GROWTH in wholesale prices of general goods eased in November, its weakest pace in five months, the Philippine Statistics Authority (PSA) reported on Friday.

Preliminary data from the PSA showed the general wholesale price index (GWPI) slowed by 4.2% year on year, significantly lower than the 7.2% in November 2022 and 4.4% in October.

The November reading was the slowest since the 4% recorded in June 2023.

Year to date, GWPI averaged 4.9%, lower than the 7.4% a year ago.

Robert Dan J. Roces, chief economist at Security Bank Corp. said that the November might be a result of the economy adjusting post-pandemic and spending patterns returning to normal, which could lead to reduced demand pressures.

“Improved supply chain conditions, which may have reduced logistical costs and supply shortages that previously drove prices higher, as well as stabilization or decline in global commodity prices, particularly if the goods are imported or influenced by global markets,” he said in a Viber message.

Additionally, he said a possible cause for the slowdown in bulk prices is the government or central bank policies that may have reduced inflationary pressures, such as adjusting import tariffs or providing subsidies.

The indicator could also be indicating base effects from a year earlier, Mr. Roces added.

In its December policy meeting, the Bangko Sentral ng Pilipinas (BSP) decided to maintain its benchmark interest rate at a 16-year high of 6.5%.
The decision came after the BSP had raised rates by a cumulative of 450 basis points between May 2022 and October 2023 in its efforts to control inflation.

The PSA said that the downtrend seen in November is due to the downtrend in the index of mineral fuels, lubricants, and related materials which contracted by 6.7% from a 3.7% decline in October.

This was followed by miscellaneous manufactured articles (3.3% from 3.6%) and chemicals including animal and vegetable oils and fats (1.5% from 1.8%).

Other commodities that logged slower growth were the heavily weighted food index (6.8% from 7%) and machinery and transport equipment (1.3% from 1.5%).

Meanwhile, manufactured goods classified chiefly by materials remained at 4.6%.

On the other hand, beverages and tobacco stood at 6.2% from 6% in October while a slower annual decline was logged in the index of crude materials, inedible except fuels at 1.9% in November from its 3.5% decline a month earlier, the PSA said.

Bulk prices growth in Luzon and the Visayas slowed while it further rose in Mindanao.

Wholesale price growth in Luzon eased by 4.1% during the period from 7.4% in November 2022 and 4.4% in October last year.

In the Visayas, GWPI likewise slowed by 5.2% in November, significantly lower from 6.5% in the same month in 2022 and 5.3% in October 2023.

On the other hand, price growth in Mindanao grew by 3.6% against the 4.8% in November 2022. It also picked up from the 3.3% in October 2023.

“If the trends observed in November continue and barring any unforeseen supply shocks or significant policy changes, the general trajectory of wholesale prices might remain stable or continue to ease slightly,” Mr. Roces said.

THE Energy Regulatory Commission (ERC) said the Panay power outage has been referred to an interim grid management committee for investigation, adding that appropriate penalties will be imposed after the panel delivers its findings.

“After the investigation, if penalties are called for, then we will commence proper proceedings to allow the relevant parties to answer and, if answers are not acceptable, impose penalties,” ERC Chairperson Monalisa C. Dimalanta said in a Viber message.

The National Grid Corp. of the Philippines (NGCP) reported on Tuesday that multiple power plants tripped, including units of Panay Energy Development Corp. and Palm Concepcion Power Corp. (PCPC).

Due to the plant outages, some 452 megawatts (MW) became unavailable, causing the NGCP to raise a yellow alert on the Visayas grid.

The yellow alert was lifted at 9:01 p.m. on Tuesday.

According to an NGCP update on Thursday, some 244.6 MW of electricity is currently being generated by Panay power plants.

The Visayas grid will need about 300 MW to stabilize, and is awaiting the return of a 135-MW PCPC facility.

The plant is targeted to be synchronized with the grid between 10 p.m. and 12 midnight on Jan. 4.

Citing an initial report, Ms. Dimalanta said equipment failure at PCPC caused the plant to trip. Operators are waiting for the unit to cool down before it can be restarted.

MORE Electric and Power Corp., the sole electric distribution utility in Iloilo City, has been affected by the power disruption, as well as seven electric cooperatives on the island.

As of 2:30 p.m. on Thursday, almost 50% of MORE’s customers were still not receiving power, it said. The company has imposed rotational outages every three hours due to the insufficient power supply.

“We need to investigate this further because it is impossible that all plants just decided to go offline all at the same time, or that they all failed on their own at the same time,” Ms. Dimalanta said.

“There must be something that led to those serial consequences among the generation plants,” she added.

Ms. Dimalanta said there should have been systems in place to prevent such occurrences.

She said that NGCP can direct distribution utilities to drop load to reduce demand to the level of available supply, thereby stabilizing the system.

“The system operator also controls the dispatch of plants so it could have initiated measures also on that end,” she said.

“We are reviewing whether these measures were undertaken and whether they were enough, or if anything else can be improved,” she added.

The NGCP has said that load restoration will be done “conservatively, by matching loads to restored generation, to prevent repeated voltage failure.”

“The people must understand that we can only transmit power, we do not generate power,” it said in a statement on Wednesday.

Legislators have called on the NGCP and the Department of Energy (DoE) to look into the Western Visayas outages.

“The DoE and the NGCP must understand the gravity of this situation and act decisively to resolve it,” Senate President Juan Miguel F. Zubiri said in a statement. “They should get their acts together immediately.”

He said constant power interruptions hamper the livelihoods and the delivery of basic services to the region’s citizens.

Mr. Zubiri called on the DoE and NGCP to be transparent in implementing measures to address the outages.

Party-list Rep. France L. Castro called on the NGCP to take accountability for the blackouts that have left some parts of Panay without electricity since Jan. 2.

In a statement, she also called on MORE Electric and Power Corp., which supplies power to Iloilo City, to improve its coordination with the electric system grid operators.

“Does (MORE Power) even have a system to help protect the grid from collapsing, like a load dropping mechanism?” Ms. Castro said.

Senate Majority Floor Leader Joel J. Villanueva said the government needs a short-term and long-term strategy for dealing with power disruptions, include ensuring that power plants are properly maintained.

“We also need to continue exploring other sources of renewable energy such as wind and solar to keep up with the DoE’s goal of a power generation mix target of 35% by 2030,” he said in a statement.

Citing DoE data, Mr. Villanueva said about half of the power plants in the Philippines are at least 20 years old.

“The situation is no longer tolerable, and the DoE and the NGCP must urgently address this issue before irreparable damage is done to our communities,” Mr. Zubiri said. — Sheldeen Joy Talavera and John Victor D. Ordoñez

THE PHILIPPINES imported 3.48 million metric tons (MT) of rice in 2023 as of late December, according to the Bureau of Plant Industry (BPI).

Rice imports in December up to the 28^th of the month totaled 387.21 thousand MT, up 29.19% from a year earlier.

The Department of Agriculture (DA) said for the entirety of 2023, imports are expected to total 3.65 million MT, or below the 3.8 million MT projected by the US Department of Agriculture.

The DA has said that about 500,000 MT of rice are expected to arrive in December and January as the government seeks to build reserves for the peak of El Niño.

El Niño is expected to intensify between January and May, affecting about 63 provinces with droughts and dry spells, according to the government weather service, known as PAGASA (Philippine Atmospheric, Geophysical and Astronomical Services Administration).

The BPI reported that Vietnam remained the Philippines’ top supplier of rice with 84.27% of total imports. Shipments from Vietnam are expected to hit 2.94 million MT.

Thailand supplied 297.2 thousand MT and Myanmar 143.92 thousand MT.

The DA said that 75 thousand MT of rice was set to arrive from India by early January, part of a 295,00 MT rice allocation India granted the Philippines in October.

The Indian government issued the quota for non-basmati white rice to the Philippines. It had earlier banned all exports of non-basmati white rice to stabilize its domestic supply.

Arrivals from India have amounted to 13,758 MT, as of Dec. 28.

Meanwhile, the BPI has issued 824 sanitary and phytosanitary import clearances (SPSICs) for December covering the import of about 660.01 thousand MT of rice.

Agriculture Secretary Francisco Tiu Laurel, Jr. said he has instructed traders to use up their SPSICs for an additional 1 million MT of rice. The DA has imposed a 30-day deadline for traders to use their permits. — Adrian H. Halili

AGRICULTURAL EXPORT growth will continue to be constrained by limited output and funding to develop the high-value crop sector, farmers said.

“Our problem with exports goes back to our problems in producing high-quality and competitively priced products on a consistent and sustainable basis, and in a way that is profitable for our farmers and market players,” Federation of Free Farmers National Manager Raul Q. Montemayor said in a Viber message.

