Shake Shack to enter PH in 2019

Local luxury retailer SSI Group, Inc. has entered into an agreement with Shake Shack to bring the US-based burger joint to the Philippines and Southeast Asia, with its first store to open by early 2019. SSI Group President Anton Huang said the company is excited to bring the burger joint to Manila and cater to young consumers. “We are proud to partner with Shake Shack and bring a complete gastronomic experience” to the Philippines, Huang said. Shake Shack announced the deal in various social media outfits saying, “Mabuhay, Manila! Pack the Jeepney - we’re officially headed to the Philippines.” Michael Kark, Shake Shack’s VP for Global Licensing added, “We are excited to begin the search for our first site in Metro Manila and look forward to becoming part of this community.” Shake Shack is the first food joint and the latest addition to SSI’s foray in foreign brands, including Zara, Gucci, Armani and others. Andrew Malihan

UBS helping Globe find third telco player

These protected rights include the right to be secure in the frequency holdings allocated by the government. Globe Telecom has hired Zurich-based financial services giant UBS to help the telecommunications firm identify likely partners in a business venture designed to speed up the entry of the third telco player. This was learned on Wednesday from Froilan Castelo, general counsel and senior vice president at Globe, in a telephone interview. He said while the whole scheme remains drawn in broad strokes at this point, the advisory services provided by UBS should not only help them identify the potential partner or partners in the proposed cellular phone tower subsidiary company but conduct due diligence audit on those who make the grade as well. “As repeatedly stated before, Globe is not opposed to the entry of a third player, or for that matter, as many players that the market can accommodate. Globe has always geared itself for growth and competition,” Castelo said. “Competition has the potential of opening up new sources of revenue streams for telecommunications players while benefiting consumers with more innovative products and services at competitive rates.” He drew a general outline in which Globe’s network of tower assets across the country would be spun into a separate entity and these assets would be shared with the third telco player. To help foster competition, Globe recently took a step forward to fulfill its plans to divest its tower assets. It has started the process of incorporating a separate tower holding company. Once regulatory approvals are secured, this initiative will allow the third player to rapidly roll out its network and launch commercial operations. It will also give smaller players the opportunity to scale up their business without the burden of high capital expenditures, the telco said in a statement. According to Castelo, some 20 potential telco players have thus far expressed interest in the tower-sharing scheme, all of whom are under due diligence audit by UBS. The list of interested telco partners include domestic as well as overseas entities who have the resources and the background necessary to deliver the required services, he quickly added. He reiterated that Globe Telecom is open to the entry of new players in the local telecommunications industry as this will foster a healthy competitive environment that will ultimately benefit consumers. So as to help foster competition, he said Globe recently took a step forward to fulfill plans to divest its tower assets. It has started the process of incorporating a separate tower holding company. Once regulatory approvals are secured, this initiative will allow the third player to rapidly roll out its network and launch commercial operations. It will also give smaller players the opportunity to scale up their business without the burden of high capital expenditures. Castelo said Globe has no specific objection on the draft TOR for the selection of a new telco player. “We trust the government will do what is fair and just – not only in the selection of the new major player, but also in protecting the vested rights of the current service providers.” These protected rights include the right to be secure in the frequency holdings allocated by the government. Republic Act (RA) 7925 states “the government shall allocate the spectrum to service providers who will use it efficiently and effectively to meet public demand for telecommunications service.” In a public consultation held on Friday, July 6, DICT Acting Secretary Eliseo Rio Jr. raised concerns on the utilization of some allocated spectrum, particularly the 3G frequencies.

