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Thursday, June 14, 2018 Vol. 13 No. 243

5 to 7 years’ transition to TRAIN 2 ‘reasonable’ By Cai U. Ordinario



USINESSES must be given time to adjust to the rationalization of fiscal incentives under the second package of the Comprehensive Tax Reform Program (CTRP) to prevent job losses, a group of economists said on Wednesday.

In a news briefing on Wednesday, the Action for Economic Reforms (AER) said a medium-term transition period of five to seven

years is “reasonable” and is a “good compromise” between the government and firms that will see their tax perks removed or reduced.

“A reasonable compromise can be forged. For example, [allowing a] transition [period] is reasonable,” AER Coordinator Filomeno


The number of workers employed by members of Seipi The Semiconductor and Electronics Industries in the Philippines Foundation Inc. (Seipi) said this tax rate will ensure that electronics exporters would keep their work force of about 3.2 million. In a news briefing on Wednesday, Seipi officials said they have already discussed with the DOF the group’s suggestions on the second package of the Tax Reform for Acceleration and Inclusion (TRAIN 2). Seipi President Danilo C. Lachica said they proposed a 10-percent CIT, inclusive of local business taxes and real-estate tax. See “Seipi,” A8

laborem exercens


N January Congress enacted a law “Institutionalizing the Philippine Qualifications Framework,” or PQF. Six months after, the country’s trifocal educational institutions—the Department of Education (DepEd), Commission on Higher Education (CHED) and Technical Education and Skills Development Authority (Tesda)—are still grappling with the needed implementing rules and regulations (IRR) for the said law. Continued on A2

By Rea Cu


“Those who are saying that TRAIN is anti-poor, are really the ones who are anti-poor.”—Sta. Ana



3.2 million

Rene E. Ofreneo


By Elijah Felice E. Rosales


Instituting a system of recognizing competencies

See “Train 2,” A8

Seipi seeks to limit CIT to 10 percent in TRAIN 2 EMICONDUCTOR exporters have appealed to the Department of Finance (DOF) to lower its proposed corporate income-tax (CIT) rate to 10 percent, from 15 percent, under the second package of the government’s Comprehensive Tax Reform Program (CTRP).

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The number of companies enjoying tax perks, according to the AER S. Sta Ana III said. “The DOF [Department of Finance] is flexible and they have already signaled their flexibility.” The AER is very vocal about its support for the fiscal incentives rationalization (FIR), which is part of the second package of the CTRP.

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EYE ON NO. 1 Tanduay Distillers Inc. holds a press conference on Wednesday to discuss the first-ever Tanduay Executive Report. Tanduay, the rum brand owned by tycoon Lucio Tan, hopes to become the country’s top liquor brand in a market depressed by changing drinking habits and slapping of taxes. Present at the press conference are Tanduay executives (from left) Paul Lim, chief marketing officer; Lucio K. Tan Jr., president and COO; and Gerry Tee, overall head for distillery operations of the Lucio Tan Group of Cos. Story on B2. ALYSA SALEN

As peso hits 53 zone, BSP mulls over options By Bianca Cuaresma



HE Bangko Sentra l ng Pilipinas (BSP) will likely tread complex waters on next week’s monetary policy setting meeting, as its chief on Wednesday said they will be evaluating a “very rich” and “broad range of information” during the upcoming assessment. BSP Governor Nestor A. Espenilla Jr. told reporters that, while anchoring inflation remains to be the Central Bank’s top priority, the Monetary Board is looking to consider other

PESO exchange rates n US 52.9020

aspects of the economy come June 20, on their fourth monetary policy meeting for the year. Espenilla said this on the day the local currency moved to breach the P53 territory and hit a fresh 12-year low on Wednesday’s trade. “Recent developments on inflation and economic activity are key inputs, but these are certainly not the only consideration,” Espenilla told reporters on Wednesday. The local currency market closed trade at 53.23 to a dollar level on Wednesday, more than a quarter of a peso weaker than the previous day’s peso value of 52.95 to a dollar. 

The total traded volume during the day was at $410.37 million, slightly up from Monday’s $389.5 million. Wednesday’s peso value is the weakest level for the local currency in more than a decade, or since the peso hit 53.55 to a dollar on June 29, 2006.  While a weaker peso value is also beneficial for the economy as it boosts the purchasing power of remittances sent by overseas Filipino workers, its depreciation raises concerns of inflation in higher imported goods, particularly its potential effect on local oil prices.  See “Peso,” A8

HE proposal of some senators to suspend the excise tax on fuel to cushion the impact of Tax Reform for Acceleration and Inclusion (TRAIN) may accelerate inflation and hike the country’s debt, local economists said on Wednesday. Action for Economic Reforms said the excise tax on fuel boosts government funds for infrastructure and social programs, such as the conditional-cash grants. Suspending it could jeopardize these initiatives and hurt the poor, according to the AER. “The motivation behind suspending the fuel tax is supposedly to bring down inflation. Ironically, if you would suspend the oil tax, then that would result in, first, higher deficit. Higher deficit, given our present situation, will lead to higher inflation,” AER Coordinator Filomeno S. Sta. Ana III told reporters in a news briefing in Manila. “Excise tax right now is the main generator of revenue for the government. In fact, despite the reduction of personal-income tax, which meant less revenue for the government, the government is still raking in new revenue because of the fuel tax,” Sta. Ana added. Sens. Paolo Benigno A. Aquino IV, Joseph Victor G. Ejercito, and Grace Poe have earlier proposed to suspend the implementation of the fuel tax, as it contributes to price increases. Sta. Ana said lawmakers and

government officials who are pushing for its suspension must first review the full impact of the fuel excise tax on prices at the end of the year. The Department of Finance (DOF) earlier said the non-indexation of fuel excise tax to inflation has eroded government revenues by P140 billion per year, based on 2016 prices. “Think through the consequences—higher inflation, higher debt, less revenues, therefore it will affect the income-tax relief, cash-transfer programs, which are being sourced out from the TRAIN,” he said. He noted that the increase in the country’s inflation rate was not caused by the TRAIN but by “external factors” like the increase in the international price of crude.

‘Pro-poor’ TRAIN Sta. Ana noted that the government sources cash grants from taxes, and scrapping the TRAIN, or even the fuel excise tax, would hurt the poor more. “Those who are saying that TRAIN is anti-poor, are really the ones who are anti-poor, to be very blunt about that.” See “Excise tax,” A8

n japan 0.4793 n UK 70.7511 n HK 6.7418 n CHINA 8.2608 n singapore 39.5943 n australia 40.0521 n EU 62.1440 n SAUDI arabia 14.1076

Source: BSP (13 June 2018 )

A4 Thursday, June 14, 2018 • Editor: Vittorio V. Vitug A2

Palace vows justice for 3 slain priests


alacañang on Wednesday joined Roman Catholic bishops and the faithful in condemning the murder of Fr. Mark Ventura, Fr. Tito Paez and Fr. Richmond Nilo. Presidential Spokesman Harry L. Roque Jr. said government authorities, led by the Philippine National Police (PNP), have mounted investigations into the crimes and vowed to bring the perpetrators to justice. “The PNP shall also be working closely with the Church, especially the hierarchy and the clergy, on measures to protect our priests,” Roque said in a news statement. Nilo was shot dead in a Nueva Ecija chapel, Paez was killed by motorcycle-riding gunmen in Jaen, Nueva Ecija, while Ventura was also killed by riding-in-tandem assailants in Cagayan province. On Tuesday Lingayen-Dagupan Archbishop Socrates Villegas and other leaders of the archdiocese declared June 18 as a “Day of Reparation” to mark the ninth day Nilo was killed as he was about to celebrate Mass on June 10. The murder of the three priests happened in a span of less than seven months. Roque said President Duterte himself has ordered an intensified campaign against criminality “to further expand the significant strides we made in the peace and order situation in the country, as acknowledged by various reports.” “In this nationwide drive, lawless elements will seek to block our efforts by sowing division and creating animosity, even exploiting crimes like the killings of priests,” Roque said. PNA

The Nation BusinessMirror

DOF orders crackdown on makers of counterfeit tobacco products


By Rea Cu


HE Department of Finance (DOF) has directed the bureaus of Customs (BOC) and Internal Revenue (BIR) to track down makers of counterfeit tobacco products and their cohorts in the government who helped let in the unlicensed cigarette-making machines into the country.

Fi n a n c e S e c r e t a r y C a r l o s G. Doming uez III has ordered Customs Commissioner Isidro S. L apeña a nd BIR Comm is sioner Caesar R . Du lay to disable the confiscated machines used to ma ke counter feit tobacco products. “I want to hit them with everything you’ve got, the Customs and the BIR, and get to the bottom of this,” Dominguez said during a recent Executive Committee meeting. Dulay and Lapeña were also told to find out how the machines for manufacturing fake cigarettes, uncovered in recent operations in Luzon and Mindanao, were able to enter the country undetected by authorities. The finance chief issued the directive after the BIR reported

that its strike team had raided several warehouses storing smuggled and counterfeit cigarettes in Malabon and Manila, yielding a total of 531 master cases of fake and smuggled cigarettes bearing various brands. BOC operatives had seized counter feit cigarettes and bo g u s t a x st a mps wor t h P50 0 m i l l ion in t hree wa rehouses in Bu lacan. “You better trace where these machines came from. W ho are the people behind this? How

did these machines get in?” he demanded to know. T he BIR st r i ke tea m a l so seized four unlicensed cigarettemaking machines, six cigarettepacking machines and a filtermaking machine along with fake cigarette tax stamps inside the San Simon Industrial Park in Pampanga. The machines were reported to have been smuggled into the country. Two factories in Cagayan de Oro City also yielded unregistered cigarette-making machines, packaging machines and a filtermaking machine during recent operations also conducted by the BIR strike team. The BIR informed Dominguez that “as instructed, the machines will be properly disabled to prevent their further usage.” BOC Deput y Commissioner Edwa rd Ja mes D y Buco sa id the customs bureau “w il l have the entr y of these machines investigated.” The finance chief directed the BOC to find out from the country of origin of the machines how the units were allowed by that country for export, when these were most probably classified as “controlled items.”

