Wednesday, January 1, 2014

‘Infra spending must be 5% of GDP’


Gov’t urged to apply key measures


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Foreign business groups in the country are urging President Aquino to boost infrastructure spending and implement critical measures on the final stretch of his term to ensure inclusive growth. FILE PHOTO



Foreign business groups in the country are urging President Aquino to boost infrastructure spending and implement critical measures on the final stretch of his term to ensure inclusive growth.


In achieving this inclusive growth, John D. Forbes, senior advisor at the American Chamber of Commerce, said the Aquino administration must be able to attain an infrastructure spending target equivalent to “5 percent of the country’s GDP; assure Philippine inclusion in advanced economic agreements with the Asia Pacific economies and the European Union; and revive labor-intensive manufacturing, improve agricultural productivity, and enable responsible mining in order to create more and better jobs.”


Higher levels of growth “are possible if infrastructure is improved faster and reforms are strengthened and enhanced to support agribusiness, manufacturing, and mining,” Forbes said. “In order for foreign investment to double or triple, there should be stronger efforts to reduce business costs and reform labor policy.”


But he noted that the Philippines would not become a high middle-income economy under one administration.


“A generation or two with sustained good governance will be required. In the near term, however, the 10 to 15 years that it takes to accomplish large infrastructure projects and to pass major reform laws should be greatly reduced. Less study and talk and more action are needed to sustain and increase high growth in a country with such a large and growing population,” Forbes said.


Henry Schumacher, ECCP vice president for external affairs, also pointed out that the Aquino administration must ensure the government’s commitment to long-term stability of rules and regulations, contracts and investment incentives.


There is too much “focus on revenue generation and too little focus on why foreign investors are not investing here. The issues of long-term commitment, no midstream changes, honoring contracts, delivering on incentives promised investors have to get higher priority,” Schumacher said.



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Tags: American Chamber of Commerce , Business , economy , Henry Schumacher , infra spending , Infrastructure , John D. Forbes , Philippines



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Muted trade seen








The local stock market will reopen Thursday after a long break, but investors expect muted trading to prevail.


Last week, the main-share Philippine Stock Exchange index added 54.70 points, or 0.94 percent, to finish the year at 5,889.83. This also marked a modest gain of 1.33 percent for the full year.


AB Capital Securities analyst Abbygayle Estrella said movement in the two trading days of the week could go either way.


“The main index could also catch up on the developments abroad, among which is the market effect of the US economic data scheduled this week,” she said. “While knee-jerk reactions are uncontrollable, external developments are already pronounced, such as the certainty of the gradual tapering and the expected slowdown in economic growth, post-“Yolanda,” which we think are already priced in.”—Doris C. Dumlao



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Tags: Finance , forecasts , Philippine Stock Exchange , Philippines , stocks



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UBS bullish on PH property sector


Swiss investment banking group UBS is upbeat on the Philippine property sector, saying it will likely post slower but “more resilient” compounded annual growth rate (CAGR) in earnings of 15 percent from 2013 through 2016.


In a report dated Dec. 18 titled “Allayng Fears,” UBS analyst Caroline Kabigting said that after performing below market expectations for most of 2013, the property sector was now trading at “more attractive” valuations as macroeconomic concerns, potential housing/office oversupply and slowing earnings momentum continued to weigh on sentiment.


“Although some of these concerns are valid, we believe there are factors that could cushion their potential impact on the sector’s fundamentals. These include a generally modest rise in property prices, high domestic liquidity, the banking sector’s accommodative stance, healthy pre-selling activity, a positive outlook in the business process outsourcing (BPO) segment, steady overseas Filipino remittances, organic growth in housing demand, and the country’s stronger economic footing,” the report said.


On concerns about property bubble forming, UBS argued that despite the hectic development in recent years, property prices in general had posted modest increases.


