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Power outages take toll on S. Africa economy

Agence France-Presse

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South Africa has been hit by rolling blackouts as state-owned power utility Eskom Holdings implements rationing cuts to help prevent a collapse of the electricity grid. (Getty)

As if choreographed by a puppet master, stores along the aisle of a Johannesburg mall hurriedly shut their doors one by one as soon as power outages strike slap-bang in the middle of the day.

“We have to close the store immediately because people can steal… the card machines also don’t work without electricity,” a 23 year-old clothing retail worker told AFP.

Since 2008, state utility Eskom has sporadically implemented rolling blackouts — rationing up to 4,000 megawatts at a time — to help prevent a collapse of the electricity grid, a process known as “load shedding.”

But this week, the crisis suddenly worsened as Eskom rationed 6,000 megawatts from the national power grid, prompting the worst cuts in the country so far.

The power outages have caused many businesses to lose out on hours of sales during the peak festive season, threatening an already fragile economy.

“Most of them have to close shop as they can’t afford alternative solutions such as generators and renewable energy such as solar systems,” the CEO of the Black Business Council, Kganki Matabane, told AFP.

Across town about 60 kilometers (40 miles) south of Johannesburg in the crucial industrial manufacturing hub known as the Vaal Triangle, industrialists reel from the unstable supply of power.

“The big industries that start up furnaces lose an obscene amount of money when there are blackouts,” said Jaco Verwey, vice-chairman of the Golden Triangle Chamber of Commerce.

“Firstly they lose money on downtime. Secondly they lose money on restarting again because they need more electricity to restart their furnaces.”

The organization boasts around 450 member businesses, 33 of which pay a combined electricity bill of 100 million rands ($6.8 million) a month.

Businesses, big and small, are plunged daily into darkness for nearly five hours at a time, sometimes even multiple times a day.

Electrifying losses

Large underground mines, among the largest contributors to GDP, suspended some shifts this week to avoid trapping miners in the belly of the earth when the electricity cuts out.

AngloAmerican spokesman Sibusiso Tshabalala told AFP that its “South African operations have been impacted by Eskom load shedding”.

“While we have response plans … this is not a sustainable solution as it is costly to run generators,” he said, adding that sustained power outages resulted in reduced revenues and production.

Hundreds of tourists, hoping to catch the aerial cableway at the top of Table Mountain, were left stranded for nearly three hours this week after load shedding escalated to stage 6.

Even telecommunications networks were forced to beef up on backup power to maintain customers’ connectivity during load shedding.

African giant MTN reportedly spends up to 100 million rand on battery generators for every three days of electricity blackouts.

But for some, like retailer Shoprite, the outages have resulted a spike in sales of alternative energy and lighting products such as candles, paraffin, gas bottles, emergency lights and kettle braais.

“South Africans often use load shedding as an opportunity to cook on the braai (barbeque),” the Shoprite group told AFP.

Eskom blames its old and poorly maintained coal-fired power stations which struggle to keep up with the electricity demands of Africa’s most industrialized economy.

The debt-laden utility generates around 95 percent of the country’s electricity.

South Africans were so livid about the power outages that President Cyril Ramaphosa cut short an official visit to Egypt to come back and meet with Eskom executives.

Upon his election in May, Ramaphosa vowed to turn around all state entities but Eskom has proved to be “the villain that leaps out of the bath in a rage when you thought that he was dead,” as author and analyst Howard Feldman describes it.

Ramaphosa critics, as well as his supporters, say he will need to improve the economy if he wants a second term in power.

‘Nail in the coffin’

Many say the current crisis is a result of years of mismanagement and corruption during the decade of Jacob Zuma’s presidency.

Despite multiple bailouts, including the latest $4 billion lifeline by parliament, Eskom said it expects overall debt to rise to the equivalent of $30.8 billion in the fiscal year ending 31 March 2020, up from $30 billion a year earlier.

Eskom forecasts a net loss of 20 billion rand for the year.

Calling it “too big to fail”, Ramaphosa unveiled plans to improve the utility’s performance by breaking it up into three units, saying that the current system was “unreliable” and “unpredictable”.