Former Agriculture Undersecretary Fermin D. Adriano blamed the lack of funds allocated for high-value crops, as against the attention paid to rice production.

The Department of Agriculture (DA) has set aside about P31 billion in 2024 to improve rice production.

“For as long as research and development and extension services receive a pittance, and the DA does not properly play its role of training our agri-exporters on (sanitary and phytosanitary) standards of the various rich importing countries, export growth potential will be constrained,” Mr. Adriano said in a Viber message.

The DA has announced the preparation of a Philippine Agricultural Export Development Plan to increase exports of agriculture and fisheries products.

“Despite all the supposed concessions we gained from trade negotiations, our agricultural trade deficit has continued to increase, especially since our competitors are racing far ahead of us,” Mr. Montemayor added.

Agricultural exports declined 13.3% to $1.61 billion during the third quarter, accounting for 8.2% of total exports, according to the Philippine Statistics Authority.

The leading exports were edible fruit and nuts as well as peel of citrus fruit and melons, valued at $492.09 million, or 30.5% of the total.

He said that the DA needs to identify products to focus on for export while setting up a support system covering the process from production to domestic and international markets.

“Malaking trabaho (It’s a big job) but there are many success stories, which we just need to promote and expand,” Mr. Montemayor added.

Meanwhile, Roy S. Kempis, a retired Pampanga State Agricultural University professor, said that agriculture products like mango, avocado, and durian are on demand in global markets but can benefit from further support.

“Philippine mango is preferred for its sweetness, texture and appropriate amount of fiber both in the export and domestic markets,” Mr. Kempis said in a Viber message, citing the potential for expanding the crop.

He added that the government could increase farmland dedicated to avocado and durian.

Mr. Kempis said technical and management training is needed by producers and exporters.

He said increasing the planting area, improving pest management and irrigation systems, and building community processing areas, will support the growth of such exportable crops, as will more access to credit.

“Exporting and financial literacy are two other areas that agriculture and food producers and exporters could be trained in,” he added.

THE Philippine Chamber of Commerce and Industry (PCCI) said that 2024 could be a better year for business as the government and private sector seek to address ease of doing business (EoDB), power, and upskilling issues.

“With all these efforts… and all those good individuals who were recently appointed to help us address the issues (of) EoDB, power and upskilling and reskilling of our labor, we are optimistic that 2024 will be a better year,” said PCCI President Enunina Mangio in a television interview.

She said foreign business organizations’ own forecasts are signaling that the Philippines could be the fastest growing economy in Southeast Asia.

“PCCI assumes that this growth will be driven by resilient domestic consumption, increased government spending, infrastructure projects and a gradual recovery in some sectors. We see the economy gradually and moderately growing,” she added.

She cited the need to strengthen its foreign relations and work on achieving remittance targets from overseas Filipino workers.

The reliance on remittances “is why reskilling of our laborers is very important,” she added.

Ms. Mangio said that the PCCI recognizes that the business sector has the responsibility to help the government in reviving the economy.

“That is why we are taking a more proactive role in helping the national and local governments champion initiatives that will make our enterprises more competitive and our important sectors more attractive to local and foreign investors,” she said. — Justine Irish D. Tabile

THE Foundation for Economic Freedom, Inc. (FEF) is proposing amending the Constitution’s economic provisions to allow 100% foreign ownership of land, utilities, educational institutions, and mass media.

“We believe that the removal of restrictive economic provisions sends a clear and compelling message to foreign investors, signaling a warm welcome to investment and business operations in the Philippines,” the FEF said in a statement on Thursday.

“The restrictions in the 1987 Constitution serve as constraints to developing areas of the economy where the Philippines has great promise such as mass media and renewable energy. The existing constitutional restrictions limit investments that we need to develop our creative industries,” it added.

The FEF proposed to amend the following sections of the Constitution to allow 100% foreign ownership: Section 2, Article XII (National Patrimony and Economy); Section 3, Article XII (National Economy and Patrimony); Section 7, Article XII (National Patrimony and Economy); Section 10, Article XII (National Patrimony and Economy); Section 11, Article XII (National Patrimony and Economy); Section 4, Article XIV (Education, Science and Technology, Arts, Culture, and Sports); and Section 11, Article XVI (General Provisions).

The FEF also proposed the following amendments to the Filipino First provisions of the Constitution:

Section 19, Article II (Declaration of Principles and State Policies): From “The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos” to “The State shall develop a self-reliant and independent national economy for the benefit of all Filipinos.”

Section 10, Article XII (National Economy and Patrimony): From “…In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos…” to “…in the grants of rights privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified investors.”

Removing such restrictions in the Constitution could help policymakers respond more effectively to both global and domestic economic changes, the FEF said.

Congress may still install safety nets within the constitution to ensure economic and social development, it added.

“We strongly emphasize that constitutional amendments should be limited exclusively to economic provisions. This focused approach reduces the risk of political controversy and division, ensuring the swift passage of crucial amendments to the economic provisions of the Constitution,” the FEF said.

However, the FEF noted that amending the constitution alone won’t sufficiently attract foreign investors as the government still needs to improve on upholding the rule of law, improving infrastructure, and ensuring ease of doing business.

Policy analyst and lawyer Michael Henry L. Yusingco said allowing 100% foreign ownership is not expected to boost foreign direct investments (FDI) significantly.

“But if we also fix our power issues, labor productivity issues, and transportation issues, then the amendment of the economic provisions can lead to a boost in FDI specifically in the sectors concerned like education, mass media and power generation,” he said via messenger.

“To boost our FDI, we also need to solve basic problems like power costs, labor costs and other costs of doing business,” he added.

Meanwhile, University of the Philippines-Los Baños Economics Senior Lecturer Enrico P. Villanueva said there is a risk politicians will take advantage of the amendment process to advance their interests.

“Government should focus its energies and resources instead on making the domestic business climate attractive. Costs of doing business should be lower (energy, transport, fees, bureaucracy, etc.), he said in a social media message.

Mr. Villanueva noted that the definition of public services was eased under the Duterte administration to attract foreign investors, but FDI did not increase significantly.

Mr. Yusingco also cited the Retail Trade Liberalization Act and the New Public Service Act as instances of the government seeking to remove obstacles to foreign ownership. — Aaron Michael C. Sy

THE Department of Trade and Industry (DTI) and e-commerce site Shopee have entered a partnership to feature halal food sellers on the platform.

“This initiative aims to support micro, small, and medium enterprises (MSMEs) and make halal products accessible online for sellers and consumers,” Shopee said in a statement.

“It also helps Shopee’s goals to empower niche businesses to grow their online presence and broaden their market,” it added.

Under the partnership, Shopee will train potential sellers on selling on the e-commerce platform.

Shopee’s onboarding sessions will cover product listing guidelines, user interface navigation, and taking advantage of business insights generated from sales data.

“Our collaboration with the DTI to onboard halal food sellers aligns with our commitment to supporting MSMEs and providing diverse options for our users,” according to Vincent Lee, head of Shopee Philippines.

The DTI’s National Halal Strategy is counting on P230 billion in investment from the industry while generating 120,000 jobs over the next five years. The industry as defined in the plan encompasses halal-friendly travel and tourism, and halal fashion, pharmaceuticals and cosmetics.

The National Halal Strategy assumes a global halal ecosystem with a market value of $7.7 trillion by 2025. — Justine Irish D. Tabile

THE National Grid Corp. of the Philippines (NGCP) has called for improved energy resource planning following the outages on Tuesday at multiple power plants on Panay Island.

“The unscheduled maintenance shutdowns of the largest power plants in Panay Island were the primary cause of the power interruption. We emphasize the need for improved planning to ensure sufficient generation per island, with a well-balanced mix of fuels and technology,” NGCP said in a statement on Wednesday.

On Tuesday, the NGCP issued a yellow alert for the Visayas grid after multiple power plants tripped, including units of Panay Energy Development Corp. and Palm Concepcion Power Corp. (PCPC).

Due to the plant outages, some 452 megawatts (MW) were unavailable to the grid.

As of 5 p.m. on Wednesday, about 203 MW of power is being produced on Panay, augmented by 24.6 MW from “sources elsewhere in the Visayas.”

“We reiterate that load restoration will be done conservatively, by matching loads to restored generation, to prevent repeated voltage failure. NGCP is ready to transmit power once it is available,” the grid operator said.

The Visayas grid needs about 300 MW to stabilize and is awaiting a PCPC facility, which has a 135-MW capacity, to synchronize back onto the grid.

In a statement, the Department of Energy (DoE) reminded the NGCP to “adhere to its responsibilities as system operator in ensuring supply security and reliability of the grid.”