In 2009-2012 or following the US-epicentered global financial crisis, UBS noted that housing pre-sales in the Philippine property sector recorded a CAGR of 43 percent. Amid aggressive capacity expansions in retail and office spaces and increased borrowings to fund large capital spending, aggregate earnings recorded a CAGR of 25 percent. UBS said this was fueled by a successive drop in interest rates, a stronger peso and improving economic performance.


UBS said the continued drop in interest rates, coupled with the banks’ accommodative stance, had led to the 18 percent CAGR in home mortgages in 2009 to 2012 and provided a significant boost in property sales.


“Despite this, overall credit growth has not been faster than those of other countries in Asia—hence, we believe the Philippines does not stand out as a risk,” it said.


The country’s mortgage penetration rate, computed by UBS using the banks’ housing loan portfolio plus developer financing, was estimated at less than 4 percent of the country’s gross domestic product (GDP), indicating that the level remained “very low.”


After heavy capital spending over the past three years, UBS’ forecast of a more resilient 15 percent earnings compounded earnings growth for the sector through 2016 was seen driven in part by the residential segment.


UBS estimated that the residential segment accounted for 64-65 percent of property sector’s revenue which, in turn, is seen getting a boost from hefty unbooked revenues even if pre-selling activities were to slow down from 2014 to 2016. Unbooked revenues refer to sales take-up, which are yet to be recognized in developers’ books because these projects have yet to reach a certain stage of development.


In the meantime, Kabigting said the continued expansion in retail and office capacity should underpin 14 percent annual growth from 2013 through 2016 in higher-margin rental portfolios, estimated to account for 35-36 of revenue. “This would offer the sector a good source of recurring income and provide support on any downside,” she said.


UBS’ “most preferred” stocks for the Philippine property sector are Megaworld Corp., Robinsons Land Corp. and Vista Land and Lifescapes, which it expects to post the strongest earnings CAGR of 19-20 percent from 2013 to 2016.


UBS revised its price target for Megaworld to P4.50 (from P4.90), Robinsons Land to P25.80 (from P29.50) and Vista Land to P6.90 (from P6).





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Throw the book at the Don Mariano group


Recently, we witnessed a tragedy when a Don Mariano passenger bus fell off the Skyway in Parañaque City and crashed onto a van plying the service road beneath. The tragedy caused injuries to 21 persons and claimed 18 lives.


As I watched the news, I could just imagine how difficult it was for the families of these individuals (including my driver Arman Balurin, who lost his 19-year-old son, Arvind) to accept the fate of their loved ones.


There is no question about it now; those responsible have to be held accountable.


For starters, the bus driver and operator should be subjected to criminal prosecution; the bus company should be made liable for millions of damages to its victims and their families; the responsible directors and officers should be made personally liable; and pending the cases against them, their properties be attached and bank accounts frozen.


For the medium term, there should be cancellation of the franchises of Don Mariano and its related companies; revocation of their SEC registration to operate as companies; and disqualification of their directors and officers to act as such for any transport company.


For the long term, their owners should forever be disqualified from operating any transport-related business under any other name or form and on the part of the government, there should be a long-term and more concrete approach to prevent these unfortunate incidents on the road.


Based on the survivors’ accounts, the Don Mariano bus driver appeared sleepy, and based on the CCTV footage, the bus was swerving and appeared to have been going beyond the speed limit. Indeed, it was a tragedy waiting to happen. After the incident, the bus’ tires were discovered to have been worn-out. Upon inspection, it was found out that 36 of the 42 Don Mariano buses failed the road-worthiness tests conducted by the Land Transportation Office (LTO).


What was more appalling is that it appears that the Don Mariano owners and management personnel failed to appreciate the gravity of the incident. While they offered to pay for the loss of the victims’ lives, the amount offered only adds insult to injury. Their actions make them out as callous and without any remorse at all.


What is most worrisome is that Don Mariano has six sister bus companies. These bus companies are Fermina Express, Mencorp., Commuters, Roval Transport, Nova Auto Transport and Admiral Transport. In total, the Don Mariano group has 474 bus units. These bus companies are owned by almost the same set of individuals with a certain Melissa Lim (not at all related to this author) holding majority interest.