Inflation, TRAIN dampen vehicle sales

The above-target inflation in June and the higher excise tax under the Tax Reform for Acceleration and Inclusion or TRAIN law helped moderate vehicle sales during the month when this slowed by 21.7 percent as consumers prioritized food over buying new cars. Vehicle sales dropped in double digits in June to only 29,350 units from 37,479 units from a year ago, data from the Chamber of Automotive Manufacturers of the Philippines Inc. (Campi) and Truck Manufacturers Association (TMA) show. This was the fifth consecutive months that vehicle sales slumped. The six-month figure also showed a 12.5 percent drop to 171,352 units from 195,772 units in the same period last year. Campi president Rommel Gutierrez said consumer attitude and their sense of priority contributed to the decline in vehicles sales. “However, we remain optimistic that our sales will recover in the coming months.” Earlier, Campi anticipated posting barely changed sales this year as the full force of higher excise tax on vehicles dampen the urge to buy new motor vehicles. The TRAIN Act raised the excise tax on cars even as it lowered the personal income tax rate to help fund the government’s various social and infrastructure programs, Year-on-year and year-to-date, the number of commercial vehicles and passenger cars sold also fell. In the commercial vehicle segment, the number of units sold totaled 21,584 units in June, down from 23,954 units in the same month last year or a 9.9 percent drop. On a year-to-date basis, commercial vehicles sales dropped to 115,606 units from 128,984 units sold in the same first six months of last year or a 10.4 percent decline. The passenger car segment posted the highest decline at 42.6 percent with 7,766 units sold last month from 13,525 units in the same month in 2017. From January to June this year, the segment dropped16.5 to 55,746 units from 66,788 units a year ago. A separate report from the Association of Vehicle Importers and Distributors (AVID) showed an 11 percent drop in the sale of imported automotive vehicles in the first half to 43,138 units from 48,344 units in 2017. Total six-month sales for passenger cars went down by 14 percent to 16,176 units from 18,679 units sold in 2017. For light commercial vehicles, the segment’s sales decreased by 10 percent to 26,528 units in the January-to-June period this year, from 29,575 unit sales last year.

Lessons for next US financial crisis

Three officials who played vital roles in combating the 2008 financial crisis say they worry that the painful lessons from the banking system’s near-collapse a decade ago may be forgotten. “It is important that people focus on the lessons,” said former Treasury Secretary Henry Paulson. “We are not sure people remember everything they need to remember.” Paulson, who was at the Treasury’s helm when the crisis erupted in the fall of 2008, and Timothy Geithner, who succeeded him in 2009, joined Ben Bernanke, the former Federal Reserve chairman, at a round-table discussion last week in advance of the 10th anniversary of the crisis. The turbulent period, in which key financial institutions, including Lehman Brothers, Bear Stearns, Fannie Mae, Freddie Mac and American International Group either failed or nearly did, marked America’s worst financial crisis since the Great Depression. On Sept. 11, former officials from the Fed, the Treasury and other agencies will meet at the Brookings Institution in Washington to discuss what worked and what didn’t and what should be done to prepare for the next crisis. “We hope to provide some useful guidance — perhaps more than the three of us had,” Bernanke said. Since President Donald Trump took office, momentum has grown within the administration and among Congress’ Republican leaders to reverse parts of the Dodd-Frank financial overhaul law, which Congress passed in 2010 to tighten regulatory loopholes revealed by the crisis. Legislation enacted this year makes modest changes to Dodd-Frank, mainly in exempting smaller banks from the stricter requirements. Bernanke, Geithner and Paulson said that so far, the easing of parts of Dodd-Frank represented sensible changes. But they cautioned that deregulatory zeal could go too far and again leave the financial system vulnerable to excessive risk-taking.

VAT threshold equals bonanza for SME

The January-to-June figure for percentage tax collection also exceeded the BIR goal of just P14.803 billion. Ramping up the value-added tax (VAT) threshold has had a beneficial impact on the small and medium entrepreneur (SME) whose contribution to the national coffers fell by 13 percent in the first six months to only P63.217 billion. This, the Department of Finance said on Wednesday, contrasted sharply against the year ago VAT collection which totaled P72.813 billion and the result of the ramping up of the VAT threshold to P3 million instead of only P1.9 million prior to the adoption of reforms under the Tax Reform for Acceleration and Inclusion (TRAIN) Act. The higher VAT threshold effectively excluded from the tax net more SMEs that previously paid the 12-percent VAT. A report by the Bureau of Internal Revenue (BIR) during an executive committee (ExeCom) meeting of the Department of Finance (DoF) showed that from January to June this year, VAT collection mostly in the BIR’s regional offices fell although collection from the percentage tax and income tax increased, indicating many SMEs now benefit from the higher VAT threshold under TRAIN. Dominguez said increases in the percentage and income tax collection over the 2017 period indicate that SME and self-employed individuals below the VAT threshold may now opt to pay either the 8 percent income tax on gross sales or receipts and other non-operating income or the percentage tax and the graduated income tax rates under TRAIN. From January to June this year, VAT collection reported by the various BIR regional offices amounted to P63.217 billion, lower than last year’s P72.813 billion, according to BIR preliminary data. However, percentage tax collection from the regions rose to P18.079 billion from P12.130 billion in 2017. The January-to-June figure for percentage tax collection also exceeded the BIR goal of just P14.803 billion for this period. Income tax collection in the regions, meanwhile, also rose to P207.332 billion from P206.454 billion in the same period in 2017. This also surpassed the BIR goal of P198.618 billion for this period. For the entire country, income tax collection rose to P500.585 billion for the same period, higher than the BIR goal of P450.375 billion and the 2017 collection of P489.456 billion. VAT collection for January to June totaled only P179.951 billion, short of the BIR goal of P222.419 billion, but slightly higher than last year’s 178.435 billion. The total six-month collection from the percentage tax rose to P44.158 billion, higher than the BIR goal of P43.744 billion and the 2017 collection of P38.241 billion for the same period.