I want to hit them with everything you’ve got, the Customs and the BIR, and get to the bottom of this.”—Dominguez

briefs army, pnp declare pangasinan ‘insurgency free’

The Army’s 7th Infantry Division and the Pangasinan Provincial Police Office (PPPO) has declared Pangasinan as free of insurgents, and that the province is now ready for further development. The declaration was jointly made by police and military officials at the headquarters of the PPPO in Lingayen, Pangasinan, and signed a joint recommendation for such for the higher headquarters and for the provincial government. An insurgency-free province meant that there is already a very favorable peace and order conditions as verified by the Armed Forces of the Philippines (AFP) and Philippine National Police (PNP) deployed in the area. The declaration of a province as free from communist rebels or free from their influence means that the province is already ready for further economic development. Rene Acosta

dpwh completes isabela road pavement project this month

The public works department is set to complete a P28.1-million road-paving project in Isabela this month that seeks to ease the transport of farm inputs and agricultural products in the province. Department of Public Works and Highways (DPWH) District Engineer Evelyn C. Costales said the paving of the 3.45-kilometer road pavement project involves the concreting of local road in Barangay Lullutan, Ilagan, leading to the municipality of Quirino. “The P28.1-million paving of Barangay Lullutan Road is for completion within this month of June as we are on the final phase of construction at 94.8 percent as of May 31,” she said. The project is part of the convergence program between the public works and agriculture departments that is aimed at increasing agricultural productivity and reducing income losses of farmers due to challenges in transportation. Costales added that her group has also completed another 2-kilometer farm-to-market road improvement project in Barangay San Antonio, Ilagan, costing P9.85 million. It involves the paving of Barangay San Antonio road from Cabiceria 22 to Cabiceria 10.   These two construction and improvement projects along local roads of Ilagan commenced in February this year and were funded under the 2018 General Appropriations Act. Lorenz S. Marasigan

bill seeks repeal of ‘obsolete’ e.o. on class, work suspension

Following the official declaration of the rainy season, a lawmaker is pushing for a measure scrapping the “obsolete” 2012 executive order (EO) on the suspension of classes and work in government offices. In House Bill 6072, Party-list Rep. Salvador Belaro Jr. of 1-Ang Edukasyon urged the government  to consider factors outside of typhoons and floods, and storm signals in suspending classes and work in the government as the existing EO on suspension due to typhoons and other calamities is already obsolete and must be replaced. “The legal basis still most often cited as authority for suspension of classes and work is the 2012 executive order of then-President Benigno S. Aquino III. Executive Order limited only to public storm warning signals of the Pagasa [Philippine Atmospheric Geophysical and Astronomical Services Administration] and to giving local government chief executives the discretion on localized suspension,” Belaro said. “EO 66 is in dire need of replacement. It is obsolete and out of touch with the current realities and the emerging future,” he added.  HB 6072, or the Rationalized Cancellation of Work and School Classes Act of 2017, will consider “not just storms and floods, but also landslides, earthquakes, tsunami, storm surge, toxic chemical spills, fire, active shooter situations, hostage-taking, kidnapping, banditry, terrorism and state of emergency,” Belaro said.  Kezhia Maglasang

Drilon to DFA’s Cayetano: File diplomatic protest against China By Butch Fernandez @butchfBM


enate Minor it y L eader Franklin M. Drilon, saying there is ample proof, prodded Foreign Secretary Alan S. Peter Cayetano on Wednesday to lodge a formal protest asserting Filipino fishermen’s right to traditional fishing grounds in West Philippine

Sea (WPS) to avert another incident of harassment by Chinese Coast Guard authorities. “I think there is enough evidence,” Drilon said. Pointing out that the latest WPS incident has been widely reported in media, Drilon, who is also a lawyer, suggested the documented incident should embolden the Department of Foreign Affairs

top official to file a formal protest to assert the rights of the Filipino fishermen, given ample evidence to prove their case. “What happened there was already reported in media,” the senator said in requesting Cayetano to take up the cudgels for the Filipino fishermen. “The media has given its account on the incident. I am, specifically, urging Secretary Cayetano to initiate the fil-

ing of protest against China,” he said in a mix of English and Filipino. He added: “We must protect our right over that area, especially given the favorable ruling that we had.” The senator was referring to the Permanent Court of Arbitration’s (PCA) ruling laid down in July 2016 that China’s nine-dash-line claim over 90 percent of the South China Sea has no legal basis. It also

Instituting a system of recognizing competencies. . .

Drafting the IRR has not been easy. The PQF law seeks to institutionalize a national system of setting standards and certifying/ recognizing the qualifications of students and workers based on the competency (skills, knowledge and values) that they have acquired not only in the formal school system but also from the informal and/or experiential routes of learning. Qualification standards are generally based on a mixture of the school curriculum and the learning outcomes for the students. The latter—learning outcomes—are increasingly given more importance in many countries, for, after all, what matters in the world of work is how the students and trainees perform at the shop floor or in the office, back or front. The HRM buzz term is “work readiness.” The training process can be designed in a flexible manner, but the outcome, which is given the qualification or certification, is fixed. These standards are then subjected to rigorous assurance system, usually in the form of tests, such as what the Professional Regulation Commission (PRC) is doing when administering the licensure examinations for various professions. At the same time, these standards must be updated from time to time because of changing technology and new knowledge. There are also new learning “pathways” or routes in the acquisition of learning. Qualification standards vary in complexity, from basic education to college education and technical-vocational education and training. They also tend to proliferate. In fact, the PQF law talks of “lifelong learning,” which means people never stop acquiring new knowledge, new skills and new competencies. A number of millennials keep learning new knowledge

and acquiring new competencies online, for example, cross-border online selling of various products. There is learning before and after graduation from the various schools accredited by the DepEd, CHED and Tesda. And even if one has not received any formal school diploma, school dropouts and workers gain knowledge and expertise through actual work and education/training provided by nonformal institutions, such as the Church, civic organizations, civil society organizations and local government units. The DepEd is also giving special attention and devoting substantial resources to the “alternative learning system” program, for the benefit of the poor and adults who have not finished elementary or secondary education. Incidentally, adult education programs are formally institutionalized and funded in many countries, both developed and developing. In tiny Denmark (with a population of just over 5 million), there are around 2,800 adult vocational training programs, which enable Denmark to have a highly literate, productive and committed citizenry. For 2004 Denmark allotted $1 billion for these programs. Overseas Filipino workers also have learnings and competencies acquired from the host countries. When they return home, they complain that these learnings and competencies are not recognized at home. For example, OFWs with practical factory exposures and experiences in Taiwan and South Korea have knowledge on how small shops can be transformed into world-class producers of watches, shoes and electronic products. How does one develop standards for these “prior learning”? In the construc-

tion industry, it is estimated that majority of the skilled and semiskilled workers, numbering over 2 million, have no formal education or training. Through the years and through the simple mode of learning by doing and observation, these workers have become skilled workers so much so that contractors keep maintaining them in the payrolls even if there are no projects available because skills are a scarce commodity in the industry. And yet, these workers do not get any qualification certification and, in the process, they get discriminated in terms of wages and benefits. Based on the foregoing, establishing a national system of qualification standards involving the trifocal educational institutions and the numerous formal and nonformal training service providers is clearly a complicated task. The PQF law talks of the need to address the “harmonization” of standards developed by these institutions. This is the job assigned to the PQF Coordinating Council. But it is obvious that the task is not simply one of coordinating. Developing competency standards in various fields requires not only know-how and expertise from the technical people assigned by the trifocal institutions and the PRC to this job. It also needs consultations, inputs and feedbacks from LGUs, industry, worker organizations, small businesses and other stakeholders. The LGUs, industry, worker organizations, small businesses and other stakeholders at the local, regional and national levels should be on board. In the first place, human- resource development or education/training programs are supposed to meet the development priorities and requirements in a given region.

ruled that China was illegally occupying and cannot claim ownership over Scarborough Shoal. The PCA declared that the shoal, though within the Philippines’s exclusive economic zone, is not owned by any country, and is an international traditional fishing ground for Filipinos, Vietnamese and other Asians. In a brief interview at the wake of the late Parañaque Rep. Roilo Golez,

continued from a1

These regional development challenges vary from region to region. The situation in Regions 3 and 4, both of which have a large number of formal industrial and commercial establishments, is not the same in the Caraga and ARMM regions of Mindanao or Regions 1 and 2 of Luzon, all of which are largely agrarian in character. The supply of well-honed workers armed with the necessary competency has to match the actual job demand in a given region. For example: skilled industrial workers and IT programmers for the more developed region and modernizing farmers and young entrepreneurs for the less developed one. A one-size-fits-all formula in supply-demand matching is a dubious proposition. The reality is that education and training programs perform a critical role in building the economy of a region. Hence, it is imperative that a system of consultation and coordination with the LGUs, industry, worker organizations, small businesses and other stakeholders in a given region, such as the Church, civic organizations, cooperatives, civil-society organizations, and parent-teacher organizations, be established and be reflected in the work of the PQF implementing body.A good labor supply-demand matching based on the development priorities of a region will help the said region reduce the outflow or out-migration of the best and the brightest from the region. This is why the proposed governmentindustry-education consultative council under the PQF system should not only be institutionalized at the national level; the GIECC should also be regionalized. The PQF should become visible in the country’s development discourse.

Drilon said he has yet to hear “that we have been assertive of our rights” in the WPS. “Maybe I was not reading the newspaper or listening to radio reports. But I was a little bit shocked on hearing claims they have filed about 100 protests [against Chinese intrusions in WPS],” Drilon said, adding, “that is a little difficult to believe.”

