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Transaction fees worse than usury
COMMONSENSE - Marichu A. Villanueva - The
Philippine Star
November 6, 2024 | 12:00am
This year’s All Saints’ and All Souls’ Days that
fell on Friday and Saturday, respectively, gave
us another long weekend. To give us all
Filipinos lead time to plan ahead on where to
spend our non-working days with our families,
Malacañang Palace released last week the list of
official holidays and other special non-working
holidays for 2025. After all, this will promote
the “holiday economics” as a policy that
President Ferdinand “Bongbong” Marcos Jr. (PBBM)
reinstituted in our country.
The holiday economics became a government policy
in 2007 when then president Gloria
Macapagal-Arroyo signed Republic Act (RA) 9492,
allowing the Chief Executive to move holidays
that fall on a Wednesday or Sunday to the
closest Monday. While this had become acceptable
to most sectors, workers who are not permanently
employed who fall under the labor laws on
no-work, no-pay were not happy about it. Thus,
the holiday economics policy was scrapped after
the late president Benigno Simeon “Noynoy”
Aquino III assumed office in June 2010.
In the aftermath of the COVID-19 pandemic in
March 2020, former president Rodrigo Duterte
signed a proclamation declaring fewer
non-working days in 2021 supposedly to boost the
economy that hit negative growth due to
lockdowns. In his Proclamation, Nov. 2 (All
Souls’ Day), Dec. 24 (Christmas Eve) and Dec. 31
(New Year’s Eve), which had been special
holidays in the past, were declared as special
working days. “For the country to recover from
the adverse impact of the COVID-19 pandemic,
there is a need to encourage economic
productivity by, among others, minimizing work
disruption and commemorating some special
holidays as special (working) days instead,” the
Duterte proclamation stated.
In 2022, PBBM reintroduced holiday economics
when he issued Proclamation 90 that declared the
regular holidays and special non-working days
for 2023. Issued on Nov. 11, 2022, PBBM’s
proclamation likewise invoked the need to boost
the domestic tourism industry that was impacted
by the COVID-19 pandemic and related lockdowns.
Under Proclamation No. 727 signed by Executive
Secretary Lucas Bersamin “by the authority of
the President” issued last week, the regular
holidays for 2025 included the anniversary of
the EDSA People Power Revolution on Feb. 25
which falls on a Tuesday next year. The 38th
anniversary of the EDSA Revolution was not
included in the list of this year’s holidays.
Malacañang explained its exclusion was because
the date fell on a Sunday.
Also, the assassination of the late senator
Benigno “Ninoy” Aquino (Aug. 21), which will
fall on a Thursday, is among the “special
non-working days” for 2025. Incidentally, PBBM
issued a separate Proclamation No. 729 that
declared July 27, 2025, the founding anniversary
of Iglesia ni Cristo (INC), as a “special
non-working day” nationwide.
While the Philippines struggles to get a large
chunk of the global tourism and travel market,
holiday economics provide the much-needed shot
in the arm from our own people, who are
encouraged to visit our own country. When
Filipinos themselves get enough time to visit
and go to these places, why not? That is, if we
have enough money to spend for these out-of-town
trips and travels.
Naturally, banks also observe no work during
these holidays, especially in cases of emergency
when one might need extra cash. But no worries.
There are a lot of automated teller machines
(ATMs) available to withdraw cash from our bank
accounts. The only problem is when an ATM conks
out due to a glitch, or its dispenser runs out
of cash due to heavy withdrawals.
That’s exactly what happens whenever long
weekend holidays spur domestic spending.
If an ATM conks out, a depositor can use another
bank’s ATM terminal. But when a bank suffers
“off-line” glitch, then it becomes a problem
because all ATM terminals of that bank cannot be
accessed. Still, there is a solution because all
Philippine banks are connected through
inter-bank ATM transactions, either MegaLink or
BancNet. But if you use another bank’s ATM
terminal to withdraw cash, be ready to pay fees
or charges for specific transactions.
Once the ATM processes it, a transaction fee of
P18 is automatically debited or deducted from
your bank account. If you use other ATM networks
in the Philippines, transaction limit is P10,000
– although some banks allow as high as P20,000
maximum withdrawal per transaction. But all of
them impose “corresponding charges” or
transactions fees that banks collect from
non-depositors using their ATM terminal.
Imagine the dismay of a recipient of the
government’s monthly cash subsidy, popularly
called “ayuda,” that may soon be downloaded in
ATMs. Checking at the ATM if the P500 “ayuda” is
already deposited to his bank account, he is
charged automatically a P2 transaction fee for
balance inquiry.
For a Juan dela Cruz depositor, whether it’s P2
or P18 per transaction, the fee is too much of a
deduction. Such a transaction fee hurts a lot
the pockets of small depositors.
This is not to mention these banks automatically
deduct 20 percent withholding income tax on
interest earnings on our savings deposits.
No wonder banks make a lot of money even during
COVID-19 pandemic and disasters and crises. Like
any other business, banks take advantage of us
consumers, despite being their own customers.
Know-your-client and abuse them.
But the most usury-like transaction fee is the
“cash-in” being now a popular mobile electric
wallet service. It offers and allows
subscribers/users to send and receive money, pay
bills, buy load and shop online. It also offers
a variety of other features, such as investment
products and borrowing cash or emergency loans.
One e-wallet service provider charges as much as
two percent transaction fee on cash-ins that
exceed the monthly limit of P8,000. So if you
are supposed to receive P10,000, you will get
only P9,702 because P198.00 was automatically
deducted from your cash-in.
And yet all these banks and financial
institutions have been digitalized supposedly to
make transactions less costly but more
convenient, efficient and fast. But obviously,
the banks and other financial intermediaries are
only too eager to pass on the cost of
digitalization to their consumers and customers. |
_______________________________________________________________________________________ |
Fixing financing failures
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 05:05 AM October 29,
2024
For the longest time, our financial system has
been lopsided against the poor. I’ve long
believed that a key reason poverty is more
prevalent and persistent in the Philippines
compared to most of its neighbors is the failure
of our financial system to make credit and
finance widely accessible to those who need it
most. And these are our small farmers, the bulk
of whom are poor, and small businesses, for whom
lack of financing for startup and working
capital is consistently cited as the top hurdle
to sustaining, let alone growing, their farm or
business.
Years ago, a top businessman borrowed hundreds
of millions of pesos from a state bank,
collateral-free, to buy that same bank’s shares
in a corporation, then turned around and sold
the shares for a fabulous profit. No ordinary
Juan dela Cruz, no matter how trustworthy, can
similarly borrow a far smaller amount from a
bank to grow the money via such opportunities
the financial markets might offer, much less to
buy inputs for a small farm or firm, promising
as it may be. It’s a lopsided picture indeed.
We widely lament how agriculture has failed in
this country and there are many reasons why.
Foremost is our age-old failure to finance small
farmers. Our scientists spend entire careers
developing technologies to make farming more
productive and lucrative. But for the farmer to
adopt these, he needs money to buy better seeds
and productive inputs like fertilizers and
equipment. Often, he resorts to borrowing from
the same traders to whom they are obliged to
sell their produce come harvest time, at prices
lower than they could otherwise get. Without
access to cheap formal credit, he sticks to his
old ways and is unable to stand up to competing
imports produced more cheaply with the same
technologies he does not have the money for. So
he demands that government keep those imports
out, and the latter obliges, believing it’s the
right way to help the farmer—and forgetting that
allowing food costs to stay high hurts all
Filipinos, especially the hungry poor who far
outnumber (and also include) the farmers it
thinks it is helping.
There’s another way failure in finance is
killing our agriculture. Rural folk appear to be
turning away from farming and shifting to other
occupations like construction or informal public
transport (especially motorcycle taxis or
“habal-habal”), and the reason goes back to
finance. There is international evidence that
the poor frequently prefer jobs that provide a
steady cash flow over even higher-paying options
but with irregular income. This is because, in
the absence of savings or credit, they need
predictable funds to meet their daily needs,
minimize debt, and maintain financial stability.
Danielle Guillen, in her 2008 doctoral thesis
for the University of Tsukuba, noted how
habal-habal drivers in Davao preferred their
occupation over farming or other regular work
where earnings are not received on a daily
basis. Nobel Prize 2019 laureates Abhijit
Banerjee and Esther Duflo, in their 2011 book
“Poor Economics: A Radical Rethinking of the Way
to Fight Global Poverty,” observed that many
low-income people in developing countries prefer
small-scale, daily-paying occupations like
vending or laboring, over seasonal or contract
work that could pay more but is unpredictable.
Jonathan Morduch and Rachel Schneider in 2017
documented in “The Financial Diaries: How
American Families Cope in a World of
Uncertainty” how low-income American families
tend to prefer even lower-paying jobs with
regular income because they need cash to cover
frequent expenses and avoid debt. They found
that sporadic income can lead to financial
stress, leading people to seek jobs that provide
predictable income. This seemingly irrational
preference for lower incomes would not happen if
credit were readily accessible to smoothen cash
flows across irregular but potentially higher
income streams (including from farming), and
more families could potentially be lifted out of
poverty. And Filipino farmers and their children
could be less likely to shun farming.
“Financial inclusion” has become a buzzword in
development circles, and is a major thrust of
the Bangko Sentral ng Pilipinas. It means making
financing accessible to all and starts with
promoting wide financial literacy and education.
Other needed changes include strengthening the
rural banking network; creating more
streamlined, accessible lending processes for
rural folk; establishment of government-backed
credit guarantee programs for agriculture;
widening government farm insurance programs, and
harnessing digitalization of financial services
to reduce financial barriers, spread financial
services to underserved regions, and ensure that
the rural poor have access to affordable,
reliable credit sources.
On all these, Thailand, Taiwan, and South Korea
have rich lessons to share. We only need to pay
closer attention, study them well, and yes, copy
what they’ve done.
—————-
cielito.habito@gmail.com
|
_______________________________________________________________________________________ |
BSP eyeing to remove fees on small transfers
October 1, 2024 | 12:33 am
THE BANGKO SENTRAL ng Pilipinas (BSP) wants to
remove transaction fees for person-to-person
electronic fund transfers and payments to small
businesses, based on a draft circular.
The central bank is eyeing to amend the Manual
of Regulations for Payment Systems (MORPS) to
“provide for the elimination of fees on
electronic fund transfers for personal
transactions, up to a specified threshold on the
number of transactions, and on payments for
micro-merchants,” according to an exposure draft
of the circular posted on its website.
BSP Governor Eli M. Remolona, Jr. earlier said
the regulator has been employing moral suasion
to influence the banking industry to permanently
remove charges for small-value person-to-person
online transactions.
The BSP has been encouraging banks since last
year to formalize the removal of these fees to
help boost digital payments.
The central bank said micro-merchants are
end-users that avail of merchant payment
acceptance activities and that fall under the
definition of microenterprises in the Magna
Carta for Micro, Small, and Medium Enterprises.
Micro-merchants have monthly aggregate gross
receipts that do not exceed P250,000, it said.
“This includes end-users who utilize either
merchant or personal accounts to facilitate
acceptance of electronic fund transfers,” the
BSP added.
Meanwhile, the proposed circular defines
personal transactions as fund transfers
“involving persons, which can either be a
remittance or lending of funds, done for
personal, family, or household purposes and not
conducted in the ordinary course of business.”
“An end-user is considered using his account for
personal transactions when the number of
person-to-person electronic fund transfers from
his account does not regularly exceed 10 times a
week,” the BSP said.
The proposed circular seeks to amend MORPS
Section 201, which contains rules on the fees
imposed on transactions performed under the
National Retail Payment System (NRPS) Framework,
to say that personal transactions “shall be
provided at no cost to consumers.”
“Accordingly, person-to-person electronic fund
transfers shall be offered free of charge for
personal transactions; provided, that
transactions beyond the threshold set in the
definition are still allowed subject to fees,”
the BSP added.
The draft rules also seek to amend MORPS Section
503, which contains guidelines for Operators of
Payment Systems-Merchant Acquisition License
(OPS-MAL) to remove transaction fees for
payments to micro-merchants.
“Notwithstanding the consumer pricing rules
under the NRPS Framework and subsequent relevant
issuances, OPS-MAL shall adopt a pricing
mechanism whereby merchant fees may be charged
to merchants availing of merchant payment
acceptance activities; provided, that such fees
shall be waived for those that are classified as
micro-merchants,” the central bank said.
“The pricing mechanisms for merchants that are
not covered by the exemption shall be
reasonable, transparent, market-based, and
proportional to the cost of the services offered
in order to sustain the business operations of
the parties involved,” it added.
Data from the central bank as of end-August
showed that transfer fees through digital
channels currently range from as low as P8 to as
high as P200 for individual InstaPay or PESONet
transactions.
The only BSFIs that do not impose any transfer
fees for InstaPay or PESONet transactions are
CIMB Bank Philippines, Inc.; Tonik Digital Bank,
Inc.; UNOBank, Inc., and Own Bank, the Rural
Bank of Cavite City, Inc.
Several other banks are currently offering small
fund transfers free of charge for a limited
period.
Sought for comment, Bank of the Philippine
Islands (BPI) President and Chief Executive
Officer Jose Teodoro K. Limcaoco said the draft
rules are a welcome development.
“For BPI, I’m okay with the circular. There are
some edits and clarifications that I’d like to
make, but in general, the concept is (on) the
right track,” Mr. Limcaoco told reporters on the
sidelines of a briefing on Monday.
If the circular is approved, payment service
providers (PSPs) will need to comply with the
amended rules by April 1, 2025.
The draft circular also proposes to lift the
moratorium on the increase of fee for InstaPay
and PESONet transactions for PSPs upon the
implementation of the circular.
Data from the BSP showed that the value of
transactions done through InstaPay and PESONet
climbed by 34.6% to P9.45 trillion in the
January-July period from a year ago.
The combined volume of transactions coursed
through the automated clearing houses jumped by
64.6% to 786.2 million year on year. — Luisa
Maria Jacinta C. Jocson |
_______________________________________________________________________________________ |
PH bankers' outlook remain optimistic for
2024-2025
By Anna Leah Gonzales
September 26, 2024, 1:32 pm
MANILA – The banking industry's outlook for the
next two years remains optimistic despite
macroeconomic challenges, results of the 2023
Banking Sector Outlook Survey (BSOS) released on
Thursday showed.
The BSOS gathers the sentiments and outlook of
presidents, chief executive officers, and
country managers of Philippine banks over a
two-year horizon.
The BSP said 147 banks responded out of the 173
banks surveyed across banking groups.
The total assets of these respondent banks
accounted for 97.7 percent of the total assets
of the country's banking system as of December
2023.
"Overall, respondent banks expect double-digit
growth in their assets, loans, deposits, and net
income, as well as plan to maintain robust
capital and liquidity positions to maintain
institutional stability," the BSP said.
Survey results showed that 64.6 percent of the
respondent banks expect a stable banking system
in the next two years, while 34.7 percent
project a stronger banking system.
The BSP said 70.1 percent of the respondent
banks also project double-digit growth in their
assets.
The results also point to improvement in the
banks’ expectations on the quality of their loan
portfolio as fewer respondent banks (48.7
percent from 52.4 percent in the 2022 BSOS),
anticipate a non-performing loan (NPL) ratio of
above 5 percent in the next two years.
"Across banking groups, most foreign banks and
universal and commercial banks are optimistic,
with the former anticipating a less than 1
percent NPL ratio while the latter foreseeing
their NPL ratio to settle within the range of 1
to 5 percent," the BSP said.
Survey results, however, showed that smaller
banking groups are more pessimistic as the
majority of thrift, rural, cooperative, and
digital banks expect their NPL ratio to be over
5 percent.
In terms of loan loss provisions, the majority
of respondent banks plan to maintain a high NPL
coverage ratio, ensuring adequate coverage of
potential losses in their loan portfolio.
The BSP said restructured loans are projected to
be at 2 percent of total loans for most
respondent banks.
In terms of priorities, the BSP said most
respondent banks indicate that they will
continue to focus on corporate and retail
lending, providing financial support to
sustainable and green projects, including key
sectors such as micro, small, and medium
enterprises, real estate, and households.
More than half of respondent banks also plan to
invest in digital transformation to enhance
their financial products and services.
Respondent banks, meanwhile, said credit,
operational, and macroeconomic risks continued
to be the primary concern of respondent banks,
as such they are actively enhancing their risk
governance to safeguard interest of their
depositors, and investors, as well as maintain
the safety and soundness of their institutions.
(PNA) |
_______________________________________________________________________________________ |
BSP eyes changes to external auditor selection
rules
September 18, 2024 | 12:01 am
THE BANGKO SENTRAL ng Pilipinas (BSP) is looking
to issue a revised framework for the
BSP-supervised financial institutions’ (BSFIs)
selection of external auditors.
“The BSP considers the external auditing
profession as a partner in promoting the safety
and soundness of BSFIs,” it said in a draft
circular posted on its website.
“In this light, the BSP is issuing the framework
for the selection of external auditors of BSFIs
pursuant to Section 58 of the Republic Act No.
8791, otherwise known as the ‘General Banking
Law of 2000,’ as amended.”
The central bank defined an external auditor as
an audit firm, partner or individual/sole
practitioner in public practice. External
auditors conduct audits and opinions rendered on
audited financial statements, it added.
These auditors “contribute to enhancing
corporate governance and empowering the public
and investors to make informed financial
decisions.”
The proposed circular revises the classification
system for external auditors to include digital
banks.
BSFIs must engage the services of an external
auditor that is included in the list of selected
external auditors, the BSP said.
“In this respect, a BSFI shall only appoint an
external auditor belonging to the same category
or from categories higher than the category of
the BSFI concerned as provided in this section,”
it added.
External auditors will be classified into three
categories, namely: Group A (universal and
commercial banks, foreign banks and branches or
subsidiaries of foreign banks, digital banks and
trust departments and trust corporations); Group
B (thrift banks, non-bank financial institutions
with quasi-banking license, virtual asset
providers and credit card issuers/acquirers);
and Group C (rural and cooperative banks,
non-stock savings and loans associations, pawn
shops and remittance and transfer companies,
money changers, and foreign exchange dealers).
The classification will be based on the external
auditors’ track record and the BSP’s assessment
of their eligibility. External auditors must
also adhere to the qualification and documentary
requirements set by the BSP.
Inclusion in the list of selected external
auditors for BSFIs will also be valid for a
period of five years or possibly shorter
depending on the BSP.
“The Monetary Board may require the BSFI to
appoint an external auditor from higher
categories as part of the BSP’s supervisory
action on the BSFI; or at the expense of the
BSFI, require the external auditor to undertake
a specific review of a particular aspect of the
BSFI’s operations/transactions,” it added.
The central bank may also “deploy its range of
supervisory enforcement actions to promote
adherence to the requirements outlined in this
section and bring about timely corrective
actions.”
“The BSP may downgrade the external auditor’s
category, shorten the period of validity of
inclusion, suspend, or delist the external
auditor from the List of Selected External
Auditors for BSFIs based on the result of its
assessment of the quality of the AFS and
compliance with the provisions of this section,”
it added.
Under the draft rules, sections of the Manual of
Regulations for Banks and Manual of Regulations
for Non-Bank Financial Institutions will also be
amended.
These include the sections regarding the
guidelines on the suspension or delisting of
external auditors in the list of selected
external auditors.The draft rules also introduce
a section on the disqualification and
watch-listing of directors and officers.
In terms of audit engagement and reportorial
requirements, the external auditor’s assessment
of the continuing compliance with provisions on
long association, including rotation of partner,
shall also be made available to the BSP upon
request. — Luisa Maria Jacinta C. Jocson |
_______________________________________________________________________________________ |
RBAP & RBRDFI Board of Directors and
Trustees celebrate the Rural Banking
Consciousness Week with the theme "Rural Banks:
Empowering Rural Communities through Inclusive
Banking."
|
_______________________________________________________________________________________ |
Geopolitical tensions keep Philippine CEOs up at
night, but optimism prevails
Sep 10, 2024 6:05 PM PHT
Lance Spencer Yu
MANILA, Philippines – The geopolitical
uncertainty dominating the world today — from
conflicts in Europe and the Middle East, to the
possibility of another Trump presidency — is
what worries most leaders of Philippine
companies.
Asked what keeps them awake at night as business
leaders, 62% of Philippine chief executive
officers named “geopolitical uncertainty” as a
concern, according to the 2024 Philippine CEO
Survey of PwC and the Management Association of
the Philippines (MAP).
The survey specifically highlights the
Russia-Ukraine war and the Israel-Hamas war, two
conflicts which have resulted in casualties in
the tens of thousands and directly decimated the
economies of the countries at war. But in
today’s globalized and interconnected world, the
effects of regional conflicts can go far beyond
their own borders.
“Aside from the billions of dollars needed to
rebuild the war-torn countries, economies across
the globe have been directly and indirectly
affected through fluctuating energy prices,
supply chain issues, and inflation,” the survey
explained.
Rene Almendras, MAP president and former
government official under Benigno Aquino III’s
Cabinet, explained that these wars can disrupt
supply chains moving oil, wheat, and other
goods.
“Geopolitical tensions may happen on the other
side of the world, but it will affect your
business because of supply chain,” Almendras
said on the sidelines of the MAP International
CEO Conference on Tuesday, September 10. “If the
war in the Middle East escalates, we all know
what’s going to happen. We worry about fuel
prices.”
Even port giant International Container Terminal
Services Incorporated or ICTSI, one of the
Philippines’ biggest companies, is keeping an
eye on “continuing economic and geopolitical
uncertainty,” warning that the Russia-Ukraine
and Israel-Hamas conflicts could “disrupt
businesses and institutions and pose threats to
world trade and economies, in general.”
Aware of the potential impact on trade and
economic relations, Philippine CEOs are also
watching the US presidential elections in
November 2024 with bated breath as Democratic
nominee Kamala Harris faces off against
Republican rival Donald Trump in what could be a
tight race.
“Many fear the prospect of another four-year
Trump presidency, as he might impose tariffs on
European and Chinese products. He may also cut
support to Ukraine and withdraw from several
foreign institutions,” the survey said.
China, POGOs, and other worries
Closer to home, the brewing tensions between the
Philippines and China remain a concern.
MAP was among the 17 business groups that issued
a joint statement in June condemning the
“harassment” of Philippine troops after another
clash in the West Philippine Sea.
Businesses have a reason to worry about what
rising Philippine-China tensions could mean. In
2023, China was by far the Philippines’ largest
supplier of imported goods and its second
largest export trading partner behind the United
States.
On top of the troubles in the West Philippine
Sea, MAP president Almendras also said the shady
workings of Philippine offshore gaming operators
(POGOs) could be bad for business.
For one, it exposes the weaknesses in the
government’s regulatory capacity, which has been
stringent enough to hurt the ease of doing
business in the country, yet loose enough to
allow illegal POGO activities and related
criminal operations to thrive.
“It’s how businessmen will feel. Ito kami,
bantay-sarado ng regulator (Here we are, with
the regulator watching us closely) here and
there, and yet a person can move in and out of
the country just like that?” Almendras said,
referring to POGO-linked Alice Guo, who was
recently recaptured after fleeing the country.
“Trade sanctions here, tariffs there, and yet
you realize your border is porous. It’s not that
safe.”
Besides geopolitical uncertainty, business
leaders also listed their other top concerns as
follows:
Uncertain economic growth (39%)
Uncertain revenue growth (38%)
Workforce issues (38%)
Environmental concerns (27%)
Social instability (23%)
Capital constraints (23%)
Others, such as politics and artificial
intelligence (24%)
Optimism prevails
However, despite these concerns, Philippine CEOs
still remain quite optimistic about their
business prospects.
Most leaders (86%) are confident about their
industry’s prospects for the next 12 months.
Likewise, 86% of CEOs believe that their company
will experience revenue growth in the next three
years. According to PwC Philippines deals and
corporate finance partner Trissy Rogacion, this
is the highest level of optimism since the
pandemic.
Asked about key growth drivers in the Philippine
economy, the CEOs pointed to infrastructure
development (59%), domestic consumption (51%),
foreign direct investments (41%), government
spending (39%), the BPO and services sector
(33%), OFW remittances (32%), manufacturing and
industry (21%), and tourism (20%).
“This optimism is driven largely by our
country’s incredible economic resilience and
sound macroeconomic fundamentals,” PwC chairman
and senior partner Roderick Danao said during
Tuesday’s conference, pointing out the
Philippines’ higher second quarter gross
domestic product growth rate and slower August
inflation rate.
The 2024 MAP CEO survey ran from July 8 to
August 9 and includes insights from 168
respondents across various sectors, with
majority of respondents representing large
corporations. – Rappler.com |
_______________________________________________________________________________________ |
PBBM: Sign the “Anti-Agricultural Economic
Sabotage Act” asap
By: Jake J. Maderazo - @inquirerdotnet
INQUIRER.net / 05:00 AM August 20, 2024
Agricultural smugglers are very active again.
Over 300 tons of smuggled vegetables were seized
by the Department of Agriculture in cold storage
facilities in Navotas city. The first raid
confiscated 132 tons of white onions estimated
at P21.2M while the second netted almost 90 tons
of smuggled carrots worth P13.4M. The operation
also seized 360 kilos of tomatoes, 10 kilos of
enoki mushrooms and 92.25 tons of imported white
onions in a container van.
In a statement, Agriculture Secretary Francisco
Tiu Laurel said the order of President Ferdinand
Marcos Jr. is clear: “Go after these smugglers
without let up,”. He also ordered the
Bureau of Plant Industry to suspend import
permits of these vegetables.
Earlier in June, Laurel revealed four
agricultural companies , two of which are in
fishery products, one in sugar and one in rice ,
will be blacklisted by his department for
involvement in smuggling activities. Up to this
point, he has not divulged the names of these
companies.
Laurel also admitted some companies attempted to
bribe him just so he would allow their smuggled
goods to enter the country. “ They bribed me
initially at P200,000 per container, then they
increased it to P1 million per container, but we
burned all of them” . (Sinuhulan ako ng
initially P200,000 per container, umakyat ng P1
million per container, sinunog namin lahat”)
“You will see in the next few months, marami
akong iba-blacklist na kumpanya, mga smugglers,
kahit kaibigan ko iba-blacklist ko,” Laurel
said. (I will blacklist several companies , and
smugglers, and even if they are my friends, I
will do so).
I remember in January last year, the House of
Representatives identified alleged big time
agricultural smugglers. DA secretary Laurel was
appointed only came in November 3 last year and
surely, he was unaware of these revelations. The
ten names tagged by Sultan Kudarat 2nd district
Rep. Horacio Suansing in a congressional hearing
, are allegedly involved in large-scale
agricultural smuggling in different points of
entry in the country. They are Michael Ma,
Lujene Ang, Andrew Chang, Beverly Peres, a
certain “Aaron”, Manuel Tan, Leah Cruz, Jun
Diamante, Lucio Lim, and Gerry Teves. Suansing
also wants to investigate the alleged
“consignees” of these people.
These 10 personalities were slated to appear in
a subsequent Jan. 30 hearing, but it was
canceled at the last minute. Investigation of
the smugglers were then transferred from the
Committee on Ways and means to the House
committee on Agriculture and Food. |
_______________________________________________________________________________________ |
Small banks lend P6.5 billion to MSMEs
BY Lee C. Chipongian
Aug 12, 2024 02:12 PM
Micro, small and medium enterprises (MSMEs)
borrowed P6.5 billion from thrift and rural
banks as of end-May this year, part of the
central bank program allowing banks to lend to
MSMEs as alternative compliance with the
reserves requirement (RR).
The latest data did not include small banks’
loans to eligible large enterprises as
alternative RR compliance.
The entire P6.5 billion are for MSMEs,
accounting for 0.5 percent of the total required
reserves for the affected reserve week.
Reserve requirements refer to the percentage of
bank deposits and deposit substitute liabilities
that banks must set aside in deposits with the
BSP. These funds cannot be used for lending.
Reservable liabilities include demand, savings,
time deposit and deposit substitutes.
The BSP relief measure on the use of new or
refinanced loans to MSMEs and eligible large
enterprises as alternative compliance with the
RR is only available to thrift and rural banks
as of July 2023. The big banks or the universal
and commercial banks are no longer part of the
pandemic-related reprieve.
However, the small banks which can still utilize
their outstanding loans to MSMEs as alternative
compliance with the RR can only do so until such
loans are fully paid, but not later than Dec.
31, 2025.
Meanwhile, both thrift and rural as well as
cooperative banks’ outstanding MSME and large
enterprises’ loans as of June 2023 that are past
due or non-performing or are extended, renewed,
or restructured are no longer eligible as
alternative compliance with the RR.
The BSP removed the temporary relief measure for
big banks to coincide with the reduction in the
RR ratios last June 30, 2023. The BSP reduced
the RR ratios for big banks, thrift, rural,
digital and non-banks.
The latest data on big banks’ RR-compliant loans
before its cancellation was P283 billion as of
end-May 2023. This includes the smaller banks’
loans under the relief measure.
Last year, the BSP cut both banks and non-banks’
RR ratios to single-digit levels by as much as
250 basis points (bps) for selected banks. The
lower ratios apply to the local currency
deposits and deposit substitute liabilities of
banks and non-banks.
At the moment, big banks’ RR ratio as well as
non-banks with quasi-banking functions is 9.5
percent, while digital banks’ RR ratio is six
percent.
Thrift banks’ RR ratio was cut to two percent
from three percent, while rural and cooperative
banks have an RR ratio of one percent.
Since changes in RRs have a significant effect
on money supply in the banking system, the BSP
is expected to reduce the RR ratio to a low of
five percent over time.
BSP Governor Eli M. Remolona Jr. said it himself
that the BSP will eventually reduce the RR ratio
to five percent within the course of his
six-year term as governor or until 2029. He even
noted that the ideal ratio is actually a zero
rate.
In Asia, the Philippines’ RR ratio is considered
one of the highest. Big banks’ RR ratio was at
its peak at 20 percent in 2014, and at the time,
it was the highest in the region. |
_______________________________________________________________________________________ |
Philippine financial resources nearing P32
trillion
BY Lee C. Chipongian
Jul 29, 2024 01:19 PM
The country’s total financial system resources
are poised to exceed P32 trillion around the
last quarter of 2024 amid the continued growth
of bank deposits, capital and in anticipation of
the central bank’s rate cuts.
Based on Bangko Sentral ng Pilipinas (BSP) data,
banks accounted for P26.463 trillion of the
total resources as of end-May which was 12.3
percent higher year-on-year. This brought the
total financial system resources to P31.787
trillion during the period, up 10.7 percent from
same time last year of P28.716 trillion.
Financial resources are held by banks and
non-banking financial institutions (NBFIs) as
funds and assets.
The BSP said the banking sector as the core of
the financial system continues to be resilient
and stable with a strong balance sheet,
profitable operations, sufficient capital and
liquidity buffers, as well as ample provision
for probable losses.
By banking group, the big banks or the 44
universal and commercial banks accounted for
bulk of total banking resources.
Meanwhile, the country’s 42 thrift banks
accounted for P1.102 trillion which was 9.76
percent higher compared to last year’s P1.004
trillion.
As of end-June this year, there are 364 rural
banks and 22 cooperative banks which contributed
P458 billion to total resources, up 13.36
percent from P404 billion same time in 2023. The
six digital banks held P105 billion of total
resources from P79 billion same period last
year.
NBFIs, on the other hand, accounted for P5.323
billion of total resources versus P5.151
trillion in 2022. NBFIs are investment houses,
finance companies, investment companies,
securities dealers/brokers, pawnshops and
lending investors. Non Stocks Savings and Loan
Associations (NSSLAs), credit card companies
under BSP supervision, private insurance firms,
Social Security System and the Government
Service Insurance System are also classified as
NBFIs.
Presently, the BSP is supervising 1,526 NBFIs
without quasi-banking function. These are
investment firms, NSSLAs and pawnshops. Only
five NBFIs have quasi-banking function which
means they can borrow funds from 20 or more
lenders. These include investment houses with
trusts business, financing companies, among
others.
To ensure the close monitoring of industry
capital health and asset quality, the BSP has
started its regular Systemic Risk Review (SRR)
as part of enhancements to its overall systemic
risk surveillance and analysis.
In a report, the BSP said it has been conducting
SRR for the Financial Stability Coordinating
Council (FSCC) as a “reference in crafting
recommended courses of action.”
The SRR included new studies, enhanced methods,
and “refined analytics that improved systemic
risk analysis, identification of contagion
channels, and assessment of conglomerate risks
in the financial system.” It also covered key
analyses and relevant notes related to the
pension system, the payments network, and the
risk price benchmark.
In 2023, the BSP conducted the second phase of
the Macroprudential Stress Test. This is a test
that captured new sets of data and improved
methodology to detect vulnerabilities that
affect credit risk in the financial system by
analyzing leverage, liquidity, contagion, and
concentration risks under different
macroeconomic scenarios, it explained.
The BSP has been improving its systemic risk
management models, metrics, and policies. |
_______________________________________________________________________________________ |
BSP issues rules on e-payment pricing
BY LEE C. CHIPONGIAN
May 27, 2024 12:56 PM
The Bangko Sentral ng Pilipinas (BSP) has
approved the guidelines on the pricing of
electronic payments or e-payments to be adopted
by both banks and non-banks to ensure
“transparent, fair, and competitive pricing” of
payment services.
BSP Deputy Governor Mamerto E. Tangonan, who
signed Memorandum No. M-2024-015 last May 24,
has recommended e-payments pricing practices to
be implemented by BSP Supervised Institutions
(BSls). These are pricing structures of
e-payment services to end-users.
The BSP has also started to conduct a survey on
BSIs' pricing structure.According to the memo,
the guidelines are “consistent with the
regulatory requirement of a Board-approved
policy on pricing, in line with the principles
outlined (in previous circulars)” which the BSP
has classified into three general categories:
reasonable and fair market-based pricing;
responsible pricing; and transparent pricing.
Tangonan said the guidelines on e-payments
pricing were based on the 2017 Circular No. 980
on the adoption of the National Retail Payment
System (NRPS) Framework and the 2022 Circular
No.1160 on the regulations on Financial Consumer
Protection to implement Republic Act No. 11765,
otherwise known as the "Financial Products and
Services Consumer Protection Act."
The memo included details in pricing governance,
on the reasonable and fair market-based pricing,
responsible pricing, and transparent pricing.
Under pricing governance, the BSP said BSIs will
adopt a policy on fees of retail e-payment
transactions, including the basis and
quantitative support for the setting of fees or
charges, and rationalization of the fee
structure or amount. Such pricing policy will
require monitoring, reporting and periodic
review.
To ensure reasonable and fair market-based
pricing, BSI's pricing policies should emphasize
the importance of avoiding price-fixing
agreements, adopting competitive fair pricing
strategies, and ensuring reasonable cost
recovery, said the BSP.
The BSP also noted that to have responsible
pricing, a BSI should follow the recommendations
in the memo and to provide e-payment services
“in a manner that is affordable for clients and
sustainable for the BSl.”
“BSls may also opt to have their product
governance mechanism assess whether algorithms
that influence or determine pricing may be
unfairly biased toward certain groups of people,
especially vulnerable segments,” said the BSP.
As to transparent pricing, the BSP said
“transparency in pricing is mainly achieved
through appropriate fee disclosure to end-users
and regulatory reporting.”
In December 2023, the BSP announced that it will
continue to impose a cap on interbank money
transfer fees by InstaPay and PESONet and bans
an increase in fees until such time when all
banks and non-banks implement zero rates on
small e-payment transactions.
The BSP first imposed a moratorium on the
automated clearing houses’ fees on Dec. 28,
2021, and ordered all BSP supervised financial
institutions with InstaPay and PESONet not to
increase their current fund transfer fees until
40 percent of all retail payments have migrated
into digital or e-payments.
Since as of end-December 2022, 42.1 percent of
all payment transactions have shifted to digital
form, the BSP said that subject to a review, the
moratorium on InstaPay and PESONet fees will
only be lifted “when zero fees for small
e-payment transactions have been implemented by
the payments industry.”
Based on BSP data as of end-March this year, the
value transactions of banks and non-banks via
the PESONet and InstaPay reached P3.81 trillion,
up 33 percent from same time last year of P2.87
trillion.
The combined volume of both PESONet and InstaPay
in the first three months of the year increased
by 70 percent to 309.3 million versus 182.4
million in 2023.
InstaPay is a real-time, low-value digital
payments facility that substitutes for cash
transactions. PESONet is a batch electronic
funds transfer service that provides a viable
alternative for checks and recurring payments.
Currently, there are 86 InstaPay participating
banks and non-banks of which 22 are big banks;
20 are thrift banks; 18 are rural banks; five
are digital banks; and 21 are non-bank financial
institutions (NBFIs) as e-money issuers.
As for PESONet, there are 109 participating
banks and non-banks, of which 40 are big banks;
38 are rural banks; 18 are thrift banks; five
are digital banks; and eight are NBFIs.
The BSP has targeted to migrate 50 percent of
all payment transactions into digital form by
the end of 2023 and it looked like this goal has
been achieved, according Tangonan. The report
will be released in July this year as the BSP is
still finalizing the data. |
_______________________________________________________________________________________ |
Department of Agriculture chief completes ‘dream
team,’ biggest in agency history
Bella Cariaso - The Philippine Star
May 27, 2024 | 12:00am
MANILA, Philippines — The “dream team” of
Agriculture Secretary Francisco Tiu Laurel Jr.
is already complete, with 26 undersecretaries
and assistant secretaries, the biggest number in
the history of the Department of Agriculture
(DA).
In an interview, Agriculture Assistant Secretary
and spokesman Arnel de Mesa said that the last
official to be appointed to complete the dream
team was Assistant Secretary for administration
Allen Kristopher Anarna.
“According to Secretary (Tiu Laurel), his team
is already complete. The last to join was
Assistant Secretary Anarna,” De Mesa said.
At least 13 were appointed as undersecretaries
and 13 officials were designated as assistant
secretaries.
De Mesa said that the last appointment for the
undersecretary post to be issued by the Office
of the President was Undersecretary for policy,
planning and regulations Asis Perez.
“We were waiting for his (Asis appointment
paper), it already came out,” he added.
Aside from Asis, the other undersecretaries are
Roger Navarro (operations), Christopher Morales
(rice industry development), Allan Umali
(administration), Nora Oliveros (finance),
Drusila Esther Bayate (fisheries), Zamzamin
Ampatuan (Bangsamoro Autonomous Region in Muslim
Mindanao), Mercedita Sombilla (bureaus), Agnes
Catherine Miranda (attached agencies and
corporations), Deogracias Victor Savellano
(livestock), Jerome Oliveros (special concerns
and official development assistance), chief of
staff Alvin John Balagbag (inspectorate and
enforcement) and Cheryl Marie
Natividad-Caballero (high value crops). |
_______________________________________________________________________________________ |
Harsh solar realities, i.e. opportunities for
bankers
CTALK - Cito Beltran - The Philippine Star
May 22, 2024 | 12:00am
I attended my first solar power trade show last
Monday and like the glare from the sun, the
trade show was a harsh reality for an idealist
like me. With family and brother-in-law in tow,
we trooped over to the SMX Convention Center and
were pleasantly surprised to see such long lines
of Filipinos eager to attend and learn from the
“Solar & Storage” event even before 9 a.m.
At the very least, it proved that Filipinos want
to learn and believe that solar energy can be
beneficial to their daily lives. In terms of
profile, those who attended were mostly middle
to lower middle-class individuals in search of
affordable or cheaper alternatives for
electricity.
Judging from reactions and conversations, the
show was technical nosebleed and overwhelming,
with 95 percent of the booths and displays
presenting solar panels, inverters, frames and
cables, construction accessories, batteries,
etc., almost all from China.
In fact, the presence of Chinese suppliers and
companies was so much that you felt you were
attending an exposition in China, not SMX. It
was more of a supplier’s festival than a
consumer event, unless the intended consumers
were installers and service providers.
Many participants were targeting companies,
business establishments and others were casting
for potential dealers or local representatives.
As I eavesdropped on the queries, the sentence
often mentioned was “It’s too expensive” or “The
minimum orders are too high, and the market is
still undeveloped.”
Sadly, the trade show occupied two levels of the
SMX Convention Center but only a small area of
about 50 square meters was dedicated to
information and education, where about five
speakers each got 40 minutes to give a talk on
“An introduction to photovoltaic solar panel
installation,” “How to design a solar PV
system,” “Creating a balanced inverter and
component system,” “What is a hybrid inverter
and storage system,” etc.
All those helpful information were provided by
members of the Association of Solar Installers
of the Philippines, but the space was so
jampacked it was difficult to stand for hours,
so we left.
What we thought was going to be a one-day
excursion lasted only two hours as the technical
nosebleed and disconnect got worse. In terms of
takeaways, we observed that there was only one
bank that participated in the event, which was
BPI or Bank of the Philippine Islands.
We literally rushed to their booth on the ground
floor to find out what programs they had for
financing solar power system installation, but
that too was disappointing because BPI simply
provided a minimum funding of P400,000 under a
“Housing Loan” category.
I figured that whoever came up with the loan
package must have talked to several installers
or colleagues in the bank who had installed
solar power set-ups in their homes. As I
mentioned in a previous column, providers we
asked in the past averaged their estimates at
P500K per house.
So, the system under consideration is for big
houses and those in the A/B economic bracket,
not for middle or lower middle class, farmers,
producers or ordinary households, many of whom
have asked online about systems that are in the
P100,000 to P200,000 range.
I still choose to commend BPI for dipping a toe
into the event because it may have helped to
convince them that there is a large potential at
the consumer level if they get out of the A/B
rich enclave cluster.
Incidentally, we did see an “American” promoting
his version of “rent to own” solar power set-up
in the Visayas. The idea, as he explained it,
was they would get the history of electric
consumption and payments of an applicant, do the
computations and if it fits, the homeowner will
simply pay the average amount saved via solar
power towards the installation and equipment.
Afterwards, someone I spoke with recalled the
Agri-Agra Law that Senator Cynthia Villar,
Congressman Junie Cua and former secretary Ben
Diokno crafted and passed into law in 2022. The
revised law requires banks to allocate 25
percent of available loans to agriculture and
fisheries operations or cashflow.
I’m guessing that the law creates a more
beneficial platform than the standard “housing
loan” or “personal loan” which probably have
higher interest rates and equity.
The problem with the Villar-Cua law is that it
does not cover the households and backyard farms
that provide the bulk of goods and services in
agriculture. The law is excluding producers and
contributors who could re-channel electricity
payments to capital or goods as well as provide
their own water distribution or irrigation
needs.
Perhaps Senator Cynthia Villar might want to
lead a movement for barangay communities to
become independent solar power producers instead
of being captive to fossil fuel generated
electricity that is inefficient and extremely
expensive. Many provincial barangays have large
open spaces or can be interconnected as a
community grid and be direct beneficiaries.
Still on the topic, conversations also touched
on the discrepancy or imbalance in terms of
incentives and legislated support. Someone
pointed out that power generators and
cooperatives all benefit from “system loss”
support, Feed In Tariff or FIT that funds
alternative sources of energy.
But nothing has been done to incentivize or
reduce costs for acquisition of consumer level
alternative power generation. While the
government and politicians drag their feet on
helping Filipino households and farmers, they
are supporting big corporations and businesses
to get a huge head start on solar energy
development and eventually gain control of
market and pricing yet again!
As harsh as the learning may have been, we
managed to hook up with the installers group and
we have resolved to go solar! |
_______________________________________________________________________________________ |
Agriculture loans surge to P3.2 trillion
Keisha Ta-Asan - The Philippine Star
May 15, 2024 | 12:00am
In a report on the Philippine financial system
for the second semester of 2023, the central
bank said the level of compliance with the
mandatory agriculture, fisheries and rural
development (AFRD) financing under Republic Act
11901 sharply improved.
It said banks allocated 37.7 percent of their
total loans for AFRD financing as of June 2023,
higher than the 10.3 percent allocated for
agri-agra credit in the same period a year
earlier.
“This shows that key enhancements under Republic
Act 11901, or ‘The Agriculture, Fisheries, and
Rural Development Financing Enhancement Act of
2022’ have enabled banks to contribute to the
development of the AFRD sector,” the BSP said.
Pursuant to Section 13 of the AFRD Law, RA 11901
lapsed into law on July 2, 2022 and became
effective on Aug. 1, 2022.
The latest law repealed RA 10000 or the
Agri-Agra Law and abolished the distinction
between the 10 percent agrarian reform and the
15 percent agricultural credit, making the
credit quota more inclusive to the entire
agricultural value chain.
Monetary Board member Bruce Tolentino earlier
said reforms made on loans extended to the
agriculture sector, through RA 11901, are now
generating positive results in the banking
system.
“We’ve had the reform for one year, and in that
year, loans to farmers and agriculture have
quadrupled,” Tolentino has said, adding that the
penalties paid by banks to the BSP have been cut
down by six times.
According to Tolentino, the banks opted to pay
the penalties since it was “cheaper” than
lending to the farmers prior to the passage of
RA 11901.
He also said that lending to the agriculture
sector is better done through an entire value
chain approach instead of just being limited or
targeted to farmers.
For the BSP’s part, the central bank rolled out
a report template for the mandatory AFRD
Financing Act to monitor banks’ compliance with
the AFRD financing requirement.
The BSP also issued Circular 1159 on Nov. 4,
2022, which recognized sustainable finance as an
eligible form of compliance with the minimum
requirement for AFRD financing.
“(The BSP) will also capture data that can be
used to assess the effectiveness of the
provisions of the law and inform policymaking,”
the central bank said.
The BSP will also adopt targeted initiatives to
ensure that smaller banks can cater to
agriculture, fisheries and rural communities.
It said that small banks should be equipped to
provide suitable financial products and services
to these clients amid a competitive digital
financial environment. |
_______________________________________________________________________________________ |
Banks to ramp up lending to agriculture sector
Keisha Ta-Asan - The Philippine Star
May 12, 2024 | 12:00am
MANILA, Philippines — Banks are looking to
increase lending to the agriculture sector this
year amid better economic conditions, higher
demand for agricultural loans and consolidation
of government programs that would boost banks’
agricultural loan portfolio.
The results of the survey jointly conducted by
the Bangko Sentral ng Pilipinas (BSP) and the
Department of Agriculture showed that 72 percent
of respondent banks were planning to raise their
loan volumes to the agri sector.
“The proportion of those expecting to increase
agricultural loan volume vary by type of banks
with rural and commercial banks (around 76
percent) being the most bullish with government
banks following closely at around 73 percent,”
the BSP said in the 2022 Countryside Bank Survey
baseline report.
The proportion of banking units who saw growth
in agricultural lending this year stood at 74
percent in 2024 for thrift banks, while
universal and commercial banks were at around 38
percent.
“There is scope to consider that universal and
commercial banks may be implementing a form of
division of labor with agricultural lending
being assigned to affiliated thrift bank and
rural bank subsidiaries,” the BSP said.
Excluding digital banks, 42.6 percent of
Philippine banks are looking to increase their
agri loan volumes by up to 10 percent in 2024
while 15.3 percent of lenders plan to raise agri
lending by 11 to 20 percent.
Around 7.5 percent of banks said they would ramp
up agricultural loan volumes by more than 20
percent this year. Broken down, 13.6 percent
were rural and commercial banks, followed by
thrift banks (11.3 percent), government banks
(4.1 percent) and big banks (1.2 percent).
Meanwhile, 23 percent of respondent banks said
there would be no change in lending stance and
one percent replied that they would lower loan
volume to the agricultural sector.
According to the survey, banks want to target
new borrower segments by expanding their
agricultural loan volume this year.
Other factors that are encouraging banks to
increase lending to the agriculture sector
include improving economic conditions favorable
to agricultural financing and higher demand for
agricultural loans, the BSP said.
According to respondent banks, there is a need
for more integration of government programs that
could help optimize lenders’ agricultural loan
portfolio this year.
But in order for banks to increase lending to
the agriculture sector, respondents said there
are necessary activities, programs, products or
services that are crucial in expanding
agricultural loans.
Banks also specified improvements in their
current offerings. This includes increasing
credit lines for borrowers with no collateral
but with good track record, removing collateral
requirement, lowering interest rate and aligning
loan maturity with project life.
Lenders could also offer incentives for good
loan repayment performance, streamline loan
processes with the use of technology, educate
borrowers and improve the skills of bank staff
on agricultural lending.
“All in all, banks are refining their approach
in lending to the agricultural sector in order
to cater to more agricultural borrowers and
further expand their agricultural loan
portfolio,” the BSP said.
Data showed that the share of agriculture loans
and services granted by the banking sector went
up to 18.1 percent in 2022 from 17.6 percent in
2021.
Likewise, the total value of agriculture loans
surged by 36.7 percent to P213.1 billion from
P155.9 billion. |
_______________________________________________________________________________________ |
Producers Savings Bank acquires Leyte rural bank
Keisha Ta-Asan - The Philippine Star
April 23, 2024 | 12:00am
MANILA, Philippines — Producers Savings Bank
Corp. has completed its merger with one more
rural bank, bolstering the bank’s assets and
profit growth via its branch network expansion.
BSP Deputy Governor Chuchi Fonacier issued
Circular Letter 2024-022 announcing that the
merger of Producers Bank with Rural Bank of
Maasin Inc. has taken effect on April 1.
Fonacier said the Securities and Exchange
Commission (SEC) approved the plan and articles
of merger executed between the two banks on July
3, 2023.
Producers Bank, the surviving entity, will
absorb all the assets and liabilities of the
rural bank located in Southern Leyte.
The country’s eight largest thrift bank in terms
of assets earlier said that expanding its
network of branches allowed the bank to reach
out to unbanked and underserved areas in the
countryside where its products and services are
needed by its target markets.
Earlier in 2021, the bank acquired five banks
namely Bangko Carrascal Inc., Peoples Bank of
CARAGA Inc., Rural Bank of San Quintin Inc.,
PBCOM Rural Bank Inc. and Masuwerte Rural Bank
Inc.
The number of branches brought about by the
mergers in 2021 totaled 41, bringing its branch
network as of end-2021 to 249 branches spread
over 14 regions and 50 provinces in the country.
The thrift bank continued its branch expansion
in 2022, opening its 260th branch in Benito
Soliven, Isabela in December 2022.
The BSP approved the Rural Bank Strengthening
Program (RBSP) in March 2022 to help boost the
operations, capacity and competitiveness of
rural lenders in recognition of their role in
promoting development in the countryside and
financial inclusion.
As part of the RBSP, the central bank raised the
minimum capital requirement for rural banks to
at least P50 million to further strengthen the
industry.
Under the new capital structure, the minimum
capitalization of rural banks will be P50
million for those with a head office and only up
to five branches, P120 million for those with
six to 10 branches, and P200 million for small
banks with more than 10 branches.
Other banks gobbled up by Producers Bank include
Rural Bank of Bustos Inc. Rural Bank of Sto.
Domingo (Nueva Ecija) Inc., Rural Bank of
Rosales in Pangasinan, New Rural Bank of
Victorias in Negros Occidental, Iloilo City
Development Bank, Rural Bank of Cainta in Rizal,
Rural Bank of Tayabas in Quezon, Tower
Development Bank in Bulacan, and Rural Bank of
San Fabian in Pangasinan.
It also acquired Rural Bank of Pamplona
(Camarines Sur) Inc., Rural Bank of President
Quirino (Sultan Kudarat) Inc., Bangko Rural ng
Pasacao (Camarines Sur) Inc., Bangko Rural ng
Magarao (Camarines Sur) Inc., Rural Bank of San
Fernando (Camarines Sur) Inc., Rural Bank of
Barotac Nuevo Inc. and Rural Bank of Sibalom
(Antique) Inc. |
_______________________________________________________________________________________ |
BSP approves 15 new banking offices in Q4 2023
BY LEE C. CHIPONGIAN
Apr 3, 2024 03:52 PM
Based on a circular letter (CL-2024-001) signed
by BSP Deputy Governor Chuchi G. Fonacier on
March 26, 2024, only the Sy-led BDO Unibank Inc.
of the universal and commercial banks applied
for one BLU in Angeles City.
Meanwhile, 14 were applications submitted by
rural and cooperative banks, of which one was
for a regular branch and 13 for BLUs. The rural
banks were as follows: Card MRI Bank, a
microfinance bank; Country Builders Bank;
Rang-ay Bank; and Rural Bank of San Narciso.
The BSP has been approving less and less regular
branches of banks and more of the streamlined
units with limited banking services.
The new approval brought to a total of 29 new
regular branches that opened in the last quarter
last year and 32 BLUs in the same period.
Among the big banks, BDO opened five regular
branches in Nueva Vizcaya and Batangas, and one
BLU in IloiIo City.
Land Bank of the Philippines opened a BLU in
Liloan, Cebu, while Maybank Philippines has a
new one in Legazpi CityFor the regular branches,
Metropolitan Bank & Trust Co. opened one regular
branch in Rosario, La Union, while Security Bank
Corp. opened seven regular branches in different
parts of the country include in Bataan, Cagayan
de Oro City, Cebu City and Iligan City.
Regular branches are full-sized banks, mostly
traditional brick-and-mortar branches or
contained within a building and offers full
banking services.
The difference between regular branches and BLUs
is that the latter have limited banking
activities but could provide a wide range of
products and services suited for servicing the
needs of the market except for sophisticated
clients with aggressive risk tolerance.
As of end-February this year, the BSP is
supervising 44 big banks, 42 thrift banks, and
388 rural and cooperative banks.
Presently, there are 12,877 bank branches in the
country, of which 7,152 are operated by the big
banks, 2,560 by thrift banks, and 3,165 by rural
and cooperative banks.
Since the pandemic and the rise of digital
banking including e-wallet and other online-only
or mobile financial transactions in the last
three years, the banking industry has
reorganized, streamlined and consolidated their
traditional brick-and-mortar branches, and opted
to digitalized more of its products and
services.
Based on the BSP's Banking Sector Outlook
Survey, the digitalization of banking products
and services continued to be identified as a top
strategic priority by all banks. |
_______________________________________________________________________________________ |
Failed modernization
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:30 AM March 19,
2024
Over 26 years ago, Congress passed Republic Act
No. 8435, known as the Agriculture and Fisheries
Modernization Act or Afma. One would expect that
two and a half decades later, we should be
seeing palpable improvement and modernization in
our farm and fisheries sector. But a recent
assessment by the country’s foremost think tank,
the Philippine Institute for Development
Studies, asserts that our agriculture and
fisheries (AF) sector remains far from
modernized. Indeed, not a few Filipinos probably
feel that outcomes on farmers’ incomes and
welfare, and food availability and accessibility
including prices, point to retrogression rather
than modernization. It shows that enacting laws
is far from enough to achieve their declared
lofty goals. And in a country where laws have
been cynically described as mere suggestions,
Afma feels like a painful joke.
Over the weekend, I was at a lunch table with
seasoned and venerable figures in Philippine
agriculture ranging in age from the 70s to 90s,
all of them fellow members of the Coalition for
Agriculture Modernization in the Philippines
(Camp). They all studied at the University of
the Philippines Los Baños (UPLB), indisputably
the country’s knowledge capital in agriculture,
and devoted decades of their professional lives
to pursuing the sector’s modernization. I posed
to them the question: “Is Philippine agriculture
now modern?” Not one answered in the
affirmative.
National Scientist Dr. Emil Q. Javier clarified
that there are “pockets of modernization” out
there, and singled out the pineapple and banana
export industries in Mindanao as examples. He
was quick to note that our most modern
agriculture industries appear to be those where
government largely keeps its hands off. In stark
contrast, those with the heaviest government
intervention, namely rice, coconut, and
sugar—all of which have distinct institutions
focused on them—are the most backward and
troubled. It seems a glaring anomaly that the
more government gets involved in an industry,
the worse it performs. For his part,
biotechnology expert and champion Dr. Ben Peczon
doesn’t see a coherent plan guiding our
agricultural authorities’ actions. Others
retorted that on the contrary, there have been
numerous plans. But Camp president Dr. Eufemio
Rasco, a major author of the National
Agriculture and Fisheries Modernization and
Industrialization Plan 2021-2030 or Nafmip, is
wondering what happened to it, as nothing is
being heard about it now from top agriculture
officials.
Dr. Mario Labadan, whose company AgriSpecialist
Inc. has long successfully put science to good
use in industry, lamented how government itself
is undermining his substantial missionary
investment to commercialize UPLB’s proven Bio-N
microbial fertilizer. He asks, “Where is the
sense in government pushing farmers to favor
imported fertilizers over far environmentally
friendlier Bio-N, at three times the cost?”
Someone cynically replied that there’s more
money to be made (i.e., by less-than-honest
officials) from large import procurements than
from pushing homegrown inputs, even if
demonstrably superior. Unfortunately, the DA’s
checkered track record with procurement scandals
over the years lends credibility to such naughty
suspicions.
“How can our agriculture modernize, when the
young people who would logically bring about
modernization are turning away from the sector?”
mused Dr. Fernando Bernardo, founding president
of the Visayas State College of Agriculture (now
the Visayas State University), and most senior
in the group at 94. Rasco observed that young
people venturing into technology-enabled
agribusiness often are not even children of
farmers, whose own offspring have only seen
persistent poverty out of their parents’
occupation. But we may yet find hope in those
innovative, nonfarm-raised young people who are
finding exciting technology applications at all
links of the value chain spanning finance
(crowdfunding, other financial technologies for
farmers); field production (soil sensors,
drones, field robots); processing (robotics,
artificial intelligence); transport, logistics,
and tracking (Grab/Uber-type platforms,
blockchain); and marketing (e-commerce,
app-based farm-to-customer platforms).
All told, the group found consensus on three
fundamental must-do’s: (1) consolidate our
fragmented farms via cooperatives, contract
growing, or even easing land ownership ceilings
for agribusiness investors; (2) diversify our
farms by shifting more attention and budgets
well beyond the disproportionate share of rice;
and (3) work through local governments by
capacitating, empowering, and funding them to do
the needed work on the ground that will lead our
farmers into modernization. Even as it seems
unlikely to happen within our aging group’s
remaining lifetimes, hope always springs
eternal. |
_______________________________________________________________________________________ |
BSP wants rural banks to consolidate
March 7, 2024 | 12:01 am
THE Philippine central bank wants the rural
banking industry to consolidate to make it more
resilient, according to its governor.
“What we’re trying to do is consolidate the
industry and make it more solid, partly with
more capital and by allowing… consolidation,”
Bangko Sentral ng Pilipinas Governor Eli M.
Remolona, Jr. told a forum on Wednesday.
“This is a troubled industry,” he said. “They
don’t really lend to agriculture anymore. They
are more into consumer lending. They are not
serving the purpose which they were established
for.”
In September 2022, the central bank raised the
minimum capital requirement for rural banks to
P50 million. It covers small lenders with a head
office and as many as five branches regardless
of location.
Rural banks with six to 10 branches must have a
minimum capital of P120 million, while those
with more than 10 branches must have a capital
of at least P200 million.
The industry has raised concern about the
capital hike requirement. Rural banks have until
2027 to meet requirements.
Remolona said the BSP is studying ways to merge
these banks. “We’re trying, we’re looking, we’re
analyzing.”
Last month, the Asian Development Bank approved
$655,000 worth of grants to nine rural lenders
and a rural bank consortium to support their
digitalization and capacity-building. — Beatriz
Marie D. Cruz |
_______________________________________________________________________________________ |
Seven-point agriculture agenda
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:30 AM February
27, 2024
Shortly before the Marcos administration began,
I wrote of “seven deadly sins” in the
historically flawed governance of our
agriculture sector, our economy’s backbone
(”Seven deadly sins,” 6/14/22). I’ve long argued
that our agriculture’s sorry state comes not
from a lack of knowledge or technology, which we
once taught our neighbors. Rather, it traces to
our age-old failure to enable our farmers to
apply and benefit from that knowledge, due to
problematic politics, flawed governance, and
weak institutions in the sector. I shared these
thoughts in a private meeting with Department of
Agriculture (DA) Secretary Francis Tiu Laurel
Jr., who asked me to elaborate on how to undo
the seven sins. Of course, I have no illusions
that my advice has taken any precedence over
that of countless others, knowing that I am but
one in a cacophony of voices constantly feeding
advice, solicited or not, to the good secretary.
Those seven sins logically lead to a seven-point
agenda, outlined here. Some may not agree with
all of them, but I plan to revisit them when
this administration ends in 2028, to see what
has been done, and assess any significant
improvements achieved.
One, let provinces lead in managing their farms
and fisheries, to reverse the sin of persistent
top-down management of the sector despite
mandated devolution since 1991. To its credit,
the previous administration already rolled out a
long overdue province-led agriculture and
fisheries extension system or Pafes. For it to
work, the DA must limit itself to “steering,”
but take full responsibility for capacitating
the provinces for the “rowing,” including
downloading much of its budget to them as
matching grants.
Two, consolidate management of small farms into
efficient production units, to correct the sin
of failure to address loss of economies of scale
from farm fragmentation. A Bureau of
Agri-Industry and Cooperatives Development must
be reestablished in the DA. Congress must lift
land ownership ceilings for agri-business
investors, who must be attracted with
appropriate incentives. Contract growing must be
fostered in a wider variety of farm and fishery
products like in Thailand, and LGUs must provide
longer and more secure leases for aquaculture
investors.
Three, pursue maximum productivity in our rice
lands (and all croplands), but help farmers in
marginal rice lands shift to better-suited crops
that will raise their incomes. The sin of undue
obsession with full rice self-sufficiency only
brought us farther from it as it was pursued
through excessive trade controls that bred
complacency from keeping productivity and cost
competitive with our neighbors. Worse, it led to
neglect of other crops, which received far less
attention and budget.
Four, look at the entire value chain and
overcome the sin of inordinate focus on
production, rather than farmers’ and fishers’
incomes and welfare. Empower farmers and fishers
to reap gains from value-adding through
participation in transport/logistics and
processing via coops. Foster local and foreign
investments in agri-based industries and rural
transport and logistics via DA’s Agri-Industry
Business Corridors program.
Five, shift to a function-based structure and
budget, away from the traditional
commodity-based orientation that proved
inefficient, ineffective, and distortive. Recast
DA to focus on its central “steering” functions:
standards setting; integrated research for
development and extension (R4DE); monitoring and
evaluation; regulation that is science-based and
separate from developmental functions;
international relations; and most critically,
capacity building for local government units.
Six, pursue greater trade openness to reverse
the sin of excessive trade protection that
removed pressure for both government and
producers to pursue higher productivity and
competitiveness with our neighbors—and moved up
our prices further away from theirs over time.
Use transparent tariffs, not trade controls, to
provide calibrated protection for domestic
producers, while opening trade to wider players
to forestall capture by cartels. Ensure that
sanitary and phytosanitary requirements are
science-based and not used as undue trade
barriers.
Seven, and possibly most crucial, make financing
widely accessible to small farmers and fishers.
Study how Thailand and South Korea did it in
conjunction with cooperative development. Work
with Congress to change regulatory metrics
applied to Landbank (and the Development Bank of
the Philippines) to let them focus primarily on
their mission to finance small farms (and
firms). Foster application of innovative
financial technologies for small farmers and
fishers.
We can’t fix Philippine agriculture with tired
old approaches that never worked, or by adding
more wheels to a defective vehicle moving in the
wrong direction. |
_______________________________________________________________________________________ |
EDITORIAL Stuck in the gray list
The Philippine Star
February 26, 2024 | 12:00am
While moving heaven and Earth to amend the
Constitution ostensibly to attract more foreign
investments, the government is taking its sweet
time getting out of the so-called gray list of
jurisdictions under increased monitoring for
money laundering and counterterrorist financing.
Being on the gray list of the Paris-based global
dirty money watchdog Financial Action Task Force
makes it harder to do business in the
Philippines. Consequent restrictions on
cross-border transactions make it difficult to
obtain credit and limit foreign direct
investments. Remittances of overseas Filipino
workers are also affected. Yet the country has
been unable to get out of the FATF gray list
since its inclusion in June 2021.
At the end of a two-day plenary in Paris last
week, the FATF announced that the Philippines
would remain on the gray list along with 24
other countries and jurisdictions. While noting
“some positive progress” in the Philippine
effort, the FATF wants two strategic
deficiencies addressed with urgency. One is the
money laundering and terrorist financing risk
linked to casino junkets. Another is the weak
investigation and prosecution of money
laundering and terrorist financing cases.
The FATF also wants to see effective risk-based
supervision of designated non-financial
businesses and professions as well as
enhancement and streamlining of law enforcement
agencies’ access to beneficial ownership
information, which must be accurate and
up-to-date.
Deadlines for implementing action plans to
address the strategic deficiencies expired in
January 2023. But the Philippines, which has one
the world’s strictest bank secrecy laws, has
always had problems in meeting anti-money
laundering standards set by the FATF. It took a
long time for the country, for example, to
include corruption and related offenses among
the covered transactions under the Anti-Money
Laundering Act.
There is a National Anti-Money Laundering /
Counter-Terrorism Financing /
Counter-Proliferation Financing Coordinating
Committee to promote a unified approach among
relevant agencies in addressing the deficiencies
cited by the FATF. Yet the country continues to
struggle to get out of the gray list. Some
developments even go in the opposite direction,
promoting secrecy rather than transparency in
government activities. The quality of governance
is among the key factors considered by foreign
investors in picking destinations for their
money. Meeting FATF requirements is a good
indication of this factor. |
_______________________________________________________________________________________ |
Loans and collection: Key risks for digital
banks today
BY LEE C. CHIPONGIAN
Feb 10, 2024 11:39 PM
Taking deposits from the public is no problem
for the six online-only digital banks in the
country. The challenge lies on how to
effectively provide loans to unsecured borrowers
and its collection procedures.When asked why
digital banks have higher non-performing loans
(NPL) compared to other banking categories, the
BSP chief said this all boils down to digital
banks’ challenge of disbursing the loans.
“At least nakaka pahiram. Mahirap magpahiram ng
digital kasi – sabi nila – kung sisingil ka,
hindi pwedeng digital. Kailangan may tao daw na
sisingil. Yun ang experience ng mga digital
banks. Pero meron magaling, meron hindi magaling
dyan (At least, they can lend to borrowers. They
say it’s a challenge to lend because it’s also
difficult to collect payments via digital means.
A person has to do the job of collecting loan
payments. That’s the experience of digital banks
here. But then there are digital banks that are
effective (when it comes to loans and
collection) and some are not,” said Remolona.
Based on the latest BSP data, as of December
2023, digital banks’ gross NPL ratio stood at
14.49 percent compared to 3.23 percent industry
gross NPL. The peak was 20.25 percent recorded
in November 2023.
Last year, the six digital banks’ total loan
portfolio amounted to P24.706 billion. There is
no comparison yet for 2022 data. The data on
digital banks’ asset quality ratios only started
last May 2023The total NPLs which are unpaid
loans for more than 30 days after due date,
reached P3.599 billion in December from P4.088
billion in November.
Past due ratio or the rate of delinquency was
also high at 21.61 percent in December 2023 but
the November ratio was even higher at 30.64
percent. Comparably, industry past due ratio was
3.95 percent.
Weak asset quality, high costs
In a Jan. 30 report, “Philippine Banks Outlook
2024: Better Economic Prospects Will Bolster
Sector” the credit rating agency S&P Global
Ratings said the asset quality of digital banks
in the Philippines is weaker than the rest of
the banking sector.
“This reflects their heavy exposure to unsecured
consumer loans and the largely untested credit
profile of their target customers. We expect
these banks to continue making losses because of
very weak asset quality and high costs,” said
S&P credit analyst Nikita Anand.
But the report also noted that so far, they have
not seen any “irrational deposit pricing in
response to the high rates offered by new
digital banks.“These banks' operations are
nascent and reflect initial struggles, with a
market share of just 0.4% of sector deposits,”
said S&P Global.
S&P Global also said in its report that since
their operations are still new, digital banks
still have a low market share, on top of weak
asset quality and high costs which are
“constraining profitability”
In addition, digital banks’ loan portfolio is
riskier. The “high share of unsecured consumer
loans and untested credit profile of target
segment is leading to significantly weaker asset
quality,” said the credit watchdog.
Based on data from the BSP as of end-September
2023, about 64.8 percent of digital banking
loans are personal loans, the rest are reverse
repurchase agreements at 18.5 percent; other
consumer loans at 16 percent; and corporate
loans at 0.8 percent.
“Digital banks have heavy exposure to unsecured
loans,” said S&P Global.
Limiting digital banks
There are six digital banks in the Philippines:
government-owned Overseas Filipino Bank Inc. of
Land Bank of the Philippines; Tonik Digital Bank
of Tonik Financial Pte Ltd. of Singapore; MAYA
Bank of the PLDT Group; UNObank Inc. of
Singapore; UnionDigital Bank of Aboitiz-led
Union Bank of the Philippines; and GoTyme Bank
Corp. of the Gokonwei Group.
The BSP has closed the window for digital bank
applications for three years, or from September
2021 until the fourth quarter of 2024. As such,
only six digital banks were granted digital bank
license by the BSP as of Aug. 31, 2021. These
banks became fully operational between in late
2022 to 2023.
Right now, the BSP is carefully monitoring the
six digital banks that were allowed to operate
before the moratorium.
Remolona said one of the things they are
assessing is their business models. The ongoing
review will also help regulators to find out
just how many more digital banks the industry
can accommodate.
The establishment of a digital bank require P1
billion minimum capitalization, lower than the
required P3 billion to P20 billion depending on
the number of branches for big banks.
A digital bank is the BSP’s seventh bank
category. Digital banks have minimal or
zero-reliance on physical touchpoints but it
will have to set up one office in the
Philippines to receive and address customer
complaints or issues.
The BSP has limited the number of digital banks
to allow them the space to closely monitor the
performance and impact of digital banks to the
banking system and their contribution to the
financial inclusion agenda.
However, more than two years since the
application window was closed, the BSP is
studying its reopening earlier than scheduled.
In 2022, the BSP’s policy making-arm, the
Monetary Board, approved Circular No. 1154 or
the “Prudential Requirements Applicable to
Digital Banks” which amended Circular No. 1105
or the “Basic Guidelines in Establishing Banks”
issued last December 2020.
The circular basically allowed the central bank
to consider applications to set up thrift, rural
and cooperative banks that have digital bank
business models as digital bank license
applications.
These thrift banks, rural banks and cooperative
banks that primarily offer financial products
and services that are processed end-to-end
through a digital platform or electronic
channels under an Advanced Electronic Payments
and Financial Services (EPFS) license, will be
required to put up P1 billion as capital to be
granted a digital bank license
Meantime, existing thrift banks, rural banks and
cooperative banks with similar digital platform
or electronic channels under EPFS license, will
be given five years to meet the new minimum
capital requirement or P1 billion for a digital
bank license
BSP Deputy Governor Chuchi G. Fonacier had
earlier clarified that the amended circular will
not mean that there will be digital bank
licenses approved. The window for digital bank
license application is still closed for new
applicants.
Before the BSP released the digital banking
framework in 2020, there are already two
existing digital banks in the country --
Malaysia’s CIMB and Dutch-owned ING. The two
foreign banks, however, did not apply for a BSP
digital bank license. |
_______________________________________________________________________________________ |
DBP-Landbank merger’s fate
Philippine Daily Inquirer / 04:35 AM February
05, 2024
It’s been nearly a year since President Marcos
purportedly agreed to the proposed merger of
Land Bank of the Philippines and Development
Bank of the Philippines (DBP), putting thousands
of employees and officers of the two state
lenders on edge as they nervously await their
fate. The President should now make known his
position on the proposed union to ease these
fears.
A report in this paper’s Bizz Buzz said the
President had signified to DBP leadership that
he was now in favor of keeping DBP and Landbank
as distinct entities, a turnaround from what
former finance secretary Benjamin Diokno had
announced in March last year. According to
Diokno at that time, the President approved the
merger during a sectoral meeting in Malacañang
and that the merger could happen before the end
of 2023.
Diokno advanced 10 arguments in favor of the
merger of the two state-run banks, foremost of
which was that the merger would create a bigger
and stronger bank to better serve the country’s
development needs. It is worth noting, however,
that the US-induced global financial crisis of
2007-2008 has led some policymakers in
Washington to argue that limits on bank size
were a way to reduce financial instability and
excessive risk-taking, prompting regulatory
proposals that include caps on bank size as well
as incentives for banks to remain small.
Best practice
Another argument cited by Diokno was that the
projected operating cost savings from the merger
could reach at least P5.3 billion a year, or
more than P20 billion over the next four years.
However, he did not say at what cost. Such
savings ostensibly will result in part from
laying off thousands of government employees in
the state banks. Under the merger proposal, 75
percent of DBP’s 3,600 employees would be deemed
redundant.
Diokno presented other points that may only be
partly true, such as the claim that having a
single bank remains the best practice in the
region. Thailand has the Bank for Agriculture
and Agricultural Cooperatives for farmers and
the SME Development Bank of Thailand for small
entrepreneurs; Malaysia has Agrobank and Bank
Perusahaan Kecil and Sederhana Berhad or SME
Bank. Indonesia also has four state-owned banks,
while the Singapore government has ownership
interests in several banks largely held through
its sovereign wealth fund.
Unintended monopoly
The affected banks, however, presented valid
points that the President cannot simply dismiss.
In a March 22, 2023, position paper submitted to
Executive Secretary Lucas Bersamin refuting
point by point the justifications laid out by
Diokno, DBP president Michael de Jesus and chair
Dante Tinga warned of an “unintended monopoly”
and concentration of risks arising from the
merger. “We think it’s best for the country that
both operate separately from each other. The
merger is not good. You’re putting all your eggs
in one basket,’’ De Jesus said, adding “In the
future, in case of mismanagement or corruption,
you only have one bank as opposed to having
two.”
Due to separate single borrower’s limit (SBL),
or the limit on total credit commitment to a
single industry, DBP also argued in its position
paper that both banks complete each other by
serving enterprises belonging to common
industries simultaneously by having separate
industry limits, thus bigger loans to those
sectors. On the other hand, a merged entity that
may enjoy the benefits of huge capital would
still be subjected to SBL and other industry
limits. In the absence of a mechanism
integrating best practices of the two banks, DBP
added that the proposed merger would just be “a
consolidation of assets.”
More prudent decision
In 2016, when Mr. Marcos was running for vice
president, he had opposed the proposed merger,
arguing that it would deprive farmers of a means
to get financial support because they would lose
a bank mandated to serve their needs. The
President may not have actually changed his
position on the issue. Contrary to Diokno’s
claim about Mr. Marcos’ approval, some of the
officials present in the March 28 meeting last
year said he stressed the need to conduct a
thorough and meticulous legal study on the
proposed merger.
With the appointment of former senator Ralph
Recto as finance secretary replacing Diokno, the
merger’s staunch advocate, a final and more
prudent decision on the proposed merger should
be made now. While the merger was supposed to
provide “better ways of doing things” as Diokno
envisioned, a forced marriage between Landbank
and DBP may not be the best answer now,
considering its impact on thousands of workers
and the disruption to agriculture and SME
lending that may be caused during their
transition to a merger.
Besides, bigger does not necessarily mean
better, and DBP and Landbank need only to be
guided separately into improving their
performance insofar as extending loans to
farmers and fishermen and to small and medium
entrepreneurs is concerned. |
_______________________________________________________________________________________ |
DoF chief joins BSP’s Monetary Board
January 23, 2024 | 12:34 am
By Keisha B. Ta-asan, Reporter
NEWLY APPOINTED Finance Secretary Ralph G. Recto
took his oath as a member of the Monetary Board
on Monday, the Philippine central bank said,
taking the last seat in the seven-member
policy-making body.
Recto is expected to prioritize inflation while
pushing stable economic growth, analysts said.
“He is responsible for National Government debt
and taxes,” Jonathan L. Ravelas, senior adviser
at professional service firm Reyes Tacandong &
Co., said in a Viber message. “He ensures that
growth continues by providing inputs to the
Monetary Board to help support and stabilize
growth.
”Recto, a former lawmaker who was appointed
Finance chief last week, will represent
President Ferdinand R. Marcos, Jr.’s Cabinet at
the Bangko Sentral ng Pilipinas’ (BSP) highest
policy-making body.
Monetary Board is headed by Governor Eli M.
Remolona, Jr., who led Mr. Recto’s oath-taking
at the central bank office in Manila, the BSP
said in a statement.
The board also has five full-time members from
the private sector, namely Benjamin E. Diokno,
V. Bruce J. Tolentino, Anita Linda R. Aquino,
Romeo L. Bernardo and Rosalia V. de Leon.
Mr. Diokno is Mr. Recto’s predecessor at the
Finance department and Ms. De Leon used to be
the national treasurer.
Ms. Aquino held key positions at Standard
Chartered Bank Manila, Rizal Commercial Banking
Corp., Citicorp Investment Bank in Singapore and
Citibank N.A. Manila.
Tolentino was the deputy director-general of the
International Rice Research Institute, served as
chief economist and country representative at
The Asia Foundation and was senior economic
policy adviser at the Asian Development Bank
(ADB).
Meanwhile, Mr. Bernardo was an analyst for the
Philippines at GlobalSource Partners. He used to
be a Finance undersecretary and an alternate
executive director at the ADB.
Mr. Recto would give the Monetary Board a clear
perspective on how monetary policy and banking
regulation can support economic growth, China
Bank Capital Corp. Managing Director Juan Paolo
E. Colet said in a Viber message.
priorities should include forming a view on when
to cut the policy rate and taking the necessary
steps to remove the Philippines from the
Financial Action Task Force’s (FATF) ‘gray
list,’” he added.