“NGCP is in a position to anticipate system disturbance such as what happened yesterday, which unfortunately resulted in the isolation of Panay from the rest of the Visayas grid due to the simultaneous tripping of power plants that caused multiple power interruption affecting other power plants and distribution utilities (DUs),” Energy Undersecretary Rowena Cristina L. Guevara said.

Meanwhile, the Energy Regulatory Commission (ERC) said it requested additional data from the NGCP and the generation companies to assist in its review of the incidents.

“The ERC understands the inconvenience this situation has caused to the consumers of Panay, and we assure the public that every effort is being made to restore power as quickly as possible,” ERC Chairman Monalisa C. Dimalanta said.

Overall, the plant outage has affected a distribution utility and seven electric cooperatives, according to the NGCP.

These are MORE Electric and Power Corp., Guimaras Electric Cooperative, Inc., Iloilo Electric Cooperative, Inc. (ILECO I), ILECO II, ILECO III, Capiz Electric Cooperative, Inc., Antique Electric Cooperative, Inc., Aklan Electric Cooperative, Inc., and Guimaras Electric Cooperative, Inc. — Sheldeen Joy Talavera

THE pilot stage of the market for reserve power has been launched, with full commercial operations targeted for later in the month, the Independent Electricity Market Operator of the Philippines (IEMOP) said.

In a statement on Wednesday, the IEMOP said pilot operations began on Dec. 26, 2023.

The pilot stage will allow the optimization of the market operator and system operator interfaces and automated real-time dispatch of committed ancillary services (AS). AS contracts are entered into in order to ensure that the grid will have sufficient power should supply be disrupted unexpectedly.

The pilot stage will trial central scheduling and dispatch of contracted ancillary services using enhanced systems of the market operator and system operator, or the National Grid Corp. of the Philippines.

IEMOP operates the Wholesale Electricity Spot Market (WESM), the trading floor for electricity.

With the set integration of the reserve market for AS power into the WESM on Jan. 26, the system operator will be able to procure reserves from the spot market to meet the reserve requirements of the system.

The IEMOP said that the reserve market provides a venue for generators to offer reserve capacities competitively. “These reserve offers are co-optimized with energy offers to determine the best mix of energy and reserve supply that will result in the most competitive prices for electricity.”

“Ultimately, the co-optimization of the scheduling of reserves and energy has the objective of reducing the overall cost of both energy and reserves,” the IEMOP said.

“The operation of the Reserve Market in the Philippine WESM is a testament to our shared commitment to the growth of the Philippine Energy Sector; a growth that ensures reliability, embraces innovation, and promotes competition, all leading to transparency and reasonableness of our power rates,” Energy Regulatory Commission (ERC) Chairperson Monalisa C. Dimalanta said.

Asked to comment, Bienvenido S. Oplas, Jr., president of Minimal Government Thinkers said that the reserve market will expand power supply by encouraging generation companies (gencos) to build more power plants.

“Most of new generation capacity will be contracted by DUs (distribution utilities), RES (retail electricity suppliers) and ECs (electric cooperatives). But some generation capacity will be for reserves by the system operator or embedded with DUs themselves,” Mr. Oplas said in a Viber message.

“The market for new capacity has expanded so more gencos will be encouraged to put up more new power plants,” he added.

In an advisory last week, the Department of Energy said that the WESM Governance Arm has yet to issue a certification on the completeness of the preparations.

The software certification by the independent auditor is still pending while the ERC is still reviewing the simulation results for additional constraints submitted by the IEMOP for the approval of the price determination methodology. 

Meanwhile, the Philippine Electricity Market Corp. (PEMC) said in a statement that it will assess and monitor the co-optimized market once fully operational to ensure the delivery of its commitment and intent of the enhanced WESM design.

“Our commitment to fulfill PEMC’s responsibility to facilitate the readiness certification for the full commercial operations of the co-optimized Energy and Reserve Market have remained steadfast,” PEMC President Elvin Hayes E. Nidea said. — Sheldeen Joy Talavera

THE Department of Agriculture (DA) said it is seeking to expand agricultural and fisheries exports and has set into motion the drafting of the Philippine Agricultural Export Development Plan (PAEDP).

According to a special order signed by Agriculture Secretary Francisco Tiu Laurel, Jr., the DA will create a national steering committee and technical working group to prepare the plan.

The DA said the national steering committee will set the policy direction that the plan will then flesh out.

It added that a technical working group will help create the mechanisms to facilitate exports and ensure that activities and programs are aligned with the Philippine Export Development Plan (2023-2028).

“Member agencies shall create their respective core group that will (assist in) the creation of the PAEDP and provide technical assistance on matters related to export development,” the DA said.

The DA added that the technical working group will seek to identify priority commodities with the strongest export potential.

The steering committee will be headed by Mr. Laurel with all DA undersecretaries as members, while Assistant Secretary for Policy Research and Development Noel A. Padre will head the technical working group.

Agricultural exports declined 13.3% to $1.61 billion during the third quarter of 2023, accounting for 8.2% of total exports, according to the Philippine Statistics Authority.

Leading exports were edible fruit and nuts as well as peel of citrus fruit melons, valued at $492.09 million or 30.5% of the total.

Among the top five exported commodities were animal and vegetable fats; preparations of vegetables, fruit, nuts or other parts of plants; tobacco and manufactured substitutes; and preparations of meat of fish, crustacean, mollusks and other aquatic invertebrates.

President Ferdinand R. Marcos, Jr. has said that the government is focusing on increasing exports of agricultural products to make the economy more competitive. — Adrian H. Halili

THE Anti-Red Tape Authority (ARTA) said only 19 local government units (LGUs) out of 1,637 are fully compliant with the electronic business one-stop shop (eBOSS) requirement of the Ease of Doing Business (EODB) law.

“Out of 1,637 LGUs, 630 have reported that they are now (implementing the law). But validation by the ARTA Compliance Monitoring and Evaluation Office showed that only 19 LGUs are fully compliant, which means that they are fully automated, while 611 LGUs are only partially automated,” ARTA Secretary Ernesto Perez said in an interview with government network PTV.

“We are continuously doing our compliance audit together with the Department of Interior and Local Government (DILG) and Department of Information and Communications Technology (DICT),” he added.

eBOSS is one of the flagship programs of ARTA. It aims to streamline procedures for applications and issuance of local business licenses and permits via a single digital portal accessible on demand.

Mr. Perez said the President has tasked ARTA and other government agencies to implement a nationwide rollout of the eBOSS platform to help non-compliant LGUs.

“President Marcos himself ordered us together with the Presidential Management Staff, DILG and DICT to hold a nationwide rollout tentatively in the last week of January,” he said.

Mr. Perez said that ARTA will be helping the LGUs by donating hardware and providing technical assistance.

“This is so our LGUs will not have any reason to not comply with the requirements,” he added.

Aside from eBOSS, ARTA also wants to hasten the issuance of permits and licenses for telecommunications towers.

“Through this, more than 36,000 permits have been issued just for one year of implementation,” Mr. Perez said.

ARTA, through its Compliance Monitoring and Evaluation Office, is also implementing Report Card Surveys which evaluate the compliance of covered agencies and LGUs with the requirements of the EoDB law.

“Based on our report, 94.72% of the covered agencies have submitted their updated citizen’s charter,” he said. — Justine Irish D. Tabile

Budget Secretary Amenah F. Pangandaman in a statement on Wednesday said the issuance of Special Allotment Release Orders will support efforts to enhance the healthcare system.

“President Ferdinand R. Marcos, Jr. has always said no Filipino should be deprived of quality healthcare. That’s why we continuously give high regard to our healthcare facilities, more importantly, our specialty hospitals like NKTI,” Ms. Pangandaman said.

The funds will finance the construction and expansion of an eight-storey OPD building for NKTI, the DBM said.

The building is designed to house services like diagnostic and surgical facilities, it added.

The proposed building will help the NKTI achieve its mission of treating and preventing kidney and allied diseases, the DBM said.

The OPD building will ultimately cost P1.331 billion, the DBM noted. — Aaron Michael C. Sy

The Bureau of Internal Revenue (BIR) has recognize the need to adapt to take advantage of fast-evolving technology to ensure it collects its rightful share of taxes from the digital economy. To do this, it has mapped out a 10-year digital roadmap. The roadmap incorporates the tools necessary to maximize resources at the BIR and ensure maximum value for the organization. It is anchored on three principles — (i) adopting a people-first approach; (ii) instituting a process perspective; and (iii) embracing digital technology, with the digital transformation mindset as its foundation. In addition, the roadmap consists of various digitalization projects that would modernize and digitalize tax administration, consistent with the objectives of Republic Act No. 11032, or the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, to reduce red tape. As it applies to the BIR, the law means making tax compliance more convenient for taxpayers.