Police arrest septuagenarian in CamSur judge’s killing By Joel R. San Juan



CTING Chief Justice Antonio Carpio on Wednesday condemned the killing of San Jose-Lagonoy Camarines Sur Metropolitan Circuit Trial Court Judge Ricky Begino, even as he urged police authorities to expeditiously bring justice to the victim and to his family. This developed as the Philippine National Police has reportedly arrested the suspect in Begino’s killing identified as 72-year-old Wilberto Armea. Reports said Armea, who resides in the same barangay, surrendered to authorities during followup operations, which led to his house in Barangay Santa Maria in Camarines Sur’s Presentacion town at around 8 a.m. on Wednesday Police are looking into land dispute angle as Armea’s motive in killing Begino. Begino was reportedly shot in the nape by Armea while the former was on his way home. “[We] condemn in the strongest terms the killing of the Honorable Presiding Judge Ricky Begino of the Metropolitan Circuit Trial Court of San Jose-Lagonoy, Camarines Sur,” Carpio said. Carpio also expressed condolences to the judge’s bereaved family and also called on “the authorities concerned to take all necessary steps with all deliberate speed to do justice” for the victim by conducting a thorough investigation of the case.

DTI chief urges strong natl, local govt tie-up in rollout of ease of doing biz law


HE country’s trade chief is doubtful the Philippines can breach the top 20 percent of the World Bank’s Doing Business survey by 2020, saying this can only be achieved if local government units implement drastic reforms that will

Economy BusinessMirror

complement the ease of doing business (EODB) law. In a speech at the EODB Summit 2018, Trade Secretary Ramon M. Lopez said he is not optimistic about the Philippines reaching the upper quartile of the World Bank’s annual report on doing

business. Last year’s survey put the country down by 14 notches to 113th in a list of 190 economies. This developed as a study commissioned by the Philippine Council for Agriculture and Fisheries (PCAF) cited “unnecessary” regulatory burden

Editor: Vittorio V. Vitug • Thursday, June 14, 2018 that affects EODB in the agriculture and fishery sector. The Development Academy of the Philippines conducted the study. “According to the study, businesses have to bear unnecessary regulatory burdens like duplication


of requirements in securing licenses and permits that could have an impact in terms of cost, time and complexity arising from overregulation,” the PCAF said in a news statement issued on Wednesday. BeatriceM.LaforgaandGillianN.Villanueva




Thursday, June 14, 2018

Oversupply sees egg tr A

By Jasper Emmanuel Y. Arcalas

MID whistling winds and wet weeks, farmers and dealers still see the sunny side of the egg trade.

Their optimism, which has waned due to lower-than-expected prices in the past months, now comes from an unexpected source: young consumers. In random interviews with Manila’s egg dealers, the BusinessMirror learned the slight uptick in prices of eggs arrives with the resumption of school. Mary Grace Gajo, an egg dealer in Blumentritt, Manila, said egg prices have been falling due to lower demand in summer. With the resumption of classes this June, she felt a yoke has been lifted from the shoulders of her losing retail trade. “Siyempre mataas na iyong demand kasi magpapasukan na. Ganyan talaga. Sanay na ang mga namimili, na every June tumataas iyong presyo ng egg [Naturally, with the resumption of classes came the increase in demand. Consumers expect prices to increase every June],” the 34-year-old owner

of Macelynce Egg Dealer told the BusinessMirror. “There is already a big difference between the prices of eggs this month from last month’s level,” Gajo said in Filipino. According to her, there is already a P500 increase per case of eggs compared to last month’s price, “and every day the price is even increasing by P100 per case.” A case usually contains 12 trays of eggs. Gajo, however, declined to reveal her price list to protect her own business. Nonetheless, Gajo said when June came, she could sell about 3,600 trays of eggs (about 108,000 eggs a day), a far cry from her daily sales of about 1,000 trays a month ago. Still, she observed something unusual with the price movement for table eggs: it has been slower compared to previous years. Actually, the price should have increased in May, Gajo said. How-

ever, she noted the price last May was too low. The upward crawl of the table egg prices is caused by a familiar woe in the layer industry: oversupply.


THERE is an anticipated oversupply of table eggs this year due to the higher number of layers. The latter is seen as caused by the expansion of commercial farms. Thus, farm-gate prices have sunk below favorable quotations for layer farmers. The industry first experienced this during the years 2007 and 2008. It appears history is repeating itself. None other than the Bureau of Animal Industry (BAI) confirmed this scenario. The BAI has warned that farm-gate prices of egg this year would be below than profit due to more-than-expected production. BAI data obtained by the BusinessMirror show that the number of imported parent-stock layer day-old chicks (PS-L DOCs) last year rose by 17 percent to 503,797 birds from 430,635 birds recorded in 2016. The figure overshoots the 9-year average volume of 351,483 birds after the years 2007 to 2008. The BAI estimates the 500,000 PS-L DOCs more or less imported a

year ago would produce around 50 million day-old pullets (DOPs). These pullets—a pullet is a young hen—would then be raised to lay eggs. The BAI says one PS-L DOC can produce at least 100 DOPs.


THE 50 million DOPs, once mature, would continuously lay eggs for at least the next 300 days of their lives, resulting in a total output of 15 billion eggs, BAI targets revealed. This estimated volume of production is at least 25 percent more than the country’s estimated 10-billion to 12-billion egg demand. Last year, the country produced 492,406 metric tons (MT) of chicken eggs or about 10.340 billion pieces, which was 6.65 percent higher than the 461,719 MT (9.696 billion pieces) recorded output in 2016. “Chicken egg production registered a 6.65-percent growth in output,” the Philippine Statistics Authority (PSA) said. “This was due to the higher number of adult female and/or laying flock in both native and layer chickens.” Of the total volume of eggs, about 83 percent were produced by commercial layer farms. The output of these farms in 2017 grew 7.41 percent to 409,506 MT (8.6 billion pieces) from 381,247 MT (8.006 billion pieces) in 2016. “This year it is probable that table eggs would become cheaper,” an official of an attached agency of the Department of Agriculture told the BusinessMirror. “In fact, a lot of backyard layer farmers closed last year due to unprofitable price margins,” said the person who was not authorized to speak in behalf of the agency.


IT was in 2007 when the layer industry first experienced a crack in its sales largely due to oversupply. The latter, however, treaded on a natural path as business grew. For one, a layer farmer would need to raise pullets to have his flock of laying hens. Usually, a farmer buys these DOPs from breeders. These breeders import PS-L DOCs to maintain the quality of their DOPs and to keep up with the layer farmers’ demand for the bird. In 2007, imports of PS-L DOCs zoomed up by 65.25 percent to 442,326 birds from just 267,663 birds in 2006. The volume was more than double the 4-year average import volume of 258,351 birds from 2003 to 2006. Industry sources say the reason behind the increase in imports was the enticing profitability of the egg sector. For the first time in history, the inventory of layers in 2008 breached the 25-million-head level. All because of the increase in PS-L DOCs imports. Since then, the expansion of layer farms became unstoppable.


THE oversupply that time forced breeders of layers to calibrate their importation to reasonable levels to avert oversupply in the future, explained Rufina S. Salas, secretarygeneral of the Agriculture Sector Alliance of the Philippines. The breeders who import PS-L DOCs agreed to limit their importation to about 300,000 birds annually, Salas added. But she said the current level of the egg trade is “history repeating itself.” However, Salas said some players from the Visayas and Mindanao area complained “that their supply of eggs was insufficient and they requested to be able to also import [PS-L DOCs].” Salas noted that “the new importers are not members of the [group of] importers who agreed to limit importation.” More than 500,000 imports came in in 2017, said Salas, “so that

resulted in a lot of layers as stakeholders expanded their farm. And with expansion, of course, came the oversupply of eggs.” This is the first time that the layer industry, particularly the breeder/layer importers, brought in more than half-a-million PS-L DOCs since 2003.


THE Philippine Association of Breeder Layers Inc. (Pabli) said last year’s hike in the imports of PS-L DOCs was a premonition of where the egg industry is heading this year. “In 2016, day-old layer PSfemale arrivals totaled 430,635, which increased to 503,797 heads in 2017,” Pabli President Leopoldo M. Mendoza told the BusinessMirror. “Compared with 315,165 heads in 2015, we can easily see where we are heading.” Mendoza explained that the layer industry made a “big” expansion in the past three years as “encouraged by good profitability.” This, he noted, led to an overdrive in demand of DOPs and, hence, more PS-L DOCs. “A big expansion in capacities in commercial layer farms in the past three years was encouraged by good profitability of the egg industry,” Mendoza said in an e-mail exchange. “Egg prices were high and the cost of feed grains, especially corn, wheat and soy bean meals was low; thus, excellent margins.” He added that this expansion led to higher demand for day-old pullets allotted for commercial tableegg production, which prompted existing and new layer breeder farms to import more day-old layer PS. Mendoza noted an imbalance in the supply-demand curve for table eggs as the expansion of layer farms outpaced the demand for the produce. “Although the demand for eggs has materially grown in the past few years, in tandem with our

good GDP growth, we feel that expansion in the supply side of eggs was too fast,” he said. “A correction is urgently needed.”