Before his appointment to the Finance department
on Jan. 15, Mr. Recto served as Batangas
representative and was a deputy speaker of the
House of Representatives.
He was a senator for three terms and held key
positions including as a minority leader. He
pushed higher value-added taxes (VAT) in the
Senate in the early 2000.
Luis A. Limlingan, head of sales at Regina
Capital Development Corp., said the central bank
is already doing a good job in keeping prices
stable.
It will depend on current economic conditions
but generally, Mr. Recto should try to help the
economy get back to a lower inflationary
environment with tools at his disposal,” he said
in a Viber message.
The Monetary Board raised borrowing costs by 450
basis points from May 2022 to October 2023. This
brought the key interest rate to 6.5%, the
highest in 16 years.
Despite the high interest rate environment, the
Philippine economy expanded by 5.9% in the third
quarter, faster than 4.3% in the second quarter.
For the nine months ended September, economic
growth averaged 5.5%, below the government’s
6-7% full-year goal.
Mr. Remolona earlier said it is unlikely for the
BSP to start easing policy rates in the first
half given risks to inflation.
The central bank sees inflation easing to 3.7%
this year and to 3.2% in 2025. Inflation in 2023
was 6%, breaching the 2-4% target for the second
straight year.
The BSP will hold its first policy meeting this
year on Feb. 15.
The FATF has kept the Philippines under a “gray
list” of countries under increased monitoring
for money laundering and terrorism financing
risks since June 2021.
Government officials expect the Philippines to
get out of the gray list in October after
failing to meet the January deadline.
|
_______________________________________________________________________________________ |
Loans used as reserves hit P8 billion
December 12, 2023 | 12:02 am
SMALL BANKS lent out P8.01 billion to micro,
small, and medium enterprises (MSMEs) and
eligible large enterprises (LEs) as part of
their alternative compliance with reserve
requirements, the Bangko Sentral ng Pilipinas
(BSP) said.
“For the reserve week ending Oct. 19, TBs
(thrift banks) and RCBs (rural and cooperative
banks) allocated an aggregate of P8 billion and
P6.5 million loans to MSMEs and LEs,
respectively, for compliance with the reserve
requirements,” it said in a report on recent
trends in the Philippine financial system.
The central bank said these accounted for 0.6%
and 0.0005% of the total required reserves for
the said week.
The BSP allowed MSMEs loans to be counted as
part of banks’ reserve requirements in a bid to
boost lending to the sector, which was hit
severely by the coronavirus pandemic.
According to the BSP, banks’ availment of the
relief measure declined in October this year due
to the expiration of its effectivity for
universal and commercial banks on June 30.
Smaller lenders can still count their loans to
MSMEs and LEs as alternative compliance with
reserve requirements until they are fully paid,
but not later than Dec. 31, 2025.
Rizal Commercial Banking Corp. Chief Economist
Michael L. Ricafort said MSME and LE loans
counted as reserve requirements would allow
smaller banks to earn more from their loanable
funds.
“Given the extension of these regulatory relief
requirements for smaller banks, so might as well
maximize the returns through these additional
MSME and LE loans used as alternative compliance
by including the calculation of required
reserves while still allowed,” Mr. Ricafort
said.
In 2022, banks lent P493.5 billion to MSMEs as
alternative compliance with reserve
requirements. This was 6.6% higher than the
P463.1 billion a year prior.
By banking group, universal and commercial banks
extended P390.9 billion in loans to MSMEs, while
rural and cooperative banks lent P52.7 billion.
In June, the BSP cut the reserve requirement
ratios of big banks by 250 basis points (bps) to
9.5%, by 200 bps to 6% for digital banks, and by
100 bps for thrift banks, and rural and
cooperative banks to 2% and 1%, respectively. —
Keisha B. Ta-asan |
_______________________________________________________________________________________ |
BSP to deploy more digital payment tools
Lawrence Agcaoili - The Philippine Star
December 1, 2023 | 12:00am
MANILA, Philippines — The Bangko Sentral ng
Pilipinas (BSP) is deploying more digital
payment tools as it ramps up initiatives to
achieve its twin goals under its Digital
Payments Transformation Roadmap.
BSP Deputy Governor Mamerto Tangonan said they
are working closely with the payments industry
to offer consumers and businesses the tools to
seize opportunities in the digital economy.
“Through strategic collaborative efforts with
our industry partners, we can expand access to
digital payment tools that are truly responsive
to businesses’ needs in the new economy,”
Tangonan said during a forum held recently.
Tangonan said upcoming digital payment
initiatives include the request to pay facility
and direct debit facility.
According to the BSP official, the request to
pay facility would empower payees to initiate
collections by simply sending a request to pay,
while the direct debit facility would enable
customers to more efficiently manage recurring
payments, such as monthly rentals, loan
amortization, and insurance premiums.
Tangonan said the central bank digital currency
(CBDC) pilot project, dubbed Project Agila, aims
to enhance the BSP’s capacity to implement CBDC
by enabling fund transfers between select
financial institutions, addressing national
payment challenges, and exploring 24/7
transaction capabilities.
Furthermore, he added that the linkage and
enhancement of cross-border payments would also
boost the competitiveness of Philippine
e-commerce, exports, and the international trade
sector.
“These initiatives support the BSP’s financial
digitalization agenda, consistent with the
overarching goal of inclusive economic growth,”
he said.
The Association of Southeast Asian Nations
(ASEAN) continues to ramp up cross-border
payments as more central banks join the regional
payment connectivity initiative.
Central banks in the region, including the
Bangko Sentral ng Pilipinas (BSP), Bank
Indonesia, Bank Negara Malaysia, the Monetary
Authority of Singapore, Bank of Thailand and the
State Bank of Vietnam (SBV) have signed the
memorandum of understanding (MOU) on cooperation
in regional payment connectivity.
The initiative was established to strengthen and
enhance collaboration on payment connectivity
through the development for faster, cheaper,
more transparent, and more inclusive
cross-border payments.
The cooperation encompasses several modalities,
including QR (quick response) code and
fast-payment based cross-border payments.
The goal of the regional payment connectivity is
to make inter-country payments more seamless,
convenient, and affordable, allowing individuals
and businesses to conduct transactions across
the ASEAN region with ease.
Through cross-border payments, ASEAN member
states would be able to increase trade and
remittances within the region, helping widen
financial inclusion and significantly contribute
to the overall advancement of the ASEAN economic
community.
Under its Digital Payments Transformation
Roadmap, the BSP aims to shift 50 percent of
total retail transactions to electronic channels
and increase the number of Filipino adults with
bank accounts to 70 percent before the end of
this year.
As more Filipinos embraced digitalization during
the height of the COVID-19 pandemic, the share
of digital payments to total retail transactions
further increased to 42.1 percent in 2022 from
30.3 percent in 2021.
Likewise, the number of banked Filipino adults
further increased to 65 percent in 2022 after
almost doubling to 56 percent in 2021 from 29
percent in 2019. |
_______________________________________________________________________________________ |
JuanHand partners with SeaBank to pioneer Loans
Channeling Financing in the Philippines
November 16, 2023 | 2:58 pm
The rise of the FinTech industry paved the way
to easier financial access, addressing the need
for financial inclusion. JuanHand, a leading
online lending platform duly licensed by the
Securities and Exchange Commission, continues to
blaze the trail in serving millions of Filipinos
who are credit-worthy yet underserved.
To give more financial access to those who need
it the most, WeFund Lending Corp., owner of the
JuanHand app, recently signed a loan channeling
agreement with SeaBank Philippines Inc. (A Rural
Bank). With this collaboration, SeaBank plans to
provide around 300 million pesos of loan capital
to eligible borrowers via the JuanHand app.
SeaBank is a duly licensed rural bank by the BSP
and is a subsidiary of SEA Limited, one of the
largest consumer tech companies in Asia.
The agreement was signed last September 20,
2023, by WeFund Lending Corp. President and CEO,
Francisco Mauricio and SeaBank Executive Vice
President of Operations, Siew Ghee Kung Lim.
This marks a milestone as one of the first
cross-institution loans channeling financing
structures in the country.
“We are honored to have been selected by SeaBank
Philippines as its one of its first loan
channeling partners in the country,” said
Francisco Mauricio. “With this partnership,
JuanHand will sustain its momentum as the
premier fintech loan app providing the easiest
way for Filipinos to access cash, leading to a
much better financial well-being.”
Since the introduction of JuanHand in 2019, it
has had over 10 million downloads, over 6
million registrations and has approved close to
3 million loans. JuanHand offers loans from Php
2,000 to up to Php 50,000, payable within 30 to
120 days. JuanHand can approve loans in less
than 5 minutes and can disburse cash to the
borrower’s bank or e-wallet in less than 45
seconds. JuanHand is a leading fintech platform
known among its loyal customers as an
easy-to-use app with a friendly and always
available customer service team. And with
partners like SeaBank, JuanHand continues to
fulfill its noble mission of providing financial
empowerment to every Juan. The JuanHand app can
be downloaded via Google Play or App Store. For
more information, visit their website,
https://www.juanhand.com/ |
_______________________________________________________________________________________ |
PH banking assets grow 9% in first 9 months
BY LEE C. CHIPONGIAN
Nov 14, 2023 04:31 PM
The improving macroeconomy also boosted banks’
deposits, loans and investments during the first
three quarters of the year. Bank assets are
mainly funded by deposits, loans and
investments.
Based on the latest Bangko Sentral ng Pilipinas
(BSP) data, with total assets growth, total
liabilities which are financial and deposit
liabilities, also increased by 8.6 percent to
P21.036 trillion from P19.369 trillion same time
in 2022.
For the first nine months, banks’ net loans
inclusive of interbank loans receivable and
reverse repurchase, totaled P12.592 trillion, up
7.8 percent year-on-year from P11.681 trillion.
Net loans have a big contribution to total
assets after investments and cash and due from
banks.
Net investments which are financial assets and
equity investments, also grew by 6.68 percent to
P6.918 trillion from P6.485 trillion same period
last year.
Cash and due from banks also increased by 3.75
percent to P2.817 trillion from P2.715 trillion
in end-September 2022.
Meanwhile, net real and other properties
acquired or ROPA went up by 2.91 percent to
P104.620 billion versus P101.658 billion same
time in 2022.
By banking group, the 45 big banks or universal
and commercial banks accounted for about 94
percent of total industry assets at P22.528
trillion of the total as of end-September this
year.
The thrift banks’ assets amounted to P999.935
billion during the same period. As of
end-October, there are 42 thrift banks under BSP
supervision.
The rural and cooperative banks have lagged
reporting period but as of end-June this year,
it contributed P385.675 billion in total banking
assets. There are 390 rural and cooperative
banks as of end-October, of which 368 are rural
banks.
Based on BSP data as of end-June, the SM Group’s
BDO Unibank Inc. is the country’s biggest bank
in assets size at P3.975 trillion.
Government-owned Land Bank of the Philippines is
second largest lender with total assets of
P3.025 trillion followed by the Ayala-led Bank
of the Philippine Islands with P2.655 trillion.
The Ty-controlled Metropolitan Bank and Trust
Co. with total assets of P2.632 trillion as of
end-June is in fourth place while China Banking
Corp., a sister company of BDO, has P1.41
trillion assets.
The other banks in the top 10 in terms of asset
size are the Yuchengcos’ Rizal Commercial
Banking Corp. with P1.215 trillion; Lucio Tan
Group’s Philippine National Bank with P1.173
trillion; Aboitiz-led Union Bank of the
Philippines with P967.729 billion; state-owned
Development Bank of the Philippines with
P962.886 billion; and Security Bank Corp. with
P901.238 billion. |
_______________________________________________________________________________________ |
PH financial resources up 7% to P29 T
BY LEE C. CHIPONGIAN
Nov 13, 2023 00:26 AM
Amid inflationary pressures and high interest
rates, the total resources of the country’s
financial system continued to grow by 6.98
percent to P29.079 trillion as of end-August
this year from P27.181 trillion same time in
2022, according to the Bangko Sentral ng
Pilipinas (BSP).
Financial system resources are held by banks and
non-banking financial institutions (NBFIs).
These funds and assets are in the form of
deposits, capital, and bonds or debt securities.
By banking group, the big banks or the universal
and commercial banks had the largest share of
assets at 94 percent.
Banks accounted for P24.046 trillion of total
resources, up by 7.95 percent from same time
last year of P22.276 trillion.
The country’s 45 big banks hold most of the
funds and assets at P22.593 trillion as of
end-August which was 7.8 percent more than
P20.958 trillion in 2022.
The 43 thrift banks, meanwhile, has P1.056
trillion of the total, 12 percent higher than
same time last year of P943 billion.
The 369 rural banks and 22 cooperative banks
accounted for P397 billion of total resources
based on an end-March data, up 5.86 percent from
P375 billion in 2022.
Similar with rural and cooperative banks, the
BSP also takes its time in reporting NBFIs’
resources. As of end-December 2022, NBFIs
accounted for P5.033 trillion of total
resources, up 2.58 percent year-on-year.
NBFIs are investment houses, finance companies,
investment companies, securities
dealers/brokers, pawnshops and lending
investors. Non Stocks Savings and Loan
Associations (NSSLAs), credit card companies
under BSP supervision, private insurance firms,
Social Security System and the Government
Service Insurance System are also classified as
NBFIs.
There are 1,324 NBFIs without quasi-banking
function as of end-August. These are investment
firms, NSSLAs and pawnshops. Only five NBFIs
have quasi-banking function which means they can
borrow funds from 20 or more lenders. These
include investment houses with trusts business,
financing companies, among others.
Based on the BSP Report on the Philippine
Financial System for the First Semester of 2023
which was released in October, the banking
sector continue to grow in terms of deposits.
The banking sector is the core of the financial
system and it continues to be resilient and
stable with a strong balance sheet, profitable
operations, sufficient capital and liquidity
buffers, and ample provision for probable
losses, said the BSP.
Meanwhile, bank deposits funded the key
activities of banks such as lending and
investing.
As of end-June, the total deposits increased 8.1
percent year-on-year to P17.8 trillion. About
84.6 percent or P15.1 trillion of the total
deposits were denominated in peso, while 99.1
percent or P17.7 trillion were sourced from
resident depositors.
The report said banks’ deposit mix provides
insulation to the banking system from
potentially significant funding withdrawals by
investors due to developments in the global
financial markets.
With adequate resources, deposits and earnings,
the BSP said banks remain well capitalized and
highly liquid, with a capital adequacy ratio and
key liquidity ratios exceeding the BSP
regulatory and international standards.
Last year, the financial system’s total
resources amounted to P28.806 trillion, up by
9.3 percent from 2021’s P26.357 trillion.
The BSP in the October report said the
Philippine financial system remained resilient
and supportive of the country’s financing needs
despite high inflation and tightened monetary
policy.
The BSP target repurchase reverse or target RRP
rate is currently at 6.5 percent and it has a
tightening bias since the BSP's forward guidance
indicate it will remain hawkish for longer as
long as inflation is above-target.
As of end-October, the country's consumer price
index stood at 6.4 percent average, way above
the government target of two percent to four
percent. The BSP forecasts that inflation will
remain above four percent in the first six
months of 2024. |
_______________________________________________________________________________________ |
Who is Francisco Tiu Laurel Jr., the new DA
chief?
NOV 3, 2023 11:57 AM
After more than a year, President Ferdinand
Marcos Jr. relinquishes his agriculture post to
fishing tycoon Francisco Tiu Laurel Jr. Get to
know the new full-time agriculture chief.
Laurel is president of Frabelle Fishing
Corporation.
The President said he is confident about his
appointment of Laurel, who he said, he has known
since they were boys and had been one of his
campaign donors in the 2022 presidential
elections.
In a short speech during the announcement in
Malacañang grounds, Laurel called Filipino
farmers and fisherfolk his brothers and sisters.
“Malapit sa puso ko ang mga kapatid nating
magsasaka at mangingisda dahil personal kong
natunghayan ang mga hirap at pangarap nila,”
Laurel said. “Asahan po ninyong laging bukas ang
aking tanggapan para sa inyong lahat.”and
fisherfolks are close to my heart because I’ve
personally witnessed their hardships and dreams.
Expect my office to be always open to all of
you.)
How did Laurel get in familiar terms with the
sector? Get to know more about the new
agriculture chief here.
Hailing from a family-run company
Laurel was born in 1966, a year after his
parents Francis and Bella Tiu-Laurel established
Frabelle as a small trawl fishing company in the
Philippines.
Now, Frabelle has expanded operations into the
Western and Central Pacific regions, where a
large share of the world’s tuna can be found.
Laurel had helped lead the company extend their
market in Asia, Europe, the Middle East, South
Africa, and the United States.
Frabelle is composed of businesses involved in
different stages of the supply chain, including
deep-sea fishing, aquaculture, food
manufacturing, importation, trading, and cold
storage.
Besides heading the seafood company, Laurel also
serves as president of Agusan Power Corporation
and is chairman of World Tuna Purse Seine
Organization.
This familiarity with the sector, especially in
fisheries, was why Marcos said he is confident
about having appointed Laurel.
Moreover, the President deemed Laurel’s
background in the private sector and his
connections as beneficial to the DA.
Before he was appointed DA chief, Laurel was
already a member of the government’s Private
Sector Advisory Council.
For Laurel, their family-run company is
testament to the potential of the Philippines to
be a leader in the fishing industry.
“Frabelle is a concrete example of how a
fisheries-based company operated and managed by
Pinoys, can succeed and can become [a leader] in
the fishing industry, not only in the
Philippines, but in the world,” said Laurel in
his commencement address to UP Visayas graduates
back in 2019.
At sea
Even though a seat in the company is already
secured because of birth right, Laurel still had
to experience work at sea.
In a 2016 interview, Laurel said that for five
years, he spent an average of 45 days at sea
onboard their fishing vessels.
He called it a learning experience, where he met
the crew and captains, and became acquainted
with operations at sea.
In the same interview, Laurel said his father
made it a point to send him to Japan to learn
from experts in the industry. Japan is the
world’s largest tuna market.
A tall order awaits
Expectations of the fishing tycoon are high, as
he is taking over the post previously occupied
by none other than the Philippine president.
Heading a huge agency concerned with feeding its
people is a tall order. Marcos himself admitted
that there are many things left to do after his
first year as DA chief.
On Friday, Marcos repeated his marching orders
to Laurel, which include the control of
agricultural commodities’ prices, recovery from
avian flu and African swine fever.
He would also have to contend with the alleged
cartels that hurt Filipino consumers.
Aside from these, Laurel would also have to
steer an agency struggling with a problem he
would most likely be familiar with: commercial
fishing vessels’ resistance against DA’s
monitoring measures. – Rappler.com |
_______________________________________________________________________________________ |
MSME loans from small banks hit P13 B
BY LEE C. CHIPONGIAN
Nov 2, 2023 09:21 PM
Thrift and rural banks released P13.306 billion
loans to micro, small and medium enterprises
(MSMEs) and eligible large companies as
alternative compliance to the reserve
requirements (RR).
Based on the latest data from the Bangko Sentral
ng Pilipinas (BSP), in the last reserve week of
July, MSMEs borrowed P13.3 billion while
eligible large companies took out P6.5 million
loans from the small banks.The P13.3 billion
accounted for one percent of total required
reserves for the particular reserve week. The
P6.5 million loans from large enterprises
accounted for 0.0005 percent of total required
reserves.
The BSP since June 30 has removed the same
privilege for the big banks or the universal and
commercial banks, but the thrift and rural banks
can still avail of the BSP’s relief measure on
the use of new or re-financed loans to MSMEs and
eligible large enterprises as alternative
compliance with the RR against deposit
liabilities and deposit substitutes.
The thrift and rural banks will be allowed to
utilize their outstanding loans to MSMEs and
eligible large enterprises as alternative mode
of RR compliance until such loans are fully
paid, but not later than Dec. 31, 2025.
The use of new or re-financed loans to MSMEs and
eligible large enterprises as alternative RR
compliance are relief measures implemented by
the BSP during the pandemic.
The BSP removed the temporary relief measure for
big banks to coincide with the reduction in the
RR ratios last June 30. The BSP reduced the RR
ratios for big banks, thrift, rural, digital and
non-banks.
Meanwhile, discontinuing RR-compliant loans for
the big banks “facilitate the transition” of
banks’ compliance with the RR and to help in
“managing friction costs related to the policy
adjustment,” said the BSP.
The latest data on big banks’ RR-compliant loans
before its cancellation was P283 billion as of
end-May. This includes the smaller banks’ loans
under the relief measure.
With the continued recovery in the economy, the
BSP has started to wind down the relief measures
implemented during the Covid-19 crisis except
for those that encourage lending to MSMEs.
The BSP reduced the RR ratio on June 30, the
same day that the relief measure expired.
The BSP cut both banks and non-banks’ RR ratios
to single-digit levels by as much as 250 basis
points (bps) for selected banks. The new ratios
apply to the local currency deposits and deposit
substitute liabilities of banks and non-banks.
The BSP has previously announced to the market
that it will reduce the RR ratios before the
expiration of the RR-compliant loans. This
relief measure was first implemented in March
and April 2020 and extended three times.
Changes in RRs have a significant effect on
money supply in the banking system.
The last time the BSP reduced the RR ratios for
big banks was March 2020, when Covid-19 was
first declared a global pandemic. By August of
the same year, the BSP also reduced the RR
ratios of thrift and rural banks by 100 bps.
Since RRs refer to the percentage of bank
deposits and deposit substitute liabilities that
banks must set aside in deposits with the BSP,
these funds cannot be used for lending. |
_______________________________________________________________________________________ |
Way out of FATF ‘grey list’
Philippine Daily Inquirer / 04:35 AM October 23,
2023
The government has finally manifested a
high-level political commitment to make the
Philippines fully compliant with global
standards on preventing money laundering and
terrorist financing. Last Oct. 16, President
Marcos issued Memorandum Circular (MC) No. 37
ordering concerned government agencies,
state-owned corporations, and local government
units to speed up the implementation of
strategies to combat these illegal activities in
the country. It specifically cited the “urgent”
need to implement a blueprint called the
National Anti-Money Laundering,
Counter-Terrorism Financing and
Counter-Proliferation Financing Strategy (NACS)
2023-2027.
This followed the move of the Paris-based global
money laundering and terrorist financing
watchdog Financial Action Task Force (FATF) to
keep the country under its “grey list,” or
jurisdictions under increased monitoring, after
the Philippines failed to address deficiencies
as of the January 2023 deadline. The country has
been on this list since 2021. Last June, the
FATF said the Philippines remains under the grey
list as it has yet to address eight out of the
18 deficiencies in controlling anti-money
laundering and combating the financing of
terrorism and was given a year or until January
2024 to act on these gaps.
Among the remaining deficiencies cited by the
FATF is that law enforcement agency objectives
were focused on drugs and corruption, and thus
did not fully reflect financial crime risks. It
also cited insufficient terrorist-financing
prosecutions, pointing out that authorities
focused on prosecuting terrorist-financing
predicate offenses and neglected the main
terrorist-financing crimes. It added that there
was no targeted financial sanctions framework
against proliferation financing, which refers to
the act of providing funds or financial services
to activities linked to nuclear, chemical, or
biological weapons. In January this year, then
Bangko Sentral ng Pilipinas Governor Felipe
Medalla, who chaired the Anti-Money Laundering
Council (AMLC), noted that while the FATF cited
gains in legislation against money laundering
and terrorist financing in the Philippines, it
noted the lack of action on easing the bank
secrecy law, as well as on the low number of
cases filed against violators of anti-money
laundering and terrorist financing and their
eventual conviction.
The FATF then recommended 18 “action plan items”
the government must implement by January next
year to exit the grey list. Among these are the
supervision of covered persons; access to
beneficial ownership information; enhancement in
money laundering and financial investigations,
prosecutions, and confiscations; enforcement of
cross-border declarations, use of targeted
financial actions in terrorism, terrorism
financing and proliferation financing, and
risk-based measures to protect nonprofit
organizations.
Thus, on July 4, Mr. Marcos issued Executive
Order No. 33 adopting the NACS 2023-2027 to
enable the Philippines to address the FATF
requirements. For instance, it revised the
expired NACS for 2018-2022 and included a
counter-proliferation financing (CPF) strategy
to answer the FATF’s urgent call to implement
such measures. It also restructured the National
Anti-Money Laundering/Combating the Financing of
Terrorism Coordinating Committee (NACC) by
adding the National Intelligence Coordinating
Agency as a member and granted it new powers to
address the FATF’s call for enhanced financial
intelligence to support law enforcement
investigations on money laundering and terrorism
financing.
In an effort to meet the January 2024 deadline,
MC 37 now puts into action EO 33 by requiring
all agency heads to review and assess their
deliverables under the action plan, assign focal
persons to complete the deliverables by Nov. 30,
and establish a mechanism to monitor the
progress of each deliverable. The NACC
Secretariat was also directed to furnish all
concerned agencies with the respective
deliverables and office targets under the action
plan. The memorandum tasked the AMLC to submit
to the Office of the Executive Secretary a
comprehensive report on the status of the
implementation of the NACS 2023-2027 on or
before Dec. 8.
Government agencies must act fast as the
Philippines has about three months to meet the
FATF deadline. Getting out of the grey list is
also important for Filipino individuals and
entities in their financial dealings with
foreign agencies and institutions. While being
on the grey list does not merit sanctions, some
Philippine individuals and companies have
reported unnecessary due diligence requirements
that delay their legitimate foreign financial
transactions.
The Philippines has been in and out of the FATF
list of countries not fully compliant with
global standards to fight money laundering and
terrorist financing and it must now demonstrate
it is serious in undertaking the measures
through MC 37. Similarly, Congress must do its
part and pass the long-languishing bill easing
the bank secrecy law to once and for all address
a number of the gaps cited by the FATF. |
_______________________________________________________________________________________ |
BSP mulls shame campaign against banks on waived
fees
Lawrence Agcaoili - The Philippine Star
September 15, 2023 | 12:00am
MANILA, Philippines — The Bangko Sentral ng
Pilipinas (BSP) wants to shame other major banks
that have yet to waive fees for small value
transactions, as the BSP continues to ramp up
its push for digitalization.
According to BSP Governor Eli Remolona Jr., the
regulator is set to meet with members of the
Bankers Association of the Philippines (BAP) to
talk about the payments system in general, as
well as discuss the call of the BSP to waive the
fees slapped on small transactions.
Remolona said three major banks in the
Philippines have already removed the fees for
small value electronic fund transfers.
“For now, three of the major banks have removed
fees on small transfers. Up to P1,000, I think,
are free for these three major banks and we’re
trying to shame the other major banks into
following the same policy,” the BSP chief said.
Ty-led Metropolitan Bank & Trust Co. (Metrobank)
has waived the fees for small InstaPay fund
transfers of up to P1,000 via its Metrobank app
until the end of the year, while Aboitiz-owned
Union Bank of the Philippines is offering free
InstaPay fund transfers of below P1,000 until
Nov. 11 this year.
Ayala-owned Bank of the Philippine Islands (BPI)
offered zero InstaPay fees on its new BPI app
for transactions up to P1,000 between July 5 and
Sept. 30 this year.
According to Remolona, the BSP will continue to
encourage banks to waive the fees slapped on
small value transactions as it continues to
implement the Digital Payments Transformation
Roadmap that aims to shift 50 percent of total
retail transactions to electronic channels and
increase the number of banked Filipino adults to
70 percent before the end of this year.
With the COVID-19 pandemic serving as catalyst,
the share of digital payments to total retail
transactions increased further to 42.1 percent
in 2022 from 30.3 percent in 2021, while the
number of banked Filipino adults almost doubled
to 56 percent in 2021 from 29 percent in 2019.
“So far yes, it’s moral suasion. It works to a
large extent, moral suasion, but we’re
formalizing it into a whole payments framework.
So we’re talking to the BAP on Friday about
payments in general. We have some discussions
and out of that we expect something more formal
to come out,” Remolona said. |
_______________________________________________________________________________________ |
Bayanihan Bank Inc. and Rural Bank of Pozorrubio
Inc. Merge
Lawrence Agcaoili - The Philippine Star
MANILA, Philippines — Two more rural banks have
combined forces to enhance their financial
stability, aligning with the Bangko Sentral ng
Pilipinas (BSP)’s ongoing efforts to enhance
risk management in the industry.
BSP Deputy Governor Chuchi Fonacier said the
merger between Bayanihan Bank Inc. and Rural
Bank of Pozorrubio Inc. took effect last Sept. 1
after obtaining the necessary regulatory
approvals.
Bayanihan Bank would be the surviving entity,
while the Pangasinan-based Rural Bank of
Pozorrubio would be the absorbed corporation.
Quezon-based Bayanihan Bank, established in May
1960, would absorb all the assets and
liabilities of the Rural Bank of Pozorrubio.
Based on its website, Bayanihan Bank, formerly
known as the Rural Bank of Atimonan, was
reestablished in 2009 under the leadership of
Jose Paolo Palileo after years of stagnation.
The BSP’s Monetary Board has so far ordered the
closure of six problematic small banks including
United Consumers Rural Bank, Bangko Pangasinan –
A Rural Bank, Rural Bank of San Juan (Southern
Leyte), Binangonan Rural Bank, Rural Bank of San
Marcelino, and Rural Bank of San Agustin
(Isabela).
Last year, the BSP ordered the closure of nine
banks. In 2021,the number of problematic banks
ordered closed by the central bank almost
tripled to 13 from five in 2020 due to the
impact of the COVID-19 pandemic.
The BSP earlier raised the minimum capital
requirements for rural banks to at least P50
million to enhance the operations, capacity and
competitiveness of small banks.
Under the new capital structure, the minimum
capitalization of rural banks would be P50
million for those with a head office and only up
to five branches, P120 million for those with
six to 10 branches, and P200 million for small
banks with more than 10 branches.
Branch-lite unit of rural banks are not included
in the number of branches. |
_______________________________________________________________________________________ |
BSP to monitor credit, equity exposures of small
banks
Lawrence Agcaoili - The Philippine Star
August 31, 2023 | 12:00am
MANILA, Philippines — The Bangko Sentral ng
Pilipinas (BSP) is set to closely monitor the
credit and equity exposures of small banks to
further strengthen the surveillance and analysis
of emerging risks.
In a draft circular, the regulator is looking at
requiring rural and cooperative banks to also
submit comprehensive credit and equity exposures
report (COCREE) as early as March next year.
The BSP currently requires big banks and
mid-sized banks, as well as non-bank financial
institutions with quasi-banking functions, trust
corporations and digital banks to submit the
COCREE.
However, the central bank is now set to require
universal and commercial banks, thrift banks and
non-bank financial institutions with
quasi-banking functions to submit an enhanced
COCREE by January and February next year.
BSP Governor Eli Remolona Jr. said in the draft
circular that the enhanced 2021 COCREE expands
its data requirements in support of further
strengthening the surveillance and analysis of
emerging risks in BSP-supervised financial
institutions (BSFIs) and the financial system.
“Pursuant to such objective, coverage of the
enhanced report, referred to as COCREE 2.0, is
likewise expanded to all thrift banks, rural
banks, cooperative banks, non-bank financial
institutions with quasi-banking functions and
trust corporations,” Remolona said.
The report will be submitted electronically
monthly within 15 working days after the end of
the reference month.
According to the BSP, the 2021 COCREE will no
longer be required upon live implementation of
COCREE 2.0.
“To prepare for the live implementation, BSFIs
can pilot test the submission of the COCREE 2.0
in Q4 2023,” it said.
The regulator pointed out that penalties for
reporting violations of COCREE 2.0 would not be
imposed during the pilot period.
However, it said the imposition of penalties
would be strictly enforced after the grace
period of COCREE 2.0’s live implementation.
Latest data showed that the assets of the
Philippine financial system rose by 7.8 percent
to P28.53 trillion in end-May this year from
P26.46 trillion a year ago.
The resources of Philippine banks grew by 9.1
percent to P23.49 trillion in end- May this year
from P21.53 trillion in end-May last year, while
that of non-banks stood at P5.03 trillion as of
end-December 2022. |
_______________________________________________________________________________________ |
Financial system’s resources rise as of May
July 17, 2023 | 12:02 am
THE TOTAL resources of the country’s financial
system continued to rise at end-May, preliminary
data from the Bangko Sentral ng Pilipinas (BSP)
showed.
Resources of banks and nonbank financial
institutions increased by 7.8% to P28.528
trillion in the first five months of the year
from P26.463 trillion in the same period in
2022.
According to data from the central bank, banking
resources rose by 9.1% to P23.495 trillion at
end-May from P21.527 trillion a year prior.
Banks include universal and commercial banks,
thrift banks, as well as rural and cooperative
banks.
Broken down, universal and commercial banks held
P22.078 trillion of total banking resources,
9.2% higher than the P20.214 trillion logged in
the comparable year-ago period.
Resources of thrift banks hit P1.008 trillion,
inching up by 5% from P954 billion a year ago.
Meanwhile, total resources of rural and
cooperative banks climbed by 13.6% to P408
billion from just P359 billion in 2022.
On the other hand, nonbanks’ resources grew by
1.9% to P5.034 trillion from P4.936 trillion as
of end-May 2022.
Nonbank financial institutions include
investment houses, finance companies, security
dealers, pawnshops and lending companies.
Institutions such as nonstock savings and loan
associations, credit card companies, private
insurance firms, the Social Security System and
the Government Service Insurance System are also
considered nonbanks. — K.B. Ta-asan |
_______________________________________________________________________________________ |
Don’t stop at land reform bailout
Philippine Daily Inquirer / 04:35 AM July 12,
2023
On one hand, the law enacted by President Marcos
last week condoning some P58 billion of soured
debts owed by the country’s agrarian reform
beneficiaries is good news.
With the stroke of a pen, the Chief Executive
and Congress gave over 600,000 farmers a fresh
start after falling into arrears for the land
that the government obtained for them from
private owners.
On the other hand, this very same law could
potentially be a dead end for both the
beneficiaries and government if all stakeholders
fail to take advantage of the clean financial
slate offered by the measure and the farmers end
up back in dire straits a few years down the
road.
Under the agrarian reform system that has been
in place since the early 1970s, farmers who have
been tilling their plots of land for a certain
number of years are entitled to have these
properties acquired on their behalf by the
government from private landowners.
The rationale for this is social justice, meant
to break generational cycles that see children
and grandchildren of farmers being figuratively
chained to the land they work on to pay for the
debts incurred by their forebears.
Without a support structure, there’s a very real
danger that the same challenging economic
realities that forced agrarian reform
beneficiaries to default on their obligations
will once more cause them to fall into debt and
perpetuate this vicious cycle despite the fresh
start offered by what is essentially a loan
bailout.
To break this cycle here and now, it is
important that policymakers implement a package
of measures that will prevent farmers from
falling into the same traps that already
ensnared them before.
Such a package must include a comprehensive
program to train these farmers in the latest
agricultural science that will improve the yield
of their farms, hopefully replacing once and for
all the traditional farming methods that are no
longer sufficient for the current demands of the
market.
Agrarian reform beneficiaries (along with all
other non beneficiary farmers, in fact) must
also be given regular education and guidance on
the proper way to handle their finances. This
includes training on how to properly use debt to
grow their businesses (and how not to abuse it,
obviously), as well as how to improve their farm
output with the help of various government and
private sector programs available for them.
For its part, the government must help connect
farmers to their markets more efficiently by
improving logistics. This will help move
agricultural products from farms to end users
faster and more cheaply, resulting in higher
incomes for farmers and lower prices for
consumers.This is even more critical today as
Filipino farmers, having been left behind in the
use of science and technology, now have to
compete with better trained, better funded,
better equipped, and better supported rivals
from overseas.
Make no mistake about it: The loan bailout
signed into law by the President is a good first
step. But it falls short of addressing the
fundamentally flawed structure that made these
agrarian reform beneficiaries fall into arrears
on their debt in the first place.
What will prevent farmer-beneficiaries from
trying, for example, to raise additional farming
capital by pledging their farms as collateral
(which the lender can foreclose once the 10-year
ban on transferring these properties lapse)? And
without fixing the broken system, what will give
these farmers a better chance of avoiding the
same debt pitfalls that made the bailout
necessary in the first place?
On a side note, there is also a question of
fairness. The law condones the debt of current
beneficiaries on their land, but what about the
future agrarian reform beneficiaries who have
yet to be awarded their farmlands as of the
measure’s cutoff date? Will they be given these
lands for free? Or did the law just create a
two-tiered agrarian reform program, with one set
of farmers receiving their land for free while
the other set will have to pay for it?
Going forward, it is imperative that the
administration does not stop with Mr. Marcos’
act of signing the emancipation measure into
law. It must learn from the expensive lessons of
the past and put in place support mechanisms
that will help farmers avoid falling back into
debt defaults and costing the government more
precious resources in the future.
Without fundamental reforms to the system—if the
same structure that caused the farmers to
default on their obligations remain in place—it
is not farfetched to expect that our agrarian
reform beneficiaries will need a second bailout
in a few years, alongside those who are yet to
become beneficiaries themselves. |
_______________________________________________________________________________________ |
PH signs a $600-M loan deal with World Bank for
agri modernization
12:31 PM July 10, 2023
MANILA, Philippines — The Department of Finance
(DOF) has signed a $600-million loan agreement
with the World Bank (WB) for the modernization
and industrialization of the agricultural
sector, said Malacañang on Monday.
Dubbed the Philippine Rural Development Project
(PRDP) Scale-Up, DOF signed the deal with WB on
July 7.
“The Government of the Philippines, through the
Department of Finance and the World Bank, signed
a US$600-million loan agreement on July 7, 2023,
for the Philippine Rural Development Project
Scale-Up, which is geared towards transforming
agriculture into a modernized and industrialized
sector through public infrastructure
interventions and strengthening the commodity
value chain,” said Palace in a joint statement
with DOF.
As of July 2023, WB has given the Philippines
loans and grants worth $7.94 billion.
The project itself amounts to a total of $818
million or P45.01 billion, with the remaining
S$218 million to be funded by the national
government.
According to Malacañang, the initiative is meant
to boost the access of local workers to markets,
increase income from agri-fishery value chains
and improve efficiency in the food supply chain.
PRDP will cover 16 regions and 82 provinces.
“In a stakeholder meeting last June 6, 2023,
President Ferdinand “Bongbong” Marcos, Jr.
emphasized the need to develop the agriculture
sector, not only in terms of production, but
also in ensuring the welfare of farmers and
fisherfolks,” said Malacañang. |
_______________________________________________________________________________________ |
New BSP governor sees inflation returning to
target before year-end
July 4, 2023 | 12:33 am
THE NEW Bangko Sentral ng Pilipinas (BSP) chief
sees inflation returning to the 2-4% target
range before the year ends.
“Inflation has finally started to come down, and
if our models are right, we should be back in
our target range even by the end of this year,”
BSP Governor Eli M. Remolona said during the
turnover ceremony and the BSP’s 30th anniversary
event at its head office in Manila on Monday.
Mr. Remolona takes over the central bank after
his predecessor Felipe M. Medalla led an
aggressive monetary tightening campaign to curb
inflation.
From May 2022 to March this year, the BSP has
raised interest rates by 425 basis points to
combat inflation. This brought the policy rate
to 6.25%, the highest in nearly 16 years.
Mr. Medalla, who served 11 years as a Monetary
Board member and one year as BSP governor, said
the past year “was a year like no other” as the
central bank faced unprecedented challenges and
fought record-high inflation.
“We acted decisively. We also sold foreign
exchange as necessary… Combined with
non-monetary measures, our actions helped reduce
second-round effects and re-anchor inflationary
expectations,” he said.
Mr. Medalla noted that the Philippines may see
18 straight months of inflation being above the
2-4% target from April 2022 to September 2023.
This is three months longer than the longest
record of 15 months in 2008 to 2009.
“Unless there are new shocks, we should see
inflation below 4% before the end of this year,”
he said.
The BSP sees full-year inflation averaging at
5.4%, before further slowing down to 2.9% in
2024.
Also, Mr. Remolona said the country’s banking
system remains strong.
“Capital and liquidity have been more than
adequate. That’s why, in recovering from the
pandemic, our banks have been a source of
strength, unlike in previous crises, when they
were a source of weakness,” he said.
Based on central bank data, the combined net
profit of Philippine banks rose by 45.6% to
P96.62 billion as of end-March from P66.34
billion in the same period in 2022.
“The plumbing of our system — our payments and
settlement system — has increasingly become
digitalized and efficient. We are delivering
greater and greater access to financial services
for our people,” Mr. Remolona said.
The BSP is aiming to have 50% of retail payments
done digitally and 70% of adult Filipinos become
part of the formal financial system by 2023.
The central bank reported that the share of
online payments in the total volume of retail
transactions in the country stood at 42.1% in
2022, while the country’s banked population was
at 56% of all adults in 2021. — KBT |
_______________________________________________________________________________________ |
Economic managers welcome Remolona’s appointment
at BSP
Louise Maureen Simeon - The Philippine Star
June 25, 2023 | 12:00am
MANILA, Philippines — The economic team of the
Marcos administration led by Finance Secretary
Benjamin Diokno expects continuity at the Bangko
Sentral ng Pilipinas (BSP) with a banker of
international stature at its helm.
Diokno, who was central bank chief during the
Duterte administration, welcomed the appointment
of Monetary Board member Eli Remolona as the
next chief monetary and banking regulator.
Diokno did not say whether Remolona was among
the names he endorsed to President Marcos but
the Malacañang statement on Friday noted
“extensive consultations” with the Department of
Finance (DOF).
Remolona will replace Felipe Medalla whose term
expires on July 2.
“Monetary policy is his life. He used to advise
central bankers around Asia Pacific so he knows
his job,” Diokno told reporters.
Diokno was referring to Remolona’s 19-year stint
with the Bank for International Settlements
where he collaborated with the governors of 12
leading central banks in Asia and the Pacific.
“He can definitely do it (serve as BSP chief),”
Diokno said.
Diokno noted that he “more or less” shares the
same views as Remolona in the seven-man Monetary
Board, which exercises the powers and functions
of the central bank.
Meanwhile, Budget Secretary Amenah Pangandaman
said Remolona’s extensive experience in both
private and international banking will be of
great value to the BSP.
“The fact that he was also part of the economic
mission led by Nobel Prize winner Paul Krugman
and Susan Collins of the Boston Fed to advise
the Philippine government on structural reforms
also guarantees that he has a deeper insight
into how best to lead the BSP,” Pangandaman
said.
“I look forward to working with him in ensuring
that we stay on track with our agenda for
prosperity,” she said.
On the other hand, Diok-no said the appointment
of the remaining members of the Monetary Board
will be announced in the coming days.
With Remolona’s appointment, the Monetary Board
will have three vacant seats as the terms of
Medalla, Peter Favila and Antonio Abacan Jr.
expire.
Bruce Tolentino and Anita Linda Aquino continue
to serve the remainder of their six-year term. |
_______________________________________________________________________________________ |
Maharlika, Kadiwa, Masagana
By: Joel Ruiz Butuyan - @inquirerdotnet
Philippine Daily Inquirer / 05:06 AM June 22,
2023
In at least three flagship government programs,
the Marcos administration has used labels that
obviously evoke connections with the 20-year
reign of his father, Ferdinand Marcos Sr. These
are the Masagana rice program, Kadiwa stores,
and the Maharlika Investment Fund (MIF).
The Masagana and Kadiwa programs were originally
conceptualized by Marcos Sr. to help farmers and
consumers, respectively. On the other hand,
“maharlika” was a favorite brand word of the old
man. Maharlika was the supposed anti-Japanese
guerilla unit led by Marcos Sr. during World War
II, a claim debunked by historians. Marcos Sr.
also renamed to Maharlika the Pan-Philippine
Highway which is our country’s transportation
link from Luzon to Mindanao. Maharlika is
likewise the name that Marcos Sr. attempted to
adopt in replacement of “Philippines” as our
country’s name.
What’s the intention behind the adoption of this
series of labels that stir connections with the
first Marcos presidency? Is it because President
Marcos fervently believes that his father’s
programs were excellent ones that need to be
reinstated as solutions to our current problems?
In other words, is this part of efforts to
fulfill the promise of bringing back the “glory
days” of the first Marcos administration?
Are these old programs being relaunched in
modernized forms, stripped of the features that
have been fodder for unending criticisms against
the first Marcos presidency? Are there other
programs to be relaunched which are
resurrections of the old administration? If
there are such other recycled programs in the
pipeline, are these indications of a soft scheme
of revisionism, in order to recast the Marcos
Sr. administration in a modern and polished
light?
The three-fold criticisms against a number of
social and economic programs of the first Marcos
presidency are the following: (1) they were
palliative but ineffective solutions that wasted
public funds, (2) their implementation were
mismanaged resulting in worsened lives for the
people, and/or (3) they were laden with
corruption.
Those who praise the Kadiwa stores of the first
Marcos presidency point to the food products
sold at low prices by the mobile stores. Those
who criticize point to the heavy burden on
public funds caused by substantial government
subsidy, as well as the token presence of the
mobile stores compared to the sizeable number of
consumers nationwide.
If there’s any bright side that we hear on the
revival of the Kadiwa stores, it’s this talk on
supporting farmers’ cooperatives and on creating
direct links between food producers and
end-consumers. But will all these verbiage
translate into genuinely laudable implementation
efforts? Or will this revived program end up
again as palliative but ineffective effort?
Those who praise the Masagana rice program of
the first Marcos presidency point to the farm
machinery and farm inputs support given to
farmers. Those who criticize the program point
to the heavy loans that bankrupted both farmers
and rural banks nationwide. Apart from declaring
that the government will promote the use of high
yielding rice varieties by farmers, the current
Marcos administration has yet to spell out the
full details of this revived program. If the
current administration does not address the
giant syndicates that manipulate palay prices,
and the loan sharks that enslave farmers, no
amount of tweaking will ever make a Masagana
rice program succeed.
Those who support MIF point to our government’s
need to raise money to fund public projects.
Those who criticize point to the fund’s
uselessness because our economy allegedly does
not produce the kind of surplus capital
appropriate for investments. For all intents and
purposes, this supposed investment fund is no
different from government loans, in the sense
that both are intended to finance public
projects. No matter how well-intentioned,
however, any investment fund will suffer the
same scourge as those borne by the behest loans
of the old Marcos presidency, if the new Marcos
administration fails to address corruption and
mismanagement loopholes.
Is the new Marcos administration falling for the
pitfalls of the old Marcos administration? Or
will the old Marcos presidency benefit from
absolution because of the reign of the new
Marcos presidency? |
_______________________________________________________________________________________ |
BSP opens up P852B in loanable funds
Jovee Marie de la Cruz June 16, 2023
A game-changer.This is how House Committee on
Ways and Means Chairman Jose Ma. Clemente “Joey”
S. Salceda described the central bank’s response
to his query whether water districts are
eligible for loans provided by the Republic Act
(RA) 11901.
Salceda issued a statement last Thursday
profusely thanking Bangko Sentral ng Pilipinas
(BSP) Governor Felipe M. Medalla for officially
clarifying that rural infrastructure projects of
water districts qualify as loans under RA 11901,
or the Agriculture, Fisheries and Rural
Development Financing Enhancement Act of 2022.
Salceda said based on the BSP’s March 2022
estimates, the central bank’s nod would allow
local water districts access to some P852
billion in loanable funds from banks.
“With just one letter, Gov. Philip [Medalla]
makes available P852 billion for rural water
services: that could be game changing,” the
lawmaker was quoted in the statement as saying.
“And what a great parting gift to rural
communities as he ends his term in the BSP.
Thank you, Governor Medalla.”
Salceda said the opportunity was opened in a
letter from the BSP chief responding to his
request for clarification about the eligibility
of water districts for Agri-Agra loans. The
lawmaker said Medalla responded that “the BSP
will include this clarification in the set of
frequently-asked questions on the implementation
of RA 11901.”
Yearly penalties
IN the same BSP letter dated June 9, 2023,
Salceda quoted Medalla as saying that “in
addition to the loans for construction and
upgrading of public rural infrastructure…loans
or investments in debt/equity securities for the
purpose of financing water and sanitation
projects for rural communities may be considered
as compliance with AFRD [agriculture, fisheries
and rural development] financing.”
“That’s very promising. When we get to the point
that local water districts issue bonds for their
rural water and sanitation projects, subscribing
to those bonds will be considered compliance
with the Agri-Agra Law,” Salceda said.
Under RA 11901, all banks are required to set
aside a credit quota, or a minimum mandatory
agricultural and fisheries financing requirement
of at least 25 percent of their total loanable
funds.
Otherwise, penalties on noncompliance or under
compliance shall be computed at one-half of one
percent of noncompliance or under compliance, or
at rates prescribed by the Monetary Board. Banks
incur around P2 billion in penalties every year
for non-compliance with the law.
Solving crisis
ACCORDING to Salceda, the pronouncement will
also help solve the water crisis, a condition
recognized by President Ferdinand R. Marcos Jr.
earlier this year.
The lawmaker attributed much of the crisis “to
the unmitigated and lazy use of groundwater
resources, which we will eventually deplete.”
According to the Gentleman from Albay’s 2nd
District, the government has not “developed
surface water” and there’s not “much progress in
connecting rural communities with surface
water.”
“Of course, the result is depletion of
groundwater resources [that] are, by the way,
also more prone to diseases such as cholera,”
Salceda said. “That is because these investments
can be expensive and financing, until this
clarification, was limited.”
The lawmaker added that water districts have
raised issues about not being able to borrow
from banks.
“The water districts themselves are not rural
beneficiaries so that creates some confusion
about whether their projects for rural water
services are included under the Agriculture,
Fisheries, and Rural Development Financing
[Enhancing] Act, or the amended Agri-Agra Law,”
Salceda said.
He added Medalla’s letter “and the issuances
that will spring forth as a result, augur very
well for solving the water crisis in the
country.” |
_______________________________________________________________________________________ |
Independent BSP chief needed
Philippine Daily Inquirer / 04:40 AM June 14,
2023
President Marcos is about to make what is
arguably the most important economic appointment
of his presidency, potentially more important
than choosing his finance secretary. And that is
choosing the person who will steer the Bangko
Sentral ng Pilipinas (BSP) — and, in the
process, help determine the value of the money
in the wallets of all Filipinos — for the next
six years.
With the legally mandated term of the current
central bank head set to end on July 3, ahead of
Mr. Marcos’ second State of the Nation Address,
the Chief Executive must contend with aggressive
lobbying both from inside and outside his
official family.
But as he weighs the qualifications of each
candidate and the clout of whoever is backing
each prospective governor, the President would
do well to remember that the job of the central
bank is to “take away the punch bowl just as the
party gets going’’ as prescribed by William
McChesney Martin Jr. who was at the helm of the
United States Federal Reserve from 1951 to 1970
— the longest serving chief of the most powerful
monetary regulator in the world.
What he meant was that central bankers’ key role
in any modern economy is to protect citizens’
purchasing power, that is, to help safeguard the
value of the money in citizens’ wallets, even to
the point of reining in economic growth which,
when left unchecked, feeds inflation.
For this to happen — for the central bank to
play its role of moderating the government’s
tendency toward fiscal excess—the BSP and its
leadership must remain independent from the
executive branch.
This is the seed of a lasting legacy Mr. Marcos
can plant this early in his presidency: To
ensure the independence of the central bank from
fiscal and political interference.
To his credit, outgoing BSP Governor Felipe
Medalla exhibited much of this desired trait
when he made it his mission to restore the
independence of the BSP, which had been eroded
during the previous administration.
Medalla also exhibited another desirable trait
among central bankers: transparency —
transparency in communicating his preferred
policy direction, so that the public can plot
their financial future with a clear
understanding of where the economy is heading.
(Unfortunately for him, he may have scuppered
his own chance of getting reappointed by being
too transparent with his concerns about the
early version of the Maharlika Investment Fund,
which was a commendable act but which apparently
displeased the proponents of the controversial
measure.)
Meanwhile, Finance Secretary Benjamin Diokno’s
advice to the President to exclude bankers from
the list of candidates is understandable. Diokno
reportedly said in an interview that he
preferred an economist as the next BSP governor,
saying that a banker would mean “you will be one
of the boys.”
But being a banker should not be a
disqualification. In fact, three of the
Philippines’ most successful central bank
governors—Jose Fernandez Jr., Gabriel Singson,
and Rafael Buenaventura—were bankers. And all
three excelled in times of crisis.
Diokno may not have been a banker, but during
his successful and abbreviated stint as central
bank head, he actively engaged with bankers and
sought their counsel and inputs on where best to
steer the country’s financial system, adopting
many of their prescriptions, including on
monetary policy. A banker would have done no
differently.
Amid the barrage of advice and recommendations
Mr. Marcos is likely receiving in selecting the
country’s next central bank chief, the President
must choose a person who will act
counterintuitively and countercyclically. Yes,
appoint a governor who will lower interest rates
when the economy is weak but, more importantly,
who will raise them when the economy is
strong—one who will “take away the punch bowl”
before everyone gets drunk with the good times
and end up making fools of themselves. In other
words, appoint an adult in the room who will
have his own mind, rather than bend to the will
of your subalterns.
The very first line of the law that created the
BSP in 1993 reads: “The State shall maintain a
central monetary authority that shall function
and operate as an independent and accountable
body corporate in the discharge of its mandated
responsibilities concerning money, banking, and
credit.”
The New Central Bank Act further says: “The
primary objective of the Bangko Sentral is to
maintain price stability conducive to a balanced
and sustainable growth of the economy and
employment.”
The framers of the law understood that the
central bank cannot be effective in protecting
the value of the peso—in helping assure that
Filipinos can continue to afford basic goods and
services—if they are subservient to the
appointing authority or their political backers
who value headline-grabbing economic growth over
boring inflation statistics.
An independent central bank is essential. And a
central bank governor independent of padrinos is
the key. |
_______________________________________________________________________________________ |
The end of revenge spending
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:30 AM June 13,
2023
As expected, the economy grew at a significantly
slower pace in the first quarter of this year
(6.4 percent) than it did a year ago (8.3
percent). There are several reasons for this. On
the production or supply side, the industry
sector dramatically slowed down to only 3.9
percent year-on-year growth from 10 percent in
the same quarter last year, and from a 6.5
percent full-year growth. The bulk of the
industry sector is manufacturing, which grew by
a mere 2 percent from an upbeat 9.4 percent a
year ago, largely explaining the overall
sector’s slowdown.
While agriculture, fishery, and forestry
improved to 2.2 percent from a marginal 0.2
percent annual growth a year ago, it still grew
far less than the overall economy did.
Furthermore, the sector accounts for less than a
tenth of total output and incomes, as measured
by the gross domestic product (GDP). The biggest
loser among agricultural crops was sugarcane,
where full-year production fell by a hefty 17.5
percent in 2022, and further by 17 percent in
the first quarter of 2023. There has been so
much needless debate and anguish over sugar
imports, yet the large production shortfall had
been staring us in the face since early last
year. Domestic prices of the commodity have
remained way above the normal levels we were
accustomed to before last year’s fiasco, telling
us that importation has been far from enough to
close the supply gap. Worse, the manner by which
import rights were awarded exclusively to three
favored exporters, rather than allow market
competition to prevail, ensured that prices
would not normalize even with importation, and
that the favored importers would make a killing
— yet another example of public policymaking at
its worst, in complete defiance of basic
economics. Given our decades-old history of
mismanaging our agricultural sector and allowing
it to be the milking cow of a lucky few at the
expense of a few million impoverished farmers
and even far more impoverished consumers, one
might ask: What else is new?
Prominent farm product exports such as
pineapple, rubber, and cacao were the other
major crop losers that saw production declines,
while bananas also stagnated at 0.1 percent
growth — all reflecting the overall slowdown in
export demand worldwide.
Indeed, the economy’s slowdown could be better
understood from the demand or spending side of
the market, where the causes of the slowdown are
easier to trace and explain. The biggest part of
that demand comes from private consumers or
households, accounting for more than
three-quarters of total spending for the
economy’s goods and services. This has seen a
marked slowdown from 10 percent a year ago to
only 6.3 percent in the first quarter, and there
are two reasons for this. One, the so-called
revenge spending that elevated consumer spending
growth in the aftermath of the pandemic
lockdowns (“Are Pinoys ‘revenge spending’?”
12/21/21) has apparently ended. This has given
way to the second factor, i.e., elevated
inflation (translation: faster-rising prices)
that has spurred more prudent spending. Higher
inflation, even as it has slowed in recent
months, will continue to bear on household
expenditures in the months ahead, making slower
growth persist through the rest of the year.
The other major spending slowdown comes from the
foreigners who buy our export products and
services. This spending accounts for the next
largest share (28 percent) of total expenditures
in our GDP, and has dramatically slowed down to
a mere 0.4 percent annual growth from 10.4
percent in the same quarter last year,
reflective of a similar “revenge spending” then.
And like domestic household spending, consumer
spending elsewhere is dampened by higher
inflation worldwide caused by global supply
chain disruptions due to the Russia-Ukraine war,
and bloated money supplies that funded
governments’ COVID-19 responses. Meanwhile, our
government appears to be ramping up its
consumption spending to offset the private
spending slowdown, but has been less successful
in speeding up infrastructure spending, which
slowed to 4.7 percent from last year’s full-year
12.7 percent growth.
All told, we’re really in for a slower year
ahead.
cielito.habito@gmail.com |
_______________________________________________________________________________________ |
BSP eyes SBL 25+15% increase for green projects
June 12, 2023 | 12:02 am
THE CENTRAL BANK is proposing an additional
single borrower’s limit (SBL) of 15% for loans
meant to finance green projects and a reserve
requirement (RR) rate of zero percent for
sustainable bonds.The draft rules posted on the
Bangko Sentral ng Pilipinas’ (BSP) website amend
sections 362 and 251 of the Manual of
Regulations for Banks that cover exposure limits
to a single borrower and reserves.
“This measure aims to support the financing of
green and sustainable projects, including
transition activities that contribute to the
achievement of the National Government’s (NG)
climate commitments and sustainable development
goals as laid down in the Philippine Development
Plan and Nationally Determined Contributions,”
the BSP said in the draft circular.
The amendments are also part of the BSP’s
11-point Strategy for Sustainable Central
Banking, it added.
Stakeholders are given until June 23 to give
their feedback on the proposed circular.
The SBL is a ceiling on the amount of loans,
credit accommodations and guarantees a bank or
financial institution can extend to one borrower
meant to prevent over-concentration of risk.
Currently, the SBL of all banks stands at 25%.
However, in January, the BSP said it will
implement a new framework that will raise the
SBL to 30% by July 1.
According to the draft, the current SBL of 25%
may be increased by an additional 15%, which
will only be for loans financing green projects,
including the transition activities to
decarbonization.
The financing should meet the categories laid
out in the NG’s Sustainable Finance Framework,
Strategic Investment Priority Plan on Green
Ecosystems, the country’s Sustainable Finance
Guiding Principles, or the sustainable finance
taxonomy guidelines.
Meanwhile, the bank must ensure that the project
does not violate any Philippine laws or any
environmental regulations. It will also maintain
the standard prudential controls designed to
protect creditors’ interests in the grant of
financing to sponsors.
If approved, the additional 15% for loans for
sustainable projects will be in effect until
Dec. 31, 2030.
The credit risk concentration arising from total
exposures to all borrowers for sustainable
projects will also be evaluated by the lender in
its internal assessment of capital adequacy
relative to its overall risk profile and
operating environment.
“The amount of any new loan, credit
accommodation, or guarantee extended as well as
the restructured, renewed, and refinanced
existing credit exposures, beginning 01 January
2031 shall not exceed the prescribed SBL of
25%,” the BSP said.
“Outstanding loans, credit accommodations, or
guarantees as of 31 December 2030 that are
granted using the additional SBL of 15% may be
maintained. The lending bank shall honor the
term of such loans or credit accommodations
until the maturity period,” it added.
Meanwhile, the zero percent reserve requirement
rate against green bonds will be effective until
Dec. 31, 2025.
Sustainable bonds include existing and new
issuance of green, social, sustainability and
other sustainable bonds as defined by the
Securities and Exchange Commission or other
international standards acceptable to the
market.
This may include the issuances of the
International Capital Markets Association or
endorsement of the ASEAN (Association of
Southeast Asian Nations) Capital Markets Forum.
— Keisha B. Ta-asan |
_______________________________________________________________________________________ |
High capitalization, liquidity to help banks
weather crises
June 2, 2023 | 12:04 am
PHILIPPINE BANKS remain well-capitalized and
highly liquid, which will help them withstand
credit and market shocks during crises, the
Bangko Sentral ng Pilipinas (BSP) said.
The BSP has continued to implement structural
reforms to ensure the financial strength and
safety of its supervised banks, it said in an
e-mail to BusinessWorld.
“The adoption of sound governance and risk
management standards, prudential limits and
requirements including the Basel III reforms on
capital and liquidity standards — with due
regard to proportionality — has enabled banks to
maintain their resilience and withstand possible
credit and market shocks even during crises,”
the central bank said.
The regulator has issued principles-based rules
for its BSP-supervised financial institutions.
This approach is more flexible and risk-based,
focusing on providing guidance rather than being
prescriptive as banks have varied business
models, it said.
Latest data from the BSP showed banks’ capital
adequacy ratios (CARs) were higher than the
regulatory minimum and international standards
as of end-2022.
The banking system’s solo and consolidated CARs
stood at 15.7% and 16.3%, respectively, well
above the BSP’s 10% minimum requirement and the
8% set by the Bank for International
Settlements.
Meanwhile, universal and commercial banks’ solo
and consolidated Basel III leverage ratios stood
at 8.8% and 9.3% respectively, also higher than
the BSP’s 5% requirement and the 3%
international standard.
“The Basel III LCR requires banks to maintain
high-quality liquid assets that can be readily
converted to cash at little or no loss of value
so that the bank can withstand an assumed 30-day
liquidity stress that may arise from run-off of
deposits, tightening of funding source, or
unscheduled drawdown on the bank’s committed but
unused credit and liquidity facilities,” the BSP
said.
It added that this would give lenders more time
to implement structural measures needed to
address any emerging or underlying issues.
Banks were also able to meet the BSP’s liquidity
and funding requirements. The liquidity coverage
ratio (LCR) and net stable funding ratio (NSFR)
of banks were both above the 100% thresholds as
of end-2022.
The universal and commercial banking industry’s
solo and consolidated LCRs stood at 185.7% and
185.4%, respectively. Meanwhile, the NSFR of the
sector stood at 137.4% and 138.1% on solo and
consolidated bases, respectively, as of
end-December 2022.
“The NSFR complements the LCR by promoting
resiliency over a longer-term time horizon
through creating additional incentives for banks
to fund their activities with more stable
sources of funding on an ongoing structural
basis,” the BSP said.
The NSFR also encourages funding stability,
limits over-reliance on short-term wholesale
funding, and boosts better assessment of funding
risk across on- and off-balance sheet items, it
said.
Standalone thrift banks, rural banks, and
cooperative banks likewise maintained adequate
proportions of liquid assets against their
liabilities, the central bank said.
The minimum liquidity ratios of standalone banks
as of end-2022 reached 29.9%, 63.7%, and 44.4%,
respectively, on a solo basis, all above the 16%
minimum requirement.
Still, even as the Philippine banking system
remains stable and healthy, financial
institutions are expected to develop the
appropriate systems, disclose liquidity risks,
and undergo supervisory assessments to manage
and address potential challenges, the central
bank said.
“To ensure their compliance and effectiveness in
managing liquidity risk, banks are expected to
establish appropriate systems for measuring and
managing liquidity risks, have a robust
liquidity risk policy and governance framework,
maintain liquidity cushion and contingency
plans, report and disclose liquidity risk
information, and undergo regular supervisory
assessments,” the BSP said.
Stress testing is a crucial aspect of banks’
risk management system and capital planning
process as it allows lenders to assess the level
of liquidity they should hold and construct
scenarios that could pose difficulties for
specific business activities, it said.
“By conducting stress tests, banks can
effectively manage risk exposures, promote
strong risk governance, and ensure their ability
to withstand adverse economic conditions or
financial shocks,” it said.
Regular meetings with the banks’ management to
discuss strategic and recovery plans also allows
the BSP to assess the risk appetite and emerging
risk exposures of banks.
The BSP also has enforcement tools that it can
deploy to ensure the stability of the banking
system.
“As the country recovers and transitions to a
post-pandemic economy, the BSP remains committed
to adopting prudential standards that will
strengthen corporate and risk governance,
promote digital transformation, and advance
sustainable finance,” the BSP said.
“All these are intended to foster a resilient,
dynamic, and inclusive financial system that is
supportive of sustainable economic growth,” it
added. — K.B. Ta-asan |
_______________________________________________________________________________________ |
BSP sees significantly lower inflation in May
May 30, 2023 | 12:33 am
HEADLINE INFLATION in May will be significantly
lower than 6.6% in April, putting it on track to
return within the 2-4% target by September or
October, the Bangko Sentral ng Pilipinas (BSP)
said.
BSP Governor Felipe M. Medalla on Monday told
reporters inflation is rapidly easing year on
year due to high base effects.
“Year on year, (May inflation) will clearly be
significantly lower because of its high base
(5.4% in May) last year. So, unless there are
new shocks or developments, by October or
September, inflation will be below 4%,” he said
in mixed English and Filipino on the sidelines
of a general membership meeting of the FinTech
Alliance.
Inflation has been on a downtrend since hitting
8.7% in January. It cooled to 6.6% in April from
7.6% in March, but it was faster than 4.9% a
year ago.
For the first four months of the year, average
inflation stood at 7.9%. This is still higher
than the central bank’s 5.5% full-year forecast
and 2-4% target.
The Philippine Statistics Authority is scheduled
to release its May inflation data on June 6.
Mr. Medalla said high base effects would likely
affect inflation in 2024.
“The most extreme will be in January. Inflation
may reach below 2% not because prices are low by
January next year, but it’s because of the high
base. January (2023) was the worst month in
terms of month-on-month inflation,” he said.
Inflation hit a 14-year high of 8.7% in January,
accelerating from 8.1% in December as food
prices soared amid supply issues. Month on
month, inflation climbed to 1.7%.
Mr. Medalla also noted that the impact of supply
shocks is beginning to wane, and monetary policy
tightening would bring inflation “back to
normal.”
At its policy meeting on May 18, the Monetary
Board kept its benchmark interest rate unchanged
at 6.25%. This was after raising policy rates by
425 basis points (bps) since May last year to
tame inflation.
Meanwhile, MUFG Global Markets Research Senior
Currency Analyst Michael Wan said Philippine
inflation is expected to ease below 4% by year
end, before averaging 5.6% this year and 3.9% in
2024.
Both of these forecasts are higher than the
central bank’s 5.5% projection in 2023 and 2.8%
for next year.
“We have likely seen the worst of the domestic
food supply constraints, as the administration
has shown a greater willingness to import,” Mr.
Wan said in a note.
President Ferdinand R. Marcos, Jr. has approved
imports of up to 150,000 tons of sugar, while
the Department of Agriculture is also
considering importing more onions this month.
“Moving forward, we also expect core inflation
components to moderate as we have likely seen
the worst of the reopening effects on domestic
price pressures,” Mr. Wan said.
Core inflation, which discounts volatile prices
of food and fuel items, slowed to 7.9% in April,
from 8% in March which was the highest since
December 2000.
However, risks to the inflation outlook are on
the upside and inflation might remain sticky in
2024, Mr. Wan said.
Further delays in food imports could lead to
another spike in food prices, he added. A
possible hike in wages and transport fares may
also push core inflation higher this year.
POLICY AND RRR CUT?
MUFG’s Mr. Wan expects the BSP to keep rates on
hold at 6.25% before cutting rates by 75 bps
starting the fourth quarter of 2023.
“(We) think the lower trajectory for headline
inflation, coupled with our expectation for the
Fed to start cutting rates over the next 12
months, should give BSP policy space to lower
its key reverse repo rate starting fourth
quarter of 2023. We see the BSP’s policy rate at
5.5% by the first half of 2024, from 6.25%
currently,” he said.
He also expects the BSP to cut big banks’
reserve requirement ratio (RRR) by 200 bps to
10%, from 12%.
“This is in part to offset some of the pandemic
loan support to micro, small and medium
enterprises that BSP provided through banks,
including the utilization of these loans as
compliance with reserve requirements,” Mr. Wan
said.
The RRR for big banks is one of the highest in
the region. Reserve requirements for thrift and
rural lenders are at 3% and 2%, respectively.
The central bank targets to cut the RRR to
single-digit levels by the end of the year. —
Keisha B. Ta-asan |
_______________________________________________________________________________________ |
BSP to extend relief for small banks
May 29, 2023 | 12:34 am
THE BANGKO SENTRAL ng Pilipinas (BSP) will
extend the alternative reserve compliance for
small banks to ensure there will be no adverse
impact after the relief measure expires on June
30.
BSP Governor Felipe M. Medalla said the relief
measure is no longer necessary since the economy
has clearly recovered from the pandemic, but the
central bank will make some considerations for
small lenders.
“There may be provisions for small banks to
allow (the relief measure) to go on until the
loans have matured, para ’di sila mabigla (so
they won’t be shocked),” he said during a book
launch event on Friday.
“Pag nag mature na ’yung loans, ’yung bagong
loans hindi na (Once the loans have matured, the
new loans won’t be counted as reserve
compliance).”
Mr. Medalla said these considerations will be
extended only to thrift banks and rural banks.
During the pandemic, the BSP allowed banks to
count their lending to micro, small, and medium
enterprises (MSMEs) and pandemic-hit large
enterprises as part of their alternative
compliance with the reserve requirements.
The relief measure has been extended three times
since it was implemented in April 2020, and is
now set to expire on June 30.
“It won’t be a complete drop immediately, as
long as the original loan, the remaining unpaid
principal, will still qualify as reserves until
they mature,” Mr. Medalla said.
Reserve requirements refer to the percentage of
bank deposits and deposit substitute liabilities
that banks must set aside in deposits with the
BSP which they cannot lent out.
Based on central bank data, banks lent P493.5
billion to MSMEs as alternative compliance with
reserve requirements as of December 2022. This
is 6.6% higher than the P463.1 billion in the
same period a year prior.
By banking group, universal and commercial banks
extended P390.9 billion in loans to MSMEs, while
rural and cooperative banks lent P52.7 billion.
RRR CUT
Meanwhile, the BSP will cut the reserve
requirements for big banks as the relief measure
expires by the end of June, Mr. Medalla
reiterated.
The BSP earlier committed to bringing down the
reserve requirement ratio (RRR) of big banks to
single digits by 2023.
The RRR for big banks is currently at 12%, one
of the highest in the region. Reserve
requirements for thrift and rural lenders are at
3% and 2%, respectively.
However, Mr. Medalla said the BSP will not cut
the RRR of big banks during a policy meeting.
“We want to always distinguish between policies
and operations. Cutting the reserve requirements
are operations because we can always offset the
effects of the changes in the reserve
requirement by increasing or decreasing our
borrowings,” he said.
A cut in RRR is a move intended to be an
operational adjustment to facilitate the BSP’s
shift to market-based instruments for managing
liquidity in the financial system, particularly
the term deposit facility and the BSP
securities.
Meanwhile, the BSP governor said it is crucial
to prioritize the protection of depositors over
business owners as 80% of funds lent by banks
are from depositors.
“In a sense, a banker is almost like a public
servant; he’s taking care of the people’s money.
That’s why it’s very important that banking laws
give regulators great cover when they do their
jobs,” Mr. Medalla said in a speech during the
launch of Banking Laws of the Philippines –
Annotated book on Friday.
During the same event, Chief Justice Alexander
G. Gesmundo said banking laws in the Philippines
have evolved amid the increasing Filipino
participation in the banking practice and the
growing demands of globalization.
“The importance of our banking laws cannot be
overstated. To begin with, our banking laws
instill in us the sense of trust and confidence
in our financial institutions, assuring both
individuals and businesses that their
hard-earned resources are protected and
nurtured,” Mr. Gesmundo said.
He said that banking laws create an environment
that enables financial institutions to provide
accessible financial services to individuals,
businesses, and communities, especially in rural
communities and agricultural households.
The Banking Laws of the Philippines – Annotated
is the fourth legal book published by the BSP. —
Keisha B. Ta-asan |
_______________________________________________________________________________________ |
Are kickbacks why gov’t wants to import rice?
GOTCHA - Jarius Bondoc - The Philippine Star
May 12, 2023 | 12:00am
It’s illegal for government to import rice. Yet
the National Food Authority announced last month
that it intends to do just that. It even claimed
to have secured President Ferdinand Marcos Jr.’s
approval.
Days later, however, a Department of Agriculture
official debunked NFA’s plan. “NFA importation
is not possible,” said Usec. Mercedita Sombilla.
“We didn’t discuss importation; the President
knows that.”
Still, anything goes with the DA and attached
agencies like NFA. In late February for
instance, the Sugar Regulatory Administration
set for bidding the importation of 440,000 tons
of refined sweetener. Senior Usec. Domingo
Panganiban then announced he already chose since
January only three importers from a three-page
list.
“Government-sponsored cartel,” Senator Risa
Hontiveros branded that sham bidding. Ignoring
her, Panganiban instructed SRA to clear 6,500
tons earlier seized by Customs. Worth P650
million, the contraband was brought in by one of
the three favored traders in early February,
before SRA even decided the 440,000-ton
necessity.
Marcos Jr. is secretary of agriculture. As such,
he chairs NFA, SRA and other DA affiliates.
Subordinates wangle his consent to make the
crooked look straight.
The 2019 Rice Tariffication Law (RA 11203)
forbade government from rice trading. Only
private individuals or groups may now import
rice at 35 percent duty.
NFA is limited to buffer stocking for
emergencies like typhoon, earthquake, volcanic
eruption, crop failure. It must procure such
hedge stock from Filipino farmers, not
foreigners.
NFA needs 330,000 tons buffer this 2023. It says
it may not be able to buy enough from local
farmers. Will it spend its P9-billion budget on
imports by hook or by crook?
That P9 billion is money of the Filipino people
meant to benefit Filipino farmers. Importing
will enrich traders in Vietnam, Thailand,
Cambodia, China and India.
Could the reason be kickbacks, commissions,
“tong-pats”? Plundering from rice imports is an
old racket of NFA, DA, Malacañang officials and
spouses. They pocket millions of dollars or
billions of pesos.
The 330,000 tons is 6.6 million 50-kilo sacks of
rice. Usual overprice is $10 or P540 per sack.
Crooks can skim $66 million or P3.5 billion.
More dirty money is made from the sack itself:
$1 or P54 apiece. That’s another $6.6 million or
P350 million from the sacks alone.
Officials extort millions more pesos from
subcontracted cargo handlers, shippers, haulers,
truckers to 16 NFA regional warehouses.
Alibi for government’s illegal rice import is
the sudden rise in retail price. But government
itself caused the jump by recently announcing
that it expected sellers to add on P5 per kilo.
That was a cue for retailers to do just that.
A scheme reportedly is being devised for the
illegal import. NFA is not to front. Instead,
the government-owned Philippine International
Trading Corp. could be used. Cartelists will
bring in not 25 percent broken but special
grains, for sale to hotels at premium price.
They will then replace the contraband with
low-grade rice to NFA. Megabucks from mega-scam.
Four major food producers associations have
warned NFA and DA against importing. Don’t break
the law, chorused former agriculture chief
Leonardo Montemayor of the Federation of Free
Farmers, ex-congressman Rafael Mariano of
Kilusang Magbubukid ng Pilipinas, Cathy
Estavillo of Bantay Bigas and Jayson Cainglet of
Samahang Industriya ng Agrikultura.
NFA and DA are ignoring their duty. They must
help Filipino farmers. Buy domestic produce.
Provide irrigation, training, fertilizers,
pesticides, fungicides. Mechanize drying and
improve milling so that more than a measly 65
percent rice is derived from every 50-kilo sack
of palay, aromatic at that. Refrigerate rice at
21 degrees Centigrade to prevent bukbok
(weevil). |
_______________________________________________________________________________________ |
Easing land conversion
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:25 AM May 09,
2023
Our total farm area has been declining over the
years—true or false? For those alarmed over the
conversion of farmlands to commercial or
residential uses, the instinctive answer would
probably be “true.” Many have long feared such
conversions to be a threat to our food security,
on the premise that our agricultural areas are
dwindling due to it.
At the individual farm level, our farms are
indeed shrinking. Average farm size in the
country is down to 1.2 hectares, and still
falling. It was 3.6 hectares in 1960 and 2.8
hectares in 1980. It shrank even more since then
mainly due to the Comprehensive Agrarian Reform
Program, which limited land ownership to 5-7
hectares, worsened by generational partitioning.
This has led to the loss of productivity from
economies of scale, which could be mitigated by
farming the lands more intensively (that is,
applying more productivity-raising inputs like
better seeds, fertilizers, and farm management).
But lack of access to finance, and government’s
failure to fill this critical need, kept small
farmers from doing so. Instead of emancipating
small farmers, they became even poorer.
Surprisingly, the fear that we’re losing our
farms in the face of land conversions appears to
be a myth. World Bank data show that our
agricultural area, as a percentage of our fixed
total land area, actually kept expanding over
time, up to the present. From 25.9 percent in
1961, it grew to 35.6 percent in 1980, 37.7
percent in 2000, 40.6 percent in 2010, and 42.5
percent in 2020. I cross-checked this with the
Philippine Statistics Authority’s annual
Selected Statistics on Agriculture and
Fisheries, which reported total crop area
planted at 13.032 million hectares in 2009,
13.229 mha in 2015, and 13.538 mha in 2021.