One of the notable projects under the BIR’s Digital Transformation initiative is the launch of the Online Registration and Update System (ORUS), a web-based system that provides an end-to-end process for registering taxpayers and updating their information. With the implementation of ORUS, taxpayers may skip the long queues and register and update their information with the BIR from the comfort of their homes.

Under Executive Order No. 98, series of 1999, all persons whether natural or juridical, dealing with all government agencies and instrumentalities, are required to provide their tax identification numbers (TIN) on all forms, permits, licenses, clearances, official papers and documents which they secure from and file with government agencies. This directive was issued as TINs are essential for our tax authorities to trace taxable transactions of persons and monitor their tax compliance.

In line with the Executive Order, BIR Revenue Regulations No. 7-2012 directs non-resident aliens not engaged in trade or business in the Philippines or non-resident foreign corporations to obtain TINs for the purpose of withholding taxes on their income from sources in the Philippines. The withholding agent is required to apply for the TIN on their behalf prior to or at the time of the filing of their withholding tax returns.

Moreover, Securities and Exchange Commission (SEC) Memorandum Circular No. 1, series of 2013, requires the inclusion of TINs of foreign investors (natural and juridical persons) in all forms, papers and documents filed with the SEC. In this regard, corporations filing their general information sheets (GIS) with the SEC are required to first secure TINs for their investors and stockholders, whether natural or juridical persons. If the TIN is missing, the SEC is to return the GIS.

With the launch of ORUS and the issuance of BIR Revenue Memorandum Circular (RMC) No. 120-2023, Filipino citizens and foreign nationals may now apply for TIN online without lining up at their respective Revenue District Offices (RDOs) and physically submitting hard copies of their application documents. Individuals and corporations may create an account in ORUS by filling out the necessary information and uploading the relevant documents in order to secure their TINs. Although the TIN application is now done online, the documentary requirements are still the same as in the previous practice (physical filing).

RMC 120-2023 is the BIR’s announcement of the availability of digital TINs through ORUS. With this new feature, individual taxpayers may secure their digital TIN identification document (ID) through the website starting Nov. 21, 2023, by creating an account and registering as a taxpayer. Those with previously issued TINs, whether or not they have been issued a physical TIN ID, may also still register with ORUS. It is worth noting that taxpayers who will be applying for a digital TIN ID are required to update their e-mail address at the RDO where they are registered by accomplishing and submitting BIR Form S1905 (Registration Update Sheet) via e-mail to their respective RDOs or through BIR’s eServices — Taxpayer Registration Related Application portal. Should there be any changes or updates that must be made after securing the digital TIN ID, taxpayers may re-generate their ID through the same website after 30 days from the first or last digital TIN ID generation, whichever is applicable.

Digital TIN IDs are to be honored and accepted as a valid government-issued ID for taxpayers to transact with government agencies and institutions, local government units, employers, banks, financial institutions and other relying parties. While digital TIN IDs do not have signatures, the authenticity of this ID may quickly be verified through ORUS as well by scanning the Quick Response (QR) code that may be found on the digital ID.

We have seen a number of the BIR’s Digital Transformation projects go live, making tax administration more efficient. Taxpayers remain hopeful that the BIR launches the remaining Digital Transformation projects to make tax compliance more convenient.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.

Jerimae Celine N. Galope is a senior associate at the Tax Services department of Isla Lipana & Co., the Philippine member firm of PricewaterhouseCoopers global network.

jerimae.celine.n.galope@pwc.com

THE PHILIPPINES logged 5.45 million international visitors in 2023, beating the 4.8 million target, the Department of Tourism (DoT) said on Tuesday.

“From Jan. 1 to Dec. 31, 2023… 91.8% or the bulk of international arrivals recorded at 5,003,475 were foreigners. The remaining 8.2% or 447,082 are overseas Filipinos,” the DoT said in a statement.

The 2023 total more than doubled the 2.6 million reported a year prior.

South Korea remained the top source of foreign arrivals during the year, accounting for 1.44 million tourists or 26.41% of the total.

Also in the top five were the US with 903,299 tourists (16.57%), Japan 305,580 (5.61%), Australia 266,551 (4.89%), and China 263,836 (4.84 %).

“Other foreigners who visited the country from other top source markets after China were from Canada, Taiwan, the UK, Singapore, and Malaysia,” it added.

The DoT said that total international tourism receipts for the year amounted to P482.54 billion. This was more than double the P214.58 billion from a year earlier.

It added that the Philippines was at about 66% of the pre-pandemic arrivals record posted in 2019.

International arrivals in 2019 amounted to 8.26 million, generating P482.15 billion in receipts, according to the DoT.

“We have set our goals for the industry not only in terms of international visitor arrivals but most importantly, the number of Filipinos, including their families, who will benefit from the opportunities generated by our efforts to make the industry prosper,” Tourism Secretary Maria Esperanza Christina G. Frasco said.

“We are poised for a thriving tourism landscape, evident in surpassing our targets in international and domestic arrivals and receipts, fostering economic prosperity and further job creation for our people,” she said.

The DoT is targeting 7.7 million international visitors for 2024. — Adrian H. Halili

THE Department of Energy (DoE) said registration for the lifeline rate program has been hindered by the practice of several households sharing power meters, making consumption by eligible users difficult to track.

Luningning G. Baltazar, director of the DoE’s Electric Power Industry Management Bureau, said users who would otherwise qualify for the lifeline rate cannot register because their homes did not have a dedicated meter.

“We will look into how we can address this issue,” Ms. Baltazar told government television network on Tuesday.

She added that registering as a group of households would bring many poor users above the lifeline consumption threshold, making them ineligible for subsidized power rates.

“We still encourage them to register since we are still studying the question of what would be the appropriate threshold,” she said.

The lifeline rate applies to users with a monthly power consumption of 100 kilowatt-hours or less. Under the revised rules, customers living in condominiums, subdivisions, and those with net-metering services do not qualify for the lifeline rate even if their consumption falls below the threshold.

Also, eligible for lifeline rates are beneficiaries of the Pantawid Pamilyang Pilipino Program (4Ps) and qualified marginalized end-user applicants who are not 4Ps beneficiaries but belong to a household of at least five members in which the combined monthly income is no more than P12,030.

Citing ERC data, Ms. Baltazar said that about 191,399 4Ps members were registered for the program as of Dec. 15. However, she said that the full list of 4Ps members is about 4.2 million, according to the Department of Social Welfare and Development.

The ERC said in an advisory last week that the full implementation of the program starts on Jan. 1.

“We will continue to do the lifeline caravan, information campaign so that many will be aware of the program,” Ms. Baltazar said. — Sheldeen Joy Talavera

THE Board of Investments (BoI) said on Tuesday that it will support a biofertilizer company in its capacity expansion by helping to promote the expanded use of its products and encouraging investment to develop the industry.

“Encouraging potential technology adaptors to invest in this industry, the BoI and other stakeholders aim to strengthen the information dissemination and education campaign for farmers to facilitate the shift from traditional fertilizer to biofertilizer,” the BoI said in a statement.

The BoI added that it will support the commercialization of the Bio-N fertilizer product which promises to raise crop yields by 11%.

The BoI said the campaign will be undertaken in collaboration with Laguna-based AgriSpecialist, Inc. (ASI), a Laguna company.

“Both BoI and AgriSpecialist agreed (on the importance of) having an industrialization partner from the beginning of the research and development process,” it added.

ASI President Mario Labadan, Jr. said farmers should be made aware of the advantages of using biofertilizer, which will be a domestically produced product.

According to the BoI, about five to six 200-gram sachets of the biofertilizer product can replace two 50-kilogram bags of urea per hectare planted to rice. The product has the potential to save producers about P10,000 per hectare.

ASI said that it aims to become the first commercial-scale manufacturer of biofertilizer.

Expansion plans for its Laguna plant will result in sufficient capacity to supply “100% of the country’s biofertilizer requirement for the lands planted to rice and corn.” — Adrian H. Halili

INCREASING the coconut content of the biodiesel blend will have a minimal impact on price but may also improve vehicle mileage, producing net savings, a coco biodiesel producer said.

“More significant will the mileage improvement expected with B3. Because mileage can improve by 5-15% the net savings can be rather significant in peso terms,” Jun Lao, president of Chemrez Technologies, Inc., told BusinessWorld in a Viber message. B3 refers to biofuel with 3% coconut content.

On its website, Chemrez — a subsidiary of publicly listed D&L Industries, Inc. — operates the country’s first continuous-process biodiesel plant.

In a draft circular, the Department of Energy is proposing to implement an increase in the coconut methyl ester (CME) blend to 3% (B3) starting July 1, from the current B2.