PHILIPPINE Egg Board Association (Peba) President Irwin M. Ambal cringes at the word “oversupply.” Ambal, a lawyer, explains that currently, the industry is having a hard time finding a market for small and medium eggs. And this resulted in declining prices for these specific sizes of eggs, he explained. “It is an oversupply in a sense there seems to be a harder market for the smaller ones,” Ambal told the BusinessMirror. “The prices for small and medium sizes of eggs are declining, that is below 60 grams, which are mostly for supermarkets. But [for] the large ones, which are for industrial users, the prices remain okay.” Industrial users include bakeries and pastries. Ambal estimates that the price difference between a mediumsized egg and a large one has ballooned by as much as 400 percent. The Peba chief said that large eggs now cost 50 to 70 centavos more than the medium-sized ones. The price difference last year was only about 10 to 20 centavos, he said, adding that the stretch in the price difference is caused by the declining prices of medium-sized eggs. “It is really [difficult]. The smaller the eggs we are getting, the more it hurts because of higher cause of production,” Ambal said. “The smaller the egg gets, the deeper the cut in prices.” According to Salas, the breakeven farm-gate price for chicken egg is around P3.50 to P3.75. But farm-gate prices today have fallen to the P2 quotation mark. “The egg producers say they are now selling at a loss of about P1.50 to P2 per piece,” she said. In April, some backyard layer farmers in the Calabarzon area were selling their produce at P1 a


sMirror | Thursday, June 14, 2018

rade treading on shells movement at the farm-gate level, then the demand for the commodity would increase. “If the eggs are being sold at prices commensurate to what the producers sell, then the demand for eggs will increase,” she said. “But the prices remain the same. Hence, the demand does not pick up.” Ambal echoed Salas’s sentiment: That is the sad part, the retail prices have not gone down. PSA data compiled by the BusinessMirror showed the wholesale price of eggs in Metro Manila at the start of the year was almost P5 per piece. However, the wholesale price of egg has been constantly declining since then. It has now sunk by 37 percent and fallen below the P3per-piece price level. Latest price monitoring by the PSA showed that as of the first week of June, the wholesale price of eggs is pegged at P2.76 per piece. Throughout the more than five months of downward spiral movement of the wholesale price of egg, its retail price maintained at an average of P5 per piece. PSA data also showed that even the low and high retail price of egg at P4 and P6, respectively, remained unchanged from January to June.



piece to dispose of their stocks, reports by news outfits said. Furthermore, the six-month closure of Boracay island was another loss that the layer industry had to shoulder. The closure of the tourist spot left layer farmers looking for other markets for their unsold produce. The bulk or about 90 to 95 percent of the egg supply of Boracay island comes from Calabarzon, particularly Batangas, according to Ambal. Layer farms supply restaurants in Boracay with medium-sized eggs, which are usually served at breakfast. “Producers are now trying to divert their small-sized and medium-sized eggs to other markets. That’s a lot of slice of market they used to have,” Salas said.


ONE of the usual recourse for farmers is the Blumentritt market in Manila, referred to as “bagsakan,” or an area where commodities are dumped wholesale. The people in Blumentritt, Ambal explains, have connections to a network of buyers of eggs in the National Capital Region and the Calabarzon area. But selling at Blumentritt comes with a hefty price. “Your last recourse if you want to sell your eggs is to sell it in Blumentritt. But the price [would make you cry],” Ambal said. “They will give you a low price in exchange for the advantage they have in the market network.” Ambal explained that Blumentritt earned its moniker as “bagsakan” not because it is a trading post but because the buying price at this Manila market is “really, really, low.” Salas says farmers are now dumping their produce eggs at Blumentritt at a price of P60 per tray, which is about P2 per piece. “The layer farmers are already in a very serious situation,” she

said. “Some are losing as much as P50,000 a day; some even P100,000.”


MORE than the problem of finding a new market for their fresh eggs, farmers are left with a big question: how will they recoup losses caused by higher cost of production? On top of the current oversupply situation, Ambal pointed out the layer industry is suffering from increasing cost of production. Ambal said their raw materials, such as corn and soybean meal, have become “very, very expensive,” going up by almost 20 percent. On one hand, corn prices have gone up to about P18 per kilogram from the usual P13 per kilogram quotation. On the other hand, the landed cost of imported soybean meal from the United States has increased to P28 per kilogram from P23 per kilogram. According to Ambal, the increase in raw materials could be attributed to three factors: weaker peso; higher global prices for imported materials; and the lack of local corn supply. “You have a 15-percent to 20-percent additional feed cost right there and then,” he pointed out. Ambal said this easily translates to at least a 15-percent increase in the total cost of production of layer farmers as feeds account for about 70 percent of their expenses. This, Ambal said, is the most crucial thing for the increase in their inputs is corn, which accounts for the bulk of their feed ratio. “The quantity and quality of corn by April was bad. And that was supposedly the best corn you’ll harvest because of better drying due to summer,” he said. “That is also the time when you stock up for the rest of the year. Unfortunately, we were not able to procure and store our needed stocks.”


THE lack of corn supply has forced some layer farmers to import wheat from Australia and Ukraine, which is cheaper than the locally produced yellow corn. The landed cost of imported wheat right now hovers around the P15-per-kilogram level. Aileen Abanto, a table egg dealer, says they are now reeling from the upward movements of the farm-gate price of chicken eggs, which she observed has gone up by around P10 from last year’s quotations, caused by higher cost of production. For example, a tray of smallsized eggs now costs P135 from last year’s P125 quotation, while farm-gate prices of medium-sized and large eggs are now at P145 and P155 per tray, respectively. The price increase, Abanto noted, was caused by higher cost of production due to more expensive farm inputs such as feeds. She said she has no choice but to pass on to consumers the added costs. “Prices never go down. It can only go up or be retained,” the 50-year-old owner of Alirem General Market told the BusinessMirror. Abanto explained dealers like her just add P15 per tray on eggs they sell to retailers. The latter decide on the price if they choose to sell the eggs to consumers.


BUT if farmers reel from higher cost of production, low farm-gate prices and loss of market, consumers, on the other hand, are not benefitting from such decline. “What is sad is the fact that in the market, consumers are still paying the same price while producers are selling at a very low price,” Salas said. “This is something we have to look into. This is another thing: the value chain is broken from producers to the retailers.” Salas said if the retail prices of egg are reflecting the downward

SALAS, Mendoza and Ambal agreed on one thing: there’s a need to address oversupply. For the first quarter alone, the country’s chicken egg output grew 7.42 percent to 130,550 MT due to “expansion of commercial farms in CAR, Ilocos Region, Cagayan Valley, Central Luzon and Caraga.” Furthermore, the production was also fueled by increased laying flock inventory and improved egg-laying efficiency ratio in commercial layer farms in Ilocos Region, Cagayan Valley, Calabarzon, Mimaropa, Bicol Region, Eastern Visayas, Northern Mindanao and Soccsksargen. The first-quarter figure translates to about 2.741 billion pieces of eggs, the highest January-toMarch period output recorded by the country ever. “We have seen it in 2008. A lot of layer farmers resorted to direct selling. They were on the highways marketing their produce,” Ambal said. “And for sure, this year, some backyard layer farmers may shut down.” Mendoza said the oversupply may spell huge losses for his group as their production of DOPs largely depends on the demand of the layer farmers. And if this demand dwindles, so will their production. “We consider our customers, commercial layer farms, as partners. If they are suffering [then] we also suffer,” he said. “In an egg oversupply situation, we won’t be able to sell some of our day-old pullets and we will be forced to cull early our PS breeders. These events will lead to huge losses for Pabli members.”


SALAS, who is also the chairman of the Committee on Poultry, Livestock and Feed Crops of the Philippine Council for Agriculture and Fisheries, said they have held a series of meetings from April to May to address the oversupply issue. One of the prominent solutions proposed during the meeting was to limit the importation of PS-L DOCs to a reasonable level, according to Salas. “The importers are amenable to have a limit of importation of up to 400,000 birds,” she said. “Because if they will not limit their imports then the trend will continue and the number of imports this year will definitely breach the 600,000 mark. And losses will continue to be suffered at the end of the year and even beyond.” Salas said limiting the impor-

tation would be effective right now as it was done in the past. Mendoza confirmed that the members of his group agreed to limit their import of PS-L DOCs to “restore” the “viability” of the layer industry.


“PABLI does not control the volume of PS DOC importations. However, if egg prices fall due to oversupply of eggs, we seek to find a consensus among our members, on the reduced volume of future PS DOC importations,” he explained. “We agree that limiting the volume of layer PS DOC imports is one of the solutions in restoring the viability of the layer industry. Pabli is a small group, compared to the number of layer farmers, thus for our group, it is easier to seek an agreement, as well as to monitor compliance,” he added. Mendoza said they will limit their PS-L DOCs import to about 400,000 birds annually for the next four years. This volume, Mendoza explained, would produce at least 2.5 million “good quality” DOPs monthly, which would be sufficient to supply the replacement for 36 million to 38 million commercial layers nationwide. Latest PSA data showed that as of April 1 the country has a total layer population of about 37.046 billion birds, which was 7.15 percent higher than the 34.575 billion birds recorded inventory in the same period of 2017. Furthermore, the figure was also 4.155 percent higher than the 35.568 billion layer population recorded at the start of the year. This is the first time that the total population of layers in the country breached the 37-billion mark.


AMONG other solutions that the industry stakeholders came up with include: shipment of Luzon-produced eggs to the Visayas and Mindanao region; intensifying marketing; and early culling of hens. “On the part of the stakeholders they requested the DA to be able to transport eggs to the Visayas and Mindanao, which are the regions they say do not have enough supply volume,” Salas said. “The DA said they will be making available a vessel for the layer farmers to transport their produce.” However, this plan has not yet materialized to date. Salas added there was a proposal to cull hens as soon as they reach eight weeks old. This, according to the proposal, would limit the supply of small and medium-sized eggs in the market. Under the proposal, culling 8-week-old hens would result in immediate loss for the farmers but would be recouped by the recovery of farm-gate prices of eggs. “This is what the egg producers are trying to sell to the smallholders,” Salas said. “But to [commit] all the egg farmers to do the same is quite difficult.” She explained every member of the sector is cooperating, except that the proposals and plans have yet to materialize. “In the meantime egg producers are incurring losses,” she said. “This is dangerous as small producers may not be able to sustain the losses and would resort to stopping [their production].” “If the solutions they are offering would be forged, then I think they are enough to control the situation,” Salas added.


AMBAL, however, is lukewarm to the idea of limiting the imports of PS-L DOCs and the early culling of hens. He said the layer industry is a free market and would “self-correct.” Limiting the importation of parental stocks is not a short-term


solution to the declining prices as the effect of such measure would only be felt in the next two years, according to Ambal. “It will not have an immediate effect as the chicks imported last year are already here and laying eggs,” he argued. “I always believe the industry would self-regulate based on the demand. The industry will not import if they are going to lose.” Ambal recommended that the government should regularly, if possible quarterly, inform farmers about the current situation of the layer industry so that they may come up with wise business decisions. The information should include but not be limited to price forecast, volume projection and estimated demand, he said. “As I said, you cannot blame anyone. The farmers saw the price was increasing so they kept on building the industry until the production was too much,” Ambal said. “Then it is the time that the market will self-regulate or undertake technical correction. That’s the regular course of the cycle.” He added that some layer farmers are opting to keep their older flock as they tend to lay the bigger-sized eggs which caused higher than the smaller ones. Layer farmers are also postponing now the loading of new birds as to limit the production of smaller eggs, Ambal said. “It is the good thing about the layer industry. It self-adjusts.”