Are fears of dwindling farm areas from land
conversion misplaced, then? It would seem so,
with our total recorded farm hectarage actually
rising! What appears to be happening is that as
farmlands are converted, more of our less
suitable lands (including forest uplands) are
being tilled. Indeed, World Bank data also show
that we now cultivate twice more (36 percent of
total land area) than our arable land area (18.2
percent of land area). The comparable numbers
are 45 vs. 32.9 percent (1.37 times) for
Thailand and 32.7 vs. 20.6 percent (1.59 times)
for Vietnam.
What should concern us, however, is how much of
our productive farmlands are being taken out of
production much sooner than need be. This is
because our rigid land conversion rules, which
absolutely prohibit conversion of irrigated
lands, induce big developers into “land
banking,” where they often take good lands out
of production and deliberately destroy
irrigation facilities therein. It is now
industry practice to accumulate thousands of
hectares for future development, holding them
idle and unproductive for that long. This is
because the land has to be unirrigated and
unproductive to be eligible for
conversion—usually up to 10-15 years later. A
bank branch manager attested to me how he had
witnessed developer clients willfully destroy
existing irrigation facilities because having
them will run counter to what they will want to
prove years later.
I witnessed the problem firsthand in a depressed
Laguna municipality when I led a team in a study
on rural poverty a few years ago. Numerous local
farmers ended up with no income source after a
large property developer bought up hundreds of
hectares of their farmlands, rendering them
untouchable henceforth. It was a great waste,
and a huge lost opportunity to otherwise provide
livelihoods to hundreds of farmers and their
families, if only they could still lease their
former farms and produce food in and earn
incomes from them—while the developer also earns
lease income.
I’ve never believed it realistic or practical to
be overly rigid on land conversion. Why ban
conversion of irrigated lands, when we can
instead impose a condition that for every
hectare of land converted, the developer causes
the irrigation of two or more hectares of
unirrigated land elsewhere? With a little
out-of-the-box thinking, we get not only a
win-win outcome but a net gain for all
concerned.
cielito.habito@gmail.com |
_______________________________________________________________________________________ |
BSP allows banks to set up eight new branches
May 2, 2023 | 12:02 am
THE BANGKO SENTRAL ng Pilipinas (BSP) approved
eight new bank branches in the fourth quarter of
2022, higher than the same period a year prior,
amid an increased number of applications for
physical offices.
The BSP green-lit eight new regular branches in
the period, higher compared with just one
regular branch approved in the fourth quarter of
2021, based on a circular letter posted on the
central bank’s website signed by Assistant
Governor Arifa A. Ala.
It also approved 11 new branch-lite units (BLUs)
of universal and commercial banks, thrift banks,
and rural and cooperative banks.
Two of the newly approved regular branches
belonged to China Banking Corp. (China Bank),
and one regular branch was for Robinsons Bank
Corp.
The BSP allowed three thrift banks to open
regular branches and branch-lite units. Two
regular branches were for the First Consolidated
Bank, Inc., while Dumaguete City Development
Bank, Inc. and Wealth Development Bank Corp.
each had one BLU approved.
Meanwhile, Rural Bank of Apalit, Inc. was
allowed to open three regular branches in Rizal
and Bulacan. BINHI Rural Bank, Inc., LifeBank –
A Rural Bank and Rural Bank of Bambang Inc. can
open a total of seven new BLUs.
During the last three months of 2022, 18 banks
opened regular branches, BLUs, and microfinance
units in the country. This was higher compared
with only 13 banks during the same period in
2021.
The central bank said there were 15 regular
branches that were opened in different locations
around the country in the fourth quarter of last
year.
Four of the newly opened regular branches were
owned by BDO Unibank Inc., and one by China Bank
in Tanza, Cavite. Land Bank of the Philippines
also opened a regular branch in Tayabas City and
seven BLUs across the country.
Five rural bank regular branches were opened in
different areas and 40 rural bank BLUs.
Meanwhile, four regular branches and 15 BLUs
were set up by thrift banks.
Branch-lite units have limited banking
activities compared with regular branches, but
it could still provide a wide range of products
and services suited for the needs of the market
except for clients with aggressive risk
tolerance.
Regular offices are traditional brick and mortar
branches operating within a building and offer
full banking services. — K.B. Ta-asan |
_______________________________________________________________________________________ |
BSP closes one more rural bank
Lawrence Agcaoili - The Philippine Star
April 30, 2023 | 12:00am
MANILA, Philippines — The Bangko Sentral ng
Pilipinas (BSP) has closed down another
problematic rural bank, bringing to three the
number of institutions shuttered this year as it
continues to weed out weak players in the
industry.
BSP assistant governor Arifa Ala said the
central bank’s Monetary Board issued Resolution
536.B last April 27 prohibiting the Binangonan
Rural Bank Inc. from doing business in the
Philippines pursuant to Section 30 of Republic
Act 7653 or the New Central Bank Act, as
amended.
Ala issued Circular Letter 2023 – 029 stating
that state-run Philippine Deposit Insurance
Corp. (PDIC) has been designated as receiver
with a directive to proceed with the takeover
and liquidation of the closed rural bank in
accordance with RA 3591 or the PDIC Charter.
The PDIC Charter provides that a bank placed
under liquidation shall in no case be re-opened
and permitted to resume banking business. It
also states that banks closed by the Monetary
Board shall no longer be rehabilitated.
Upon placement of a bank under liquidation, the
powers, functions and duties of the directors,
officers and stockholders of the bank are
terminated.
Accordingly, the directors, officers, and
stockholders shall be barred from interfering in
any way with the assets, records and affairs of
the bank.
This is the third rural bank ordered closed by
the BSP this year. The regulator also ordered
the closure of Rural Bank of San Marcelino Inc.
last March and Rural Bank of San Agustin
(Isabela) Inc. last January.
Last year, the BSP closed down nine problematic
banks including the Rural Bank of Galimuyod
(Ilocos Sur) Inc., Rural Bank of Polomolok
(South Cotabato), Banco Rural De General Tinio
in Nueva Ecija, Farmers Savings and Loan Bank
based in Bulacan, Metro-Cebu Public Savings
Bank, Rural Bank of Mahaplag (Leyte) , Rural
Bank of Salcedo (Ilocos Sur), Rural Bank of San
Lorenzo Ruiz (Siniloan), and Rural Bank of San
Nicolas (Pangasinan).
In 2021,the number of problematic banks ordered
closed by the central bank almost tripled to 13
from five in 2020 as the country has yet to
fully recover from the impact of the COVID-19
pandemic.
To strengthen the sector, the central bank has
rolled out of the Rural Bank Strengthening
Program (RBSP) to enhance the operations,
capacity, and competitiveness of the industry.
The BSP earlier raised the minimum capital
requirements for rural banks to at least P50
million to enhance the operations, capacity and
competitiveness of small banks.
Under the new capital structure, the minimum
capitalization of rural banks would be P50
million for those with a head office and only up
to five branches, P120 million for those with
six to 10 branches, and P200 million for small
banks with more than 10 branches.
Branch-lite unit of rural banks are not included
in the number of branches.
|
_______________________________________________________________________________________ |
Preparing for El Niño
Philippine Daily Inquirer / 05:07 AM April 28,
2023
With the official weather bureau forecasting an
80-percent probability of El Niño in the coming
months, pertinent government agencies have no
excuse to dawdle on their job and should now
speed up preparations for this catastrophic but
expected weather phenomenon. According to the
Philippine Atmospheric, Geophysical, and
Astronomical Services Administration, the
probability of an El Niño occurrence has
increased from 55 percent to 80 percent in June,
July, August, and September, with an El Niño
alert set to be issued next month.
El Niño, which is caused by the seasonal warming
of the Pacific Ocean, upsets normal weather
patterns and brings heavy rainfall in some
countries, and dry spells and drought in others,
including the Philippines. Fishermen from South
America first noticed the phenomenon in the
1600s, and noted that it usually occurred toward
the Christmas season, hence the name El Niño
which refers to the child Jesus. Climate change
however has broken that pattern such that El
Niño may be expected in other months of the
year.
This extreme weather condition has been known to
cause the outbreak of diseases, heat stress, and
respiratory ailments, as well as wreak
devastation on agricultural lands that result in
lower crop yields and, consequently,
longstanding food shortages. Over the past
decade, the Philippines has incurred P463
billion in damages from extreme weather events,
62 percent of that in the agriculture sector.
The fisheries sector has not been spared, with
warm ocean waters dispersing and driving schools
of fish into deeper waters and drastically
reducing one’s catch. Severe temperatures and
lower ocean waters have also exposed and
bleached fragile coral reefs, killed plankton,
and triggered fish kills. Forest fires, degraded
water sources, and other environmental risks can
also be expected.
While there’s little that humans can do to
influence El Niño’s onset, duration, and
intensity, its severe effects can be mitigated
with sound policy interventions, preemptive
government actions, and long-term strategies
informed by science. Expected to lead these
initiatives is the Department of Agriculture
(DA), and its acting secretary, President Marcos
himself.
So far, the DA has outlined its plans to help
the fisheries and agriculture sector cope with
El Niño’s effects, including putting up more
water-related infrastructure such as
hydroelectric power plants, irrigation canals,
and diversion dams. Small scale irrigation
projects would also be developed or
rehabilitated, and made available to farmers.
The DA also said that it has already identified
hybrid varieties of rice and other high value
crops that can be planted during dry spells.
All well and good, though it remains to be seen
if the agency blamed for spotty policies behind
the skyrocketing prices of sugar, rice, and
onions could follow through its plans and prove
detractors wrong.
For his part, the President could have expounded
on his announced plan for the government to
slowly convert the country’s dependence on water
supply from underground to surface water, since
conventional wisdom has it that groundwater,
being less polluted, is easier and cheaper to
treat than surface water. Knowing about the risk
of groundwater depletion and the reduction of
water in streams and lakes, as well as the
deterioration of water quality, should be enough
to convince most people to go for it. The plan
to help local government units install their own
water supply systems should rain prove
insufficient is sound, however. As is the
executive order that the President said he had
signed to create an office to manage the
country’s water resources.
Just as noteworthy is the mitigation and
adaptation plan set up by the Disaster Risk
Reduction and Management Unit that includes the
promotion of drought-tolerant and early maturing
crop varieties, organic fertilizer to increase
retention of soil moisture, the adjustment of
the planting calendar, and crop shifting. |
_______________________________________________________________________________________ |
BSP launches credit scoring model
April 26, 2023 | 12:32 am
THE BANGKO SENTRAL ng Pilipinas (BSP) has
launched a credit scoring model that is expected
to enhance credit risk assessment by lenders.
The Credit Risk Database (CRD) Scoring Model was
developed as part of a technical cooperation
program between the BSP and the Japan
International Cooperation Agency (JICA).
It is expected to serve as an additional tool
that lenders can use to analyze the
creditworthiness of micro-, small-, and
medium-sized enterprises (MSMEs).
The CRD utilizes a data-driven approach to
boosting lenders’ confidence in financing MSMEs,
especially those without credit history or
enough collateral, the BSP said.
“The CRD scoring model will [not only]
contribute to bridging the funding gap to MSMEs,
but it will also enhance credit risk management
among financial institutions,” BSP Governor
Felipe M. Medalla said at the launch event on
Tuesday.
Sakamoto Takema, chief representative of JICA,
said the CRD can contribute to the BSP’s goal of
enhancing access to finance under the National
Strategy for Financial Inclusion.
“The overall goal is to enhance the capacity of
credit risk assessment of each financial
institution, and to promote risk-based lending
rather than collateral based lending. It will
strengthen the country’s financial system by
expanding and streamlining lending to MSMEs,”
Mr. Takema said.
Mr. Takema said JICA has agreed to extend the
CRD project period for another year and will
extend support for phase 2.
The CRD project was launched virtually in
December 2020 at the height of the pandemic. The
project has expanded with the help of 32
participating rural and universal and commercial
banks.
BSP Deputy Governor Bernadette Romulo-Puyat said
the CRD is a tool that may significantly expand
credit access of small and medium enterprises.
“MSMEs make up 99.6% of business establishments
in the country providing 64.7% of employment to
the country’s workforce and contribute about
35.7% to the country’s gross domestic product,”
she said.
Mr. Medalla noted that there is a
“one-size-fit-all policy” towards lending to
small businesses in the country, citing the
Republic Act 6977 or the Magna Carta for MSMEs.
“A highly specialized Japanese bank for instance
— [which] has less than a hundred employees
because they are focused on lending to Japanese
firms in the Philippines — are being told to
lend to MSMEs and agriculture,” he said, adding
that the law becomes a “tax” on foreign
investors.
Mr. Medalla said that banks have opted to incur
penalties for noncompliance instead of taking on
the risks associated with lending to small
businesses.
Lenders are mandated by the Republic Act 6977 or
the Magna Carta for MSMEs to allocate 10% of
their credit portfolio for small businesses to
boost the sector — 8% for micro and small
enterprises (MSEs) and 2% for medium-sized
enterprises.
In April 2020, the BSP allowed MSME loans to be
counted as part of banks’ reserve requirements
in a bid to boost lending to the sector at the
height of the pandemic. — Keisha B. Ta-asan |
_______________________________________________________________________________________ |
Suspended for doing duty? Bank staff decry
maltreatment
GOTCHA - Jarius Bondoc - The Philippine Star
April 12, 2023 | 12:00am
Philippine National Bank’s board of directors
meets with urgency today. Agenda seems but a
speck of PNB’s P1.15-trillion assets,
P11.4-billion profit, 8,550 personnel and 670
branches.
But the speck can inflame the crisis. It
concerns the suspension since March of PNB’s
administrative staff. They allegedly were not
informed of their offenses or afforded a chance
to explain.
Their suspension came right after they reported
an irregular, overpriced aircraft repair. An
officer linked to the $3-million expense
supposedly instigated their punishment.
Top management is in disarray. Initially
supportive, superiors of the admin staff
purportedly have abandoned them. Two board
directors were cited in a March 8 pseudonymous
complaint as aware of the events.
The suspended staff decried the sudden black
mark on their employment records. They may be
unable to transfer to other financial
institutions. Some have been with the
107-year-old bank before tycoon Lucio Tan bought
it from government in 2005. They worry about the
suspension’s effect on their retirement.
If not resolved fast, the Bangko Sentral,
Department of Labor, Philippine Stock Exchange
and Bureau of Internal Revenue will swoop in.
Already the punishment of the investigators is
affecting PNB affiliates Philippine Airlines and
Basic Holdings Aviation of the Lucio Tan Group.
Mr. Tan, 88, chairs the three firms and the
group.
Repeated efforts were exerted over two days to
contact bank EVP Aida Padilla and corporate
fleet VP Clive Kian on their known mobiles – to
no avail. Known as a straight-shooter but downed
by Covid-19, president Florido Casuela declined
an interview.
On Oct. 28, 2020 Mr. Tan approved the overhaul
of PNB’s King Air executive jet’s two engines.
Price: $230,000. Local offeror was Manila
Aerospace Products Trading for overhauler Pratt
& Whitney of Canada.
June 18, 2021 MAPTRA billed PNB $2,958,800.30,
including 12-percent VAT for the overhaul.
Next day Kian, on a Basic Holdings form, signed
the purchase order and payment request. Also on
June 19 Kian, on PNB stock requisition form,
signed for the same. He is executive assistant
to chairman & CEO Mr. Tan, who reportedly is now
frail and forgetful from age.
Stunned, PNB bosses sought the help of PAL, the
country’s largest airline, to check the
technicals and possibly haggle down the price.
Oct. 25, 2021 PAL specialist officers wrote to
Kian: “We cannot help but raise our earnest
concern about the costly repair to MAPTRA.”
An online check showed that a brand-new King Air
engine costs only $845,169, or $1,690,338 for
two. After it was questioned for not offering
such an alternative, MAPTRA asked P&W to send a
quotation for brand-new.
On top of P&W’s $1,690,338, MAPTRA tacked on a
non-negotiable 15-percent administrative cost of
$293,945.58. Add import costs, VAT and supposed
“work in progress,” total for brand-new was
$3,086,142.24.
Overhaul of $2,958,800.30 looked cheaper. Still
PAL probers stuck to the $230,000 “duly signed
by our beloved Chairman Dr. Lucio C. Tan.”
Receiving PAL’s investigation report, PNB’s
board deferred payment. Told to probe on its
own, the bank admin staff prepared their own
report to Casuela for relay to the board.
Instead they were investigated by PNB internal
auditors. Supposed findings: Habitual tardiness,
improper uniform, sharing of passwords, missing
furniture and collusion with scrap buyers.
The staff decried lack of due process: “If only
our beloved Kapitan is made aware of this
illegal act, he will not agree to us being
insulted and treated this way. Sir Kapitan will
surely admonish our officers for failing to
protect the interest of the bank and rights of
the employees.”
PNB doesn’t punish without hearing all sides,
Senior VP Claro Fernandez said. Too, it
encourages whistle-blowing, even if anonymous,
for sustainability and as part of compliance
with BSP rules.
Though unaware of the issue, Fernandez said
“preventive suspension is done to avert
purloining of documents. It is obligatory for
the president and Human Resources to act on such
cases.” |
_______________________________________________________________________________________ |
SC affirms injunction on BSP’s closure order on
AMA Rural Bank
April 3, 2023 | 12:00 am
THE SUPREME COURT (SC) has upheld an appellate
court ruling that granted the shuttered AMA
Rural Bank of Mandaluyong, Inc.’s appeal to stop
the Bangko Sentral ng Pilipinas (BSP) from
ordering its closure.
In a 17-page decision dated March 1 and made
public on March 31, the court agreed with the
Court of Appeals’ decision that said the BSP
failed to provide legal grounds for the bank’s
closure.
“Indeed, the totality of circumstances reveals
the tangible efforts on the part of AMA Bank to
comply with the directives of BSP,” the tribunal
said.
“Thus, under the particular facts of this case,
coupled with the public interest involved, the
closure of AMA Bank is too harsh.”
In a decision dated Nov. 7, 2019, the Court of
Appeals ordered the central bank to restore AMA
Bank to fully operational status, saying the BSP
abused its discretion in issuing the closure
order.
The central bank in 2016 attained a
cease-and-desist order (CDO) to stop a housing
loan program of the bank that allegedly approved
irregular and questionable loans to borrowers.
The order also stopped the recognition of the
bank’s income for capitalized interest and
penalties.
The BSP ordered the bank’s closure in 2019 over
alleged unsafe and unsound practices.
On Nov. 7, 2019, the Monetary Board issued MB
Resolution No. 1705.D, which ordered the
Philippine Deposit Insurance Corp. to take over
the bank’s liquidation.
It said the AMA Bank can continue its business
without involving probable losses to its
depositors and creditors. As of Sept 30, 2019,
AMA Bank’s total assets amounted to P2.8
billion.
The High Court said the appellate court had the
authority to look into the Monetary Board’s
practice of ordering the closure of banks
without a prior hearing.
Under the law creating the BSP, the Monetary
Board can order the closure and liquidation of a
local lender if it has suspended payment of its
deposit liabilities in the past 60 days, has
insufficient realizable assets; cannot continue
businesses without involving probable losses to
depositors or creditors; and if it has violated
a cease-and-desist order.
The tribunal said the central bank failed to
establish the existence of the said grounds to
warrant the closure of AMA Bank.
It added that AMA Bank did not “willfully”
violate the 2016 cease-and-desist order, adding
the bank showed efforts to comply with the CDO.
“There being no valid grounds that would justify
AMA Bank’s closure, the inevitable conclusion is
that MB Resolution No. 1705.D. is void,” it
said. — John Victor D. Ordoñez |
_______________________________________________________________________________________ |
Bad banker (6)
VIRTUAL REALITY - Tony Lopez - The Philippine
Star
April 4, 2023 | 12:00am
A number of senators and even media have joined
the growing chorus of objectors to the impending
merger of the Land Bank of the Philippines and
the Development Bank of the Philippines, the two
biggest banks of the government.
I am one of the earliest to voice my opposition
to the merger. My main reason is that Land Bank
has failed miserably in its original mission to
finance and develop Philippine agriculture.
Because of that failure, we don’t have enough
food today. At least 25 percent of our food
requirements have to be imported every year. We
have today the world’s most expensive plain rice
(our cost of production is double the world
average), the most expensive onions, potatoes,
tomatoes, pepper, aside from having among the
most expensive fish and pork.
The yearly cost of importing rice alone is $2
billion (P110 billion) – money that could have
gone to job-creating economic activities. Or for
educating our young people who, by repeated
global tests among nations, have been shown to
be the most stupid young people on earth.
They cannot read and write. If they can read and
write, they don’t understand what they are
reading. They cannot count beyond 100. They
don’t know any science. The result of that
collective stupidity is bad governance because
stupid people naturally make the wrong choices
during elections.
Crucially, the food shortage has meant a very
unstable society. Food after all is 50 percent
of the average budget of Filipino households; 55
percent if you are very poor. This explains why
the Philippines’ – and the world’s – longest
running communist insurgency is agrarian-based
or food-based.
So you can say Land Bank indirectly has
contributed to the communist insurgency which at
one point (in 1987) reached an armed strength of
35,000 regulars, and to the state of
mis-governance in this country.
The biggest producers of food – our farmers and
fishermen – are the poorest of Filipinos. They
have been let down and abandoned by the Land
Bank, which has gone heavily into commercial and
business loans in an operation that will put
Shylock to shame. It explains why Land Bank
keeps saying it is very profitable but not as
profitable as the better-run private banks.
All commercial banks are required by law to
allocate 25 percent of their loanable funds to
agriculture and agrarian reform. Land Bank
should lead in that purposeful action. But no.
Its ratio of agri-agra lending, 26 percent, is
the same, if not lower, than all the other
banks’. And LBP hits that ratio by simply buying
securities or IOUs peddled by the government as
compliance with agri-agra lending.
We have about seven million farmers and
fishermen. Ask Land Bank how many it has reached
out to. Just 10,000 in the case of agrarian
reform beneficiaries. We pay with precious
dollars for our food importations, money that
comes mainly from the hard-earned dollars of our
overseas Filipino workers – workers who went
abroad precisely because they don’t have
adequate income and don’t have adequate food to
eat at home.
When Land Bank was founded 60 years ago,
agriculture was the strongest and largest sector
of the economy. We were a rice exporter.
Agriculture contributed as much as 30 percent of
total annual economic production or GDP and up
to 70 percent of total employment. Today,
aggie’s GDP share is down to 8.9 percent – the
lowest in the last 100 years.
The economy has been taken over by call center
agents, truck drivers and logistics operators
and, of course, by bankers. These are the people
who man services or the biggest sector of the
economy.
The main argument for the merger of LBP and DBP
is bigness. Bigness is supposed to be good.
That’s a lie. Credit Suisse was Switzerland’s
second biggest bank. Last month, CS died, a
victim of habitual mismanagement, mission
failure, loss of confidence by its depositors
and by incompetent regulators.
The bank was built as the bank of the world’s
richest and hoarders of illicit money, of kings,
tyrants and the corrupt. These people know a bad
deal when they see one and they vote with their
feet.
The consolidation of LBP and DBP would create a
super bank, the biggest in the Philippines, with
assets of P3.796 trillion, deposits of P3.195
trillion and a loan portfolio of P1.681
trillion.
In contrast, BDO Unibank, the current No. 1
bank, has total resources of P3.727 trillion
(just P69 billion smaller), deposits of P2.947
trillion (P248 billion smaller), loans of P2.523
trillion (P842 billion bigger) and capital of
P442.95 billion (P161.392 billion bigger).
Land Bank itself has total loans of P1.107
trillion, or just 45.8 percent of its total
deposits of P2.416 trillion. BDO’s
loans-to-deposit ratio is a remarkable 85.6
percent (P2.253 trillion of loans out of P2.947
trillion of deposits).
BDO’s loans-to-deposits ratio is an awesome 85.6
percent – 1.86 times bigger than Land Bank’s
48.5 percent. Meaning Land Bank is only half as
diligent and hardworking in doing its lending
function as BDO is.
In banking, laziness could be a fatal flaw.
The new Land Bank (after gobbling up DBP) would
still be massively under-capitalized, at P281.55
billion, and would have one of the largest bad
loans in the industry, P90.57 billion or 5.4
percent of total loans – three times the
industry average.
So if the idea is bigness – bigness in shortage
of capital and in size and ratio of bad loans,
then the merger of LBP and DBP would achieve the
bigness purpose. A bank with such a big problem
with capital shortage and size of bad loans are
a formula for failure. |
_______________________________________________________________________________________ |
|
_______________________________________________________________________________________ |
‘Provincializing’ agriculture
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:25 AM February
28, 2023
You know agriculture is in great trouble when so
many op-ed columns are being written on the
sector, even from writers who don’t normally
deal on the subject. The attention is well
deserved, as I consider agriculture the backbone
of our economy. It stands out as the sector most
evenly spread across all regions of the country,
unlike services, where only two regions (Metro
Manila and Calabarzon) already account for over
half of the sector’s gross domestic product
(GDP) contribution. In industry, only three
regions do (with the addition of Central Luzon).
In agriculture, it takes six regions to comprise
half its output, and regional contributions are
more even. One might say it’s the sector that
binds them all together.
But agriculture directly accounts for barely a
tenth of our GDP now (from about a third in the
1940s). It could, and should, account for more,
especially in a country as naturally
well-endowed as ours. But it’s time for a new
approach to managing the sector, and it hinges
on provinces taking primary responsibility to
make their farmers and fishers productive,
competitive, and profitable. Three observations
lead me to this:
One: Devolution was a good idea, but badly
executed.
After the Local Government Code of 1991 became
law, municipal agricultural officers (MAOs) were
largely left on their own. It seemed that the
Department of Agriculture (DA) felt no
compulsion to provide them technical supervision
as municipal employees. Worse, mayors with
little regard for agriculture made them
all-around workers, even drivers. Still, the DA
continued to work top-down, managing things
centrally and prescribing one-size-fits-all
programs, even where unsuitable. My favorite
field anecdote was when I asked the village
chief of a poor upland Mindanao barangay what he
would ask of the government if granted one wish.
His reply: carabaos (for tilling the idle
grasslands around them). I asked what they were
getting from government; he said fertilizers and
hybrid seeds. So I asked what they did with
them. He said they had no use for them, so they
simply sold them. When I chided the MAO for not
telling the DA of their real need, she replied,
“I keep telling them that every year, but
they’ve made up their minds to give fertilizers
and hybrid seeds.” This incident alone firmly
convinced me that recentralizing agricultural
extension—like at least one DA secretary
wanted—cannot be the way to go.
Two: Agriculture needs a much higher budget
allocation.
Something is wrong when less than 2 percent of
our total government budget goes to agriculture
when our closest neighbors reportedly allot from
3.4 percent (Indonesia) to 6.5 percent
(Vietnam). But it’s hard to justify raising the
DA budget when its absorptive capacity is slow,
and the quality of its spending is low. For
example, it spends more on farm inputs (yes,
fertilizers and hybrid seeds) with one-off
benefits, when it should be investing more in
public goods like irrigation, rural roads, and
postharvest facilities with lasting
productivity-enhancing effects. DA can leverage
more funds for agriculture by downloading their
budget to provincial governments via matching
grants that give the latter one, two, or more
pesos for each peso they spend on agricultural
development—with necessary safeguards on fund
use. This yields a double dividend of improved
DA disbursements (helping them better justify
increased budgets), while drawing out even more
funds from the units of government closer to the
actual problems on the ground, hence more
knowledgeable on solving them.
Three: Agriculture is everyone’s concern.
It is much too important to leave to the DA
alone. It must be a joint accountability of the
DA and the provincial agricultural offices
coordinating the MAOs, along with other
institutions like church, academe, and big
business. Agriculture outcomes impact food
consumers, and that means everyone, especially
the poor that counts farmers among them—leading
them to food insecurity and malnutrition when
productivity is low and food prices high. All
have a part to play to address the pervasive and
long-term effects of our troubled agriculture
sector. And in our suggested playbook, provinces
must step up if things are to get better. |
_______________________________________________________________________________________ |
BSP warns public anew against virtual asset
firms
Published February 14, 2023, 2:22 PM
by Lee C. Chipongian
The Bangko Sentral ng Pilipinas (BSP) on
Tuesday, Feb. 14, has again issued a warning
against transacting with virtual asset service
providers (VASPs) that are unregistered and
domiciled abroad or unknown foreign virtual
asset companies.
The BSP said there are only 20 registered VASPs
with the BSP as of end-January 2023, of which
two are not yet operational and two are
inactive. Of the registered VASPs, the BSP also
listed four that are not operating at the
moment.
In total, of the 20 that did register with the
BSP, only 12 are active and in operation as of
end-January.
These 12 VASPs are: COEX STAR; Appsolutely;
COINS PH; Bexpress; Bloomsolutions; Frenetic;
Moneybees Forex; Maya Philippines; Philbit;
PDAX; TopJuan; and Zybi Tech.
The BSP on Tuesday also reissued an August 17,
2022 public advisory reminding Filipinos that
the BSP will not be able to enforce legal
recourse or protect consumers such as redress
mechanisms for VASPs based abroad. Dealing in
virtual assets, said the BSP, are generally
considered as high risk activities “which may
result in huge financial losses due to price
swings.”
The BSP highly encourage financial consumers to
verify with the BSP if the virtual asset firm or
companies they are dealing with is supervised
and regulated.
Based on a Dec. 7, 2022 memo, the central bank
has likewise instructed all registered VASPs not
to engage in any business activities other than
for the safekeeping of assets.
The BSP imposed a three-year ban on VASP
licensing beginning on Sept. 1, 2022. The BSP
refers to virtual currencies as virtual assets.
It issued a circular to govern VASPs in 2017.
The VASP regulation expands the BSP’s previous
rules on virtual currency exchanges to include
businesses that perform an exchange between one
or more forms of virtual assets, the transfer of
virtual assets and its safekeeping or
adminstration.
BSP Deputy Governor Chuchi G. Fonacier said in
the December 2022 memo that there are persistent
threats in the virtual asset world that affect
practices and endanger the safety and security
of customer funds, such as what happened in the
FTX debacle, a cryptocurrency that went bankrupt
last year.
Fonacier said all VASPs, particularly those
providing safekeeping and administration
services for virtual assets such as custodians,
should ensure that customers’ virtual assets are
not being used for any business activities other
than for safekeeping on the customers’ behalf.
VASPs facilitate the conversion or exchange of
fiat currency to virtual assets or vice versa.
Fonacier also reminded all VASPs to be
especially critical in assessing the risk
profile of liquidity providers and check the
following: license and registration status; the
legal and supervisory framework of the
jurisdiction from which the liquidity providers
are domiciled; and supervisory/enforcement
capabilities of relevant regulatory
bodies/enforcement agencies. |
_______________________________________________________________________________________ |
What now, Department of Agriculture?
By: Meliton B. Juanico - @inquirerdotnet
Philippine Daily Inquirer / 04:10 AM February
06, 2023
One of the country’s most pressing needs now is
the appointment of a full-time secretary at the
Department of Agriculture, where President
Marcos Jr. is still the head but does not
initiate crucial solutions to our woefully
dysfunctional agricultural economic system. The
President cannot take his own sweet time in
mulling over who to appoint as agriculture
secretary, while onion farmers are killing
themselves due to government apathy and the poor
suffer from hunger amid abnormally high food
prices. The neoclassical economists of his
administration are singing praises over the
country’s high GDP growth rate of 7.6 percent
and its consequent P22.02-trillion worth of the
economy; however, they should ask themselves if
this growth rate has tangibly trickled down to
the masses and solved the country’s age-old
problems of poverty, inequality, and
unemployment.
Currently, the most pressing problem lies in the
monopsonistic-oligopsonistic distribution system
of farm products characterized by the
multilayered system of from four to as many as
eight middlemen who depress farm gate prices to
ensure their own profitability and who are
controlled by cartelized urban merchants who
dictate the terms of agricultural trading. Based
on studies of the Philippine Peasant Institute,
the price-setting urban cartel leaders hide
behind two masks — one as monopsony traders at
the farm gate and another as monopoly traders at
the consumer market. They also provide the
capital used by agents and traders — capital
which ironically comes mostly from
government-owned/controlled banks and
institutions.
Practically the same pattern of cartelization
occurs for major farm products and which cannot
be dismantled effectively by the government’s
interventionist institutions such as the
National Food Authority with their limited
budgets for stabilizing prices or perhaps with
their deliberate connivance with the traders to
relinquish control of the market. The cartels’
market control has also been strengthened by
market deregulation and easy resort to import
liberalization by the government. However, we
must remember that importations are always
capital leakages that result in the loss of
multiplier effects from the national economy.
The most effective solution is for farmers to
organize themselves into marketing cooperatives
and farmers’ nongovernment organizations—an
activity that the Cooperative Development
Authority should have been pervasively promoting
all over the country. Cooperatives interacting
solely among themselves can break the control of
middlemen and ensure high prices for farmers’
produce. Farmers should also be provided with
sturdy vehicles for bringing their produce to
good markets, as well as sufficient cold storage
and post-harvest facilities for keeping their
harvests fresh while waiting for favorable
prices—information on which the government
should also help provide. The Landbank,
Development Bank of the Philippines, and private
banks should be proactive in providing easily
accessible and low-interest loans. Rampant
smuggling in our porous ports that is abetted by
conniving customs officials should also be
curtailed, as they contribute to the depression
of farm gate prices.
On a long-term basis, the government should
provide a more elaborate system of
farm-to-market roads, especially in highland
areas where the terrain abets a dendritic road
pattern leading to the large urban centers where
the controlling cartel leaders are located.
Then, of course, on the production side, the
government should intensify the provision to
farmers of technical, managerial, and accounting
support services for increasing agricultural
production and raw material processing and for
limiting the exodus of farmers’ sons from farm
work.
The new agriculture secretary has a plateful of
challenges awaiting him. He should be one, then,
with a deep understanding of our grossly
dysfunctional agricultural economic system,
i.e., of the ingrained imperfections in the
production, distribution, and consumption phases
of the grain, vegetable, fruit, fishery, meat,
and other sectors of the agricultural economy.
And, most importantly, he should have the grit
to prosecute cartels, smugglers, and the
entrenched cabal of corrupt bureaucrats, and to
use the full range of weapons in the enforcement
arsenal. |
_______________________________________________________________________________________ |
BSP starts consultation of open finance pilot
Published February 1, 2023, 3:46 PM
by Lee C. Chipongian
A year after announcing an open finance pilot
program, the Bangko Sentral ng Pilipinas (BSP)
is now calling for financial sector participants
to standards consultations in 2023.
The BSP said on Wednesday, Feb. 1, that the PH
Open Finance Pilot will enable a more
“responsive, inclusive, and responsible digital
financial ecosystem that is characterized by
innovation-driven use of consumer data.”
“We call on our BSFIs (BSP supervised financial
institutions) and third-party providers to
proactively take part in the development of
technical and operational standards and
arrangements and carefully scrutinize the
fundamental elements necessary in the
establishment of a vibrant open finance
ecosystem in the country,” said BSP Governor
Felipe M. Medalla.
The pilot program is a collaborative project on
a voluntary basis, to explore the use of
Application Programming Interface (API)
technologies in the delivery of financial
products and services which will be responsive
to the needs of customers.
The activities of the PH Open Finance Pilot,
which will operate through the support of the
International Financial Corporation (IFC), will
be governed pursuant to Circular No. 1122, and
monitored by the Open Finance Oversight
Committee Transition Group (OFOC TG), said the
BSP.
The BSP said open finance will accelerate
financial inclusion by improving access to
credit and improving the tools that micro, small
and medium enterprises can tap.
As defined by the BSP, open finance is the
extension of data sharing principles, assigning
greater control to customers over their own data
and enabling them to allow third party providers
access to their data across multiple financial
products and services.
Basically, open finance promotes consent-driven
data portability, interoperability, and
collaborative partnerships among entities. It
extends the principles of data sharing,
security, and privacy across the different
financial products.
The central bank previousely announced plans to
pilot test at least three use cases for its open
finance framework such as account opening,
direct debit payments and fund transfers.
The OFOC TG is currently conducting preparatory
activities for this year. They should be able to
identify and determine areas of cooperation to
enable open finance which is a model based on
collaboration and data sharing API.
The Open Finance Roadmap 2021 to 2024 outlines
priority actions and the adoption of the policy
framework as well as the capacity-building for
regulation and cooperative oversight. It will
lay down the groundwork for the establishment of
an open finance ecosystem in the Philippines.
The OFOC TG as the interim governing body, will
lead the establishment of an open finance
ecosystem in the country.
and alternate members represent the universal
and commercial banks, thrift banks, rural banks,
digital banks, e-money issuers, operators of
payment systems and financial technology or
fintech sector.
The members of the OFOC-TG, which will serve for
a two-year term, have the responsibility to
facilitate the initial policies and standards
formulation. They will also support pilot
implementations under the open finance
regulatory sandbox. |
_______________________________________________________________________________________ |
ADB cuts developing Asia's 2023 growth forecast
again
CLIFF VENZON, Nikkei staff writerDecember 14,
2022 09:00 JSTUpdated on December 14, 2022 17:33
JST
MANILA -- Developing Asia's economic expansion
next year is expected to be slower than
previously projected as a global slowdown and
the prolonged war in Ukraine weigh on the
region, the Asian Development Bank said in a new
report.
The ADB trimmed its 2023 growth outlook for
developing Asia -- which covers 46 regional
members of the bank -- to 4.6% from 4.9%. The
region will likely end the current year with a
4.2% expansion, slightly lower than the 4.3%
forecast in September.
"Three main headwinds continue to hamper
recovery in developing Asia: recurrent lockdowns
in the People's Republic of China, the Russian
invasion of Ukraine, and slowing global growth,"
the bank said in an update to its Asian
Development Outlook publication.
The latest downgrades mark the third time this
year the ADB has cut its growth estimates for
the region, which is also under pressure from
elevated inflation partly due to the war and
rising interest rates.
The ADB marginally reduced its regional
inflation forecast for this year to 4.4% from
4.5%, but raised its projection for price
increases next year to 4.2% from 4.0%.
The ADB said the forecasts were based on
information available as of Nov. 30, a week
before China began easing its zero-COVID
restrictions, which had sparked protests.
While the loosening of restrictions in China has
the potential to boost economic growth, it could
also create new problems. A surge in infections
and work absences already appears to be causing
labor shortages in some sectors.
China's growth forecast for next year has been
trimmed to 4.3% from 4.5% amid a slowdown in the
U.S. and Europe, the ADB said. The outlook for
India, the region's second-largest economy,
after China, is unchanged at 7.2%.
The ADB upped Southeast Asia's growth forecast
for this year to 5.5% from 5.1% on
stronger-than-expected domestic consumption. But
the region is headed for a slowdown next year
with 4.7% growth, from 5.0% in the previous
forecast.
"Consumer and business confidence are likely to
be affected by high inflation and rising
interest rates, while government spending may be
curtailed under constrained public finances,"
the bank said.
Indonesia, Southeast Asia's largest economy, is
expected to grow 4.8% next year, down from the
5.0% forecast in September. Among the sharpest
downgrades, the ADB cut Malaysia's growth
outlook to 4.3% from 4.7% on subdued external
conditions and slashed its forecast for Vietnam
to 6.3% from 6.7% on inflationary pressures. |
_______________________________________________________________________________________ |
Banks release P281.3-B compliance loans in Sept.
Published November 27, 2022, 9:10 PM
by Lee C. Chipongian
Bank lending as alternative compliance to
reserve requirements (RR) totalled P281.3
billion as of September, up by 21 percent from
same period last year of P232.4 billion.
Based on Bangko Sentral ng Pilipinas (BSP) data,
RR-compliant loans to micro, small and medium
enterprises (MSMEs) reached P220.1 billion as of
the reserve week in late September, 13.1 percent
higher compared to same time in 2021 of P194.6
billion.
Loans to large enterprises, meantime, rose by
61.9 percent to P61.2 billion this year from
P37.8 billion same time in 2021.
RR-compliant loans to MSMEs accounted for 13.9
percent of total required reserves during the
period while loans to large enterprises was 3.9
percent of total reserves. The aggregate limits
for MSME loans is P300 billion and P425 billion
for large enterprises.
As part of BSP relief measures while there is a
pandemic, the BSP allowed banks to use loans to
MSMEs and large enterprises that are not
affiliated with conglomerates as alternative
compliance with the RR against deposit
liabilities and deposit substitutes.
“Availment of the BSP’s relief measure on the
use of new or re-financed loans to MSMEs and
eligible large enterprises as alternative
compliance with the (RR) continues to be
strong,” said the BSP in a report.
At the moment, RR ratio is at 12 percent for big
banks and 14 percent for non-banks with quasi
banking functions. Thrift banks have three
percent reserves ratio while rural banks have
two percent.
The relief measure will lapse on Dec. 29 this
year. The policy was first issued on April 24,
2020 for MSMEs and May 29 of the same year for
large enterprises.
The BSP had intended to reduce the RR ratio
before the expiration of the relief measure by
end-2022 but with high inflation which had to be
dealt with by tightening monetary policy, an RR
ratio cut will have the opposite desired effect.
To address the excess liquidity that will be
released after Dec. 29, the BSP allowed trust
units of banks or stand-alone trust companies to
buy BSP securities in the secondary market.
As the relief measure winds down, the move
improves BSP’s ability to control money supply
through their open market facilities in
particular through the issuance of the 28-day
bills. |
_______________________________________________________________________________________ |
Two questions for Marcos Jr.
By: Segundo Eclar Romero - @inquirerdotnet
Philippine Daily Inquirer / 04:25 AM October 25,
2022
Responding to gentle suggestions that he should
appoint a full-time agriculture secretary,
President Marcos Jr. is adamant that he will
hold on to the position, saying he is “still
needed there.” He explains that there are things
that only a president can do that a secretary
cannot. The problems in the agriculture sector
are “so difficult that it will take a president
to change and turn it around.” The President
says that he will appoint a full-time secretary
when he has properly institutionalized the
functions of the Department of Agriculture (DA)
and he has completed the necessary structural
changes.
The President has been the agriculture secretary
for almost four months. In that period, there
have been some revealing tests of his caliber as
a leader and manager of the agricultural sector.
His boast during the elections that he will
bring down the price of rice to P20 per kilo is
now out of reach. His policy and managerial
decision-making in resolving the critical sugar
shortage was erratic, causing the resignation of
his well-regarded undersecretary, Leaocadio
Sebastian, and exposing signs of disarray in his
Cabinet.
Being agriculture secretary is not a problem if
there are functioning, motivated, and
self-confident undersecretaries that have the
“hand-in-glove” trust and confidence of the
President. But no self-respecting competent
undersecretary would think of being creative,
innovative, and proactive, only to get the
“Sebastian treatment.” What remains in DA is
undersecretary Domingo Panganiban who served as
deputy minister of the Ministry of Food and
Agriculture as early as 1984 during the
dictatorship of Marcos Sr. Panganiban, at 83, is
past his prime for the present challenges in
Philippine agriculture.
As a matter of prudence, considering that the
nation is facing food and energy crises,
Filipinos, especially in media, the academe, and
policy institutes, should help the President
identify the key issues in agriculture and the
promising initiatives that might constitute
solutions.
There are many discussions of agricultural
issues happening across the land. For instance,
in the Future Earth Philippines Filipino SDG
Hour online symposium last Friday, Dr. Ted
Mendoza, an agronomist and retired professor of
UP Los Baños made a provocative presentation on
“Diet Change: The Filipino Answer to Climate
Change and Food Shortage.”
(https://youtu.be/K7z2XtNlAR0) He suggested that
looking at the world situation, the grains fed
to animals yearly can supply the food caloric
requirements of 8.3 to 10 billion people.
Reducing by 50 percent the grains fed to animals
can feed 50 to 60 percent of the growing world
population by 2050. His recommendation is for
Filipinos to shift more toward a plant and
fish-based diet for food self-sufficiency,
environmental sustainability, and health
reasons.
His presentation on the Philippine agricultural
situation had the audience groping for answers
to two imbalances—our rice shortage and the
resource-carrying capacity deficit of the
Philippines.
I thought these questions should properly be
directed to Mr. Marcos as agriculture secretary
and president, so I coached the questions
accordingly:
Question 1: With a population of 115 million by
2023, the rice output per hectare to be
self-sufficient should be 12.5 tons. The current
yield is only 4 tons. This translates into a
rice deficit of 17 percent. With the estimated
10 percent reduction in production due to
cost-cutting and floods, the deficit is
estimated at 27 percent, requiring the
importation of 3.5 million tons per year. By
2030, with a projected population of 124
million, the Philippines will be importing 4.8
million tons of rice. What level of rice
self-sufficiency should the Philippines aim for
by 2030 and what creative feasible strategy
would you adopt to attain this?
Question 2: Filipinos have always been told that
the Philippines is rich in natural resources. If
we take our population into account, this is no
longer true. With an arable land area of 13.42
million hectares out of our total 30 million
hectares, our ideal population should only be 33
million. We reached this threshold around 1965,
57 years ago. We have been in deficit since, and
the demands of our population at present exceed
threefold the carrying capacity of our land and
natural resources. How would you mobilize the
Filipino nation and people to redress this
fundamental gap between population and
resources?
Wouldn’t it be reassuring if Mr. Marcos can give
us his thoughts on these questions? If he
obliges, he might demonstrate he is indeed his
best agriculture secretary. |
_______________________________________________________________________________________ |
Why can’t we export more?
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:35 AM September
06, 2022
We are an outlier among our Asean peers—meaning
Indonesia, Malaysia, Thailand, and Vietnam—as
far as exports are concerned. The numbers say it
all: we averaged $69 billion in annual export
earnings between 2017 and 2020. Indonesia got
$170 billion, Malaysia $234 billion, Thailand
$242 billion, and Vietnam $251 billion. Even if
we add our annual services exports today of some
$33 billion, and overseas remittances of about
the same amount—in both of which we do better
than our neighbors—we’d still be far below
Indonesia’s goods exports alone.
I’ve written before about how our laggard export
performance mirrors our similar laggard status
in attracting foreign direct investments, and in
exporting agricultural and agriculture-based
products (“Pathetic laggard,” 9/14/21). Our more
dynamic neighbors get most of their export
earnings from foreign investors. It also shows
us how our neglect of high-value exportable
crops has deprived our farmers of the higher
incomes they could have been earning, if not for
the pervasive dependence on traditional crops
that have mired them in poverty. And yet, these
are the same crops that got disproportionate
attention (and protection) and budgets from the
government all these years. But apart from that
perverted situation, why else is our export
performance so pathetic?
We must start by looking at the demand and
supply sides of the export markets, as there are
drivers and hurdles to export growth on either
side. As a small exporting country in the global
economy, the demand side of export markets is
virtually unlimited from our point of view.
Hence, getting higher demand for our exports
mainly entails better marketing (via trade
missions, participation in trade fairs and
exhibitions, etc.), and expanding our market
access through preferential trade agreements
(PTAs).
In both, we are far from our four neighbors.
They reportedly spend an equivalent of 2 to 5
percent of their export earnings on market
promotion and advertising. Our own Department of
Trade and Industry keeps fighting for a much
bigger budget for trade and investment
promotion, but this falls on largely deaf ears
in our budget authorities or in Congress. On
PTAs, we are a country seemingly terrified of
them. Witness how we can’t even have our Senate
ratify the long-signed Regional Comprehensive
Economic Partnership agreement. Our four
neighbors are part of 15 to 27 PTAs; we have 10.
Lagging exports? No surprises here.
On the supply side is a far longer list of
challenges and impediments, or things that keep
us from producing and selling more to the export
markets. In a recent analysis done toward the
formulation of the Philippine Export Development
Plan, the list included the following: lack of
private and public investments (the latter in
infrastructure, human resource development, and
science and technology support); weak access to
financing by exporters, especially small ones;
fragmented land structure that makes having
economies of scale in raw materials production
extremely difficult; lack of the needed skills
in the workforce; gaps in product value chains
(example: we export nickel ore but import
batteries in which nickel is the key component);
coordination failures across firms, industries,
value chain links, government entities, and
among government, private sector and civil
society; and faulty government policies and
processes. Under the last is an even longer list
of shortcomings, including taxation and fiscal
incentives issues; regulatory burden and red
tape; political risk and policy inconsistency;
weak interagency coordination; and graft and
corruption, to name a few.
We must break out of the vicious circle our
country is trapped in: Low average incomes and
high poverty incidence lead to a limited
domestic market. In turn, this limits the growth
our producers and our economy, in general, can
attain. And this leads us back to low incomes,
and we come full circle.
The only way to break out of the vicious circle
and turn it into a snowballing virtuous circle,
thus creating much more jobs and incomes, is to
look to the export markets. But as we have seen,
we have a lot of homework to do. |
_______________________________________________________________________________________ |
Online scams and the elderly
By: Randy David - @inquirerdotnet
Philippine Daily Inquirer / 05:02 AM September
04, 2022
We who were born in the age of passbooks and
real bank tellers will never feel at home in the
world of digital banking and automated teller
machines (ATMs). This is not a Luddite
resistance to all labor-saving machinery. It
proceeds rather from a general insecurity we
feel when navigating the virtual space created
by computers, smartphones, and the internet.
Those who venture into cyberspace for the chance
to reconnect with long-lost friends, relatives,
and classmates tend to confine their presence in
that space to a Facebook account. In all other
things, especially where it concerns their
lifetime savings, they prefer to deal in person
with their bank manager or favorite teller.
But, alas, transactions essential to everyday
life have become increasingly automated and/or
conducted online — and there we easily lose our
bearings.
It is difficult to describe the distress we
experience when, in the middle of a task, we no
longer know what to do next. In that state of
utter frustration, we gladly surrender ourselves
to the gracious offer of assistance by another
human, albeit a stranger. In doing so, we
unwittingly enter uncharted space in which most
scams take place. We find ourselves being led
into performing online actions whose full
meaning we barely understand.
“It’s as if I was hypnotized, and all my
critical faculties were put to sleep,” a close
relative told me after her two bank accounts
were emptied by a woman purporting to be a
customer relations officer of the bank in which
she had kept her hard-earned savings. “I was
just so happy to find somebody who was willing
to stay with me for hours on the phone to guide
me through the maze of digital banking.”
It all started with a phone call from that
“nice” lady supposedly from the bank. “She said
that as a preferred client of the bank, I could
redeem my accumulated credit card reward points
by converting them into cash, to be transferred
to my GCash account, if I had one, or to my
existing bank accounts.”
The lady then offered to guide her prey, a
senior citizen in her late 60s, through the
process. This would entail, she told her,
opening a digital bank account through which the
client could access all her accounts with the
bank. For this, the lady caller, supposedly a
representative from the bank, needed to get the
client’s account numbers, user IDs, and
passwords, and, later, the system-generated OTP
or one-time passwords that would be sent to the
client’s mobile phone to confirm the
transaction.
It is true that banks have issued advisories
telling their clients not to share such
information, particularly passwords, with
anyone. They warn them against clicking links
embedded in emails and text messages purporting
to be from the bank. When in doubt, clients are
advised to call the manager or visit the bank in
person. At the height of the pandemic, however,
it wasn’t always easy to do that.
Online scammers have so methodically mapped out
the process involved in a typical digital
banking transaction that they can pinpoint
exactly where an intervention by an outside
party can plausibly be made. For people who are
familiar with the way the digital world works,
it may be hard to imagine how anyone could be so
trusting as to share sensitive data like
usernames and passwords with a total stranger.
They have no idea of the kinds of challenges the
elderly face when they find themselves in
virtual space. I have used personal computers
and smartphones since these were first
introduced. The complex ways of the virtual
world fascinate me as a sociologist. Yet not
being a digital native, I cannot presume to know
to what possible uses information shared online
can be put. With every passing year, I find
myself painfully taking more time to complete
online transactions, such as buying an airline
ticket or booking a hotel room. |
_______________________________________________________________________________________ |
‘Ayuda’ not a waste of money
Philippine Daily Inquirer / 05:12 AM August 31,
2022
Let’s assume for the sake of argument that
Finance Secretary Benjamin Diokno is correct in
describing financial assistance for impoverished
Filipinos who were severely affected by the
COVID-19 pandemic as “a waste of public funds.”
Assume for the moment that the head of the
Marcos Jr. administration’s economic team is
correct in describing the country’s situation as
having “fully recovered” from the worst gross
domestic product contraction since the end of
World War II.
Let us assume further that the Philippines has
“limited fiscal space” after having engorged
itself with debt during the previous
administration, both to fund an infrastructure
buildup program, as well as to embark on an
emergency spending program at the height of the
global public health crisis.
Finally, let’s assume that it is a good idea to
limit the granting of financial assistance only
to those Filipinos who already have their
national IDs.
Here’s the problem with these assumptions: they
have weak legs and cannot stand up independently
to well-reasoned counterarguments.
Take for instance the national budget. Almost
every year since he became a lawmaker, former
senator Panfilo Lacson has made it part of his
advocacy to point out surreptitious pork barrel
insertions that are either unnecessary or prone
to graft and corruption. After his retirement,
Lacson’s mantle has been passed on to Sen. Ralph
Recto, who recently pointed out that as much as
P588 billion of the proposed government budget
for next year as unprogrammed appropriations,
which he described as “gray areas.”
Should those funds be lost to graft and
corruption—and the government’s track record in
this regard does not leave much room for
optimism—that will be the classic definition of
“a waste of public funds.”
Another more appropriate example of a waste of
public funds—more appropriate than describing
“ayuda” to the poor as such—is the P2.4-billion
deal of the Department of Education for 40,000
laptops for school teachers to be used as tools
for distance learning. The laptops turned out,
unsurprisingly, to have outdated specifications
and are worth only a fraction of that price tag
if bought off the shelf. That, having supposedly
been transacted by a controversial unit of the
Department of Budget and Management (DBM), is
the classic definition of “a waste of public
funds.”
More examples? How about the more than
P11-billion anomalous contracts for
COVID-related medical supplies bagged by
Pharmally Pharmaceuticals Corp., again under the
auspices of the DBM?How about the kilometer upon
kilometer of perfectly good concrete roads in
various urban and rural areas nationwide that
were ripped up and recemented—concrete
“reblocking,” they call it—and, in the process
of giving menial jobs to contractual laborers,
lined the pockets of contractors? That is the
definition of a waste of public funds.
Of course, it also bears pointing out that
financial assistance to even the most
irresponsible of recipients is not wasted when
viewed within the framework of helping the
Philippine economy regain its footing.
Even if, hypothetically, the recipient would
spend it on nothing more than booze and other
vices, note that the previous administration
hiked the tax levies from so-called sin
products. Whatever a person spends on alcohol,
tobacco, or other unnecessary luxuries finds its
way back to the coffers of the state in the form
of substantial tax revenues, while the rest
helps oil the wheels of the economy, spurring
production and creating more jobs.
But more realistically, this financial aid is
spent on more basic needs like food, clothing,
shelter, and utility bills—all of which yield
taxes for the government and benefits for the
growth of the economy.
Finally, Secretary Diokno and the rest of our
public servants, both in high government office,
as well as those working closer to the people
they serve, would do well to remember that the
time for condescending “straight talk” is
inappropriate toward the people who pay for
their salaries with their taxes.
We are in a new administration, and hopefully
gone is the time when uncouth words and behavior
toward Filipinos can be passed off as “telling
it as it is.”
If nothing else, the people from whom this
financial aid will be withheld deserve dignity.
No, Mr. Secretary. Helping the poorest of the
poor hurdle the worst economic crisis in the
country’s history—a pandemic that has pushed
millions more below the poverty line—is not a
waste of public funds.
Doing so is our collective moral and social
obligation to those we have neglected for so
long. It is—in the face of all the government
waste and corruption we have seen in recent
years—quite simply, the right thing to do. |
_______________________________________________________________________________________ |
Digitalization for greater financial inclusion
POINT OF VIEW - Pia Arellano - The Philippine
Star
August 16, 2022 | 12:00am
Digitalization is defined as the use of digital
technology to change business models and provide
new revenue-producing opportunities. It embraces
technology’s capabilities to optimize customer
journeys and uses data to enable better business
decisions.
Digitalization also presents an opportunity for
many countries around the world to facilitate
greater financial inclusion. Everyone benefits
from being a part of the mainstream financial
ecosystem and economy. As customers gain access
to more financial services, they are better
positioned to grow financially – empowering
themselves and the communities they belong to.
As more people gain access to the financial
system and begin to build wealth and access
credit, greater financial inclusion serves as a
catalyst for investment and spending, which in
turn enables economies to flourish.
The Philippines is well on the way to achieving
greater financial inclusion through the
continued growth and development of digital
payment innovations. The 2022-2028 National
Strategy for Financial Inclusion launched by the
Bangko Sentral ng Pilipinas (BSP) places
digitalization as an important initiative in
broadening access to essential financial
products and services. In terms of legislation,
House Bill 8992 – also known as the Promotion of
Digital Payments Act – is currently pending
review. The bill seeks to widen access to
digital payment systems to reach Filipinos who
have otherwise been excluded from the formal
financial system.
COVID-19 also had a hand in the country’s rapid
push toward digitalization. Social distancing
guidelines and movement restrictions prompted
businesses and customers to change their
behavior, to shift to digital payments and allow
wider access to financial products. Many
government units also sent financial relief
payments through digital channels. According to
data from the BSP, over 4 million Basic Deposit
Accounts (BDA) were opened since the start of
the lockdowns.
With a maturing millennial demographic (born
1981-1996) alongside high rates of mobile
subscriptions, internet usage, social media
penetration and smartphone adoption, the
opportunities are present for digitalization to
create a more inclusive economy for more
Filipinos.
The digital divide
Digital financial inclusion can be
transformational, especially for unserved and
underserved members of the population who
transact mainly in cash due to the lack of
effective access to formal financial services.
According to the latest BSP Financial Inclusion
Survey, the number of unbanked Filipinos stood
at 51.2 million – accounting for 71 percent of
the total adult population.
Financial exclusion affects a wide range of
people. While there is no “one size fits all”
solution for the problems of financially
excluded people around the world, affordable and
accessible digital financial services can go a
long way.
In a recent TransUnion global study on consumer
attitudes towards credit, findings showed that
consumers across the globe understand both the
benefits and risks of credit and want to
maintain control of their finances. In the
Philippines, most unserved (51 percent) and
underserved (52 percent) consumers surveyed
expected their credit needs to increase in the
next three to five years. In relation to this,
both unserved (39 percent) and underserved (51
percent) consumers plan to apply for credit
within the year. Finding ways to meet the needs
of this large population of consumers while
prudently managing risk represents a significant
growth opportunity for lenders.
With the right technologies and business
strategies, banks and other financial
institutions across the country can help bridge
the digital divide to promote greater financial
inclusion. By reducing barriers to entry with
lower-cost digital services, digital financial
inclusion offers the promise of reaching new
markets that conventional solutions are unable
to service. As customers gain familiarity and
trust with digital platforms, the data utilized
and generated by such platforms enable access to
services such as savings, credit and insurance
tailored to customer needs.
A tech-driven economy
Digital financial services also enable economic
empowerment by allowing customers to transact in
small amounts. This helps increase economic
participation by helping individuals with uneven
income manage their expenses. BSP data showed
that in the first seven months of 2021, the
value of transactions made through local
e-wallets increased by more than 180 percent.
Greater economic participation through digital
financial services propels the country further
in terms of transitioning towards a
technology-driven economy. According to research
conducted by economic consultancy firm
AlphaBeta, if a technology-driven economy is
fully leveraged by 2030, the Philippines can
raise up to P5 trillion in economic value. The
majority of the total estimated digital
opportunity can be generated by technology-led
businesses such as e-commerce and mobile retail
applications. These platforms facilitate digital
transactions, reduce labor requirements, promote
inventory efficiencies and cut retail costs,
offering productivity gains ranging from six to
15 percent.
Digitalization for the future
Digital solutions streamline processes. For
lenders, effective digitalization can help
create a positive consumer experience that
potentially brings more consumers into the
formal financial system. Additional local
findings from the TransUnion global study on
consumer attitudes towards credit showed that
smooth digital processes can significantly
reduce credit application abandonment rates –
helping more people become financially included.
However, with the presence of bad actors and the
emergence of more sophisticated methods of fraud
and other forms of cybercrime, banks and other
financial institutions must be vigilant in
ensuring security. Everyone stands to benefit
from being confident in the integrity of digital
financial services. Bad experiences can
undermine trust, but robust security and an
informed consumer base form the blueprint for
trust and loyalty.
As a global information and insights company,
TransUnion Philippines is committed to helping
build trust between businesses and consumers.
With high smartphone usage rates in the country,
solutions such as our updated CreditVision Link
Universal Score leverage traditional and
alternative credit data to enhance risk
decisions and understand consumer trajectory,
while digital onboarding technologies increase
acquisitions while safeguarding against fraud.
Although much has been done to drive broader
financial inclusion, there is still much work to
be done. While digitalization is an important
component in fostering inclusive growth and
financial resilience, efforts must be cohesive.
Financial institutions must work together with
the new government to help increase awareness,
promote digital literacy and advance the
development of needed infrastructure to ensure
greater access to digital finance.
With these measures in place, not only can more
Filipinos become credit visible, but more
families stand to enjoy an improved quality of
life across the nation.
* * *
Pia Arellano has over 25 years of experience in
banking, payment solutions, telecommunications
and remittance services. She has been
instrumental in establishing TransUnion as a
risk management and data solutions and insights
partner of banks and financial institutions in
the Philippines. |
_______________________________________________________________________________________ |
Our
interconnected crises
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:25 AM August 09,
2022
The human costs of COVID-19 and how we managed
it heightened grave threats to the nation’s
future that had been looming even before the
pandemic. We have a ticking time bomb in our
midst that needs to be defused fast with
decisive reform and wide collective action.
Many are already aware of our stunting problem,
wherein one in every three Filipino children 5
years old and below is stunted due to chronic
malnutrition, as reported by the Food and
Nutrition Research Institute (FNRI). A child is
stunted when his/her height is lower than the
median (average) height for his/her age by two
standard deviations or more. In 2015, incidence
among 5-year-olds and younger was 33.4 percent,
and had inched down to 28.8 percent in 2019. But
the pandemic more than doubled the incidence of
forced hunger, based on the Social Weather
Stations’ regular survey—and it is quite likely
that early childhood stunting has also escalated
in turn.
I have written before about why our high
incidence of stunting, which is among the
highest in our part of the world, is a silent
crisis in our midst. FNRI describes it as a
“silent pandemic.” It’s not the height that is
the main problem here; it’s the underdevelopment
of the child’s brain that is. It’s a fact that
90 percent of a human’s brain development
happens by age 5. Brain scans of healthy and
stunted children indeed show that the latter
have much less brain tissue or white matter,
which is essential to memory, cognitive ability,
and overall mental capacity. Thus, a chronically
malnourished child who is stunted at age 5 will
no longer be able to achieve his/her full
physical and mental potential, and is
irreversibly damaged for life. Studies have
consistently shown that early childhood stunting
has adverse long-term effects on individuals and
entire societies, including poor cognition and
educational performance, low productivity as
adults, and consequently, lower earnings or
wages.
Our other silent crisis is the alarmingly
abysmal average performance of our elementary
and high school students in international
comparisons. It is now well-known that the
Philippines ranks at the bottom in reading
comprehension and second to the bottom in
science and mathematics among 79 participating
countries in the 2018 Program for International
Student Assessment. Recently, the World Bank
released the latest country assessments on
learning poverty, which measures the percentage
of children who cannot read and understand the
simple text by age 10. The Philippines rated a
dismally high 90.9 percent, far exceeding
Indonesia’s 52.8, Malaysia’s 42, Thailand’s
23.4, Vietnam’s 18.1, and Singapore’s 2.8
percent. And even as our education was already
in crisis before COVID-19, the pandemic set us
back further with over two years of remote
learning that put children from poor families
and far-flung areas with no connectivity at an
even greater disadvantage.
The two crises are closely intertwined. Our
serious education crisis is not just about
classrooms and teachers but also traces more
fundamentally to the silent pandemic of stunting
and malnutrition that has afflicted our children
for decades. That helps explain why we ranked
lowest (with an average of 86) among all 10
Asean countries in average IQ in a cross-country
assessment in the early 2000s. Even the best
teachers can only do so much for a pupil whose
learning has been compromised by early childhood
stunting or distracted by hunger pangs in the
classroom. School feeding programs are
important, but making sure pregnant and
lactating mothers are able to eat well is even
more critical and urgent. And our overly
protective (rather than nurturing and enabling)
agricultural policies, which pushed food prices
higher than they need to be, ultimately led to
the poor’s food insecurity, malnutrition, and
poor education outcomes, hence perpetuating
their poverty.
Until we understand that the Department of
Agriculture has as much to do with our education
outcomes as the Department of Education does, we
may continue finding ourselves at the bottom of
many global lists.
Our most serious crises are interconnected. And
so should our bureaucrats connect across their
silos. |
_______________________________________________________________________________________ |
PH central
bank welcomes passage of new agri financing law
By Michael Chen -
August 6, 2022
The Bangkok Sentral ng Pilipinas (BSP), the
central bank of the Philippines, welcomes the
passage of Republic Act (RA) No. 11901 or “The
Agriculture, Fisheries, and Rural Development
Financing Enhancement Act of 2022” that provides
a comprehensive financing framework for the
development of the agriculture and fisheries
sector and rural communities.
“The BSP is committed to the effective
implementation of this law, which aims to
enhance access of rural communities and
agricultural and fisheries households, including
their micro, small, and medium enterprises
(MSMEs), to much needed financial services and
programs,” said BSP Governor Felipe M. Medalla.
The new law broadens activities for agricultural
credit and rural development financing to
include agri-tourism, digitalization of
agricultural activities and processes, public
rural infrastructure, programs that promote
health and wellness of rural communities, and
activities that improve livelihood skills.
It also promotes financing toward environmental,
social, and governance projects, including green
projects that support sustainable and inclusive
economic growth.
Banks are no longer required to reserve 10
percent of their lending portfolio for agrarian
reform beneficiaries and 15 percent for
agricultural activities. Instead, this new law
provides banks with greater flexibility in
allocating the combined 25 percent mandatory
credit quota to a range of borrowers in the
agriculture, fisheries, and agrarian reform
sectors.
Moreover, banks that are unable to directly lend
to rural community beneficiaries may contribute
through other means, such as investing in debt
and equity securities, undertaking agricultural
value chain financing, and granting
agri-business loans to fund agricultural and
community-enhancing activities.
In addition, the law provides a mechanism to
finance organizational, capacity, and
institution-building programs to improve
competitiveness and productivity in agriculture
and fisheries, as well as rural communities.
“The enactment of the new Agri-Agra and Rural
Financing law is a timely and positive
development since it will assist the sector’s
recovery from the impact of the COVID-19
pandemic and other natural calamities through
private sector financing,” the Governor
emphasized. |
_______________________________________________________________________________________ |
BSP widely
seen raising interest rates until 2023
Lawrence Agcaoili - The Philippine Star
August 6, 2022 | 12:00am
MANILA, Philippines — Economists expect the
Bangko Sentral ng Pilipinas (BSP) to extend the
tightening cycle by hiking interest rates until
next year to address soaring inflation.
Aris Dacanay, economist for ASEAN at British
banking giant HSBC, said in a commentary that
the BSP may raise interest rates by another 100
basis points this year and another 50 basis
points next year.
“The BSP will likely have to hold its ground and
keep on hiking to prevent inflationary
expectations from being disanchored,” Dacanay
said.
The BSP has so far raised interest rates by 125
basis points since it started its liftoff last
May to curb rising inflationary pressures.
Including the back-to-back 25-basis-point
increases in May and June as well as the huge
75-basis-point hike during a surprise off-cycle
rate-setting meeting last July 14, the benchmark
interest rate now stands at 3.25 percent from an
all-time low of two percent.
Dacanay said HSBC sees the BSP raising interest
rates by 25 basis points in the remaining four
rate-setting meetings for the rest of the year,
bringing the overnight reverse repurchase rate
to 4.25 percent by the end of 2022.
For 2023, the British banking giant sees the BSP
hiking rates by another 50 basis points in the
first quarter before pausing for the remainder
of the year at 4.75 percent.
HSBC raised its inflation forecast to 5.3
percent this year, but retained next year’s
projection at 3.7 percent.
Inflation averaged 4.7 percent in the first
seven months, staying above the BSP’s two to
four percent target range, after accelerating to
6.4 percent in July from 6.1 percent in June.
“In most cases, month-on-month inflation needs
to peak first before year-on-year inflation
peaks. Year-on-year inflation can peak at the
same time as its month-on-month counterpart, but
the latter will need to drop by a considerable
amount. In this note, we look closely at the
numbers and check where month-on-month inflation
will likely tread in the next few months and how
y-o-y inflation will follow,” Dacanay said.
HSBC sees the peak of year-on-year inflation up
ahead, but it seems to be stretched, bumpy, and
cloudy.
Bank of the Philippine Islands lead economist
Jun Neri said the BSP would hike rates until the
end of the year as the economy has enough
capacity to absorb the ongoing policy
normalization.
“While a hike toward 4.25 percent by end-2022
will be a slight damper on demand, the
contractionary risk of de-anchoring inflationary
expectations carries more weight,” Neri said.
Neri explained that household consumption
accounts for at least two-thirds of the economy,
and not getting inflation in check would likely
have a more severe impact on consumption and
overall demand.
According to Neri, the economy managed to grow
by 6.3 percent in 2018 and 6.1 percent in 2019
even if the policy rate was above four percent.
“Supply disruptions have kept food prices
elevated and could be vulnerable to higher
transport costs, trade restrictions, and weather
disturbances. This, along with sustained peso
depreciation due to import expansion and hawkish
Fed policy will likely compel the BSP keep up
with its adjustments through 2023,” Neri said.
ING Bank senior economist Nicholas Mapa sees a
more aggressive tightening by the BSP which
could bring the reverse repurchase rate to 4.50
percent by the end of the year. “We expect the
BSP to remain hawkish with rate hikes in the
pipeline,” Mapa said.
BSP Governor Felipe Medalla, who earlier
signaled a rate increase of 25 or 50 basis
points on Aug. 18, said the central bank
recognizes the broadening of price pressures
amid the emergence of second-round effects,
including the approved wage and fare hikes as
well as elevated inflation expectations.
“The risk to the inflation outlook is tilted on
the upside for 2022 and 2023, but is broadly
balanced for 2024,” Medalla said.
The BSP chief said upside risks over the
near-term continue to emanate from the higher
global non-oil prices driven by the protracted
war between Russia and Ukraine as well as from
the potential second-round impact of higher oil
prices on the prices of goods and services.
Likewise, Medalla said domestic food prices also
pose upside risks due to shortages in the supply
of several key food items.
Meanwhile, Medalla said a slower-than-expected
global recovery due to tighter global monetary
policy conditions and the continued uncertainty
from the pandemic continues to present a
downside risk to the outlook.
“The upward adjustment in monetary policy rates
in May and June and the off-cycle adjustment in
July should help moderate inflation
expectations,” the BSP chief said. |
_______________________________________________________________________________________ |
BSP seen to
deliver more rate hikes
July 18, 2022 | 12:33 am
By Keisha B. Ta-asan
THE PHILIPPINE central bank could deliver more
aggressive rate hikes in order to support the
peso and tame inflation without derailing
economic growth, analysts said.
The Bangko Sentral ng Pilipinas (BSP)
unexpectedly tightened its monetary policy by 75
basis points (bps) on July 14, bringing the
benchmark rate to 3.25%.
Interest rates on the overnight deposit and
lending facilities were also hiked by 75 bps to
2.75% and 3.75%, respectively.
Deutsche Bank Chief Executive Officer for Asia
Pacific Alexander von zur Muehlen said the BSP
would likely raise interest rates by another 50
bps in August to support the peso, which
recently touched the all-time low.
“We think the central bank needs to stabilize
the currency and it will take more than (the
July 14) move to do that. We still expect a
50-bp rate hike in August and for now will keep
the September rate hike at 50 bps too,” Mr.
Muehlen said in an exclusive interview with
BusinessWorld.
Despite policy tightening, the peso remains
under pressure. It closed at P56.36 against the
US dollar on Friday, weakening by 21 centavos
from its Thursday finish.
Year to date, the peso depreciated by 10.5% or
by P5.36 from its close of P51 versus the dollar
on Dec. 31, 2021
“What we’re experiencing right now, is that
obviously, a lot of currencies here in our
region are looking weaker against the dollar.
This is less to do with any individual
currency’s weakness, and more to do with a
number of macroeconomic drivers pushing up the
dollar’s strength,” Mr. Muehlen said.
Investors are flocking to the dollar, which is
seen as a safe-haven asset, as the US Federal
Reserve considers larger rate hikes amid red-hot
inflation.
BSP Governor Felipe M. Medalla said he would not
rule out another interest rate increase in its
next policy meeting on Aug. 18.
“We still have room to raise depending on the
inflation picture,” Mr. Medalla said in an
interview with Bloomberg TV on Friday, also
citing spillover effects from other countries
for last Thursday’s off-cycle decision.
Inflation rose by 6.1% year on year in June, the
fastest in nearly four years and exceeded the
central bank’s 2-4% target band for a third
straight month. The inflation rate averaged 4.4%
in the first six months, still below the BSP’s
full-year forecast of 5%.
The Philippine Statistics Authority (PSA) is
scheduled to release July inflation data on Aug.
5, and second-quarter gross domestic product
(GDP) data on Aug. 9.
GROWTH OUTLOOK
Sanjay Mathur, chief economist for Southeast
Asia and India of ANZ research, said the BSP has
room to hike rates without hurting economic
recovery amid global uncertainties.
“The 75-bp rate hike, though unexpected and
unexpectedly large, is unlikely to impact
growth. Nonetheless, further tightening is also
on the cards to reduce inflation,” Mr. Mathur
said in an e-mail.
“Now the critical point to bear in mind is that
the way a monetary tightening cycle works is
that it reduces aggregate demand and that in
turn, stabilizes or reduces inflation. The same
transmission will evolve in the Philippines —
aggregate demand ease and that is a prerequisite
for lower inflation.”
The economy expanded by a faster-than-expected
8.3% in the first quarter. The Development
Budget Coordination Committee (DBCC) is
targeting 6.5-7.5% GDP growth this year.
“On the external developments, we should bear in
mind that the Philippines is not a major
exporting economy. Nonetheless, even a marginal
impact on exports when domestic demand is easing
(as discussed above), the overall impact on
growth would be apparent,” Mr. Mathur said.
The global economic outlook for this year and
2023 is expected to be further downgraded when
the International Monetary Fund (IMF) releases
its World Economic Outlook Update later this
month.
“The war in Ukraine has intensified, exerting
added pressures on commodity and food prices.
Global financial conditions are tightening more
than previously anticipated. And continuing
pandemic-related disruptions and renewed
bottlenecks in global supply chains are weighing
on economic activity,” IMF Managing Director
Kristalina Georgieva said in a statement.
“Moreover, downside risks will remain and could
deepen — especially if inflation is more
persistent — requiring even stronger policy
interventions which could potentially impact
growth and exacerbate spillovers particularly to
emerging and developing countries,” she added.
Meanwhile, Mr. Muehlen expects that countries in
the Southeast Asian region would continue their
recovery in contrast with the global outlook.
“This part of the world is set for growth, we
anticipate that ASEAN (Association of Southeast
Asian Nations) and large parts of Asia will see
its GDP grow by two times versus the rest of the
world, in the foreseeable future, and for quite
a number of years,” Mr. Muehlen said.
“The growth opportunities here are over
proportional. And as a consequence, we continue
to look very constructively at the future here
for us,” he added. |
_______________________________________________________________________________________ |
Never
underestimate inflation
THE CORNER ORACLE - Andrew J. Masigan - The
Philippine Star
July 13, 2022 | 12:00am
It was worrying that President Bongbong Marcos
was unaware of (or was in denial of) our current
inflation situation. At this point, rising
inflation and its toxic effects should be front
and center of his concerns.
Headline inflation reached a three-year high of
6.1 percent this month, driven by skyrocketing
food prices and fuel cost, declared the
Philippine Statistics Authority. One peso in
2018 is worth a mere 87 centavos today.
Inflation is climbing across the world due to
the shortage of oil, natural gas and wheat
resulting from the Russian-Ukraine war. Supply
chain disruptions owing to China’s COVID-induced
lockdown exacerbates the situation. As of this
writing, inflation is at 8.6 percent in the US,
8.4 percent in the Eurozone, 7.6 percent in
Thailand, 21.3 percent in Pakistan, 78.62
percent in Turkey and a whopping 927 percent in
Venezuela.
Inflation should never be underestimated as it
has the power to impact policies, priorities,
politics and poverty across nations. In short,
it has the power to change the world order. This
was confirmed by the WION news agency. Let me
explain.
Inflation changes policies. In a period of acute
price increases, governments typically shift
their policies towards stabilizing prices and
securing ample supply of essential goods at
home. Hence, policies become more inward
looking, more nationalistic and more
protectionist. Even now, rising prices has
compelled Indonesia to ban the export of palm
oil. Argentina banned the export of soybean
meal. Iran banned the export of potatoes. India
banned the export of wheat and Turkey banned the
export of beef. These protectionist policies
impact countries like the Philippines which
depend on imports for her basic food
requirements.