Power insecurity has weighed on the sluggish South African economy, already dogged by high and rising debt, low growth and record-high unemployment of 29 percent over the last decade.

“Job creators are retrenching staff and/or going out of business,” warned the CEO of the National Small Business Chamber, Mike Anderson.

Analysts at wealth asset management company Anchor Capital said the level of load shedding has heightened concerns that the economy could slip into another recession.

Indigo Ellis, an analyst at Verisk Maplecroft echoed this sentiment, saying “power cuts are (the) nail in the coffin for economic growth”.

Growth contracted further by 0.6 percent in the third quarter of 2019, after falling 3.2 percent in the first quarter.

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Globe signs UNGC statement on renewed global cooperation

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Globe Telecom joins over 1,200 private companies from 100 countries in supporting the call of the United Nations Global Compact (UNGC), for an inclusive alliance among all stakeholders across different nations, sectors, and generations to address the various challenges the world is facing.

The “Statement from Business Leaders for Renewed Global Cooperation”, including the full list of CEO supporters, was presented to the UN Secretary-General during the UN Private Sector Forum on 21 September as part of the official UN 75th anniversary commemorations.

It states: “We, the business peoples, recognize that peace, justice and strong institutions are beneficial to the long-term viability of our organizations and are foundational for upholding the Ten Principles of the UN Global Compact and achieving the Sustainable Development Goals (SDGs). Now is our opportunity to learn from our collective experiences to realign behind the mission of the UN and steer our world onto a more equitable, inclusive and sustainable path. We are in this together — and we are united in the business of a better world.”

“The Statement is a resounding endorsement of inclusive multilateralism. In no uncertain terms, it says that cooperation must cross borders, sectors and generations for us to adapt to changing circumstances,” said Sanda Ojiambo, UNGC CEO & Executive Director.

“In the course of just one month after we issued the Statement, it has been signed by 1,294 CEOs from large, medium and small enterprises in virtually every industry and region. We deeply appreciate their commitment to global cooperation at a pivotal time for the UN and the world at large.”

By signing the Statement, Globe, through its President and CEO Ernest Cu, demonstrates the company’s commitment in upholding the 10 UNGC principles and the UN Sustainable Development Goals (UNSDGs).

“As a responsible organization which strongly supports the UN’s sustainability missions, Globe believes in the importance of working together and uniting the efforts of businesses worldwide to make significant inroads in the UN’s goal of creating a better world where no one is left behind,” said Cu.

In 2019, Globe became a signatory to the UNGC, committing to implement universal sustainability principles.

With this, Globe commits to demonstrate ethical leadership and good governance through values-based strategies, policies, operations and relationships when engaging with all stakeholders as well as invest in addressing systemic inequalities and injustices through inclusive, participatory and representative decision-making at all levels of its business.

Globe also pledged to continue to partner with the UN,  government and civil society to strengthen access to justice, ensure accountability and transparency, provide legal certainty, promote equality and respect human rights.

At the same time, the company joined  the call for governments to protect human rights, ensure peace and security, and uphold the rule of law so that businesses, individuals and societies can flourish; create an enabling environment to serve the interests of people and planet, prosperity and purpose, through strengthened international cooperation and national legal frameworks; and enhance multilateralism and global governance to combat corruption, build resilience and achieve the SDGs.

To learn more about Globe’s sustainability efforts, visit https://www.globe.com.ph/about-us/sustainability.

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Global stocks tank on fears of second coronavirus wave

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GLOBAL stocks took a beating on Monday.

NEW YORK (AFP) — World equity markets suffered heavy losses Monday as investors reacted to mounting fears of a second coronavirus wave and diminishing odds of another US stimulus bill as partisanship intensifies ahead of the presidential elections.

Crude oil prices plunged, owing to expectations for less demand just as more supply from Libya becomes available, traders said.

The banking sector was also rocked by an international media probe that claimed massive sums of allegedly dirty money had flowed for years through some of the world’s largest banks.

London stocks fell by 3.4 percent after Health Minister Matt Hancock warned Britain’s coronavirus crisis was at a “tipping point”, fueling expectations of more restrictions aimed at curbing Covid-19 as government experts said cases could mushroom.