BUT as the layer industry awaits the implementation of measures that would ensure the viability of the sector, Ambal said they are banking on seasonal things to aid them to recover in the short term: Class resumption and fiestas. “Everybody is hoping that by June the demand would increase. And we are talking about a 50-percent increase or improvement in the demand,” he said. “June usually is the start of classes and when fiesta season comes in.” But mothers interviewed by the BusinessMirror expressed varied statements on whether they would increase their consumption once classes resume. For example, Leah Miguel, a mother of two, said they increased their egg consumption to 10 to 12 eggs weekly, compared to the 8 to 10 eggs they ate per week during the summer season. “It’s more for convenience because it’s easier to cook, especially when preparing it during breakfast or for school baon [packed meal],” Miguel, 44, told the BusinessMirror. However, for Myra Marie M. Muli, 45, their household’s egg consumption remains the same whether classes resumed or not. “I don’t think it will increase now that vacation has ended because as for me, I regularly buy 1 tray every payday of the month,” Muli, a mother of a 10-year-old girl, told the BusinessMirror. “And I don’t increase the quantity of the eggs I’m buying when school year comes.” The same is true for Salvadora Orating, 50, a mother of three: “It will remain the same; about 16 to 20 eggs per week.” The PSA estimates that a Filipino consumes at least 1.61 piece of egg weekly or about 83.82 eggs annually. But whether the resumption of classes and fiesta season would buoy the layer industry in the next following months, Gajo said it will just be business as usual. “Dadaanin na lang namin sa volume,” she said. “Mas maraming itlog; mas magandang kita [We’ll rely on volume sales because the more eggs we sell, the more we earn].” With additional reports by Jenn Kiana Louise N. Cardeño and Monique Danielle A. Fernando, Interns

A6 Thursday, June 14, 2018 • Editor: Angel R. Calso

Opinion BusinessMirror


Giving workers their fair share


N an ideal world, when the minimum wage does not keep pace with inflation, a corresponding wage adjustment must be made. Automatically. The pay hike must allow low-wage workers to live above the poverty line. Filipino workers, however, do not live in an ideal world, much less in their desired work environment. Most of them do not even enjoy security of tenure. This is unfortunate considering the economy’s continued growth, which is expected to further rise to 6.8 percent this year and 6.9 percent in 2019, from 6.7 percent in 2017. Sadly, economic boom means nothing for the low-wage workers who feel neglected. Part of the problem is that the government has allowed the erosion of the minimum wage for so long that it is now difficult to even consider bringing the wage floor up to a level that would allow low-wage workers to have a decent quality of life. The Tax Reform for Acceleration and Inclusion (TRAIN) law, which stoked inflation that eroded most everyone’s buying power, magnified the situation. In view of the recent inflation surge, President Duterte ordered the Regional Tripartite Wages and Productivity Boards in all 13 regions to intervene. The RTWPB is composed of representatives from the government, employee and employer sectors. Responding to the President’s order, two regional wage boards announced wage increases in their respective areas. The Region 6 wage board approved a P41.50 per day wage increase for nonagricultural workers, with the proviso that those working for companies with less than 10 employees will only get a pay hike of P23.50 per day. Agricultural workers in this region were given P13.50 increase in their daily pay. Meantime, the Region 7 wage board approved a P20 per day wage increase for those employed in Class A cities and municipalities, while those in Class B, C and D areas will get a pay hike of P15 per day. The Associated Labor Unions-Trade Union Congress of the Philippines said the new wage increase rates approved by the wage boards in Regions 6 and 7 do not lift workers out of extreme poverty level. ALU-TUCP Spokesman Alan Tanjusay said the segmentation of wage rates in Western Visayas is bound to create more poverty problems caused by migration of workers and their families. By granting segmented wage rates, he said, the two RTWPBs will create pressure for workers in poorer communities to migrate to more prosperous cities in hopes of landing jobs with higher pay. This, he added, will further exacerbate the problem of overpopulation in already crowded urban areas like Metro Manila. The ALU-TUCP earlier asked for P800 daily across-the-board nationwide wage hike, saying this would restore workers’ purchasing power eaten up by inflation. The labor group said an average family of five members needs at least P1,200 a day to live decently. As workers nationwide push for a higher minimum wage, many business leaders resist out of fear that their businesses will struggle with higher payroll costs. They say a minimum-wage hike now would harm businesses, especially small enterprises. Advocates for higher wages, however, say that RTWPB’s failure to intervene as soon as possible would allow employers to continue paying peanuts to workers whose purchasing power has been destroyed by surging inflation. We hope the government will act with dispatch to find ideal solutions that strengthen poverty alleviation and social protection initiatives, especially in this regime of high inflation. There’s an urgent need to determine wage hikes that sufficiently meet the needs of the minimum-wage worker’s family. As the country’s economic pie continues to expand, we must give them their fair share. Since 2005

BusinessMirror A broader look at today’s business

The stock market sweet spot John Mangun



he question about where you would invest an extra million if you did not need the money is actually important for understanding the economy and the stock market. People that are clueless about money and the economy always seem to relate stock market performance to economic growth. There is a strong relationship between stock prices and the economy, but it is not what most people think it is. Having invested—and advising others—through the local stock market for three decades, I like the Philippines Stock Exchange. Trading is simple and relatively transparent. Stock value is reasonable and there is sufficient liquidity to be able to absorb large amounts of capital. Back in the day, the largest foreign fund devoted to the PSE held $7 million because of low liquidity. Today, there are individual clients that have invested more. Nevertheless, there has always

been the nagging question about the low public participation in the stock market. There are several factors that have kept the number of retail investors down, and I have written about those in the past. However, for those 30 years of experience, it all comes back to the question of where a person would place his extra million. The Philippines, as have many countries in the past 40 years, has emerged from an economic Stone Age. Ignoring the wild swings in the average annual economic growth, ever since 1988, the economy has only been able to squeeze a 4-percent increase. With the population increase rate, 4-percent growth is

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It is a sweet spot that varies from country to country. Too “little” growth, no money. Too “much” growth, buy a business. Both investing in a business and the stock market come with unique risks and effort. Note, you can open a siomai kiosk for P200,000 and a branch of a Chinese restaurant chain for P10 million. So what is the economic growth sweet spot for the local stock market? That is hard to say. We are way ahead in terms of percentage economic growth than those found in other stock market sweet spots. Listed companies’ corporate profits are still growing at an amazing rate, as is the economy. What I would like to see is when we have reached the sweet spot in the Philippine personal savings rate, which had been steadily rising since 1998 and has been going down since 2009. When the savings rate firmly flattens out, as it has for the past two years, that may indicate that there is balance in spending, investing, and saving. That may create the sweet spot. E-mail me at Visit my web site at Follow me on Twitter @mangunonmarkets. PSE stockmarket information and technical analysis tools provided by the COL Financial Group Inc.

Wrong policies that keep oil prices and power rates rising

✝ Ambassador Antonio L. Cabangon Chua Publisher

just survival stage and 5 percent is an extra bag or two of pan de sal. With that amount of economic growth, there was no money available for stock market investing. Then, in large measure because of the fiscal policies of the Arroyo administration, the GDP growth rate broke and held the 5-percent area. That is also the time the stock market started taking off. Even with this growth, investor participation stayed low, contradicting the idea that rising stock prices should create rising significant numbers of investors. Since 2009 we have seen historic high after historic high and still stock market investing remained a small fraternity. That question about where you would put your extra million now comes into play. More than 20 long-term studies using short- to extended-time periods in over 30 stock markets have shown that a nation’s economic growth does affect stock prices and investor participation. But it works this way. Too little economic growth and there is no stock market money available. Too much economic growth and it is more profitable investing in a business because more people have more money to spend.

Part Four

Increase in IPP contracts and liabilities


OR his part, President Fidel V. Ramos deliberately convinced Congress to grant him emergency power to deal with the worsening power situation. Republic Act (RA) 7648, or the Electric Power Crisis Act (Epca) of 1993, allowed his regime to enter into negotiated contracts with independent power producers (IPPs).          His administration complemented Epca with RA 7718, or the expanded build-operate-transfer law, which granted the private sector a broad range of investment incentives, unmindful of its the deleterious effects to consumers.  Between Ramos and former President Gloria Macapagal-Arroyo, a total of 46 IPP contracts were signed, with National Power Corp. (NPC) playing the lead role for the government’s power projects.  Before the end of Ramos’s term, NPC gradually went bankrupt. Its liabilities grew as income declined over the years, while the ratio of loans to capital expenditure consistently increased. In terms of debt-to-equity

ratio, NPC had become increasingly dependent on debt, just 10 years after the fall of the Marcos regime. According to the Bureau of Treasury and the Freedom from Debt Coalition (FDC), obligations to the IPPs rose to P244 billion from only P35 billion in 1995, while long-term debts had risen to P441 billion in 1997.  By June 2003 NPC had $7 billion worth of debt, excluding the $250-million bond partly backed by Overseas Private Investment Corp. Around $500 million of $7 billion and other sovereign contingent guarantees have matured in 2003.  NPC obligations as of mid-2004 reached more than P1 trillion, of which P700 billion is due the

IPPs. NPC’s financial obligations represented at one time more than one-fifth of the P5.39-trillion national debt. A government study commissioned by the Credit Suisse First Boston and Arthur Andersen estimated NPC’s net liabilities from obligations to the IPPs at a staggering range from $6.1 billion to $6.77 billion. Worse, these liabilities and obligations continued to grow until today.  The heavy financial losses, the huge capital requirement for upgrading power facilities, and the so-called inefficiencies of the public sector eventually became the government’s major reasons for pushing the passage of the Omnibus Electric Power Industry Bill. The more compelling reasons, however, were the new loans dangled by international financial institutions (IFIs), the approval of which depended on the enactment of the proposed measure, FDC said.  First filed in 1996, the power bill met sustained opposition from people’s organizations and prominent individuals like Sen. Juan Ponce Enrile who relentlessly opposed and exposed the onerous contracts and the many threats they posed to consumer’s interests.  