Scarcity of food imports has driven prices up
and/or lead to food shortages. In Italy, for
instance, the price of pasta has increased by 40
percent due to the shortage of wheat flour.
Here at home, a 25-kilo sack of good quality
rice worth P1,200 last year is now P1,350. As
for shortages, chicken and pork are becoming
increasingly expensive as importations run low.
Inflation causes a shift in global priorities.
It took decades to persuade governments to
realize the urgency of climate change. Following
intense lobbying by environmentalists, the
United Nations finally adopted its Framework
Convention on Climate Change in 1992. Through
successive treaties, governments made nationally
determined commitments to reduce their
greenhouse gas emissions by a certain percentage
until 2030. The Philippine government committed
to reduce its emissions by 75 percent.
These commitments are now out the window for
most. Governments are now more concerned about
arresting price increases and generating savings
wherever they can get it. As a result, energy
derived from fossil fuels is making a comeback.
Despite commitments to shift to renewable
energy, countries like Austria decided to
re-open its coal-fired power plants. In the US,
the Supreme Court defanged the Environmental
Protection Agency, taking away its powers to
regulate emissions from fossil fuel power plants
and mandate a shift to renewable energy sources.
The world’s priorities have changed. The name of
the game is to keep prices down, even at the
expense of accelerating global warning.
Inflation exacerbates poverty. There are 1.1
billion people living below the poverty line
worldwide, of whom 25 million are Filipinos.
Poverty sets off a chain reaction of medical
consequences including malnutrition,
miscarriages, infant morbidities and stunted
growth. It breeds social problems such as crime,
homelessness and unemployment.
Just as the world recovers from the economic
effects of the pandemic, here comes festering
inflation that erodes purchasing powers across
currencies. It will be more difficult for those
living in poverty to find relief.
Inflation induces political change. Rising
prices translates to a discontented population.
In severe cases, this could lead to social
unrest. A discontented population will always
clamor for political change.
We’ve seen this happen many times before. In
India, despite his popularity, Manmohan Singh
lost the parliamentary polls in 2014 due to high
inflation during the months leading to
elections. In the United States, the last 15
months of Jimmy Carter’s presidency saw prices
soar due to an oil crisis brought about by the
Iranian revolution. High prices caused Carter to
lose his re-election to Ronald Reagan.
Today, food prices in the US are up by 10
percent while fuel cost is up by 8 percent. With
midterm elections happening in November, we can
expect a shake up in the American legislature.
The American status quo will be broken.
Globally, 50 countries will go to the polls
within the next 12 months including Brazil,
Israel, Pakistan and Turkey. As inflation rates
register all-time highs, experts expect a new
cast of global leaders to emerge. With this
comes a change in the world order.
In the Philippines, President Bongbong Marcos is
hard-pressed to bring relief to his
constituency, mostly consisting of the
marginalized sector. Already battle scarred from
COVID, the poor must now deal with stiff price
hikes. If President Marcos fails to bring them
relief, his popularity will dissipate and his
honeymoon period will be cut short.
But President Marcos faces a conundrum. Mr.
Duterte left him with an economy that operates
with huge budget deficits and maturing debts
worth P834 billion this year. How can he provide
food and fuel subsidies at a time when he needs
to tighten belts? Mr. Marcos will have to raise
the funds somehow. He must impose new taxes
without further burdening a population besieged
with high inflation. He must raise funds without
acquiring more debts. He must cut spending
without choking economic expansion. He must
spend on infrastructure and social services
without widening the budget deficit. It’s going
to be a tough balancing act.
We must never underestimate the perilous
consequences of inflation. President Marcos will
do well to be on top of it and count it as one
of his priorities. |
_______________________________________________________________________________________ |
Meeting
inflation head-on
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:30 AM July 05,
2022
In my childhood days in the 1960s, we would
watch on our dark Radiowealth TV screen “Da’
Best Show,” a daily early evening variety show
that featured comedy skits with veterans Sylvia
La Torre, Oscar Obligacion, Ading Fernando, and
more. A recurrent skit scene was the family meal
where members took turns sniffing on a small
piece of meat hanging by a string, before taking
a spoonful of rice—their supposed way of coping
with not being able to afford “ulam” for
everyone. It was funny to most of us then, but
perhaps not for the poorest among us for whom
even rice is too expensive to buy in sufficient
quantity. And the bad news is, its price is set
to go up further.
Worldwide, a rapid rise in food and fuel prices
has been the unwanted fallout from the
Russia-Ukraine war, on top of general inflation
that had already resulted from massive
COVID-19-related spending by countries—much of
it financed with unprecedented printing of money
even by erstwhile fiscally disciplined
governments. The galloping inflation large
economies are now reeling under forces them to
rein it in with drastic moves to reduce money
supply, with central banks raising interest
rates and upsetting financial markets worldwide,
including our own. Here at home, escalating food
and fuel prices, not so much excessive money
supply, shapes our inflation outlook. And
reduced fertilizer application due to tripled
prices of the petroleum-based product will
further tighten domestic food supplies.
How bad could the price hikes get? What can we
do to cope with heightened inflation still to
come? One projection from a knowledgeable source
has our annualized inflation rate steadily
rising and breaching 8 percent by December, for
a full-year average exceeding 6 percent. While
plausible, it can also still be dampened if we
are able to manage the forces pushing our prices
up. As I wrote last week, our inflation is not
quite the same as the prominently
money-supply-induced inflation the big economies
are now fighting, and are better dealt with by
addressing supply-side problems. These include
overcoming African swine fever that has
drastically cut domestic pork supplies,
improving fisheries output via aggressive
aquaculture, reducing post-harvest losses and
food wastage, improving rice milling recovery by
turning more to healthier unpolished rice,
ramping up production and application of
nonchemical fertilizer substitutes, and more.
On the last, the University of the Philippines
Los Baños is already working with the Department
of Agriculture to quickly scale up production of
its promising fertilizer substitute called
Bio-N. This is a microbial-based fertilizer
composed of good bacteria that can convert
nitrogen from the atmosphere into a form plants
can absorb. This is just one example showing
that we have the scientific knowledge needed to
cope with difficulties like what we now face,
but had traditionally fallen short of making it
widely accessible to our farmers. Crisis now
pushes us to do it right. On unpolished rice,
I’ve written before about how we could gain
around 10 percent more rice volume by simply
consuming more rice in unpolished or “brown”
form (“Win-win with brown rice,” 7/17/12)—and
actually become healthier in the process.
At the household level, there are various ways
we could cope with rising food and fuel prices.
Many of us turned to grow our own food,
especially vegetables, in our backyards or even
in hanging receptacles during the pandemic
lockdowns; that continues to make much sense. We
can plan our errands and trips more efficiently
to reduce our transport costs. We can forego or
cut down on nonessentials, especially the
harmful “sin products” of tobacco and alcohol,
and make a conscious effort to conserve energy
and water in our homes—and there are many little
ways of doing that, which could add up to much
savings. And we could take extra effort to keep
healthy and fit, through more exercise and
avoiding infection risks, thus saving on
avoidable medical costs.
Inflation expectations can be self-fulfilling,
so the more we all do to cope with it, the less
likely it will be as bad as we fear. |
_______________________________________________________________________________________ |
BSP to invest
P25 B for New Clark City facility
Published June 26, 2022, 10:10 PM
by Lee C. Chipongian
The Bangko Sentral ng Pilipinas (BSP) will spend
at least P25 billion for the construction of a
new Currency Production Facility (CPF) in its
31.2-hectare complex in New Clark City in Capas,
Tarlac.
BSP told Manila Bulletin that the budget of
“around P25 billlion” for the bigger printing
facility has been approved recently.
“The actual budget for the component projects
will be provided in the procurement documents,
as they are filed,” the BSP said in an email.
Meanwhile, the BSP said the CPF is currently in
its design phase. “(This) is estimated to be
completed in the last quarter of this year,” it
also said.
“After the approval of the detailed designs and
plans, the BSP will open the bidding for the
general contractor,” the BSP added.
After the bidding process, construction could
begin as early as the first quarter of 2023. BSP
Governor Benjamin E. Diokno said earlier that
construction of the new complex will take two to
three years. Before the pandemic happened, the
BSP was planning to start construction in the
first quarter of 2020 and completion of the
project is expected three years after.
The contract for the winning bidder Aidea Inc.
for the architectural and engineering design
services of the complex, was only completed in
March of this year due to the two-year delay
following the Covid health crisis.
The New Clark City home for the BSP’s printing,
minting and other activity is bigger than its
current six-hectare, 44-year old Security Plant
Complex (SPC) in Quezon City.
The P25-billion approved budget will cover the
construction of an “inclusive, green, and smart”
office building, the BSP Museum, an academic
building, a sports complex, data and command
centers, and commercial stalls. Aidea will
design all publicly accessible and
semi-restricted areas.
The Tarlac printing facility once operational is
intended to have the full capacity to print all
of the country’s banknotes requirement,
currently at five billion pieces in all six
denominations, including the P20 which will be
phased out eventually to give way to its coin
version.
The central bank has modernized and expanded the
SPC from 2014 when the Monetary Board approved a
10-year plan but it was in 2018 when the need
for a bigger facility to handle the currency
requirements of a growing economy became more
apparent.
The SPC, built in 1978, has the capacity to
produce 3.6 billion pieces of banknotes per
year. It has invested over P5 billion to buy two
new superline banknotes printer, the first was
bidded out in 2011 and the second in 2013. The
installation and commissioning was completed in
2017. This raised the central bank’s printing
capacity from 1.8 billion pieces of banknotes to
3.6 billion at the end of 2017.
The plan to relocate the printing facility was
initiated during the time of BSP Governor Nestor
A. Espenilla Jr. in 2018, but he passed away in
February 2019, leaving it to his replacement,
Diokno, to carry out with the proposition.
By September of that year, when Diokno led
ground breaking ceremonies in New Clark City, he
said it was crucial for the BSP to maintain a
currency production facility that could “allow
sufficient agility to meet the country’s
currency requirements” and the “move to the New
Clark City will also boost the central bank’s
capacity to sustain its operations in times of
calamity or natural disaster.” |
_______________________________________________________________________________________ |
A bitter pill
to swallow
Philippine Daily Inquirer / 04:40 AM June 20,
2022
Bangko Sentral ng Pilipinas Governor Benjamin
Diokno, who as the finance secretary-designate
will be the chief economic manager of the
incoming administration, last week announced a
six-year fiscal plan to bring the budget deficit
back to a manageable pre-pandemic level by 2028.
The fiscal consolidation blueprint, which will
essentially outline measures to shore up
government revenues and perhaps cut public
expenditures, will be submitted to
President-elect Ferdinand Marcos Jr. within two
weeks, or immediately after the new
administration takes over on July 1.
Such a plan is crucial because of the urgent
need to raise revenues to start repaying
government debt that has ballooned to P12.7
trillion as of end-March 2022, breaching 60
percent of gross domestic product (GDP) — the
threshold of international standards for prudent
economic housekeeping. This is projected to
reach P13.1 trillion by the end of 2022.
Diokno himself indicated that the first item on
the agenda when he takes over the finance
portfolio will be the sustainability of
government debt. “We need a lot of money — first
[in order] to continue our [economic] growth
momentum and second, to service our higher level
of public debt,” he said. The debt problem has
been exacerbated by the depreciation of the peso
past the P53 to $1 mark, making it more
expensive to repay the foreign loans borrowed
during the pandemic.
The outgoing Duterte administration actually
drafted a fiscal plan for the incoming
administration. Finance Undersecretary Valery
Brion, quoting the Bureau of the Treasury, said
that to prevent having to use more borrowings to
pay P3.2 trillion in incremental debt due to the
pandemic, the government needs to generate at
least P249 billion each year in new revenues.
Based on the Department of Finance (DOF)’s
estimates, a total of P349.3 billion can be
raised each year if the Marcos Jr.
administration implements three packages of tax
reforms starting from 2023 up to 2025. A key DOF
proposal is to defer the scheduled reduction in
personal income tax rates for 2023-2025 to
generate P97.7 billion yearly. The DOF also
recommended the removal of many exemptions from
the 12-percent value-added tax starting in 2023
to generate P142.5 billion a year.
According to Brion, the Philippines’ debt-to-GDP
could ease faster from more than 60 percent by
year’s end to 59.1 percent in 2023, 57.7 percent
in 2024, and 55.4 percent in 2025 if the Marcos
Jr. administration pursues this complete fiscal
consolidation and resource mobilization plan.
The consequence of not acting fast on the debt
problem, on the other hand, will be more
economic difficulties. “We need to start paying
for the debts we incurred during the pandemic,
with the first principal payment falling due as
early as 2023 … If we do not pursue fiscal
consolidation and resource mobilization, there
are serious and spiraling consequences to our
fiscal and economic health. If no reforms are
introduced or the reforms are diluted, there
will be two scenarios ultimately leading to the
same outcome: a fiscal and economic crisis as a
result of higher debt, lower socioeconomic
spending, and fewer investments,” Brion pointed
out.
However, Marcos Jr. and Diokno have on separate
occasions frowned upon the imposition of new or
additional taxes when the new administration is
just starting. During his presidential campaign,
Marcos Jr. said that it may not be a good time
to immediately introduce new tax measures amid
the protracted fight against COVID-19. This is
obviously to avoid angering the public, which
normally bears the brunt of new taxes. Diokno
stressed the need to focus on sustaining
economic expansion rather than raising taxes.
But the problem is that any economic growth
trajectory has been made more difficult by the
protracted war between Russia and Ukraine, which
has roiled global markets, pushed up oil prices,
and disrupted the economic recovery of many
nations.
There is really nothing wrong with imposing new
tax measures, especially since the Philippines
needs to repay a swelling debt and avoid the
risk of a credit-rating downgrade. The country
enjoys investment-grade ratings from the top
three debt watchers—Fitch Ratings, Moody’s
Investors Service, and S&P Global Ratings. It is
important to keep this credit rating, which is a
measure of a government’s creditworthiness.
Improved ratings will allow the government to
demand lower rates when it borrows from lenders,
which can translate to lower interest rates for
consumers and businesses borrowing from banks,
using government-issued debt paper as benchmarks
for their loans.
“Sometimes you have to take a medicine that
tastes lousy — that is bitter and it’s no good,
but if you don’t take it, you may even get
worse,” outgoing Finance Secretary Carlos
Dominguez warned. It will be interesting to see
how Diokno’s fiscal consolidation plan will play
out. The details — and their subsequent
implementation — will determine if the Marcos
Jr. administration will be able to control the
worsening fiscal situation and address the
burgeoning public debt or, failing that, bring
the country to a deeper economic malaise. |
_______________________________________________________________________________________ |
Seven deadly
sins
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:30 AM June 14,
2022
I’ve long asserted that agriculture is far too
important to be left to the Department of
Agriculture (DA) alone. Our farm and fisheries
sector is the concern of every Filipino, because
on it hinges our ability to feed our people,
while also providing important products other
than food. Last week, I suggested that getting
back to the two basics — our people and our land
— should be top priority in planning the
nation’s way forward. Having discussed the
first, especially in terms of addressing our
serious education crisis, I now turn to our
land, particularly in maximizing the value and
benefits we get from our farms, and coastal and
inland waters.
Of the three major economic sectors, agriculture
is the most evenly spread across the country’s
regions. In stark contrast, Metro Manila and
Calabarzon alone already account for more than
half of our services gross domestic product,
while for our industry GDP, more than half comes
just from Calabarzon, Metro Manila, and Central
Luzon. Agriculture is truly our most inclusive
economic sector, and our best bet to achieving
inclusive economic development.
That the incoming president has been taking his
time to name his agriculture secretary suggests
that he sees the success of his presidency
hinging crucially on the sector’s performance. A
reliable source tells me that he would like to
see a thorough overhaul and restructuring of the
agriculture bureaucracy if Philippine
agriculture were to stop lagging far behind
those of our neighbors, whose agriculture
experts we once mentored. He, thus, needs an
agriculture secretary who can effectively
preside over such a major house cleaning and
renovation. Having studied the sector for
decades, I had concluded long ago that what
Philippine agriculture most critically needs is
fundamental bureaucratic and institutional
reform, without which it would simply continue
being the drag on our overall economic progress.
It’s not a problem of lack of knowledge or
technology to raise productivity; we’ve long had
that in the University of the Philippines Los
Baños and our other agricultural knowledge
centers, where we’ve even taught our neighbors
since the 1960s. Rather, it’s our persistent
inability to have our farmers properly and
widely apply and benefit from that knowledge in
farms all over the country, because of what I’d
call the “seven deadly sins” of our DA. The DA
(1) persisted with a largely top-down
centralized approach to managing the sector, in
spite of the devolution mandated by the Local
Government Code of 1991; (2) was unduly obsessed
with rice self-sufficiency, to the relative
neglect of other crops, both in terms of
attention and budgets; (3) inordinately focused
on farm production and neglected the rest of the
agricultural value chain for a holistic systems
perspective; (4) was largely structured and
organized according to commodities rather than
according to key central functions it must
fulfill under the mandated devolved setup; (5)
relied primarily on protecting our farmers by
closing our domestic markets to foreign
competition, to the neglect of nurturing them to
shape up so they can well compete and thrive in
both our internal and export markets; (6) failed
to respond to the fragmentation of our farms
from agrarian reform and generational partition,
via effective consolidation and clustering
schemes that our neighbors had used to good
advantage; and (7) neglected to work with public
and private financial institutions to ensure
farmers ample access to working capital, so they
could maximize use of superior technologies and
inputs, profit from improved productivity, and
thereby raise their families’ incomes and
welfare.
Furthermore, it’s no secret that much of our
agriculture budget has failed to go to its
intended uses to benefit farmers, but ends up in
the wrong pockets in a bureaucracy that has
traditionally been notorious for graft and
corruption. I’ve written about suggested
solutions to all these “sins” over the last 20
years. But old habits die hard, and we have yet
to see substantial reform in the agriculture
bureaucracy since then. Meanwhile, Filipino
farmers and food consumers continue to suffer
from it. |
_______________________________________________________________________________________ |
Back to
basics
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:35 AM June 07,
2022
As a new administration prepares to take over
the reins of government, it needs to firm up its
strategy for moving the country forward. Given
the state of our country and its people right
now, my unsolicited advice is to start with the
basics, and these boil down to our two assets
needing utmost attention: our people and our
land. Let me elaborate.
The greatest toll the pandemic has taken on us
has been its human cost, in how it severely
compromised health and nutrition, and disrupted
education, especially among lesser-endowed
Filipinos. COVID-19 delivered a debilitating
blow to what was already a battered health,
nutrition, and education status, especially of
our children—the cumulative result of many years
of seeming benign neglect. The signs had been
staring us in the face: worst rankings worldwide
in reading, science, and mathematics; lowest
average IQ among all 10 Asean member states; and
higher incidence than in most of our Asean
neighbors of stunting due to severe malnutrition
in children five years old and below.
Our progressive deterioration in education
started decades ago. When I resumed teaching
duties at the University of the Philippines-Los
Baños in the mid-’80s after five years of
post-graduate studies overseas, I recall feeling
shocked at the very discernible general decline
in my students’ capabilities. It couldn’t have
been due to an easing of UP’s admission
standards, and I could only blame a likely
decline in the quality of our high school
education then.
By 1991, Congress saw it fit to create the Joint
Congressional Commission to Study and Review
Philippine Education (EDCOM) over a 12-month
time frame, noting the palpable and continuous
decline in the quality of Philippine education.
EDCOM noted that (1) school dropout rates were
inordinately high, especially in rural areas,
probably caused by inadequacy of preparation
among young children; (2) government investment
in the education system was inadequate,
including in teaching materials and learning
resources for primary education; (3) the
education system was poorly managed; (4) there
is a lack of curriculum upgrading; (5) programs
and facilities for special education (i.e., for
children with special needs) were lacking; and
(6) tertiary and technical-vocational education
institutions lacked coordination with industry
and market focus, leading to job-skills mismatch
and poor job placement of graduates.
A tangible outcome of EDCOM 1991 was the
“tri-focalization approach” that led to the
establishment of the Commission on Higher
Education and the Technical Education and Skills
Development Authority. The former Department of
Education, Culture and Sports (DECS) would then
focus exclusively on basic education (elementary
to high school) and was renamed the Department
of Education (DepEd). I recall how then DECS
Secretary Isidro Cariño loudly protested the
“dismemberment” of his department, predicting
disastrous results.
Whether that split contributed to it or not, the
decline in Philippine education appeared to have
continued, leading us to the damning
international rankings our educational system is
known for now. Three decades since the last
EDCOM, our education system again cries out for
a long and hard look, hopefully with all of us
putting our heads together to chart the right
way forward. The group Philippine Business for
Education is spearheading the call for a new
multisectoral Education Commission participated
in by all sectors of society “to analyze the
gaps, look for opportunities and pave the ground
on which we build our (educational) reform
efforts.” Incoming Education Secretary Sara
Duterte-Carpio would do well to make it one of
her first moves, if we are to inspire confidence
in the country’s education future, the same way
the appointment of respected new economic
managers is doing for the economy.
Apart from people, the other basic concern is
land, where the imperative boils down to vastly
improving the productivity and competitiveness
of our agriculture sector. This requires a
separate discussion of its own, and in the
meantime, we all await with bated breath the
choice of the person to lead the sector in the
next six years. |
_______________________________________________________________________________________ |
BBM test:
Debt and taxes
Philippine Daily Inquirer / 05:08 AM June 01,
2022
No one enjoys paying taxes.
But each administration faces its own unique set
of fiscal challenges that require taxes on a
variety of goods and services to be raised one
way or another, and the incoming one is no
different.
No different except for one thing: no thanks to
the COVID-19 pandemic, the incoming presidency
of Ferdinand “Bongbong” Marcos Jr. faces the
toughest economic conditions, both globally and
locally, since the first half of the 2000s when
the country was struggling with a looming crisis
brought about by ballooning expenditures and
insufficient revenues.
Today, the Philippines’ total debt as a
percentage to the value of economic output
stands at 63 percent, which is slightly higher
than the acceptable international threshold for
a sustainable level of borrowings of 60 percent
for similar emerging markets.
In other words, at current levels, the
Philippine government is relying more on credit
to spend for its operations rather than
revenues. Allowing this to continue for an
extended period will result in an upward spiral
of debt which can only be obtained at higher
interest rates, causing borrowing costs for
every Filipino to increase in step and,
ultimately, stunt economic growth—at the worst
possible time for a nation just starting to dig
itself out of the deep pandemic hole.
Headed by Finance Secretary Carlos Dominguez
III, the economic team of the outgoing Duterte
administration recognizes this challenge and is
leaving behind a fiscal consolidation plan that
entails a slew of tax hikes and spending cuts
that are necessary to reduce the national debt
that now stands at P12.68 trillion while
simultaneously — hopefully — prodding the
private sector to restore activity to a gross
domestic product level that would help the
country “outgrow” its debt.
That’s the best-case scenario.
Naturally, however, Finance Secretary-designate
Benjamin Diokno is wary about swallowing all
those bitter pills hook, line, and sinker.
No one in the incoming Marcos Jr. administration
wants to start off on the wrong foot, and
launching a salvo of tax increases and austerity
measures in the opening months of the new
presidency would surely be unpopular.
Thankfully, President-elect Marcos Jr. has the
popularity to spare thanks to the biggest
winning margin for a Philippine chief executive
in recent times.
Thankfully, too, Mr. Marcos Jr.’s jaw-dropping
popularity during the campaign period has
required surprisingly few populist promises to
the electorate from him (apart from the
P20-per-kilo rice price, which is now being
walked back as only being “aspirational”).
That, together with a solid grip on both
chambers of Congress, will allow the next
administration to implement what Mr. Diokno
describes as the “correct” form of taxes. For
now, this means a tax on digital transactions
like popular video and audio streaming services,
as well as the booming electronic commerce
sector.
More importantly, the next head of the economic
team wants the upper socioeconomic strata of
society to bear this added burden while
exempting the country’s poor — all digital
transactions below P500 — from the new taxes.
Implementing it will be challenging, but the
incoming finance chief has the requisite
experience for this daunting task, having helped
the country’s financial system transition to the
digital world at the height of the pandemic.
This plan will require President-elect Marcos
Jr. to expend some political capital. But the
judicious application of political capital now,
when the challenge is still manageable, will
head off bigger economic (and consequently
political) problems further on.
If implemented properly — and if the Philippine
economy does indeed rise at a pace that will
allow it to outgrow its debt — further painful
tax hikes down the road may not be needed.
Indeed, no one enjoys paying taxes.
But, provided it is done correctly, the incoming
administration can raise the sufficient amount
of taxes from the right sectors of society to
balance the government’s fiscal position and
eventually restore the country’s upward economic
growth trajectory.
What better legacy can the new Marcos
administration leave after six years than a
strong Philippine economy that uplifts the life
of every Filipino? The hard work to achieve that
starts now. |
_______________________________________________________________________________________ |
EDITORIAL - A
looming food crisis
The Philippine Star
May 21, 2022 | 12:00am
The warning comes from the secretary of
agriculture himself, although William Dar was
merely echoing similar statements issued by
global experts: a food crisis is looming in the
second half of the year, due to the lingering
COVID pandemic, Russia’s continued invasion of
Ukraine and the sustained impact of climate
change.
In a report last month, the United Nations Task
Team for the Global Crisis Response Group said
an estimated 1.7 billion people, mostly from
developing economies, are expected to suffer
from food insecurity, high fuel prices and debt
burdens. Aside from the impact of the pandemic,
the Russia-Ukraine conflict has pushed up global
fuel prices to record highs and disrupted supply
chains.
The Philippines is now reeling from soaring pump
prices and the incoming administration is
inheriting a record-high P12.68 trillion debt
that the government was forced to incur to
finance the pandemic response as the economy
nosedived into its worst post-war recession.
In a briefing last Wednesday, Dar said that
already, fertilizer prices have tripled while
the costs of certain poultry feeds have doubled.
The country is fully dependent on imports for
its fertilizer needs.
The agriculture department is seeking an
additional P6 billion this year for fertilizer
subsidies to boost farm production plus more
funding to encourage urban farming. Where to
source those funds is a problem when the country
is already buried in debt and businesses are
just starting to recover from the pandemic.
Although Dar says the country still has
sufficient supplies of rice, vegetables and
fish, he warns that the food crisis may start to
be felt by late June or early July. While the
government works out the proper responses, he
has urged the public, seriously, to try backyard
farming and livestock breeding even in urban
centers.
The looming crisis should provide more impetus
to boost agricultural production. The country’s
neighbors notably Thailand and Vietnam and even
tiny Taiwan have robust local agribusiness
enterprises. Dependence on imports to stabilize
local supply and prices is unsustainable, and
kills the marginalized sectors that depend on
agriculture for their livelihood. With the
looming food crisis, there should be greater
urgency to develop long-term food security
anchored on the strength of local agricultural
production. |
_______________________________________________________________________________________ |
Agriculture’s
plea to the new administration
By: Ernesto M. Ordoñez - @inquirerdotnet
Philippine Daily Inquirer / 05:14 AM May 13,
2022
The new administration must take the imperative
of immediately acting on the inadequate
Department of Agriculture (DA) budget.
Fortunately, we are now on the right track. In
the course of 10 days sometime last year, three
leading presidential candidates were interviewed
by agriculture leaders in a multimedia forum.
They discussed a historic document given to them
prior to their individual interviews. The
candidates were Manila Mayor Francisco “Isko
Moreno” Domagoso, Vice President Leni Robredo
and former Sen. Ferdinand Marcos Jr. The
two-page document was titled: “Transform
Agriculture for Food Security, Job Creation, and
Balanced Growth.”
It contained 12 recommendations, which the
current government has failed to do. They were
formulated and unanimously agreed by five
national coalitions (representing different
agriculture-related sectors), which has never
happened before. The groups were Federation of
Free Farmers, representing farmers and
fisherfolk; Philippine Chamber of Agriculture
and Food Inc., representing agribusiness;
Coalition for Agriculture Modernization in the
Philippines, representing science and the
academe; Alyansa Agrikultura, a multisector
alliance; and Bayanihan sa Agrikultura,
representing civil society.
Since the new administration will soon be in
control of the DA’s 2022 and 2023 budgets, it
must focus on both budgets immediately. This
will ensure that the directions given during the
interviews will be implemented—with the proper
budget.
For 2022, the Department of Budget and
Management (DBM) agreed to only allot P85.8
billion for the DA. This amount is just 1.7
percent of our national budget, less than half
of Thailand’s 3.6 percent and Vietnam’s 6.5
percent shares.
For 2023, the DBM gave an even lower budget
ceiling of P71.7 billion. This is opposite the
direction given by the presidential candidates,
who suggested to at least double the current
budget. Consequently, the proposed budget does
not have the components to fund the new
directions given by the presidential candidates.
The new administration must now adjust the 2022
budget by aligning with the directions provided
during the campaign. It should also ensure that
the 2023 budget is increased so that the
directions provided are also funded.
Three directions
Three key directions for agriculture
transformation will not be implemented unless
the needed budget is provided.
We basically have a monocrop system in place,
such as in the coconut, rice and corn sectors.
In the coconut sector, for example, 2 million
hectares out of 3 million ha have nothing
planted in between trees. This system can only
yield an average annual income of P25,000 a
hectare. Intercropping products like cacao and
coffee can increase this to P300,000 a hectare.
Note, however, that high-value crops get only 4
percent of the budget, as compared to rice,
which gets 40 percent of the budget.
Because we have small fragmented agriculture
farms with outdated technologies, we can’t
compete against imports nor implement a
reasonable export strategy.
Contrast this with Thailand, whose emphasis on
farm clustering and consolidation to achieve
economies of scale and shared technology is
found in the name: Ministry of Agriculture and
Cooperatives. We have neither a concrete plan
nor budget for this.
The huge potential of our fisheries and
aquaculture, meanwhile, remains untapped. Today,
despite its enormous potential, fisheries and
aquaculture contributes only 16 percent of our
agriculture value added. Furthermore, it gets
only 3 percent of the DA budget.
A comprehensive plan with an adequate budget
should support this sector. Its poverty level at
30 percent is more than double the rural poverty
rate of our neighboring countries.
The new administration must now ensure the that
the new agriculture transformation directions
given during the multimedia presidential
interviews are implemented. Addressing the DA
budget inconsistency is a must.
The author is Agriwatch chair, former secretary
of presidential flagship programs and projects,
and former undersecretary of the DA and the
Department of Trade and Industry. Contact is
agriwatch_phil@yahoo.com. |
_______________________________________________________________________________________ |
Economic
agenda to allay fears
Philippine Daily Inquirer / 05:08 AM May 12,
2022
The benchmark Philippine Stock Exchange index
plummeted by as much as 3.14 percent on the
first trading day after the historic May 9
elections that put former senator Ferdinand
“Bongbong” Marcos Jr. on the cusp of winning the
presidency by a landslide, driven in part by
nagging uncertainties over the presumptive
incoming administration’s economic agenda.
Investors — particularly the foreign ones —
reportedly rushed to unload their shares over
concerns on how exactly the presumed next
president of the Philippines plans to tackle the
complex economic issues that need to be
immediately addressed, primarily the surging
prices of basic commodities, record P12.68
trillion in outstanding debt, and a weakening
peso.
Marcos Jr. had already been tagged in a
Bloomberg survey as “the least favored
candidate” by the investor community, thus the
lack of a detailed economic program has made a
number of nervous investors jittery.
“The lack of clarity on Marcos Jr.’s policies is
indeed a concern in the short term,” AAA
Equities William Matthew Cabangon said in a
Nikkei report.
As Marcos Jr. had shunned policy debates
throughout the presidential campaign and
disclosed “little of his vision for the country
in substantive policy terms,” as the Economist
Intelligence Unit (EIU) puts it, there are
hardly any details to calm down jumpy investors.
However, it is widely expected that given his
close political alignment with outgoing
President Duterte, he will “pursue a broadly
similar policy course” centering on the “three
key pillars of infrastructure upgrade, tax
incentives for businesses and the removal of
investment barriers.”
But for the EIU, the “biggest risk to a Marcos
presidency (and the country’s political
stability) lies not in the policy agenda but in
the competence of the incoming administration to
execute it,” thus the growing pressure on the
Marcos group to immediately lay out its plans,
as well as name the key Cabinet members who will
be burdened with the huge responsibility to
carry the battered economy forward.
As ING senior Philippine economist Nicholas
Antonio Mapa stressed, the 2022 economy that
Marcos Jr. is inheriting “is not the same” as
the fast-growing economy that Mr. Duterte
inherited from the late President Benigno S.
Aquino III in 2016, given the daunting
challenges from within and outside the
Philippines that cannot be addressed by
simplistic calls for “unity.”
Investors want to know how the new
administration that will take the government
reins on June 30 plans to grow the economy fast
enough to overtake rising debt and continue
government spending to bankroll ambitious reform
and infrastructure programs and help vulnerable
Filipinos cope with the lingering effects of the
COVID-19 pandemic, as well as the rising prices
of basic commodities.
The gravity of these myriad economic challenges,
indeed, cannot be underestimated and has already
prompted American financial services giant J.P.
Morgan last Tuesday to downgrade the Philippines
to “underweight,” which means that it has
advised its clients to lighten up or reduce
their exposure to Philippine stocks due to the
more risky investment environment.
Rising risks have also caused interest rates on
the benchmark 91-day treasury bill to jump to
1.531 percent the day after the elections from
1.272 percent last week. The private sector has
likewise reverted to a wait-and-see attitude “as
a matter of prudence,” holding back on any major
investment decisions until Marcos Jr. shares his
detailed plans and policies over the next 100
days and names his economic team.
Providing some relief to jumpy investors,
however, is the disclosure by Finance Secretary
Carlos Dominguez III that transition talks with
the incoming administration has begun and is
proceeding smoothly, although he declined to
identify the members of the new economic team.
Michael Ricafort, chief economist at Rizal
Commercial Banking Corp., underscored the need
for a credible and competent economic team as it
will be the key to the success of a new
president, especially one who will have to hit
the ground running at full speed to overtake
mounting challenges and fulfill his campaign
promise of a better life for Filipinos.
If his apparent insurmountable lead is
confirmed, Marcos Jr. must do himself—and the
country—a favor by immediately presenting his
economic team and strategy, and begin to assure
Filipinos sharply divided by the bruising
election campaign that the seemingly
overwhelming mandate for his presidency will not
be for naught. |
_______________________________________________________________________________________ |
Wild promises
and P20 rice
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:35 AM May 03,
2022
Can a presidential candidate credibly promise
rice at P20 a kilo? Last week, Ferdinand
“Bongbong” Marcos Jr. made a bold statement that
he “plans to bring down the price of rice by P20
to P30 per kilo by recommending a price cap on
the staple.” In March, regular milled rice sold
at a nationwide average of P38.50 per kilo,
ranging from P32 (in Cagayan Valley) to P47 (in
Eastern Visayas), based on Philippine Statistics
Authority (PSA) data.
Let’s examine the numbers. Given PSA data, his
promised P20-30 per kilo reduction in the
staple’s price implies a price in the level of
P18.50 to as low as P8.50 a kilo for regular
milled rice, the rice grade mostly consumed by
lower-income groups. Surely, he wasn’t thinking
of a price that low; some reports said he
mentioned P20/kilo. He couldn’t have been
referring to the highest grade of rice
(“special”), which PSA says averaged P50.53 per
kilo in March, ranging from P43.25 (in the
Zamboanga region) to P59 (in Eastern Visayas) —
after all, why subsidize the rich who could well
afford more expensive rice? (But then again,
could his own lifestyle make it the only grade
of rice he knows?)
He may not know that as a rule of thumb, the
farm gate price of unmilled palay is about half
the retail price of milled rice, given milling
recovery efficiency, and costs of milling,
transport, and logistics through the supply
chain. His promised P20 rice price thus implies
a farm gate palay price of about P10 per kilo —
well below the P12 to P15 farmers cite as their
production cost. No wonder farmers’ groups
aren’t jumping for joy over his P20 promise. But
he also promises to issue an executive order
directing the Department of Agriculture and the
National Food Authority to procure rice harvests
from local farmers “at higher and more
competitive prices” (impliedly, beyond their
levels now). Good luck.
He also seems to forget that the price of rice
even in our best rice-growing neighbors is now
moving beyond his P20 target, amidst surging
fertilizer prices coupled with supply shortages
and price hikes in other grains, all due to the
Russia-Ukraine war. Hence, promising P20 rice at
this time is not only reckless; it’s outlandish.
It could only mean that general taxpayers will
pay for nearly half the costs of rice farmers!
Under a tax system long known to be regressive
(one that’s a heavier burden on the poor than on
the rich), this subsidy is actually worse than
letting everyone pay for higher-cost rice to
begin with. At least we’d avoid the massive
costs of administering the subsidy, not to
mention the money that will go into the wrong
pockets in the process.
To top it all, he vows to amend the rice
tariffication law, implying a return to
state-controlled rice imports, which is
precisely what allowed our rice prices to move
further and further away from and much higher
than in our neighbors through the years. Thus,
will he negate the Duterte administration’s
game-changing reform meant to force us to
finally help our farmers right, via nurturing
for greater productivity and competitiveness,
not insulating and “protecting” them from
competition? It’s in fact that same import
competition that could be his best bet for
moving toward P20 per kilo rice, by forcing us
to shape up and work to bring down the
production cost of rice closer to it.
Marcos Jr.’s numbers and other promised measures
give him away on several worrying weaknesses:
careless use of numbers that make no sense;
being out of touch with realities on the ground;
complete disregard for fiscal responsibility and
proclivity for massive borrowing to finance
ambitious promises (a la Marcos Sr.); lack of
understanding of basic economics—including the
principle embodied in the very name of this
column—which would have come naturally with a
genuine Oxford degree; and a penchant for making
what the National Federation of Peasant Women
describes as “motherhood statements para
makakuha ng boto (to gain votes).”
What I see here is a mind so confused and out of
touch, he knows not what he speaks. In trying to
sweet-talk both rice consumers and producers, he
will end up helping neither. And that, my
friends, would be a dangerous leader. |
_______________________________________________________________________________________ |
Copy our
neighbors
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:35 AM April 19,
2022
One little piece of advice I have for our
government, particularly in steering our
agriculture sector toward greater dynamism, is
simply to copy our neighbors. Once upon a time,
these neighbors were the ones copying us, and
sent many students to learn agricultural science
at the University of the Philippines in Los
Baños, acknowledged then as the best place in
the region to learn agriculture. That era is
long gone, and the tables have turned. Now, we
must humbly accept that our neighbors made much
better use of what they learned here than we
did, and have since left us lagging far behind.
It’s time to copy what they did in return.
What they (especially Thailand, Vietnam, and
Indonesia) learned from us back then was the
science. They went on and harnessed the
scientific knowledge with the right governance
and institutional environment, management, and
attitudes, and achieved far greater mileage from
it than we did. Even so, there was also some
management and institutional knowledge we
shared, including to the South Koreans, who came
to Los Baños in the 1960s to learn about our
farmers cooperative marketing associations
(Facomas), a model to emulate then. They went on
to develop a strong agricultural cooperative
system that now owns one of the country’s top
banks. In contrast, our own experience with farm
cooperatives since the glory days of the Facoma
has been a checkered one, marred by
all-too-common stories of corruption and
mismanagement.
With our own agricultural performance now
trailing that of Indonesia, Thailand, Malaysia,
and Vietnam, it’s our turn to find out what they
are doing better, and try to copy and adapt them
to our own situation. There should be no shame
in this, as there is, indeed, so much to learn
that could potentially catapult our farm sector
to the levels where they are now. Indeed, many
of the agricultural imperatives I’ve written on
in the past are the subject of such lessons we
could learn from our neighbors today. Let’s cite
a few.
First, look beyond the farm gate. Our Department
of Agriculture had traditionally taken the
position that anything that happens beyond the
farm gate is no longer its concern, but that of
the Department of Trade and Industry. Yet,
Malaysia calls its agriculture ministry the
Ministry of Agriculture and Food Industries;
Vietnam calls it the Ministry of Agriculture and
Rural Development. They have clearly long
understood that agriculture authorities need to
look at the farm system holistically with a full
value chain perspective—that is, “from field to
fork” (I like to add “finance” before “field” as
well.)
Second, finance small farmers amply. The
Asia-Pacific Rural and Agricultural Credit
Association reported in 2016 that Thailand’s
Bank for Agriculture and Agricultural
Cooperatives “now reaches nearly all farmers and
villages and, unlike most developing countries,
smallholder farmers in Thailand have adequate
access to credit.” And as mentioned earlier,
Korea’s National Agricultural Cooperative
Federation (NACF) owns what has become the
country’s third-largest bank (NongHyup Bank).
Our own Landbank could probably learn a thing or
two on what makes the Thais and Koreans more
successful in bringing ample financing to their
small farmers through their similar banks.
Third, cluster and consolidate farm management.
Small average farm size is not unique to us; it
is a challenge our neighbors face too.
Thailand’s Ministry of Agriculture and
Cooperatives indicates how they see farm
cooperatives to be central to agricultural
development. Korea’s NACF has asserted this for
decades, and through coops, their farmers
achieve scale economies and participate in
higher value-adding all the way to retail.
Socialist Vietnam has had long experience with
farm collectives, and even with an average farm
size of only half a hectare, it is now a strong
exporter of a wide variety of farm products.
They must have secrets we can copy.
Finally, copy how our neighbors devote much more
funds to agriculture. The sector only takes up
1.7 percent of our total government budget,
while it’s 3.4 percent in Indonesia, 3.6 percent
in Thailand, and 6.5 percent in Vietnam. That
alone already speaks for itself. |
_______________________________________________________________________________________ |
Five ways
forward
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:30 AM March 15,
2022
In my recent economic briefings, I outline five
things we must do as we navigate our way to the
post-pandemic global economy from our little
corner of the world. I state these as follows:
(1) Put people first; (2) Copy our neighbors;
(3) Reshape our services; (4) Look outward; and
(5) Don’t look back. Let me elaborate.
Putting people first must be foremost as it was
on human lives that the COVID-19 pandemic took
its heaviest toll, with the common Filipinos’
health, nutrition, and education severely
impaired. Moving forward, I see at least three
important directions to pursue. First is to
upgrade our public health system, starting with
cleaning up and fixing the corruption-ridden
PhilHealth, the very institution primarily
tasked with promoting public health. Second, we
must reconfigure our food systems and food
security strategy, emphasizing food
accessibility and affordability, thus ensuring
that our food producers are highly productive
and internationally competitive. And to address
the country’s education crisis that the pandemic
further exacerbated, we need a new multisectoral
education commission, as convened in the Cory
Aquino and Ramos administrations, to plot our
post-pandemic education roadmap. We must look to
the example of leading countries like Finland
and other global models with superior education
outcomes.
Copy our neighbors particularly pertains to
agriculture and agribusiness, which I consider
the backbone of the Philippine economy. There is
so much we could learn from countries around us,
including those who, ironically, we mentored
decades ago. Lessons include having our
Department of Agriculture look well beyond the
farm gate, but concern itself with the entire
value chain spanning farms to final consumers.
Malaysia has its Ministry of Agriculture and
Food Industries, and Vietnam has its Ministry of
Agriculture and Rural Development, showing the
much wider scope of their agriculture
ministries’ concern. Thailand calls it the
Ministry of Agriculture and Cooperatives,
showing how crucial it is to them to consolidate
farm management through agri-industry co-ops
along with contract growing schemes to achieve
scale economies and higher value-adding (and
incomes) for farmers. And one glaring difference
we have with our neighbors is our low budgetary
allocation for agriculture, taking only 1.7
percent of the total budget, against 3.4, 3.6,
and 6.5 percent for Indonesia, Thailand, and
Vietnam respectively.
Reshaping our services is all about improving
the quality of jobs in our most jobs-rich
sector, and this entails gearing up for the new
digitalized economy in the age of the Fourth
Industrial Revolution. New financial
technologies are critical to empowering small
producers and savers, and low-income households.
We must ramp up domestic tourism to make up for
slow-recovering foreign tourism, especially
highlighting eco- and agritourism potentials
that tap the synergy between the farm and
services sectors. We must retool and direct our
workforce toward technology, creative, and
logistics skills, while fostering
entrepreneurship by deliberately easing the
numerous bureaucratic burdens small Filipino
enterprises must hurdle.
Looking outward means adopting an aggressive and
opportunistic mindset for our producers to look
well beyond our limited domestic market, which
traps us in a vicious cycle of low incomes and
high poverty that perpetuates the limited
domestic market. We must chart an aggressive new
Philippine Export Development Plan that examines
and addresses the entire landscape spanning the
macroeconomic environment down to
commodity-level strategies and programs. And we
must participate actively in trade agreements
like the Regional Comprehensive Economic
Partnership to tap even wider opportunities to
diversify our exports both in products/services
and destination markets.
Finally, when I say don’t look back, it is to
caution against reversing and undoing a whole
array of economic reforms that our post-Edsa
administrations systematically put into place.
We have come a long way from the economic
stagnation the Marcos dictatorship led us to.
This is no time to lose the momentum by bringing
back the discredited old. |
_______________________________________________________________________________________ |
The
Russia-Ukraine fallout
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:35 AM March 01,
2022
Just when we thought our economy was finally
getting over the deep pandemic shock, now comes
the Russian invasion of Ukraine, whose shock
waves have yet to be clearly understood and
assessed. Our direct economic linkages with both
countries are actually minimal, but the impact
of the conflict’s global repercussions is likely
to be the greater threat to our economy and our
people. Added to already elevated oil and
commodity prices worldwide and financial
pressures stemming from high levels of global
debt especially in the United States, the ride
coming out of the pandemic crisis promises to be
anything but smooth. And for small economies
like ours, the ride could be even rougher.
How would we be directly impacted by the
Russia-Ukraine conflict? Based on our official
foreign trade statistics, our exports to Russia
were a relatively minimal $102.3 million in
2019, or a mere 0.1 percent of our total
exports, mostly in the form of office machine
parts, electrical transformers, and integrated
circuits. But our imports from them were nearly
ten times as much in value, at $985.8 million or
0.9 percent of total imports, mostly
semi-finished iron, petroleum, and wheat. To
Ukraine, we exported a miniscule $4.8 million
worth of products, mostly integrated circuits,
scrap plastic, and processed fruits and nuts.
But we imported 57 times as much from them,
amounting to $272.4 million or 0.2 percent of
our total imports, mostly wheat, semi-finished
iron, and sawn wood. Ukraine was actually the
fourth largest source of our total cereal
imports in 2020, and the third largest for
wheat, while Russia supplies about a sixth of
our oil imports.
There is hardly any trade in services between
the Philippines and these two countries. Our
recorded foreign direct investments from them
are likewise negligible ($110,000 from Russia
and $10,000 from Ukraine in 2019). Last year,
remittances amounted to $2.3 million from Russia
and $121,000 from Ukraine, with just over 350
Filipinos known to be residing in the latter
(and now being evacuated), according to the
Department of Foreign Affairs. All told, direct
impacts of the invasion owing to disruption of
trade, investment, and remittances would appear
minimal.
However, it is actually the indirect impacts of
the Russia-Ukraine conflict, and Western moves
in response to it, that could well pose the
bigger problem for us through their
repercussions on the global economy and markets.
With Russia and Ukraine together producing about
a quarter of the world’s wheat, this is one
commodity whose global flows and prices will be
affected by the war-induced disruption of
supplies from these two major producers. Thus,
even though we might readily source from
elsewhere the wheat imports lost from Ukraine
suppliers, the likely spike in world wheat
prices will raise the price of flour, hence
bread and other baked goods. It will also push
up the price of animal feeds where wheat is a
major ingredient, which will in turn lead to
higher meat prices. The world is in for elevated
food prices over the following months, which for
us had already been happening in the past year
due to our own internal problems with steep
declines in livestock and fisheries supplies.
On top of food, energy costs will rise further
than they already have, with crude oil prices
feared to go as high as $150 per barrel,
especially if Russia’s large supplies of oil and
gas are cut off from the market by Western
sanctions. For a country like the Philippines
that imports virtually all its fossil fuels,
there will be major implications for electric
power and transport costs. Still another vital
commodity whose costs will further rise is
nitrogen fertilizers, a by-product of petroleum
refining, along with another key fertilizer
component potash, of which Russia is a major
source—in turn feeding further into surging food
prices.
And so, even as our inflation has eased in
recent months, we must brace ourselves as it
turns for the worse yet again as the year
unfolds. Our next president would have to hit
the ground running, with the unenviable position
of taking over the reins of a battered economy
about to run through yet another gauntlet. |
_______________________________________________________________________________________ |
Racking up
debts
Philippine Daily Inquirer / 05:08 AM February
03, 2022
It’s bad enough that Filipinos are saddled with
a national debt that had risen to record highs
ostensibly to help the Philippines recover from
the devastation wrought by the lingering
COVID-19 pandemic.
But what’s making the burden more difficult to
bear is the growing likelihood that a part of
the borrowings may have been lost to corruption,
based on the Senate blue ribbon committee’s
report on the questionable P11.5 billion worth
of contracts for pandemic supplies won by
Pharmally Pharmaceutical Corp. in 2020 and 2021.
And those are just the contracts that
fortunately caught the attention of the
Commission on Audit.
How about the rest that had been awarded since
March 2020 when the COVID-19 pandemic first hit
the Philippines and subsequently triggered
unprecedented public health and economic crises
from which the Philippines is still struggling
to recover?
While the extent of the corruption behind the
COVID-19-related contracts is a matter of
speculation at this point, what is certain is
that the Philippines continues to rack up a debt
bill that is in danger of going beyond the point
that credit rating agencies consider sustainable
or manageable.
ING Bank Manila senior economist Nicholas Mapa
said last year that it was “quite clear that
debt watchers are now increasingly concerned
about the medium-term growth prospects for the
Philippines, suggesting that the so-called
‘solid fundamentals’ are now being questioned.”
The Department of Finance reported that as of
Jan. 14 this year, total foreign borrowings and
grants devoted to COVID-19 response from March
2020 has reached $25.79 billion or P1.32
trillion.
This includes the $1.2 billion it borrowed from
the World Bank, the ADB, and the China-led Asian
Infrastructure Investment Bank in March 2021 to
buy vaccines, plus another $800 million from the
same three development banks in December to
purchase booster and pediatric shots.
With the country still firmly in the stubborn
pandemic’s grip, especially with the most recent
surge in cases caused by the Omicron variant
that brought with it a fresh round of mobility
restrictions, more will definitely be added to
the tally.
Only recently, the government already said it
would borrow another $400 million from the World
Bank to support “policy reforms” for sustainable
recovery from the pandemic. At the end of 2021,
the Bureau of the Treasury said the country’s
outstanding debt already reached P11.73
trillion, 19.7 percent more than the 2020 level.
This puts the ratio of debt to gross domestic
product or total domestic economic output at
60.5 percent, the highest in 16 years and also
the first time it returned to the 60-percent
level since 2005.
If the ratio will stay above the 60 percent
level and the rating agencies conclude that it
is unsustainable—Fitch’s outlook on the
Philippines already deteriorated to negative
from stable—then a downgrade of the Philippines’
sovereign rating may not be far behind and that
means it will become more expensive for the
Philippines to borrow money to finance needed
programs including infrastructure development.
The Duterte administration’s economic managers
have long argued, however, that the rising debt
level was not just manageable but necessary for
the country to ably respond to the challenges
brought about by the pandemic and put it in a
position to rebound from the unprecedented
crises it has spawned.
As the economic team rightly pointed out, other
countries in the region have likewise taken on
more debt than usual because of the pandemic.
However, while the economies of neighboring
countries are firmly on their way back to their
pre-pandemic vigor, the Philippines is expected
to bring up the rear. It has likewise earned the
unwanted distinction of being the most
vulnerable to COVID-19 among 56 advanced and
emerging markets covered by the January 2022
scorecard of UK-based think tank Oxford
Economics. The Philippines was likewise once
again ranked the worst in COVID-19 resilience
among 53 countries evaluated by Bloomberg, the
third time it was named the cellar dweller in
just the last five months, raising burning
questions over the soundness of the programs
that these borrowings are supposed to be for.
“Difficulties administering vaccines in remote
areas continue to be a vulnerability as the
country sees an Omicron surge worse than other
Southeast Asian countries like Malaysia,
Indonesia and Thailand,” Bloomberg said in its
latest report.
Fortunately, the worst of the Omicron surge
seems to be over, but the debt burden is here to
stay and, as Finance Secretary Carlos Dominguez
III said, a major issue that the next Philippine
president will have to address if the Philippine
economy is to return to the pink of health.
But more than arguing over the wisdom of taking
on more debt, what is more important for
pandemic-weary Filipinos is the reassurance that
the debt that they will eventually pay for goes
to effective pandemic response strategies and
will not end up bankrolling failed programs or
worse, lining the pockets of unscrupulous
government officials and their cohorts. |
_______________________________________________________________________________________ |
Huge risks
ahead
Philippine Daily Inquirer / 04:07 AM January 31,
2022
“The door to recovery is now fully open,”
declared Socioeconomic Planning Secretary Karl
Kendrick Chua when he presented last week the
economic numbers for 2021.
Gross domestic product (GDP), a measure of the
value of goods produced and services rendered in
the economy, expanded by 5.6 percent last year,
beating the government’s forecast of 5 to 5.5
percent. The expansion in the fourth quarter was
most surprising at 7.7 percent, fueled by what
economists described as “revenge spending,” or
consumers splurging on purchases for the
holidays after being confined to their homes for
nearly two years.
Chua is confident that return to pre-pandemic
levels is imminent despite the Omicron surge,
adding that the economy remains on track to hit
the more ambitious growth target of 7-9 percent
in 2022, as long as restrictions are eased
before this quarter ends.
He points to the “significant” decline in
COVID-19 infections now following the Omicron
outbreak this month that placed many areas under
the stricter alert level 3. If the downtrend in
infection continues, Chua predicts that a shift
to the less stringent alert level 2,
particularly in Metro Manila and neighboring
provinces that account for half of the economy,
will not only gain P3 billion a week, but also
pave the way to the lowest alert level 1.
Not to dampen the economic optimism now
pervading the government, there are huge risks
ahead, which Chua himself acknowledges.
These include rising oil prices, the strong
likelihood that the US Federal Reserve Board
will raise interest rates, and the dismal
performance of the agriculture sector.
Brent crude, the international oil benchmark,
last week hit $90 a barrel for the first time
since 2014. The rising cost of oil, traced to
growing geopolitical tensions between Russia and
Ukraine and the tight supply when global demand
is picking up due to increasing economic
activities, is a threat to inflation in emerging
economies such as the Philippines. It will raise
transport fares, electricity rates, and the
prices of basic consumer goods. As consumer
sentiment is dampened, the consumption-driven
economy will slow down.
An increase in US interest rates, on the other
hand, will raise debt servicing cost, trigger
capital outflows as money always go where it
will grow (putting pressure on the peso as
demand for dollars for repatriation abroad
increases), and generally force local monetary
authorities to raise interest rates to remain
competitive. This, in turn, has the effect of
also dampening domestic business activities.
“Emerging economies should prepare for potential
bouts of economic turbulence,” the International
Monetary Fund warned earlier this month, citing
the risks posed by faster-than-expected Federal
rate increases predicted to “rattle financial
markets and tighten financial conditions
globally.”
The Philippines is particularly vulnerable since
it has amassed a pile of foreign debt. The
country’s total pandemic-related foreign
borrowings, accumulated since March 2020, have
now ballooned to $22.55 billion, or about P1.2
trillion. The country’s total outstanding debt,
both external and domestic, swelled to P11.93
trillion as of end-November 2021, from P8.22
trillion as of end-2019, or prior to the
pandemic.
On the domestic front, there’s the recurring
problem about the agriculture sector’s dismal
performance. Earlier branded by the Duterte
administration’s economic team as the weakest
link in the economy, the farm sector shrank by
1.7 percent in 2021, or worse than the previous
year’s decline of 1.2 percent. To a large
extent, this has been due to the limited
attention and development assistance it has been
getting from the government for decades now.
Finally, there’s the presidential election in
May. While such political exercises have the
effect of boosting the economy through massive
election-related spending, the uncertainties
attendant to this year’s polls have already kept
investors at bay. Pantheon Macroeconomics senior
Asia economist Miguel Chanco cautioned that
despite the hefty rebound in private consumption
in the last quarter of 2021, other economic
sectors “leave little to be desired.”
He adds: “In particular, gross investment rose
by just 3 percent quarter-on-quarter … This
suggests that pre-election uncertainties are
settling in much earlier than we expected. We
reckon that businesses will remain on the
sidelines in the first half of this year, at
least until the political dust settles.”
The Philippines is not out of the woods yet, but
barring the emergence of another deadly COVID-19
variant, the possibility of the US calibrating
its rate hikes, and the May elections being
credible and peaceful, there’s the real prospect
of the economy finding its way back to the
pre-pandemic growth path.
One thing remains certain at this point: the
next administration will have a lot on its
plate, economically speaking. |
_______________________________________________________________________________________ |
Future
proofing the country
THE CORNER ORACLE - Andrew J. Masigan - The
Philippine Star
December 29, 2021 | 12:00am
We have a national goal and that is to become an
upper income economy by the year 2040, where
each Filipino earns $13,000 a year (about
P640,000 in today’s money), with zero incidences
of poverty. Each Filipino household should have
their own home and live their lives with pride,
dignity and security.
In my column last week, I wrote about how the
next administration will inherit a fundamentally
weaker economy. There are clear and present
threats, not the least of which are alarming
debt levels and widening budget deficit. If
these are not addressed, the next administration
will have to cut spending on infrastructure and
social services or worse, devalue the peso.
Fortunately, there is a silver bullet solution
to our problems – and this is to attract our
fair share of foreign direct investments (FDIs).
FDIs provide capital infusion to help reduce the
budget deficit. A reduced budget deficit will
give the government the financial space to spend
on infrastructure and social services. FDIs
increase economic activity and exports, which
will help government cope with debt payments.
FDIs infuse new technologies and best
manufacturing practices from abroad. FDIs
provide competition to local firms, which pushes
them to level up.
Moving forward, what industries will drive the
economy in the next decade and what reforms are
needed to maximize their potentials?
The IT-KPO industry has been the country’s cash
cow for a decade. Annual revenues grew
three-fold from $9 billion in 2010 to $27
billion in 2020. However, to maintain our
position as the world’s second largest provider
of IT-KPO services, we must lessen our
dependence on voice-based services and evolve to
become a center for excellence in artificial
intelligence, animation, game development,
information management, robotics, cloud
technology and software development.
The electronics industry is another strong leg
of the economy. It is poised to generate some
$44 billion in revenues in 2022. There are
500-plus semiconductor companies operating in
the Philippines today. However, the industry is
threatened by aging technologies which will soon
become obsolete. We are not attracting enough
new companies that manufacture next-generation
electronics. Again, we must revisit the
impediments to attracting FDIs to address this.
Mining holds enormous potentials but the sector
is plagued by disinformation and stigma. Mining
contributes less than one percent of GDP. It’s a
shame since the Philippines sits on seven
billion metric tons of metallic resources and 50
billion metric tons of non-metallic resources.
Our mineral reserves are worth well over a
trillion US dollars at today’s prices. Minerals
are our God given resource – it is the
Philippine equivalent to Saudi Arabia’s oil. Not
to leverage mining to solve poverty is a
disservice to our people.
Three impediments stand in the way of a
flourishing mining industry. They are: the ban
on open pit mining, the power of LGU’s to enact
ordinances banning mining and the excessive
zonal ban on mining. These impediments must be
lifted for us to benefit from the resources we
have been endowed with. Note, open pit mining is
already governed by the strictest environmental
laws.
Agriculture is a perpetual underachiever due to
the ill-conceived Comprehensive Agrarian Reform
Law and the absence of the Land Use Law.
Agricultural output increased by only 20 percent
in the last 10 years. It is an embarrassment.
This is because the average farm size today is
below one hectare, with a maximum holding of
five. Industrial farming are few and far
between.
To unlock the potentials of agriculture, the
maximum size of land holdings must be increased
to permit industrial farming. The Land Use Law
must be passed and budgetary support for the
agricultural sector must increase from three
percent of GDP to eight percent.
There are eight industries in which the
Philippines has a competitive advantage and the
next administration will do well to develop
them.
The first are “blue industries.” These include
ship building, ports & shipyard management,
logistics services, seafarer crewing, maritime
financing, aquaculture and offshore energy
exploration.
Other opportune industries include
agro-processing; auto and auto parts; electric
vehicles and parts; aeronautics; construction;
creative industries and e-commerce.
What structural reforms are needed to achieve
our national goal by 2040?
The economy would need to grow by an average
rate of seven percent for 20 years to increase
income levels to $13,000. Is it possible? Yes,
but only if structural reforms are instituted
soon. Congressman Joey Salceda proposed a
20-point reform agenda to enable the economy to
achieve this. I concur with his recommendation
and hope the next administration puts it to
effect.
In terms of government reforms: Complete the
digital migration in all government units to
curtail corruption; leverage on science and
technology in all business processes; invest
heavily on education and student nutrition;
invest in technical skills by uplifting TESDA
and Meister schools; professionalize our
institutions to one that is rules-based and
science-based; invest in rural infrastructure
and public transportation; accelerate rural
development; migrate to indigenous and renewable
energy sources; invest in health care reform;
invest in public housing and invest in
unemployment insurance.
In terms of economic policies: Embark on a
second agricultural revolution to achieve food
surplus; break down oligopolies by opening
industries to foreign competition; develop MSMEs
via business incubation, ease in funding and
entrepreneurship instruction; establish the
basic law for creative industries (the Korean
model); expand public-private partnerships
beyond infrastructure; digitalize the tax system
and foster broader financial and capital
markets.
In terms of foreign policy: Strengthen ties with
the US, India, ASEAN, Australia, South Korea,
Japan and Israel while optimizing trade with
China. And if I may add, strengthen diplomatic
and economic ties with Spain, Mexico, Central
and South America; establish a modern and
credible national security policy to respond to
emerging and unconventional threats.
There is a lot to do to future-proof the country
and to achieve our national goal. All these will
fall on the shoulders of the next president. |
_______________________________________________________________________________________ |
2 SC rulings
forewarn ‘alalays’ in corruption
Jarius Bondoc - The Philippine Star
November 19, 2021 | 12:00am
Romulo Neri, former National Economic and
Development Authority director general, has lost
all leave credits and retirement benefits from
the government. He is now barred from public
service.
The Supreme Court recently upheld the
Ombudsman’s findings of sleaze in the 2007
national broadband network project with China’s
ZTE Corp. Neri’s “grave misconduct” was
affirmed, and the Court of Appeals verdict of
“simple misconduct” reversed.
“The elements of corruption and clear intent to
violate the law are quite patent,” the SC Third
Division ruled. “(Neri) actively brokered for
ZTE’s bid by using his public position despite
knowing the corruption involved in the project.
There is no cogent reason to justify the
lowering of liability to simple misconduct.”
“Petitioner Neri is dismissed from service,”
wrote Justice Marvic Leonen, division chairman.
“(This) includes the necessary penalties of
cancellation of eligibility, forfeiture of leave
credits and retirement benefits, and perpetual
disqualification from reemployment in the
government service.”
The verdict dated July 5 was publicized last
week. Justices Ramon Paul Hernando, Henri Jean
Inting, Ricardo Rosario and Jhosep Lopez
concurred.
Neri had introduced whistle-blower Rodolfo
Lozada Jr. to then-Comelec chairman Benjamin
Abalos. The CA found Abalos “highly interested
in pursuing a telecommunications project with
the government” under then-president Gloria
Macapagal-Arroyo.
Lozada prepared the NBN-ZTE technicals. Neri
next processed the approval amid allegations of
a P200-million bribe offer from Abalos. Finding
misconduct, the Ombudsman in 2009 suspended Neri
for six months without pay. While Neri did not
solely approve the deal, he “was deemed to have
mediated – through the NEDA – between Abalos and
ZTE.” Deemed improper were Neri’s attendance in
conferences and golf games hosted by ZTE execs
and Abalos.
Abalos and Arroyo were indicted for graft at the
Sandiganbayan. They were acquitted in May and
September 2016, respectively. Dismissed were
testimonies of P10-billion kickback in the
P17-billion project, and in Abalos and Arroyo’s
lunches and golfing at ZTE’s Shenzhen
headquarters while the deal was being processed.
Arroyo was NEDA chairman and Neri the vice.
Before joining the Arroyo Cabinet Neri was head
of the powerful Congressional Planning and
Budget Office under three successive House
Speakers.
* * *
The Anti-Money Laundering Council has been
ordered to divulge bank transactions related to
the 2009 sale of used, overpriced helicopters as
brand-new to the Philippine National Police. The
AMLC records are pertinent to the Sandiganbayan
case that former first gentleman Mike Arroyo
owned the aircraft.
The AMLC had twice refused the Sandiganbayan
order to open its files, and ran to the SC. The
Third Division dismissed the agency’s petition,
seeing no abuse of discretion by the
Sandiganbayan.
“Instead of avoiding compliance with the
subpoena, [AMLC] must firmly perform its mandate
as an investigatory body and independent
financial intelligence unit,” Justice Leonen
ruled. Justices Hernando, Inting, Edgardo delos
Santos and Lopez agreed with the February
verdict released last week.
On trial at the Sandiganbayan are Arroyo and
several police generals. Lionair president
Archibald Po testified that Arroyo purchased
five choppers from him in 2003-2004. He was
instructed in 2009 to transfer two units to
Manila Aerospace Trading Products, he swore.
From records, Maptra then offered the
second-hand choppers to the police. Arroyo
denied any part.
Po said Arroyo deposited partial payment to
Lionair’s account with Union Bank. To verify
these, the Office of the Special Prosecutor
presented a bank official. The latter said that
since the account was closed in 2006 and the
files discarded, the Sandiganbayan can seek
recourse with the Bangko Sentral or AMLC. On the
OSP’s request, the Sandiganbayan ordered AMLC
Executive Director Julia Bacay-Abad to open the
records. Po waived the right to secrecy of
Lionair’s account under the Foreign Currency
Deposit Act.
The AMLC twice moved to quash the subpoena. The
Sandiganbayan rejected the motions, prompting
AMLC to go to the SC.
The AMLC argued that “it is prohibited by law to
disclose the relevant bank records of Lionair
... (because) confidential.” Cited was Section
9(c) of the Anti-Money Laundering Act, that
“Financial institutions and their officers be
prohibited from disclosing covered and
suspicious transaction reports, or ‘tipping-off’
that a case is being filed.”
The SC found the claim untenable, saying the
AMLC is not among the institutions covered by
the ban. AMLC is “not merely a repository of
reports and information.”
“It would be antithetical to its own functions
if (AMLC) were to refuse to participate in
prosecuting anti-money laundering offenses by
taking shelter in the confidentiality provisions
of the Anti-Money Laundering Act,” the SC added.
More so since Lionair submitted a written
permission to open its accounts. |
_______________________________________________________________________________________ |
Historic
agriculture people power
By: Ernesto M. Ordoñez - @inquirerdotnet
Philippine Daily Inquirer / 05:24 AM October 29,
2021
Last Oct. 27, Federation of Free Farmers chair
Leonardo Montemayor said: “I consider historic
the adoption of this agriculture position. It
groups together for the first time the thinking
of farmers, fishers and rural development
organizations (BSA, FFF, and AA); agribusiness
(PCAFI), and the academe/science community
(CAMP).
Montemayor is referring to the document
“Transform Agriculture for Food Security, Job
Creation, and Balanced Growth.” It has been
given to all the presidential candidates to
respond to in the forthcoming Halalan sa
Agrikultura 2022. This will be a forum where
each presidential candidate will speak on a
separate day exclusively about agriculture. It
will have extensive nationwide coverage through
all traditional and social media to inform our
citizens of our serious agriculture situation
today.
In previous elections, the presidential
candidates, in general, did not give agriculture
a high priority. Consequently, their agriculture
programs fell short, lacking focus and detail.
As an indication, over a nine-year period,
agriculture increased by only 1.6 percent
compared to industry’s 6.8 percent.
With the new agriculture people power, this will
no longer be the case. There are 12 specific
recommendations in this document which the
presidentiables will study and give their
positions, plans and programs for. Which
agriculture sectors agreed to these 12
recommendations? These are divided into three
categories, with the organizations identified
and their founding years:
Farmers and fisherfolk: a) Federation of Free
Farmers (FFF-1953), a farmer-led nationwide
organization with a 68-year track record of
commendable service to small farmers. It is led
by Leonardo Montemayor; b) Alyansa Agrikultura
(AA-2003), a coalition of farmers and fisherfolk
with special focus on economic upliftment and
social justice for small stakeholders, led by
chair Arsenio Tanchuling and executive vice
president Elias Jose. Its vice presidents for
Luzon, Visayas and Mindanao are heads of
national major commodity federations, and c)
Bayanihan sa Agrikultura (BSA-2021), a grouping
of 99 agriculture-related NGOs (nongovernmental
organization) and POs which signed a joint
manifesto identifying today’s agriculture main
problems and recommendations. Their coordinator
is Hazel Tanchuling, Rice Action Watch executive
director.
Agribusiness: Philippine Chamber of Agriculture
and Food Inc. (PCAFI-1999), a business grouping
with 44 agriculture commodity champions. It’s
president is Daniel Fausto, cited Entrepreneur
of the Year by the Department of Agriculture.
Science and academe: Coalition for Agriculture
Modernization in the Philippines (CAMP-2004), an
organization of academicians and scientists from
the entire Philippines. It’s chair is National
Scientist Emil Javier, former University of the
Philippines president and Minister of Science
and Technology.
The documents’ main premise is stated in its
first two paragraphs:
“A major development challenge facing the next
government is transforming Philippine
agriculture into an engine of economic growth, a
generator of jobs, a social and economic
stabilizer in the countryside, and the
cornerstone for the country’s food security.
Before COVID-19, the sector had been stagnating.
Under the pandemic, agriculture has been
weakened further by transport and logistical
breakdowns, aimless import liberalization, lack
of health facilities to contain the virus spread
and poor distribution of amelioration assistance
to the rural masses.
“We demand a reversal of this situation.
Agriculture can and should play a leading role
in national economic recovery and, more
importantly, in ensuring social and economic
development for all. To achieve this, urgent
policy reforms must be institutionalized and
implemented with decisiveness.”
Two of the 12 recommendations are:
– Given the immense area and economic potential
of our territorial and inland waters, a
Department of Fisheries and Marine Resources
should be created. Moreover, the government must
assert our sovereign rights in the West
Philippine Sea. – Genuine representation and
involvement of farmers, fishers and other
stakeholders must be institutionalized in all
levels of planning and monitoring. Sectoral
appointees to government agri-fisheries boards,
councils and committees must have a proven track
record of service.
With this historic agriculture people power that
started, quo vadis, agriculture?
The author is Agriwatch chair, former Secretary
of Presidential programs and projects and former
undersecretary of DA and DTI. Contact is
Agriwatch_phil@yahoo.com. |
_______________________________________________________________________________________ |
Former
officials of closed bank convicted for DOSRI
violation
October 20, 2021 | 12:01 am
TWO FORMER OFFICIALS of a closed bank in
Batangas were found to have violated rules on
the internal disbursement of loans, as well as
granting fictitious credit, the central bank
said.
The Bangko Sentral ng Pilipinas (BSP) filed
charges versus former officials of closed
Synergy Rural Bank, Inc. The respondents are
Herman S. Villalobos, its former president and
chairman, and former compliance officer Danilo
D. Tobias.
Mr. Villalobos and Mr. Tobias were found guilty
of the violations by regional and municipal
trial courts in Lipa City, Batangas.
“The criminal cases stemmed from a Directors,
Officers, Stockholders and Related Interests
(DOSRI) loan granted to Tobias in violation of
approval, reportorial and ceiling requirements
for DOSRI loans provided under the law, as well
as a fictitious loan application which the BSP
discovered during its investigation of the
bank’s transactions,” the central bank said in a
statement on Tuesday.
Based on the BSP’s findings, the loans involved
amounted to P2.51 million.
The former bank officers were found guilty of
five counts of violation of the General Banking
Law of 2000 in relation to the New Central Bank
Act, as amended, and one count of violation of
the Revised Penal Code.
The regional trial court sentenced Mr.
Villalobos to a fine of P200,000. He will also
face one year of imprisonment for one case, and
another sentence of up to two years and four
months in prison for another case, aside from a
penalty of P10,000 imposed by the municipal
trial court.
Meanwhile, Mr. Tobias was slapped with penalties
worth P150,000.
“The BSP is committed to ensure banks’
compliance with the law while maintaining the
soundness of the financial system and protecting
public interest through the implementation of
good governance practices among its supervised
financial institutions,” the central bank said.
Local courts in Negros Oriental also found an
employee of the closed Rural Bank of Bayawan
(Negros Oriental), Inc. for facilitating
fraudulent loans, the central bank earlier said.
— L.W.T. Noble |
_______________________________________________________________________________________ |
BSP proposes
3% RRR on digital banks
October 7, 2021 | 12:34 am
THE BANGKO Sentral ng Pilipinas (BSP) is
proposing to initially align the reserve
requirements of digital banks with thrift
lenders as both are targeting the same market
and offer similar financial products.
Under a draft circular released by the BSP,
digital banks will generally be subjected to the
same standards and prudential requirements
imposed on traditional lenders.
One of the key provisions is that digital banks
will have to keep a reserve requirement ratio
(RRR) of 3%, which is similar to the current
level for thrift lenders. In comparison, the RRR
of big banks and rural lenders is pegged at 12%
and 2%, respectively.
“The policy proposal is to initially align the
RRR of digital banks with those of thrift banks,
considering the current similarity in their
target markets and the type of financial
services they offer,” BSP Assistant Governor Lyn
I. Javier said in a Viber message.
Ms. Javier said the central bank may adjust the
RRR for digital banks “as needed consistent with
its price and financial stability objectives.”
Under the draft circular, digital banks will be
required to comply with all prudential
requirements set by the BSP for the conduct of
business. These include requirements for
corporate governance, risk management
(particularly on information technology and
cybersecurity), outsourcing, consumer
protection, and anti-money laundering, among
others.
“They will be subject to the same standards and
prudential requirements because they are exposed
to the same types of risks as any other bank,”
Ms. Javier said.
The central bank released the digital banking
framework last year which differentiated these
lenders from universal, commercial, thrift,
rural, cooperative, and Islamic banks.
These digital banks are required to maintain a
minimum capital requirement of P1 billion, which
is also stressed in the draft circular.
Unlike other banks that need to have
brick-and-mortar branches, digital banks do not
need to establish branches but only have to have
a main headquarters.
Based on the proposed regulation, digital banks
will be required to have at least one member of
its board of directors and a senior management
officer to have a minimum of three-year
experience and technical knowledge in operating
a business in the field of technology or
e-commerce.
Earlier this week, BSP Governor Benjamin E.
Diokno said the central bank will cap the
current digital bank licenses at six.
Mr. Diokno has said the central bank is likely
to keep the application for new digital banks
closed for the next three years to assess the
development of the new lenders and the
competitive landscape.
The six digital bank licenses were given to
state-owned Overseas Filipino Bank, Tonik
Digital Bank, Inc. (Philippines), UNObank,
Aboitiz-led Union Digital Bank, GOTyme led by
the Gokongwei Group and Tyme, and Maya Bank of
Voyager Innovations, Inc.
The proposed BSP circular likewise stressed that
other banks operating with a different license
type are not allowed to represent themselves as
digital banks, even if they also offer online
services. They are prohibited to describe
themselves as digital banks through media,
websites, or mobile applications, among others.
“Only a bank granted with digital banking
license may represent itself to the public as
such. The policy draft proposes that banks
belonging to other bank categories may represent
themselves as a bank offering ‘digital banking
products or services’ or other equivalent
terms/phrases,” Ms. Javier said, noting these
specific provisions are already in line with
Circular 1105 that laid down the guidelines for
the establishment of digital banks.
Prior to the release of the digital banking
framework in 2019, some banks with a different
license type already allowed its clients to
access financial services including bank account
opening, deposits, and loans all through an
online platform. These include CIMB Bank
Philippines, Inc., ING Bank N.V. Manila, as well
as the Komo app of East West Banking Corp. Last
year, Rizal Commercial Banking Corp. also
launched Diskartech app. — Luz Wendy T. Noble |
_______________________________________________________________________________________ |
Funding
agriculture right
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:06 AM September
28, 2021
Why has the Department of Agriculture (DA)
perennially received much less than it asks from
the Development Budget Coordination Committee
(DBCC) composed of government’s top economic
managers, which finalizes the national budget
proposed to Congress? Fellow Inquirer columnist
Ernie Ordoñez recently noted that in 2020 and
2021, the DA got only 22 and 30 percent,
respectively, of what it originally requested,
and got even less in 2022. What gives? Don’t the
economic managers believe in the importance of
agriculture to our economy?
I am certain that they do. After all, the
secretary of finance, usually considered the
primus inter pares among them, was once
secretary of agriculture himself under President
Cory Aquino. A key member (Dr. Bruce Tolentino)
of the Monetary Board of the Bangko Sentral was
also undersecretary to then Agriculture
Secretary Sonny Dominguez, and Governor Ben
Diokno, a seasoned economist, surely sees
agriculture’s critical role as well. And
Socioeconomic Planning Secretary Karl Chua’s
past work as World Bank economist had him
leading a multi-year jobs program that had
agriculture as a critical focus. So what makes
them seem so “harsh” on the agriculture budget?