It also proposed to raise the biodiesel blend to 4%, effective July 1, 2025, and to 5% on July 1, 2026.

The Biofuels Act of 2006 requires that all liquid fuels contain domestically sourced biofuel components.

“If the price of CME is lower than diesel, the blend will make the pump price lower. Depending on the prevailing prices prior to the effectivity of B3, it can also go the other way.  Either way the price difference of B2 and B3 will be minimal,” Mr. Lao said.

A combustion engine operating at a given efficiency and fuel quality can produce incomplete combustion, he said, with inefficient engines producing black smoke from the exhaust system.

“You can improve combustion by overhauling the engine and using better quality fuel. CME does the latter,” Mr. Lao said.

“CME improves the fuel quality, so it burns more completely. There is more power and less black smoke. That means the car engine will perform better by delivering better mileage,” he added.

He said a car performing at 10 kilometers per liter (kms/liter) will soon achieve 11 kms/liter when B3 takes effect, effectively bringing down the cost of fuel by 10%, Mr. Lao said.

“So I expect the cost of transport to drop with B3 implementation. Along with that is the cleaner emission from cars. Then a massive reduction in CO2 (carbon dioxide) from land transport,” he said. — Sheldeen Joy Talavera

In a statement, the NGCP said it issued a yellow alert over the Visayas grid for between 4 p.m. and 10 p.m.

“Restoration of affected plants is ongoing. While NGCP did not implement manual load dropping, distribution utilities may implement load drops due to voltage-sensitive loads or manual disconnection to secure voltage levels,” the NGCP said.

According to the grid operator, multiple plants tripped starting with the power plant unit 1 of the Panay Energy Development Corp. (PEDC) as of 12:06 p.m.

This outage was followed by PEDC Unit 2, the tripping of the power plant of Palm Concepcion Power Corp., and “other plants” in Panay Island.

About 302 megawatts (MW) was lost to the power grid, in addition to 150 MW from the planned maintenance shutdown of PEDC Unit 3.

“In total, 452 MW is unavailable. Currently, none of the power plants in Panay Island is generating power,” the NGCP said.

It has yet to disclose the cause of the power plant outages.

“NGCP is focusing its efforts on stabilizing voltage, and has extended feedback power to Iloilo and PEDC,” the grid operator said. “Load restoration will be done conservatively, by matching loads to restored generation, to prevent repeated voltage failure.”

The Negros-Panay interconnection was restored at 3:24 p.m. after a brief trip at 3:07 p.m.

Meanwhile, the Department of Energy (DoE) said in a statement that it is closely coordinating with the NGCP and all affected generation plants and distribution utilities.

“We assure the public that power restoration is a priority,” the DoE said.

The Energy Regulatory Commission is investigating the incident, according to the Energy department. — Sheldeen Joy Talavera

THE Department of Agriculture (DA) said it hopes to expand the beekeeping industry, citing the prospect of new export markets.

Agriculture Undersecretary Deogracias Victor B. Savellano said the DA will explore funding for the expansion to be overseen by the Bureau of Animal Industry.

“Beekeeping is a high-value farm sector. It has export potential given an organized national program to develop it,” Mr. Savellano added.

He said Philippine honeybee breeds are easy to raise, setting the stage for a significant expansion.

“The program offers huge opportunities as income earners for farmers. Honey has medicinal and pharmaceutical properties,” he added.

The DA said it plans to accredit bee suppliers to develop the industry, as a measure to reduce the smuggling of queen bees.

“Queen bee smuggling has been destroying our domestic industry,” he said.

The DA added that apiculture products include antibacterial soap, massage oil, lip balm, and shampoo.

“Philippine bee products have reportedly been reaching prominent export markets,” it said.

The DA has also partnered with the University of the Philippines-Los Baños (UPLB) to develop a roadmap for developing export markets and a community-based beekeeping program.

“UPLB has been developing technologies using native bees, particularly stingless bees, in order to raise crop yields and sustain biodiversity,” the DA said.

The project has benefited communities of Lanao del Norte and indigenous Mangyan in Victoria, Occidental Mindoro.

It added that bee farms are also being developed as agriculture tourism sites.

“One of the sites is the Balay Buhay sa Uma Bee Farm in Bulusan, Sorsogon. It is accredited by the Department of Tourism,” it said.

Additionally, the program is also set to establish a Food and Drug Administration-accredited bee facility for testing product quality. — Adrian H. Halili

MINERS are expected to perform well in 2024 due to increased demand for transition minerals used by the renewable energy industry, mining officials said.

“The government is pushing for local mineral processing of energy transition metals such as nickel and copper and the Philippine metallic mining industry would like to participate and take advantage of opportunities presented by this development,” Michael T. Toledo, chairman of the Chamber of Mines of the Philippines (CoMP), said in a Viber message.

Environment Secretary Maria Antonia Yulo-Loyzaga has said that the Department of Environment and Natural Resources (DENR) will encourage exploration for critical minerals this year, with the Mines and Geosciences Bureau (MGB) instructed to gear up for enabling projects undertaken with foreign mining partners.

Nickel, cobalt, and copper are deemed essential for the production of electric vehicles (EVs), the large-scale batteries which power them, and also wind and solar farms.

“A lot still needs to be done but we believe the signposts show we are on a course that is likely to result in success,” Mr. Toledo added.

The Philippine Nickel Industry Association (PNIA) said the industry is pushing for the government to fast-track the approval of mining permits by establishing a “one-stop shop” application process.

According to the PNIA, the streamlining of approvals will attract more investment in mining.

About 470 applications are currently awaiting approval. They are proposing to explore for copper, chromite, nickel, and cobalt, according to the MGB.

Phase 1 of the MGB’s priority list consists of metallic mines, with about 12 projects expected to start operations in the next six months.

“If realized, this (encourages) upbeat expectations for the production and export of more of these goods, given the high level of global demand,” the MGB said in its metallic production report.

These operations are a magnetite sand (Iron) site in Region 2, nickel laterite in Region 3, gold in Region 5, four nickel, copper and gold sites in Region 11, and five nickel, copper and gold sites in Caraga.

CoMP said metals prices would mainly depend on the recovery of China’s economy, a major user of Philippine minerals.

“Traders are cautious of the incoming year, considering the weaker Chinese economy and significantly cheaper nickel pig iron (NPI) from Indonesia,” Mr. Toledo said.

He added that the mining industry expects Indonesia to keep up its NPI output.

NPI is low-grade ferronickel, which serves as a cheaper alternative to higher-grade nickel used in stainless steel production.

“We don’t know when China’s economy will improve. Most developed countries are challenged at this time,” he said.

PNIA has said that nickel production this year will likely remain flat due to the limited capacity in ore-supplying regions.

The MGB said however that due to domestic nickel supply concerns in Indonesia, Chinese demand for nickel ore from the Philippines will rise.

It added that Indonesia has become a new export market for nickel ore. The Philippines has exported about 102,100.72 dry metric tons of nickel ore to Indonesia amounting to P171.37 million during the nine months to September.

Mr. Toledo said that the industry is optimistic that the Philippines can service global copper demand.

However, he said that in the absence of new copper mining operations in the next five years, “there could be a supply deficit that would drive prices upward.”

“In the next few years, we believe the Philippine copper sector can keep up with the demand for this metal as an input for renewable energy technologies,” he said.

“As the global demand for critical minerals for the energy transition intensifies, however, there are concerns on whether copper from Philippine mines can keep up,” he added.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the demand for raw materials from the renewable energy industry is expected to grow in the coming years.

“There will still be a large shift towards renewable and towards electric vehicles for the coming years amid the need for more sustainable source of energy and the need to reduce carbon emissions,” Mr. Ricafort said in a Viber message.

Mr. Ricafort added that a decline in global interest rates could also drive more investment towards minerals.

“Lower borrowing costs will encourage more investment and business activity, as well as the demand for minerals,” he said.

The Federal Reserve maintained its target rate in the 5.25%-5.5% range for a third straight meeting on Dec. 12-13.

The Bangko Sentral ng Pilipinas kept its key borrowing rate unchanged at 6.5% during its Dec. 15 meeting.

Regina Capital Development Corp. Head of Sales Luis A. Limlingan said metal prices will largely be influenced by the strength of the Chinese economy and its adoption of EVs.

“The Philippines will be able to take advantage, should responsible mining practices be put in place to allow further export of our precious minerals,” Mr. Limlingan said in a Viber message.

Prices for nickel ore declined to $10.39 per pound from $11.97 per pound the previous year.

“For nickel, attributing factors to growth during the period are the improvement of nickel ore prices and better loading conditions on account of good weather, particularly in the southern part of the country,” Mr. Toledo said.