“Virus fears have come back to haunt investors today, as concern rises that the consumer-led recovery is going to falter if lockdowns are re-introduced,” noted Fawad Razaqzada, an analyst at ThinkMarkets.

“Stocks have tanked, the dollar has jumped, and the pound has been pounded,” he added.

Wall Street also had a losing day, although equities clawed back from session lows in apparent bargain-hunting.

The Dow Jones Industrial Average ended at 27,147.70, down 1.8 percent or around 510 points, but more than 400 points above session lows.

Hopes of another round of US stimulus spending took a hit with the death of US Supreme Court Justice Ruth Bader Ginsburg, which has sharpened already significant partisan differences in Washington ahead of the US presidential election on November 3.

Ginsburg’s death “means the political scene now seems more hostile, decreasing the possibility of a stimulus deal getting done,” said TD Ameritrade’s JJ Kinahan in a note.

Russ Mould, at the online broker AJ Bell, added that “travel stocks again faced severe turbulence amid the rising fears over new (government) restrictions.”

Most Asian bourses had already fallen sharply earlier in the day.

Shares in major banks dived after BuzzFeed News and the International Consortium of Investigative Journalists published findings over dirty money allegedly flowing through the banking system.

“Profits from deadly drug wars, fortunes embezzled from developing countries and hard-earned savings stolen in a Ponzi scheme were all allowed to flow into and out of these financial institutions, despite warnings from the banks’ own employees,” according to the probe.

Banks replied that they have been working for several years with national regulators to address many of the issues raised in the report.

Also, the industry noted that law enforcement sometimes request banks keep a client relationship ongoing to support further investigations.

Key figures around 2130 GMT 

New York – Dow Jones: DOWN 1.8 percent at 27,147.70 (close)
New York – S&P 500: DOWN 1.2 percent at 3,281.06 (close)
New York – Nasdaq: DOWN 0.1 percent at 10,778.80 (close)
London – FTSE 100: DOWN 3.4 percent at 5,804.29 (close)
Frankfurt – DAX 30: DOWN 4.4 percent at 12,542.44 (close)
Paris – CAC 40: DOWN 3.7 percent at 4,792.04 (close)
EURO STOXX 50: DOWN 3.7 percent at 3,160.95 (close)
Hong Kong – Hang Seng: DOWN 2.1 percent at 23,950.69 (close)
Shanghai – Composite: DOWN 0.6 percent at 3,316.94 (close)
Tokyo – Nikkei 225: Closed for a holiday
Euro/dollar: DOWN at $1.1777 from $1.1840 at 2100 GMT
Pound/dollar: DOWN at $1.2817 from $1.2917
Euro/pound: UP at 91.85 pence from 91.67 pence
Dollar/yen: UP at 104.66 yen from 104.57 yen
West Texas Intermediate: DOWN 4.4 percent at $39.31 per barrel
Brent North Sea crude: DOWN 4.0 percent at $41.44 per barrel

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Neutral stance prompts full award on T-bills

Joshua Lao

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Lack of uncertainty over the Bangko Sentral ng Pilipinas’ (BSP) policy horizon contributed to the oversubscription of the Bureau of Treasury’s (BTr) Treasury bills (T-bills) on Monday.

As such, the BTr decided to award its T-bills in full despite a slight increase on the 182- and 364-day tenors.

National Treasurer Rosalia de Leon said the increment on the T-bills can be traced to the market’s view that the BSP will continue to hold out on its neutral stance for the rest of the year.

“Full award for all tenors as rates for 182- and 364-day slightly pushed up with expectations (that) BSP will keep policy rates steady for the remainder of the year,” De Leon said.

“Demand remains strong with oversubscription in all tenor buckets,” she added.

Rates for the 91- and 182-day benchmarks fetched an average of 1.156 and 1.615 percent respectively, a 0.6 and 2.6 basis point increase from the posted 1.150 and 1.589 percent week-ago.

Yield for the 364-day IOU stood at 1.850 percent, which is 11.9 basis point improvement from the fully rejected 1.969 percent last week.

The BTr was able to raise its full P20 billion offer after attracting P72.8 billion worth of tenders, oversubscribing the original amount by more than 3.6 times.