My own informed guess is that they don’t see
practical sense in dramatically raising the DA
budget when it has perennially failed to
demonstrate the absorptive capacity to utilize
its budget effectively and efficiently. I had a
first-hand sense of this in the 1990s, when as
then head of Neda, I would receive reports from
my staff that the DA typically managed to spend
only about 60 percent of its annual budget by
the end of November. And because the DBCC would
not entrust a larger budget to those who can’t
even spend what they already have, it would be
in a mad rush to spend the remainder within the
final month of the year—and the easiest way
would usually be to grant all sorts of bonuses
and “incentive allowances” to employees, to
utilize the “savings.” The DA was by no means
alone in this, and having been out of government
for over two decades now, I couldn’t help wonder
if the problem persists to this day.
Well, it turns out that it does. I examined the
DA’s recent annual audit reports, which anyone
can view on the Commission on Audit website
(thank God for COA transparency!). I found that
the DA managed to spend only 61.2 percent of its
allotted budget in 2017, 62 percent in 2018, and
60.4 percent in 2019 (never mind the abnormal
year of 2020). At least they outdid the
Department of Public Works and Highways, which
has consistently managed to spend less than 40
percent of its annual budget since 2017, and
even worse, the Department of Transportation,
which spent less than 30 percent. Should we then
fault our economic managers for finding it hard
to believe that the DA can actually spend 3-4
times more than what it has been getting?
Still, I’d argue that agriculture needs a far
bigger budget than what it has been getting.
Ordoñez points out that our agriculture budget’s
2 percent share in the total budget pales in
comparison to Thailand’s 3.5 percent and
Vietnam’s 5.5 percent. And after decades of a
rice-dominated agriculture budget, it’s time to
substantially boost budget support to other
important farm products, even as we cannot
drastically slash the rice budget in the
process, especially after liberalizing rice
trade. The DA’s limited absorptive capacity need
not get in the way if it works through the local
government units (LGUs) and actually spends
money through them. After all, LGUs must do the
rowing while the DA confines itself to steering.
The expected LGU “windfall” from the
implementation of the Mandanas ruling next year
would hardly help, as it will only make up for
longstanding “unfunded mandates” passed on to
LGUs by the 1991 Local Government Code.
I’d like to see Secretary Willie Dar’s resolve
to work through provincial LGUs translate into
DA funds being passed on via memorandums of
agreement to LGUs for program implementation, a
mechanism that has already worked well for other
agencies. If we can show that such managed
devolution could serve our farmers well, then
the DA can better convince the DBCC that it
deserves the budget boost the sector has always
needed. |
_______________________________________________________________________________________ |
Banks’
capital health improves in H1
Published September 23, 2021, 4:30 PM
by Lee C. Chipongian
Big banks in the country remained
well-capitalized despite the prolonged
pandemic-induced crisis, the Bangko Sentral ng
Pilipinas (BSP) said.
BSP Governor Benjamin E. Diokno said that big
banks’ capital adequacy ratio (CAR), a measure
of lenders’ solvency, improved to 17.6 percent
in the first six months of the year from 17.1
percent at end-2020.
Diokno said the latest CAR is well-above the 10
percent minimum threshold set by the central
bank.
The universal and commercial banks’ CAR also
improved from end March’s 16.9 percent.
Despite the pandemic’s impact on borrowers’
ability to pay their loans, Diokno said banks’
risk-taking activities were supported by
adequate capital which was mainly composed of
common equity and retained earnings.
Diokno also cited the latest central bank
internal stress test exercises showing most
banks are capable of absorbing losses under
scenarios of assumed credit impairment because
banks are proactive in making sure their credit
risks are sufficiently funded.
On solo basis, banks’ CAR for the first half of
2021 stood at 17 percent.
“Internal stress test exercises show that banks’
capital position is sufficient to withstand
assumed credit impairment in bank loans,” Diokno
said.
Despite the pandemic and increasing bad loans
ratio which is expected to reach a peak of 8.2
percent in 2022, Diokno said banks remain
profitable with net profits of P122.7 billion in
the first half of the year.
As for banks’ liquidity, they have maintained
sufficient buffers to meet their operating
requirements, the central bank chief noted.
At end-June, big banks’ liquidity coverage ratio
(LCR) was at 198.4 percent and 196.4 percent,
respectively.
The relatively high LCR indicates banks’ ability
to fund requirements during short-term liquidity
shocks, said Diokno.
The banking industry’s solo and consolidated net
stable funding ratio also reached 144.4 percent
and 144.5 percent, respectively, during the same
period. This means that banks have stable
funding to serve their customers in the medium
term.
“These key metrics show that banks are in a
strong position to service the financing
requirements of our recovering economy,” Diokno
said.
On one hand, the 47 universal and commercial
banks accounted for the lion’s share of the
banking systems’ capital with 91.1 percent. On
the other hand, the rural and cooperative banks
have 2.2 percent while thrift banks have 6.7
percent share.
“The minimum liquidity ratios of stand-alone
thrift banks, rural and cooperative banks
surpassed the 20 percent minimum at end-June
2021,” Diokno also said. |
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Big and bad?
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:08 AM September
21, 2021
Is big business bad? Is big business dominance
in our economy leading us away from inclusive
growth and development, the professed goal of
the Philippine Development Plan (PDP) for at
least three decades now?
It may look that way at first glance, but the
fact is, there is encouraging evidence that our
economy is actually getting more inclusive,
especially within the last decade.
A study by Dr. Rafaelita Aldaba (now trade and
industry undersecretary) found that across
Philippine manufacturing industries, the top
four firms accounted for an average of 81
percent of total industry output back in 1998.
But 10 years before, that “four-firm
concentration ratio” was just 71 percent,
implying that market concentration rose through
that decade. More recently, the Ateneo Policy
Center found that in 2012, the top 15 business
conglomerates generated the equivalent of 4.7
percent of our total gross value added, aka
gross domestic product. By 2018, this share had
grown to almost 6 percent. Is the Philippine
economy getting more exclusive, then, contrary
to the PDP mantra of inclusive development?
The principle of economies of scale explains
this tendency for increased concentration in a
market economy. As the scale of production goes
up, unit costs generally go down, giving an
inherent cost advantage to larger firms, and
allowing them to undercut and drive smaller
competitors out of business. Technology is the
major driver in economies of scale, and rapid
technological advance further reinforces it,
making it even harder to resist the seemingly
natural trend toward even more concentration.
Hence, the pushback to counter this trend so we
can achieve a more inclusive economy must
necessarily come from either the state and/or
big business itself.
The good news is that the data show that the
Philippine economy has actually become more
inclusive, and income distribution has actually
improved over time, notably within the last
decade. The average income of the richest
one-tenth of all Filipinos was 12 times that of
the poorest one-tenth in the 1980s, 10.3 times
in 2009, and now only 7.6 times as of 2018. The
Gini coefficient, which measures income
inequality on a scale where 0 denotes perfect
equality and 1 is perfect inequality, steadily
declined from 0.464 in 2009 to 0.427 in 2018,
showing a significant reduction in inequality.
Regional disparities have similarly narrowed.
The average income in the richest region (Metro
Manila) was 3.1 times that of the poorest region
(Muslim Mindanao) in 2009, but down to 2.9 times
in 2018.
These all mean that incomes of the lowest income
groups have grown faster than incomes at the
top, and incomes in the poorest regions have
risen faster than in the traditionally favored
areas of Metro Manila and Luzon. Surely,
government policies must have been instrumental,
like the Magna Carta for Micro, Small and Medium
Enterprises of 2008 (MSMEs), the Philippine
Competition Act of 2015, and the Board of
Investments incentives for inclusive business
models. But with large enterprises contributing
an estimated 38 percent of total jobs and 64
percent of total incomes, it stands to reason
that they too must have had a role in the
observed improvement. Conglomerates provide
millions of jobs directly, and sustain millions
more indirectly within the wider business
ecosystems they create through their value
chains. Even as big businesses often supplant
small ones—as when large retail chains drive
small retailers out of business upon entering a
locality—they can deliberately choose to be in a
symbiotic relationship that benefits both sides.
Conglomerates and big businesses need not be
rivals or adversaries to MSMEs, especially when
the former take their responsibility for
inclusive development to heart.
We’ve all seen business giants that, by their
self-serving actuations, make it easy to believe
that being well-intentioned does not come with
being well-endowed. But I recently had the
pleasure of interviewing four top business
tycoons known for their big hearts, for a
forthcoming Ateneo book. I will write more about
them here in due course, but I was happy to see
in them that in business, being big need not
mean being bad.
cielito.habito@gmail.com |
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BSP shuts
down another rural bank
Lawrence Agcaoili - The Philippine Star
August 29, 2021 | 12:00am
MANILA, Philippines — The Bangko Sentral ng
Pilipinas (BSP) ordered the closure of the Rural
Bank of Datu Paglas Inc. based in Maguindanao,
bringing to five the number of problematic banks
shuttered this year.
BSP Deputy Governor Chuchi Fonacier said the
Monetary Board issued Resolution 110.A last Aug.
26 prohibiting the Rural Bank of Datu Paglas
from doing business in the Philippines pursuant
to Republic Act 7653 or the New Central Bank
Act.
Fonacier said that state-run Philippine Deposit
Insurance Corp. (PDIC) has been designated as
receiver with a directive to proceed with the
takeover and liquidation of the closed rural
bank.
This brought to five the number of rural banks
ordered closed by the BSP this year.
Prior to the closure of the Rural Bank of Datu
Paglas, the regulator has ordered the closure of
the Rural Bank of Caloocan, Rural Bank of
Alimodian (Iloilo) Inc., Palm Tree Bank Inc.
based in Cagayan de Oro, and Occidental Mindoro
Rural Bank Inc.
Last year, the regulator ordered the closure of
Providence Rural Bank, Rural Bank of Tibiao
(Antique), De La O Rural Bank, San Fernando
Rural Bank, and Cooperative Bank of Aurora.
PDIC paid P124.11 million worth of insurance
claims for 7,072 valid deposit accounts
maintained in five banks, or 76 percent of the
estimated total deposit accounts of 9,305.
BSP Governor Benjamin Diokno earlier announced
the launching of the Rural Banking Industry
Strengthening Program (RBSP) which aims to
strengthen the industry in recognition of its
critical role in providing financial services in
rural and agricultural communities.
“The program is part of the BSP’s broader and
continuing efforts to boost the resilience of
the rural banking industry, which is a key agent
of countryside development as it provides
financial services to rural communities,
including micro, small and medium enterprises,”
Diokno said.
Meanwhile, former Monetary Board member Juan de
Zuñiga Jr. has been appointed as a member of the
PDIC board of directors as one of the private
sector representatives that include Rogelio
Guadalquiver Eduardo Pangan, and Reynalto
Tansioco.
He replaced former director Anita Linda Aquino
who has been serving as member of the Monetary
Board since July last year. |
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In surprise
move, BSP sets 3-year moratorium on new digital
banking licenses
By: Daxim L. Lucas - Reporter / @daxinq
Philippine Daily Inquirer / 03:54 PM August 19,
2021
MANILA, Philippines—The central bank will shut
the door to new digital banks in the Philippine
market for at least three years to preserve a
level of competition and quality of service
among players while allowing regulators to learn
from this relatively new banking phenomenon as
well.
Bangko Sentral ng Pilipinas (BSP) Governor
Benjamin Diokno announced on Thursday (Aug. 19)
that the Monetary Board decided to close the
window for applications from new digital banks,
including converting banks, by Aug, 31, 2021.
“The closure of the application window will
allow the BSP to monitor the performance and
impact of digital banks on the banking system
and their contribution to the financial
inclusion agenda,” Diokno said at an online
briefing.
“We need to ensure that the business environment
continues to allow healthy competition among
banks enabling them to offer innovative and
competitive financial products and services to
their clients,” he added.
Digital bank applications received by the BSP
until month’s end will be processed on a
first-come, first-served basis and will be
assessed for completeness and sufficiency of
documentation or information, as well as
compliance with the licensing criteria on the
establishment of digital banks.
Applicants that are able to submit the complete
documentation on or before the closure date will
be processed by the BSP.
The applications received on or before Aug. 31,
2021 with noted documentary deficiencies, or
which do not meet the BSP’s pre-qualification
criteria, will be returned and will not be
subject to further processing. The organizers
will be informed that their applications will be
deemed closed.
After this date, the BSP will no longer
entertain or accept new or returned
applications.
To date, the Monetary Board has already approved
the application of five digital banks, including
two incumbent banks which have converted their
existing licenses to a digital bank license.
These include UNObank, UnionDigital Bank and
GoTyme, while Overseas Filipino Bank Inc. and
Tonik Bank are banks that converted their
existing license to digital banks.
The Monetary Board approval corresponds to the
first of the three-stage licensing process. The
BSP is currently processing two other digital
bank applications.
“As these tech-savvy, customer-centric players
introduce innovations in the banking sector, we
are confident that the BSP is on track to
achieving its digitalization and financial
inclusion goals,” Diokno said. |
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We are not
out of recession
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:07 AM August 17,
2021
There was misplaced jubilation over the 11.8
percent second quarter increase in our GDP that
the Philippine Statistics Authority (PSA)
recently announced, as it gave the wrong
impression that the Philippine economy is now
out of recession. Unfortunately, it is not. As
others have already pointed out, including
fellow Inquirer columnist Winnie Monsod and
yesterday’s main editorial, the seemingly
impressive growth rate was merely the result of
what statisticians call the “base effect.” That
is, the percentage growth came out of the
comparison with a greatly shrunken GDP one year
ago, making it illusory and misleading.
The economy didn’t grow over the past quarter;
the truth is, it actually shrank. Expressed in
constant 2018 prices (to eliminate the
misleading effect of rising prices) and adjusted
for seasonality, our second quarter (April to
June) GDP of P4.468 trillion was smaller than
the P4.528 trillion posted in the first quarter
(January to March). That’s a negative
quarter-on-quarter growth rate of -1.3 percent.
Our economy’s aggregate output and incomes
actually took a turn for the worse in the first
half of 2021. It is thus wrong to believe that
our economy is out of recession and is seeing
rebounding growth.
The issue lies in how GDP growth that is
measured year-on-year—comparing a quarter’s
performance with that in the same quarter a year
ago — can be misleading given the highly
abnormal situation we had last year due to the
pandemic-induced lockdown. More advanced
economies typically announce and focus on the
annualized quarter-on-quarter, seasonally
adjusted growth rate, as it depicts the more
current real-time pace of the economy. In our
case, the figure always prominently reported is
the year-on-year growth rate, hence highly
subject to the base effect. But at times like
this, it’s a purely arithmetical result of
computing the percentage growth on a reference
base figure that is unusually low, as it was in
Q2-2020.
Let’s examine our numbers more closely on this
basis. Recall that at the worst of our lockdowns
in the second quarter last year, GDP was
reported to have been 17 percent lower than in
the same quarter of 2019. Against the preceding
quarter (Q1-2020) and adjusted for seasonality,
the PSA says it was 15.1 percent lower. While
the PSA, as always, also reported that number
then, hardly anyone took note. Annualized, that
translated to a negative 75.51 percent, a huge
contraction. No wonder we still feel the effects
of that now.
The technical definition of a recession is two
or more consecutive quarters of negative GDP
growth, or falling production and incomes. Our
quarterly GDP levels corrected for inflation and
seasonality fell in the first and second
quarters last year, so we were indeed officially
in recession then. But the decline actually
ended as early as the third quarter, when our
quarterly GDP level turned upward again as
lockdowns were eased, and continued rising until
the first quarter of this year. It was only in
this past second quarter that GDP fell again, as
already noted earlier. If the quarterly GDP
level continues to drop in the third quarter
from where we were in end-June, then we would
officially be in recession again. And given how
the Delta variant of the COVID-19 virus has led
to renewed lockdowns, such quarter-on-quarter
drop in GDP is almost a foregone conclusion. We
are, in short, in a double-dip recession forming
a W-shaped graph.
A recent article in Forbes magazine gives a
better definition of recession that we could all
better relate with. It says that a recession is
when “the economy struggles, people lose work,
companies make fewer sales and the country’s
overall economic output declines.” Indeed, we
should be looking well beyond GDP as we assess
whether our economy is on a rebound. I use my
own “PiTiK” test that focuses on presyo,
trabaho, and kita. Are prices regaining
stability with a declining inflation rate? Are
jobs back on a sustained uptrend?
With a resurging pandemic in our midst, it’s
quite clear that we cannot declare ourselves out
of recession just yet, and that government must
move like we’re in the middle of one.
cielito.habito@gmail.com |
_______________________________________________________________________________________ |
Banks still
'upbeat' but expect bad loans to remain high:
BSP
ABS-CBN News
Posted at Jul 21 2021 07:02 PM
The BSP said banking industry leaders view the
banking system as stable and expect double-digit
growth in assets, loans, investments, deposits,
and net income for the next two 2years, based on
a central bank survey.
“The upbeat expectations of the banking system
based on the results of the Banking Sector
Outlook Survey (BSOS) for the first semester of
2021 is testament to its confidence in the
strong medium-term prospects of the country’s
economy,” said BSP Governor Benjamin E. Diokno.
Majority of the survey respondents however
expect their non-performing loan ratio (NPL) to
exceed 5 percent in the next two years, the BSP
said.
Universal and commercial banks see their NPL
ratio settling between 3 percent and 6.5 percent
in the next 2 years, it added.
In comparison, the bad loan ratio of the banking
industry was at 2.16 percent in January last
year before the pandemic.
"This is, however, accompanied by greater
prudence in the management of credit risk by the
industry as higher number of banks intend to
report NPL coverage ratio of more than 50
percent to 100 percent, the BSP said.
BSP Governor Diokno meanwhile said the enactment
of the Financial Institutions Strategic Transfer
Act will help limit the build-up of NPLs in the
financial system.
The FIST Act allows banks to offload bad loans
to asset management firms.
The BSP survey also showed banks see
restructured loans ratio to be higher than 5
percent from earlier projections of between 3 to
5 percent of loans.
"This reflects continued efforts of banks to
grant financial relief to their borrowers
through modifications in their loan payment
terms," the central bank said.
The BSP has kept interest rates at record lows
and cut banks' reserve requirements to spur
lending. But banks have been reluctant to lend
amid worries over the ability of clients to
repay their loans. |
_______________________________________________________________________________________ |
What happened
to jobs?
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 05:08 AM July 13,
2021
Believe it or not, we have more than recovered
the number of jobs killed by the pandemic last
year. We now have over two million jobs more
than there were before the pandemic flattened
our economy. The May 2021 Labor Force Survey
(LFS) of the Philippine Statistics Authority
(PSA) reports that there were 44.72 million
employed workers in our economy, as against
42.65 million in January last year. So does this
mean that Filipinos are now back on their feet
again?
Not quite. Before we start thinking that the
average Filipino worker and his/her family has
gone over the hump, let me summarize what closer
scrutiny of the LFS data from May 2021 and
January 2020 reveals. The bottom line is this:
While there are indeed more jobs now than
pre-pandemic levels, there has been a drastic
deterioration in the nature and quality of those
jobs.
This should come as no surprise, knowing that
total incomes in the economy, measured by gross
domestic product (GDP) and gross national income
(GNI, formerly known as GNP), fell by 4.2 and
10.9 percent, respectively, as reported also by
PSA last May. The first measures total incomes
resulting from production in the domestic
economy, whether by Filipinos or foreigners
(“Gawa Dito sa Pilipinas”); the latter measures
incomes from production by Filipinos wherever
they are in the world (“Gawa Ng Pinoy”). That
the latter fell by much more tells us that
overseas Filipinos lost proportionately more
income than those working here at home.
How did jobs change domestically? Five key
observations emerge. One, most displaced workers
turned to trading (buy and sell), agriculture,
and construction work. Jobs in the hardest-hit
industries of accommodation and food services,
transport services, and manufacturing are still
519, 495, and 94 thousand less than pre-pandemic
levels, but trading, farming, and construction
jobs now exceed pre-pandemic levels by 1.6
million, one million, and 390 thousand
respectively. The next highest net job gainers
are education (with 154,000 more jobs),
government work (87,000 more including 15,000 in
the military), and information and communication
(73,000 more).
Two, much of our skilled workforce have been
forced into low-skilled and unskilled work.
Topping the job losers were managers (down by
half a million), clerical support workers
(-200,000) and skilled workers in crafts and
trades (-189,000); technicians and associate
professionals (-57,000); and plant and machine
operators and assemblers (-23,000). They turned
to elementary occupations like unskilled farm
and non-farm labor (up by 1.8 million), service
and sales (up by 754,000), and skilled farm work
(up by 279,000).
Three, many wage and salary workers have become
individually self-employed or unpaid family
workers. Wage and salary workers now comprise
only 61.8 percent of our total employed labor
force, from nearly two-thirds early last year.
This has reversed the steady improvement in job
quality we had seen with the rising proportion
of wage and salary jobs over many years. Worse,
247,000 less jobs in the “self-employed with
employees” category compared to pre-pandemic
levels shows just how badly micro, small, and
medium enterprises have become casualties of the
pandemic lockdowns.
Four, large numbers of full-time workers have
been forced into part-time work. There are now
3.2 million more part-timers (worked less than
40 hours a week) than before the pandemic, and
1.4 million less full-timers. The bulk of new
jobs that have emerged are part-time, and most
likely inadequate to meet the needs of workers
and their families.
Five, more of those still without jobs are
better educated (with post-secondary education),
aged 45 and above, and are women. The last
reflects how most workers in the badly-hit
retail and food services industries tend to be
female. The other two attributes suggest a more
severe toll on poverty incidence, as more mature
and educated workers (thus probably less poor)
have suddenly been rendered without incomes.
This all tells us that COVID-19 has left rather
deep scars on the Filipino people, and healing
them could be a much more protracted process
than we may think. |
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Tell me it
ain’t so
CTALK - Cito Beltran
(The Philippine Star) - July 12, 2021 - 12:00am
Recently, “stories” have been popping up in many
conversations that suggest that the much awaited
full scale vaccination campaign among the
private sector companies for the month of July
and August won’t be happening as planned and as
scheduled because most of the vaccines arriving
in the country are being directed to local
government units or LGUs, even those that were
ordered, paid for and scheduled for delivery to
private companies.
During the first quarter of the year, many
corporations and businesses were totally
convinced that the vaccines they ordered would
be sufficient to inoculate their staff as well
as their immediate family members or dependents,
especially since the purchase had a “tucked in”
condition called “Buy One – Plus One for
donation.” The companies were so sure about the
deal that they even invited consultants and
external associates to sign up. I myself got
offers from two major conglomerates, a church
and a government corporation and a hospital for
whom I consult for free, to include me and my
wife in their program of inoculation. That to me
was truly encouraging and much appreciated but
in the end, Karen and I were inoculated with
Sinovac through the program of Pasig City under
Mayor Vico Sotto.
In the meantime I monitored how things have gone
with the generous organizations that offered to
include us in their lists. One of my friends who
decided not to go for a Sinovac jab because his
company already announced they would get
Moderna, recently informed me that his company
advised them not to wait for the company bought
vaccines and take advantage of LGU vaccinations
in their respective barangays or villages
because there were no guarantees or schedules
when their vaccine would be delivered. When I
called on the Communications group of a major
conglomerate I was told by the vice president of
the group that their vaccines have been held up
and very delayed under the IATF that they
quietly worked out with LGUs and told their
employees to enlist with those LGUs for COVID-19
vaccination.
Add to that another friend whose family owns
several medium-size businesses and decided early
on to spend their own money to order vaccines
through the government just to make sure that
their employees were all vaccinated. It seems
that she also got vaccinated through their local
LGU, Taguig City, and not with the Moderna
vaccine they had ordered and paid for: “Our
shipment is technically here too but the
government is the one dispensing it, that is,
it’s being farmed out to vaccination centers and
even if we got an order in and paid for it we
still have to wait our turn which, ironically
for me, I got called by Taguig faster than our
vaccines which we paid for.”
Last Friday, one of my pastor friends told me he
was lined up for his second dose of Sinovac
courtesy of the Lipa City vaccination center and
not the AstraZeneca that he originally thought
he would be receiving once his church got the
stocks. Come to think of it, one major reason
there was initially a low turnout for
vaccination in barangays or local governments
may be because many employees were waiting for
company vaccines, until they could not wait any
more or were told by their employers not to
wait. Now that those people are signing up, LGUs
understandably run out of supplies.
Yesterday, a friend from Mindoro Oriental
forwarded a long article purportedly from Sen.
Leila de Lima labeled as “Dispatch from Crame
No:1090 Sen. Leila De Lima on the IATF Practice
of Re-appropriating Private Sector Vaccine
Purchase.” We tried to verify the article from
the staff of Sen. De Lima but failed to get a
response in time. The key issue raised in said
article goes: “When the vaccines arrived during
the expected delivery dates, some companies were
frustrated because their allocations were not
released to them. Instead of the expected
thousands of vaccines for their employees, they
received only a few dozen as token releases...
“Now because the vaccines they purchased are
being withheld by the IATF, their employees had
to resort to the LGUs for their much-needed
vaccination. Moreover, these companies were
deprived of the vaccine brands of their choice,
which they purchased with their own money.”
The article went on to raise the sanctity of
contracts between the private sector and the
IATF, the fact that the private sector had to
pay double because of the condition “Buy One –
Plus one for donation” and suggested that the
situation makes it appear that the private
sector “got scammed” having to pay double yet
getting nothing in return and ending up relying
on local governments to inoculate their
employees.
The article went on to raise issues of
accountability, electioneering and the like, but
I am using editorial privilege to use parts that
are actually substantiated by the private sector
alongside the timeliness of the letter relative
to the issues raised by friends and employees in
the private sector. As the saying goes, “Where
there’s smoke, there’s fire.” Right now the
smoke is about disgruntled business people who
don’t have the vaccines they paid for. What
happens then if all their employees are fully
vaccinated by LGUs, are companies expected to
simply write off the expense as a business
“loss” or a campaign contribution? We all hope
to get some answers soon. |
_______________________________________________________________________________________ |
BSP sees more
stable savings, loan associations under tighter
rules
By: Daxim L. Lucas - Reporter / @daxinq
Philippine Daily Inquirer / 04:32 PM June 17,
2021
MANILA, Philippines—The Philippine central
bank’s strengthened rules governing the
country’s savings and loan associations were
expected to improve the soundness and stability
of these financial institutions, several of
which ran into risks associated with weak
corporate governance.
At an online press briefing, Bangko Sentral ng
Pilipinas (BSP) Governor Benjamin Diokno said
these enhanced regulations promote the value of
a strong board of trustees and board-level
committees coupled with effective control
functions, with the board expected to oversee
the implementation of effective risk governance
and management systems.
“Effective corporate governance is the
foundation of safe and sound business
operations, and it embodies the principles of
fairness, accountability and transparency,”
Diokno said. “It also provides a crucial anchor
for sound risk governance practices that enables
[savings and loan associations] to be responsive
in identifying, understanding, measuring, and
managing risks,” he said.
“Since corporate powers are exercised through a
[savings and loan association’s] board of
trustees, the enhanced guidelines aim to ensure
that trustees shall hold their office for the
best interest of the association,” he said.
He said trustees and officers must be fit and
qualified for their positions to carry out with
“utmost integrity” their business affairs.
To promote independence and instill
accountability, a percentage of independent
trustees are required for these firms, and that
the chairperson of the board of a complex
savings and loan associations must not have any
management position.
There are also mandatory board-level committees
depending on a savings and loan association’s
complexity and size to increase efficiency and
allow deeper focus on specific areas.
The revised corporate governance guidelines were
also seen to promote public trust in the savings
and loan industry, which continues to have sound
and stable operations and financial condition
amid the COVID-19 pandemic.
As of March 31, 2021, the industry’s total
assets reached P271.2 billion, a 4.3 percent
growth from the end-December 2019 level. Savings
and loan associations’ total loan portfolio,
meanwhile, stood at P238.9 billion at end-March
this year, a 5.7 percent increase from the
figure recorded at end-December 2019. |
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EastWest Bank
mulls Komo spin-off as digital bank
Published June 15, 2021, 5:07 PM
by Lee C. Chipongian
East West Banking Corp. (EastWest Bank) may
apply for digital bank license with the central
bank to spin off its digital bank unit Komo,
said a member of the Gotianun family who owns
the bank.
Josephine Gotianun-Yap, president and CEO of
Filinvest Land Inc. and director of Filinvest
Group’s banking arm, EastWest Bank, said they
are assessing the digital banking market and the
viability of converting or spinning off Komo as
a separate digital bank.
“No decision has been made as of now, as far as
that is concerned,” Yap told a forum hosted by
the Economic Journalists Association of the
Philippines on Tuesday, referring to plans to
apply for a digital bank license.
“I think currently the digital banking service
being done by Komo is quite sufficient at this
point in time,” she said. Komo is a digital bank
operated by subsidiary EastWest Rural Bank.
Yap said the bank is “heavily investing in
digital initiatives” both on digital banking and
EastWest Bank’s digitization efforts. “We’re
always assessing developments in the industry
including whether Komo will be spun off as a
separate entity. We are always open as well to
looking at strategic partnerships with the
entities that can make the bank become a bigger
player in the various fields,” she added.
EastWest Bank introduced Komo last May 2020,
during the height of the strictest phase of the
COVID-19 lockdown. It is an exclusively digital
banking service via a mobile app, and since all
transactions are done online, it has no physical
branches.
Komo was launched in the local market before the
Bangko Sentral ng Pilipinas (BSP) issued its
circular for the establishment of digital banks
in November 2020.
Based on BSP rules, a digital bank license
requires a minimum P1 billion capitalization.
This is lower than commercial banks’ minimum
capitalization of P2 billion to P15 billion
depending on where branches are located. A
universal bank license is required a minimum
capitalization of P3 billion to P20 billion.
But while digital banks’ minimum capital
requirement is only P1 billion, the BSP could
impose a higher minimum amount and capital ratio
based on its assessment of the risk profile of
the digital bank.
EastWest Bank is 11th of the country’s 46 big
banks. As of end-March this year, it posted a
lower net income of P2 billion or 10 percent
down from same period in 2020 of P2.3 billion.
The BSP has granted three digital bank license
so far, and is reviewing the application of
three commercial banks and one financial
company.
BSP Governor Benjamin E. Diokno said earlier
that he would like to limit the number of
digital banks to just five but this is a
flexible number that could be increased
depending on the condition of the digital
banking market at the time of review. |
_______________________________________________________________________________________ |
Central bank
grants digital banking license to UNOBank
June 9, 2021 | 12:01 am
UNOBANK has secured a digital banking license
from the Bangko Sentral ng Pilipinas (BSP),
adding to the roster of lenders offering
all-online services.
The lender, which is backed by
Singapore-headquartered financial technology
player DigibankASIA Pte. Ltd., is looking to
“bridge the gap” in the Philippine financial
inclusion story by offering products that allow
Filipinos to “save, borrow, transact, invest,
and protect their finances easily, with speed
and ease.”
“The BSP’s vision and foresight to digitize the
local banking industry is future-forward and
apt, because ultimately it will help align the
Philippines as a modern banking center for the
region,” UNOBank Chief Executive Officer Manish
Bhai said in a statement.
The lender said it is working with technology
firms including Amazon Web Services, Backbase,
and Mambu to deliver its services.
UNOBank aims to help “bridge the financial
inclusion gap in the Philippines and eventually
Southeast and South Asia,” it said.
Some 51.2 million adult Filipinos in the country
were unbanked as of 2019, as only 29% had
accounts with formal financial institutions. The
central bank hopes to bring 70% of the adult
Filipino population into the formal financial
system by 2023.
The central bank defines a digital bank as a
lender that mainly offers its products and
services through a digital platform instead of
brick-and-mortar branches. The BSP in 2019
unveiled a framework which differentiates these
lenders from traditional ones such as
commercial, thrift, rural, and Islamic banks.
In April, the central bank granted the first
digital bank license to Overseas Filipino Bank,
a unit of the state-owned Land Bank of the
Philippines.
Tonik Digital Bank, Inc. (Philippines) has also
secured a digital banking license from the BSP,
it said on Monday. The lender was initially
granted a rural bank license by the regulator in
2019.
Meanwhile, UnionBank of the Philippines, Inc. in
May submitted to the BSP its own application for
a digital bank license.
Other lenders such as CIMB Bank Philippines,
Inc., ING Bank N.V. Manila, EastWest Banking
Corp. through its Komo app, and Rizal Commercial
Banking Corp. through its Diskartech app are
also offering all-online banking services where
users can open a bank account, deposit, or loan
straight through the banks’ mobile platform,
attracting clients by offering deposit rates
higher than those of traditional banks. — Luz
Wendy T. Noble |
_______________________________________________________________________________________ |
Big banks
fail to meet MSME credit quota
June 1, 2021 | 12:02 am
BIG AND thrift banks failed to hit the quota for
small business loans required by law in the
first three months of 2021, data from the Bangko
Sentral ng Pilipinas (BSP) showed.
Loans extended by these banks to micro-, small-,
and medium-sized enterprises (MSME) amounted to
P448.458 billion in the January to March period
or just 5.24% of their total loan portfolio of
P8.564 trillion.
This was also 16% lower than the P534.767
billion in loans they extended to the sector in
the same period in 2020.
Lenders are mandated by the Republic Act 6977 or
the Magna Carta for MSMEs to allocate 10% of
their credit portfolio for small businesses to
boost the sector — 8% for micro and small
enterprises (MSEs) and 2% for medium-sized
enterprises.
However, banks have long opted to incur
penalties for noncompliance instead of taking on
the risks associated with lending to small
businesses.
Broken down, MSE loans extended by banks
amounted to P174.925 billion in the first
quarter, which was just 2.04% of their total
loan portfolio and well below the 8% quota.
On the other hand, lending to medium-sized
enterprises stood at P273.533 billion in the
period, equivalent to 3.19% of these banks’
credit book and beyond the 2% minimum
requirement by law.
Based on the type of bank, BSP data showed
universal and commercial banks disbursed
P113.748 billion in credit to MSEs, equivalent
to only 1.47% of their P7.719-trillion loan
portfolio.
Meanwhile, their lending to medium-sized
enterprises hit P227.447 billion or 2.95% of
their loan book.
Thrift banks were also unable to meet the quota
for MSE credit as they only extended P31.498% or
4.36% of their P722.079-billion loan portfolio
to the sector.
However, these lenders went beyond the credit
quota for medium enterprises as their loans to
the sector hit P32.027 billion or 4.44% of their
portfolio.
Meanwhile, rural and cooperative banks extended
loans worth P29.679 billion to MSEs, equivalent
to 24.11% of their P123.077-billion credit book,
well above the amount required by law. These
banks’ lending to medium enterprises hit P14.059
billion or 11.42% of their loan portfolio.
To help prop up the MSME sector during the
coronavirus pandemic, the central bank last year
allowed banks to count MSME loans as alternative
reserve compliance. Loans extended to the sector
likewise were also given reduced credit risk
weight.
The BSP has also been working with the Japan
International Cooperation Agency for a credit
risk database project meant to help banks
evaluate the creditworthiness of small
businesses. — L.W.T. Noble |
_______________________________________________________________________________________ |
Diokno shrugs
off credit downgrades amidst rise in PH
liabilities
By Joann Villanueva May 20, 2021, 8:02 pm
MANILA – Bangko Sentral ng Pilipinas (BSP)
Governor Benjamin Diokno is confident that the
Philippines will not lose its investment grade
credit ratings amidst the jump in its debt
because the level of liabilities remains within
the international threshold.
He said while the debt to gross domestic product
(GDP) ratio has risen to 54.6 percent as of
end-2020, it remains below the 60 percent
threshold “and we’re very careful about that.”
Diokno also noted that the Philippines’
debt-to-GDP ratio is better compared to some
Asian countries.
“And the analysis is that because of the reforms
that we have done our borrowing program is
sustainable. So, there should be no fear that
the rating agencies will downgrade us. In fact,
in the sea of downgrades they have affirmed
their ratings on the Philippines’ international
credit,” he said.
As of end-2020, the country’s total external
liabilities reached USD98.5 billion, higher than
USD83.6 billion in end-2019.
This level of foreign debt accounts for around
27.2 percent of the country’s output.
Authorities point increase in foreign debt to
funding requirements for government programs to
address the impact of the coronavirus disease
(Covid-19) pandemic as well as general financing
requirements.
Diokno said debt service ratio (DSR), or the
measure of the adequacy of the country’s foreign
exchange earnings to meeting maturing foreign
debts, is at 6.3 percent.
Philippines gross international reserves (GIR)
amounted to USD107.25 billion as of end-April
2021, near its record-high USD110.117 billion in
December 2020. It is equivalent to 12.3 months’
worth of imports of goods and payments of
services and primary income.
Diokno said part of the reasons behind the
sustainability of foreign debt is the conduct of
annual survey on foreign borrowings of both the
public and the private sector, the
liberalization of foreign exchange regulatory
framework, and the implementation of the law on
the approval of public sector foreign
borrowings. (PNA) |
_______________________________________________________________________________________ |
Only 4 bank
branches approved in Q4 2020
Published May 18, 2021, 4:28 PM
by Lee C. Chipongian
The Bangko Sentral ng Pilipinas (BSP) approved
four new banking offices in the last quarter of
2020 compared to 67 new branch applications in
the same period in pre-pandemic 2019.
Based on a BSP circular letter, there was only
one approved regular branch and three
branch-lite units (BLUs) in the fourth quarter
2020, and these are all Security Bank Corp.
branches. In 2019, there were 23 regular branch
applications and 44 BLU applications by four big
banks, and nine are BDO Unibank Inc. regular
branches.
The BSP also noted that by the last three months
of 2020, 24 regular branches were opened amid
the less severe general quarantine community
lockdown, and 54 BLUs were also opened.
Rural/cooperative banks likewise opened three
microfinance-oriented branches. These numbers
are lower compared to 2019’s 71 regular
branches, 152 BLUs and six microfinance-oriented
branches.
Big banks only opened 12 regular branches in the
fourth quarter 2020 compared to 44 in the
previous year. Thrift banks opened eight regular
branches and 10 BLUs compared to 11 and 78,
respectively, in 2019. The smaller banks opened
24 regular branches and 54 BLUs versus 71 and
152 in 2019.
The BSP is listing all non-regular bank branches
as BLUs since 2018. This means that banks’
extension offices, microbanking offices and
other banking offices are now referred to as
BLUs. The BSP also allows conversion of regular
branches into BLUs.
The difference between regular branches and BLUs
is that the latter have limited banking
activities but could provide a wide range of
products and services suited for servicing the
needs of the market except for sophisticated
clients with aggressive risk tolerance; while
the former (regular branches) are full-sized
banks, mostly traditional brick and mortar
branches or contained within a building and
offers full banking services.
With the COVID-19 public health scare, banks had
to close down a lot of their branches while
maintaining a skeletal or a minimum number of
employees in select branches in compliance with
social distancing health protocols. The BSP has
no data on how many bank branches are currently
in operation while still on lockdown.
Since banking operations were affected by the
pandemic, at the end of 2020, bank profits
declined by 32.8 percent year-on-year to P155
billion, mainly because of increased loan loss
provisioning.
The BSP in a report said the banking system
landscape were streamlined last year due to an
ongoing industry consolidation.
As of end-December 2020, banking units increased
to 13,044 from 12,870 because of new other
offices added to the overall network, said the
BSP. There were 535 head offices and 12,509
branches compared to end-December 2019’s 547
head offices and 12,323 branches.
At the close of 2020, there were 46 big banks or
the universal/commercial banks with 6,983
branches, it’s the same number end-2019 but
branches were lower at 6,896.
The number of thrift banks were reduced to 48
from 50 with end-2020 of 2,637 branches compared
to 2,633 in 2019. There were 441
rural/cooperative banks with 2,889 branches by
end-2020 versus 451 with 2,821 branches in 2019. |
_______________________________________________________________________________________ |
LANDBANK to
consider revisiting loan application
requirements
Published May 17, 2021, 2:02 PM
by Madelaine B. Miraflor
Amid the pending amendments to the Agri-Agra
Reform Credit of 2009 (Agri-Agra Law), the Land
Bank of the Philippines (LANDBANK) said it is
open to revisiting its existing loan application
requirements to make it easier for farmers and
fishermen to borrow from the state-run bank.
In a statement, LANDBANK said it fully supports
the ongoing Senate initiative to amend the
provisions of Republic Act. (RA) 10000,
otherwise known as the Agri-Agra Law.
During a public hearing on the proposed
Agri-Agra Law amendments, LANDBANK welcomed the
recommendations from legislators to revisit its
loan application requirements, specifically for
small farmers and fishers, to make it easier for
them to access financing.
However, the bank claimed that in 2019, even
prior to the ongoing Agri-Agra law revisit,
LANDBANK already started simplifying its loan
processes to make the Bank’s programs more
accessible to small farmers and fishers.
First, the loan application form was condensed
from three documents to just one document and
was reformatted with mostly tick boxes for
easier completion.
Second, the Promissory Note was significantly
trimmed from 14 pages to only 1 page.
LANDBANK said it has also consistently complied
with the number of loans that should be lent to
agriculture and agrarian reform.
As of December 2020, LANDBANK’s agriculture
loans reached 76.95 percent and 11.52 percent
for agrarian reform.
Overall, LANDBANK’s agriculture lending has been
consistently growing from P222.05 billion in
2018, to P236.31 billion in 2019, and P237.62
billion in 2020.
Likewise, as of March 31, 2021, LANDBANK’s total
loan portfolio to the agriculture sector also
grew by 4.8 percent to P229.70 billion from
P219.24 billion last February.
The increase is primarily attributed to a 9.5
percent rise in loans released to small, medium,
and large enterprises.
A decade since RA 10000 took effect, the overall
banking sector of the Philippines still fails to
comply with the law.
Last year, President Rodrigo Duterte said during
his fifth State of the Nation Address (SONA)
that he wants to end the more than a decade of
non-compliance of the Agri-Agra Act.
Agriculture Secretary William Dar said at the
time that it’s good that Duterte brought up
during his SONA the proposed laws that would
amend the Agri-Agra Act.
“That’s a great development. With that law, the
penalties that the banks pay for not complying
with the Agri-Agra Law will be collected and
will be utilized to support farmers,” Dar said. |
_______________________________________________________________________________________ |
PH banks’
resources hit P24T
Published May 17, 2021, 7:00 AM
by Lee C. Chipongian
The financial system’s total resources increased
to P24.08 trillion as of end-March, up by 5.46
percent from same period last year of P22.84
trillion, based on Bangko Sentral ng Pilipinas
(BSP) data.
Of the total figure, banks have P20.03 trillion
of total resources, up by 6.64 percent
year-on-year or from P18.98 trillion.
The 46 big banks or universal/commercial banks
accounted for 92 percent of the Philippine
banking system’s total resources or P18.54
trillion at the end of the first quarter, this
was 6.9 percent more than last year’s P17.35
trillion
The banking system is the core of the financial
system as credit source for economic activities,
and its resources come from deposits, bond
issuances and capital infusion. The end-March
total resources is unchanged from end-2020’s P24
trillion but it still managed to grow during the
first pandemic year compared to end-2019’s
P22.94 trillion.
Thrift banks’ total resources as of end-March
reached P1.18 trillion, also up by 2.88 percent
or from P1.14 trillion same period in 2020.
There are 48 thrift banks as of end-March this
year.
The BSP data on the 408 rural banks, in the
meantime, have a lag time and the latest was
still end-December 2020 of P308 billion total
resources which was 5.84 percent more than
end-December 2019’s P291 billion.
The BSP in its latest report on the financial
system said funding – despite the pandemic – was
still relatively stable with asset expansion
principally funded by deposits, bond issuances
and capital infusion.
It said bank deposits continued to grow as
consumers shifted to digital payments. Banks’
lending activities were also mostly funded by
deposits which grew by 8.9 percent year-on-year
to P14.88 trillion as of end-December 2020, up
by 7.1 percent year-on-year.
“The growth in total deposits is consistent with
the global trend towards precautionary savings,
decrease in consumption in view of a highly
uncertain economic environment due to the
pandemic, and the observable increased usage of
digital platforms by the BSP supervised
financial institutions in onboarding depositors
and investors,” according to the BSP. |
_______________________________________________________________________________________ |
IMF urges BSP
not to delay recognition of losses,
restructuring of NPLs
Lawrence Agcaoili (The Philippine Star) - April
12, 2021 - 12:00am
MANILA, Philippines — A prompt loss recognition
and non-performing loan (NPL) restructuring may
help Philippine banks prevent sharp deleveraging
and recover faster from the pandemic-induced
recession, according to the International
Monetary Fund (IMF).
In its latest Financial System Stability
Assessment on the Philippines, the multilateral
lender said the Bangko Sentral ng Pilipinas
(BSP) should now withdraw forbearance measures
introduced at the height of COVID-19 outbreak in
2019.
“The central bank should allow forbearance
measures to lapse as scheduled and avoid
introducing new measures as delayed loss
recognition and NPL restructuring could limit
credit growth,” the IMF said. The same scenario,
it said, was observed during the Asian financial
crisis in 1997.
As part of its COVID-19 response measures, the
BSP implemented various measures, including
time-bound regulatory relief and forbearance
measures, although the scale of loan moratoria
and credit guarantees has been relatively
limited.
“Forbearance does not address the underlying
issues in weak banks and hampers banks’ ability
to continue providing credit and ultimately may
even undermine financial stability,” it said.
Instead, the multilateral lender said the BSP
should continue to use the flexibility of tools
available in the Basel capital framework, as
well as further develop and use macroprudential
tools and buffers.
It also said the forbearance measures could
undermine their effectiveness by reducing bank
capital’s sensitivity to risks as delay keeps
bank capital at artificially high levels.
“Stress tests show that while banks can
withstand the already severe baseline scenario,
they could experience systemic solvency distress
if the economic impact of COVID-19 turns out to
be severe,” the IMF said.
It warned the economic shock would weigh on
corporate earnings and then spill over to banks.
“Bank stress could limit credit supply, reducing
economic growth noticeably even more,” the IMF
said.
Bank lending in the country contracted by 2.7
percent in February as banks remained risk
averse and due to the lack of demand from
borrowers.
Based on baseline scenario, the IMF said the
capital adequacy ratio (CAR) of Philippine banks
could fall to 11.7 percent in 2022 from the
current level of 15.6 percent.
It warned the CAR of the local banking industry
could fall further to 9.3 percent in adverse
scenario and 4.9 percent under severe adverse
scenarios, below the required 10 percent.
Under the baseline scenario, the IMF said 185
banks, comprising mainly of rural and
cooperative banks, would not be able to meet the
required CAR.
The IMF sees the banking sector’s CAR recovering
in 2022 as the Philippines recover from the
pandemic-induced recession.
Given the significant downside risks, the IMF
said monetary authorities should limit bank
dividend distributions and the BSP should be
ready to take additional measures to strengthen
the bank’s capital if risks materialize. |
_______________________________________________________________________________________ |
Help for
small businesses
By: Joel Ruiz Butuyan - @inquirerdotnet
Philippine Daily Inquirer / 04:06 AM March 29,
2021
We are so overwhelmed with depressing news from
all fronts these days. The strain on our mental
health must be building up at an unprecedented
rate. Even if there are no noticeable changes in
our external behavior, the unending stress
streaming through our subconsciousness affects
us in so many different ways.
In my case, even if my conscious thoughts do not
amount to excessive psychological stress, I’ve
noticed that I’ve been having lesser hours of
sleep, and my blood pressure has been above safe
levels recently. While we need to give
considerable attention to protocols aimed at
protecting ourselves from the virus, we cannot
let the pandemic totally control our lives.
The sprouting of so many home-based businesses
shows that many of our people are asserting
control over their lives, refusing to be at the
complete mercy of the virus. While so many of
our giant businesses are on the brink of
collapse, many homegrown businesses that sprang
up because of the pandemic are thriving in our
communities. These businesses need to continue
thriving for the sake of families whose
breadwinners have lost employment. But even
after the pandemic, it is in our country’s
interest to make them flourish.
These considerations may have been in the minds
of the local officials of our small town,
Alcala, Cagayan, when they recently met with
officials of the Department of Science and
Technology (DOST) at its Cagayan Valley regional
office. I tagged along because I was curious to
find out the kind of government assistance
available, and I was looking at putting up a
startup enterprise myself. I was so glad I
joined the meeting.
I was impressed with the DOST presentation led
by regional director engineer Sancho Mabborang
and provincial director engineer Sylvia
Lacambra. What underlies the DOST programs that
were presented to us is the recognition that
small and medium enterprises (SMEs) are the true
engines of growth in the countryside. With this
premise, the DOST has designed various
assistance programs to help SMEs in the various
aspects of their operations.
The DOST has priority sectors where it
concentrates its assistance. These are SMEs
involved in processed food, marine and
agriculture, furniture, metals, gifts, decor and
handicraft, electronics, and health
products/services and pharmaceuticals. It was
very encouraging to know that the DOST has a
roster of scientists and experts who give online
technical advice and consultancy services for
free to SMEs in making their crops yield more
harvest, in manufacturing their food products,
in recommending the right equipment and
technology, in turning their waste into fuel and
fertilizer, in maximizing their profitability,
in minimizing their expenses, etc. Private
enterprises can go directly to the DOST for
assistance.
For food products, the DOST even helps SMEs with
their packaging and labeling requirements, food
hygiene and food safety protocols, and in
providing access to laboratories that will
measure the nutritional value and determine the
expiry dates of their products. Among the SMEs
that I’ve learned have benefited from DOST
assistance are a bakeshop, a kamote beer
entrepreneur, a peanut product venture, a canned
goat meat enterprise, and a citrus farm, among
many others.
The DOST also operates OneStore.ph, which is an
e-commerce web portal where customers can easily
shop from all DOST-assisted SMEs.
Recently, there’s news that our government plans
to provide billions of pesos to help giant
business conglomerates survive the economic
crisis. I hope the government equally allots
more funds to help the small businesses that
have mushroomed because of the crisis.
The emergence of these small ventures presents
to us a crucial chance to recalibrate our
economy by redistributing to small enterprises
wealth opportunities that have long been
monopolized by big conglomerates. The growth of
these home-based businesses gives our country a
rare opportunity to help stop the decimation of
our middle class, and to halt the widening gap
between the extremely rich and the rest of us.the government can still reach its target
of vaccinating up to 70 million people by the
end of the year. |
_______________________________________________________________________________________ |
Concepcion:
Private sector to fund own vaccine rollout
By CNN Philippines Staff
Published Mar 20, 2021 6:39:35 PM
Metro Manila (CNN Philippines, March 20) —
Members of the private sector have agreed to
fund their own immunization program as COVID-19
vaccines start to arrive in the country.
"In our town hall meeting last Thursday with the
AstraZeneca donors, all companies agreed to fund
and pay for the logistics cost of the vaccine
rollout," Presidential Adviser for
Entrepreneurship and Go Negosyo founder Joey
Concepcion said in a statement.
He added this is also to ensure economic
recovery that should start in the last quarter,
provided no major lockdown is implemented, and
the administration of vaccines will be at a
"lightning speed."
Concepcion said they already tapped Zuellig
Pharmaceutical Corporation as their logistics
service provider to ensure effective and
efficient rollout of vaccines. A tripartite
agreement between the private sector, Zuellig,
and the national government will be finalized,
he added.
On January 14, the Philippines, through
tripartite agreements involving private firms
and local government units, was able to procure
17 million doses of AstraZeneca's COVID-19
vaccine, with the first batch expected to arrive
by May to June.
"We want to help the government so that we can
execute the vaccine rollout in the fastest and
most efficient way possible," Concepcion said.
He said they will also pay for logistics costs
for the rollout of vaccines for government
frontline workers that will be covered by their
donations.
"Allowing us to execute, we could focus on the
vaccination of our employees, the LGUs could
focus on its constituents, and the national
government could focus on the rest that are not
covered. We need a fast and almost perfect
rollout, and the private sector could do this
for its employees," he noted.
Currently, the government has received some one
million donated doses of Sinovac and AstraZeneca
vaccines, which are still not enough to immunize
around 1.7 million healthcare workers who are
the priority in the vaccine rollout.
Despite this, Vaccine czar Carlito Galvez Jr.
said the government can still reach its target
of vaccinating up to 70 million people by the
end of the year. |
_______________________________________________________________________________________ |
Better rice
yields raise farmer income by P7,000 per hectare
March 12, 2021 | 6:37 pm
RICE farmers earned an additional P7,000 pesos
per hectare two years after the implementation
of Republic Act No. 11203 or the Rice
Tariffication Law, the Agriculture department
said.
Agriculture Secretary William D. Dar in a
statement Friday credited increased harvests to
the P10 billion-a-year Rice Competitiveness
Enhancement Fund (RCEF), which was created under
the law.
“Farmers are… averaging 400 kilograms per
hectare or roughly eight cavans at 50kg each
which is equivalent to an additional income of
P7,000 per hectare,” Mr. Dar said.
“This shows that with the use of certified seed,
adoption of modern technology, and mechanizing
land preparation, crop establishment and
harvesting, farmers can attain incremental
yields. At least two million rice farmers are
now reaping and enjoying the initial benefits of
the law,” he added.
Dionisio G. Alvindia, director of the National
Integrated Rice program, said the RCEF budget
for 2021 is currently scheduled for release.
“To date, the Department of Agriculture (DA) and
other implementing agencies have obligated P16.2
billion and disbursed over P7.1 billion from the
P20-billion allocation from 2019 to 2020,”Mr.
Alvindia said in the statement.
According to Mr. Alvindia, rice farmers using
traditional home-saved seed recorded lower
yields compared to those using certified inbred
seeds.
He said traditional seed produced an average of
3.6 metric tons (MT) per hectare while inbred
seed yielded 4 MT per hectare.
“To date, 674,400 farmers have received 1.68
million bags of free certified inbred rice seed.
These were planted to 843,000 hectares in 948
RCEF municipalities nationwide, or 98.5% of the
targeted 962 towns for seed distribution,” Mr.
Alvindia said.
Baldwin G. Jallorina, Philippine Center for
Postharvest Development and Mechanization
(PhilMech) director, said in a statement that
15,046 units of farm equipment have been
procured out of the targeted 23,378 units.
Mr. Jallorina said 13,499 of the procured units
have been distributed.
Meanwhile, the DA said P1.58 billion worth of
RCEF loans have been disbursed to farmers’
cooperatives and associations. Some P968 million
was released by the Land Bank of the Philippines
(LANDBANK) and P616 million by the Development
Bank of the Philippines (DBP).
It added that 90 farm schools have been
established, while 43 were upgraded since the
law’s passage.
Passed in 2019, the law allows rice to be
imported more freely but the commodity is
charged tariffs of 35% on imports from Southeast
Asia. Under the law, the tariffs provide P10
billion a year to RCEF to help modernize the
rice industry. — Revin Mikhael D. Ochavethat the local banking system will
continue to be under pressure in 2021 on account
of rising bad loans. |
_______________________________________________________________________________________ |
Banks’
resilience clear in indicators–Diokno
By BIANCA CUARESMA MARCH 11, 2021
BANGKO Sentral ng Pilipinas (BSP) Governor
Benjamin Diokno said recent indicators show that
banks remain resilient despite the negative
economic effects of restrictions to curb the
pandemic.
This is amid the recent assessments of two of
the major international credit watchers, saying
the Philippine banking system may face
increasing pressures in 2021 as travel and
movement restrictions are in place and bad loans
continue to rise.
In a recent speaking engagement, Diokno said the
Philippine banking system remains strong based
on three core strengths: capital position,
liquidity buffers and expanding asset base.
Diokno said the banking industry’s strong
capital position is evidenced by its stable
capital adequacy ratios (CAR) at about 15
percent in the past 10 years.
This is well above the 10 percent minimum
threshold set by the BSP and 8 percent minimum
set by the Bank for International Settlements
(BIS).
Moreover, the risk-based CAR of the universal
and commercial banking industry stood at 17.2
percent on a consolidated basis as of
end-September 2020.
The BSP governor also said the banks’ liquidity
buffers remain “ample.” This, Diokno said,
enables banks to withstand short-term liquidity
shocks and provides them adequate stable funding
in the medium term.
As of end-November 2020, the liquidity coverage
ratio (LCR) of banks hit 201 percent. This is
double the regulatory minimum of 100 percent.
The minimum liquidity ratios of stand-alone
thrift, rural and cooperative banks also
continued to exceed the regulatory minimum
requirement.
Diokno also said banks’ assets continued to
expand amid the pandemic on the back of
increasing deposit liabilities.
As of end-December 2020, the banking system
assets grew by 6.1 percent year-on-year to P19.4
trillion.
“All in all, these contributed to the sustained
strength and resilience of the banking sector,”
the BSP governor said.
Earlier this week, Fitch Ratings put a negative
outlook of the Philippine banks’ asset quality,
as further deterioration is likely on the back
of expected rise in bad loans for the year.
This comes after the S&P Global Ratings recent
assessment that the local banking system will
continue to be under pressure in 2021 on account
of rising bad loans. |
_______________________________________________________________________________________ |
BSP sets
alternative modes of compliance for
agriculture-agrarian loans
Lawrence Agcaoili (The Philippine Star - March
8, 2021 - 12:00am)
MANILA, Philippines — The Bangko Sentral ng
Pilipinas (BSP) has relaxed the compliance rules
for agriculture and agrarian reform loans as
Philippines banks continue to fall short of the
mandated threshold.
BSP Governor Benjamin Diokno issued Circular
1111 after the Monetary Board approved the
revised rules and regulations governing the
mandatory credit allocation under Republic
10000, otherwise known as the Agri-Agra Reform
Credit Act of 2009.
Banks are required to set aside at least 25
percent of their total loanable funds for
agriculture, fisheries, and agrarian reform
credit in general, of which at least 10 percent
of the total loanable funds shall be made
available for agrarian reform beneficiaries
(ARBs), ARB households or agrarian reform
community.
Under the revised guidelines, Diokno said the
excess compliance in the 10 percent agrarian
reform credit can be used to offset a
deficiency, if any, in the 15 percent other
agricultural and fisheries credit, but not vice
versa.
Another allowable alternative compliance
includes eligible securities such as investments
in bonds issued by state-run Development Bank of
the Philippines and Land Bank of the
Philippines, investments in other debt
instruments used to finance activities under
Republic Act 8435 or the Agriculture and
Fisheries Modernization Act of 1997, as well as
paid subscription of shares of stock of
accredited rural financial institutions,
Philippine Crop Insurance Corp. (PCIC), and
companies primarily engaged in agriculture and
fisheries activities.
Other modes of compliance include rediscounting
facility granted by big banks to other banks,
including loans covered by guarantees of the
PCIC, loans intended for the construction and
upgrading of farm-to-market roads, and provision
of post-harvest facilities, loans to
agri-business enterprises that maintain
agricultural commodity supply-chain
arrangements, as well as agricultural value
chain financing.
Loans extended by Philippine banks for
agriculture and agrarian reform slipped by 2.8
percent to P713.6 billion last year from P733.92
billion in 2019 as the industry continued to
fall short of the mandated threshold for the
sector.
Total loanable fund generated by the banking
industry jumped by 15.7 percent to P7.14
trillion last year from P5.54 trillion in 2019.
However, the loans extended by the banks to the
agriculture sector declined by 3.6 percent to
P666.69 billion in 2020 for a 9.32 percent
compliance ratio or below the required 15
percent.
Big banks or universal and commercial banks
registered a compliance ratio of 9.01 percent
after extending P608.9 billion to the
agriculture sector in 2020, while the ratio of
thrift or mid-sized banks only reached 6.4
percent after granting P18.1 billion.
On the other hand, rural banks extended P15.33
billion to the agriculture sector for a
compliance ratio of 16.3 percent.
Likewise, the compliance ratio of the banking
system fell way short of the 10 percent
threshold for agrarian reform credit as loans
given by banks to the agriculture sector
increased by only 5.9 percent to P55.84 billion
for a compliance ratio of a measly one percent.
The compliance ratio of big banks for agrarian
reform loans only reached 0.88 percent, while
that of thrift banks settled at 0.95 percent, as
well as rural and cooperative banks with 9.69
percent. |
_______________________________________________________________________________________ |
Philippine
bank assets up 70% to P20 trillion in 2020
Lawrence Agcaoili (The Philippine Star) - March
2, 2021 - 12:00am
MANILA, Philippines — The domestic banking
sector managed to post a 6.9 percent growth in
total assets despite the uncertainties brought
about by the pandemic, according to the Bangko
Sentral ng Pilipinas (BSP).
Total resources of Philippine banks hit a record
high of P20 trillion last year, P1.29 trillion
higher than the P18.71 trillion recorded in
2019.
The total assets of big banks or universal and
commercial banks grew by 7.5 percent to P18.51
trillion in 2020 from P17.22 trillion in 2019,
while that of mid-sized banks or thrift banks
slipped by about one percent to P1.19 trillion
in 2020 from P1.2 trillion in 2019.
The total resources of small or rural bank
inched up by 3.4 percent to P301 billion as of
end-September last year from P291 billion in the
same period in 2019.
The industry’s total resources continued to grow
impressively, accounting for more than 90
percent of the country’s gross domestic product
(GDP).
Major players in the local banking sector are
BDO Unibank, Metropolitan Bank & Trust Co., Bank
of the Philippine Islands, Philippine National
Bank, China Bank, Rizal Commercial Banking
Corp., Union Bank and Security Bank.
State-run Land Bank of the Philippines and
Development Bank of the Philippines are also
part of the country’s 10 largest lenders in
terms of assets last year.
BSP Governor Benjamin Diokno earlier said the
country’s banking system is expected to
withstand the impact of the pandemic. “While the
full impact of the pandemic is still unfolding,
the good news is that the Philippine banking
system is expected to withstand the impact of
the pandemic. The financial system is in a
strong position to both weather the significant
economic effect caused by the COVID-19 pandemic
and support the country’s economic recovery,” he
said.
The BSP has implemented reforms over the years,
reflecting the lessons learned in the Asian
financial crisis in 1997.
Based on the results of the latest Banking
Sector Outlook Survey (BSOS), 69 percent of the
respondent banks projected a stable banking
system as they expect a 10 to 15 percent growth
in the industry’s loan portfolio over the next
two years.
Bankers are also looking at double-digit growths
in net income, as well as deposits for the next
two years.
Earnings of Philippine banks slumped to a
four-year low after declining by 33 percent to
P154.96 billion last year from a record high of
P230.67 billion in 2019 as provision for
potential loan losses almost quadrupled to
P210.89 billion from P52.89 billion. |
_______________________________________________________________________________________ |
Duterte signs
law creating trust fund for coconut farmers
Published February 26, 2021, 10:19 PM
by Genalyn Kabiling
Under Republic Act No. 11524, the government
will dispose of P75-billion worth of coco levy
assets in the next five years to establish a
trust fund for the benefit of the coconut
farmers and development of the industry. The new
law, also known as the “Coconut Farmers and
Industry Trust Fund Act,” is expected to benefit
coconut farmers who own not more than five
hectares of coconut farm.
The coconut levy funds refer to the funds
generated from the taxes imposed on coconut
products and collected from coconut farmers,
millers, refiners, exporters, and other
end-users decades ago.
The new law mandates the Bureau of Treasury
(BTr) to transfer P10 billion to the trust fund
in the first year, P10 billion in the second
year, P15 billion in the third year, P15 billion
in the fourth year and P25 billion in the fifth
year.
The trust fund will be maintained for 50 years
under the Coconut Farmers and Industry
Development Plan that will also be formulated.
“All Coconut Levy Assets in the name of the
Philippine Government shall be sold within the
period of five years after the effectivity of
this Act,” the law read.
“All other coconut levy assets that may
hereafter be recovered shall likewise be
disposed of within five years from the time it
is declared as belonging to the government, and
the proceeds shall be transferred to the Trust
Fund for the benefit of the coconut farmers,” it
added.
The trust fund will be used on the following:
– Development of hybrid coconut seed farms and
nursery for planting and replanting (20
percent);
– Training of farmers and their families listed
in the coconuts farmers registry on coconut
production and processing technologies,
sustainable farming methods, financial literacy,
among others (8 percent);
– Research, marking, and promotion to be
implemented by the Bureau of Micro, Small and
Medium Enterprise Development (5 percent);
– Crop Insurance (4 percent);
– Farm improvements through diversification and
intercropping with livestock, dairy, poultry,
coffee, cacao production (10 percent);
– Shared facilities for processing (10 percent);
– Organizing and empowerment of coconut farmer
organization and their cooperatives (5 percent);
– Credit programs through Development Bank of
the Philippines and Land Bank of the Philippines
(10 percent);
– Infrastructure development in identified
coconut producing local government units (10
percent);
-Scholarship program for farmers and their
families (8 percent); and,
-Health and medical program for farmers and
their families (10 percent)
A committee, composed of the Department of
Finance, Department of Budget and Management,
and the Department of Justice, will also be
created to set the investment strategy of the
trust fund. The finance department is designated
as trust fund manager.
“All cash Coconut Levy Assets shall be invested
in Philippine Government securities and other
securities guaranteed by the National
Government. On the other hand, the BTr may hold,
manage and invest non-cash Coconut Levy Assets,
only upon approval of the DOF,” the law read.
Under RA, the Coconut Farmers and Industry
Development Plan will also be prepared by the
reconstituted Philippine Coconut Authority to
increase productivity and income of farmers as
well as rehabilitate and modernize the industry.
The plan is subject to the approval of the
President.
The development must include a national program
for community-based enterprises to boost incomes
of coconut farmers, social protection for farm
workers and their families, coconut farmers
organization and development, innovative
research projects, and integrated processing of
coconut and downstream products.
Under the new law, the PCA will be reconstituted
and strengthened to ensure participation of
coconut farmers in crafting the Coconut Industry
Development Plan. A coconut farmers registry
will also be established with annual
verification in coordination with local
government units and the agriculture department.
The Secretary of the Department of Agriculture
will sit as chairman of the PCA board while the
Secretary of the Department of Finance serves as
vice chair.
The board also includes the Secretaries of the
Department of Budget and Management, Department
of Science and Technology, and Department of
Trade and Industry; administrator of the
authority, and three members from the coconut
farmers sector representing Luzon, Visayas and
Mindanao.
In 2019, President Duterte vetoed a measure
creating the coconut farmers trust fund due to
concerns about possible violation of the
Constitution as well as lack of safeguards “to
avoid the repetition of painful mistakes
committed in the past.” Duterte claimed then
that the proposed trust fund could
“disproportionately benefit wealthy coconut farm
owners” due to the absence of a limit on the
covered land area for entitlement of benefits. |
_______________________________________________________________________________________ |
Agri-agra
loans slip 2.8% in 2020
Lawrence Agcaoili (The Philippine Star)
February 24, 2021 - 12:00am
MANILA, Philippines — Loans extended by
Philippine banks for agriculture and agrarian
reform slipped by 2.8 percent to P713.6 billion
last year from P733.92 billion in 2019 as the
industry continued to fall short of the mandated
threshold for the sector.
Preliminary data from the Bangko Sentral ng
Pilipinas (BSP) showed the banking system was
able to allocate only about 10 percent of its
total loanable funds last year, way below the 25
percent mandated under Republic Act 10000 or the
Agri-Agra Reform Credit Act of 2009.
The law has retained the mandatory credit
allocation in Presidential Decree 717, where 15
percent of banks’ total loanable funds are to be
set aside for agriculture while 10 percent
should be made available for agrarian reform
beneficiaries.
Total loanable funds generated by the banking
industry jumped by 15.7 percent to P7.14
trillion last year from P5.54 trillion in 2019.
Loans extended by local banks to the agriculture
sector declined by 3.6 percent to P666.69
billion in 2020. The figure was equivalent to a
9.32 percent compliance ratio or below the
required 15 percent.
The central bank said big banks or universal and
commercial banks registered a compliance ratio
of 9.01 percent after extending P608.9 billion
to the agriculture sector, while the ratio of
thrift or mid-sized banks only reached 6.4
percent after granting P18.1 billion.
Rural banks extended P15.33 billion to the
agriculture sector for a compliance ratio of
16.3 percent.
Likewise, the compliance ratio of the banking
system fell way short of the 10 percent
threshold as banks only extended P55.84 billion
for agrarian reform loans equivalent to a
compliance ratio of only one percent.
The compliance ratio of big banks for agrarian
reform loans only reached 0.88 percent, while
that of thrift banks settled at 0.95 percent as
well as rural and cooperative banks with 9.69
percent.
BSP Governor Benjamin Diokno earlier said the
central bank remains committed to pursue
strategies to promote agriculture financing in
view of the sector’s critical role in enhancing
financial inclusion and broad-based economic
growth.
“A more responsive agriculture financing
ecosystem is needed to realize its full
potential as an engine of inclusive economic
development. We need to be deliberate in our bid
to create a more inclusive new economy by
supporting the development needs of the
agriculture sector,” Diokno said. |
_______________________________________________________________________________________ |
Banking
industry groups welcome FIST law
February 19, 2021 | 12:04 am
BANKING GROUPS welcomed the signing of the
Financial Institutions Strategic Transfer (FIST)
Act and hope it will spur bolster credit growth
as the crisis continues.
“With this measure, banks can gradually recover
from non-performing loans (NPLs) that have
increased due to the pandemic. As financial
institutions utilize the special purpose
vehicles, banks may now continue to increase
lending activities to help spur economic
activity,” the Bankers Association of the
Philippines said in a statement on Thursday.
The group said they are waiting for the
implementing rules and regulations (IRR) of the
new law.
The law covers the transfer of non-performing
loans and assets from banks to asset management
companies or FIST corporations. Loans and assets
classified as non-performing as of Dec. 31, 2022
will be eligible for transfer.
“All those NPLs (non-performing loans) and NPAs
(non-performing assets_ that become such on or
before Dec. 31, 2022 are eligible, that’s just
the cut-off,” Noel Neil Q. Malimban, deputy
director at the BSP Office of General Counsel
and Legal Services, said in an online briefing
on Thursday.
“There’s no distinction as to whether it’s from
the start of the lockdown because all of these
[NPLs and NPAs] are affected by the pandemic,
whether it’s directly due to the lockdown or
not. The aim is to help the financial
institutions get rid of these bad assets,” he
added.
Chamber of Thrift Banks Executive Director
Suzanne I. Felix said the FIST law’s enactment
was “just in time”, noting credit raters have
warned about the industry’s asset quality which
will likely deteriorate further this year as the
loan moratorium expired in December last year.
Ms. Felix said they also welcome the tax
exemption measures in the law and considers it
“pain sharing” with the government.
Under the law, exemptions will be applicable for
payments of documentary stamp tax, capital gains
tax, creditable withholding income taxes and
value-added tax (VAT) in relation to the
transfer of non-performing assets from a
financial institution to the FIST corporation or
from a FIST corporation to a third-party buyer
or borrowers.
Rural Bankers Association of the Philippines
President Elizabeth C. Timbol meanwhile said
they are hopeful the law’s implementing rules
will be inclusive of the needs of smaller
lenders.
“We expect that the IRR would provide simple and
efficient procedures that will allow different
stakeholders to avail of the benefits and
privileges FIST aim to provide specially for
rural banks like us,” Ms. Timbol said in a text
message.
“We are hoping that this law will not only focus
on big loan accounts but also with micro-loans,
where a big portion of rural banks’ portfolio is
allocated to,” she added.
The banking industry’s NPL ratio stood at 3.61%
as of December, higher than the 2.08% a year
earlier but still better than BSP’s 4.6%
projection.
BSP Governor Benjamin E. Diokno has said the law
could trim banks’ non-performing loan ratio by
0.63 to 7 percentage points. He said the IRR for
the law is being circulated among industry
players to garner sentiments.
Estimates from the National Economic and
Development Authority showed the law could free
up P1.19 trillion in bad loans from banks’
portfolio, according to a statement from the
Department of Finance. — Luz Wendy T. Noble |
_______________________________________________________________________________________ |
Banking
industry groups welcome FIST law
February 19, 2021 | 12:04 am
BANKING GROUPS welcomed the signing of the
Financial Institutions Strategic Transfer (FIST)
Act and hope it will spur bolster credit growth
as the crisis continues.
“With this measure, banks can gradually recover
from non-performing loans (NPLs) that have
increased due to the pandemic. As financial
institutions utilize the special purpose
vehicles, banks may now continue to increase
lending activities to help spur economic
activity,” the Bankers Association of the
Philippines said in a statement on Thursday.
The group said they are waiting for the
implementing rules and regulations (IRR) of the
new law.
The law covers the transfer of non-performing
loans and assets from banks to asset management
companies or FIST corporations. Loans and assets
classified as non-performing as of Dec. 31, 2022
will be eligible for transfer.
“All those NPLs (non-performing loans) and NPAs
(non-performing assets_ that become such on or
before Dec. 31, 2022 are eligible, that’s just
the cut-off,” Noel Neil Q. Malimban, deputy
director at the BSP Office of General Counsel
and Legal Services, said in an online briefing
on Thursday.
“There’s no distinction as to whether it’s from
the start of the lockdown because all of these
[NPLs and NPAs] are affected by the pandemic,
whether it’s directly due to the lockdown or
not. The aim is to help the financial
institutions get rid of these bad assets,” he
added.
Chamber of Thrift Banks Executive Director
Suzanne I. Felix said the FIST law’s enactment
was “just in time”, noting credit raters have
warned about the industry’s asset quality which
will likely deteriorate further this year as the
loan moratorium expired in December last year.
Ms. Felix said they also welcome the tax
exemption measures in the law and considers it
“pain sharing” with the government.
Under the law, exemptions will be applicable for
payments of documentary stamp tax, capital gains
tax, creditable withholding income taxes and
value-added tax (VAT) in relation to the
transfer of non-performing assets from a
financial institution to the FIST corporation or
from a FIST corporation to a third-party buyer
or borrowers.
Rural Bankers Association of the Philippines
President Elizabeth C. Timbol meanwhile said
they are hopeful the law’s implementing rules
will be inclusive of the needs of smaller
lenders.
“We expect that the IRR would provide simple and
efficient procedures that will allow different
stakeholders to avail of the benefits and
privileges FIST aim to provide specially for
rural banks like us,” Ms. Timbol said in a text
message.
“We are hoping that this law will not only focus
on big loan accounts but also with micro-loans,
where a big portion of rural banks’ portfolio is
allocated to,” she added.
The banking industry’s NPL ratio stood at 3.61%
as of December, higher than the 2.08% a year
earlier but still better than BSP’s 4.6%
projection.
BSP Governor Benjamin E. Diokno has said the law
could trim banks’ non-performing loan ratio by
0.63 to 7 percentage points. He said the IRR for
the law is being circulated among industry
players to garner sentiments.
Estimates from the National Economic and
Development Authority showed the law could free
up P1.19 trillion in bad loans from banks’
portfolio, according to a statement from the
Department of Finance. — Luz Wendy T. Noble |
_______________________________________________________________________________________ |
CitySavings
buys stake in Batangas-based thrift lender
February 11, 2021 | 12:02 am
UNIONBANK of the Philippines, Inc. has acquired
a majority stake in Batangas-based thrift lender
Bangko Kabayan, Inc. (BK) through its own thrift
unit, further expanding the Aboitiz group’s
banking network.
UnionBank’s subsidiaries CitySavings Bank, Inc.
and UBP Investment Corp. bought a combined 70%
stake in the thrift bank — 49% for the former
and 21% for the latter — making it a part of the
group, the listed bank said in a statement on
Wednesday.
“BK is a very well-run bank with a decades-long
track record of success and service to SMEs
(small- and medium-sized enterprises). We are
excited to work with them to expand their
business and reach,” CitySavings President and
Chief Executive Officer Lorenzo T. Ocampo was
quoted as saying.
The Batangas lender was established as Ibaan
Rural Bank in 1957 and has grown to cover nearby
Laguna and Quezon through its 24 branches that
provide credit to small merchants and farmers.
“The bank’s focus on grassroots entrepreneurship
is aligned with CitySavings’ overall strategy to
strengthen its presence in the mass market
segment. It hopes to combine its digital
capabilities with BK’s foothold in Calabarzon to
expand into the micro-, small- and medium-sized
enterprise (MSME) business,” the statement said.
“Being part of the UnionBank group gives us
access to digital banking solutions that will
improve BK’s services with no need for a brick
and mortar expansion. We look forward to the
technological and capital support from
CitySavings and UnionBank to level up BK’s
capacity and reach out to more clients faster,”
BK President Beatriz B. Romulo said.
CitySavings has 140 branches nationwide. In
December, it raised P5 billion from its
corporate note issuance to support its asset
expansion.
Meanwhile, its parent UnionBank booked a lower
net profit of P11.561 billion last year, down by
17.4% from P14 billion in 2019, as the bank
increased its loan loss provisions due to the
coronavirus crisis.
UnionBank’s shares ended trading at P72 apiece
on Wednesday, down by P1.45 or by 1.97% from its
previous close. — L.W.T. Noble |
_______________________________________________________________________________________ |
More imports
vs food price spike eyed
By: Ben O. de Vera - Reporter / @bendeveraINQ
Philippine Daily Inquirer / 04:59 AM February
08, 2021
MANILA, Philippines — Tariff authorities are now
looking into proposals to increase the
importation of food to stem the rise of prices,
which have zoomed past what the government
considered last month to be manageable.