The price of gold increased to $1,932.07 per troy ounce, while copper prices fell to $3.9 per pound from $4.12 a year earlier. Silver prices rose 7.32% to $23.55 per troy ounce.

“The low copper prices were offset also by good weather, which resulted in less production interruptions, as well as by the strong dollar-to-peso exchange rate,” he added.

“Ang strategy kasi ng PEZA is how we can diversify ’yung basket of eggs natin (PEZA’s strategy is how we can diversify our basket of eggs). It cannot be reliant on one country alone so we’re reaching out to non-traditional sources,” PEZA Director General Tereso O. Panga told reporters last week.

He added that PEZA will also seek to ride the wave of Middle Eastern countries making clean energy investments.

“That’s why we’re looking into the Middle East (which is) veering away from fossil-based investments, so they want to diversify. And it cannot be just for the Middle East,” Mr. Panga said.

The Philippines had recently allowed full foreign ownership of renewable energy (RE) projects, as authorized by the Department of Energy’s Circular No. 2022-11-0034.

This had triggered an increase in RE investment. Foreign ownership of renewable projects was previously limited to 40%.

Mr. Panga said that the “China plus one” approach taken by investors seeking to diversify their manufacturing sites will be the main driver for the growth of PEZA investments in 2024.

He added that PEZA is in continued talks with China-based investors. “That’s one way we can mitigate the impact and the ones coming here are also industry leaders in their own right.”

Last week, PEZA said it is likely to take in P170 billion in investment for 2023, which would exceed its P154.77-billion target. — Adrian H. Halili

“We have included the green energy option program” in the consumer-choice rules, Chiara Angela LB. Blanco, division chief of ERC’s Contestable Market Division, told reporters last week.

The Energy department is hoping to release the circular outlining the rules early this year, she said.

Ms. Blanco said that the proposed guidelines will cover all the rules under the Retail Competition and Open Access (RCOA), Retail Aggregation Program, and Green Energy Option Program (GEOP), which she said are “consumer choice programs.”

“All of those — eligibility, procedures, licensing, magna carta for the rights of the retail customers — so that we will have a sole reference for the retail market,” she said.

The timetable for the release of the omnibus rules was meant to align with the implementation of RCOA, Retail Aggregation Program, and GEOP in Mindanao, which was originally targeted for Dec. 26, 2023.

Qualified contestable customers, or end-users consuming at least 500 kilowatts (kW) a month, may choose their own power suppliers through the RCOA scheme, as stipulated in the Electric Power Industry Reform Act of 2001.

Under the aggregation program, two or more electricity end-users or all end-users within a contiguous area can be treated as a single contestable customer.

Meanwhile, GEOP allows users consuming at least 100 kW of power to source power from accredited retail energy suppliers which generate electricity from renewables.

The DoE seeks to establish a Wholesale Electricity Spot Market in Mindanao which will help facilitate the implementation of policy mechanisms that promote competition and consumer empowerment, which are currently available only in Luzon and the Visayas grid.

Ms. Blanco said input from focus group discussions has been taken into consideration in drafting the rules. — Sheldeen Joy Talavera

Preliminary data released by the BSP indicated that the international investment position (IIP) was a net external liability of $50 billion at the end of September, as against a net liability of $49.6 billion at the end of June. 

Year on year, the IIP was 62.1% wider against the net external liability of $30 billion a year earlier.

“This development was driven mainly by the 1% contraction in external financial assets, offsetting the 0.7% decline in external financial liabilities,” the BSP said in a statement.

The IIP is an indicator of the value and composition of a country’s financial assets and liabilities. It gauges an economy’s external exposure in financial assets and liabilities.

The central bank reported that external financial assets fell 1% to $227.9 billion at the end of September against $230.3 billion at the end of the previous quarter.

The BSP attributed the decline in financial assets to the combined decreases in reserve assets ($98.1 billion as of September from $99.4 billion as of June), portfolio investments ($32.5 billion from $33.5 billion), and other investments ($26.9 billion from $27.5 billion).  

“The lower level of reserves was attributed to the National Government’s payments of its foreign currency debt obligations, coupled with the downward adjustments in the valuation of the BSP’s foreign currency-denominated reserves (or non-gold reserves) and gold holdings,” the BSP said. 

“In addition, the residents’ net withdrawal of their investments in foreign debt securities, and net repayment of loans by nonresidents to the local banks also contributed to the lower total outstanding level of external financial assets during the review period,” it added.

Some 43% of the external financial assets are reserve assets held by the BSP. Other sectors held $92.6 billion (40.6%) during the same period, while banks kept $32.9 billion (14.4%).

Meanwhile, external financial liabilities fell 0.7% to $277.9 billion at the end of September compared with the end of June.

Residents’ outstanding foreign portfolio investments stood at $80.7 billion at the end of September, 5.2% lower from the previous quarter.

“This development emanated mainly from the decline in nonresidents’ net investments in equity securities (by 6.2%) and debt securities (by 4.5%) amid global slowdown and high interest rate environment, which weighed down on investment activity, coupled with downward valuation adjustments during the period,” the BSP said.

“This decline, however, was muted partly by the 3.8% growth in residents’ outstanding foreign loans to $67.2 billion from $64.7 billion,” the central bank added.

The BSP has hiked benchmark interest rates by 450 basis points from May 2022 to October 2023 to fight inflation. This has brought the key policy rate to 6.5%, the highest in 16 years.

Other sectors accounted for 60.9% or $169.3 billion of the country’s total external financial liabilities at the end of September. The rest were held by the National Government and banks, with financial liabilities worth $70.4 billion (25.3%) and $34.5 billion (12.4%), respectively.

The BSP held 1.4% of all external financial liabilities at $3.8 billion, which were mostly in the form of Special Drawing Rights. — Keisha B. Ta-asan

THE Bureau of the Treasury (BTr) has launched the National Insurance Indemnity Program (NIIP) to provide cover for “strategically important” government assets, starting with school buildings, the Department of Finance said.

“I commend the BTr for successfully implementing the NIIP. Safeguarding our national assets is crucial to ensure the safety and readiness of the projects delivered by this administration for the Filipino people. This is just one of the many immediate actions we are taking to bolster our country’s financial resilience. We are starting the year strong and well-prepared as we expect the realization of many more high-impact infrastructure projects under the leadership of President Ferdinand R. Marcos, Jr.,” Finance Secretary Benjamin E. Diokno said in a statement on Monday.

The NIIP aims to assist the government in financing the recovery from unexpected losses due to disasters such as typhoons and earthquakes.

It also aims to ensure access to funding post-disaster for reconstruction.

The insurance was arranged by the Government Service Insurance System (GSIS), which took a portfolio approach to mitigate risk and maximize the available funding for premiums.

“I am excited to see this program finally come to fruition. This is just one of the many programs the BTr implements to enhance our resilience against disasters. Our vulnerability to natural disasters makes it imperative for us to act now and implement solutions that would help us become more resilient and recover faster,” Monetary Board Member and former National Treasurer Rosalia V. de Leon said.

Ms. De Leon also led the development of the NIIP during her term as Treasurer.

“We are glad to start the year strong with one of our flagship programs — the NIIP, finally in place. The program will provide financial protection for our schools in the event of disasters. We are also grateful to the GSIS who continues to be our partner in finding appropriate solutions to protect government assets against unforeseen losses,” BTr Officer-in-Charge Sharon P. Almanza said.

The 2024 pilot program of the NIIP covers 132,862 Department of Education school buildings nationwide.

The GSIS previously set aside P843.11 billion to provide fire, lightning, and natural catastrophe insurance cover for public school buildings for one year starting Jan. 1, 2024. — Aaron Michael C. Sy

THE national average retail price of well-milled rice in late December was P54.68 per kilogram (kg), according to the Philippine Statistics Authority (PSA).

Rice prices rose 0.97% during the Dec. 15 to 17 period, which the PSA calls the second phase of December, compared with prices between Dec. 1 and 5, or the first phase.

The PSA reported that Calabarzon (Cavite, Laguna, Batangas, Rizal and Quezon) posted the highest average retail price, with well milled rice selling for P58 per kg.

At the low end during the period was Ilocos Region with rice prices at P50.37 per kg.

It said regular-milled rice averaged P49.38 per kg, or 1.13% higher compared to the first phase.

Caraga region posted the highest average price at P50.64 per kg, while Western Visayas was lowest at P44.08 per kg.

The PSA reported that the national average retail price for refined sugar was P90.19 per kg.

For the second phase of December, prices in Eastern Visayas were the highest, with sugar hitting P102.92 per kg.

Prices in the Bangsamoro Autonomous Region in Muslim Mindanao were the lowest at P82.05 per kg.