The Treasury chief noted that they are currently monitoring market developments in terms of their foreign issuances for the rest of the year.

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DTI assures support for Filipino franchisers

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The Department of Trade assured the Filipino franchisers of its continued support to help businesses thrive and survive under the ‘new normal.’ PHOTOGRAPH COURTESY OF FRANCHISE MARKET PHILIPPINES

The Department of Trade and Industry (DTI) assured Philippine franchisers of its continued support to help businesses thrive and survive under the “new normal.”

In his keynote address during the opening of the Franchise Asia Philippines (FAP) Virtual Conference on Monday, Trade Secretary Ramon Lopez said “the DTI has always believed in franchising as a tried and tested business model.”

“DTI will continue to support the franchise sector by spousing the continued reopening of our economy,” Lopez added.

Also during the opening of the five-day virtual conference, themed “Pivoting to the Golden Age of Franchising,” Philippine Franchise Association (PFA) founder and chairman emeritus Dr. Sammie Lim says he “believes that from the ashes of the mediocre and fake franchises will emerge a new breed of strong franchisor and franchisee to serve the pent up demand of the consumer,” as franchisers enter the golden year of franchising starting next year, hitting the peak by 2025.

“I couldn’t be prouder of how franchises in the Philippines pivoted under the circumstances. As entrepreneurs, we always believe that there are opportunities in the midst of adversities but we need to decide and act fast,” Lim says.

He noted that the coming years will be a boom for the franchising community for a number of reasons such as the growing number of people, especially those who lost their jobs looking at starting a business, the availability of retail spaces and the new opportunities in the new normal.

“But the best reason, perhaps, is that franchising continues to be the best model to grow your business and, if you are a new into business, the safest way to open a business is to franchise, rather than starting a business from scratch,” says PFA chairman Richard Sanz.

He revealed that based on EGS, a US-based franchising think tank, the Philippines still ranks among the best destinations for international franchises and garnered an average of 2.1, with 1 as the highest, 2.5 as fair and 4 as the lowest.

Sanz said the ranking was based on a number of indicators, namely, GDP growth, market size, Intellectual Property (IP) protection, ease of entry, ease of starting a business, corruption index, political situation, economic factors, long term investment level risk and projected COVID-19 recovery.

“The Philippines ranked high in market size, IP protection, ease of entry, economic factors, long-term investment risk and even in the projected COVID-19 recovery,” Sanz said.

While PFA president Sherill Quintana, franchising, before the pandemic, contributed 7.8 percent to the country’s gross domestic product (GDP).

“The employment that we generate, both direct and indirect, is about two million. And if we talk about taxes, the sector’s direct and indirect taxes can go up to eight percent of the total taxes collected by the government and help fund the nation’s progress. At least, this is how it was before the COVID-19 crisis. But by changing mindset, this can also mean that this is the potential of the franchising sector if we are able to manage the difficulties of the said crisis,” Quintana said.

The FAP’s conference was originally slated last March, but was cancelled when the entire country was placed under enhanced community quarantine (ECQ) during the coronavirus disease (COVID-19) pandemic.

Organizers said the week-long event was designed to help attendees transcend the challenges of the COVID-19 crisis and take advantage of the opportunities under the “new normal.”

Among the topics to be discussed include Shaping the Next Normal: Trends and Outlooks; Pivoting Towards Resiliency and Sustainability; Leading Organizations Amidst Disruptions; Embracing Digitalization in a Disruptive World, among other matters.

The event will also feature franchise and business leaders like Dr. Vicki Belo of Belo Medical Group, Hans Sy Jr. of SM Engineering Design and Development, Josiah Go of Mansmith and Fielders, Robert Trota of Max’s Group Inc., Jose Victor Paterno of 7-Eleven, Jose P Magsaysay, Jr. of Potato Corner, Kenneth Yang of McDonald’s and other sector leaders.