“Our priority right now is to ensure that food
supply is adequate so that households affected
by COVID-19 and the quarantines will not be
doubly affected by the increase in food prices,”
Karl Kendrick Chua, acting socioeconomic
planning secretary, said in a statement on
Friday.
The spike in food prices pushed the headline
inflation rate to a two-year high of 4.2 percent
year-on-year in January, beyond the government’s
target range of 2 to 4 percent.
Chua, who heads the state planning agency
National Economic and Development Authority,
said the Cabinet-level interagency Committee on
tariff and related matters has endorsed to the
Tariff Commission an increase in the minimum
access volume of pork and the temporary decrease
in the most favored nation tariff rates of pork
and rice.
Tight supplies
Due to tight supplies caused by the African
swine fever and the damage caused by typhoons
toward the end of 2020, faster price hikes were
reported in meat products, especially pork, and
vegetables.
Economists also worried that elevated consumer
prices may temper consumption at a time when the
pandemic-battered economy needed a boost to
recover from last year’s gross domestic product
(GDP) drop of a record 9.5 percent, the worst
post-war recession.
Reduce tariffs
In a webinar on Friday, former socioeconomic
planning secretary Cielito Habito, an Inquirer
columnist, said the inflation rate would likely
average 4 to 5 percent this year, hence a need
to ramp up food importation.
“Right now, we are forced to open agriculture—in
pork, because of the shortage due to the African
swine fever. And this is no longer the time to
oppose imports because the reason prices are
skyrocketing is the sheer lack of domestic
supply,” Habito said.
Roehlano Briones, senior research fellow at the
state-run Philippine Institute for Development
Studies, said in a position paper submitted to
the Senate last week that “rather than rely only
on price freezes, we recommend [to] further
liberalize private-sector importation by
reducing tariffs on meat, fish and vegetables.”
But House Minority Leader Carlos Isagani Zarate
on Saturday opposed a looming opening up of the
domestic market to an influx of imported goods
amid a pandemic-induced recession.
Runaway inflation
“The Duterte administration’s policy of further
liberalization of our economy will only
aggravate rather than address the runaway
inflation,” Zarate claimed in a statement.
But “runaway inflation,” or hyperinflation, is
technically defined as rapidly rising and
uncontrollable inflation, typically measuring
more than 50 percent per month. Inflation rates
less than 10 percent are generally considered
manageable. |
_______________________________________________________________________________________ |
2-year
inflation high of 4.2 percent in January driven
mainly by pork, veggie prices
By: Ben O. de Vera - Reporter / @bendeveraINQ
Philippine Daily Inquirer / 04:42 PM February
05, 2021
MANILA, Philippines—High prices of food,
especially pork and vegetables, pushed headline
inflation upward to a two-year high of 4.2
percent year-on-year last January, making it
tougher to convince consumers to spend more amid
a prolonged recession.
Not only was the rate of increase in prices of
basic commodities the highest since January
2019’s 4.4 percent, but it was also already
above the government’s target range of 2 to 4
percent—considered manageable inflation—for
2021.
Prices last January further rose by a faster 0.9
percent from levels in December, when
month-on-month inflation inched up 0.8 percent
amid the Christmas holidays.
The impact of high prices was worse for poor
households—inflation for the bottom 30-percent
income households climbed 4.9 percent, also the
most elevated in two years.
In a report, the Philippine Statistics Authority
(PSA) said the surge in inflation among the poor
was mainly due to faster price hikes in food and
non-alcoholic beverages.
For nationwide inflation, National Statistician
Dennis Mapa said meat inflation jumped to 17
percent year-on-year in January from 10 percent
in December last year, no thanks to higher pork
prices due to the African swine fever (ASF).
The 21.2-percent year-on-year hike in vegetable
prices in January also outpaced December’s 19.7
percent. Fruits were more expensive by 9 percent
year-on-year also last January, a bigger
increase than the 6.3 percent in December.
Fish prices rose 3.7 percent last month.
Besides food, which accounted for almost
three-fifths of the headline rate, restaurant
and miscellaneous goods and services as well as
transport costs contributed to the
faster-than-expected January inflation.
Economic officials had said the upward price
pressures, which started in October 2020, were
only “transitory” as a result of tight pork
supply, damaged agricultural produce after a
string of strong typhoons and lack of mass
transportation amid prolonged COVID-19
quarantine.
But Mapa said the PSA’s survey trends showed the
elevated inflation environment could spill over
to the coming months as price conditions
remained the same.
Private economists had expected inflation
breaching the target band this year, but not as
early as January. They had warned this may
prolong recovery from the pandemic-induced
recession due to tempered consumer spending.
Asked if January’s inflation rate would result
in stagflation, or a combination of high prices
with a drop in gross domestic product (GDP),
acting Socioeconomic Planning Secretary Karl
Kendrick Chua replied in a text message: “Our
[inflation] target is for the whole year, and
recessions are defined as two consecutive
quarters, so one-month data is not enough to
make any conclusion.”
Chua, who heads the state planning agency
National Economic and Development Authority
(Neda), last week said GDP would likely post
year-on-year growth only by the second quarter
of 2021 amid a “slow start” in the current
quarter, extending economic contraction since
the first quarter of 2020 to five straight
quarters.
ING Bank’s senior economist for the Philippines
Nicholas Mapa called this episode a
“slowflation,” while Security Bank Corp.’s chief
economist Robert Dan Roces agreed that
stagflation was “too early to call.”
“We have to see the other indicators for the
period: unemployment and persistent cost-push
inflation,” Roces said. The government plans to
conduct the labor force survey on a monthly
basis starting this year in order to monitor the
anticipated return of jobs alongside gradually
easing quarantine more frequently than the
current quarterly data.
Rizal Commercial Banking Corp.’s chief economist
Michael Ricafort said headline inflation “could
remain at 4-percent levels” during the coming
months mainly due to base effects from last
year’s rates.
BDO Unibank Inc.’s chief market strategist
Jonathan Ravelas said updated projections showed
inflation breaching 5 percent year-on-year
starting March, and further rising to 6 percent
in September and October, before slowly easing
by yearend, although still above 4 percent.
At an online seminar, former socioeconomic
planning secretary Cielito Habito said the
inflation rate would likely average 4-5 percent
this year, hence a need to ramp up food
importation.
“Right now, we are forced to open agriculture—in
pork, because of the shortage due to the African
swine fever. And this is no longer the time to
oppose imports because the reason prices are
skyrocketing is the sheer lack of domestic
supply,” Habito said. |
_______________________________________________________________________________________ |
PH will win
economic marathon (Part 1)
Published February 2, 2021, 7:00 AM
by Dr. Bernardo M. Villegas
Independent think tanks and financial
institutions from abroad rate the Philippine
economy as the worst hit in 2020 and is expected
to be the slowest to recover in 2021 among the
countries in Asia. The average estimate of the
GDP decline expected of the Philippine economy
for the year just ended is anywhere from a
negative 8.5 to 9.5 percent for the whole year.
The prospects for 2021 are not much brighter. My
most optimistic growth projection for the whole
year of 2021 is 4 percent, which will still keep
the Philippine GDP below its pre-pandemic level
until the last quarter of 2022. Because the
Philippine Government has been the least
effective in controlling the negative impact of
COVID-19 on the economy among the Asian
economies, it will surely lose the
short-distance race or economic sprint to its
neighbors. The good news, however, is that the
Philippine economy will be one of the sure
winners in the economic marathon if we consider
a two to three-year horizon. By 2022, the
Philippine GDP growth will be one of the highest
growing at anywhere from 8 to 10 percent
annually. Already, a London-based think tank—the
Centre for Economic and Business Research
(CEBR)—has forecasted that among 193 countries,
the Philippines will become the 22nd largest
economy within the next fifteen years. This is
consistent with another long-term projection the
Hong Kong Shanghai Bank made more than 15 years
ago that by 2050, the Philippine economy will be
the 16th largest economy in the world.
This bright long-term forecast of CEBR is only
one of the many optimistic prognostications of
independent think tanks and financial
institutions about the long-term future of the
Philippine economy. Within the last year or so,
the Philippines was rated by the Oxford Economic
Institute to be the second most attractive
emerging market in the next decade or so, next
only to India and ahead of Indonesia and China
in third and fourth places, respectively. It was
ranked by The Economist publication as the sixth
in financial strength ahead of countries like
Vietnam, Thailand and China. The Japan Credit
Rating Agency upgraded its credit standing to
triple B Plus. These and other long-term
projections of a bright prospect for the
Philippine economy are based on strong
fundamentals that are literally immune to the
damage done by COVID-19 whose impact on the
Philippine economy will be short-lived.
Two sectors that are expected to bounce back
quickly in 2021 are the BPO-IT sector as
business enterprises in the developed countries
such as those in North America and the European
Union struggle to recover profitability by
paring down their labor costs through
outsourcing of their business services. To be
equally benefited will be the export of Filipino
manpower to these developed countries (including
the Northeast Asian countries suffering from
demographic crises) as OFWs find greater
opportunities to work abroad, resuming the
average growth of foreign exchange remittances
to the Philippines of some 3 to 5 percent
yearly. In fact, even in the worst year of the
pandemic of 2020, the decline of these
remittances was limited to less than 2 percent
on an annual basis, despite the fact that more
than 300,000 OFWs had to return home because
they were laid off from their work, especially
in the Middle East.
Chances of growing even more rapidly at 10
percent or more, starting 2022 and beyond. will
be greater if all sectors cooperate to endow the
countryside and the agricultural sector with
better farm-market-roads, post-harvest
facilities, irrigation facilities, cold storage
and other infrastructures needed by the farmers
to make their land more productive and to
deliver their produce to the market at lower
costs. Agribusiness— from farming to storage to
logistics to processing to retailing, etc—should
attract heavy investments from both the public
and private sectors. Every effort should be
exerted to make agriculture as a whole to grow
at least at 3 percent per annum. The other
requirement for faster growth is the amendment
of the Constitution to remove the many
unreasonable restrictions against Foreign Direct
Investments in such areas as public utilities,
mining, media and education. We should emulate
Vietnam in the way their public authorities have
made it easier for foreign direct investors to
participate in these sectors in which the
Philippines has been ultra-nationalistic in its
policies. If these amendments cannot be
introduced in the remaining years of the Duterte
Administration, it is hoped that the next
Administration will give them the highest
priority.
The greater growth prospects starting in 2022
will also be made possible by the
intensification of the move of economic
activities towards regions outside the National
Capital Region, which has been lagging in growth
even before the pandemic. There are much higher
growth prospects in the Southern Luzon area,
especially Batangas that is evolving into
another metropolitan region spanning the space
from Calamba, Laguna to the Batangas seaport,
which already has a larger volume of passenger
traffic than the Manila ports. The other
candidate for replacing Metro Manila as a
metropolis is Central Luzon, the so-called
Pampanga triangle consisting of Angeles, San
Fernando, Clark and Subic. Rapid urbanization
and industrialization in this region will be
further facilitated by the railroad system that
is being constructed by the Japanese from Clark
to Bulacan and eventually to Manila. Similar
infrastructural developments are expected in the
CALABARZON area with a railway extending from
Calamba, Laguna to the Batangas seaport, a
private cargo international airport in Batangas
(similar to the international airport San Miguel
Corporation is building in Bulacan) and the
doubling of the capacity of the Batangas
seaport, which is the natural gateway from Luzon
to the Visayas and Mindanao. To be continued.
For comments, my email address is
bernardo.villegas@uap.asia |
_______________________________________________________________________________________ |
Proposed rice
tariff cut a stab in the back of Philippine
farmers
By: Raul Montemayor - @inquirerdotnet
INQUIRER.net / 03:53 PM February 01, 2021
The
Federation of Free Farmers (FFF) believes the
recommendation of the Department of Agriculture
(DA) to reduce tariff on imported rice was
unwarranted and ill-timed.
Last Jan. 28, the DA asked the Tariff Commission
(TC) to reduce tariffs on rice imported from
non-Asean countries to only 35 percent from the
current 50 percent. The TC will conduct a
hearing on Feb. 4 to discuss the proposal.
The FFF questions the basis for the DA petition
to the commission mainly because Agriculture
Secretary William Dar had repeatedly attested to
an ample supply of rice in the Philippines
following a record harvest in 2020 that defied a
series of typhoons and natural calamities. The
group also took note of a move by the DA to
suspend the issuance of import clearances late
in 2020 to ease a glut in supply resulting from
a surge in importation in the middle of the
year.
If prices would be the justification, data from
the Philippine Statistics Authority (PSA) would
show that reducing tariff on imported rice would
not be a rational move.
PSA data showed that average retail prices for
well-milled rice (WMR) and regular-milled rice
(RMR) in 2020 were 2.5 percent lower than their
2019 levels. From July 2020, prices had shown a
continuing downtrend an reached their lowest
level of P40.75 per kilo for WMR and P36.09 per
kilo for RMR in December 2020. Local prices of
rice declined despite an increase in prices of
rice from other countries, especially Vietnam
and Thailand, which are major sources of rice
imported by the Philippines.
This sudden proposal of the DA is totally
unjustified. It is a stab in the back of our
rice farmers, who are still reeling from the
drastic fall in farm gate prices caused by
excessive imports in the last two years
following the enactment of the Rice
Tariffication Act. Why encourage more and
cheaper imports now when local supply is more
than enough and prices are very stable?
Imports from countries, like India and Pakistan,
are still cheaper than comparable products from
Asean countries, like Vietnam and Thailand, even
if they were assessed a higher 50 percent
tariff. There is no guarantee that reduced
import costs for rice from non-Asean countries
due to lower tariffs will translate into lower
retail prices for consumers.
The DA proposal will only make importers richer.
Those who will now import from India and
Pakistan to take advantage of lower prices and
tariff are also the ones who import from
Thailand and Vietnam. They will sell the rice at
the highest possible price and consumers are not
likely to benefit from their savings.
The DA proposal to reduce rice tariffs was made
with zero consultation with farmers and appears
to have been surreptitiously inserted into the
petition to reduce tariffs for pork products.
Secretary Dar should live up to his mandate to
support the Philippine agricultural sector and
small farmers, instead of pandering to the
interests of importers under the guise of
protecting consumers.
It is lamentable that our own agriculture
secretary is bringing harm to the very farmers
he is supposed to protect and support.
(Editor’s note: Raul Montemayor is national
manager of the group Federation of Free Farmers) |
_______________________________________________________________________________________ |
Alternative
Economic Scenarios for 2021
There
were both good and bad news contained in the
report by the Philippine Statistical Authority
on the Philippine GDP and its components for the
third quarter of 2020. The good news is that the
worst is over. The GDP decline for the third
quarter of 11.5 per cent was slower than that of
the second quarter which had been downgraded
from 16.5 to 16.9 percent. Also encouraging was
the continuing increase in agricultural output
of 1.2 percent, repeating its performance of a
positive growth in the second quarter. For me,
this is the brightest spot in an otherwise
continuing gloomy economic outlook. Before the
pandemic, agriculture had always been the
laggard, the achilles heel of the economy—a
result of decades of neglect and mismanagement.
Now there seems to be a light at the end of the
tunnel of low agricultural productivity that has
been the greatest dampener of economic growth
and the most important cause of mass poverty in
the country. The pandemic has helped to open the
eyes of our leaders—both in the public and
private sectors—that food security should be our
most important concern as the economy returns to
normal after the pandemic. The so-called new
normal should not be a return to business as
usual as regards the way we manage our
agricultural sector. At both the national and
local government levels, the most important
concern should be to endow the small farmers
with all the infrastructural and other support
they need to increase their incomes, especially
in the coconut regions where poverty incidence
is the highest. This has been accentuated by the
recent spate of typhoons that have hit the Bicol
region the hardest. Bicol is primarily a coconut
producing area.
Another encouraging news about the third quarter
is that there is evidence that the State is
beginning to be the primary engine of growth,
which it should be in times of crisis such as we
are experiencing. The growth of 5.8 per cent in
government spending is reassuring that, despite
all the accusations of corruption we hear from
Senators and the President himself, especially
against health and DPWH officials (with special
mention of the regional directors), there is a
clear sign that the Government is the lead
sector. This will have to be the case at least
for the next two years until we see firm signs
of a strong recovery of the consumption and
private investment sectors. These two sectors
dropped by 9.3 per cent and 37.1 percent,
respectively during the third quarter. With
consumption spending declining, it was
inevitable that imports would fall by 21.7
percent. With the whole world economy going into
a deep recession, exports took a hit of -14.7
percent.
The bad news was especially concentrated in such
job-intensive sectors such as Accommodation and
Services (-52.7 percent); Construction (-39.8
percent); Durable Equipment (-34.4 percent) and
Transport and Storage (28.1 percent). Two
services components, Health and Social Work as
well as Wholesale/Retail Trade had only
single-digit declines of 4 percent and 5.4
percent, presaging a quicker recovery if the
economy can avoid more lockdowns in the future.
The huge declines in some key sectors came as a
surprise to most analysts who were predicting
narrower GDP declines in the third quarter.
Before the PSA came out with the final figures,
figures as low as 7.1 percent drop were being
forecasted. The median forecast was 9.6 percent
decline in a Bloomberg poll. Looking forward to
the fourth quarter of 2020 and first quarter of
2021, I would be more cautious and project
another double-digit GDP decline in the fourth
quarter and still negative GDP growth for the
first quarter for 2021. From the weather pattern
we have seen so far, we should expect more
devastating typhoons in the coming months all
the way to the end of December. As we have
experienced in the past, typhoons that come late
in the year (like Ondoy) can do more damage than
those early in the rainy season. Already there
are estimates that typhoons Roland and Ulysses
have taken as much as 1 to 2 percentage points
from our GDP. The other worrisome trend is what
we are witnessing in very developed countries in
Europe as well as the US, i.e. second or even
third waves of the Coronavirus with even
increased rates of infection as people start
discarding safety measures such as wearing masks
and social distancing.
Given the threats of more devastating typhoons
in the next few months and the possibility of
more lockdowns as the Philippines suffers from
new waves of the virus, the outlook for the next
six to eight months continues to be very
uncertain. Since we are at the mercy of the
pandemic and the Philippines may benefit from
any vaccine most probably only late in 2021, it
is highly probable that there will continue to
be GDP declines way into the second quarter of
2021. We should already factor into the short
run the possibility of the Philippines suffering
the same fate of more developed countries
experiencing new waves of infection with the
subsequent imposition of stricter lockdowns. If
the Philippine Government overreacts to these
new waves, then we should expect the major
engine of growth, consumption, to once again
suffer as it did in the second and third
quarters of 2020. Until and unless consumption
spending recovers and is able to post positive
growth rates, we should expect GDP to continue
declining. Our only hope is for our Government,
both at the national and local levels, to be
more realistic in accepting higher rates of
infection as a fact of life and refrain from
imposing severe lockdowns on the premise that we
have already limited the number of deaths and
have achieved high rates of recovery from
COVID-19. As long as we can get the public to
strictly abide with the safety measures (wearing
masks, washing hands, and keeping social
distance), we should continue to relax movements
of people. I believe in the saying that the
epidemic of fear is even worse than the virus
itself.
Once Filipinos can more easily travel from one
province to another and from one island to
another, domestic tourism will be a strong
vehicle for a large increase of consumption
expenditures, including accommodation and
related services, travel and transport, dining
out, discretionary purchases of tourism-related
goods, etc.
This greater freedom of movement should start
with the Christmas season of 2020 and sustained
through the first quarter of 2021. If this can
be done, then we may able to avoid another
decline of GDP in the first quarter of 2021.
Otherwise, more lockdowns will guarantee the
continuation of negative growth rates for GDP
and such sectors as accommodation and related
services, wholesale and retail trade, and
transport and storage. Also, fundamental to
attaining growth early in 2021 is the timely
passing of the P4.5 trillion budget, despite all
the controversy about corruption in DPWH and
other government departments. The Philippine
government fiscal response to the pandemic is
still the weakest in the Southeast Asian region.
Since the Government is in a position to borrow
more heavily because of its strong fiscal
position, there should be an effort to bring the
pandemic-related expenditures from its present
low level of about 2 per cent of GDP to at least
5 percent. Some of our Southeast Asian neighbors
spend as much as 10 percent or more of their GDP
in addressing the recession brought about by the
pandemic. I, therefore, submit two alternative
economic scenarios for 2021: a) continuing GDP
declines up to the first quarter of 2021 if the
Government overreacts to new waves of the
Coronavirus compounded by low rates of
expenditures of the Government; or b) a 4
percent increase of GDP in the first quarter of
2021 if the Government refrains from imposing
more lockdowns even if there are second or more
waves of the virus and if the Government is able
to spend a greater percentage of GDP on both
relief and stimulus packages during the ongoing
recession. For comments, my email address is
bernardo.villegas@uap.asia. |
_______________________________________________________________________________________ |
BSP caps
loans for MSMEs, large firms used for reserves
Lawrence Agcaoili (The Philippine Star) -
December 12, 2020 - 12:00am
MANILA,
Philippines — The Bangko Sentral ng Pilipinas
(BSP) has imposed a cap on the amount of loans
to micro, small and medium enterprises (MSMEs)
and to large firms used as alternative
compliance with the reserve requirement ratios
(RRR) to make sure there is enough liquidity in
the financial system to support economic
recovery.
BSP Governor Benjamin Diokno said the loan
disbursements used by BSP-supervised financial
institutions (BSFIs) as alternative compliance
to the RRR should not exceed P300 billion for
MSMEs and P425 billion for large enterprises
severely affected by the pandemic.
Diokno said the limits are calibrated based on
different simulations and are meant to ensure
that the use of loans as an alternative mode of
compliance is in line with domestic liquidity
conditions and projected growth.
He said BSFIs are encouraged to continue to
avail of the relief measure to sustain lending
and financial support to viable MSMEs and large
enterprises.
“Access to finance by these businesses will
contribute to the recovery of the domestic
economy and will help secure our envisioned path
of sustainable and inclusive growth,” the BSP
chief said.
Preliminary data as of Nov. 12 from the central
bank showed the average amount of MSME loans
utilized by banks as compliance with the reserve
requirements stood at P123.6 billion, while
loans to large firms stood at P29.5 billion.
As part of COVID-19 response measures, including
the cumulative 200-basis point interest rate
cuts, the BSP allowed banks until end-2022 to
count loans to MSMEs and large enterprises as
part of their compliance to the level of
deposits they are required to keep with the
central bank.
The BSP requires banks to keep a minimum amount
of cash reserves with the central bank
determined by the amount of deposit liabilities
owed to customers.
It slashed the RRR for universal and commercial
banks by 200 basis points last March 30 and for
thrift as well as rural and cooperative banks by
100 basis points effective July 31 as part of
measures to soften the impact of the COVID-19
pandemic on the economy. |
_______________________________________________________________________________________ |
COVID-19
economy: What are we doing wrong?
By: Solita Collas-Monsod - @inquirerdotnet
Philippine Daily Inquirer / 05:06 AM December
05, 2020
How is it
that a country like the Philippines, “which by
all the usual metrics of having ‘strong
macroeconomic fundamentals’ pre-COVID-19, both
relative to its own past history and relative to
its regional neighbors, would end up having the
second-largest contraction in GDP in the second
quarter of 2020 and the worst projected economic
growth outcome in 2020 in ASEAN+3?” A paper
jointly authored by Monsod (Toby Melissa C.) and
Bautista (Ma. Socorro Gochoco) that will appear
in the next issue of Asian Economic Papers,
rather lengthily entitled “Rethinking ‘Economic
Fundamentals’ in an Era of Global Physical
Shocks: The Philippine Experience with
COVID-19,” attempts to answer that question.
Before we go any further, Reader, I must
disclose (proudly) that the Monsod referred to
above is my daughter, and is a much better
economist than I. The two authors are faculty
members of the UP School of Economics.
Now, how do they go about answering the
question? Well, they created a model for 21
countries in ASEAN+3, developing East Asia and
South Asia, as well as Australia and New Zealand
to explain the difference in actual 2019 and
forecasted (as of October) 2020 GDP growth, and
they relate the fall in real GDP growth to four
factors: national capacities to detect and
respond to acute public health events and
emergencies, susceptibility to the disease,
dependence on the foreign sector, and a
country’s fiscal position.
What did they find? That, everything else
remaining the same, stronger national capacities
to detect and respond to emerging outbreaks, in
particular laboratory capacity, are associated
with better short-term economic outcomes. For
the Philippines, in particular, better prepared
laboratory systems coming into the crisis could
have saved up to 3.6 percentage points in lost
GDP growth forecasted in 2020.
They also find that “if COVID-19 is not first
well-contained—by decisively addressing
underlying physical causes of disease and
transmission and progression—large fiscal
spending aimed at other things could have
perverse economic effects.”
Moving forward, their results suggest that a
dearth in health system capacity should be
prioritized over and above any other type of
spending including traditional stimulus (e.g.,
large-scale infrastructure). Their results also
underscore that given physical shocks (including
those brought about by climate hazards),
efficient and prepared institutions matter. “A
macroeconomy is not resilient if these are not.”
The paper (I swear it is easy reading) points
out that this is not what our government is
doing, as shown by the National Expenditure
Program for FY 2021 currently being renegotiated
in the bicameral committee (I think). It has
done the opposite of what is suggested by the
results of the model. It has increased the
infrastructure budget by 49 percent, while it
has decreased the health sector budget by 28
percent (or P50 billion).
Moreover, I would like to point out that come
2021, our Social Amelioration Program will be no
more—that’s P197 billion that was supposed to go
to the poor, who have been left mostly to fend
for themselves.
WTF? I hope our legislators make major changes
in that budget. There is still time. If they had
sliced the health budget as a way of showing
their dislike of Health Secretary Francisco
Duque III, that would be asinine, because they
are punishing the Filipino people as well. If
they cut it because the department doesn’t have
the absorptive capacity, this is where the
efficient and prepared institutions issue comes
in. An efficient and competent bureaucracy is
definitely possible in the Philippines, except
for the fact of politics reaching even down to
the assistant director level. Only consider the
International Monetary Fund’s damning assessment
of the Philippines’ fiscal stimulus program: it
was “limited or inefficiently implemented.”
Reader, this is not just some academic issue
from an ivory tower. I read where Gen. Carlito
Galvez Jr. opined that the COVID-19 vaccine
would be available to us only in late 2021 or
early 2022. That means we have to gear up our
national capacity to deal with COVID-19 until at
least the end of next year. The MB paper points
them out. Example: Our contact tracing system
reaches only 4-5 people, where the international
standard is 30-37 for urban areas, and 25-30 for
rural areas. We don’t hear about contact tracing
anymore from the government after the propaganda
about adopting the Magalong example in Baguio. |
_______________________________________________________________________________________ |
ASEAN pivot
to China
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 06:20 AM November
17, 2020
Something
momentous happened over the weekend that signals
the continuing shift of the world’s economic
fulcrum to Asia-Pacific away from North America,
dominated by the United States. Fifteen
economies comprising about a third of the
world’s population and of the global economy
signed a trade agreement that formalizes what is
now the world’s largest trading bloc.
Initiated by the 10 Asean economies that we are
part of, the newly-minted Regional Comprehensive
Economic Partnership or RCEP now brings in five
of the six “dialogue partners” with which Asean
has already had separate free trade deals:
Australia, China, Japan, New Zealand, and South
Korea. India, the sixth dialogue partner, was
originally part of the group, but chose to
withdraw late last year on fears of an onslaught
of dumped goods from China, among other
concerns. RCEP would have been even more
formidable with India, bringing the group’s
combined population and economic share closer to
40 percent of the entire world. Even without
India, RCEP is now bigger than the European
Union, and the North American Free Trade
Agreement composed of Canada, the United States,
and Mexico.
Formal signing of the RCEP agreement is seen as
a “victory” for China over the United States, as
it certainly gains an advantage over the latter
in their ongoing trade war. This is because
China, by its sheer size, inevitably dominates
the new trade group, and with formalization of
the agreement, can assert that (1) it has
alternatives to the US market, and (2) it gains
the upper hand over the latter in influencing
future economic directions in Asia-Pacific.
It was the second concern that had prompted
President Barack Obama to champion the
Trans-Pacific Partnership (TPP) agreement as a
key part of his administration’s “pivot to
Asia.” TPP was then seen as a rival to RCEP, as
even as it has a much smaller combined
population and consumer base, it would have also
accounted for 40 percent of the world’s incomes.
But Donald Trump chose to pull out of TPP in one
of his earliest moves as president, thereby
emasculating that grouping. Still, the rest
proceeded on a much-downgraded scale and
significance, as the Comprehensive and
Progressive Agreement for Trans-Pacific
Partnership or CPTPP, which they signed in 2018.
Where does our country stand in all this?
Trump’s withdrawal from TPP was actually a
blessing for the Philippines, because we had not
been part of the group forging the TPP, which
included the three Asean members Malaysia,
Singapore, and Vietnam. Had it gone through with
the United States in it, we would have suffered
significant diversion of our very prominent
trade and investment ties with the United
States, especially to Vietnam and Malaysia.
Their preferential access to the US market under
TPP would have made them preferred sources of
products that we export to the United States,
and preferred destinations for US foreign
investments (which they already had been even
without TPP). For that reason, our government
had been making a strong pitch to join TPP as
well—until Trump came.
In contrast, as a founding Asean member, the
Philippines had been part of the RCEP from the
very beginning. Trade Secretary Ramon Lopez
points out that the RCEP economies accounted
last year for half of Philippine exports, 61
percent of our imports, and 11.4 percent of
foreign direct investments. The agreement is
thus of critical importance to us, especially as
we look to our post-COVID-19 economic recovery.
For sure, traditional trade opposers would again
be wary of a greater influx of imports due to
the trade deal. But we would do well to go
beyond defensive concerns and also focus on
great opportunities opened up for Filipino
producers and workers. In addition to the nine
other economies in the Asean Economic Community,
they can now look to newer doors opened into the
large economies of Australia, China, Japan, New
Zealand, and South Korea. And provided we do our
homework right—including catch up on
infrastructure, fix our tax system for better
conformity with our neighbors, and improve
confidence in our country’s governance—then RCEP
could truly be a critical path to a better
post-pandemic economic future for Filipinos. |
_______________________________________________________________________________________ |
A porky
problem
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:06 AM October 27,
2020
“Pigs
don’t vote, but corn farmers do,” an agriculture
official declared over three decades ago, as he
defended high import barriers then that made
corn, a vital feed grain, a much more expensive
burden to the livestock and meat industry than
could have been. He was half joking, but half
serious as well.
The statement exemplified how the Department of
Agriculture (DA) then, and through the years
thereafter, had been prone to making policy
decisions based more on politics than good
economics. Since then, livestock and poultry
raisers and their downstream industries have
constantly clamored for stronger policy and
program support from government.
Through the years, they saw the preferential
attention government gave to the cereal grains
rice and corn in terms of policy, programs, and
budgets. Import barriers were kept high for rice
and corn, with the effect of significantly
raising their domestic prices relative to those
overseas.
This reduced the pressure to be effective in
improving productivity and competitiveness in
our food staples — which indeed stagnated and
even declined over time, only recently rising
again — all in spite of highly-funded program
support. And because the resulting higher price
of corn also made costs of livestock and poultry
production higher, import barriers for meat also
had to be kept high to permit domestic producers
to recover their higher costs through their own
higher prices shielded from outside competition.
The vocal victims have been the meat processors
who faced high raw material costs tracing to
expensive corn, thus expensive meat, with their
competitiveness impaired by this chain effect of
higher costs. (They were later to obtain the
concession of lower tariff rates on
processing-grade meat, as opposed to table-grade
meat, but which led to a new problem with
technical smuggling—but that’s another story I
will not go into.)
The more important but silent victims were the
Filipino poor, whose nutrition status got a
double whammy. Not only were their staple
cereals more costly and virtually ate up their
food budget with hardly any money left for the
ulam to meet protein needs; meat, with its
resulting higher cost, became even less
affordable, too. With hindsight, it figures why
stunting due to severe malnutrition affected 45
percent of our children under 5 years old in
1990, meaning nearly one in every two young
Filipino children then were damaged for life.
These same people are in our labor force today.
Fast forward to 2020, when we have a livestock
and poultry industry beleaguered by African
swine fever (ASF) and avian flu. ASF is said to
be “rampaging through Laguna and Calabarzon,”
according to a veterinarian in the know, and has
already closed large swine producers in Central
Luzon. In a recent meeting with Bureau of Animal
Industry (BAI) director Ronnie Domingo, ASF Task
Force leader Dr. Sam Castro reported that an
estimated one-fourth of our swine population has
been decimated by the epidemic. If you’ve bought
pork lately, you’d know that its price has been
zooming, now even topping P300 per kilo, from
the usual P200 and below. Now you know why.
For us, ASF is a particularly big problem,
especially because pork is the favorite meat of
Filipinos, who on the average eat 16 kilos per
year, vs. 12 kilos for chicken meat — and we
actually eat more pork than the world eats on
average (12 kilos/year). Next to fish, it is the
biggest source of protein for Filipinos. BAI has
lined up a good “TIGIL ASF” plan to combat the
epidemic, which needs a substantial budget for
its execution. But Domingo laments that their
budget proposal has been slashed in half.
Meanwhile, of the P15.3 billion DA program
budget for production support services, rice
gets P12.8 billion, a whopping 84 percent of the
total, while livestock gets P756 million, a
measly 5 percent. Rice similarly hogs (pardon
the pun) DA’s other program budgets. But guess
what: Livestock and poultry together contribute
far more to total agricultural gross value added
(27 percent) than rice does (19 percent). Where
is our sense of proportion here?
And we wonder why the average Filipino’s diet
lacks so much protein. |
_______________________________________________________________________________________ |
Bangko
Sentral urges thrift banks to leverage
'limitless' potential of digital tech
ABS-CBN News
Posted at Oct 13 2020 12:07 PM
MANILA -
Bangko Sentral ng Pilipinas Gov. Benjamin Diokno
said Tuesday thrift banks should take advantage
of the "limitless" potential of digital
technology including cloud banking.
Cloud banking can expand reach and potential of
small thrift banks, Diokno said at a convention
hosted by the Chamber of Thrift Banks.
Diokno said using the cloud also lower
operational costs.
"Thrift banks must change from brick and mortar
to embracing the promise of cloud banking.
Moreover, the smaller thrift banks can take
advantage of this digital tech to lower
operational cost. The opportunities are
limitless," he said.
At least 20 financial institutions are moving to
cloud banking and rural banks have already seen
this as an "opportunity," the governor said.
Digital banks are subject to the same risks as
normal banks and are therefore covered in the
same rules and regulations, Diokno said.
So far, there are 12 thrift banks offering
PesoNet and 8 thrift banks offering InstaPay
while 4 others provide e-payment systems, Diokno
said.
InstaPay, or the instant transfer of funds
online and PesoNet, an online fund transfer
system used for bigger transactions are part of
the BSP's National Retail Payment System
launched to push for digitalization of
transactions in the country.
The BSP defines thrift banking as composed of
savings and mortgage banks, private development
banks, stock savings, loan associations and
microfinance.
Thrift banks provide short and long-term capital
for businesses in agriculture, services,
industry and housing and small and medium sized
enterprises (MSMEs) and individuals, the central
bank said.
-- with a report from Warren de Guzman, ABS-CBN
News |
_______________________________________________________________________________________ |
Agri-agra
loans drop to P696 billion in Q1
Lawrence Agcaoili (The Philippine Star) -
October 5, 2020 - 12:00am
MANILA,
Philippines — Loans extended by domestic banks
for agriculture and agrarian reform slipped by
2.1 percent to P696.35 billion in the first
quarter from P711 billion in the same quarter
last year as the industry continued to deliver
the mandated threshold for the sector.
Preliminary data from the Bangko Sentral ng
Pilipinas (BSP) showed the banking system was
able to allocate only about 12 percent of total
loanable funds from January to March, way below
the 25 percent mandated under Republic Act 10000
or the Agri-Agra Reform Credit Act of 2009.
Total loanable funds generated by the banking
industry increased by 17 percent to P5.81
trillion in the first quarter from P4.96
trillion in the same quarter last year.
The law retained the mandatory credit allocation
in Presidential Decree 717 where 15 percent of
banks’ total loanable funds are to be set aside
for agriculture, while 10 percent should be made
available for agrarian reform beneficiaries.
The BSP reported the loans extended by the banks
to the agriculture sector amounted to P639.82
billion, equivalent to a compliance ratio of
11.02 percent. This was, however, below the
required compliance ratio of 15 percent.
The central bank said big banks or universal and
commercial or big banks registered a compliance
ratio of 11.15 percent after extending P603.08
billion to the agriculture sector, while the
ratio of thrift or mid-sized banks only reached
6.61 percent after granting P19.32 billion.
Rural banks extended P17.42 billion to the
agriculture sector for a compliance ratio of
16.8 percent.
Likewise, the compliance ratio of the banking
system fell way short of the 10 percent
threshold for agrarian reform credit as banks
only extended loans amounting to P56.53 billion
for a compliance ratio of less than one percent.
The compliance ratio of big banks for agrarian
reform loans only reached 0.84 percent, while
that of thrift banks settled at 1.15 percent.
The rural and cooperative banks reported a
compliance ration of 7.36 percent.
BSP Governor Benjamin Diokno earlier said banks
opted to pay P10.3 billion worth of fines to the
regulator over the past decade for failing to
meet the mandated agri-agra loan threshold.
“Sadly, as noted in the last few years, banks
have opted to pay the 0.5 percent penalty for
non-compliance, instead of providing agri-agra
credit. Banks justified this based on the
perceived high risk and high cost of lending to
this sector,” Diokno said.
About 45 percent of the total collections are
used to beef up the agriculture guarantee fund
pool managed by the Land Bank of the Philippines
and another 45 percent go to the Philippine Crop
Insurance Corp. (PCIC) to sustain its
operations.
The remaining 10 percent is left with the BSP to
cover administrative costs. The BSP is committed
to improving the current state of agriculture
financing as the sector which employs 8.7
million Filipinos accounted for 9.8 percent of
the country’s gross domestic product (GDP) and
11 percent of total imports.
“We find the present state of affairs
unacceptable,” he said.
According to Diokno, a more responsive
agriculture financing ecosystem is needed to
realize its full potential as an engine of
inclusive economic development.
Diokno supports key legislative initiatives such
as the warehouse receipts bill and the amendment
of the Agri-Agra Law, which aims to expand the
range of eligible rural beneficiaries and
agricultural activities that can be financed as
part of the mandatory credit. |
_______________________________________________________________________________________ |
More than
stimulus
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 05:25 AM September
29, 2020
It seems
conventional wisdom now that the way out of the
COVID-19-induced recession is to throw money —
lots of it — at the problem. The term commonly
used is “economic stimulus,” which in the
current context means government spends
unprecedented amounts of money, even if it must
borrow big time, to provoke economic activity.
But spending money to revive a frozen economy is
not enough; it must also be spent right if we
are to get the most overall benefit out of it.
Quality of spending, apart from quantity,
matters as much. What we need now is spending
with maximum multiplier effect via the
spending-incomes circular flow that an initial
spending in the economy generates. The
multiplier is greatest when every round of
income is spent on domestic goods and services,
production of which creates jobs for Filipinos.
This is not the time to spend money on imported
goods and services — like a presidential jet,
for example — where we completely lose the
multiplier effect to the foreign economy to
which the money is paid.
The better way to transport the President and
his officials at this time is to patronize our
domestic air carriers, which are hemorrhaging
from lack of business and forced to shed
hundreds of prime jobs as they do. To spend
billions now in a way that does nothing to
support the domestic economy, when there’s an
obvious alternative that would, borders on the
obscene. It’s no excuse that the purchase had
been committed before the pandemic. With
aircraft manufacturers facing massive
cancellations of orders by airlines for obvious
reasons, I don’t see why a government in great
need of economic stimulus funds cannot put off
buying a private jet. On this basis, that
frivolous Manila Bay white beach strip project
is arguably better; at least the money stays and
circulates within the economy. Still, it’s no
less obscene, what with emerging signs of
large-scale corruption, severe environmental
harm, and outright stupidity (with much of the
dolomite sand already washed off by strong
waves).
What we really need, and the Vice President had
it right, is Kumpiyansa, or Confidence with a
capital C, for economic activity to more quickly
move back toward its pre-pandemic state. That
means confidence that government has a good plan
for containing the pandemic, and the plan is
being executed and is working, evidenced by
declining infection rates (not just declining
deaths from it). This leads on to confidence for
people to go out and engage in their usual
activities that bring life to the economy. But
it inspires no confidence when people see a
government lacking single-minded focus and
competence in containing, controlling, and
curing the virus that ails the people and the
economy — but instead wandering off into costly
distractions like pushing an anti-terrorism law
of dubious ends, window-dressing a short strip
of Manila Bay seafront, buying a presidential
jet, persecuting critics in media, and more.
Indeed, not only do these fail to help improve
confidence in government; they actually
undermine it.
Analyzing vast behavioral data it gathers
worldwide, Google has issued Community Mobility
Reports over the past months, indicative of
people’s confidence to go out and engage in
normal activities. Their data show that within
the original Asean-5 plus Vietnam, Filipinos
remain farthest from restoring pre-pandemic
levels of mobility, hence least confident to
move about, even as community mobility in
Vietnam, Singapore, and Thailand have already
gone well beyond pre-pandemic levels.
My Ateneo colleague Dean Nandy Aldaba aptly sums
it in a recent article: “Even (with) adequate
fiscal stimulus to firms, entrepreneurs, workers
and poor households, without the confidence
built among them, no economic recovery program
will succeed. Firms will not borrow because they
are not assured that their market will return.
Workers will not commute if their safety will be
compromised. They will not report to their
factories if health protocols are not in place.
Consumers will not go to restaurants or malls if
the proper regulations on social distancing are
not being implemented….”
All told, stimulus without confidence is like
pushing on a string. |
_______________________________________________________________________________________ |
CA upholds
BSP, PDIC closure of Batangas rural bank
By Benjamin Pulta September 2, 2020, 2:40 pm
MANILA –
A ruling by the Court of Appeals (CA) upheld a
decision of government banking regulators to
shut down a rural bank in Batangas in 2018 for
serious lapses in its management.
In a 20-page decision written by Associate
Justice Ramon Bato Jr. dated August 25 and made
available on Tuesday, the CA's sixth division
dismissed the petition filed by Gerardo
Castillo, majority stockholder of the Tiaong
Rural Bank Inc. (TRBI) against the Philippine
Deposit Insurance Corp. (PDIC) and the Monetary
Board of the Bangko Sentral ng Pilipinas (BSP).
In August 2018, the BSP issued a resolution
prohibiting TRBI from doing business while the
PDIC issued a notice of closure against it.
The decision was based on the findings of the
BSP's examination department (ED) on the bank,
which has eight branches in Calabarzon, during a
regular examination in July 2017.
The ED noted several unaddressed weaknesses
leading to net losses which continue to deplete
TRBI's capital.
It also noted that while TRBI reported that its
capital adequacy ratio (CAR) and capital were
above the government's requirements, in truth,
its adjusted capital was only PHP38.9 million
and has a capital deficiency of PHP60.7 million.
The BSP also noted that "there was no express
commitment from the stockholders on the required
immediate capital infusion."
A special examination by the BSP-ED later showed
the bank's precarious financial condition.
It pointed out that TRBI is significantly
undercapitalized with a CAR of negative 21
percent and an adjusted capital of negative
PHP203.5 million, or deficient by at least
PHP300.3 million to meet the 10 percent minimum
CAR and the minimum required capital of PHP30
million.
In upholding the BSP's regulatory authority over
banks, the CA said "the BSP is not simply a
corporate entity but qualifies as an
administrative agency created to carry out a
particular governmental function, pursuant to a
constitutional mandate".
"As the country’s central monetary authority,
the Constitution expressly grants the BSP the
power of supervision over the operation of banks
(and) its finding on matters of bank closure is
accorded technical deference and even finality
when supported by substantial evidence. Verily,
by reason of the special knowledge and expertise
of administrative departments over matters
falling within their jurisdiction, they are in a
better position to pass judgment thereon and
their findings of fact in that regard are
generally accorded respect, if not finality, by
the courts,” the CA said. (PNA) |
_______________________________________________________________________________________ |
Thrift, rural
banks back proposed tweaks to Agri-Agra credit
quotas
September 1, 2020 | 12:03 am
SMALL
LENDERS expressed support for the central bank’s
proposal to include sustainable financing as
part of their compliance with the mandated
credit under the Agri-Agra Law as this will help
boost the capital of pandemic-hit businesses
geared towards sustainability.
Rural Bankers Association of the Philippines
(RBAP) President Elizabeth C. Timbol said
allowing banks to count green loans as part of
their Agri-Agra (agriculture and agrarian)
compliance will broaden business opportunities
for borrowers and farm owners.
“They will be encouraged to make their farms
more productive. Also, by making their farms as
tourism sites will help generate employment
within their locality,” Ms. Timbol said in a
Viber message.
She added the proposal can create a ripple
effect in the economy amid job losses among
Filipinos here and abroad amid the coronavirus
pandemic.
Chamber of Thrift Banks (CTB) Executive Director
Suzanne I. Felix also expressed support for the
proposal.
“Green financing as a mode of compliance with
Agri-Agra is a signal for banks to refocus their
strategy towards sectors and activities that
support sustainable recovery, and should provide
various opportunities for them,” she said in an
e-mailed reply to questions.
Ms. Felix said they also support House Bill 6134
which seeks to amend the Agri-Agra Law to
include green finance projects as compliance
with the credit quota. The bill has been
approved by the House of Representatives and was
received by the Senate in March.
Meanwhile, Senate Bill 1585 filed on June seeks
to amend the Agri-Agra Credit Act by including
investments and grants for agriculture
activities as part of the mandated credit. It
also seeks to remove the distinction between
agriculture and agrarian reform lending and to
include fishery activities, agriculture
mechanization, agri-tourism and green finance
projects as part of compliance. The bill is
still pending in the Senate.
“We trust that legislation on Agri-Agra lending
will continue to be adjusted to realistic
levels, for the good not only of the farmers but
of the Filipino people. Instead of imposing
penalties, we earlier proposed the granting of
incentives to encourage banks to lend to the
Agri-Agra sector,” Ms. Felix said.
Bangko Sentral ng Pilipinas (BSP) Governor
Benjamin E. Diokno last week said they are
looking at counting financing for green and
sustainable projects as compliance with Republic
Act 10000 or the Agri-Agra Reform Credit Act.
The law requires banks to disburse 25% of their
loanable funds to the agriculture and agrarian
reform sector in a bid to boost productivity and
growth.
Mr. Diokno said they observed banks would rather
pay the 0.5% penalty instead of complying with
the agriculture and agrarian reform lending
quotas of 15% and 10%, respectively, as these
sectors are considered high risk. Banks’ credit
to the agriculture and agrarian reform segments
were only at 10.8% and 1.09%, respectively, of
their total loan book, he added.
In May, the BSP issued Circular No. 1085 which
lays out a sustainable finance framework for
banks. Lenders will be given three years to
streamline their operations in accordance with
the framework, which is based on sustainability
principles through environmental and social risk
management systems.
BSP data showed 10.6% of the banking system’s
total loans in 2019 were disbursed to finance
projects that are in line with the Sustainable
Development Goals of the United Nations. — Luz
Wendy T. Noble |
_______________________________________________________________________________________ |
Small banks
can withstand COVID-19 – BSP
Published August 16, 2020, 9:00 PM
by Lee C. Chipongian
The rural
and cooperative banking sector can cope against
the adverse impact of the COVID-19 pandemic up
to three months, based on the Bangko Sentral ng
Pilipinas (BSP) stress tests and simulation
exercises.
BSP Governor Benjamin E. Diokno said both
simulation exercises and stress tests done on
rural and cooperative banks indicated its
capability to tolerate write offs and losses due
to the public health crisis, even losses of up
to 20 percent on their net interest income.
The small banks, he said, can “withstand and
assume simultaneous write off of interest income
on total loans and non interest income from fees
and commissions up to three months and this is
expected as banks recorded high pre-shock
capital adequacy ratios (CAR).”
Both the rural and cooperative banks have above
10 percent CAR which is the minimum, after being
subjected to stress tests, according to the BSP
chief.
Diokno said that they did simulations – using
end-March 2020 data — on the small banks’
profitability if they incur a five, ten or even
20 percent net interest income losses for the
first, second and third lockdown months.
“This scenario is tested against the banks
baseline CAR whereas the use of net interest
income in this exercise enables us to capture
the impact on interest income from both loans
and other financial assets as well as on
interest expenses from all deposit liabilities
and other sources of funding such as bonds
payable, bills payable and unsecured subordinate
debts, among others,” said Diokno.
He noted that the results of these tests showed
the CAR of rural and cooperative banks “remain
comfortably above 15 percent over the first,
second and third month period of the quarantine
even under a 20 percent assumed reduction in net
interest income.”
Rural and cooperative banks’ latest CAR was at
19.5 percent, more than the 10 percent minimum.
“These banks have profitable operations and
ample liquidity,” said Diokno, adding that
“rural and cooperative banks are poised to
continue supporting rural economic activities as
the industry faces the COVID-19 pandemic.”
Based on a BSP survey, small banks were able to
return to normal operations after adopting to
the requirements of community quarantine
restrictions, partly with the help of
technology.
At the end of the first quarter, rural and
cooperative banks have total assets of P265.7
billion, up 5.9 percent year-on-year. This is
about 1.4 percent of total banking resources,
with the big banks accounting for 92.7 percent.
Loans and deposits were also up by 6.1 percent
and 4.8 percent year-on-year to P188.2 billion
and P151.7 billion, respectively. As of
end-March, the loan quality also improved as its
non-performing loans ratio fell to 11.2 percent
from 11.6 percent in 2019.
The BSP has been performing simulations to test
for CAR to determine the hits of the pandemic on
all banks, specifically the impact of the
“Bayanihan to Heal As One Act”.
Generally and so far, results indicate that all
banking groups from the large commercial banks,
thrift, to rural and cooperative banks have the
capability to meet the required minimum CAR of
10 percent.
“COVID-19 may exert pressure on the quality of
bank loan portfolio, but we expect the impact to
be manageable,” said Diokno.
To help the small banks during the pandemic, the
BSP implemented measures such as reducing the
reserve requirement ratio (RRR) for rural and
cooperative banks by 100 basis points, to
increase its lending to micro, small and medium
enterprises (MSMEs).
As of July 23, Diokno said 66 rural and
cooperative banks have released about P1.5
billion loans to MSMEs as alternative compliance
with the RRR.
The BSP is supervising 419 rural banks and 25
cooperative banks as of end-July this year. |
_______________________________________________________________________________________ |
Rediscount
facility untapped amid BSP’s easing measures
August 11, 2020 | 12:01 am
BANKS did not tap the rediscount facility of the
Bangko Sentral ng Pilipinas (BSP) in July as
policy easing measures have already boosted
liquidity in the market.
“For the period covering Jan. 1 to July 31,
total availments under the peso rediscount
facility remains at P20.7 billion as there was
no availment in July,” the central bank said in
a statement on Monday.
Lenders last touched the facility in March and
April for peso rediscount loans worth P20.7
billion.
This is lower compared to the P116.574 billion
in loans from the facility recorded from January
to July 2019.
Banks likewise left the facility untapped from
November 2019 to February 2020.
The BSP’s rediscount facility allows banks to
get hold of additional money supply by posting
their collectibles from clients as collateral.
In turn, the banks may use the cash — in peso,
dollar or yen — to disburse more loans for
corporate or retail clients and service
unexpected withdrawals.
The halt in rediscount availments is a sign of
high liquidity in the market, said UnionBank of
the Philippines, Inc. Chief Economist Ruben
Carlo O. Asuncion.
“We know that liquidity has been high recently
with the various monetary actions of the BSP
since February to address the impact of the
COVID-19 pandemic. Demand for the facility may
remain subdued as long as liquidity remains high
in the coming months,” Mr. Asuncion said in an
e-mail.
The BSP slashed the reserve requirement of
universal and big banks by 200 basis points
(bps) to 12% in April to provide a liquidity
boost during the lockdown. The move freed up
some P200 billion into the financial system.
The central bank in July also reduced the
reserve requirement ratios of thrift and rural
banks by 100 bps to three percent and two
percent, respectively, releasing about P10
billion in liquidity.
The BSP has also allowed banks’ lending to
micro-, small, and medium-sized enterprises as
well as to some large enterprises hit by the
pandemic to count as reserve compliance.
AUGUST RATES
Meanwhile, for this month, all peso loans,
regardless of maturity, will be priced at 2.75%,
which is the lending rate of the BSP.
For dollar-denominated loans, applicable rates
are at 2.24875% for all tenors.
Yen loans are priced at 1.94483% regardless of
maturity. — Luz Wendy |
_______________________________________________________________________________________ |
COVID-19
versus hunger: The cruel choice
By: Mahar Mangahas - @inquirerdotnet
Philippine Daily Inquirer / 05:05 AM July 25,
2020
In 2020, the Philippine hunger rate took a
sudden, very sad, U-turn.
After falling to only 8.8 percent of families in
December 2019, its lowest proportion since 2004,
it leaped to 16.7 percent last May, the second
month of the pandemic-cum-lockdown, and then
rose further to 20.9 percent by July.
The new level is the highest since mid-2014 (SWS
July 3-6, 2020 National Mobile Phone
Survey-Report No. 5: “Hunger among families
climbs to 20.9%,” www.sws.org.ph, 7/21/20).
Hungry families are in the millions. In December
2019, a benign time, about 2.1 million families
experienced involuntary hunger. Of these, 1.8
million suffered moderately (hungry only once or
else a few times, in the past three months) and
0.3 million suffered severely (often or else
always, in that same period).
By early July, the moderately hungry were
already 3.9 million families, and the severely
hungry reached 1.3 million. Thus, in the new
survey, severe hunger is now one-third of total
hunger, whereas last December it was only
one-seventh.
From 2019 to 2020, the hunger rate rose all over
the country. From last May to early July, it
rose in the Visayas and also in the Balance of
Luzon, was steady in Mindanao, and fell in Metro
Manila. However, the composition of hunger
turned more severe everywhere, including
Mindanao and Metro Manila. Have the social
amelioration funds run out?
To estimate the number of hungry individuals,
multiply the number of hungry families by 6—not
just 5, since poor/hungry families are above
average in size. The 5 million hungry families,
times 6, implies 30 million hungry Filipinos.
The number of individuals suffering specifically
from hunger is what may be compared to the
number of individuals afflicted with COVID-19.
Other types of suffering caused by hunger, such
as illnesses, deaths, and underdevelopment of
the mental capacities of malnourished young
children, would be additional.
Unlike in the past, the high hunger rate in 2020
is not due to a spike in food prices. Instead,
it is due to the radical disruption in very many
people’s livelihoods, and hence their general
purchasing power, for food and other basic
needs. This disruption was brought on by (a) the
government-mandated closure of many workplaces,
and (b) its shutdown of basic public
transportation, preventing workers from going to
the workplaces allowed to open. The prolonged
grounding of jeepneys has obviously led to
hunger among the families of the jeepney
drivers.
On the other hand, COVID-19 victims are in the
tens of thousands. There’s no getting away from
COVID-19 statistics; they are updated daily by
the government, and well publicized. The DOH PH
COVID-19 Viber group has a national tally of
1,837 deaths, 23,281 recoveries, and 45,646
active cases, as of 7/23/20. The active cases
are 8 percent asymptomatic, 91 percent mild, and
0.8 percent severe/critical. These add up to a
national total of 70,764 cases, active and
inactive.
For every COVID-19 victim, there are of course
others that suffer, such as family members,
relatives, and friends, who look after the
victim, help with the medical care and other
needs, and grieve together. They may be counted
as well, but it will not make the number of
COVID-19 sufferers reach even a million.
Moral hazard in forming policies to cope with
COVID-19. I can’t help but be conscious that the
politicians and bureaucrats who control the
lockdown rules are not the ones who will be too
inconvenienced by them. Their posts and reward
systems have been unaffected. They have private
cars for their personal mobility, and they are
“authorized to be outside residence.”
In short, these are people who are quite safe
from hunger. Their real worry is that they and
their friends and relatives might be infected by
COVID-19. Their apparent priority is to prevent
the spread of the infection, regardless of the
cost to the general public in terms of hunger.
Well, what if the membership of the Inter-Agency
Task Force for the Management of Emerging
Infectious Diseases were expanded to include a
fair number of jeepney drivers, factory workers,
teachers, and stranded overseas workers? |
_______________________________________________________________________________________ |
BSP ready to
ease further when needed, awaiting right
conditions
July 13, 2020 | 7:12 pm
THE central bank stands ready to ease monetary
policy, but views current money supply as ample
and is gauging when the financial system can
absorb extra liquidity, Bangko Sentral ng
Pilipinas (BSP) Governor Benjamin E. Diokno
said.
The Monetary Board has slashed 200 basis points
(bps) out of the 400 bps it is authorized to
reduce this year to add liquidity into the
financial system during the pandemic. This has
lowered the reserve requirement ratio (RRR) for
universal and commercial lenders to 12% while
the RRR for thrift and rural banks have been
maintained at 4% and 3%, respectively.
“RRR cut, if ever, will be for big banks. The
RRR for thrift and rural banks are already low
and they would benefit the most from (Monetary
Board) policy that considers new lending to
MSMEs (micro, small, and medium-sized
enterprises) as in compliance with reserve
requirements,” Mr. Diokno said in a text message
to BusinessWorld Monday.
The central bank has allowed banks to include
their lending to small businesses as well as
large enterprises as an alternate means of
reserve compliance during the pandemic.
So far, the BSP said P45 billion worth of loans
to MSMEs has been used by banks, most of which
rural lenders, to comply with reserve
requirements.
Earlier this month, the Chamber of Thrift Banks
said it is pushing for a further 100 basis-point
reduction to the sector’s current reserve
requirement of 4%, saying that a decrease
signifies additional billions of pesos in
liquidity that could be utilized to provide
credit for embattled sectors.
Mr. Diokno said there is “ample liquidity” in
the market currently.
He added the monetary authorities can afford to
bring down the reserve requirement for big banks
to 10% “if there’s a need for it.”
“We’re just pausing to make sure that the
financial sector is able to digest all these
monetary easing that we’ve done,” Mr. Diokno
said in an interview with ABS-CBN News Channel
early Monday.
The central bank has also brought down policy
rates to record lows through 175-bps worth of
easing this year. Its latest 50-bps rate cut in
June trimmed the overnight reverse repurchase,
lending, and deposit facilities to 2.25%, 2.75%,
and 1.75%, respectively.
The uptick in the savings rate is an indication
of improvement in liquidity, according to
Security Bank Corp. Chief Economist Robert Dan
J. Roces.
BSP data showed the savings growth rate inching
up during the pandemic. Savings deposit growth
was 13.4% in May from 11.9% in January.
“Money saved is money not spent, so a higher
savings rate could also mean less consumption
but high liquidity,” he said in a text message.
“For consumers facing uncertainties, the lower
interest rates may not necessarily help in the
near term and they will opt to save. But since
borrowing costs are lower, this should become
attractive over the longer term,” Mr. Roces
added.
Domestic liquidity or M3 rose 16.6% year on year
in May from 16.2% in April. Despite this, growth
of outstanding loans growth issued by universal
and commercial banks was 11.3% in May, against
12.7% in April. — Luz Wendy T. Noblee
hotline at (02) 8-405-7000 or at PLDT Domestic
Toll Free 1-800-10-405-7000. (Landbank CDO) |
_______________________________________________________________________________________ |
LANDBANK
offers loan package for COVID19-affected CFIs
Philippine Information Agency
10 Jun 2020, 18:38 GMT+10
CAGAYAN DE ORO CITY, June 10 - The Countryside
Financial Institutions Enhancement Program
(CFIEP), a joint program of Bangko Sentral ng
Pilipinas (BSP), Philippine Deposit Insurance
Corporation (PDIC) and Land Bank of the
Philippines (LANDBANK), is rolling-out a new
lending program to assist Countryside Financial
Institutions (CFIs) that have been affected by
natural calamities, man-made disasters, pests
and diseases, and viral infections or outbreaks,
including the coronavirus disease (COVID-19)
pandemic.
The Countryside Financial Institutions
Enhancement Program - 2020 Calamity Assistance
Program (CFIEP-2020 CAP) lending program will
provide additional working capital to
Cooperative Banks, Rural Banks and Thrift Banks.
The credit assistance may augment liquidity of
CFIs that are affected by extensions or defaults
of its borrowers as a result of
calamities/disasters/viral infections, and
thereby encourage CFIs to continue lending,
particularly to the agricultural sector.
"In the first three months of the year alone,
our country has been hit by various calamities
that have caused unfavorable outcomes to CFIs.
We hope that the CFIEP2020 CAP will help them
recover from the damages and disruptions in
their operations, and enable them to restore
operational cash flows, thus, allowing them to
continue lending to small farmers," LANDBANK
President and CEO Cecilia C. Borromeo said.
The program will be made available by LANDBANK
to eligible CFIs at an amount equivalent to 90%
of their affected existing portfolio or P10
million per CFI, whichever is lower, provided
that the loan amount does not exceed the CFI's
borrowing capacity, as per LANDBANK's existing
policy.
The loan shall bear an affordable interest rate
of 4.5% per annum, fixed for one year and
subject to annual repricing thereafter. The loan
shall be payable up to a maximum of five (5)
years, with up to one year grace period on
principal and interest payments.
The CFIs are also expected to relend the fund to
their affected end-borrowers at concessional
interest rates.
Interested borrowers may contact the nearest
open LANDBANK Lending Center or Branch
nationwide, or call LANDBANK's customer service
hotline at (02) 8-405-7000 or at PLDT Domestic
Toll Free 1-800-10-405-7000. (Landbank CDO) |
_______________________________________________________________________________________ |
Boosting our
farm co-ops
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:06 AM June 09,
2020
The biggest challenge in Philippine agriculture
could well be the highly fragmented structure of
our farms. Recently, I wrote of how nearly 9 out
of 10 farms are under 3 hectares, and those less
than a hectare account for the majority (57
percent). The 2012 Census of Agriculture counted
5.56 million farmholdings spanning 7.19 million
hectares, averaging a mere 1.29 hectares each.
In a recent dialogue between officers of the
Coalition for Agriculture Modernization in the
Philippines (CAMP) and Department of Agriculture
(DA) Secretary William Dar, CAMP chair Dr. Emil
Javier suggested ways on how we can best help
farmers under a fragmented farm structure.
Javier, a National Scientist who was also former
science minister and University of the
Philippines president, highlighted the crucial
role of farm cooperatives, as already well
demonstrated in our more successful neighbors.
Even as cooperativism is alive and well in the
country, only 1,315 of our 18,065 operating
co-ops in 2018 were agriculture or agrarian
reform co-ops. In contrast, Vietnam has more
than 10,000, while the latest data I could find
for Thailand counted 6,712 farm co-ops in 2006.
While small farms are also dominant in these two
neighbors, they have been far better organized
and collectivized, likely explaining why their
farm sectors perform far better than ours.
There was a time when we actually taught our now
more successful neighbors how to run farm
co-ops. The former Agricultural Credit and
Cooperative Institute (ACCI) in UP Los Baños,
now known as the Institute of Cooperatives and
Bio-Enterprise Development (Icoped), was
established out of a felt need for such an
institution expressed in 1956 by delegates from
Cambodia, China, Korea, Thailand, Vietnam, and
the Philippines. In the heyday of our Farmers’
Cooperative Marketing Associations or Facomas in
the 1960s—still nostalgically remembered by Dr.
Javier and agriculturists of his
generation—trainees from Korea, Thailand, and
other neighbors came to ACCI to seek mentoring
on running successful farm co-ops.
Now, over five decades later, our farmers’
cooperatives are struggling, and success stories
are few and far between. They have taken on
different forms over the decades, from the
Facomas of the 1950s and ’60s, the short-lived
Marcos-era Samahang Nayon of the ’70s, agrarian
reform beneficiaries’ groups in the late ’80s,
irrigators’ associations in the ’90s and
onwards, and most recently, sugarcane block
farms. The general picture is one where
Philippine farm co-ops have largely failed.
But CAMP believes that our neighbors’ success in
harnessing farm co-ops for agricultural
development shows that they continue to be a
viable instrument for getting Philippine
agriculture moving in step with our neighbors.
The only way our agricultural sector can raise
productivity to meet our rapidly growing
population’s food needs is for them to group
together in larger farming units to achieve
economies of scale. And the only way government
can ever be effective in helping small Filipino
farmers is not to have to deal individually with
5.56 million farmers, but with groups of them
organized into co-ops and other forms of farm
clusters or collectives. And that, Dr. Javier
told Secretary Dar, is why we must not give up
on farm cooperatives.
Why have Filipino farm co-ops been relatively
weak? I noted that time and again, cooperatives
have fallen flat with weak leadership, and this
is most often the reason most of our farm co-ops
are short-lived. Conversely, successful co-ops
are those with strong and competent leaders. A
neglected public investment we need to boost is
for a much stronger cooperatives leadership
training system, particularly focused on farm
co-op leaders. The National Association of
Training Centers for Cooperatives has been very
helpful, but the DA must also put in money to
achieve a more encompassing and sustained
public-private partnership for cooperatives
leadership development, well beyond what
UPLB-Icoped can currently handle.
South Korea’s system of Saemaul Undong training
institutes may hold useful lessons on approach
and methods. Maybe it’s time we learned
something from them in return. |
_______________________________________________________________________________________ |
Creative tax
adjustments
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:30 AM May 22,
2020
Governments are now out to find ways to revive
their ailing economies in the wake of the
pandemic. It’s already a foregone conclusion
that the second quarter will show dire economic
numbers on the incomes and jobs front. If
government statisticians were able to proceed
with the regular April round of the quarterly
Labor Force Survey in the midst of lockdown, a
drastic jump in unemployment (from 5.3 percent
last January) up to the double digits is quite
likely.
The sobering fact is that many of the local jobs
frozen by the lockdown will not return beyond
the pandemic. Restaurants are just one example
where downscaling of the workforce will be
inevitable. Many other types of business where
physical distancing forces scaled-down
operations will similarly let go of workers, if
not close down altogether. On top of that, tens
of thousands of our overseas workers are
expected to return home, having lost their jobs
in their similarly affected host economies. We
need to protect existing jobs, but we must
create even more for the substantial numbers of
displaced workers as well.
This is why government’s ongoing tax reform
program has to be part of the effort to protect
and create even more jobs. The Department of
Finance (DOF) has been quick to make needed
adjustments on the major tax proposal now in the
legislative mill, known as Citira (Corporate
Income Tax and Incentives Rationalization Act).
Partly giving in to earlier objections, but
mostly in view of the urgent need to revive the
battered economy, the DOF is now prepared to
forego large revenues for the sake of economic
revival—up to P42 billion this year, and P625
billion over the next five years. After all,
like most other governments in the world, ours
has accepted that it would have to incur a much
larger deficit now and effectively absorb a
higher level of indebtedness in the face of
urgent needs. When the patient is in the
sickbed, you first worry about bringing her back
to health, before fretting over the hospital
bills.
Thus, Citira—previously dubbed Trabaho, for Tax
Reform for Attracting Better and High-Quality
Opportunities, and before that, as Package 2 of
TRAIN or Tax Reform for Acceleration and
Inclusion—has undergone yet another name change,
this time to CREATE, for Corporate Recovery and
Tax Incentives for Enterprises. Even as it aims
for the same ultimate tax changes pursued by
Citira, the new name reflects its primary
motivation, which leads to differences in the
timing and manner of achieving the intended
outcomes. The essence of the reform lies in two
changes: (1) reduce the corporate income tax
rate from 30 to 20 percent ultimately, to better
align ourselves with the rest of our Asean
neighbors, whose current rates range from 17 to
25 percent; and (2) rationalize various tax
incentives that have bled the government of
massive revenues in past years, many of them
having been found unwarranted and unnecessary.
On the first, Citira would have lowered the tax
rate yearly by one percentage point for 10 years
(presumably to ease government’s revenue
losses); CREATE will immediately reduce the rate
to 25 percent until 2022, then lower it one
percentage point yearly till it reaches 20
percent by 2027. On the second, Citira would
have phased out perpetual incentives currently
enjoyed by eligible firms within 2 to 7 years;
CREATE lengthens that period to 4 to 9 years.
Net operating losses incurred in 2020 may also
be carried over up to five years, a relief to
firms badly hit this year.
An important new feature allows government to
offer tailored incentives to targeted major
investors, something already done for years by
our competing Asean neighbors. Using this
strategically, Indonesia has reportedly grabbed
a large share of investments exiting China
because of both COVID-19 and the US-China trade
war. Some worry that this authority could be
misused and abused by a corrupt government. But
like what I’ve said of the national ID, any good
thing in the wrong hands could be used for evil
ends. That’s why we need to ensure that we vote
responsible leaders into office.
Via tax reforms or otherwise, now indeed is the
time to create economic opportunities. |
_______________________________________________________________________________________ |
PARC ExCom
confirms LBP’s one-year moratorium relief for
payment of farmer's amortization
By DAR Published on April 25, 2020
QUEZON CITY, April 25 -- The Presidential
Agrarian Reform Council Executive Committee
(PARC-ExCom) has affirmed and confirmed the
Landbank of the Philippines (LBP) Board
Resolution No. 20-256 entitled “Relief Packages
for LANDBANK Customers Affected by COVID-19”
granting one (1) year moratorium for the payment
of the farmer’s amortizations with no write-off
on principal and/or interest payments to be
allowed through PARC-ExCom Resolution No.
2020-SP-02 dated April 8, 2020.
PARC Council Secretary and DAR Undersecretary
for Legal Affairs Office (LAO) Atty. Luis
Meinrado C. Pañgulayan said the matter was
unanimously supported and approved by the
members of the PARC ExCom during its Special
Meeting via video conference on April 8, 2020.
He said the PARC ExCom supports the initiatives
of the LBP in providing immediate response and
relief to the ARBs who were greatly affected by
the global pandemic.
Pañgulayan emphasized that the previous PARC
ExCom Resolution No. 2016-132-02 provides for
the continuing implementation of the moratorium
on Agrarian Reform Receivables (ARR)/land
amortization payment of ARBs in areas to be
affected by natural or man-made calamities.
LBP Board Resolution No. 20-256 signed last
March 31, 2020 imposing a one-year moratorium on
the amortization payment of agrarian reform
beneficiaries (ARBs) was passed to assist the
ARBs amidst the economic difficulties as a
result of the enhanced community quarantine.
This LBP board resolution has now been formally
affirmed and confirmed by the PARC ExCom.
PARC is the highest policy-making body of the
Comprehensive Agrarian Reform Program (CARP).
Based on Republic Act 6657 or the Comprehensive
Agrarian Reform Law of 1988, the PARC is
composed of the President of the Philippines as
Chairman, the Secretary of Agrarian Reform as
Vice-Chairman with the Secretaries of the
Departments of Agriculture; Environment and
Natural Resources; Budget and Management; Local
Government: Public Works and Highways; Trade and
Industry; Finance; Labor and Employment as
members. (DAR) |
_______________________________________________________________________________________ |
Speaker Cayetano urges banks to offer
loans to MSMEs, farmers affected by COVID-19
pandemic
Published
April 22, 2020 11:17am
By ERWIN COLCOL, GMA News
Speaker Alan Peter Cayetano called on government
and private banks to offer loans to micro, small
and medium-scale enterprises (MSMEs) as well as
farmers whose livelihoods were affected by the
ongoing coronavirus disease 2019 (COVID-19)
pandemic.
According to Cayetano, the problem of the
financial system is how to encourage potential
small borrowers to apply for loans from
banks.“The purpose is to help people but at the
same time keep the financial institutions
healthy,” Cayetano said during the virtual
meeting of the House Defeat COVID-19 Committee
on Tuesday.
He pointed out that small borrowers are
"intimidated by the formal banking system."
"Even farmers with land titles who apply for
small loans are told the application/approval
process is very tedious. They are being
dissuaded,” he said.
Cayetano urged the resource persons in the
virtual meeting coming from the economic sector
to simplify and shorten the loan process and
minimize the needed requirements, but without
affecting their respective financial
institutions.
The resource persons include Finance Secretary
Carlos Dominguez III, Bangko Sentral ng
Pilipinas Governor Benjamin Diokno, Land Bank
president Cecilia Borromeo, and Government
Service Insurance System general manager Rolando
Macasaet.
Borromeo, in response, said: “Yes, we can strike
a good balance of maintaining prudence and the
other due diligence processes that we need to
undertake before we lend out precious government
funds.”
“We did it in the case of the P15,000-loan to
farmers, We trimmed down the requirements and
shortened the process. One key success factor
was that we had a list of beneficiaries
identified by Department of Agriculture. So we
can do it in the case of small and medium-scale
enterprises. We will continue to look for
solutions,” she added.
For his part, Diokno said the BSP has already
eased the requirement for banks to set aside a
part of their funds as reserves.
“We have freed up from P180 billion to P200
billion and we asked banks to lend the money to
MSMEs,” he said.
Dominguez, meanwhile, said the government,
through the Philippine Export and Foreign Loan
Guarantee Corp., would allow for a large portion
of loans banks extended to MSMEs to encourage
lending to small borrowers.
A measure is currently being proposed in the
House to help mitigate the impact of the
COVID-19 crisis to the country's economy.
The proposal, introduced by Albay Representative
Joey Salceda and Marikina City Representative
Stella Quimbo, will be called the "Philippine
Economic Recovery Act."
Cayetano said they are still waiting for the
executive branch's version of the proposal and
the input of the Bangko Sentral ng Pilipinas,
but they are also already hearing the measure in
a technical working group.
"We'll fast-track all of this and kung merong
certificate of urgency ang Malacañang just like
the Bayanihan to Heal As One, more time is
better," he said.
"Regardless of the new normal, we commit that
Congress will be relevant, reliable and
responsive," he added. |
_______________________________________________________________________________________ |
BSP: Current policy can accommodate ECQ
extension
April 20,
2020 | 12:31 amFacebookTwitterLinke
THE central bank’s current policy stance can
accommodate the impact of a possible extension
or expansion of the enhanced community
quarantine (ECQ), Bangko Sentral ng Pilipinas
(BSP) Governor Benjamin E. Diokno said.
“The BSP’s recent moves are designed to be
prospective, given our strong economic
fundamentals,” Mr. Diokno said in a text message
on Sunday. “We think the BSP is ahead of the
curve.”
Presidential Spokesperson Harry L. Roque said in
a radio interview on Saturday the ECQ could be
extended or modified after April 30. A modified
lockdown, according to him, will depend on
geographical location, comorbidity or
industries.
Earlier, Mr. Roque said a total lockdown could
be enforced as the virus has yet to be contained
and as cases continue to rise.
Resigned Socioeconomic Planning Secretary
Ernesto M. Pernia earlier said extending the
lockdown to May would be “difficult” and had
suggested a gradual lifting that will allow the
partial resumption of public transportation and
mall operations.
The coronavirus disease 2019 (COVID-19) has
already sickened 6,259 as of Sunday, according
to the Department of Health. The death toll has
reached 409, while recoveries have risen to 572.
Mr. Diokno said in an interview with ABS-CBN
News Channel that its latest move to include
lending to micro-, small- and medium-scale
enterprises (MSMEs) as part of banks’ compliance
with reserve requirements could be equivalent to
a cut of more than two percentage points in the
reserve ratio.
The move was announced along with the latest
50-basis-point (bp) off-cycle rate cut from the
central bank last week, barely a month since it
reduced policy rates by the same magnitude in
March.
This brought the overnight reverse repurchase,
lending and deposit rates to record lows of
2.75%, 3.25% and 2.25%, respectively.
The BSP has already slashed rates by a total of
125 bps for this year, following the 75 bps in
cuts in 2019. This means the BSP has completely
reversed the 175 bps in hikes done in 2018.
Meanwhile, the central bank also reduced the
reserve requirement ratio (RRR) for big banks by
200 bps in early April to 12%. Although it kept
RRR for smaller thrift and rural lenders at four
percent and three percent, the BSP shaved 400
bps off the minimum liquidity ratio (MLR) of
stand-alone thrift, rural and cooperative banks
to 16% until end-2020 to provide a liquidity
boost for smaller lenders.
LOCKDOWN EXTENSION TO HIT FIRMS
According to Rizal Commercial Banking Corp.
Chief Economist Michael L. Ricafort, another ECQ
extension will take a toll on businesses.
“For the hardest hit business sectors, every two
weeks of lockdown extension is equivalent to
about four percent of production or income lost
on an annualized basis,” Mr. Ricafort said in a
text message.
But this is not to say an extension should not
be taken into consideration as this is meant to
contain the outbreak that could have greater
impact on the global economy if left unchecked,
he said.
“This is also a dilemma faced by many countries
around the world — in whether or not to extend
lockdowns,” Mr. Ricafort said.
UnionBank of the Philippines, Inc. Chief
Economist Ruben Carlo O. Asuncion is also of the
view that a modified quarantine could be the
“ideal” way to ensure economic recovery.
“A shift to some form of a modified community
quarantine is most ideal to help jumpstart the
economy, but a probable extension may prove
essential as a form of premature uncoiling of
current interventions may result in a resurgence
of cases,” Mr. Asuncion said in a text message.
He cited data from the Organization for Economic
Cooperation and Development which estimates that
countries’ gross domestic product (GDP) could
lose 2% for every month in lockdown.