This group of bus companies has something in common other than ownership—their buses are the deadliest buses traversing our metropolis.


A report of the Land Transportation and Regulatory Board (LTFRB) covering 2010-2011 on the most dangerous and accident-prone bus companies shows that this group of bus companies occupies the top spots in most categories.


Admiral Transport and Nova Auto Transport are the two most dangerous bus operators in terms of the number of deaths caused and injuries inflicted.


On the other hand, Don Mariano and Nova Auto Transport are the two most dangerous operators on the damage to property category.


Indeed, Don Mariano has been involved in several road accidents in recent years. In 2011, it was involved in three accidents resulting in two injuries and damage to properties. Last July 2012, a Don Mariano bus almost fell off the Edsa flyover in Ortigas, which damaged part of the rails and hurt eight passengers.


Admiral Transport was involved in two accidents in 2010, one resulted in a death and the other caused physical injuries.


Fermina Express had three road mishaps in the last three years, causing injuries in 2011, damage to property in 2012, and two counts of damage to property in 2013.


Simply put, unless these companies shape up, there are 474 virtual rolling coffins plying the streets of Metropolitan Manila.


Indeed, with all these available data, my question is: Why are these bus companies still on the road? I cannot fathom what could have prevented the government from canceling or withdrawing these bus companies’ franchises to operate.


It is basic that common carriers, such as public buses, are required by law to observe extraordinary diligence for the safety of the passengers transported by them.


To emphasize, the law uses the word “extraordinary,” which means that ordinary diligence is not sufficient. Consequently, Don Mariano is bound to carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with due regard for all the circumstances.


It is shameful how Don Mariano alone is reported to have a fare income of P43.435 million in 2011 and P40.77 million in 2012, and yet it did not (or will not) buy new bus tires to ensure the safety of the passengers.


The proprietors of Don Mariano and its related bus companies should forcefully be reminded that the public transport business is above all a public service, not a mere money-making endeavor.


Now is the opportune time for the LTFRB to demonstrate that it is true to its mission to ensure safe, convenient, and dependable public land transportation services for the commuting public.


Fortunately, the LTFRB has a new leadership under Winston Ginez, a seasoned litigation lawyer.


He certainly knows the concept of extraordinary diligence for common carriers and what a certificate of public convenience means under the law. This will be, at the very least, a defining moment of his leadership in the LTFRB.


It is my hope that chair Ginez will not hesitate to throw the book at the Don Mariano group of companies, as demanded by public safety.


If the Don Mariano bus and its related companies are allowed to continue given the quality of their operations, and LTFRB does not take decisive action on the matter, then we should brace ourselves for another man-made tragedy to happen.


God forbid!


(The author is the co-managing partner and head of the corporate and special projects department of the Angara Abello Concepcion & Regala Law Offices (Accralaw). The author may be contacted through francis.ed.lim@gmail.com.)





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BSP to pore over credit card transactions

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Local banks will have to submit more detailed reports on their credit card businesses starting this month to allow regulators to identify risks involved in the nascent but growing use of plastic money in the country.


Banks were told to submit their first set of credit card business activity reports (CCBAR), which should show a snapshot of their credit card businesses at the end of last year, on Jan. 28, 2014.


Guidelines released by the Bangko Sentral ng Pilipinas (BSP) also said starting February, CCBARs would have to be submitted on a quarterly basis.


The BSP said banks would have to submit a CCBAR as of the quarter ending March 2013 on Feb. 7 of this year. The CCBAR for the quarter ending June 2013 is due on Feb. 21; for September 2013, the deadline was set at March 5; and for the period ending December 2013, the deadline was set at March 19.


The rules on CCBARs, which was approved by the BSP last September, mandate that banks submit data on cardholder complaints on a monthly basis. Data on usage location of credit cards would be submitted quarterly.