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Megawide bags P28B MCRP railway project

Maria Romero

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The Malolos-Clark Railway Project is estimated to cost P28 billion, which is equivalent to over half of Megawide’s current order book of P48 billion. PHOTOGRAPH COURTESY OF MEGAWIDE

The consortium of Megawide Construction Corp. (Megawide) and its Korean partners Hyundai Engineering & Construction Co. Ltd. and Dong-ah Geological Engineering Company Ltd. won the contract for the construction of Phase 1 of the Malolos-Clark Railway Project (MCRP).

In a disclosure to the stock exchange on Monday, Megawide said the award, issued by the Department of Transportation (DoTr) on 18 September, has an estimated project value of P28 billion.

Under the contract, the consortium will undertake building and provision of civil engineering works for around 17 kilometers of viaduct structure, including elevated station buildings in Calumpit, Bulacan and Apalit, Pampanga.

Megawide says the project’s estimated cost of P28 billion is equivalent to over half of its current order book of P48 billion.

It is thus seen to boost the company’s construction segment revenue in the next three to four years covering the development phase.

“Megawide, together with our world-renowned consortium partners in the field of engineering, Hyundai E & C and Dong-ah, is committed to deliver the highest standards of construction and engineering excellence for the MCRP. This will be another first world infrastructure in the making,” says Megawide chair and CEO Edgar Saavedra.

The project is also expected to benefit Megawide’s business units and support its expansion plans, given that precast materials and construction ancillary services will be major components for these kinds of development.

The MCRP, part of the 163-kilometer North-South Commuter Railway Project, is envisioned to ease road congestion in the capital and nearby provinces and reduce annual traffic-related economic costs, which total $18 billion in Metro Manila alone.

It will likewise help boost economic activity of regional growth centers like Clark in Pampanga.

Once completed, the project is expected to cut travel time between Clark and Manila from two to three hours by bus to one hour by train, while reducing greenhouse gas emissions by more than 60,000 tons annually.

The Japan International Cooperation Agency, which is co-financing the project, will provide up to $2 billion in additional funding for the rolling stock and railway systems.

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Illegal tax credits hit P606M

Joshua Lao

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Illegal tax credits availed by four textile firms reached P606 million, the Department of Finance (DoF) said on Monday following the Commission on Audit’s (CoA) issuance of notices of disallowance (ND) for such.

“The errant firms had illegally acquired the tax credit certificates (TCC) over a four-year period from 2008 to 2012,” the agency said.

“Several officials and employees of the DoF, Board of Investments (BoI), Bureau of Customs and OSS (One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center) who were responsible for processing and approving the illegal TCC, as well as their recipients and claimants from the four companies, were held liable by CoA in various instances,” it added.

Among the delinquent firms included Capital-Roll Knit Corp. managed to slip P285.58 million and P40.88 million of tax perks in February and June, respectively, which adds up to the combined amount of P83.56 million TCC in 2010 and 2011 to total at P410.02 million to date.

Another erring firm, Uni-Glory’s Knitting Corp. received illegal tax credits of P78.02 million.

The remaining firms, Primeknit Manufacturing Corp and Tai-Cheng International Resource Inc. meanwhile managed to secure illegal tax perks of P55.89 million and P62.03 million, accordingly.

According to the DoF, tax credits are provided as incentives to exporters and manufacturers of BoI-registered products for export that have paid the necessary taxes.

“Approved applications meant refunds on (firms’) duties and taxes that were used to pay other tax liabilities due the government,” it explained.

To recall, the CoA foiled an P11.18 billion scam of 33 unqualified non-existent textile companies from 2008 to 2014, to which Finance secretary Carlos Dominguez III took immediate action by forming a task force to investigate and run after such firms.

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Values-driven course for CESO

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At least 30 career executive service officers (CESO) and other third-level government officials will be attending the Aboitiz-backed Executive Course on Leadership, Innovation, Communication and Knowledge Management (CLICK), an experiential, curriculum-based development program on the “new normal” workplace environment.

A collaboration launched last 2 September 2020 among the Aboitiz Group, Development Academy of the Philippines (DAP) and the National Union of Career Executive Service Officers (NUCESO), CLICK envisions to contribute towards enhancing the knowledge and competencies of CESO and advance participants’ capacity to innovate, strategically communicate and analyze information through agile work strategies as they adapt to the new normal.