“A total lockdown from March 15 to May 15 is
equivalent to four percent GDP decline, much of
the average GDP output of the Philippines in
recent years. We are not even talking about
unemployment here,” he said.
“A careful balance must be adopted to help
restrain the virus and jumpstarting the
economy.”
The Philippine economy grew 5.9% in 2019. Prior
to the outbreak, the government targeted GDP
growth of 6.5% to 7.5% this year.
As the pandemic continues, Finance Secretary
Carlos G. Dominguez III has said the country may
see flat or zero growth or as much as a one
percent contraction in GDP. — Luz Wendy T. Noble |
_______________________________________________________________________________________ |
ECQ vs economy
By:
Cielito F. Habito - @inquirerdotnet Philippine
Daily Inquirer / 04:04 AM April 21, 2020
It has been said that containment policies like
the enhanced community quarantine (ECQ) now on
its sixth week “flatten the medical curve, but
steepen the recession curve.” The implication is
that there is a direct tradeoff between
safeguarding public health and saving lives on
one hand, and maintaining economic stability and
protecting people’s economic well-being on the
other. That is, the more we try to save lives
from the pandemic, the deeper we are driving the
economy down to ruin — and some argue that the
cost to human lives could be worse.Economies
have indeed been brought to a virtual standstill
as most economic activities have been suspended,
except for essential goods and services, and
people are confined to their homes, allowed only
a minimum of movement. The International
Monetary Fund swung from an upbeat global
economic growth forecast of 3.3 percent in
January, down to a dramatically scaled down 0.6
percent, and now to a rather grim -3 percent —
all in a matter of weeks, and with a caveat that
this may still be too optimistic.
Until this latest pandemic struck, an economic
standstill so widespread as to encompass the
whole globe was beyond anyone’s imagination, and
certainly unprecedented in the lifetimes of
those living today. It’s so new and so strange
to most of us, that many are still unable to
fathom the profound impact it will have on our
economy, and our lives. I’m surprised to hear
some pundits boldly proclaim that the Philippine
economy can still grow this year, even as larger
and richer economies had already declared
recessions even before the IMF came up with its
latest prognosis. While I would love to be wrong
on this, I just cannot see how we can still
avoid a significant contraction of our economy
this year, at the rate things are going. This
means that incomes, output, and jobs will fall,
and like it or not, a large segment of the
Filipino population will suffer increased pain
and hardship this year.
How deeply can the COVID-19 crisis impact our
economy? I tried to do some quick arithmetic
with the available data to get a clearer idea.
The relevant questions to ask include: What
industries are the main drivers of the economy,
and providers of the most jobs, and how badly
are these industries hit by the COVID-19 crisis?
On the demand side, what and whose expenditures
give the biggest impetus to produce goods and
services in our economy, and how are these
expenditures being hit by the crisis?
On a sectoral level, the top three that together
contribute more than half of our GDP are
manufacturing (23 percent); wholesale and retail
trade and repair services (17 percent); and
tourism industries (13 percent). All three are
seeing deep declines, with production likely cut
by at least half during the ECQ. Similarly hit
deeply are construction and land, air and water
transport. On jobs, the top five contributors
are wholesale and retail trade; agriculture,
hunting and forestry; construction;
manufacturing; and transport and storage—all
together accounting for 28 million jobs, or
two-thirds of all workers. All except
agriculture are likely to have seen more than
half their workers idled, adding roughly 14
million to the 2 million already unemployed
beforehand.
On the spending side, the biggest impetus to our
GDP is household consumer spending, equivalent
to 68 percent of our GDP. Investments on durable
equipment make up 16 percent, followed by
government consumption spending (12 percent) and
construction spending (11 percent). Consumer
spending will be dented by the displacement of
hundreds of thousands of overseas Filipino
workers and the corresponding fall in
remittances. Other than government consumption
spending that the social amelioration program
has given a massive boost, investments in
durable equipment and construction are also
major casualties of the ECQ.
All told, my rough and conservative calculations
point to GDP contraction that could range from
-6 to -14 percent, depending on how many
quarters inactivity persists. By the looks of
it, we could be in for a recession we haven’t
seen since the politically turbulent years
following the Aquino assassination in the early
1980s. God help us. |
_______________________________________________________________________________________ |
BSP eyes ‘deeper’ policy rate cuts
April 13,
2020 | 12:33 am
THE central bank is looking at a “deeper cut” in
interest rates to help cushion the economy from
the impact of a “once-in-a-lifetime crisis”
caused by the coronavirus disease 2019
(COVID-19) pandemic, Bangko Sentral ng Pilipinas
(BSP) Governor Benjamin E. Diokno said ahead of
a policy meeting next month.
He also signaled another cut in the amount of
cash that banks need to hold as reserves to
boost liquidity in the financial system.
“While BSP has cut the policy rate by 150 bps
(basis points) since I assumed office last year,
the Philippines is now faced with a
once-in-a-lifetime crisis. It is now clear that
reverting to where we were in 2018 — policy rate
at 3.0% — is no longer an appropriate policy
goal,” Mr. Diokno said in a text message to
reporters on Sunday.
“A deeper cut is warranted in response to the
expected sharp economic slowdown,” he said,
noting that inflation is likely to settle closer
to the lower end of the BSP’s 2-4% target this
year.
The policy-setting Monetary Board (MB) has cut
rates by a total of 150 bps since 2019, almost
completely unwinding the 175 bps in hikes it
implemented in 2018 amid multi-year high
inflation.
Its latest move was 50-bp reduction on March 19,
which brought the overnight reverse repurchase
(RRP) rate — or the key policy rate — to 3.25%
and overnight lending and deposit rates to 3.75%
and 2.75%, respectively, in a bid to shield the
economy from the virus fallout.
Headline inflation eased to 2.5% in March coming
from the 2.6% in February and the 3.3% in the
same month in 2019, mainly on the back of
falling oil prices amid low demand due to
COVID-19. This brought the year-to-date average
to 2.7%, above the 2.2% expected by the BSP for
2020.
The Monetary Board will meet to discuss policy
anew on May 21.
While noting that monetary policy works with a
lag and that they will remain “data dependent,”
Mr. Diokno said governments worldwide need to
ensure a “soft landing” for their economies in
the aftermath of the pandemic.
“The monetary authorities’ job, in coordination
with fiscal authorities, is to manage a ‘soft’
landing and ensure that economic takeoff begins
quickly once the pandemic fades,” he said.
“These new realities call for bolder but
appropriate moves on the part of the BSP. The
challenge is to cushion the impact of the
economic slowdown on people, firms and the
financial system,” Mr. Diokno noted.
The central bank chief added that they will cut
lenders’ reserve requirement ratio (RRR) further
following the 200-bp reduction in universal and
commercial banks’ RRR earlier this month as they
seek to boost liquidity to support economic
activity.
The Monetary Board last month authorized Mr.
Diokno to cut RRR by a maximum of 400 bps for
the year, with potential cuts in the reserve
requirements for other banks and nonbank
financial institutions also to be explored.
“[T]he additional 200 bps cut is forthcoming
based on available data, the needs of the
economy, and the utilization of the additional
liquidity,” he said.
Mr. Diokno earlier said the 200-bp cut freed up
some P180-200 billion in liquidity.
The reserve ratios of thrift and rural banks are
at four percent and three percent, respectively.
However, the minimum liquidity ratio for
stand-alone thrift, rural and cooperative banks
was cut by 400 bps last week to 16% until
end-2020 to boost their buffers amid the
disruptions caused by the pandemic.
Before the COVID-19 outbreak, Mr. Diokno had
vowed to reduce big banks’ RRR to the
single-digit level by the end of his term in
2023.
ECONOMIC RECOVERY
Analysts said a more aggressive reduction in
both benchmark interest rates and banks’ RRR
will help ensure the country’s recovery after
the crisis.
Rizal Commercial Banking Corp. Chief Economist
Michael L. Ricafort said further monetary easing
will be in line with aggressive moves by central
banks worldwide amid the pandemic.
“There is no better time than now to further cut
interest rates and RRR to also complement the
record programs versus COVID-19 to better deal
with the economic losses especially in providing
aid to vulnerable sectors as well as to prepare
the economy for a rebound,” Mr. Ricafort said in
a text message.
Security Bank Corp. Chief Economist Robert Dan
J. Roces said Mr. Diokno’s signal is a
“proactive stance” amid easing inflation that
also factors in the transmission lags of
monetary policy.
“[I]nflationary tendencies from cuts may be
absent on the back of low oil prices which may
offset any price repercussions,” Mr. Roces said
in a text message. “[W]e can hit the ground
running in terms of recovery after ensuring that
the economy is adequately capitalized.”
UnionBank of the Philippines, Inc. Chief
Economist Ruben Carlo O. Asuncion said lower
interest rates will help the economy during this
crisis even as he warned that this could take a
toll on the peso, noting that adjustments can
wait until a “soft landing” is reached.
“The peso has been attractive because of its
spread between inflation and the existing policy
rate. If the RRP is further cut, the peso may
not be the same as it is perceived by the market
now,” Mr. Asuncion said in a text message.
“[The] BSP has the careful task of continuing to
smoothen the volatility of the peso after
further rate cuts,” he said. “It’s a difficult
balancing act. We may win or lose, but we do not
have many policy choices at this point.”
Finance Secretary Carlos G. Dominguez III said
last week the country’s gross domestic product
(GDP) will likely post flat growth or even
shrink by as much as one percent this year, as
economic activities in Luzon remain at a
standstill due to the Luzon-wide enhanced
community quarantine (ECQ) that will last until
April 30.
The estimated 1% contraction in GDP is lower
than -0.6% to 4.3% growth range seen by the
National Economic and Development Authority
(NEDA) prior to the extension of the one-month
lockdown.
NEDA last month said the low end of its growth
estimate for this year, a contraction of 0.6%,
is “still too high” if the ECQ is extended
beyond one month “or if the spread of COVID-19
is unabated even after the ECQ.”
This compares to the 5.9% GDP expansion in 2019
and the 6.5-7.5% growth target set by the
government for this year.
COVID-19 cases in the country reached 4,648 as
of Sunday, with 297 casualties, according to the
Department of Health. Recoveries totaled 197. —
L.W.T. Noble |
_______________________________________________________________________________________ |
Peso gains as BSP boosts small banks’
liquidity
April 8,
2020 | 5:56 pmFacebookTwitt
THE PESO appreciated against the greenback on
Wednesday before the Holy Week break on the back
of positive sentiment due to the central bank’s
move to boost liquidity and amid lower
coronavirus disease 2019 (COVID-19) infections
in some countries.
The local unit ended trading at P50.585 per
dollar on Wednesday, rising by 9.5 centavos from
its P50.68 close on Tuesday, according to data
from the Bankers Association of the Philippines.
The peso was also stronger by 29.5 centavos
versus its P50.88 close last Wednesday and by
13.5 centavos from its Friday finish of P50.72
per dollar.
The currency opened Wednesday’s session at
P50.60 per dollar. Its weakest showing was at
P50.695 while its strongest was at P50.58
against the greenback.
Dollars traded increased to $521 million from
$455.9 million on Tuesday.
A trader said the peso’s strength continued its
recent trend of appreciation on the back of the
Bangko Sentral ng Pilipinas’ (BSP) announcement
of a cut in the minimum liquidity ratio for
smaller banks.
“The strengthening was more of a continuation of
the trend of peso’s strength. A little bit of
risk on for us because there was a recent
announcement for liquidity ratio cut for thrift
banks so it’s a bit of easing so it’s a positive
for peso,” the trader said in a phone call.
The BSP slashed the minimum liquidity ratio
(MLR) requirement for smaller lenders to 16%
from 20% until end-2020 to boost the war chests
of thrift, rural and cooperative banks amid the
extended lockdown in Luzon.
“The BSP recognizes that the COVID-19 outbreak
and community quarantine implemented to combat
the spread of the disease has elevated the
liquidity risk exposures of banks arising
primarily from higher demand for funds by
depositors, borrowers or both,” BSP Governor
Benjamin E. Diokno said in a memorandum dated
April 7.
Earlier, the central bank cut universal and
commercial banks’ reserve requirement ratio by
200 basis points to 12% effective on April 3.
Meanwhile, another trader attributed the peso’s
gains to global optimism amid what seemed like a
plateau in the number of infections in some
virus hotspots, as well as some profit taking
before the two-day break.
“The peso appreciated from prevailing market
optimism that coronavirus-related cases are
already plateauing in major global hotspots.
There was also some cautious profit taking ahead
of possible coronavirus developments during the
Holy Week break,” the second trader said in an
e-mail. — LWTN |
_______________________________________________________________________________________ |
SRA seeks intervention as sugar price
falls
Published
April 3, 2020, 10:00 PM
By Madelaine B. Miraflor
The Sugar Regulatory Administration (SRA) had
sought interventions from the national
government after the price of sugar dropped by
P200 per 50-kilogram bag in the span of two
weeks.
“We recently saw an abnormal price drop, in some
cases as big as P200 in just two weeks, and
before this gets worse, we are appealing for
immediate intervention from the national
government,” SRA Board Members Emilio Yulo and
Roland Beltran said in a joint statement.
Yulo represents the planters in the SRA Board,
while Beltran represents the sugar millers.
The two officials said Land Bank of the
Philippines (LandBank) and other government
financial insti-tutions must step in and provide
quedan financing to the local sugar industry.
“We are afraid that the drastic drop in sugar
prices will cause a disastrous effect in the
long term period,” the SRA Board members said.
“We are still at the height of the milling
season and with the good weather, many sugar
producers are taking this opportunity to harvest
their sugar canes but many are afraid that if
the trend of prices col-lapsing will continue,
the producers will not have anything left to
even think of planting for the coming crop
year,” they added.
Figures from Victorias Milling Company, one of
the major sugar producers in the Philippines,
showed that two weeks ago, sugar price was at
the ₱1,560 to ₱1,580 per 50-kilogram bag. This
week, the price fell to ₱1,375 per 50-kilogram
bag, which is just equivalent to the cost of
producing the sweetener.
Yulo and Beltran said vast majority of the
industry’s stakeholders who are small planters
and agrarian reform beneficiaries, which
comprise about 92 percent of sugar producers,
will not be able to survive this loss,
especially during the national health crisis
brought about by the coronavirus disease 2019
(COVID-19).
According to them, LandBank, through the
intercession of Agriculture Secretary William
Dar, should immediately help address this issue
through quedan financing at very minimal
interest rates.
The other day, SRA pushed for the distribution
of financial assistance for sugar mill workers
that were displaced due to the lockdown placed
over Luzon.
In a resolution signed by Yulo and Beltran, the
agency’s management has been requested to draft
and present a national COVID-19 plan within a
week.
The plan, according to them, must include the
allotment of fund for a ‘pantawid’ assistance
for the thousands of displaced sugar mill
workers to help them tide over the lockdown.
Because of the ECQ, which shutdown public
transportation and established police
checkpoints in various areas in the region, each
sugar mill currently operates with only 25
percent of its workforce.
The word on the street is that SRA Administrator
Hermenegildo Serafica has not yet met with the
SRA Board for the primary purpose of coming up
with measures that would help the industry
sector and its players cope with the COVID-19
pandemic.
Meanwhile, Yulo and Beltran’s resolution is also
pushing for the procurement of Personal
Protective Equipment (PPES), alcohols, and other
disinfectants for the use of SRA frontliners as
well as donation to centers and hospitals in the
sugar producing areas.
The resolution also wants SRA to procure
surgical masks for distribution to marginalized
farmers, Agrarian Reform Beneficiaries (ARB)
communities, marginalized small farmers, and
laborers. |
_______________________________________________________________________________________ |
BSP outlines additional relief measures for
banks
THE
CENTRAL BANK is giving additional regulatory to
financial institutions, including the imposition
of a higher single borrower’s limit (SBL),
removing penalties for reserve deficiencies, and
providing leeway for some notification
requirements amid disruptions caused by the
coronavirus disease 2019 (COVID-19).
“The measures ease certain BSP (Bangko Sentral
ng Pilipinas) regulatory requirements governing
banking operations for the duration of the
enhanced community quarantine and one month
thereafter,” BSP Deputy Governor Chuchi G.
Fonacier said in a memorandum signed on March
19.
“The period of eligibility may be extended
depending on the developments related to the
COVID-19 situation,” she added.
First of the measures is the hike in big banks’
SBL to 30% from 25% for a period of six months.
The SBL helps banks manage their exposure to
borrowers.
The BSP will also relax maximum penalty
impositions for reserve deficiencies.
According to Ms. Fonacier, the maximum penalty
the BSP can impose will be the rate on the
overnight lending facility, which is currently
at 3.75%, plus 50 basis points.
Banks can be exempt from the maximum penalty
“provided that the maximum reserve deficiency of
the BSP-supervised financial institution (BSFI)
shall be 200 basis points above the reserve
requirement.”
The reserve requirement ratio (RRR) of universal
and commercial banks is at 14% and four percent
and three percent for thrift and rural lenders,
respectively.
Ms. Fonacier said they will also give banks some
leeway in their notification requirements, such
as in letting BSP know of a change in their
banking hours and the temporary closure of some
of their units in light of the Luzon-wide
enhanced community quarantine (ECQ).
“A bank need not to inform the BSP of changes in
its banking hours, as required under Section 108
of the Manual of Regulation for Banks, during
the ECQ period,” Ms. Fonacier said.
However, BSFIs will be required to submit
consolidated reports on the temporary closure of
their bank branches on or before June 30.
The BSP will likewise postpone the deadline for
required reports from BSFIs that have deadlines
from March to May, except for the Financial
Reporting Package for Banks, the Consolidated
Foreign Exchange Position Report, as well as
event-driven report requirements and reserve
requirement-related reports.
Moreover, lenders will also be given a grace
period to comply with BSP supervisory
requirements with deadlines prior to March 8.
These reports can be submitted until end-June.
Sought for comment, Rizal Commercial banking
Corp. Chief Economist Michael L. Ricafort said
the said relief measures will help banks during
this period.
“These regulatory relief measures specifically
the higher SBL and relaxed maximum penalty for
reserve deficiencies will effectively give banks
greater leeway to further increase lending to
different borrowers such as businesses,
consumers, and other institutions,” Mr. Ricafort
said in an email. — L.W.T. Noble |
_______________________________________________________________________________________ |
Gov’t pulls plug on Land Bank subsidiary formed
for agri inputs
By: Ben O. de Vera - Reporter / @bendeveraINQ
Philippine Daily Inquirer / 03:27 PM March 11,
2020
The
Governance Commission for Government Owned or
Controlled Corporations (GCG) has deactivated
the Land Bank of the Philippines’ subsidiary,
Masaganang Sakahan Inc. (MSI), while awaiting
orders from President Rodrigo Duterte to finally
abolish the state-run firm.
The interim deactivation of MSI was approved by
GCG Chair Samuel G. Dagpin Jr., Commissioners
Michael P. Cloribel and Marites C. Doral, and
ex-officio Land Bank officers Finance Secretary
Carlos G. Dominguez III and Budget Secretary
Wendel E. Avisado last Feb. 20.
MSI’s deactivation meant it cannot enter into
any contracts or transactions anymore or receive
any corporate operating budget from the national
government.
Mandated by Republic Act No. 10149, or GOCC
Governance Act of 2011, MSI was “deemed under
evaluation for formal abolition.”
The GCG had already recommended MSI’s abolition
to the Office of the President in 2017.
In 2017, the GCG deemed MSI was just a
duplication of other government agencies and was
“not producing the desired outcomes.”
MSI, the GCG continued, is “no longer achieving
the objectives and purposes for which it was
designed.”
“MSI’s functions and purposes are no longer
relevant,” the GCG added. MSI, it said, is “no
longer consistent with the national development
policy of the state and its activity is best
carried out by the private sector.”
The GCG also found MSI to “not cost-efficient
and does not generate the level of social,
physical and economic returns vis-a-vis the
resource inputs.”
Land Bank’s governing board, chaired by
Dominguez, in 2019 passed a resolution rendering
MSI inactive or nonoperational.
MSI was established in 1974 as a wholly-owned
subsidiary of Land Bank. Its main purpose was
acquire, operate, maintain, lease, sell and deal
in agricultural equipment and farm machinery,
implements and tools. MSI was supposed to make
these available to farmers and land reform
beneficiaries. |
_______________________________________________________________________________________ |
Men and machines
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:05 AM March 10,
2020
In
January 2012, the Labor Force Survey counted
12.190 million employed Filipino agricultural
workers. In January 2019, there were only 8.847
million. Within that seven-year period, the
number had gone down successively to 11.049
million in January 2015, and 10.034 million in
January 2017. There was, in short, a steady
decline in agricultural workers in the country
over the past seven years or so. If you’ve heard
it said that people don’t want to work in the
farms anymore, there’s the clear proof.
It’s not because agriculture declined all
through that time. The sector actually grew in
those seven years at an average rate of 1.3
percent per year—and yet, the number of workers
in the sector declined by 3.343 million. The
bright side is that farmworkers have become more
productive. Even as the number of workers
actually declined by 27.4 percent, farm output
grew 11.1 percent within that period. But the
bad news is that rural workers are indeed
turning away from agriculture in droves, putting
to question the future of our farm sector, hence
our ability to feed ourselves—unless we can
replace the leaving workers with farm machines
that could offset the dwindling labor.
But wait—wasn’t the Comprehensive Agrarian
Reform Program (CARP) supposed to help farmers
own the land that they tilled, so that they
could more productively farm it, earn larger
incomes for their families, lift themselves out
of poverty, and encourage their children to
sustain their farms? That was in fact the whole
idea, but it seems that things didn’t quite work
out that way—and there are many reasons why.
The most important, it seems to me, is that
against expectations, owning their farmlands
didn’t make it any easier to borrow money from
the banks, after all. While the agrarian reform
beneficiaries (ARBs) now had their farmlands as
a bankable asset, banks refused to take them as
loan collateral, again for various reasons,
including fear of being “CARPed,” too if they
accumulated too much land from loan defaults.
And when they ended up holding farmlands from
defaulting borrowers, they found the properties
very hard to sell, as CARP all but killed rural
land markets. There were many restrictions on
land disposition by ARBs, while the only people
who had the money to buy lands—the original
landowners—could not legally buy them back
(although that didn’t stop them). Without loans,
farmers on their own couldn’t make their farms
productive, found themselves constantly in need
of cash, and pushed them into occupations that
would assure them of some cash every day. That
is, in fact, too common a story I am
encountering in the countryside: An ARB leases
off his land, buys a motorcycle with the
proceeds, and chooses to work as a habal-habal
or tricycle driver instead—and with him is lost
another farmworker.
Machines are indeed slowly but surely taking
over our farms. They come in many forms:
traditional four-wheel tractors or smaller hand
tractors to till the land; “halimaw” combine
harvesters that harvest and thresh palay in one
operation; reapers that cut sugarcane stalks as
they pass through the cane field; mechanical
“grabbers” that load cut cane into trucks; and
so on. The machines have created demand for a
new kind of skill on the farms: that of
operating these farm equipment. They have now
also added a measure of “glamour” to farm jobs,
I am told—and hence help keep those farmworkers
from leaving.
But there’s a little problem: There still are
not enough of them out there who can readily
operate, run and fix the whole array of farm
machines we’re now seeing. Apart from helping
make farm machinery more accessible via
duty-free importation, machinery rental pools to
serve smallholder farms, and special equipment
loan programs, government can also help with
training programs on farm equipment operation
and repair. These need not be as rigorous as the
usual skills development courses of the
Technical Education and Skills Development
Authority, and can be easily rolled out in the
countryside.
Are we finally at the doorstep of Philippine
farm modernization? It’s beginning to feel like
it. I just hope that government doesn’t blow it
this time. |
_______________________________________________________________________________________ |
Gov’t bank launches 7 loan programs to help
farmers
Philippine Daily Inquirer / 04:11 AM February
24, 2020
In
response to the worsening plight of local rice
farmers brought by plummeting palay prices,
state-owned Land Bank of the Philippines has
introduced seven new agri-lending programs in
partnership with the Department of Agriculture
(DA).
LandBank president and CEO Cecilia Borromeo said
the new lending facilities were the bank’s
direct response to the rice crisis and would
“help address the specific requirements of the
various players in the agriculture sector.”
The new lending programs are: PAlay aLAY sa
Magsasaka ng Lalawigan, Expanded Survival and
Recovery Assistance Program for Rice Farmers,
Rice Farmer Financial Assistance Program,
Accessible Funds for Delivery to Agrarian Reform
Beneficiaries, Sulong Saka Program, Sustainable
Aquaculture Lending Program, and the Greenhouse
Farming System Financing Program.
These programs, with varying funding allocations
totaling billions of pesos, would assist
rice-producing provinces in procuring palay
produced by their local farmers as well as in
acquiring farm machinery and postharvest
facilities.
There will also be conditional cash transfers
and credit assistance to farmers tilling
one-half to two hectares of land.
As of Feb. 3, 5,822 LandBank cash cards
totalling more than P29 million in cash
assistance have been distributed to rice farmers
in Pangasinan, Ilocos Norte, Neuva Ecija,
Zamboanga del Sur, North Cotabato, Bataan and
Pampanga.
Three of the new programs will also promote the
production of high-value crops, mariculture and
aquaculture, and will provide financial
assistance to cooperatives and agrientrepreneurs
who would like to shift to modern farming by
adopting greenhouse farming technologies.
These are on top of the annual P10-billion rice
competitiveness enhancement program under the
rice tariffication law and complement DA’s own
rice programs.
The huge funding for the rice industry came as
local rice farmers continued to call on the
government for help as palay prices have yet to
recover from a major slump that started in
January 2019.
In several studies conducted by state-run
agencies such as the Philippine Institute for
Development Studies and the Philippine Rice
Research Institute, they reported that farmers
have already lost billions of pesos in palay
revenues following the influx of imported rice
in the market. —Karl R. Ocampo INQ |
_______________________________________________________________________________________ |
Drags and drivers in 2020
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:30 AM February
21, 2020
The year
2020 started with a series of jolts to weigh the
Philippine economy down in the very first month.
The US-instigated assassination of Iran’s top
military leader brought the specter of new
volatility in the Middle East, and yet another
episode of destabilizing oil price hikes. The
British formalized their country’s exit from the
European Union, bringing renewed apprehensions
on its international economic repercussions. Out
of China has come the COVID-19 virus that is
poised to crimp growth prospects in our own
tourism and manufacturing sectors, among others.
Here at home, Taal Volcano’s eruption has caused
substantial damage to crops, livestock and
fisheries, and disrupted manufacturing
operations in the country’s most industrialized
region of Calabarzon. Meanwhile, President
Duterte’s intensified attacks on major business
entities have sent chills down the spines of
domestic and foreign investors at a time when
total investment growth in the country had
already ground down to a near halt. This follows
years of double-digit investment growth, and
three years of successive slowing down in the
overall economy’s growth.
These first-month jolts came on top of
longer-standing drags on our economy that have
already been taking a toll in recent years. Our
perennially underperforming farm sector has
remained sluggish, growing persistently more
slowly than our population does, implying that
agricultural production per capita has
continuously declined over the years. The trade
war that US President Donald Trump has waged
against China has already severely diminished
overall world trade, and slowed global economic
growth. While the Philippines’ weak export
sector relative to our economic peers has
softened the impact of the world slowdown on us,
the trade war’s dampening effect on our
manufacturing sector’s growth has been
unmistakable. Its toll on our human resource
exports is also seen in slower growth in
deployment of overseas Filipino workers, and
similar slowdown in inward income remittances
from the rapid growth of yesteryears.
As if the slowing down of foreign exchange
inflows through goods and services exports,
inbound tourism and remittances were not enough,
foreign direct investment (FDI) inflows have
actually declined for the second year in a row.
Last year’s cumulative decline of 32.8 percent
as of October was a far steeper fall than the
previous year’s 4.9 percent decline, and yet
most of our neighbors continued to enjoy growing
FDI inflows. The implication is clear: something
of our own doing is making us attract less of
those job-creating investments, even as the
trade war created a window to attract fleeing
investments from China, with neighbors like
Vietnam cashing in. Part of the problem could be
the demonstrated low absorptive capacity of our
government infrastructure agencies tasked to
push the ambitious infrastructure buildup that
the government has embarked on.
All these notwithstanding, the Philippine
economy possesses certain long-standing and
recent strengths and opportunities that could be
harnessed to help drive growth in the year ahead
and beyond. Ours is an abundant and relatively
young labor force, an advantage that will
persist in coming decades owing to a
persistently higher fertility and population
growth rate relative to our comparable peers.
Coupled with an abundance of human resources is
our also peculiar abundance of natural
resources: great biodiversity, fertile soils,
rich inland and maritime fisheries, and a higher
preponderance of minerals in the ground. Our
macroeconomic fundamentals are solid, built over
past administrations’ careful and skillful
monetary and fiscal management. Formalization of
the Bangsamoro Autonomous Region in Muslim
Mindanao paves the way for potential economic
dynamism in the erstwhile lagging region.
Opportunities from greater economic cooperation
and integration in our part of the world remain
largely untapped. And “Build, build, build” can
yet be the great economic boost it was meant to
be, if and once we sort out the implementation
bottlenecks plaguing us.
Our list of drags may dominate our list of
drivers, but we enter 2020 hoping for the best. |
_______________________________________________________________________________________ |
Cloudy crystal balls
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:05 AM February
04, 2020
With the
January 2020 update of its World Economic
Outlook, the International Monetary Fund (IMF)
officially downgraded its original global
economic growth forecast for 2019 for the sixth
time in as many quarters. From its original
bullish forecast of 3.9 percent for 2019 global
GDP growth issued in early 2018, IMF had lowered
this to 3.7 percent by October 2018, to 3.5
percent by the start of last year, further down
to 3.3 percent in April, 3.2 percent by July and
3.0 percent by October. Now they say it will be
only 2.9 percent, a full percentage point below
their original forecast — and the jury is still
out. It won’t be until April when the actual
final figure based on complete 2019 data will
come out. If it’s any indication, the final
growth figure for 2018 released in April 2019
ended up still lower than their last revised
projection in January 2019.
Casual onlookers could easily lose faith in
economists’ forecasts, seeing how the otherwise
authoritative institution’s crystal ball seemed
to be cloudy and unreliable this past year,
prompting a changing forecast with every passing
quarter. To be fair, unexpected events in 2019
gave even the best-equipped economists a hard
time projecting economic growth. The IMF blamed
the repetitive downscaling of growth projections
on the unpredictability of the US-China trade
war, with each move and countermove of the
protagonists, hence their global economic
implications, extremely difficult to anticipate.
In the first place, US President Donald Trump
was never guided by solid economic reasoning in
waging the war, so economists were not the best
predictors of his successive moves in the
high-stakes gambit with China.
Americans are far from alone in the
unpredictability of their leader and surprise
moves he can make with potentially drastic
economic consequences, positive or negative. On
our side of the ocean, we have a President whose
words and actions often also appear to defy
logic, while having potentially strong impacts
on business and the economy. Misplaced verbal
attacks against certain business entities, and
threats to retaliate with far-reaching measures
for the cancellation of one favored senator’s US
visa, are just two recent examples that cloud
many an economic forecaster’s crystal ball.
But then again, economic forecasting has never
been an exact science. Predicting economic
outcomes, especially numbers for economic
variables like GDP growth and inflation and
unemployment rates, is often little more than
educated guesswork. Now, at the start of the
year 2020 — ironically a number that connotes
clarity of vision — the outlook for the economy
is anything but clear, even to the most seasoned
economist.
We in the Philippines, in particular, are off to
a bad start, having already been buffeted in the
first month alone by a succession of external
and internal negative events that will exert a
drag on the economy in the year ahead: new
volatilities in the Middle East triggered by the
US assassination of a top Iran military leader,
the spread of the novel coronavirus, the final
sealing of Brexit, the eruption of Taal volcano,
and President Duterte’s chilling diatribes
against certain large business entities. There
will surely be more as the year unfolds. The
magnitude of economic impact of each taken alone
is impossible to predict with any accuracy; what
more when one considers that interactive forces
across the various effects could compound their
combined impacts.
What could provide the offsetting upside to the
economy in 2020 and beyond? Foremost would be
government’s ambitious infrastructure push, to
the extent that earlier implementation
bottlenecks experienced could finally be
overcome. But there remains much uncertainty on
this, due to emerging limitations in human and
physical resources (e.g., availability of
construction materials like cement and steel,
and of engineering equipment) so vital to its
execution.
What’s in store, then, for the Philippine
economy in 2020? I and any economist could give
best educated guesses on the numbers for the key
indicators. But with the IMF’s own experience
last year, I doubt anyone would be willing to
bet on them. |
_______________________________________________________________________________________ |
50 richest Filipinos: Share-the-wealth challenge
By: Eddie Ilarde - @inquirerdotnet
Philippine Daily Inquirer / 05:01 AM January 26,
2020
Some
years back, American economist and former
director of The Earth Institute of Columbia
University Jeffrey Sachs wrote an article about
what he called “the ability to improve the world
through transformative philanthropy”—that if
today’s billionaires were to pool their
resources, “they could outflank the world’s
governments in ending poverty and pandemic
disease.”
He named John D. Rockefeller, Bill and Melinda
Gates, Warren Buffet, Carlos Slim Helu, Lakshmi
Mittal and George Soros, among others, who, on
their own initiative—by sharing a part of their
wealth—have succeeded in fighting disease,
poverty and other areas of human concerns such
as the “eradication of hookworm in the US, the
development of the yellow fever vaccine,
elimination of malaria-transmitting strain of
mosquito in Brazil, funding the Asian Green
Revolution, etc.”
Bill and Melinda Gates, for example, have
sufficiently funded “the extension of basic
health care to the poorest in the world to end
the pandemics of AIDS, TB and malaria, and
address the crying need for safe drinking water
for 1 billion people.”
There are 2,153 billionaires in the world today.
That includes 50 in this country as named by
Forbes magazine, among them Manuel Villar, the
Sy siblings, John Gokongwei Jr., Enrique Razon
Jr., Jaime Zobel de Ayala, Lucio Tan, the Campos
siblings, Ramon Ang, the Consunji siblings, the
Ty siblings, etc.
The Sy siblings lead the pack, and Menardo
Jimenez is at No. 50. They are in various kinds
of businesses: construction, power generation,
hotels, restaurants, banking, media,
pharmaceutical, insurance, property development,
retail, etc.
The SM group, for example, owns the biggest bank
in the country and “over 200 companies in the
Philippines, including 73 shopping malls plus
another six in mainland China.”
Our research is still incomplete as to how many
high-rise condominium and office buildings they
have and how big their real estate properties
are.
It can be mind-boggling when we include the
other billionaires’ massive holdings, which can
make people suspect that this country’s reputed
poverty is fake.
Improving the world through philanthropy has
been proven to be doable, with generous rich
people willing to share their wealth with the
less fortunate.
Can it be done here?
Who among the 50 shall step forward and show
courage and magnanimity?
It would be surprising, historic even, if this
challenge is accepted, however grudgingly; it
shall be an event never seen before in this
country—the “callous rich” finally showing
sparks of patriotism and concern for the less
fortunate through the proposed mechanism below:
A “Philippine Alliance for Humanity” is
organized, initially with four founding
members—persons of probity and proven
honesty—who renounce in writing the will to earn
from such an endeavor.
Five additional members from the Big 50 (or
their authorized representatives) complete the
membership to nine, to form the core of the
alliance or foundation.
It is hoped that the rest of the 50 will cast
away suspicion and distrust and support the
alliance, with monthly donations direct to
designated banks.
No one can touch the money as stipulated in the
Securities and Exchange Commission-approved
papers, except only upon the authority of the
majority of the nine members, who shall decide
where to spend the money and when the money can
be withdrawn.
Depository banks shall post in all their
branches or publish weekly the existing balance
of the charitable fund.
The initial goal of this social entrepreneurship
program is to build: (1) evacuation centers, (2)
rain catchment minireservoirs in barangays
without safe drinking water, and (3) senior
citizens’ health centers, following the lead of
President Duterte’s “Build, build, build”
program for economic and industrial prosperity.
Thus, the “Philippine Alliance for Humanity’s”
money pool is philanthropy that will go to
building urgently needed infrastructure for the
health, security and safety of the people. How
about it, good sirs and madames?
Believe! “Charity shall cover the multitude of
sins.” (I Peter 4:8) |
_______________________________________________________________________________________ |
Taal’s fury and the economy
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 05:07 AM January 17,
2020
So early
in the year, we are beset with a major natural
disaster yet again. Two major typhoons just
ruined the Christmas season for large numbers of
our fellow Filipinos, and now this—and the
disaster isn’t even over. A major explosive
eruption is still anticipated from Mt. Taal as
of this writing, and based on the nature of the
expected “magmatic” versus the recent “phreatic”
or steam-induced eruption, it could well be that
the worst is yet to come. What do all this hold
for Filipinos in general?
The question I tend to get asked as an economist
is what impact Taal’s eruption would have on our
economy. People seem to be after a number that
measures the impact, with interest usually on
economic growth, especially given the ups and
downs our gross domestic product (GDP) growth
has seen in the past year. But it’s actually a
misplaced question because GDP is hardly the
right yardstick for assessing the cost of
calamities, even taking “cost” in its narrow
economic sense—and we all know that the negative
effects are much more than economic. There’s no
question that the economic costs could be
staggering. Damage to crops and food production
alone would run into the hundreds of millions,
possibly billions, of pesos. Earlier this week,
the Department of Agriculture put out the number
P577.59 million as an estimate (with remarkable
precision) of crop damage. But damage to lives,
property and infrastructure is likely to be far
beyond that, and the orders of magnitude
involved are anyone’s guess.
The true extent of economic costs alone cannot
be readily seen in the GDP data that official
statistics will report later. This is because
the GDP data will count the remedial economic
activities that will be spurred by the
calamities along with those that have been
curtailed by it, showing why GDP should never be
looked at as a measure of well-being. Higher GDP
does not imply more happiness, and more misery
can in fact be associated with higher GDP. It’s
perfectly possible, even likely, that the value
of economic activities in disaster remedial
measures would more than offset the reduction in
regular economic activities, such that a net
positive effect on GDP could actually result.
For example, I’ve checked the data for the
periods corresponding to past major typhoons
“Ondoy” (September 2009) and “Sendong” (December
2011), and the Habagat floods (August 2012). As
I suspected, GDP growth actually speeded up in
the aftermath of those calamities!
Much of the economic activities spurred by
disasters lie within the part of the economy
called the informal sector, better known as the
“underground economy,” because transactions
therein are not captured in official statistics.
During such calamities and in their aftermath,
many economic activities not seen in more normal
times tend to flourish. In past instances of
prolonged flooding, for example, “water taxis”
and toll footbridges sprouted all over. In the
aftermath of Ondoy in 2009, I remember seeing
ads for inflatable boats and rafts coming out in
the papers, hinting the emergence of a growing
industry in small-scale water transport—over
floodwaters.
Carpenters and construction workers suddenly
find themselves in great demand for home
repairs. Enterprising groups and individuals
have offered home clean-up and recovery services
for hire. I even saw ads for restoration of
precious photographs damaged by floodwaters.
Vehicle repair services in both the formal or
informal sector suddenly find great demand for
the thousands of motor vehicles submerged in
floodwaters, and now, damaged by ashfall. And
then there are the substantial economic
activities associated with respiratory and other
illnesses and deaths, from sales of common
medicines to funeral services. The list goes on
and on.
All told, every natural calamity is different,
with their own peculiar impacts on the economy
and people’s well-being. The last similar
disaster we had was the 1991 eruption of Mt.
Pinatubo, but the geography of Mt. Taal makes
its eruption very different from Pinatubo’s.
Putting any number to the economic impact of
Taal’s eruption at this time would be nothing
more than speculation, even irresponsible. |
_______________________________________________________________________________________ |
Widening and narrowing gaps
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:05 AM January 14,
2020
Good
news: Inequality among countries has improved,
as poor countries have managed to narrow their
gap with the rich ones in recent decades. Bad
news: Income inequality within individual
countries has generally worsened. Good news (for
us): The Philippines has been an exception to
this, with evidence showing income gaps to have
narrowed since 2000. Poverty incidence has also
lately declined faster than it has in decades,
especially after it actually increased in the
last.
The government think tank Philippine Institute
for Development Studies’ (PIDS) recent
“Understanding the New Globalization” report
discusses and documents these trends. While
rising average incomes with associated
improvement in various measures of health and
well-being have been generally observed
worldwide, what has been deeply contested, PIDS
notes, is the fairness and inclusiveness of
humanity’s progress. Since the 1980s and 1990s,
disparities in average incomes across countries
have been observed to decline, with rapid
economic growth in China and India having been
dominant drivers of this positive change.
However, the pace of catch-up is observed to
have faltered after the 2008 global financial
crisis.
More disturbing is the way income inequality has
been worsening within large or small economies
alike. PIDS notes that in 2016, the richest 10
percent of households captured over 40 percent
of national income in the case of China, India,
Russia, and United States-Canada, while this
share was 35 percent or below in all these
regions in 1980. Meanwhile, the share of the
bottom 50 percent remained unchanged at 9
percent. The report also notes that the share of
economic growth captured by the top 10 percent
worldwide is 57 percent, whereas the bottom 50
percent of the world population received only 12
percent. All these imply that the richer
segments of society have captured the bulk of
the gains of economic growth.
What is it about the new globalization that is
driving the trend toward greater inequality?
PIDS cites four key factors: greater capital
mobility, technological change, changing labor
market institutions, and financial deepening.
The easier flow of capital across borders has
made it easy for companies to “export”
lower-skilled jobs via foreign direct
investments from rich to poorer countries where
wages are low, taking jobs away from
lower-skilled workers in the origin country. At
the same time, machines and increasingly
sophisticated software continue to take jobs
away from workers everywhere. The resulting
labor surpluses have induced greater flexibility
in the labor markets, with low-skilled workers
put at a disadvantage with greatly reduced
bargaining power. Meanwhile, innovations in
finance have tended to benefit households
already with higher incomes, as there are high
transaction costs in dealing with diverse
“bottom of the pyramid” households with
generally lower levels of education and access
to markets.
Interestingly, the Philippines has defied this
general trend seen elsewhere. In our case, data
show that income distribution has actually been
improving, with the share of the richest
one-fifth (20 percent) of Filipinos having
fallen from 54.8 percent in 2000 to 45.5 percent
in 2015. At the same time, the income shares of
the lower 80 percent increased from 45.2 percent
to 54.5 percent in the same period (look up FIES
data). The poorest 30 percent increased their
share of national income from 7.9 to 12.5
percent.
Hard to believe? The bulk of this improvement
actually happened after 2010, when the economy
found new dynamism from a combination of factors
that included a more open, hence more
competitive, economy; better business confidence
that led to hiked rates of job-creating
investment; and improved government finances
that led to greater economic stability. The
gains have transcended the Aquino and Duterte
administrations, and show what could be achieved
with sustained economic growth, which has
averaged 6 percent and above for eight
consecutive years now, and counting.
The challenge for us, then, is to sustain our
economy’s growth momentum, with more growth
coming from agriculture and manufacturing, which
could create the most jobs. |
_______________________________________________________________________________________ |
Ex-officials of closed rural banks convicted
January 6, 2020 | 12:01 am
OFFICIALS
of closed rural banks in Visayas have been
convicted on charges filed by the Bangko Sentral
ng Pilipinas (BSP).
Former bankers from the defunct Rural Bank of
Badiangan (Iloilo), Inc (RBBI). and Rural Bank
of Sebaste (Antique), Inc. (RB Sebaste) have
been found guilty of fraudulent bank
transactions.
“The cases stemmed from a criminal complaint
filed by the BSP’s Office of Special
Investigation against the three RB Sebaste
officers for their participation in the creation
of fictitious loans aggregating to about P63
million as of March 2007,” the BSP said in a
statement on Friday.
The BSP found that the said bogus loans were
included in the lender’s financial statements
and reports, making it look as if the bank was
in sound financial state.
“The bank, however, was actually incurring huge
operational losses and was unable to pay its
liabilities as they become due in the normal
course of business. The bank also had
insufficient assets to meet its liabilities,”
the central bank said.
A decision by the Regional Trial Court of
Culasi, Antique dated July 9 found former RB
Sebaste chairman and president Eugene T.
Estrella guilty on eight counts for violating
the General Banking Law of 2000 due to
fraudulent transactions. Because of this, he was
sentenced to two years of imprisonment for each
count.
Moreover, Mr. Estrella, together with RB
Sebaste’s former director Luis T. Estrella, Jr.,
were also found guilty by the Municipal Trial
Court of Kalibo, Aklan on seven, four, and two
counts of falsification of public documents,
respectively.
The Kalibo court also sentenced the three bank
officials to minimum imprisonment of six months
and one day to a maximum of two years, four
months, and one day. They were also slammed with
fines of P1,000 for each count.
Meanwhile, three officers from RBBI were
convicted by the Regional Trial Court of Iloilo
City for 20 counts of violation of the General
Banking Law of 2000 also on the grounds of
fraudulent transactions.
In its decision dated Sept. 18, the court
sentenced RBBI’s former chairman, president and
manager Bella A. Buscar, as well as Cynthia A.
Taconloy and Leni A. Abordaje, who were loans
and savings clerks, to imprisonment of two to
four years for each count.
It was in 2016 when the BSP filed a criminal
complaint against the three persons for
defrauding clients by soliciting deposits but
willfully omitting said transactions in the
books of the bank.
“Investigations revealed that high interest
rates were offered to entice the public to make
such deposits,” the central bank said.
In Aug. 24, 2007, the Monetary Board placed the
RB Sebaste under the receivership of the
Philippine Deposit and Insurance Corp. The same
fate happened to RBBI on July 5, 2012.
“In line with its mandate to promote financial
stability, the BSP continues to foster high
standards of governance and risk management
among institutions it supervises,” the central
bank said. — L.W.T. Noble |
_______________________________________________________________________________________ |
Agri-agra loans grow 11% to P714 billion in 9
Months
Lawrence Agcaoili (The Philippine Star) -
January 3, 2020 - 12:00am
MANILA,
Philippines — Loans extended by Philippine banks
for agriculture and agrarian reform recorded a
double-digit growth of 10.8 percent to P714.27
billion from January to September 2019 compared
to P644.64 billion in the same period in 2018,
but the figure remained below the threshold
mandated by the law.
Data released by the Bangko Sentral ng Pilipinas
(BSP) showed the banking system was only able to
allocate 12.9 percent of its total loanable
funds during the nine-month period last year,
way below the 25 percent mandated under Republic
Act 10000 or the Agri-Agra Reform Credit Act of
2009.
The law retained the mandatory credit allocation
in Presidential Decree 717 where 15 percent of
banks’ total loanable funds are to be set aside
for agriculture, while 10 percent should be made
available for agrarian reform beneficiaries.
According to the BSP, the loans extended by
banks to the agriculture sector amounted to
P653.65 billion, for an 11.8 percent compliance
ratio, which is below the required 15 percent.
The central bank said big banks or universal and
commercial banks registered a compliance ratio
of 11.8 percent after extending P615.92 billion
to the agriculture sector, while the ratio of
thrift banks only reached 7.23 percent after
granting P18.25 billion.
Rural banks extended P19.49 billion to the
agriculture sector for a compliance ratio of
22.4 percent.
Likewise, the compliance ratio of the banking
system fell way short of the 10 percent
threshold for agrarian reform credit as banks
only extended loans amounting to P60.84 billion
for a compliance ratio of 1.1 percent.
The compliance ratio of big banks for agrarian
reform loans only reached 0.95 percent, while
that of thrift banks settled at 0.93 percent as
well as rural and cooperative banks with 10.34
percent.
BSP Governor Benjamin Diokno said the priority
legislative measures the central bank is
pursuing under the 18th Congress include reforms
to agricultural financiing that seek to amend
the Agri-Agra Reform Law and allow banks to
merge their loan allocation to the farm measure
to improve banks’ compliance rate.
Monetary Board member Bruce Tolentino had said
fines collected by the BSP from banks that fail
to reach the 15 percent agriculture and 10
percent agrarian reform to beneficiaries under
the Agri-Agra Reform Law have reached P6
billion.
“Many of the banks prefer to pay the penalty
rather than actually lend to farmers because
farmers are poor credit risks, so they pay. I
think over the last two years it has been
something like P6 billion in penalties alone,”
he said. |
_______________________________________________________________________________________ |
S2 courts convict rural bank execs over
fraudulent transactions
The Bangko Sentral ng
Pilipinas wins in two cases against two
shuttered rural banks in Iloilo and Antique over
violations of the General Banking Law of 2000
Convicted. The Bangko Sentral ng Pilipinas wins
in its two cases against two rural banks'
officers over fraudulent transaction. File photo
from BSP
Convicted. The Bangko Sentral ng Pilipinas wins
in its two cases against two rural banks'
officers over fraudulent transaction. File photo
from BSP
MANILA, Philippines – Two courts convicted rural
banks in Iloilo and Antique in separate
violations of Republic Act No. 8791 or the
General Banking Law of 2000 due to fraudulent
transactions.
In separate statements on Tuesday, December 31,
the Bangko Sentral ng Pilipinas announced that 3
officers of the shuttered Rural Bank of
Badiangan Incorporated (RBBI) were convicted for
20 counts of violation of RA 8791 due to
fraudulent transactions.
In a decision dated September 18, the Regional
Trial Court of Iloilo sentenced ex-bank chairman
Bella Buscar, ex-loan clerk Cynthia Taconloy,
and ex-savings clerk Leni Abordaje to
imprisonment of two to 4 years for each count.
In 2012, the Monetary Board placed RBBI under
receivership of the Philippine Deposit Insurance
Corporation. In December that year, the National
Bureau of Investigation Western Visayas filed a
criminal complaint of syndicated estafa to a
total of 17 bank personalities.
It was later learned that high interest rates
were being offered by RBBI to entice the public
to make deposits.
In 2016, BSP filed a criminal complaint against
the said 3 RBBI officers for defrauding clients
by soliciting deposits but said transactions
were omitted from the bank's books. |
_______________________________________________________________________________________ |
Bangko Sentral requires lenders to disclose
strategies for rate risks
December 23, 2019 | 12:04 am
THE
CENTRAL BANK’S policy-setting body Monetary
Board laid out additional disclosures required
under the Risk-Based Capital Adequacy Framework
for the Philippine Banking System on interest
rate risk in the banking book (IRRBB) for both
lenders and quasi-banks (QBs).
Besides the general disclosure requirement, the
Bangko Sentral ng Pilipinas (BSP) has also
ordered banks to disclose in their annual report
their management and mitigation strategies.
In a memorandum signed by BSP Governor Benjamin
E. Diokno, strategies cited include the
“monitoring of risk measures in relation to
established limits, hedging practices, conduct
of stress testing, outcomes analysis, the role
of independent audit, the role and practices of
the asset and liability committee (ALCO), the
bank’s practices to ensure appropriate model
validation, and timely updates in response to
changing market conditions.”
The central bank said in a statement in August
that IRRBB refers to the current or prospective
risk to capital and earnings that come from big
movements in interest rates that affect banking
book positions.
Meanwhile, banking book positions pertain to
assets that yield interest income which would
include loans and investments and liabilities
paying out interest such as deposits.
“The guidelines aim to provide clear
expectations on how a bank/QB should manage
IRRBB and align the BSP’s supervisory framework
on interest rate risk with international
standards,” the central bank said.
BSP said it expects stand-alone thrift, rural
and cooperative banks to look into the impact of
a 1-3% movement in interest rates in relation to
their net interest income for the succeeding
12-month period. For their part, big banks and
QBs are to come up with a wider scope of
interest rate shock and stress scenarios where
they will test their IRRB exposures.
Aside from a description of their overall IRRBB
management and mitigation strategies, banks are
also required to disclose the period of the
calculation of their IRRBB measures as well as
to describe the interest rate shock and stress
scenarios they utilized to estimate the
difference in the earnings.
The BSP also said banks should present a “high
level description of key modelling and
parametric assumptions used in IRRBB
measurement” as part of their disclosure. —
L.W.T. Noble |
_______________________________________________________________________________________ |
Poverty rate below 10% by 2022
By: Ben O. de Vera - Reporter / @bendeveraINQ
Philippine Daily Inquirer / 04:19 AM December
09, 2019
Given the
faster pace of poverty reduction during the past
three years, the country’s chief economist said
it was possible for poverty incidence to drop
below 10 percent by the time President Duterte
steps down from office in 2022.
Socioeconomic Planning Secretary Ernesto M.
Pernia told the Inquirer that the poverty
incidence rate might further drop to 12 percent
by 2021 when the government undertakes the next
round of poverty statistics conducted every
three years.
Last week, the government reported that the
national poverty rate fell to 16.6 percent in
2018 from 23.3 percent in 2015.
The reduction in poverty incidence meant the
number of poor Filipinos declined to 17.6
million last year from 23.5 million in 2015.
The 2018 poverty line of P10,727 a month for a
family of five also rose from P9,452 in 2015 as
incomes of poor households increased due to the
availability of better-paying jobs as well as
cash grants from the government.
Pernia said he expected that by mid-2022,
poverty incidence would ease to 11 percent “or
possibly below 10 percent.”
“It would mainly depend on sustained economic
growth rate of 6 to 7 percent or better and
intensity in family-planning program
implementation, especially among poor households
who are having more children than they want and
can provide for,” Pernia said.
Finance Secretary Carlos G. Dominguez III, who
heads the Duterte administration’s economic
team, said it was “certainly possible” that the
current target of reducing poverty incidence to
14 percent by 2022 would be revised to aspire
for an ever lower rate.
Dominguez said that aiming for an even faster
poverty-reduction goal would be discussed during
the next Economic Development Cluster (EDC)
meeting.
“Reforms have been put in place by President
Duterte to improve the lives of all Filipinos
such as the tax reform, ‘Build, Build, Build,’
rice tariffication, free state universities and
colleges tuition, and institutionalization of
the 4Ps (Pantawid Pamilyang Pilipino Program)
for the poorest households. These economic
reforms have clearly resulted in more money in
the pockets of the Filipino people, while
reducing inflation and creating more jobs,”
Dominguez said.
“The government will hit its target of pulling
down poverty incidence to 14 percent with
further reforms such as the full implementation
of universal health care and higher ‘sin’ taxes
to ensure sufficient funding for this healthcare
program for all Filipinos,” Dominguez added.
“We have advanced a number of the game-changing
reforms we set out to accomplish at the start of
the Duterte administration. If we pass the rest
of the reforms in the zero-to-10 point
socioeconomic agenda, we will move even closer
to the President’s ultimate goal of a
comfortable life for our people,” according to
Dominguez. INQ |
_______________________________________________________________________________________ |
Burdening
depositors with charges and fees on ATM
Philippine Daily Inquirer / 04:09 AM December
02, 2019
Banks are
lobbying to be allowed to increase the charges
or fees they impose on transactions via
automated teller machines or ATMs. As expected,
consumer groups and some legislators have raised
a howl of protest at the move.
It is not hard to understand why ordinary
depositors are against it. What is difficult to
understand is why banks — among the most
profitable sectors of the economy — want their
customers to finance the cost of improving
services using the ATM network.
This is how banks, through their group the
Bankers Association of the Philippines (BAP),
justify their request to impose higher fees on
ATM transactions. The cap on fees that banks
could charge on cash machine transactions
imposed in 2013 — and lifted earlier this year
by regulators — has led to the country falling
behind its regional peers in terms of the number
of ATMs deployed, it said.
It added that local ATM density in the
Philippines stood at only half compared to other
Association of Southeast Asian Nations (Asean)
countries. The culprit for that? The moratorium
on ATM transaction fees since 2013, which has
supposedly held back the banks’ optimal
performance in servicing and expanding their
reach.
“The number of cardholders has been increasing
for the past six years,” BAP managing director
Benjamin Castillo said in a statement. “Banks
need to keep up with the maintenance and
innovation of ATMs, as well as expansion of ATM
network to accommodate the surge of ATM usage.”
The BAP estimated that only 21,000 ATMs service
58 million cardholders nationwide — equivalent
to about 20 ATMs for every 100,000 cardholders.
Meanwhile, Thailand has 94, Singapore has 49,
Malaysia has 45 and Indonesia has 40 ATMs for
every 100,000 cardholders. The BAP, however,
didn’t say how much those countries charge for
their ATM usage.
The group added that the annual growth rate in
ATM deployments averaged 13 percent prior to
2013, but since then has declined to 6.4
percent, while ATM transaction volume has
continued to increase from 2014 up to the
present.
Aside from the physical ATM deployments, it said
there were other expenses that banks incur from
operational activities such as loading,
servicing, complaints handling, reconciliation,
software, capacity expansion and security.
While it is true that expanding the ATM network
and servicing it entails cost, these expenses
are for the good of the customers that banks are
supposed to invest in and nurture. More to the
point, don’t banks make money by using the
deposits of these ATM users for lending to their
corporate clients, even as users of ATM
machines, on the other hand — ordinary employees
are the majority — hardly earn interest on their
deposits?
Besides, haven’t the banks also saved much from
the reduction in physical workforce and the
man-hours required for over-the-counter
transactions, and from other efficiencies
brought about by ATM networks?
Now, let’s see how much banks earn as an
industry. The net profits of Philippine banks
surged 26.4 percent in the first half of 2019 to
P109.77 billion from P86.87 billion a year ago
due to higher interest and noninterest earnings,
according to data from the Bangko Sentral ng
Pilipinas. In 2018, earnings of Philippine banks
climbed by 6.4 percent to P178.83 billion from
P168 billion in 2017 on the back of higher
trading gains and interest income.
Economist Cielito Habito also highlighted these
figures in an earlier Inquirer column: “In the
15-year period 2004-2018, overall GDP growth
averaged an annual rate of 5.8 percent, but
financial intermediation (primarily banking and
insurance) grew at an average annual rate of 8.7
percent. In the first half of this year, the
overall economy grew by a disappointing 5.5
percent, after maintaining 6-7 percent growth
over the last eight years. But guess what: The
financial sector grew nearly twice as fast, by
9.7 percent. Recently, the country’s top banks
have also announced growth in profits ranging
from 17-46.8 percent. Interestingly, when our
economy nearly ground to a halt at 0.9 percent
GDP growth in 2009, financial intermediation
actually grew a hefty 7.1 percent.”
BAP has tried to assuage the public’s anger with
platitudes.
“We would like to assure the banking public of
our commitment to serving them,” it said.
If banks are halfway sincere in that commitment,
they should channel part of their prodigious
profits to expanding and improving their ATM
services — without passing on the cost to their
depositors. |
_______________________________________________________________________________________ |
AMA Rural
Bank gets TRO on closure order by PDIC
Lawrence Agcaoili (The Philippine Star) -
November 29, 2019 - 12:00am
MANILA, Philippines —
AMA Rural Bank of businessman Amable Aguiluz has
obtained a temporary restraining order (TRO)
preventing the Bangko Sentral ng Pilipinas (BSP)
and state-run Philippine Deposit Insurance Corp.
(PDIC) from further implementing a closure order
issued early this month.
The Court of Appeals (CA) issued the TRO last
Nov. 26 after major shareholders of the
shuttered rural bank questioned the issuance of
Resolution 1705D by the Monetary Board on Nov. 7
prohibiting AMA Rural Bank from doing business
in the country.
In a statement, PDIC president Roberto Tan said
the state-run deposit insurer is now constrained
to stop its liquidation operations in the closed
rural bank for a period of 60 days.
“We assure our depositing public that the PDIC’s
paramount commitment is to expedite the
validation of bank records to be able to
immediately pay the insured depositors of AMA
Bank,” Tan said.
Tan said the agency is now pursuing legal
remedies. “We have in fact resorted to
alternative procedures to do just that when the
TRO was issued. We appeal to the depositors for
their understanding,” he said.
Tan said PDIC would advise depositors, creditors
and borrowers of AMA Bank of any further
developments through announcements made at
PDIC’s website and through local media networks
such as Facebook.
It would be recalled PDIC took over the assets
and affairs of the closed bank last Nov. 8.
However, accountable directors, officers and
employees refused to account for, surrender and
turn over records under their accountabilities,
custody and possession, despite demand.
The PDIC earlier said that the refusal to
account for, surrender and turn over records
would delay the payment of the claims of AMA
Rural Bank’s depositors for insured deposit.
The PDIC has since adopted alternative
procedures, although with great difficulty.
Faced with another setback, the TRO prevents the
PDIC from further continuing the
inventory-taking of bank records during the 60
days of its effectivity.
The management of AMA Rural Bank earlier
questioned the closure order, claiming the bank
was liquid after shareholders infused an
additional P405 million as well as the total
deposit due from BSP and other banks amounting
to P246 million.
AMA Rural Bank is ranked 15th largest rural bank
in terms of assets with P2.83 billion and fifth
in terms of capital with P1.04 billion.
The Mandaluyong-based bank with 13 branches has
8,434 deposits accounts with deposit liabilities
amounting to P1.4 billion. Of the total amount,
about 92.06 percent or P1.3 billion are insured. |
_______________________________________________________________________________________ |
BSP sees lag
in effects of monetary easing moves
November 22, 2019
IT MAY TAKE a while
before the financial system fully feels the
impact of the easing moves implemented by the
central bank this year, according to Bangko
Sentral ng Pilipinas Governor Benjamin E.
Diokno, with its decision to hold steady to help
it assess how the market is taking past cuts.
“Monetary policy works with lag so ‘di pa namin
nakikita yung impact ng ginawa naming rapid
fire, 75 basis points (bps) [of key interest
rate cuts] tapos 400 basis points dun sa RRR
(reserve requirement ratio). (we have yet to see
the impact of the rapid fire easing we’ve done —
75 bps in key interest rate cuts and 400 bps in
RRR reductions),” Mr. Diokno told reporters at
the sidelines of the launch of the EGov Pay
Facility and QR PH held at the central bank on
Wednesday.
“In fact, you can argue na yung impact nung 175
basis points [hike] pa nagpi-feed (what’s still
being felt is the 175 bps hike in policy rates)…
So let’s see,” he added.
The BSP hiked interest rates by 175 bps last
year as inflation hit multi-year highs. However,
it cut key rates by 75 bps earlier this year
amid easing prices, partially dialling back its
tightening last year.
Rates for overnight reverse repurchase,
overnight deposit and lending facilities
currently stand at four percent, 3.5% and 4.5%,
respectively.
Meanwhile, the reserve ratio of universal,
commercial and thrift banks will be slashed by
another 100 bps effective December, bringing
total reductions to their reserve ratios for
this year to 400 bps. This cut will also apply
to the reserve ratio of non-bank financial
institutions with quasi-banking functions
(NBQBs).
This will bring the reserve ratio of universal
and commercial lenders to 14% by December, while
the RRR of thrift banks will stand at four
percent. On the other hand, the reserve ratio of
NBQBs will be cut to 14% next month, while the
RRR for rural banks will remain at three
percent.
Mr. Diokno said it could take six to nine months
for the BSP’s policy actions to fully work their
way into the financial system.
“Ang monetary policy, ang lag nyan is mga nine
months. So dapat talaga monetary policy should
be forward-looking (Monetary policy’s lag is
about nine months. So monetary policy should
really be forward-looking),” he said, adding
that RRR reductions may take about six to nine
months before these are felt in the market.
“But at the same time, yung (our) pause namin
gives us an opportunity to assess the situation.
It gives us, in the event of, say, turning for
the worst, madami pa tayong bala (we still have
shots),” he told reporters.
Asked about when the next RRR cut will be, Mr.
Diokno reiterated his goal to bring big banks’
reserve requirement ratio down to single digit
by the end of his term in 2023.
“I’m not gonna give you some dates but to give
you an idea, sa promise ko (my promise) is by
the end of my term, it will be single digit.
That could be nine percent. We’re not gonna go
to one percent,” he said, adding that the
central bank is “not in a hurry.”
“Ini-evaluate din namin yung quality of lending
ng banking industry (We’re also evaluating the
quality of the banking industry’s lending,” he
said.
Mr. Diokno added that he is positive that
economic activity will be more robust on the
back of the government’s infrastructure program.
“Ang gusto namin yung small and medium
industries sila yung manghihiram. (What we want
is for small and medium industries to borrow)…
So we need more liquidity,” he said.
BSP data showed that domestic liquidity picked
up by 7.7% year-on-year in September to P12
trillion, from the 6.3% growth logged in August.
Meanwhile, outstanding loans disbursed by
universal and commercial banks grew 10.5%
year-on-year in September, unchanged from the
August print. Inclusive of reverse repurchase
agreements, bank lending rose 10.2% in
September, slightly picking up from the 10% seen
the previous month. — L.W.T. Noble |
_______________________________________________________________________________________ |
Trade war
threats
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 05:07 AM November
19, 2019
When elephants fight,
it’s the grass that suffers,” goes an ancient
Kenyan proverb. A variation says “when elephants
fight, the ants get crushed.” Either way, it
means that the bigger casualties in big fights
tend to be the small bystanders.
There’s no doubt that the ongoing trade war
between the United States and China instigated
by US President Donald Trump in mid-2018 is
taking a toll on consumers, workers and
capitalists in the economies of both
protagonists in this battle of giants. But more
than that, it is also dragging down the world
economy and pushing it to the brink of another
global recession, last seen in the aftermath of
the world financial crisis 10 years ago. And
there are clear signs of the collateral damage
being caused on small economies like ours.
In China, economic growth has already slowed
down to 6 percent as of the third quarter this
year, the lowest it has seen in 27 years (even
as it remains among the fastest in the world).
In September, China’s exports dropped by 3.2
percent in US dollar terms, while its imports
fell 8.5 percent. In the United States, exports
to China have declined by 15 percent, with US
farm exports being hit the most by the import
tariff increases imposed by Beijing on US goods,
in retaliation for prior tariff hikes by the
United States on Chinese goods. The move has
prompted the US government to pay out $28
billion in cash assistance over the last two
years to American farmers hard hit by the steep
reduction of their exports to China.
The latest reports for US manufacturing output
also show a decline since August. A recent
Financial Times report suggests that American
manufacturers are being hit more than their
Chinese counterparts. While the debate rages
within the United States on whether Trump’s
trade war can ultimately benefit the American
people, what is clear is that other major
economies around the world are suffering
significant declines in trade. For economies
like Germany and Japan where exports are a
dominant driver of output, incomes and jobs, the
trade slowdown threatens economic stability, and
the effects permeate to other economies they are
linked with through the global value chains.
Here in the Philippines, the trade war’s adverse
impact is most visible in recent trends in our
foreign trade and their impact on the
performance of the manufacturing sector, the
dominant source (85 percent) of the country’s
exports. Latest data show that our total exports
as of the first nine months of the year dropped
by 3.4 percent from last year, a complete
turnaround from its 11-percent increase in the
same period a year ago. This drop was
prominently due to the 3.1-percent decline in
our exports of electronics components, which
accounted for 55 percent of total exports. This
dominant component of our exports has been most
vulnerable to the global trade slowdown caused
by the US-China trade war.
China has been our single biggest trading
partner and export destination, for which 56
percent of our exports are electronics products.
These electronics exports of ours find their way
into the finished consumer electronic products
China in turn exports to the United States, now
hit by the US tariff hikes. Similarly,
electronic products have been our top export to
Japan, United States, Korea, Hong Kong, the
European Union and Asean—all part of the global
value chains for electronic products that have
slowed down in the wake of the trade war.
In the domestic economy, electronic products
make up one-fifth of total manufacturing output,
and its decline has caused overall manufacturing
growth to slow down to 3.7 percent, after having
grown briskly at 7-8 percent annually in the
last eight years. For this reason, the overall
quality of jobs has also worsened in the past
year, with the share of wage and salary jobs
again falling to 63 percent from 65 percent last
year, while informal work and unpaid family
labor have again been on the rise.
It is heartening to note, though, that
manufacturing industries comprising 60 percent
of the total output of the sector are still
growing faster than the overall economy’s
6.2-percent growth.
From our end, we can only pray that the
elephants find a way to stop the fighting. |
_______________________________________________________________________________________ |
Pulls and
pushes
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:04 AM November
12, 2019
It was welcome news
last week that the economy’s growth in the third
quarter managed to exceed 6 percent again, after
slowing down to 5.6 and 5.5 percent in the first
two quarters, respectively. Based on available
data so far, this makes us the second
fastest-growing economy in the region, behind
only Vietnam, with its 7.3-percent GDP growth
boosted by opportunistic gains from the US-China
trade war. Our growth, on the other hand, is
homegrown, driven more by internal domestic
demand largely unfazed by a world economic
slowdown induced by the same trade war that has
exceptionally benefited Vietnam. Not even static
exports and falling foreign direct investment
inflows could offset surging domestic demand by
Filipino consumers and the government, whose
combined spending continued to make our economy
among the top growers worldwide.
The single biggest swing-around factor that
renewed our economy’s erstwhile seemingly
dissipating steam was government construction
activity. As is now well known, delayed passage
of the government’s 2019 budget impeded the push
that was to come from the “Build, build, build”
thrust, particularly in the first quarter of the
year. But an even deeper decline in public
construction in the second quarter, when the
2019 budget had already been in place, showed
that the delayed budget was not the whole story.
It implied that government’s capacity to
implement its planned infrastructure projects
could be the bigger problem.
The Commission on Audit reported budget
disbursement rates for the Department of Public
Works and Highways of only 34.1 and 39.7 percent
in 2017 and 2018 respectively. The Department of
Transportation’s numbers were worse, and even
declined from 25.6 percent in 2017 to 23.8
percent in 2018. With all eyes on these main
infrastructure agencies of government, it seems
they have been pushed to get their acts
together. We should see improved budget
disbursement rates from these agencies when this
year’s numbers get reported next year. We could
surmise this from the reversal of the first two
quarters’ consecutive deep declines (-8.6 and
-27.2 percent) in public construction into
double-digit growth (11 percent) in the third
quarter.
At the same time, private construction growth
nearly doubled last year’s 10.4-percent growth
with an impressive 19.1-percent growth this
year. As overall construction comprises nearly
12 percent of total GDP, the combined
double-digit push clearly helped push GDP growth
back to regain its momentum interrupted earlier
this year. Lower inflation also helped boost Q3
growth in household consumption to 5.9-percent
annual growth, from last year’s corresponding
figure of 5.3 percent.
From the production side, it was agriculture and
services that drove the uptick in GDP growth,
while industry growth slowed down. Corn
production, which zoomed by 24.1 percent in the
third quarter, was the biggest contributor to
growth in agriculture, followed by poultry (with
the former providing the feed inputs for the
latter). Livestock was also a key contributor,
but the recent influx of African swine fever is
likely to dampen this in future quarters. In
services, trade and repair of motor vehicles
gave the strongest boost, consistent with the
speedup in household consumption. But as always,
financial intermediation (banks and insurance)
showed the fastest growth (9.8 percent) among
the main services subsectors. As I have
previously observed, this is an industry that
rides high whether the economy is up or down.
The US-China trade war and the global trade
slowdown it has caused weighed down on
manufacturing, whose meager 2.4-percent growth
was largely due to the 4.3 and 11.3-percent
declines in electronics and furniture and
fixtures, respectively. Together, these two
export products make up 22 percent of total
manufacturing output, and their decline was
enough to drag down the sector’s growth. The
good news is that manufacturing industries
representing 60 percent of the sector’s output
continued to grow faster than the overall
economy did. This tells me that if the trade war
could end soon, we could be back on track toward
the 7 to 8-percent growth we have been
targeting. |
_______________________________________________________________________________________ |
Gov’t fully
awards 5-year bonds
October 16, 2019 | 12:02 am
THE GOVERNMENT fully
awarded the fresh five-year Treasury bonds
(T-bond) it offered during its auction
yesterday, even opening its tap facility to
accommodate excess demand from investors.
The Bureau of the Treasury (BTr) raised P20
billion as programmed from its T-bond offer on
Tuesday, with total tenders reaching P63.2
billion or more than three times the initial
offer.
The five-year papers fetched a coupon rate of
4.25%, which was 122.5 basis points (bp) lower
compared to the 5.452% average rate fetched
during the previous issuance of fresh five-year
papers back in March 6, 2018.
This prompted the BTr to open its tap facility
for another P10-billion offering following the
huge demand from investors, as well as to fill
the gap from the bid rejections they made during
previous auctions.
“Given the huge demand in today’s auction, we
saw that there are a handful of bids unserved at
the 4.25% level so we decide to open the tap for
P10 billion… And one other reason is we would
also like to cover for past rejections just to
fill in that hole in the previous auction,”
Deputy Treasurer Erwin D. Sta. Ana told
reporters after the auction on Tuesday.
The government last offered five-year T-bonds on
Nov. 21 last year, where it auctioned off P15
billion in reissued papers with a remaining life
of four years and three months. It made a full
award of the offer. The bonds, which carry a
coupon of 5.5%, were issued at an average rate
of 7.003%.
In the secondary market on Tuesday, the
five-year notes were quoted at 4.37%, based on
the PHP Bloomberg Valuation Service Reference
Rates published on the Philippine Dealing
System’s website.
Mr. Sta. Ana said the auction result was
expected following the Bangko Sentral ng
Pilipinas’ (BSP) announcement of another 100-bp
cut in banks’ reserve requirement ratios (RRR),
which will take effect in November, as well as
the upcoming maturity of government securities
worth P197 billion.
“The announcement of an RRR cut on bonds this
morning prompted the rally on belly bonds,
making the 4.25% rate that the new 5-76 bond
fetched attractive relative to the rest of the
bond curve,” Carlyn Therese X. Dulay, first
vice-president and head of Institutional Sales
at Security Bank Corp., said on Tuesday.
The BSP announced last month that it will reduce
lenders’ RRR by another 100 bps effective
November to bring the reserve requirement of
universal and commercial banks to 15% from 16%.
The reserve ratios of thrift banks will also be
cut to five percent from the current six
percent, and to three percent from four percent
for rural and cooperative banks.
Yesterday, the central bank said the Monetary
Board approved the reduction in the reserve
requirement rate for bonds issued by banks and
quasi-banks (QB) to three percent effective next
month in a bid to deepen the local debt market.
This rate is lower than the required reserves of
other debt instruments issued by banks such as
long-term negotiable certificates of time
deposits which is currently at four percent.
“The lower bank reserves on bond issuances is
expected to reduce the bond issuers’
intermediation cost that could be passed on to
the holders of such securities. The adjustment
in the required reserves for bonds complements
the BSP’s earlier policy issuance streamlining
the rules and requirements for the issuance of
debt instruments by banks/QBs. These initiatives
are intended to incentivize banks/QBs to tap the
domestic bond market as part of its liquidity
management,” the BSP said.
Ms. Dulay added that previous comments from the
Treasury that there will be no more issuance of
retail Treasury bonds this year prompted players
to put their investments in other facilities.
“The recent statement of the BTr regarding their
decision not to issue a retail Treasury bond
this year also emboldened market participants to
put their excess cash to use,” she said.
BORROWING APPROVALS ON TRACK
Meanwhile, Mr. Sta. Ana said the BTr is “on
track” with their requests for approvals for its
planned offshore and domestic borrowings next
year.
“We started the request for approvals so we will
be expecting some comments, let’s say from BSP,
moving forward. So we are on track with respect
to seeking approvals on this, both domestic and
foreign,” the official said.
He declined to disclose the volume but said
“it’s supposed to cover all foreign commercial
borrowings for 2020.”
Asked on the possible offshore markets that they
will tap next year, he said they will still
consider the usual sources such as the euro,
dollar, panda and samurai bond markets, but will
remain “flexible” as they look for “new
opportunities” from other markets such as the
Swiss bond market, among others.
“Basically the same markets that we have been
issuing in, and there’s a little bit flexibility
if there are new opportunities in other markets.
For example, Swiss francs, we may also look at
that more closely and other markets, I just
cited one but I think there could be other
markets,” Mr. Sta. Ana said.
The government is set to borrow P220 billion
from the local market this quarter, broken down
into P100 billion in Treasury bills and P120
billion via T-bonds.
It is looking to raise P1.189 trillion this year
from local and foreign sources to fund its
budget deficit, which is expected to widen to as
much as 3.2% of gross domestic product. — B.M.
Laforga |
_______________________________________________________________________________________ |
BSP: Banks
now allowed to submit reports via AI
Lawrence Agcaoili (The Philippine Star) -
October 15, 2019 - 12:00am
MANILA, Philippines —
The Bangko Sentral ng Pilipinas is simplifying
the reporting requirements of banks and
financial institutions through artificial
intelligence (AI) to improve the timeliness,
ease, and integrity of data submission.
BSP Governor Benjamin Diokno said the regulator
has developed a prototype that allows
machine-to-machine link between the BSP’s system
and those of its supervised entities for
streamlined transmission, processing,
warehousing, and analysis of banks’ prudential
reports.
“Targeted to go live by the latter part of 2020,
this innovation will significantly improve
timeliness, ease, and integrity of data
submission,” Diokno said.
The BSP chief said the regulator continues to
pilot test the use of regulatory technology and
supervisory technology including the use of AI,
machine learning and application program
interface (API) to enhance the timeliness and
quality of risk-based decision making.
Diokno added an API system automates the
collection, processing and analysis of data from
supervised institutions.
He said banks are burdened by an extensive and
time-consuming validation process involving more
than 240 Excel-based data entry templates with
100,000 plus data points.