Brown sugar averaged P79.52 per kg for the period.

The PSA reported that Calabarzon had the highest retail price for brown sugar at P88.86 per kg, while Zamboanga Peninsula posted the lowest at P71.87 per kg.

Pork kasim (shoulder) averaged P322.72 per kg.

The highest retail price was reported in Northern Mindanao at P367.22 per kg, while Central Visayas posted the lowest at P284.5 per kg.

Pork liempo (belly), on the other hand, averaged P340.65 per kg during the second phase.

Davao Region had the highest price at P373.9 per kg, while Cagayan Valley posted the lowest at P292 per kg. — Adrian H. Halili

THE National Government’s gross borrowing rose 28.2% year on year in November, as domestic debt continued to grow in the double digits.

The Bureau of the Treasury reported that gross borrowing rose to P125.462 billion in November from P97.865 billion a year earlier.

Gross domestic debt surged 59.4% to P121.020 billion in November. This accounted for 96.46% of total borrowing during the month.

Domestic debt consisted of P100 billion in fixed-rate Treasury bonds, P6.02 billion in Treasury bills, and P15 billion in tokenized bonds.

The Philippines issued P15 billion or $270 million in a maiden offering of tokenized bonds earlier in November.

Meanwhile, external debt dropped 80% to P4.44 billion, consisting of new project loans. There were no program loans and global bonds recorded for the month.

For the 11-month period, gross borrowing declined 0.14% to P2.101 trillion.

Domestic borrowings rose 1.9% to P1.64 trillion during the 11 months. This accounted for 78.1% of total borrowing for the period. 

Fixed-rate Treasury bonds accounted for P1.155 trillion of domestic debt, followed by retail Treasury bonds (P252.091 billion), Treasury bills (P145.717 billion), retail onshore dollar bonds (P71.78 billion), and tokenized bonds.

Meanwhile, external debt as of November fell 6.6% to P460.756 billion.

This consisted of P187.573 billion in program loans, P163.607 billion in global bonds, and P109.573 billion in new project loans.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said higher borrowing in November was due to elevated inflation, which increased government expenditure.

Headline inflation grew to 4.1% in November, falling from 4.9% in October and 8% in November 2022. This was the weakest inflation reading in 20 months, but it was still above the 2-4% target band for a 20^th consecutive month. 

Mr. Ricafort said that elevated interest rates also drove borrowing costs higher.

The Bangko Sentral ng Pilipinas (BSP) kept interest rates steady in November, after it delivered a 25-basis-point (bp) off-cycle rate hike in October. The benchmark interest rate stood at a 16-year high of 6.5%.

Since May 2022, the central bank has raised borrowing costs by a cumulative 450 bps.

Mr. Ricafort said easing inflation amid declining global crude oil prices would support possible local policy rate cuts this year, which could reduce debt servicing and temper additional government borrowings.

A BusinessWorld poll of 13 analysts last week yielded a median estimate of 4% for December inflation. This is also within the 3.6% to 4.4% forecast given by the BSP last week.

If realized, December would finally hit the BSP’s 2-4% target range after 20 straight months of above-target inflation readings. It would also mark the slowest pace since the 3% in February 2022.

The Philippine Statistics Authority will release inflation data for December on Friday, Jan. 5.

This year, the National Government plans to borrow P2.207 trillion, consisting of P1.654 trillion from domestic sources and P553.5 billion from foreign creditors. — Keisha B. Ta-asan

Like the way families gather to celebrate and strengthen their bonds during the holidays, the advent of a new taxable year also brings the need for entities under the same corporate umbrella to collaborate and plan their business operations, organizational goals, and financing strategies ahead of the upcoming year. Perhaps an ever-present concern during such planning is the financial transaction requirements within a corporate group, including the appropriate interest rate and terms and conditions to be implemented to ensure that intercompany loans are negotiated at arm’s length.

Worry not. The Bureau of Internal Revenue (BIR) issued Revenue Audit Memorandum Order (RAMO) No. 1-2019 which includes a chapter prescribing guidelines on testing the arm’s length nature of interest payment transactions.

Further, the Organization for Economic Cooperation and Development (OECD) issued its final transfer pricing guidelines on financial transactions in February 2020. This marks the first time the OECD has laid out specific transfer pricing guidelines relating to intercompany financial transactions.

In this edition of Let’s Talk TP, we discuss the key factors to consider in determining whether intercompany financial transactions are carried on at arm’s length.

DELINEATION OF FINANCIAL TRANSACTIONS
Our previous article “The real deal: Delineating transactions in transfer pricing,” discussed the concept of “substance over form” and how the economic and factual substance of transactions matter over their legal form in determining the arm’s length price for controlled transactions between associated enterprises. This concept holds true when it comes to intercompany loans.

The RAMO and OECD guidelines highlighted that evaluating whether a financial transaction is carried out at arm’s length does not only entail determining if the interest rate implemented is at arm’s length. It also involves determining whether a prima facie loan can indeed be regarded as a debt transaction or if it can be construed as a contribution to equity. This will ultimately have tax consequences to the parties involved since the corresponding interest income or interest expense recognized may be partially or fully disallowed for taxation purposes if it can be determined that the debt transaction is, in essence, a capital contribution.

In one instance cited by the RAMO regarding the re-characterization of a financial transaction, an investment in a related party in the form of interest-bearing debt is not expected to be structured in the same way had it been conducted at arm’s length given the economic circumstances of the lending company. In this case, it is appropriate for the transaction to be characterized according to its economic substance, and the loan may be treated as a capital subscription.

Now, it is critical to know the following economically relevant characteristics which are useful indicators in accurately delineating intercompany advancement of funds according to OECD: (a) presence or absence of a fixed repayment date; (b) obligation to pay interest; (c) right to enforce payment of principal and interest; (d) status of the funder in comparison to regular corporate creditors; (e) existence of financial covenants and security; (f) source of interest payments; (g) ability of the recipient of the funds to obtain loans from unrelated lending institutions; (h) the purpose of the loan and business strategy; and (i) the purported debtor’s ability to repay on the due date or to seek a postponement.

The RAMO also defined the steps to be undertaken by the taxing authority in testing the nature of loan transactions which are performing analysis of the need for the debt, confirming that the loan actually occurred, testing the arm’s length nature of the debt-to-equity ratio, testing interest rate of loans with affiliated parties, determination of arm’s length price; and applying the corresponding adjustments.

INTEREST RATE BENCHMARKING ANALYSIS
The determination of the arm’s length interest rate ultimately requires the identification of comparable transactions. In our previous articles, we discussed how the Comparable Uncontrolled Price method (CUP method) compares the price and conditions of products or services in a controlled transaction (i.e., between related parties) with those of an uncontrolled transaction (i.e., between unrelated parties). The OECD noted that the CUP method may be easier to apply to loan transactions than any other type of transactions due to the widespread existence of markets for borrowing and lending between independent borrowers and lenders. The arm’s length interest rate for a tested loan can be benchmarked against publicly available data for other borrowers with the same credit rating for loans with sufficiently similar terms and conditions and other comparability factors.

According to the RAMO, testing the interest rate of intercompany loans involves the comparison of such rates with those commonly used by independent parties, which are usually calculated from a particular interest rate (i.e., BSP, LIBOR, SIBOR, USOR, or JISOR) plus a certain amount based on the credit rating of the borrower.

Based on the foregoing, the question now arises: Is it acceptable to merely use the interest rates published by Bangko Sentral ng Pilipinas (BSP) and other independent financial institutions as valid benchmark for interest rate of intercompany loans?

Note that the OECD emphasized several factors to consider in determining the appropriate comparable interest rates such as the similarity of the terms and conditions of the transaction, the credit rating of the borrower and other economic factors.

In fact, the OECD acknowledges that comparability adjustments may be required due to the varying features of debt instruments. Characteristics that usually increase the risk for the lender, such as long maturity dates, absence of security, subordination, or application of the loan to a risky project, will tend to increase the interest rate. Characteristics that limit the lender’s risk, such as strong collateral, a high-quality guarantee, or restrictions on future behavior of the borrower, will tend to result in a lower interest rate.

Going back to the question, interest rates published by BSP, and other independent financial institutions can be used as benchmark but are subject to comparability adjustments as discussed by the OECD.

In case that there are no comparable uncontrolled transactions which could reasonably be used as benchmark, the OECD suggests that the cost of funds approach may serve an alternative to price intra-group loans. This approach considers the following borrowing costs borne by the lender when raising funds to be lent: (a) expenses incurred in arranging and servicing the loan; (b) a risk premium to account for the various economic factors inherent in the proposed loan; and (c) a profit margin, which will generally include the lender’s incremental cost of the equity required to support the loan.