Intervention by IMF and other IFIs IN December 1999 the International Monetary Fund intervened. In a letter addressed to the House Committee on Energy, Marcos Rodlauer,

IMF’s chief mission officer, called for the immediate passage of House Bill 8457, or the Omnibus Power Bill, stressing the importance of “investor confidence and the adherence to international financing institutions’ conditionality.” The letter further noted:  “We are disappointed to learn that the ‘Electricity Reform Bill,’ which you have sponsored appears to have run into some further delays in passing through the House of Congress. As you are aware, the program supported by the IMF expected passage of this bill before the end of the year, which already represented a significant delay from earlier schedules.”  The IMF had included the privatization of NPC as part of its “exit program” prescription for the Philippines. As stated under the Memorandum of Economic and Financial Policies of the Philippine government, “the structural-reform agenda of the country will increase the resiliency of the corporate sector mainly by improving the enabling legal framework, continuing trade and investments liberalization, developing of the domestic capital market, additional privatization and further strengthening of external debt management.”  The memorandum explicitly emphasized that the government remains committed to carry out its privatization plan in the coming See “Arillo,” A7

Opinion BusinessMirror

Pagbilao LNG hub project hits dead-end

Growing gradually to fullness Msgr. Sabino A. Vengco Jr.

Alálaong Bagá

Val A. Villanueva



T now appears that Australia-based Energy World Corp.’s (EWC) Liquified Natural Gas (LNG) Hub Receiving Terminal project in Pagbilao, Quezon, has either been trapped in a bureaucratic quagmire or stymied by a group that may be adversely affected by its implementation. My column last week, which described the project as 90 percent complete, has generated disbelief among the project’s stakeholders who claimed that it has actually grounded to a halt. In an e-mail, an investor who requested anonymity told BusinessWise that the Philippines is missing out on a valuable project which is expected to beef up the country’s power requirement now that the Malampaya gas reserves are about to run out. He says: “Your column—‘In search of clean energy’—certainly confirms the need for clean energy [LNG/gas] in the Philippines and many other countries, as well. But let me just refresh your memory that the conclusion of a Senate hearing on the project [on] April 26 didn’t turn out well. Not sure if you were aware of this hearing, but I and many others who have reviewed the contents of it can’t believe the [stumbling] blocks put in front of Energy World Corporation for it to complete its Pagbilao project.” He puts the blame for the long delay the project has to endure squarely on the Department of Energy (DOE), National Grid Corp. of the Philippines (NGCP), the National Transmission Corp. (Transco) and the Grid Management Committee (GMC). “I have worked in management roles in the oil/gas industry around the world for 45 years,” he explains, “and find it hard to believe that this situation is allowed to happen in the Philippines when [the country] so needs additional power.” Another reader, Anthony George, a foreign investor from Australia, wrote: “That was an interesting article you penned ‘In search of clean energy’ and in particular the section relating to Energy World’s project in Pagbilao. You rightfully mentioned [that] both the LNG hub and first stages of the gas-fired power plant are in advanced stages of construction and close to being connected to the grid but all is not what it appears to be. I’ve been an investor in this company for many years and have closely followed the plight of this project.” He claims that all the government and regulatory bodies involved seem to be acting in concert to sabotage the project from day one, “and they continue to do so to this very minute.” He says that, contrary to what has been reported, EWC is still being blocked from connecting to the grid, and is having difficulty satisfying conditions set out by financiers to draw down funds to complete the project. “I’ve been watching this thing unfold from my home country of Australia,” George continues, “and the optics from this distance are obvious and rather damning. There appears to be an entity, special interest or dark principality within the Philippines that has the power to control the actions and policy of at least four regulatory bodies vital to the success of this project. The Philippines badly needs this additional generating capacity but I have grave doubts that it will ever be allowed to participate in the market.” BusinessWise tried but was unsuccessful in getting the side of the DOE, NGCP, Transco and GMC, who have all not responded to repeated requests for an interview Once operational, the LNG Hub Receiving Terminal—which is a 650MW combined-cycle, gas-fired power plant—is set to become a hub of LNG

distribution around the country. In a report to the Australian Securities Exchange, EWC revealed that the facility would be capable of handling 3 million metric tons per annum of LNG. Its first tank could support 3,000 megawatts of gas-fired power plants. “This will support our adjacent 650-MW combined cycle gasfired power plant, and provide expansion options for both EWC and its third-party gas clients,” the company explained. It said the deep-water jetty of the terminal was capable of handling all sizes of LNG vessels. EWC received an approval from the Energy Regulatory Commission (ERC) to develop a point-to-point transmission facility to connect its 650-MW combined-cycle gas plant to the power grid. The government regulatory agency allowed EWC to develop the P694-million transmission facility to connect its power plant to the New Pagbilao Station of the NGCP. The LNG Hub Terminal, the first of its kind in the Philippines, can process 3 million metric tons of LNG per annum, which is sufficient to generate up to 3,000 MW of gas-fired power plants, and with the second tank currently being constructed, up to 6,000 MW of power. The project costs over $750 million of direct investment in the Philippines, and has created over 800 direct jobs during the construction period. The project signifies that the country will now be able to gain access to clean and affordable fuel for power generation, and further develop its gas infrastructure. It can commission the first 200-MW unit of its gas-fired power station in six months after the drawdown of funds from the company’s policy bank lenders—the Development Bank of the Philippines (DBP) Landbank of the Philippines (LandBank) and Asia United Bank (AUB)—with 400 MW and 650 MW at three-month intervals thereafter. But the big problem the project— which has been on the pipeline since 2006—faces is that it has not been allowed to connect to a distribution grid, despite the company’s strict compliance with the Department of Environment and Natural Resources’s clean-energy policy directives. As mandated by the DENR, EWC is not allowed to enter into long-term power purchase agreements, but instead will ensure that all power will be sold through the Wholesale Electricity Market (WESM), with the DBP and Landbank to be given the opportunity to invest in, finance and profit from the project. The project represents an investment of over $750 million, of which EWC has already invested approximately $600 million of its own with the balance of $150 million being funded by Philippine banks. EWC has also provided a full corporate guarantee under the loan facility covering repayment of the loan and interest to lenders on time and in full, even if the project faces unplanned delays. EWC signed the loan financing for its power station in September 2015 with DBP, Landbank and AUB. There were 49 condition precedents to satisfy in order for lenders to release loan funds. EWC says it has now satisfied 48 condition precedents, except for the last, which involves clarifications regarding its transmission and export of power. For comments and suggestions, e-mail me at

Thursday, June 14, 2018 A7


he mystery of the presence of God in our lives and in the world is like a seed that looks average and ordinary, but not without significance and promise, that somehow gradually unfolds and grows to maturity and brings about amazing fruitfulness (Mark 4:26-34).

The seed and earth in growth Parables are a literary form that uses the familiar to point out the unfamiliar, the material to lead on to the spiritual. It takes something from our world of experience to make a point and level up to “something like” in another realm. It imaginatively describes something to focus on and illumine another dimension of our life. Its figurative language is open-ended brain-teaser, admitting of deeper levels of understanding and interpretation. When the connection is made, it feels like making a personal discovery and receiving a revelation at the same time. Metaphors and comparisons are at times the only way we can go beyond the

surface of things and leap even into the mystery of the reign of God. The first parable about seed and soil depicts to us the natural process of growth and urges us to trust it. When the contact is made between the seed (God’s word) and the good soil (the welcoming human heart), a process of development sets in, a process that is mysterious and beyond our sight and control. The sower sleeps and rises night and day, and through it all he knows not how but the seed is sprouting and growing. God who sustains all things allows them to follow their natural courses. The trusted working of seed and good earth (Mark 4:20) together is according to a pattern of gradual,

unfolding development, “first the stalk, then the head, then the full grain in the stalk,” finally ripeness and harvest. We may plant the seed and watch it grow and harvest its yield, but the seed works its own wonderful way, the secrets of its growth incomprehensible.

The seed that grows huge

This process of gradual growth picturing the reign of God is further illumined by the image of a seedling that takes years to grow into a magnificent tree, or of a rather negligible seed like that of mustard that eventually develops into a copious tree that gives shades and roost to many birds. It is not an overnight development, but needs some time to grow trunk and branches and to become the remarkable plant it is. The reign of God similarly begins in very ordinary circumstances and grows gradually until it has spread itself far and wide. We can count on the phenomenal growth of the reign of God and its universality providing shelter to all. Although the parables can, indeed, lead us into a deepening of consciousness, we still need the teacher to guide us into changing our consciousness in a permanent and radical way. Each person has “eyes to

see and ears to hear” (Mark 4:9, 23), but greater growth comes only with more personal encounter with the teacher. So, after Jesus has spoken the word to the public with as many parables as they are able to understand, He reveals their deeper meaning to His disciples in private. This ongoing interpersonal process with His disciples means Jesus shares His own consciousness to them, to stretch their imagination more and to make connections beyond what they may ordinarily do. Alálaong bagá, the fellowship with Jesus in the reign of God works mysteriously. It takes root, grows, thrives and produces according to its own way, in the way of divine grace within the concreteness of human experience. It may be found where least expected and in what appears inconsequential, among the poor and the suffering and the despised, but its potential is wonderful and its results amazing. Among the followers of Jesus, continuing personal encounter and sharing with Him means simply more, more life force, more presence and love of God. Join me in meditating on the Word of God every Sunday, from 5 to 6 a.m. on DWIZ 882, or by audio streaming on