Six-month debt, equity sales down 11 percent

“Capital raising activities totaling only P271 billion in 2015 steadily ramped up the past few years.” Generating funds for capital expansion and other purposes proved lower than anticipated in the first six months this year, with actual capital raising 11 percent lower than a year ago to only P327 billion, according to investment banking firm First Metro Investment Inc. Capital generation activities from a year earlier, whether in the form of debt or equity shares, was higher at P366 billion. This developed even as analysts at FMIC and elsewhere look forward to an expanding economy driven in the main by investments and by the strength of the local manufacturing sector. The sale of fixed-income or debt securities in the first half amounted to only P177 billion, which was 35 percent lower than a year ago sale reaching P274 billion. Equity security issues, on the other hand, aggregated P150 billion or 63 percent higher than a year ago when this amounted to only P92 billion. The pick up in the sale of capital-boosting securities during the period explains in part the bullish outlook of securities brokers and stock market players at the Philippine Stock Exchange (PSE). Still, the numbers reflect realities acknowledged even by those on the floor of the stock exchange given that forecast debt and equity activities for the period should have been substantially higher. Data show anticipated debt and equity securities sales aggregating at least P467 billion in the first half, composed of P343 billion worth of debt notes and at least P123 billion in equity securities sales. Instead, fixed-income debt note sales proved 48 percent lower as this totaled only P177 billion instead of the forecast P343 billion. Equity securities sales, however, proved higher than the forecast P123 billion as the actual figure stood 22 percent higher to P150 billion. These local events developed against a backdrop of overseas developments in which the US Fed, the most influential central bank in the world, twice hiked its borrowing rate in March and June this year as did the Bangko Sentral ng Pilipinas which similarly raised its borrowing rate in May and June. During this period, local inflation progressively ramped up from only 3.4 percent in January to 5.2 percent in July or well above the 4-percent ceiling set under the inflation-targeting regime instituted by the BSP many years earlier. It has been acknowledged that while the momentary authorities and the various analysts and experts continue to believe that inflation should soon fall to within-target levels, the inflation uptrend has muted some of the enthusiasm nornally elicited from the investing community. It was also during this period when the exchange rate, averaging only P49.785 per dollar in January, steadily weakened to P53.037 in June, making corporate borrowing in foreign currency that much more risky than most investors prefer. These developments also helped explain why some P64 billion worth of foreign capital invested in the Philippines during the period were sold for dollars and repatriated to their overseas principlas. Analysts noted that capital raising activities totaling only P271 billion in 2015 steadily ramped up the past few years, totaling P383 billion in 2016, P724 billion in 2017 and projected to be at least 7 percent higher this year to P773 billion.