The BSP said financial institutions would have to disclose the number of cards per network or brand, the types of cards issued, approved applications and the number of cards based on credit limits.


Banks were also told to disclose their total receivables, gross payments, general profiles on cardholders (based on gender, civil status and educational attainment, among others) and the type of payments.



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Tags: Bangko Sentral ng Pilipinas , credit card business activity reports , credit cards , Philippines



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Call centers to provide more jobs in 2014, says congressman

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MANILA, Philippines—Call centers or business process outsourcing companies will remain a major source of employment in 2014, and could provide up to 124,000 new full-time jobs this year, according to Pasig Representative Roman Romulo.


Romulo, chair of the House committee on higher and technical education and a backer of the industry, said in a press statement Wednesday that BPO companies would play an important role in providing jobs especially to college graduates.


“Based on sectoral projections, we are confident that BPO firms will be able to add an average of 124,000 well-paying jobs annually from 2014 to 2016, or a total of 372,000 new posts over the next three years,” Romulo said.


“We are counting on the bigger BPO players to continue to drive the formation of new jobs,” he added.


He noted that BPO companies made P192 billion in revenues in 2012.


Major players in the industry include Accenture and Convergys Philippines Services Corp., which each has more than 35,000 employees. Accenture’s 2012 revenues stood at P28.104 billion, while that of Convergys was P17.281 billion.


Other top earning BPO firms were JPMorgan Chase Bank N.A–Philippine Global Service Center (P10.805 billion); 24/7 Customer Philippines Inc. (P7.711 billion); Telephilippines Inc. (P7.241 billion); TeleTech Offshore Investments B.V. (P6.978 billion); Sutherland Global Services Philippines Inc. (P6.805 billion); Stream International Global Services Philippines Inc. (P6.738 billion); Sitel Philippines Corp. (P6.364 billion); and Deutsche Knowledge Services Pte. Ltd. (P5.754 billion).


“As they draw in more business, the super BPO firms can quickly scale up their activities here and hire extra staff, while reducing cost per unit of output owing to greater operational efficiency,” Romulo said.


Romulo also authored the Data Privacy Act, which his statement said played a part in getting global corporations to establish new operations here in the country.


Under this law, all entities, including BPO companies, must protect the confidentiality of personal information collected from clients and stored in their systems. This requirement conforms with strict international privacy standards.



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Tags: bpo , Business process outsourcing , call centers , Employment



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Sin tax law ups prices of tobacco, booze anew

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MANILA, Philippines – Prices of tobacco and alcohol products went up on January 1 as the second increase of prices took effect in accordance with the Sin Tax Law.


Beginning January 1, 2014, the tax for cigarette packs priced at P11.50 and below will now be P17 a pack.


Cigarettes that are priced more than P11.50 per pack will be taxed P27. An increase of P2 from last year’s P25.


For fermented liquor, those that are sold at less than P50.60 per liter will be taxed P17, an increase of P2 from last year’s P15.


Liquor products priced more than P50.60 per liter will be taxed P21, an increase of P1 from 2013′s P20.


For distilled spirits, however, the tax remains at P20 plus 15 percent of the retail price per proof. By 2015, it will increase to P20 plus 20 percent of retail price.


The tax on tobacco products and fermented liquor on both upper and lower price ranges shall continue to rise at their respective rates until 2017 when tobacco products are taxed P30 and fermented liquor P23.50.


Republic Act 10351 or the Sin Tax Law mandates that a portion of the revenues collected from sin taxes will be allocated to projects that will benefit tobacco farmers and workers nationwide.


A portion of the revenues will also go to health care and improvement of medical facilities nationwide.


The Sin Tax Law was passed by Congress on December 11, 2012 and signed by President Benigno Aquino III on December 19.


Related stories


The sin tax law


Sin tax sends premium brands beyond poor’s reach


‘Sin tax’ is also a ‘health tax’



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Tags: Business , liquor , News , sin tax , tax , tobacco



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