Taxpayer’s recourse on BIR’s unacted VAT refund claims Atty. Rodel C. Unciano

Tax Law for Business


rior to the amendments introduced by the Tax Reform for Acceleration and Inclusion (TRAIN) law, the 1997 Tax Code was clear that a taxpayer may elevate to the Court of Tax Appeals (CTA) its claim for refund or tax credit of unutilized input tax attributable to VAT zero-rated sales in case the Commissioner fails to act on the said claim within 120 days from the submission of complete documents. Section 112(c) of the old Tax Code provides that in case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the commissioner to act on the application within the period prescribed by law, the taxpayer affected may, within 30 days from the receipt of the decision denying the claim or after the expiration of the 120-day period, appeal the decision or the unacted claim with the CTA. Under the TRAIN law, the Tax Code provision on the taxpayer’s right to appeal an unacted claim to

the CTA was deleted, with a proviso, however, that failure on the part of any official,agent, or employee ofthe Bureau of Internal Revenue (BIR) to act on the application within the 90-day period shall be punishable, which under Section 269 of the Code, could be imprisonment of up to a period of 15 years. Following the provisions of the TR AIN law, it is only when there is a full or partial denial of the claim for tax refund that the taxpayer affected may, within 30 days from the receipt of the decision

denying the claim, appeal the decision with the CTA. The law is not clear whether an unacted claim may already be elevated to the courts in case the commissioner fails to act on it within the 90-day period. Understandably, Revenue Regulations 13-2018, which implements the value-added tax (VAT) provisions of the TRAIN law, did not clarify this, since it is not clear in the law in the first place. So also, Revenue Memorandum Circular 17-2018, which laid down the guidelines in VAT refund claims, is likewise silent on this issue. So then, what will be the recourse of a taxpayer whose claim for VAT refund with the BIR is unacted by the commissioner? Interestingly, in CTA Case 8752, involving an inaction of the commissioner of the Bureau of Customs on a refund claim of allegedly erroneously paid Customs duties, the CTA has ruled that the case was properly elevated to the CTA, following the provisions of solutio indebiti under Article 2154 of the Civil Code. In this case, it was argued that the inaction of the Commissioner is not appealable to the CTA, citing as basis Section 7(a) 4 of Republic Act 1125, as amended by RA 9282.

The CTA asserted its jurisdiction on the issue. The court finds it anomalous, if not highly iniquitous, if the claimant is totally without recourse but to await the decision of the commissioner of Customs, which may or may not be forthcoming. Such inaction can deprive lawful tax refund claimants of positive and expedient relief from the courts of justice. Will this ruling be applicable to VAT refund claims not acted upon by the commissioner of Internal Revenue? Following the rationale of the tax court in CTA Case 8752, it would seem that the court will take a positive stand on this issue. Truly, the taxpayer claimant cannot be forever awaiting for the decision of the commissioner. The author is a senior associate of Du-Baladad and Associates Law Offices (BDB Law), a memberfirm of WTS Global. The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported therefore by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at rodel.unciano@ or call 403-2001 local 140.

Trump’s mostly meaningless summit with Kim


he world can be glad of one thing after US President Donald J. Trump’s summit meeting with North Korean dictator Kim Jong Un: They’re still talking. But that, by itself, does little to reduce the North Korean threat. The joint statement issued in Singapore was vague. Kim didn’t confirm and extend a moratorium on testing nuclear weapons and ballistic missiles; he didn’t say he’d detail his arsenals or open them to inspection. The promise “to work toward complete denuclearization of the Korean Peninsula” is meaningless: North Korea has consistently used that formulation to suggest it might give up

Arillo . . .

continued from A6

years: “Going forward in privatization efforts will focus on disposing off remaining major items, which are strategically vital to industrial development, particularly the NPC.” The IMF pressure was part of its Precautionary Standby Arrangement for the Philippines worth $1.4 billion for the year 1998 and 1999.  To stop the country’s financial hemorrhage, President Joseph Ejercito Estrada stopped the practice of issuing sovereign guarantees when

its nukes one day—so long as the US does, as well. Despite Trump’s claim to have achieved something that eluded his predecessors, previous US administrations extracted more specific commitments from Pyongyang, only to see them breached. Kim, though, did get something valuable—a meeting with a sitting US president (something his father and grandfather never accomplished, despite great efforts). This will bolster his position at home. He also appears to have talked Trump into suspending joint US-South Korea military exercises—another longtime demand— in exchange for dismantling a missileengine testing site that the North may,

in fact, have already destroyed. Granted, the US concessions are mostly reversible. As Trump noted, sanctions remain in place. Military exercises could be restarted if the North drags out future talks. (Doubts among allies about US reliability will be harder to repair.) Given how quickly the summit was thrown together, no one should have expected a credible, comprehensive deal. It’s important to remember, however, that from now on US leverage will dwindle. China has already called upon the United Nations to relax sanctions, and its own enforcement efforts are sure to weaken. South Korea, too, will be looking for ways to begin normalizing economic

relations with the North and might resist harsher measures should they be necessary. If Kim ever feared that Trump might order a preemptive military strike, those worries have subsided. What’s needed now from the US president isn’t further showmanship but quiet and methodical diplomacy, closely coordinated with China, South Korea and Japan. The US should make no more unrequited concessions and insist on actions and a relatively short timetable to freeze, cap and then dismantle the North’s nuclear and ballistic-missile arsenals. The longer this goes on, the worse the prospects of an eventual and genuine success. Bloomberg View

he assumed office. According to FDC, the main architects of power sector reforms were the World Bank and the Asian Development Bank (ADB). Their policy toward power sector reform stemmed from the perspective that developing countries need energy, particularly electric power, for social and economic development. Today their primary focus is on rural electric cooperatives, allocating almost $201.3 million thus far.  Other energy projects in the Philippines with World Bank loans amounted to $1.5 billion. One of these, the $65.5 million in loan, was

extended to the country’s biggest distribution company, the Meralco. The Bank’s other lending window, the Global Environment Project, financed some $442 million in different Philippine power projects. These projects carried sovereign guarantees. Another indicator of significant international financial institutions’ involvement in power privatization is the role of the ADB, whose biggest loans in the Philippines also go to the power sector. The bank’s investments are designed to create a competitive market in the electricity sector through the privatization of NPC and the

restructuring of the entire sector. The ADB lending in the power sector, according to FDC, had reached $2.257 billion by 2002. For power restructuring, the ADB funded $300 million. World Bank and the JBIC provided additional funding of $400 million, while United States Agency for International Development released several more millions of dollars in the form of technical assistance grants.  

To be continued

To reach the writer, e-mail cecilio.arillo@

2nd Front Page BusinessMirror

A8 Thursday, June 14, 2018

DA all set to put SRP on some veggies, fish


By Jasper Emmanuel Y. Arcalas


GRICULTURE Secretary Emmanuel F. Piñol declared on Wednesday that the Department of Agriculture (DA) is all set to kickstart the implementation of a suggested retail price (SRP) system on some farm products next week. Speaking to reporters, Piñol said only rice, basic vegetables and three species of fish will be initially covered by the SRP.

Vegetables that may be covered include pechay and eggplant, while galunggong, tilapia and bangus will be the ones covered by SRP under

fisheries products. “Hopefully we will be implementing the SRP next week,” Piñol told reporters in an interview on Wednesday. “The implementation will be covered by the anti-profiteering law,” he said, explaining their basis for concluding when such is palpable: if, he said, “there is a fluctuation in the prices by more than 10 percent over last week’s price, then that’s already profiteering.” Piñol said the SRP next week for rice would only cover the regular-milled and well-milled varieties. The SRP for regularmilled rice should range between P38 and P39 per kilogram, while

well-milled rice should be priced between P40 and P42 per kilogram, he added. “I think that’s the fair pricing,” he said. “We cannot cover the fancy rice because that’s a consumer’s option. If you want to eat fragrant rice, then you really have to pay for the premium. What is important here is that the ordinary consumers are protected.” Piñol said they have deferred the implementation of SRP on poultry meat and poultry products pending further consultations with concerned industry stakeholders. “We are asking them what is their production costs for us to compute properly the fair mark-up

Shabu in condom, other ‘tricks’ keep drug trade alive in prison By Joel R. San Juan `


@jrsanjuan1573 `

HE problem of illegal drugs inside the New Bilibid Prisons (NBP) in Muntinlupa is still far from over, retired National Police chief and now Bureau of Corrections (BuCor) Director General Ronald “Bato” dela Rosa has admitted, while citing some gains from key jail reforms. In an interview with the BusinessMirror,  dela Rosa noted new strategies and personalities have emerged with regard to the drug trade inside the country’s main penitentiary. This, despite several reforms that were implemented to address the problem since he assumed as BuCor chief last month. “We are eyeing a zero drug trade but, right now, I can’t say that it’s already zero drug transaction and drug use. It still exists inside the penitentiary,” dela Rosa admitted. While the prison guards have already made it difficult for illegal drugs to be smuggled inside the NBP with the strict screening of visitors and the presence of members of the Special Action Force (SAF), dela Rosa said some people have found creative ways to

Seipi. . .

Continued from A1

“We have asked [Finance Secretary Carlos G. Dominguez III] to lower the [corporate income tax] rate for us to 10 percent, instead of 15 percent,” Lachica said. The logic behind this, he added, is to maintain the competitiveness of the industry, as it is country’s top export sector.

Train 2. . .

Continued from A1

AER Industrial Policy Coordinator Jenina Joy Chavez said the rationalization of fiscal incentives has been a “reform-in-waiting” for the past 23 years. However, many firms have enjoyed these tax perks for far too long and this, AER said, can be addressed via the FIR. “A good one that will address issues and can be a compromise for those playing hardball is the transition period,” Chavez said. “We understand

SOUTHWEST MONSOON AFFECTING LUZON as of 4:00 pm - June 13, 2018

bring in illegal drugs. For instance, dela Rosa recounted, a lady visitor was caught with a condom inserted in her private part, containing a small amount of shabu. “Our lady prison guard got suspicious so she was led to a private area and was asked to sit down. She saw the condom dangling from the visitor’s private part,” dela Rosa said. He also received reports that some people were bold enough to throw small packs of shabu over the perimeter wall of the maximum security compound using a sling shot. The said strategy, he said, was discovered during a routine patrol of the jail guards, who noticed contraband, such as packs of cigarettes, on the ground near the maximum security compound’s perimeter wall. “If they could throw cigarette packs over the wall, how much more shabu in small packs?” dela Rosa wondered aloud. While he has ordered strict security around the wall of the maximum security compound, he believes that closing the road adjacent to walls would be the permanent solution. However, dela Rosa admitted that

the plan would not be feasible at the moment since the road is being used by residents living at the back of the NBP. Dela Rosa also ordered continuous surveillance on several personalities at the maximum security compound who have reportedly taken over drug operations inside the penitentiary, following the transfer of all well-known illegal-drug operators to the NBP’s Building 14. Besides the strict screening of prison visitors, dela Rosa imposed a lights-off policy at the maximum security compound from 10:30 p.m. to 4:30 a.m. He said the lights-off policy would deter drug transactions and other illegal activities which usually happen at night time. Dela Rosa said that since the measure was implemented, there has been no single incident of violence inside the maximum security compound.