PH port operations join poorest in SE region

“The country’s ports operations have “long standing issues that have divided our ranks and keep us lagging behind our ASEAN neighbors.” Top officials of the Bureau of Customs (BoC) recently acknowledged that the country’s ports operations are some of the poorest performers in Southeast Asia. In a two-day port operations summit initiated by the BoC last July 12 and 13, Deputy Commissioner for Assessment Operations and Coordination, Edward James Buco, said the country’s ports operations have “long standing issues that have divided our ranks and keep us lagging behind our neighbors in terms of operations in the ports.” The ASEAN groups the Philippines, Thailand, Indonesia, Vietnam, Malaysia, Singapore, Myanmar, Cambodia, Laos and Brunei. According to Buco, the problems pertain to port congestion and the return of empty containers. Customs Commissioner Isidro Lapeña said the issues Buco cited formed the basis for holding the summit held in Manila for the first time. When asked by the Daily Tribune what he meant by Philippine port operations lagging behind ASEAN, Lapeña said port operations in the Philippines is at or near the bottom among its peers in the region. Thus, the BoC, hand in hand with the Department of Public Works and Highways, the Metropolitan Manila Development Authority, the Philippine Ports Authority and other stakeholders need to flesh out the problems and subsequently come up with proposed solutions quickly. He also acknowledged having been surprised when “other problems” were raised by the participants, saying it was the first time he learned of the issues. Among the problems that surprised Lapeña were so-called port congestion fees, local charges imposed by international shipping lines and freight forwarders, the use of ports as storage facilities for importers, overstaying empty containers and leased boxes as well as nonexistent depots for the international shipping lines. He also learned that international shipping lines impose their own charges that help to create cartels, unwarranted apprehension among towing firms, late transactions of customs brokers, the use of inaccurate weighing scales, redundant weighing exercises, uncalibrated weighing scales, inefficient loading and unloading equipment of terminal operators and many others. The summit secretariat listed a total of 30 problem areas in port operations. An importer claimed that some of the problems were the same as previously tackled in earlier fora. Lapeña said existing customs personnel failed to brief his office of the gravity of the situation at the country’s ports. He also said not all the problems mentioned in the summit are considered conclusive or final but vowed they will be thoroughly studied and evaluated by a monitoring task force soon created. Lapeña said he will head the task force himself. Some of the issues can be readily dealt with by his office but the others will be relayed to the House of Representatives for legal remedy in the form of amendments to the relevant legislation. Nelson S. Badilla

PSBank to sell P15B LTNCTD

The Philippine Savings Bank (PSBank), the thrift bank arm of the Metrobank group, recently obtained approval from the Bangko Sentral ng Pilipinas (BSP) to sell up to P15 billion worth of so-called long-term negotiable certificates of time deposit (LTNCTD) notes. On 21 May 2018, the board of directors at PSBank approved the issuance of the LTNCTD through two or more tranches over a period of one year. The LTNCTD represents for PSBank an opportunity to access long-term funding as the lender further expands its consumer banking business. LTNCTD are bank products with long tenors offered to investors looking for a higher interest rate compared to regular savings accounts or shorter-term deposits. They are tax-exempt for qualified individuals if held for at least five years. They are insured by the Philippine Deposit Insurance Corp. (PDIC) up to a maximum coverage per depositor, currently at P500,000. The final terms, including offering period and interest rates, will depend on market conditions. In the first quarter, PSBank reported a 25 percent increase in net income to P641.1 million from only P511.1 million in the same period last year, underpinned by strong revenues composed of net interest margin and other operating income. Total operating income for the period rose 15 percent to P3.7 billion from P3.2 billion a year earlier as total loan portfolio rose 11.7 percent to P149.2 billion, driven by its consumer loan business. PSBank has 250 branches and more than 600 ATM strategically located nationwide.

OF investors grow threefold in 5 years

The number of overseas Filipino (OF) remitters and their beneficiaries who are into investments has tripled since 2013, according to customer data from BPI Asset Management and Trust Corp. (BPI AMTC). The company said this was a welcome trend as more OF 35 years old and above begin to realize the importance of investing. “Our OF clients have started considering investments to fund long-term goals,” said BPI AMTC President Sheila U. Tan. “While remitters, according to a BSP report, still allocate some 40 percent of their earnings in the purchase of appliances, vehicles and a family home, there is promising data that remittances for investment are starting to become part of the OF lifestyle.” The peso-denominated equity fund is the most popular investment product among OF investors, with more than 60 percent of them holding this fund type. Around 20 percent have likewise acquired the habit of investing by enrolling their accounts in an automated regular investment program. “Our regular subscription plan automatically debits an investor’s savings account on a monthly basis to channel them into investments. The fact that OF clients are into equity funds and commit to save and invest on a regular basis indicate improved financial literacy. We are glad that our efforts on educating them is showing promising results,” said Tan. BPI AMTC has been awarded the Best in Financial Inclusion Program in the 2nd Bank Marketing Awards for its creative and impactful investment learning seminars, which target primarily non-investors in the mass market and OF segments. The company recently concluded a series of seminars on practical financial planning in areas with heavy concentrations of OF families, particularly Fairview in Quezon City, Baguio and Pampanga. BPI AMTC is a trust corporation managing total assets of more than P570 billion from both institutional and individual investors. It was recently named the Best Asset and Fund Manager in the Philippines for the fourth consecutive year in the Alpha Southeast 12th Annual Best Financial Institution Awards 2018.
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