Keep in mind, however, that the cost of funds approach should be applied by considering the lender’s cost of funds relative to other lenders operating in the market. Lenders cannot simply charge based on their cost of funds. It requires consideration of the options realistically available to the borrower as well. A borrowing entity would not execute a loan priced under the cost of funds approach if it could obtain the funding under better conditions by entering an alternative transaction.

The OECD also clarified that opinions issued by independent banks stating the interest rate the bank would apply were it to make a comparable loan to that particular entity are not sufficient evidence of an arm’s length transaction. Such practice deviates from the arm’s length approach to comparability since it is not based on the comparison of actual transactions.

DEBT CAPACITY ANALYSIS
In addition to delineating the transaction and determining the arm’s length interest rate, it’s also important to demonstrate that the borrower would have been able to raise a similar quantity of debt from independent lenders.

The creditworthiness of the borrower is one of the main factors independent moneylenders take into consideration when entering into a loan agreement. Even on a personal level, you wouldn’t extend a loan to a person you know is not financially capable of paying you back or has a history of failing to meet payment obligations, wouldn’t you? Thus, it is imperative to assess the credit quality of the borrower in a controlled transaction.

An independent lender will usually carry out a thorough credit assessment of the potential borrower to enable the lender to identify and evaluate the risks involved and to consider methods of monitoring and managing these risks. Such credit assessment includes understanding the structure and purpose of the loan, determining the source of repayments, and analyzing the borrower’s cash flow forecasts and the strength of its balance sheet.

Remember, the ultimate objective of the arm’s length principle is to ensure that a transaction is carried out as if it were entered into by independent parties. Hence, the related party lender is expected to perform a thorough credit assessment of the related party borrower, as if it were an independent financial institution.

TAKEAWAY
Holiday seasons may come and go, but as businesses continue to expand beyond global borders, the intricate webs of intra-group financial transactions are here to stay. And as we usher in a new taxable year, taxpayers must approach transfer pricing considerations on intercompany loans with a proactive mindset.

The RAMO and OECD provide detailed transfer pricing guidelines to ensure that financial transactions are carried out at arm’s length. It is prudent that taxpayers prepare transfer pricing documentation containing the necessary information to establish that the terms and conditions of their intercompany loans are at arm’s length. Although not yet prevalent in Philippine tax audits, transfer pricing issues relating to financial transactions are looming on the horizon and are something to watch out for in the future.

Let’s Talk TP is an offshoot of Let’s Talk Tax, a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

Patrick Manuel R. Olarte is a manager from the Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com

The Development Budget Coordination Committee (DBCC) expects gross domestic product (GDP) to grow by 6.5%-7.5% next year, “taking into account the risks posed by the possible global economic slowdown, El Niño, and other natural disasters, as well as geopolitical and trade tensions,” Mr. Diokno said in a statement Thursday.

The DBCC expects the economy to grow by 6-7% this year, and by 6.5-8% for 2025-2028.

GDP grew 5.9% in the third quarter, bringing the nine-month average to 5.5%.

“Growth in 2024 will be driven by private consumption as inflation is expected to return within the target range,” the Department of Finance (DoF) said.

The BSP last week maintained its 2-4% inflation target range through 2026, but said risks were weighted to the upside.

Its forecasts indicate inflation will likely decelerate next year and in 2025, “given limited demand-based inflation pressures amid improving supply conditions.”

Headline inflation slowed to 4.1% in November from 4.9% in October, marking the 20th straight month of price growth breaching the BSP’s 2-4% target. Year to date, inflation averaged 6.2%.

Growth in 2024 will also be led by investment due to the Philippines’ “sound macroeconomic fundamentals, investment-grade credit ratings, the implementation of structural reforms; and increased demand for Philippine exports as supply chain bottlenecks ease.”

On the supply side, growth will be driven by the services and industry sectors, the DoF said.

The government’s 2028 medium-term fiscal framework, which includes a deficit target of 5.1% of GDP, could also be achieved with the passage of proposed legislation to fund the P5.77-trillion budget for 2024.

“The economic team will continue to work with Congress in pushing for key reforms crucial to accelerating economic development,” Mr. Diokno said.

This year, the government’s deficit ceiling is set at P1.49 trillion, equivalent to 6.1% of GDP. The projection assumes P3.847 trillion in revenue and P5.34 trillion in disbursements.

The Bureau of the Treasury reported that the National Government budget deficit narrowed by 24.8% to P93.3 billion last month from the P123.9-billion deficit in November 2022.

In the year to date, the fiscal deficit contracted by 10.1% year on year to P1.11 trillion. This was equivalent to 74.1% of the full-year P1.499-trillion targeted deficit. — Aaron Michael C. Sy

In a statement Thursday, NEDA Secretary Arsenio M. Balisacan said the Philippines should also diversify its sources of imports to ensure the sufficiency and affordability of food.  

Such measures would help mitigate the inflationary impact of El Niño, the persistence of African Swine Fever (ASF), and geopolitical disruptions and as supplier countries move to restrict their food exports.

“Short-term and long-term interventions need to work together to protect the purchasing power of households and boost producer productivity and income. Doing so will ensure equitable and sustainable development,” Mr. Balisacan said.  

NEDA also said these strategies include sustained investment in irrigation, flood control, logistics, and climate change adaptation.

Headline inflation slowed to 4.1% in November from 4.9% in October, marking the 20^th straight month that inflation breached the central bank’s 2-4% target range.

In the first 11 months of the year, inflation averaged 6.2%, still above the central bank’s 6% full-year forecast.

Meanwhile, the extension of the reduced Most Favored Nation (MFN) tariff rates for key agricultural commodities such as pork, corn, and rice will likely help keep food prices and overall inflation manageable, NEDA said.

“Swine fever, production shortfalls in corn, and estimated supply deficits in rice drove price increases in these commodities for this year, (but) additional meat imports played a crucial role in reducing meat inflation to -1.2% in September 2023 from 21% in 2021,” it said.

“In addition, the reduction on tariff rates had pulled down corn inflation and broadened market sources for rice, mitigating the impact of elevated inflation in September ,” NEDA added.

President Ferdinand R. Marcos, Jr. last week signed Executive Order (EO) No. 50, which extends the reduced MFN tariff rates on rice, corn, and pork until Dec. 31, 2024.

The rates for rice imports will be kept at 35% for shipments both within or over the minimum access volume (MAV) quota.

Tariff rates for fresh, chilled or frozen pork were retained at 15% for shipments within the quota and 25% for those exceeding the quotas.

Imports for corn are still to be charged 5% for shipments within MAV and 15% for those exceeding it. 

The tariff rates on rice, pork, and corn are subject to review every six months, according to the EO. — Keisha B. Ta-asan

LIVESTOCK and poultry production are expected to decline next year with imports admitted under lower tariffs discouraging producers from expanding, according to the Philippine Chamber of Food, Inc. (PCAFI).

“We have a negative growth outlook for the livestock and poultry sector next year affecting both backward linkages like corn production and forward linkages in the value chain,” PCAFI President Danilo V. Fausto said in a Viber message.

The Department of Agriculture has said that it plans to raise livestock production levels by five times in 2028.

According to the Philippine Statistics Authority, hog and goat production rose 3.3% and 0.1%, while dairy output fell 12.4%, as did that of cattle (-1.5%), and carabao (-0.3%), during the third quarter.

Mr. Fausto said that the recent extension of a lower tariff regime on imported meat will set back the livestock and poultry industry.

“Basically, imports will hurt livestock production especially now that lower import tariffs have been extended for another year,” Mr. Fausto said.

Executive Order 50 extended the lowered Most Favored Nation  tariff rates on rice, corn, and pork until Dec. 31, 2024.

The rates on pork meat, whether fresh, chilled, or frozen were kept at 15% for imports within the minimum access volume (MAV) quota and 25% for those exceeding the quota.

Tariff rates for rice imports remained at 35% regardless of their source country or volume.

Corn shipments, on the other hand, were kept at 5% for shipments within the MAV quota and 15% for those exceeding the quota.

“Our livestock producers will find it difficult to compete with imported meat and poultry products which are highly subsidized by exporting countries,” Mr. Fausto added.

As of October, meat imports amounted to 1.02-billion kilograms, according to the Bureau of Animal Industry (BAI).

The BAI reported that Brazil was the top supplier, accounting for 343.86 million kg. This was followed by the US and Spain with 179.64-million kg and 123.36-million kg, respectively.

Meat Importers and Traders Association President Jesus C. Cham said that lower costs for acquiring meat could potentially lower retail prices.

“A lower-cost environment will always provide a better cushion against price increases. This will benefit consumers,” Mr. Cham said in a Viber message.