Meanwhile, dela Rosa also defended his choice of luxurious True Religion brands for his casual outfits, saying that he was only giving himself a treat, considering that he had worked so hard while in the

dela rosa police service and got almost P14 million as retirement pay. Dela Rosa’s photo wearing True Religion jeans earlier went viral as netizens pointed out that an original pair of True Religion jeans is priced at around P25,000. “I think I am allowed to buy this brand. In fairness, I received P14 million, almost P14 million [in] retirement pay. So I think it’s about time to pamper myself,” dela Rosa said. Dela Rosa on Tuesday visited a True Religion branch at Conrad Hotel in Pasay City, where he bought several garments which were offered on sale for up to 70 percent.

In a May news release, Dominguez said the DOF wants to make the tax system more equitable by replacing the 5-percent gross income tax with a 15-percent tax rate on net taxable income. At the same time, this will allow firms to keep their income-tax holiday and other income-based incentives. For Lachica and his group, this may push electronics firms to the brink, as it could increase the cost of operations by up to 40 percent. He said this is unfavorable to them,

given that they are employing some 3.2 million workers, direct and indirect. Richard Cohen of Maxim Integrated also argued the government might need to think twice about imposing the 15-percent tax rate. “The economic environment of the Philippines should remain competitive to be able to attract [investments in] expansions. In some aspects, the Philippines is not already competitive, like in power,” Cohen said.

Lachica also said due diligence could at least be given to the sector, as it pumps more than half of the country’s commodity exports year after year. He said imposing the 15-percent tax rate could lead to a migration of investors to neighboring Southeast Asian countries. “Vietnam is just sucking in all foreign investments given its 30 percent less power cost and 40 percent less labor cost. Our suggestion to Secretary Dominguez is to look at the cost of operations of electronics firms.

if one or two years [they will adjust to the law] but 20 years might be too much and forever is definitely not acceptable.” The FIR is expected to address problems with the tax perks extended by the government to companies, particularly those in the special economic zones, such as the Philippine Economic Zone Authority (Peza), which have elements of perpetuity, among others. Apart from income-tax exemptions in the first few years of operation, Peza-registered firms also pay lower taxes. Once their tax exemptions expire, they enjoy a 5-percent tax on their gross incomes, which serve as their income tax annually.

Chavez said some of these firms enjoy this particular tax incentive for as long as 40 years, which prevents other firms, who need incentives the most, from enjoying the same benefit. The AER said only one out of 200 firms benefit from various tax incentives. Using 2015 data, out of the 600,278 firms in the country, only 2,800 enjoy tax perks. What is worrisome, Chavez said, is that a number of these firms who benefit from the incentives even belong to the top 1,000 corporations in the Philippines. Apart from this, Chavez said the FIR also prescribes the grant of “targeted” incentives, which include perks for research and development (R&D) activities. However, this incentive can be enjoyed for only one or two years—the usual time frame for R&D activities, according to Chavez. “There’s a high possibility for compromise. The important thing is to do it immediately,” Sta. Ana said. Based on the DOF proposal, the rationalization of fiscal incentives, under the proposal of TRAIN 2, also includes the creation of the Fiscal Incentives Regulatory Board, headed by the finance secretary, will approve incentives. The primary criteria proposed by the DOF in granting tax incentives includes performancebased indicators, such as actual investment, job creation, exports, country- side development, and research and development. The criteria also includes granting only targeted incentives to minimize leakages and distortions; ensuring they are time-bound; and transparent, which means these are regularly monitored by the government.

Expensive jeans a ‘treat’ to self

or margin of profit where we are going to base the SRP,” he said.

Ubra’s warning

Earlier, the United Broiler Raisers Association (Ubra) urged the government to go slow on its proposal to implement an SRP scheme on farm products, as it could do more harm than good. “You only impose an SRP on broiler during times of oversupply.  Only when the retail prices are not responding to the law of supply and demand,” Ubra President Elias Jose Inciong told the BusinessMirror. “But when prices are stable, meaning the movement is normal and in accordance with historical

BTr awards P7.6-B T-bonds, sees slight uptick in rates By Rea Cu



Peso. . .

Continued from A1

Worries on inflation and the BSP’s upcoming decision on its monetary-policy stance are also seen to have dampened investor sentiment in the short term, including the foreign investors playing in the local currency market. International financial giant Deutsche Bank also earlier flagged the BSP’s “mixed signals” in its resolve to tighten monetary policy in the economy. The bank’s economist Michael Spencer said, in particular, that the recent move of Espenilla to cut the banks’ reserve requirement ratio anew “added to the sense among investors that the Central Bank is not trying to tighten policy,” there-

Excise tax. . . Continued from A1

Economist Calixto V. Chikiamco also said that TRAIN is not antipoor since revenues from the taxreform program are used for education, health, social services and infrastructure projects. Chikiamco added that higher oil

record, [let it be],” Inciong added. Under Republic Act 7581 or the Price Act, the implementing agency, in this case the DA, may issue anytime a “suggested reasonable retail prices” for basic necessities and prime commodities for the awareness of the public. “From time to time, [the head of the implementing agenc y] may issue suggested reasonable retail prices for any or all basic necessities and prime commodities under his jurisdiction for the information and guidance of producers, manufacturers, traders, dealers, sellers, retailers and consumers,” Section 10, paragraph 5 of the law reads.

HE Bureau of the Treasury (BTr) has partially awarded the seven-year Treasury bonds (T-bonds) up for auction on Wednesday with P7.612 billion, from the P10 billion on offer, seeing a slight uptick in the rates for the security. Deputy Treasurer Erwin D. Sta. Ana told financial reporters on Wednesday that the auction committee decided to partially award the reissued T-bond with P7.612 billion, seeing an uptick in the rates for the seven-year security due to anticipation of rate hike pronouncements from the Federal Reserve System (the Fed) and inflation concerns. “If you compare this auction to the last auction of the seven-year [T-bond], we think that the market remains unchanged. If you analyze the bids coming from the GSEDS [Government Securities Eligible Dealers], it’s at the level where it was before in May 17. So we felt that it didn’t move much, although there is a slight uptick in today’s rates compared to what was awarded before,” Sta. Ana said. The auction committee partially awarded P7.612 billion, from the P10 billion on offer, for the T-bond, with tenders reaching as much as P14.382 billion. The rate saw an increase of 11.1 basis points, which settled at 5.976 percent higher compared to the previous auction

by adding pressure to the peso. The BSP chief admitted that the Monetary Board will have to look at a spectrum of indicators in the local economy, given recent developments. “It’s a fairly complex environment that we need to navigate,” Espenilla said.  “We’ll be examining closely all the potential drivers of future inflation through the various transmission channels as affected by global developments, expectations formation and uncertainty,” he added. 

Key rates cut

In its previous meeting in May 10, the BSP decided to hike its main policy rates by 25 basis points to 3.25 percent, aiming to curb inflationary pressures in their policy horizon. The BSP last made such a policy tax would only affect richer households, or Filipinos who own cars. “The resulting loss in government revenue and investments will hurt the poor more. Besides, the correct response is to liberalize rice importation to help the poor.” Based on the analysis of the AER, the poorer Filipinos even gained from the TRAIN because, apart from receiving cash transfers under the

rate of 5.865 percent. “In our pre-auction surveys, they [the market] are saying that there is still concern [on] inflation and the Fed [who] will meet this week starting tomorrow. Although it’s widely expected for them to raise rates but I think that’s still an uncertainty that the market may have factored in,” he added. Th e Ph i l i p p i n e S t at i s t i c s Authority (PSA) reported earlier that the country’s inflation level for May this year reached 4.6 percent, coming from 4.5 percent in April. The Bangko Sentral ng Pilipinas (BSP) has set an inflation target for the year of 2 percent to 4 percent. In the previous auction for the Tbond, the BTr also partially awarded P4.915 billion, from the P10 billion on offer, as rates for longer-dated securities remain high. The average annual rate for the reissued seven-year T-bonds was capped at 5.86 percent with the partial award, which is 11.5 basis points higher than the coupon rate of 5.750 percent. If compared to the previous auction rate of 5.712 percent, rates would have shot up by 15.3 basis points for the security. “But as I’ve said there is an expectation already of a rate hike and there is a view that markets have already factored that in, so we cannot say for sure what would be the impact after the Fed meeting,” he said.

move to curb inflationary pressures in 2014, when inflation threatened to rise above their target for the year. Latest inflation numbers show the growth of consumer prices hit 4.6 percent in May, significantly above the BSP’s 2-percent to 4-percent annual inflation target. Espenilla earlier said that while inflation seems to be “losing momentum,” the BSP still expects this to rise further towards the end of the year and peak around the third quarter before going back to target range in 2019.  The BSP also said on Wednesday that  the Monetary Board is expected to hold its next monetary policy meeting on June 20. The schedule has been moved a day earlier from its original June 21 date due to “logistical” issues, according to Espenilla.  Pantawid Pamilyang Pilipino Program, they also benefited from unconditional-cash transfers, even if they do not have jobs. They estimated that the poorest 50 percent of households saw net welfare gains ranging from P1,512.44 in the fifth decile to as much as P1,953.25 in the first decile, or the poorest Filipinos, every year. With reports from Cai U. Ordinario,

Marc de la Paz and Pearl Anne M. Gumapos

Businessmirror june 14, 2018  
Businessmirror june 14, 2018