“Given that public service covers a wide range of responsibilities, it really is to our collective benefit that our CESO receive the right kind of support to become even better leaders not only in their respective agencies but, more so, to the greater communities they belong to. This is especially relevant right now as the entire world grapples with COVID-19,” said Sabin M. Aboitiz, Aboitiz Group president and chief executive officer.

“It is our belief that with this tripartite agreement, we will be able to successfully deliver national competency, building initiatives to upgrade the skills and competencies of our CESO by giving them the ability not only to cope in an environment that is volatile, uncertain, complex, and ambiguous but to actually thrive in it and take advantage of its nuances,” DAP president Engelbert Caronan said.

NUCESO president Atty. Lynn Danao-Moreno said the collaboration will propel their career officials to upskill and consequently effect change.

“Providing a venue to upskill our career officials through CLICK could not have been realized by NUCESO alone without the close collaboration of its two distinguished institutional members, the DAP and AEV (Aboitiz Equity Ventures). Through CLICK, NUCESO, DAP, and AEV are united to a singular cause to spark change and initiate development across all national government agencies towards nation-building and sustainable development,” Danao-Moreno said.

Aboitiz is expected to share its current best practices in various areas of management through the 40-hour program that will start in October.

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DTI expects lower unemployment rate

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The Department of Trade and Industry (DTI) is seeing close to 5.1 percent unemployment rate by the end of 2020, as the Inter-Agency Task Force is eyeing the reopening of the country’s economy safely.

“We’re seeing our unemployment rate going down from the worst rate of 17.7 percent last April to 10 percent in July. We hope to get back closer to our pre-pandemic 5.1 percent level before yearend,” DTI secretary Ramon Lopez said in his report to the members of the Franchise Asia Philippines (FAP) on Monday.

Lopez said that in the three-runs surveys in three periods done by the DTI to over 2,000 MSME nationwide, it showed that 38 percent of companies were closed and about 50 percent partially operated during the height of the ECQ for the April-May period.

“This went down to 11 percent (from 38 percent) in June-July, and to six percent in August-September as we were reopening the economy,” according to Lopez.

He also noted that the country’s manufacturing sector climbed back closer to the benchmark 50 index, up to 49.7 in June, from its record-low of 31.6 in April.

“The Philippines has always been posting 50 indexes. Above 50 suggests an increase in manufacturing activities and below 50 suggests a contraction – so we are about to surpass the 50 indexes. This reflected a recovery in our manufacturing indices as we eased down the community quarantine in several regions across the country.

Furthermore, our Output Index has been climbing from 10.2 last April to 51.1 last June,” said Lopez.

“We are hoping to recover to positive growth territory by year end, in the same way that they have been posting positive growth rates in 2019, as well as in January and February before the lockdown this year. We are one of the few countries that have been posting positive growth last year and early this year prior to the pandemic,” he said.

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UK, BCDA to design Clark housing project

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The British Embassy Manila and the Bases Conversion and Development Authority (BCDA) signed a memorandum of understanding (MoU) to design the New Clark City Central Park and an affordable housing project in the new metropolis.

The MoU was signed by British Ambassador to the Philippines Daniel Pruce and BCDA president and CEO Vince Dizon during a recent virtual ceremony.

“What is being done in Clark is pioneering and hopefully creating a model for developments elsewhere in the Philippines and the region,” said Pruce.

“It’s exciting that we face the prospects of something which is going to be clean, green, sustainable and resilient and a city that’s inclusive as well where all branches of the community and society can find their place,” he added.

New Clark City, which is envisioned as the first smart, green, sustainable and resilient metropolis in the country, was chosen as among the pilot areas of the UK Prosperity Fund Global Future Cities Program.

Phase 1A of the New Clark City project, which involved the construction of world-class sports facilities used in the 30th South East Asian Games, government buildings and residences, and a 1.4-kilometer river park, was completed last year.

Under the MoU, the UK and BCDA will work on three key areas for New Clark City, like: Participative Design for New Clark City Central Park and citywide public space recommendations; Housing Strategy and Livelihood Recommendations for Clark Special Economic and Freeport Zone and New Clark City; and the Establishment of a Sustainability Unit for New Clark City.

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