintenance of Clark International Airport.
“We believe that our investments in power and infrastructure can yield returns that balance out our
more cyclical business segments. Steady and stable revenues from the rental, power, sugar and
infrastructure sectors will help to smooth out the waxing and waning of the business cycle. In addition,
investing in airport infrastructure will complement our projects in hospitality and BPO rental
properties,” indicated FDC President and CEO Josephine Gotianun Yap.