“The resulting delays and the scope for human
error posed complications on our data and
statistical compilation operations. With this
modern API system, manual intervention is
eliminated since data sorting, sanitation and
validation processes are fully automated and
secured,” he said.
With the same 7,000 data validation rules still
being applied, Diokno said processing time of
filed returns was cut to just 10 seconds from
more than 30 minutes, thereby streamlining the
entire end-to-end process of regulatory
reporting and validation.
For the less sophisticated supervised entities
that cannot immediately migrate to the API-based
reporting, Diokno said the BSP developed a
central automated reporting environment referred
to as the FI (financial institution) portal.
“The FI portal provides a single electronic
platform upon which FIs can submit reports,
receive feedback on its acceptability, and
exchange correspondences with the BSP on matters
related to report submissions. It offers a more
secure encrypted process of submission through a
web facility where supervised entities can
upload their reports instead of sending them via
regular email,” he added.
Diokno said an automated chatbot system would
also go live by mid-2020 to adequately and
efficiently handle consumer concerns using AI
and natural language processing. |
_______________________________________________________________________________________ |
SEC flags new
batch of online lenders
Iris Gonzales (The Philippine Star) - October
15, 2019 - 12:00am
MANILA, Philippines —
The Securities and Exchange Commission (SEC) has
flagged another batch of online lenders,
ordering them to stop their lending activities.
Last Oct. 10, the SEC slapped cease and desist
orders against A&V Lending Mobile, A&V Lending
Investor, A.V. Lending Corporation, Cashaku,
Cashaso, CashEnergy, Happy Loan, Peso Pagasa,
Vito Lending Corp., Phily Kredit, Rainbow-Cash
and Rainbowcash.Ph Lending Corp.
In its order, the SEC said these companies
should stop advertising their lending business
through the internet and to delete or remove
promotional presentations and offerings of such
lending business from the internet including the
lending applications that they operate.
The SEC said these entities are not authorized
to implement lending activities.
“Considering that the online lending operators
are not incorporated entities or have no
Certificate of Authority to Operate as Lending
Companies or Financing Companies, the lending
activities and transaction are illegal and have
to be stopped immediately by this Commission,”
the orders said.
“Moreover, the abusive collection practices
engaged in by unlicensed online lending
companies constitute unfair debt collection
practices which the Commission expressly
prohibits under SEC Memorandum Circular No. 18,
Series of 2019 (Prohibition on Unfair Debt
Collection Practices of Financing Companies and
Lending Companies) which took effect recently,”
the SEC said.
Based on the findings of the SEC Corporate
Governance and Finance Department (CGFD), the
online lending applications and their operators
do not have the necessary papers and permits.
In the case of A&V Lending Mobile, the CGFD
found no record of the registration of its
purported operator, A&V Lending Investor.
A certain A.V. Lending Corp. turned up in the
SEC database, but its registration has already
been revoked.
Peso Pagasa and Rainbow-Cash are reportedly
operated by Vito Lending Corp. and
Rainbowcash.Ph Lending Corp., respectively.
However, no such corporations are recorded in
the Commission’s database, the SEC said.
A number of complainants said many of these
lending companies engage in abusive collection
practices.
According to Section 4 of Republic Act 9474, or
the Lending Company Regulation Act of 2007, a
lending company must be established only as a
corporation.
It further provides that “no lending company
shall conduct business unless granted an
authority to operate by the SEC.”
Violators will be penalized, the SEC said. |
_______________________________________________________________________________________ |
New BSP rule discourages banks from becoming
‘too big to fail’
By: Daxim L. Lucas - Reporter / @daxinq
Philippine Daily Inquirer / 04:11 AM October 14,
2019
Philippine banks that
become too large—large enough to affect the rest
of the financial system, in case they run into
trouble—will be required to set aside more
capital to guard against market volatility, the
central bank said.
In a statement released last weekend, the Bangko
Sentral ng Pilipinas also said that its newly
approved framework for dealing with domestic
systemically important banks would have
provisions to discourage banks from growing into
the so-called too-big-to-fail category.
Apart from requiring these giant financial
institutions to have higher capital, they will
be “subject to more intensive supervisory
approach and will be required to adopt a
concrete and acceptable recovery plan that will
address the risks they pose to the financial
system and the real economy,” the BSP said.
Depending on the degree of systemic importance,
identified systemically important banks will be
categorized into different higher loss
absorbency buckets and will be required to
increase their minimum common equity tier 1
capital by 1.5 percent to 2.5 percent of total
risk-weighted assets, it said.
The requirement to have higher loss absorbency
or additional capital in the form of pure equity
aims to bolster the resilience of these
systemically important banks.
“This is on top of the existing [minimum equity]
levels, capital conservation buffer, and
countercyclical capital buffer required from all
universal and commercial banks, as well as their
subsidiary banks and quasi-banks,” the regulator
said.
Large banks classified as posing the highest
systemic risk will have a uniform 1.5 percent
higher loss absorbency requirement, while those
slotted under the less riskier category will
have a differentiated requirement (up to a
maximum of 2 percent).
A third category with loss absorbency
requirement of 2.5 percent will be maintained
“to provide incentives for banks to avoid
becoming more systemically important,” the
regulator said, adding that failure to meet
these minimum requirements will be penalized
with restrictions on the bank shareholders’
dividend policies.
The BSP said the new rules were approved by its
policy-making Monetary Board in line with
international standards that aimed to safeguard
the stability of the financial system, in line
with regulatory changes around the world.
The enhanced framework will cover revisions in
the differential weights of categories or
indicators and the composition of indicators,
including the adoption of threshold level; and
calibration of the level of additional capital
requirement. These enhancements will be applied
on a consolidated basis to all universal and
commercial banks as well as their subsidiary
banks and quasi-banks, and branches of foreign
banks.
Under the revised framework, a bank’s systemic
importance is assessed based on pre-defined
indicators for size, interconnectedness,
substitutability and complexity. Among the four
categories, size and interconnectedness bear
greater weight as these factors are more
critical measures in determining a bank’s
systemic importance in the Philippines, taking
into consideration the simple structure of the
Philippine financial system.
Banks identified systemically important will be
individually informed of their designation with
details as to the category they belong to and
the individual score for each indicator, the BSP
added.
|
_______________________________________________________________________________________ |
Poor Internet connection spurs ‘creative ways’
for digital technology in banking and finance
By Bianca Cuaresma
October 10, 2019
FROM its early
beginnings of traditional brick-and-mortar
transactions to the rise in automation as seen
in the proliferation of automated teller
machines (ATMs), the global banking industry is
facing yet another new wave of innovations to
make financial management faster and more
efficient.
Amid the rise in global connectivity through the
Internet, financial innovations are evolving,
and financial technology—or the so-called
fintech—is becoming the new mode of doing
business among banks and financial institutions
all over the world.
In recent years, advanced technology providers
have diversified into the world of financial
services—with two of the largest competing
technological giants, Google and Apple, now
providing digital wallet services.
Google Pay, for example, describes its
electronic wallet service as “a fast, simple way
to pay on sites, in apps, and in stores using
the cards saved to your Google Account.” Google
also says the service “protects your payment
info with multiple layers of security and makes
it easy to send money, store tickets, or cash in
on rewards—all from one convenient place.” Apple
Pay, meanwhile, claims that its service “is even
simpler than using your physical card, and
safer, too.”
Earlier this year, Facebook announced its
venture to put up “Libra,” a blockchain digital
currency.
In the Philippines, fintech has transformed the
delivery of financial services—from branch
banking to online banking, paper-based money to
electronic money, and face-to-face customer
verification to technology-aided
know-your-customer process.
The Philippines is positioned to make its own
financial technology innovations as Internet
penetration continues to expand and the
population—which is largely composed of young
adults—are now spending a lot of time online. A
recent report said that Filipinos spend an
average of 10 hours a day on the Internet.
However, poor Internet connection and
infrastructure hinder technological advances in
the country, which has a great potential to take
advantage of huge online business opportunities.
Bangko Sentral ng Pilipinas (BSP) Deputy
Governor Chuchi Fonacier told the BusinessMirror
that good infrastructure and fast Internet
connection are crucial for the country to reach
its potential when it comes to digital
innovations in the financial sector.
“Having a good public infrastructure such as
high-quality and affordable Internet connection
for the populace would provide a suitable
environment for fintech products and services to
flourish,” Fonacier said.
Recent data, however, reveal a bleak outlook.
Despite high costs, the Philippines’ average
connection speed was only at 2.8 Megabits per
second (Mbps) in 2015. This is significantly
lower than the global average connection speed
of 5.1 Mbps, which makes our Internet speed the
second slowest in the Asia-Pacific region based
on data from the International Telecommunication
Union.
Spur of creativity
Amid the growing pains of connectivity in the
country, the ability of Filipinos to create,
based on what they have, is astounding. The BSP
said banks and financial technology companies
are increasingly finding ways to deliver new
services that only need little connectivity.
“There’s still considerable momentum when it
comes to fintech development because fintech
players are able to design products and services
that can run on low Internet bandwidths,”
Fonacier told the BusinessMirror.
“This is also the case for banks and other
financial institutions, whereby the design and
delivery of products and services primarily
takes into account the Internet connection and
speed for certain markets/areas,” she added.
A recent example is banking solutions provider
PearlPay’s tie-up with a rural bank in Dagupan.
PearlPay signed a pilot program agreement with
BHF Rural Bank Inc. (BHF) for the use of
cloud-based technologies to deliver services to
customers.
The agreement allows the bank to access
cloud-based technologies such as core banking
solutions (CBS), agent banking solutions (ABS),
and eWallet solutions—all of which are designed
to reach customers with limited or no access to
the Internet.
Earlier this year, Philippine-owned business
group Transnational Diversified Group (TDG) and
Japanese shipping firm NYK Line have joined
forces to develop a fintech platform that will
allow electronic money transfers without an
Internet connection.
The program would allow seafarers and vessels’
masters to make electronic money transactions
aboard their ships.
MarCoPay takes its name from “Maritime
Community,” and seeks to provide its target
market with a quality product that can help them
strategically manage their finances. MarCoPay,
the brainchild of NYK and TDG, comes in the form
of an app, which will be launched in January
2020.
MarCoPay will use QR codes that can be used to
complete pre-boarding procedures, receive and
convert salaries into digital currency, and this
e-money can be used for onboard purchases and
for remitting money to their families.
Fintech roadmap
The BSP said it continues to open its doors to
innovations through its fintech roadmap.
“Likewise, the BSP collaborates with other
financial regulators, through the Financial
Sector Forum FinTech Committee, to ensure
fintech policy consistency, prevent regulatory
arbitrage and promote expansion of fintech
innovations,” Fonacier said.
“As you know, the BSP is spearheading a number
of major initiatives. All of these initiatives
necessitate a stable, reliable, affordable and
high-quality Internet connection. As such, the
BSP remains committed in working with the
Department of Information and Communications
Technology [DICT] to push the agenda forward,”
she added.
“The BSP understands that the DICT is already
working on the National Broadband Plan
formulated in 2016, which aims to address the
longstanding issue of Internet connection
quality in the country. The plan will provide
Filipinos with wider access to high-speed
Internet connection and better services, which
can spur economic activity, particularly in the
e-commerce and digital space,” Fonacier said. |
_______________________________________________________________________________________ |
Banks still expand physical network amid
digitalization–BSP
By Bianca Cuaresma
October 4, 2019
EXECUTIVES of local
financial institutions continue to believe in
face-to-face delivery of service amid the rise
in digital banking, as data from the Bangko
Sentral ng Pilipinas (BSP) showed banks
continued to expand their physical network as of
August this year.
Data from the Central Bank showed local banks
have a total network of 12,618 branches as of
August this year, adding 191 branches in a span
of five months. Universal and commercial banks
still dominate the market, with 6,850 total
branches as of end-August this year or more than
half of the total banking network.
Thrift banks, meanwhile, have a total of 2,606
branches, while rural and cooperative banks have
3,162 branches.
Universal banks and commercial banks, as well as
rural and cooperative banks posted solid growth
rates in terms of their physical network from
March to August this year. Big banks in the
country grew their branch network by 190
branches in five months, while rural and
cooperative banks added 61 branches to their
network in the five-month period.
Thrift banks, however, partially bucked the
growth—as their total branches decreased by 60
during the period. By distribution, data
available from the BSP showed the National
Capital Region still has the lion’s share of
bank branches with 3,764 as of June 2019. This
is followed by Region 4A or Cavite, Laguna,
Batangas, Rizal and Quezon with 1,840 branches
and then by Region 3 or Central Luzon with 1,307
branches.
The poorest areas, however, continued to receive
little banking presence during the year, with th
Autonomous Region in Muslim Mindanao having only
18 branches for the entire region. This is
followed by the Cordillera Administrative Region
at 193 branches and Region 13 or the Caraga
region with 221 branches. |
_______________________________________________________________________________________ |
Misguided reversal
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 04:06 AM September
24, 2019
Would imposing
“safeguard measures” and doubling tariffs on
rice imports be a good solution to current
difficulties in our rice sector as it adjusts to
the more open trade regime established by the
Rice Tariffication Act (RTA)? Appealing as it
may sound to many, it is not. It goes against
the interests of the wider majority of
Filipinos, is unlikely to help the intended
beneficiaries of such a move, and to top it all,
would reward the very people in the rice
business who are instrumental to the current
difficulties.
World Trade Organization (WTO) rules permit
members to impose temporary emergency
restrictions on imports such as higher tariffs
to deal with a surge in imports that causes
injury to domestic producers. The rules provide
that safeguard measures may be applied only
after an investigation conducted by competent
authorities according to established procedures.
Among the topics on which affected parties’
views are required to be sought is whether or
not a safeguard measure would be in the public
interest.
This is really the crux of the issue: Whether or
not the rules allow us to do it, would imposing
high import tariffs now, to the point of making
them prohibitive (that is, stop imports
altogether), actually be in the public interest?
This would be tantamount to a complete reversal,
albeit temporarily, of the RTA and what it seeks
to achieve. Temporary or not, and whether or not
WTO rules allow it, this would be an outright
violation of the recently enacted law, hence
cannot be done without an act of Congress. Let’s
face it: Those who are pushing for the so-called
safeguard measures are actually still hoping to
reverse the law altogether.
As I have constantly argued, it would only mean
a return to helping our rice farmers in a
glaringly wrong way, via a perverse “shotgun”
policy that imposes collateral damage of high
rice prices on 104 million rice consumers, in
order to help some 2 million rice farmers and
their families—even as many of them could
actually be competitive and thrive under a more
open trading regime. Yet we could give them much
more meaningful help in a more focused way.
Taking rice trade out of government control was
a move that had been overdue for decades,
because it would bring domestic rice prices down
and induce our rice industry into greater
competitiveness. Meanwhile, we penalized our 22
million poor with expensive rice, leaving them
little money left to buy other nutrient-rich
foods.
It’s no surprise, then, that the incidence of
severe malnutrition, especially among our young
children, has been unduly higher than in most of
our neighbors enjoying lower-priced rice. The
result has been impaired brain and physical
development in a large segment of our
population, condemning them to low productivity
and persistent poverty.
What we have long needed, and what RTA should be
spurring us to do now, is to use a
“rifle”-focused approach to helping our rice
farmers. Right now, the rifle solution urgently
needed is to give emergency cash support to the
farmers badly affected by lower rice farmgate
prices. The need for this had always been
anticipated, yet we somehow failed to plan ahead
for it. Even so, if there’s a will, there ought
to be a way.
Moving forward, government must get its act
together in helping rice farmers right, to raise
productivity and lower their production costs
where feasible, or to shift to other lucrative
crops where not. There’s tremendous opportunity
for this from the large tariff revenues already
being collected for rice imports, but we must
make sure that our past history of massive
agriculture funds finding their way into the
wrong pockets will not be repeated. We must also
organize government’s technical support for
farmers better, by enabling and empowering our
provincial governments to coordinate farm
support services within their jurisdictions,
under close tutelage and supervision by the
Department of Agriculture.
Restricting rice trade anew would be
ill-advised. Rather than stop the hoarders who
have so far arrested the fall in rice retail
prices, we would only play into their hands and
make them, once again, the big winners in this
long mismanaged sector. |
_______________________________________________________________________________________ |
FinTech Alliance commits to code of ethics
Louella Desiderio (The Philippine Star) -
September 18, 2019 - 12:00am
MANILA, Philippines —
FinTech Alliance.PH, which groups financial
technology and digital firms, has committed to
promote a code of ethics and adopt a code of
conduct for responsible lending following the
move of the National Privacy Commission (NPC) to
recommend criminal charges against officials of
three online lenders for data privacy
violations.
FinTech Alliance’s initiative also comes as the
Securities and Exchange Commission (SEC) issued
a cease and desist order against 19 online
lending applications operated by unlicensed
persons and entities, amid complaints of
invasion of privacy and harassment.
“Technoethics is a framework on the ethical
utilization of emerging technologies, protecting
consumer against the misuse and abuse of
innovations, and adoption of common principles
to guide players about new advances in
technological development and application to
benefit society,” FinTech Alliance chairman Lito
Villanueva said.
The initiative involves setting standards for
the industry to promote transparency and protect
customers from any possible malpractices and
other unethical actions of fintech players.
In particular, fintech players would not be
allowed to use customer data with the objective
of disbursing more loans.
Fintech players’ practice of intimidation to
collect from borrowers is likewise prohibited.
Alliance members providing online lending would
be required to fully disclose all costs of
customers including interest rates, processing
fees and fines for late payment.
The alliance decided to adopt the initiative to
protect consumers from unscrupulous and abusive
online lenders, as well as safeguard industry
players with good practices as the NPC earlier
this month, recommended criminal charges against
the officials of online lending firms Fast Cash
Global Lending Inc. (Fast Cash app), Unipeso
Lending Co. Inc. (Cashlending), and Fynamics
Lending Inc. (PondoPeso) for violations of the
Data Privacy Act for their business practice of
shaming borrowers by targeting their privacy in
order to collect payments.
Complaints received by the NPC include online
lending firms’ use of borrowers’ contact list
without consent or authority; disclosure of
unwarranted or false information to other
persons; use of personal information for
harassment; and unduly intrusive personal data
processing.
Regulators such as the SEC and the NPC welcome
the move of the FinTech Alliance and have
committed to work closely with the private
sector as well as other government agencies like
the Bangko Sentral ng Pilipinas and Department
of Trade and Industry to promote safety and
security of consumers.
In line with the corporate regulator’s
commitment, SEC Commissioner Kelvin Lee said a
cease and desist order was issued last Sept. 12,
against 19 online lending applications such as
Instant Pera, QuickPera, Lendmo Philippines,
Binixo, CashBus, Cashcat, Cashuttle, Crazy Loan,
Flash Cash, Happy2Peso, Hatulong, MeLoan,
MoneyTree Quick Loan, Pera Express, Pera4u,
Peramart, PesoLending, QuickPeso and Umbrella.
“Based on the findings of the SEC Corporate
Governance and Finance Department and
Enforcement and Investor Protection Department,
the owners and operators of the online lending
applications have not secured the required
certificates of authority to operate as lending
or financing companies. Furthermore, they are
not registered as a corporation with the SEC,”
he said.
He said SEC decided to conduct investigations on
lending activities of the online apps as they
received complaints on high interest rates,
unreasonable terms and conditions,
misrepresentations as to non-collection of
charges and fees, as well as violation of right
to privacy and other abusive practices such as
accessing borrower’s personal information to
contact a borrower’s relatives, friends and
acquaintances, as well as threatening public
shaming and harassment. |
_______________________________________________________________________________________ |
Far behind in housing
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 05:25 AM September
06, 2019
For a country with
far less poverty incidence, Singapore’s public
housing expenditures (PHE) as a ratio to gross
domestic product (GDP) in the 15-year period
from 2000 to 2014 was 13 times more (1.6
percent) than that in the Philippines (0.12
percent). Among the original five members of the
Association of Southeast Asian Nations (Asean),
our country posted the least PHE as a ratio to
GDP, with Indonesia spending twice, Malaysia
three times, and Thailand five times what we
did. Even Bangladesh, with an average income
(GDP per capita) only half ours, spent more than
twice as much (0.26 percent of GDP) as we did.
The Philippine Development Plan notes that
housing has consistently received less than 0.5
percent of our government budget. In 2017, the
National Housing Authority and the Social
Housing Finance Corp. jointly received P13
billion, or 0.39 percent of the total P3.35
trillion budget. This is a mere “drop in the
bucket,” notes the John J. Carroll Institute on
Church and Social Issues at the Ateneo de Manila
University, given the 1.7 million households
targeted for direct housing assistance from
2017-2022. This target is still far less than
our people’s actual housing needs.
Figures cited in the housing sector roadmap
prepared for the Department of Trade and
Industry indicate a projected need of 6.2
million new housing units from 2012 to 2030, 3
million of which are in the socialized and
subsidized housing category. Even if only half
the minimum cost of a decent housing unit (which
I’m very conservatively placing at P300,000) is
subsidized by government, this would still
require P450 billion over the 19-year period, or
about P24 billion annually, which is twice the
2017 allocation. Doubling our annual allocation
for public expenditures on housing would only
bring us to the level of Bangladesh in relative
terms. To match the average in the four other
Asean-5 members, we would need to hike our PHE
six times.
It’s no surprise, then, that informal settlers
have been a persistent and growing problem in
our midst. The need for mass housing has always
been evident, and should have been seen as
urgent all these years. For a country that has
had a persistently high poverty incidence,
providing for the basic human need for decent
housing should be among government’s top
priorities, and one for which government must
have a creative and proactive strategy. I
already explained in my last article why PHE
would have a high multiplier effect in the
economy, thereby helping generate wider and
faster growth in jobs and incomes.Reacting to
that piece, a reader wrote: “The government’s
attitude toward housing, in spite of the promise
of its Build, Build, Build (BBB) program, is
disappointing if not disgusting.” He argues that
overall infrastructure planning ought to be
undertaken with provision for low-cost housing
consciously integrated into plan. He has a
point. He laments how “the government has not
taken the potential of consolidating the various
roads and railways projects of the BBB with
development programs for low-cost housing. It
lost a lot of opportunity in reserving land for
low-cost housing along the routes of the MRT 7
and LRT 1 Cavite Extension. It just stood by and
watched the greedy real estate developers.”
He wonders if there is any move to reserve
and/or expropriate land for the same purpose
along the routes of the planned LRT 4 from
Edsa/Ortigas to Taytay, Rizal, and LRT 6 from
Bacoor to Dasmariñas in Cavite. And noting many
old but durable buildings along the 35-year-old
LRT 1 heritage line from Baclaran to Monumento
that have been idle for anywhere from 10 to 30
years, he asks: “Is it not possible for the
government to lease some of them for conversion
into dormitories for the students of the several
schools along the route? There are dozens if not
hundreds of old and usually dilapidated
warehouses and manufacturing plants in Metro
Manila. Shouldn’t the government try to
expropriate them and convert them into
medium-rise low-cost apartment buildings?”
Indeed, there could be many creative approaches
and solutions to our housing problem, but we
have to first overcome what seems to be the
foremost obstacle, and that is recognizing that
there is one. |
_______________________________________________________________________________________ |
More housing in BBB
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 05:05 AM September
03, 2019
Our continuing
overall economic slowdown since 2016 suggests
that government’s “Build, build, build” (BBB)
program has so far failed to give us the
economic stimulus it was meant to provide.
Public construction had already slowed down from
a 28-percent annual growth in 2016 to 19.7
percent last year, and the budget impasse swung
it into negative (-22.1 percent) this year so
far. Heaven forbid, but the “Build, build, bust”
I expressed apprehension about early on might
yet play out, unless we do things differently.
I’ve already written of absorptive capacity
issues in our major infrastructure agencies,
which appear to be an underlying drag on BBB,
with or without budget delays. For this reason,
many are urging government to revisit
public-private partnerships in infrastructure,
which was set aside on the seemingly misplaced
premise that government could speed things up.
Well, the numbers now belie this, and it matters
not whether we point the finger at Congress or
the implementing agencies.Apart from the
economic boost from improved infrastructure, BBB
aimed to directly stimulate our economy via the
textbook multiplier effect. That is, a one-off
expenditure by government would actually raise
total production and incomes by several times
the amount of the original spending. If
government spends P100 million to, say, build a
new road, that same amount becomes incomes
received by contractors, engineers, equipment
suppliers, construction workers and more. But
that’s not the end of it. Those various people
now have money to spend or save as they choose.
Ignoring taxes, if Filipinos on average save P10
of every additional P100 income they receive,
then the original P100 million spent by
government turns into a new round of P90 million
in spending on various things such as food,
clothing, appliances, etc. that those
construction industry people would spend their
incomes on.
But someone’s spending is someone else’s income,
so that second-round spending of P90 million
turns into a third round of spending amounting
to P81 million, which becomes yet another round
of incomes to spur yet another round of
spending, and so on and so forth. When it all
plays out, the P100 million originally spent by
government would have created 10 times as much
(P1 billion) total production and incomes.
Mathematically, if the saving rate is 10 percent
or 0.1, the multiplier works out to be one
divided by that, or 10. The lower the saving
rate, the higher will be the multiplier effect.
How can government maximize the efficacy of its
spending? First, it must spend it on things most
beneficial to society — more bridges versus new
cars for government officials, more hospitals
versus ornamental lampposts. Second, spending it
on domestically produced goods and services
keeps the multiplier effect within our own
economy. If the money is spent to buy trains
from China, it’s Chinese incomes that would be
multiplied, not ours. Third, it is best spent on
activities with widespread linkages to the rest
of the domestic economy. For this reason, mass
housing is a potent way to spend government
money.
Mass housing not only directly responds to a
long-standing need of our poorer citizens; it
would also have a powerful multiplier effect.
First, low-cost housing entails large numbers of
construction workers, thereby creating many more
jobs than a capital-intensive investment would.
The money would circulate more among
lower-income and lower-saving individuals,
keeping more money moving around in the
spending-income cycle and boosting the
multiplier effect.
Second, low-cost housing would have much lower
import content than other government
expenditures (say, hybrid seeds from China), and
thus keep the money circulating here at home.
Third, housing links on to numerous domestic
economic activities: home furnishings,
utilities, household supplies and many more. All
told, public spending on housing would permeate
much more widely and more quickly across various
industries and sectors within the Philippines.
I’d say a good way to avert a “Build, build,
bust” is to focus more of it on mass housing,
where our backlog is huge. It would also bring
down poverty much faster. |
_______________________________________________________________________________________ |
Crisis-proofing the Philippine financial system
August 28, 2019 | 12:05 am
IT HAS BEEN MORE THAN
A DECADE since the last global financial crisis.
The 2008 crisis had started in the US subprime
mortgage market, which crept into financial
markets and led failing banks to either be
rescued by governments or be closed down.
However, the Philippine banking system was
relatively insulated with bank failures
contained within the rural banking sector whose
small assets relative to the total sector’s
resources posed little to no systemic risk.
Nevertheless, the Bangko Sentral ng Pilipinas
(BSP) has been fortifying regulatory standards
under the international Basel 3 framework since
2014 to ensure that the country’s financial
system remains capable of weathering potential
shocks that could spill over to the rest of the
economy.
“At the height of the 2008 Global Financial
Crisis, the BSP prudently considered
opportunities for monetary policy easing and
infusion of appropriate levels of liquidity amid
the potential tightening of financial
conditions. This in turn, helped maintain the
efficient functioning of the financial markets
and helped avert the shrinkage of domestic
markets,” BSP Deputy Governor Chuchi G. Fonacier
said in an e-mail.
Among these string of reforms include the 10%
capital adequacy ratio (CAR), the 5% leverage
ratio, and a framework for domestic
systematically important banks (DSIBs) among
others. The standards imposed by the BSP are
well above the minimum standards of 8% for CAR
and 3% for the leverage ratio set under the
Basel 3 regime.
CAR indicates the banks’ ability to absorb
losses from risk-weighted assets while the
leverage ratio represents how much capital banks
should have in hand to cover non-risk weighted
assets.
These reforms will boost buffers maintained by
big banks against potential risks, complementing
the 6% common equity Tier 1 ratio and the 7.5%
Tier 1 ratio imposed by the BSP. |
_______________________________________________________________________________________ |
ATM fee hikes
can't exceed over-the-counter charges – BSP
By CNN Philippines’ Melissa Lopez
Published Aug 13, 2019 6:11:55 PM
Metro Manila (CNN
Philippines, August 13)— The Bangko Sentral ng
Pilipinas (BSP) on Tuesday reiterated it will
thoroughly review any bank’s request for an
automated teller machine (ATM) fee hike amid
concerns from the public and lawmakers.
“Costs declared should be clear, properly
supported, and may be validated by the BSP when
deemed necessary,” BSP said in a statement.
“Rest assured that the BSP shall examine each
request and decide if the increase is warranted
to cover the cost of maintaining the ATMs.
Should an increase be necessary in order for
banks to continue providing ATM services to the
banking public, the BSP will ensure that the
increase will be reasonable and will adhere to
pricing principles provided under BSP Circular
No. 980 dated 6 November 2017,” it added.
The central bank noted that should any increase
be approved, the charge must be lower than the
fees collected from over-the counter
transactions.
The BSP in July announced its decision to lift a
six-year moratorium on ATM fees, allowing banks
and ATM providers to set new fees for
machine-based transactions. Bank proposals,
however, should first gain the central bank’s
approval.
Makati Representative Luis Campos, Jr., through
House Resolution 210, on Monday sought for an
inquiry on the looming ATM fee increases
following the moratorium’s lifting.
Current fees on cash withdrawals range from ₱10
to ₱15 for big banks, while rural lenders are
authorized to charge up to ₱46 per transaction,
according to BSP's list. Balance inquiries can
also go as high as ₱2.50 per request. These
charges are slapped on a cardholder who uses
another bank's ATM terminal.
The said fees have remained unchanged since
2013.
“The BSP assures the public that its policy on
ATM fees is guided by best industry practices
and that it is driven with the broader welfare
of consumers in mind,” the BSP added. |
_______________________________________________________________________________________ |
BSP cautions
banks on interest rate risks
Lawrence Agcaoili (The Philippine Star) - August
10, 2019 - 12:00am
MANILA, Philippines —
The Bangko Sentral ng Pilipinas (BSP) has
cautioned banks and financial institutions on
interest rate risks on their earnings.
BSP Governor Benjamin Diokno said the Monetary
Board has issued resolution 1087 last July 19
approving the adoption of the guidelines for
managing interest rate risk in the banking book.
The resolution also amended the guidelines on
risk management.
In the circular, Diokno said that the central
bank recognizes that changes in the structure of
banks’ and quasi bank’s balance sheets and
movements in interest rates pose risks to
earnings and economic value.
In particular, the BSP chief said excessive
interest rate risk in the banking book (IRRBB)
may result in a reduction in earnings or of
capital.
IRRBB refers to the current or prospective risk
to capital and earnings arising from adverse
movements in interest rates that affect banking
book positions.
“In this regard, the BSP expects banks and quasi
banks to implement a comprehensive approach to
risk management that ensures timely and
effective identification, measurement,
monitoring and control of IRRBB,” he said.
The guidelines aim to provide clear expectations
on how a bank/QB should manage IRRBB and align
the BSP’s supervisory framework on interest rate
risk with international standards.
Banking book positions refer to assets
generating interest income such as loans and
investments and liabilities paying out interest
such as deposits. IRRBB can manifest through
decreased net interest margins for a bank or
quasi bank that can ultimately impact its
capital.
Hence, the BSP said the framework is expected to
bring about prudent management of the risks
posed by movements in interest rates to a bank’s
or quasi bank’s funds generation and lending
activities, which are the predominant business
activities of BSP-supervised financial
institutions.
The new guidelines set out the minimum
requirements on the identification, measurement,
monitoring and control of IRRBB as well as the
key provisions of the guidelines pertain to the
expectations on banks and quasi banks regarding
IRRBB measurement, which include obtaining a
thorough understanding of the frequency of
interest rate changes for certain deposits and
loans; quantifying the possible losses under
both normal and stressed business conditions;
and gauging the impact of IRRBB on earnings or
capital.
In developing the guidelines, the BSP likewise
took into consideration the profiles and
existing practices of banks and quasi banks with
respect to the management of IRRBB.
The BSP said stand-alone thrift, rural and
cooperative banks are expected to measure and
assess the impact of a one, two and three
percent movement in interest rates on their net
interest income for the succeeding 12-month
period.
“These banks should likewise apply stress
scenarios specific to them, such as increasing
competition within their localities that could
result in adjustments in the interest rates that
they offer on their loans and deposits,” it
said. |
_______________________________________________________________________________________ |
Shun the
shotgun
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 05:20 AM August 02,
2019
A “happy compromise,”
the President calls the idea of reimposing,
albeit “temporarily,” import controls on rice.
But as I explain below, such move promises to be
anything but happy, including for rice farmers
themselves. To restore a policy aimed at the
welfare of a few (rice farmers in this case) but
inflicting collateral damage on far greater
numbers of poor rice consumers (which include
rice farmers, too) is to return to using a
shotgun to hit a specific problem that is better
shot with a focused rifle.
What prompts the President’s idea and persistent
calls for review or even recall of the rice
tariffication law is the drop in average farm
gate prices of palay to P17.87 per kilo from
last year’s P21.61, as reported by the
Philippine Statistics Authority (PSA). Prices as
low as P12 per kilo have been reported. The
price drop is no surprise, both for milled rice
at retail and unmilled rice (palay) at the farm
gate, as this had always been the intended
result of opening up rice trade to greater
competition.
What concerns many is how palay farm gate prices
have fallen disproportionately more than
wholesale and retail prices of milled rice have.
PSA data for mid-July report average wholesale
and retail prices of well-milled rice of P39.08
and P42.88 per kilo, respectively, from last
year’s P42.07 and P44.80. In percentage terms,
they fell 7.1 percent (wholesale) and 4.3
percent (retail).
But farm prices had dropped by a much higher
rate of 17.3 percent, suggesting that there’s
something wrong in the system somewhere. The
traditional rule of thumb is that the rice
wholesale price is about twice the farm gate
palay price. So if palay prices are down P3.74
per kilo since last year, the corresponding drop
in the rice wholesale price should be around
P7.48, not just P2.99 as observed. What is
happening?
I asked Dr. Roehl Briones, expert agricultural
economist from government think tank Philippine
Institute of Development Studies, who has
studied the rice market closely for decades. The
P6.5 billion in rice import tariffs reportedly
collected by the Bureau of Customs as of
mid-July corresponds to about 1.5 million tons
of rice imported this year so far. With the
price of imported rice being far lower than
domestic prices, retail prices should have
fallen by much more than the approximate P2 drop
seen since last year.
Briones estimates that the 17-percent drop in
palay prices should correspond to a 26-percent
drop in the rice wholesale price. As this hasn’t
happened so far, the only feasible explanation
is that substantial rice stocks are being stored
somewhere, whereas traders, with those imports
in mind, are holding off buying palay from
farmers. Call it hoarding or strategic supply
management, but this has so far kept consumers
from realizing the full benefit of the
liberalized rice trade regime. But with a little
more patience, it should come, as storing rice
is not costless and rice stocks cannot be held
indefinitely. Briones expects that once the
stored stocks are unleashed into the market,
that’s when we would see rice retail prices drop
more commensurately with the observed fall in
palay prices.
Meanwhile, farmers are bearing the brunt of the
situation, and their loss has been far greater
than the consumers’ gain so far. This is why
analysts who had pushed for rice tariffication
had also recommended prompt assistance to
affected rice farmers, even in the form of
outright cash assistance. This is urgent and
necessary, especially because production
assistance funded by the Rice Competitiveness
Enhancement Fund sourced from the rice import
tariff proceeds will be slow in coming, given
government’s traditional bureaucratic
rigidities. |
_______________________________________________________________________________________ |
Philippines’
UnionBank Rolls Out Own Cryptocurrency: The PHX
Stablecoin
Posted on July 30, 2019 by Rehan Yousaf
After last year’s
pilot project in collaboration with the
Ethereum-based startup ConsenSys, Philippine’s
UnionBank now has its own cryptocurrency,
reports local news outlet The Philippine Star.
Arvie de Vera, Senior Vice President of
UnionBank confirmed that not just the
cryptocurrency, in the form of a stablecoin
called PHX, has been launched, but PHX
transactions have also been enabled across rural
banks. Actions of PHX buying, transferring,
domestic remittance and redemption transactions
with the rural banks were done via a special
connection with UnionBank (more on that below).
In addition, de Vera said how PHX would ensure
stable, transparent and automatic transactions.
This recent development is a step by UnionBank
to make efficient and fast transactions
available to its users in rural areas. It aims
to provide “financial inclusion” by introducing
this cryptocurrency.
UnionBank is one of the Philippines’ top ten
major banks. Last year it reported $140 million
worth of earnings, has become the country’s
first bank to implement blockchain technology,
and started dispersing crypto ATMs across the
country. Since PHX is backed by a conventional
asset, it makes it less volatile than regular
cryptocurrencies. Also known as a “stablecoin,”
such cryptocurrencies are pegged to already
existing stable financial assets, which in this
case would be the Philippine peso. This makes
the digital currency more stable.
Crypto Trafing via Platform Connected to Rural
Banks
In the report by Philstar, de Vera stated
“Governance is assured by design. Reconciliation
challenges of the past are no longer an issue.
Meanwhile, audit and compliance are made
easier.”
According to him, PHX uses i2i platform to
connect listed banks with rural banks; i2i is
UnionBank’s clearing system that uses blockchain
technology to connect to the rural banks. This
network was used to make transactions by three
rural banks: Progressive Bank, Summit Rural Bank
and Cantilan Bank.
Initially, PHX is only available to i2i users.
They can buy the virtual currency by debiting
directly from their UnionBank accounts. Users
can also easily convert PHX to Philippine’s peso
through their bank accounts. In the future, PHX
is expected to be used across different
platforms and wallets. Its conversion will not
be limited to peso but will be able to cater to
all global currencies.
Recent developments in the financial realms
prove that at least some banking authorities are
not against cryptocurrencies. For example, some
of Australia’s biggest banks are now
experimenting with blockchain technology.
Banks and financial institutions don’t like to
give up control. They are against the idea of
decentralization by default, which makes digital
currency less stable. Once the instability
problem is solved, cryptocurrency can
revolutionize the banking systems of the world. |
_______________________________________________________________________________________ |
Agri-agra
loans rise 19% in Q1
Lawrence Agcaoili (The Philippine Star) - July
9, 2019
MANILA, Philippines —
Philippine banks continued to fall short of the
mandated threshold for agriculture and agrarian
reform lending despite the 18.9 percent increase
in the first quarter, data from the Bangko
Sentral ng Pilipinas (BSP) showed.
The BSP reported the banking system was able to
set aside a total of P711 billion of total
loanable funds for agriculture and agrarian
reform credit under Republic Act 10000 or the
Agri-Agra Reform Credit Act of 2009 from January
to March, higher than the P597.94 billion
disbursed in the period last year.
The total loanable funds of the banking industry
increased by 15.3 percent to P4.96 trillion as
of end-March from P4.3 trillion in end-March
last year.
Despite the increase, the combined allocation of
loanable funds for agriculture and agrarian
reform of 14.33 percent in the first quarter was
way below the minimum threshold set by the law.
RA 10000 retained the mandatory credit
allocation in Presidential Decree 717 where 25
percent of the banks’ total loanable funds are
to be set aside for agriculture and fisheries in
general, of which at least 10 percent should be
made available for agrarian reform
beneficiaries.
The BSP reported the loans extended by the banks
to the agriculture sector amounted to P652.97
billion for 13.16 percent compliance ratio or
below the required 15 percent.
The central bank said big banks or universal and
commercial banks registered a compliance ratio
of 13.27 percent after extending P617.81 billion
to the agriculture sector, while the ratio of
thrift banks only reached 7.2 percent after
granting P16.21 billion.
Rural banks extended P18.94 billion to the
agriculture sector for a compliance ratio of
23.36 percent.
Likewise, the compliance ratio of the banking
system fell way short of the 10 percent
threshold for agrarian reform credit as banks
only extended loans amounting to P58.03 billion
for a compliance ratio of 1.17 percent.
The compliance ratio of big banks for agrarian
reform loans only reached 1.01 percent, while
that of thrift banks settled at one percent.
On the other hand, the compliance ratio of rural
and cooperative banks reached 11.1 percent.
BSP Governor Benjamin Diokno had said the
regulator is pushing for the amendments to the
agri-agra law as it continues to punish banks
through penalties for failing to meet the
thresholds of the mandated lending.
“Amendments to this law will allow banks to
merge their loan allocation to the farm sector
as a measure to improve banks’ compliance rate,”
Diokno said. |
_______________________________________________________________________________________ |
Diokno eyes
6% level output for PH economy in Q2
July 3, 2019
By Joann Villanueva/Philippine News Agency
MANILA — Bangko
Sentral ng Pilipinas (BSP) Governor Benjamin E.
Diokno is optimistic of at least a six percent
growth in the domestic economy in the second
quarter of 2019, on the back of stronger public
spending and more robust consumption.
In an interview after the launch of the New
Generation Currency (NGC) bearing his signature
at the central bank Wednesday, the BSP chief
explained that consumption slows when inflation
goes up and this, he said, also impacts the
manufacturing sector.
In the first quarter of the year, growth, as
measured by gross domestic product (GDP), slowed
to 5.6 percent from quarter-ago’s 6.3 percent.
Government economists traced this to the delay
in the approval of the national budget, which
hampered government’s spending program.
Relatively, inflation sustained its deceleration
down to last April after it peaked at 6.7
percent in September and October in 2018.
It rose to 3.2 percent last May from month-ago’s
three percent level but monetary officials
believe that this is a one-off situation.
Aside from government spending and consumption,
Diokno said growth of investments is also
robust, with various companies like Jollibee,
McDonalds and 7-11 reporting expansion plans.
He also hopes for the recovery of the banking
industry “because of what we’re doing”,
referring to the impact of the total of 200
basis points cut in banks’ reserve requirement
ratio (RRR).
BSP’s policy-making Monetary Board (MB) slashed
universal and commercial banks’ (UKBs), thrift
banks’ (TBs) and non-bank financial institutions
with quasi-banking function (NBQBs) RRR by a
total of 200 basis points on staggered basis
effective May 31, 2019 (100 basis points), June
28, 2019 (50 basis points) and July 26, 2018 (50
basis points)
RRR on demand deposits and negotiable order of
withdrawal (NOW) accounts of rural and
cooperative banks were, in turn, slashed by 100
basis points effective May 31, 2019.
Diokno said deciding on a big cut in banks’ RRR
was a “smart move” on the part of the BSP since
it allowed the banks to make the necessary
adjustments ahead of the full implementation.
He said earlier fears that the cut would
negatively impact on the economy and the local
currency did not materialize.
“Looking back, I think it was really a smart
move to pre-announce the reserve requirement
(cut) so that the banking industry can prepare
because there will be questions on what will
happen next if we only announced a 100 basis
points cut,” he said.
Asked if the cuts were able to address earlier
concerns on tightness of domestic liquidity,
Diokno said industry players have seen that “we
are actually addressing their needs.”
Also, the BSP chief cited that the trend of bond
issuances among private companies to raise funds
for their expansion plans may be reduced now
since they can now tap more funds from the
banking sector following the RRR cuts.
He said the goal is to bring the RRR to single
digit, from the current 16 percent, by the end
of his term in 2024 since some countries in the
ASEAN has a one percent RRR.
“Plus, we are given by the new law another
instrument to control liquidity if necessary so
that’s why we are emboldened to do this (RRR
cuts) much faster than originally planned,” he
added. |
_______________________________________________________________________________________ |
Cebuana
Lhuillier Rural Bank reaches 1 million Micro
Savings account holders; brings Filipinos closer
to financial inclusion
By BusinessMirror - June 21, 2019
Cebuana Lhuillier
Rural Bank (CLRB), the banking arm of Cebuana
Lhuillier, has reached the 1 million mark for
its Micro Savings account holders following its
recent launch in late February of this year.
This further cements the company’s position in
changing the landscape of the microfinance
industry by bridging the gap between a savings
account and unbanked Filipinos. The Micro
Savings product is the flagship offering of CLRB
through its cash agent, the 2,500 Cebuana
Lhuillier branches nationwide.
“I am elated to see that we have reached 1
million account holders in such a short amount
of time, this is a huge step towards financial
inclusion and I look forward to banking more
unbanked Filipinos.” shared Jean Henri
Lhuillier, President and CEO of the P.J.
Lhuillier Group of Companies.
The Micro Savings product of CLRB’s is Cebuana
Lhuillier’s response to the Bangko Sentral ng
Pilipinas’ (BSP) Basic Deposit Framework which
eases the process of opening a bank account.
Through the circular, more Filipinos can now
open a basic deposit account, for an initial
deposit of less than PHP100, with no maintaining
balance or dormancy charges. To reach out to
far-flung communities, the BSP has also allowed
the use of cash agents for banks. The move is in
line with the agency’s mission of bringing
financial inclusion closer to every Filipino.
“When we launched our Micro Savings product, our
goal was to tap close to half of the population
who understood the importance of savings, but
were always hampered by the onerous requirements
in opening a savings account. Using the BSP
Framework as our guide, we were able to simplify
the process of opening an account simply by
requiring one valid ID and a 50 pesos initial
deposit,” said Dennis Valdes, CLRB president.
Thanks to Cebuana Lhuillier’s close to
2,500-strong network of branches, Cebuana
Lhuillier Rural Bank is positive that the
product will convert and encourage more
Filipinos to become dedicated savings account
owners. The launch is just the first step – CLRB
will take advantage of the many technological
innovations made available by its cash agent
Cebuana Lhuillier to increase convenience and
greater connectivity. Launching soon is CLRB’s
eCebuana app which will allow micro savings
users to check their balance and perform money
transfers, as well as load prepaid credits to
their phones, and pay their bills by integrating
it to their micro savings account. Also in the
line-up is the migration to an EMV-enabled card
accessible through ATMs, plus a debit and credit
facility for online and cashless shopping. |
_______________________________________________________________________________________ |
Gov’t raises
P20B from T-bonds as rate plunges
June 12, 2019 | 12:05 am
THE GOVERNMENT raised
P20 billion as planned via the reissued 20-year
Treasury bonds (T-bond) on offer yesterday, as
its average yield plunged to two-year lows as
participants continued to price in the reduction
in lenders’ reserve requirement ratios (RRR) and
a possible rate cut from the central bank.
The Bureau of the Treasury fully awarded the
20-year bonds it auctioned off on Tuesday as it
received bids totalling P27.292 billion, more
than the amount it wanted to raise.
The 20-year debt notes, which carry a coupon
rate of 6.75% and have a remaining life of 19
years and seven months, fetched an average rate
of 5.17% yesterday, 154.6 basis points (bp)
lower than the 6.716% recorded when the bonds
were last offered in January.
The average rate was also the lowest for the
20-year tenor in two years or since it fetched
5.035% last June 2017.
At the secondary market, the 20-year IOUs were
quoted at 5.241% yesterday, based on the PHP
Bloomberg Valuation Service Reference Rates
published on the Philippine Dealing System’s
website.
Following the auction, Deputy Treasurer Erwin D.
Sta. Ana said the BTr saw “very good” results
yesterday as the rate on the bonds plunged.
“It just shows the trend (is heading towards)
declining interest rates,” Mr. Sta. Ana said.
“As already mentioned by the Treasurer, the
factors (include) the RRR cut, the possible rate
cut from the BSP (Bangko Sentral ng Pilipinas),”
he added.
The central bank last month slashed the RRR of
lenders by a percentage point effective May 31
to 17% for universal and commercial banks, 7%
for thrift banks, and 4% for rural and
cooperative banks.
The BSP earlier estimated that a percentage
point cut in big banks’ RRR released P90-100
billion into the financial system, while another
P22 billion was seen unleashed due to a 100-bp
reduction in reserve requirements for smaller
lenders.
Meanwhile, BSP Governor Benjamin E. Diokno
earlier said the central bank “has more room”
for monetary easing, and that it is a question
of when and not if.
Mr. Sta. Ana said another factor considered by
investors yesterday was the movement of US
Treasuries.
Yields on US debt papers have been declining
recently as market players flocked to other
instruments due to the simmering trade tensions
between the US and countries such as China and
Mexico.
“The market continued to track US Treasury
yields which saw a mild correction week-on-week
as trade concerns eased after the US and Mexico
reached an agreement,” Robinsons Bank Corp. peso
debt trader Kevin S. Palma said in a phone
message.
US President Donald J. Trump decided to cancel
an earlier plan to impose a five percent tax on
all Mexican imports over the weekend as part of
its bilateral deal with Mexico on immigration.
The government plans to borrow P315 billion from
the domestic market this quarter, broken down
into P195 billion in Treasury bills and P120
billion in T-bonds.
It is looking to raise some P1.189 trillion this
year from local and foreign sources to fund its
budget deficit, which is expected to widen to as
much as 3.2% of the country’s gross domestic
product. — Karl Angelo N. Vidal |
_______________________________________________________________________________________ |
Merger of 3
rural banks Okd
Lawrence Agcaoili (The Philippine Star) - June
9, 2019 - 12:00am
MANILA, Philippines —
Three more rural banks have merged as the
industry continued to heed the Bangko Sentral ng
Pilipinas’ (BSP) call for mergers and
consolidation to further strengthen the
country’s financial system.
BSP Deputy Governor Chuchi Fonacier announced
the merger among First lmperial Business Bank
Inc. (formerly RBG lmperial Bank Inc.), First
Midland Rural Bank Inc. and Business and
Consumers Bank.
Fonacier said FIBB would be the surviving entity
and the merged rural banks would commence
operation on June 28.
The Securities and Exchange Commission (SEC) had
already approved the amended Articles of
Incorporation and by-laws of RBG lmperial Bank
including among others, the change in its
corporate name to FIBB.
Fonacier said the SEC also approved the plan and
articles of merger. |
_______________________________________________________________________________________ |
Another
troubled bank gets closure order from BSP
Lawrence Agcaoili (The Philippine Star) - June
2, 2019 - 12:00am
MANILA, Philippines —
The Bangko Sentral ng Pilipinas (BSP) has closed
down another problematic bank, bringing to four
the number of financial institutions shuttered
last month and seven so far this year.
The central bank’s Monetary Board issued MB
Resolution 802 last Thursday prohibiting East
Coast Rural Bank of Hagonoy Inc. from doing
business in the Philippines and placing it under
the supervision of the state-run Philippine
Deposit Insurance Corp.
East Coast Rural Bank of Hagonoy is a
single-unit rural bank located at HRBI Compound,
G. Panganiban St., Brgy. Santo Niño Hagonoy,
Bulacan.
Latest available records showed EastCoast Rural
Bank of Hagonoy has 1,412 deposit accounts with
total deposit liabilities of P122 million as of
the end of March, of which 91.36 percent or
P111.4million are insured deposits.
PDIC assured depositors that all valid deposits
and claims shall be paid up to the maximum
deposit insurance coverage of P500,000.
Individual account holders of valid deposits
with balances of P100,000 and below do not need
to file deposit insurance claims, provided they
have no outstanding obligations or have not
acted as co-makers of obligations.
Other banks closed down in May include the Rural
Bank of Guihulungan (Negros Oriental), Rural
Bank of Basey (Samar) and Iloilo-based Valiant
Bank Inc. Banks also ordered closed by the
central bank this year include Puerto
Princesa-based Palawan Bank, Rural Bank of
Mabitac (Laguna) and Bagong Bangko Rural ng
Malabang (Lanao del Sur).
Last year, BSP closed down 12 problematic banks.
The government continues to provide incentives
under the Consolidation Program for Rural Banks
to encourage mergers and consolidations among
small banks, particularly rural banks, to
further strengthen and enhance the viability of
the banking system. |
_______________________________________________________________________________________ |
Demand for
TDF drops ahead of reserve requirement
reductions
May 30, 2019 | 12:04 am
BIDS FOR term
deposits declined further on Wednesday ahead of
the first round of cuts to lenders’ reserve
requirement ratios (RRR) taking effect this
week.
Tenders for the Bangko Sentral ng Pilipinas’
(BSP) term deposit facility (TDF) auction
yesterday totalled just P29.155 billion, well
below the P40 billion on offer. This was also
less than the P39.113 billion in bids seen last
week.
Demand for the eight-day papers on offer
yesterday stood at P14.98 billion, failing to
fill the P20 billion on the auction block and
also declining from the P20.455 billion in
tenders received for the seven-day tenor last
week.
Accepted yields ranged between 4.5% and 4.7679%,
slightly below the 4.453-4.76% margin seen the
previous week. Thus caused the average rate of
the eight-day term deposits to decline to
4.6187% yesterday from 4.6375%.
Meanwhile, total tenders for the 15-day papers
amounted to just P6.11 billion yesterday, lower
than the P8.286 billion in bids last week for
the two-week tenor and also below the P10
billion up for grabs.
Banks asked for returns within 4.5%-4.75%,
slightly wider than last week’s range of
4.5-4.7%. The average yield on the 15-day term
deposits likewise slipped to 4.591% on Wednesday
from the previous week’s 4.5999%.
The 28-day papers, on the other hand, were met
with tenders totalling P8.065 billion, down from
the P10.372 billion logged a week ago and less
than the P10 billion the BSP offered yesterday.
Yields sought by banks for the one-month papers
were steady at the 4.5-4.75% range. Still, the
average rate dropped to 4.5974% yesterday from
4.638% last week.
The term deposit tenors offered yesterday were
adjusted due to the regular public holidays on
June 5 and June 12.
The TDF stands as the central bank’s primary
tool to shore up excess funds in the financial
system and to better guide market interest
rates.
Earlier this month, the BSP cut benchmark
interest rates by 25 basis points (bp), bringing
the interest rate on the central bank’s
overnight reverse repurchase facility to 4.5%.
The rates on the overnight lending and deposit
facilities were also reduced accordingly to 5%
and 4%, respectively.
Sought for comment, BSP Monetary Board Member
Felipe M. Medalla said in a text message that
banks were likely holding on to their funds as
they want to deploy these elsewhere.
“They don’t have low appetite (for TDF). They
have high needs,” he said. “They plan to deploy
the cash that they did not place in the TDF
(e.g. make new loans).”
Last week, Mr. Medalla said liquidity in the
system was “tight” ahead of scheduled cuts to
banks’ reserve ratios.
The BSP will slash the RRR of lenders by a
percentage point effective May 31 to 17% for
universal and commercial banks, 7% for thrift
banks, and 4% for rural and cooperative banks.
The central bank has said that a percentage
point cut in big banks’ RRR will unleash P90-100
billion into the financial system, while another
P22 billion is seen to be released due to a
100-basis-point cut in the reserve ratios of
smaller lenders.
Further reductions will be implemented after
this week’s round of cuts to eventually bring
big banks’ RRR to 16% and thrift banks’ ratio to
6% by July.
BSP Governor Benjamin E. Diokno has said he
wants to reduce big banks’ reserve requirement
ratio to single digits by 2023 to put the rate
at par with those being implemented in
neighboring countries. — RJNI |
_______________________________________________________________________________________ |
BSP rolls out
reserve cuts for RB’s
By Melissa Luz Lopez, CNN Philippines
Updated May 23, 2019 5:41:09 PM
Metro Manila (CNN
Philippines, May 23) — Shortly after announcing
phased cuts to the required reserves for big
banks, the Bangko Sentral ng Pilipinas (BSP)
rolled out a similar move for thrift and rural
lenders.
BSP Governor Benjamin Diokno told reporters on
Thursday that the Monetary Board has approved
the lowering of the reserve requirement ratio
(RRR) for thrift, rural, and cooperative banks.
This comes a week after the Monetary Board
approved a three-stage reduction in the RRR for
the big boys, or the universal and commercial
banks.
"The BSP will issue the necessary circular
shortly," Diokno said in a text message.
Banks have been calling for a lower RRR, saying
that this is effectively a tax on banks as they
are forced to keep a substantial portion of
deposits intact rather than use them to grant
more loans.
The Monetary Board decided to bring down the
required reserves for rural and cooperative
banks to four percent by May 31. These lenders,
who usually cater to small borrowers in the
provinces, currently need to keep five percent
of total deposits on hand.
Bolder cuts will be rolled out for thrift banks:
from the current eight percent RRR, it will be
slashed by 100 basis points (bps) by May 31, and
by 50 bps in June 28. Another 50 bp reduction
will take effect July 26, leaving the required
reserves at six percent.
Thrift banks cater to retail clients, mostly for
home and car loans. These lenders also charge
higher interest rates compared to corporate
credit lines.
The phased reduction for thrift banks' RRR
mirrors the 200bp cut introduced for big banks,
which will settle at 16 percent by end-July.
The BSP said slowing inflation and tempered
price expectations made the case for these
long-awaited reserve cuts.
"The Monetary Board also expects this adjustment
to help mitigate any tightness in domestic
liquidity conditions due to limited public
expenditure following the budget impasse in the
first quarter of the year," the central bank
added.
Banks have welcomed recent reserve cuts, saying
this will unlock more funds that will fuel
business activity.
On May 9, the BSP also reduced the benchmark
interest rate by 25bp to 4.5 percent, kicking
off an easing cycle for monetary policy. |
_______________________________________________________________________________________ |
Bangko
Sentral shuts down Rural Bank of Basey in Samar
MANILA, Philippines – The Bangko Sentral ng
Pilipinas (BSP) shut down a rural bank in Samar
on Monday, May 20, the fifth bank it has closed
in 2019.
According to BSP Deputy Governor Chuchi
Fonacier, the Monetary Board prohibited the
Rural Bank of Basey from doing business in the
Philippines, pursuant to Section 30 of the New
Central Bank Act.
The bank is now under the supervision of the
Philippine Deposit Insurance Corporation (PDIC).
The PDIC will be accepting letters of intent
from interested banks and non-bank institutions
who seek to purchase the bank's assets and
assume its liabilities.
Based on the latest available records, the Rural
Bank of Basey has 631 deposit accounts, with
deposit liabilities totaling P41.4 million. Of
these, 19.7% or P8.15 million were insured
deposits.
The BSP has closed 4 other banks this year, so
far:
Valiant Bank Incorporated (A Rural Bank), Iloilo
Palawan Bank (Palawan Development Bank)
Incorporated, Puerto Princesa City
Rural Bank of Mabitac (Laguna) Incorporated
Bagong Bangko Rural ng Malabang (Lanao del Sur)
Incorporated
In 2018, the BSP closed down 12 problematic
banks. – Rappler.com |
_______________________________________________________________________________________ |
It’s
coordination, stupid!
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 05:05 AM May 21,
2019
Development planning may be seen as an
effort to coordinate actions of government,
private sector and civil society to uplift
everyone’s wellbeing via outcomes that bring
about the greatest good for the greatest number.
The key word is “coordinate.”
It’s a challenge enough to achieve coordination
across the three stakeholder groups of
government, private sector and civil society;
across economic sectors (agriculture, industry
and services); or across industries (say,
manufacturing, logistics and power). But when
coordination fails even within the same group
(say, within government itself, or within
agriculture itself), then we really are in
trouble.
The National Economic and Development Authority
(Neda) recently organized an Agri-Industry
Research Forum to take stock of our knowledge
base in agriculture and agribusiness. I came out
of that forum seeing no lack of research-based
knowledge to achieve the level of
agri-industrial dynamism already attained by
neighbors like Thailand and Vietnam. After all,
we can say that these neighbors learned their
agriculture from us, having sent many students
to the University of the Philippines Los Baños,
erstwhile Southeast Asia’s knowledge center for
the agricultural sciences. Thus, we know what’s
needed to solve our problems in
agriculture/agribusiness; we just can’t seem to
do things right.
The crux of the problem lies in governance, the
focus of the last session in the Neda forum, and
research has not been wanting even in that area.
Dr. Nerlita Manalili drew her presentation from
previous studies on governance and regulatory
management in the sector, and lying at the heart
of the governance problem is lack of
coordination.
Random examples include, among many others: lack
of personnel for critical regulatory and
accreditation agencies like the Food and Drug
Administration (FDA), even as there are
inadequate testing facilities/laboratories to
examine food and nonfood agricultural products
for marketworthiness; conflict of interest in
certain agriculture agencies with both
regulatory and promotional functions; weak
agricultural insurance system contributing to
poor credit access by farmers; duplicating or
overlapping regulatory requirements; and
disjointed policy and program support for the
various links in the agricultural value chain.
On regulatory overlaps, a favorite example that
used to be cited by former Customs commissioner
Sunny Sevilla was the need for importers of
Toblerone (or milk chocolate candies with nuts,
in general) to obtain prior clearance from the
FDA, the Bureau of Animal Industry because the
product contains milk, and because it also
contains nuts, from the Bureau of Plant Industry
as well—when all three could simply coordinate
and consolidate their permits into one.
On value chain support, our problem is that the
Department of Agriculture (DA) considers
anything that happens beyond the farm gate to be
the responsibility of the Department of Trade
and Industry (for processing), or the Department
of Transportation (for logistics).
A long suggested fix for the regulatory issue is
to consolidate all agriculture-related
regulation functions into one apex regulatory
agency within the DA. This would not only
address the conflict of interest issue in
certain DA bureaus, but would also address the
regulatory overlaps and duplication that raise
the cost of doing business in our country. I’ve
written before of a long suggested solution to
address the interdepartment coordination problem
that prevents holistic value-chain oriented
support for agribusiness, which is to follow the
examples of Malaysia, Vietnam and many other
countries: Rather than just a Ministry of
Agriculture, Malaysia has a Ministry of
Agriculture and Agri-based Industries, and
Vietnam has a Ministry of Agriculture and Rural
Development.
We must also foster industry associations that
bring together members from various links in the
value chain, rather than have separate
associations for farmers, traders, food
processors or truckers.
If we are to have tighter coordination in the
governance of agriculture/agribusiness in
government and in the private sector, these
would be good ways to start. |
_______________________________________________________________________________________ |
Losing steam?
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 05:06 AM May 14,
2019
Election years have historically kicked up
our economy’s growth by 2-3 percentage points.
In the election years of 2004, 2007, 2010, 2013
and 2016, first quarter gross domestic product
(GDP) growth was 6.2, 7.0, 8.4, 7.7 and 6.9
percent, respectively, against an average of
only 5.0 percent in the nonelection years since
then.
For the first time since the turn of the
century, we’re seeing an election year start off
with the economy slowing down (5.6 percent), the
first time in at least two decades it has grown
below 6 percent—when we should be seeing a
growth upsurge. Why so? Is the economy finally
losing steam, after growing above 6 percent for
seven years in a row?
A lot of money goes around the economy running
up to elections. Much cash comes into
circulation out of hidden or unhidden bank
accounts held here and abroad. It also comes out
of government coffers; from private cash hoards
hidden in safes, chests and cartons; or even
from illegal money printing machines. A major
money counterfeiting operation was actually
caught by the National Bureau of Investigation
before the 2013 midterm elections.
All that money buys campaign posters, streamers
and tarps; radio, TV and newspaper ads; land,
sea and air transport services for candidates
and their entourage; hotel and other
accommodations; T-shirts, caps, fans and
umbrellas emblazoned with candidates’ names;
show-business personalities’ talent fees;
salaries and wages of campaign workers; food and
meals consumed and given away during the
campaign, and yes—to buy people’s votes
directly.
On the government side, the Commission on
Elections (Comelec) reportedly budgeted about
P16 billion for the conduct of the 2013 midterm
elections. Government at both national and local
levels also has the tendency to boost
infrastructure spending in the run-up to
elections, for obvious reasons.
So why is the economy now chugging along with a
mere 5.6 percent growth, when it should have
been within 7-8 percent based on past election
years’ experience? Government points to the
delayed passage of the 2019 budget as the main
culprit, given that it was already well into the
second quarter when the lawmakers’ squabble over
the pork barrel was finally resolved. But was it
really mainly the delayed budget that slowed
things down, when government spending actually
accounts for a mere 13 percent of aggregate GDP
on the spending side? Or is the economy
generally slowing down, with or without the
budget delay that slowed down government
spending?
Closer examination of the GDP data suggests that
there’s much more to the slowdown than the
budget delay. Based on sectoral composition,
this year’s slowdown from the same quarter last
year happened in agriculture, fishery and
forestry (from 1.1 percent last year to an even
more dismal 0.8 percent this year), and in
industry (from 7.7 percent last year to only 4.4
percent this year). The slowdown in agriculture
was driven by 4.5 and 2.1 percent contractions
in rice and corn, respectively, along with
falling production in key export crops like
banana, mango, coffee and rubber.
Most disturbing to me is the slowdown in the
manufacturing sector, which had grown at an
average of 7-8 percent annually since 2010, but
whose growth has weakened since the second
quarter last year (now 4.6 percent). Food
manufacturing, the single largest subsector
therein, actually sped up from 5.8 to 10.6
percent, but the next largest subsector composed
of electronic equipment and apparatus
dramatically slowed from 16 percent growth last
year to a mere 1 percent this year.
Manufacturing fell in furniture and fixtures,
office equipment, nonelectrical machinery,
rubber and plastic products, and petroleum
refining. Meanwhile, services, the largest
sector in the economy comprising 60 percent of
total GDP, actually speeded up from 6.8 to 7
percent growth.
Lower government spending alone couldn’t have
induced much of those slowdowns and
contractions. It’s time that our leadership
recognized that bad governance and politics are
taking their toll on the economy, and with them,
people’s wellbeing. I could only hope that the
choices we made in yesterday’s elections would
help change that.he Bangko Sentral ng Pilipinas (BSP) and
the Agricultural Credit Policy Council (ACPC)
have increased the number of its accredited
rural financial institutions (ARFI) for
agri-agra lending to 35 from 30 last year,
according to a circular memo.
The April 16 memo, signed by BSP Deputy Governor
Chuchi G. Fonacier, listed nine ARFIs approved
by the BSP, and 26 recognized by the ACPC.
defective if a disaccredited RFI is declared and
used for compliance with the agri-agra
requirement beyond the grace period, said
Fonacier approach.
The BSP has amended circulars detailing the
rules and regulations of Republic Act 10000 (or
the Agri-Agra law) which repealed Presidential
Decree 717 in 2011 and listed alternatives for
banks for easier compliance such as investments
in housing and education/medical bonds and
microbusinesses even if these are not agri-agra
related.
The amended law has rationalized compliance by
banks. It has retained the mandatory requirement
of 25 percent that banks will set aside as
loanable funds for agriculture and fisheries. Of
the 25 percent, 10 percent are for agrarian
reform-related loans. |
_______________________________________________________________________________________ |
Gov’t expands
list of ARFIs for agri-agra lending network
Published April 23, 2019, 10:00 PM
By Lee C. Chipongian
The Bangko Sentral ng Pilipinas (BSP) and
the Agricultural Credit Policy Council (ACPC)
have increased the number of its accredited
rural financial institutions (ARFI) for
agri-agra lending to 35 from 30 last year,
according to a circular memo.
Bangko Sentral ng Pilipinas (BSP) logo
The April 16 memo, signed by BSP Deputy Governor
Chuchi G. Fonacier, listed nine ARFIs approved
by the BSP, and 26 recognized by the ACPC.
Fonacier again stressed that an accreditation is
not an endorsement from the BSP, and that the
list of accredited rural banks are for
“reference and guidance of lending and/or
investing banks” only.
It used to be that BSP will only disclose the
seven to 10 rural banks that they have named as
ARFIs since 2012 but now includes the ACPC list
which was created in 2016.
According to Fonacier in the memo, “under
existing rules and regulations, a lending and/or
investing bank intending to utilize its exposure
to an accredited RFI to comply with the
agri-agra report must disclose such exposure in
its agri-agra report submitted to the BSP along
with the RFls corresponding ARN (accredited
reference number). Exposure to the accredited
RFI shall be eligible for determining compliance
with the agri-agra requirement for as long as
the said RFI remains validly accredited until
sooner revoked for non-renewal or non-compliance
with the qualification requirements prescribed
under existing rules and regulations.”
“In the event of disaccreditation,” she added,
“the lending/investing bank is allowed to use
its exposure to a disaccredited RFI for
compliance with the agri-agra requirement for a
grace period of only up to the next reporting
quarter following the disaccreditation.”
The agri-agra report of the lending/investing
bank will then be considered defective if a
disaccredited RFI is declared and used for
compliance with the agri-agra requirement beyond
the grace period, said Fonacier.
The nine rural banks in the BSP list are:
Producers Savings Bank Corp.; Rural Bank of Sta.
Catalina; Common Wealth Rural Bank; Rural Bank
of Bay; Rural Bank of Angeles; New Rural Bank of
San Leonardo (Nueva Ecija); First lsabela
Cooperative Bank; Rural Bank of San Mateo
(lsabela); and Cavite United Rural Bank Corp.
Not in the list but were on it previously were
Rural Bank of Kiamba, Rural Bank of Pilar
(Bataan), and Rang-Ay Bank, Agri Business Rural
Bank, Philippine Resources Savings Bank Corp.
and Rural Bank of Gattaran (Cagayan).
ACPC, in the meantime, has accredited five more
cooperatives as ARFIs in 2018, bringing the list
to 26 from 21 in 2017.
The BSP said the accreditation is only in
accordance with the provisions of the Agri-Agra
Reform Credit Act of 2009 and should not be
viewed as an “endorsement of the soundness” of
the ARFIs.
“The accreditation cannot be used for any
purpose other than for implementing the
provisions of the Agri-Agra Reform Credit Act of
2009 and its relared rules and regulations,”
said the BSP.
The RFIs were established as part of the
implementation of the Agri-Agra Reform Credit
law and the BSP list serves as guide to inform
the public of which banks to approach.
The BSP has amended circulars detailing the
rules and regulations of Republic Act 10000 (or
the Agri-Agra law) which repealed Presidential
Decree 717 in 2011 and listed alternatives for
banks for easier compliance such as investments
in housing and education/medical bonds and
microbusinesses even if these are not agri-agra
related.
The amended law has rationalized compliance by
banks. It has retained the mandatory requirement
of 25 percent that banks will set aside as
loanable funds for agriculture and fisheries. Of
the 25 percent, 10 percent are for agrarian
reform-related loans. |
_______________________________________________________________________________________ |
Agriculture
beyond rice
By: Cielito F. Habito - @inquirerdotnet
Philippine Daily Inquirer / 09:05 AM April 23,
2019
Is a Philippine agricultural takeoff
finally in the offing? The much-debated rice
tariffication law, the main effect of which is
to open our rice trade, heralds the possible
unleashing of the Philippines’ full agricultural
potential, and make it the economic driver it
has been for our closest neighbors. For decades,
agriculture has been the drag on the Philippine
economy, always lagging far behind growth in
industry and services—all because too many of us
seemed to have the mindset that rice is
Philippine agriculture.
One would think that Vietnam, a major rice
exporter, would be dominantly focused on that
commodity. But as rice area grew by 20 percent
in the 1990s, the area under industrial crops
increased far more rapidly at 83.4 percent. Like
Vietnam, Thailand deliberately pursued
agricultural diversification, and while the
world’s top exporter of rice has also been a top
exporter of rubber, sugar and cassava.
Here, attention and budget have been hogged by
rice—and have little to show for it. And so,
while we earned only $5 billion from
agricultural exports last year, Thailand and
Vietnam both got eight times as much from
theirs. Thailand’s of natural rubber alone
already equal the value of our total farm
exports.
Many believe that agrarian reform stifled
Philippine agriculture, leading to small
farmholdings that have deprived our farm sector
of the efficiency and productivity that come
with economies of scale. But small farmholdings
have not stopped Thailand, Malaysia and Vietnam
from achieving much more dynamic agricultural
sectors than we have. It is not farm ownership
that matters, but farm organization, and our
neighbors’ example should guide us on how to
proceed with an agriculture expansion push no
longer unduly fixated on rice, to the relative
neglect of other crops.
It’s ironic that apart from us having trained
our neighbors’ agricultural scientists in
decades past, key to our neighbors’ agricultural
dynamism has been something we actually
pioneered in the 1970s. It’s called contract
farming, a scheme used by Arbor Acres for
poultry production in the United States. San
Miguel Corp. applied it in its poultry
operations at around the same time agribusiness
giant Charoen Pokphand began adopting it in
Thailand. In both the Philippines and Thailand,
market supply of chicken meat dramatically rose,
sharply reducing its price. “For the first
time,” wrote Thai agricultural economist Nipon
Poapongsakorn, “chicken meat had become the
important source of cheap protein for the poor
and the lower middle class.”
What is contract farming? The scheme involves
small farmers supplying agreed quantities of a
crop or livestock product to a large processing
company, based on the latter’s quality
standards. The company pays a predetermined
price, and supports the farmers with assistance
in land preparation and provision of inputs and
production advice. Coalition for Agri-Fisheries
Modernization in the Philippines chair Dr. Emil
Javier recently wrote of its virtues: “For small
farmers, the arrangement gives them ready access
to credit, inputs and modern technologies which
they have difficulty obtaining on their own…
(and assurance) of market prices designed to
make them profitable. In study after study and
country after country, contract growers are
known to be much better off than their
independent, unorganized counterparts.”
Thailand had since expanded contract farming to
many other products including pork, sugar,
vegetables, pineapple, oil palm, various fruits,
potato, dairy, tilapia, shrimp and sea bass. It
has been credited for Thailand’s dynamic
agricultural sector growth and exports. Vietnam
has also embraced the model for its rapid
agricultural diversification and growth.
In the Philippines, beyond poultry, we now see
it used in oil palm in Mindanao, and by Jollibee
Foods to procure onions and calamansi. The scope
remains huge, and in an agricultural sector less
fixated on rice and targeted at wider
diversification like in Thailand and Vietnam, it
should be our vehicle to propel Philippine
agriculture from being a drag to a driver of the
economy—and uplift our farmers’ lives in the
process. |
_______________________________________________________________________________________ |
Real
transformation seen to boost efforts to finance
PHL’s agriculture sector
By BusinessMirror
March 21, 2019
NEARLY four decades ago, artist Rody Vera
sang about Tano, a farmer victimized by usurious
practice that led him to join the enemies of the
State. The song popularized by Vera’s group
Patatag struck a discordant note in civilized
society that the State issued policies
addressing usury. The latest among these
policies is Republic Act (RA) 10000 or the
Agri-Agra Reform Credit Act.
When the 10,000th law was signed in 2009, the
government intended to pursue equal access to
opportunities for farmers and fishermen, in an
effort to promote rural development. The spirit
of the law is on enhancing access of the
agricultural sector to financial services and
programs that increase market efficiency and
promote the modernization of the farm sector.
The mandated lending to agriculture and agrarian
reform requires banks to allocate 25 percent of
their total loan portfolio to the two sectors—10
percent for the agrarian reform credit and 15
percent to other agricultural credit.
The decade-old law, however, has failed to steer
the target level of bank funds to the farm
sector.
Bank compliance
IN end-September 2018, universal and commercial
banks’ compliance to the 10-percent required
lending to the agrarian reform sector hit 0.79
percent; their compliance to the 15-percent
required lending to the agricultural sector
reached only 12.95 percent.
The thrift banking sector follows the universal
and commercial banks’ trend, with a 1.2-percent
compliance rate against the 10-percent mandate
for the agrarian reform sector and 6.19 percent
as against the 15-percent mandate for the
agricultural sector.
Even rural and cooperative banks—whose major
market are composed of farmers and fishermen—are
finding it increasingly difficult to comply with
the mandatory lending to the agrarian reform and
agricultural sector, data from the Bangko
Sentral ng Pilipinas (BSP) showed.
Five-year data trend from the BSP showed that
while rural and cooperative banks are still the
only banking group that is able to comply with
the agri-agra lending quotas, their share in
this sector has been shrinking over the years.
This is despite the crucial role of agriculture
in a country’s overall development.
By end-September of last year, the rural and
cooperative banks’ lending to the agrarian
reform sector hit 11.79 percent and 24.19
percent for the agricultural sector. This is
versus their allocation in end-2013, when these
smaller banks were able to allocate 24.53
percent of their total loan portfolio to
agrarian reform credit, way above the 10-percent
mandate. For the agriculture sector, rural and
cooperative banks set 44.59 percent of their
loan portfolio to this sector, also exceeding
the 15-percent quota.
According to the BSP, providing access to credit
to the agriculture sector has significant
economic implications especially for a
developing country like the Philippines
especially in terms of food security, employment
and poverty reduction.
Data from the BSP also showed that the
nonperforming loan (NPL) ratio of agricultural
loans has actually been decreasing along the
overall decline in NPLs of the whole banking
industry. From an NPL ratio of 4 percent in
2014, the NPL ratio of agri-agra loans dropped
to 2.78 percent in 2018 as end-September 2018.
However, this is still higher than the NPL ratio
of the banking industry, which posted a ratio of
2.3 percent in 2014, 1.7 percent in 2017, and
between 1.83 percent and 1.87 percent in 2018.
Implementation challenges
A BSP official who requested to remain anonymous
told the BusinessMirror that although mandatory
credit quota appears to be a straightforward
approach in channeling funds to the agri sector,
it does pose serious implementation challenges
and financial stability risks.
The BSP has, for years, been vocal in its
support to amending the decade-old law, saying
that mandated lending is an outdated mode of
pushing funding into specific sectors in the
economy.
In October 2017, the Inter-Agency Agri Agra Task
Force— composed of the BSP, the Department of
Agriculture (DA) and the Department of Agrarian
Reform (DAR)—submitted to the Senate Joint
Committee on Agriculture and Food and Agrarian
Reform its report on the state | | |