CORPORATEContents BRIEFSJune 2018 THE MONTH’S HIGHLIGHTS I.T. UPDATE WORD FOR WORD 51 PH digital competitiveness COMMENTARY drops SPECIAL REPORTS 53 DICT tie-up with Transco, NGCP for broadband plan 20 POLITICAL BUSINESS CLIMATE INDEX CORPORATE BRIEFS 20 SWS: Filipinos still unaware of INFRASTRUCTURE Federalism 22 Ombudsman indicts Aquino over DAP, Abaya for MRT 65 NAIA Consortium to obtain controversy original proponent status 26 66 WESM starts independent operation THE ECONOMY 67 Korean firms eye $4.4 Bn in PH energy projects 26 1.5Mn in net new jobs created CONGRESSWATCH in 1H18 45 29 Business, consumer 71 Duterte signs mental health confidence down on higher law inflation 73 House approves 32 BSP raises policy rates anew ‘Telecommuting’ bill 32 Government to sell $1B in 74 Lawmakers support BSP Samurai bonds Charter amendments 77 Asia Pacific Executive Brief BUSINESS 95 Asia Brief contributors 65 45 Pledged investment drops in 1Q2018 48 Harnessing the disruptive force of Industry 4.0 through connectivity MINING 71 49 Mining sector to slowdown in 2018 Online To read Philippine ANALYST online, go to wallacebusinessforum.com For information, send an email to [email protected] or [email protected] For publications, visit our website: wallacebusinessforum.com Philippine ANALYST June 2018 Philippine Consulting is our business...We tell it like it is PETER WALLACE Publisher BING ICAMINA Editor Research Staff: Rachel Rodica Christopher Miguel Saulo Allanne Mae Tiongco Robynne Ann Albaniel Production-Layout Larry Sagun Efs Salita Rose Basas Ramon Lopez 5/F Builders Centre Bldg., 170 Salcedo St., Legaspi Village, Makati City ● Tel: (632) 810 96 06 to 09 ● Fax: (632) 810 96 10 ● Email: [email protected] ● Website: www.wallacebusinessforum.com ● To read Philippine ANALYST online, go to wallacebusinessforum.com ● For information, send an email to [email protected] or [email protected] ● For publications, visit our website: wallacebusinessforum.com the month’s highlights 1 Political Business PRESENT DEVELOPMENTS PAST DEVELOPMENT SWS: Filipinos still unaware of Federalism Pledged investment drops in 1Q2018 Federalism continues to be an unfamiliar and unpopular concept The total foreign investment pledges to the 7 investment for most Filipinos, a recent survey of the Social Weather Stations promotion agencies (IPAs) significantly decreased by 37.9% in (SWS) showed. This poses a huge challenge to President Rodrigo 1Q2018. This is the lowest data reported in 8 years since the Duterte’s grand vision of overhauling the country’s political P13.8 billion recorded in 2Q2010. (see story on p45) system and shift it to a federal form before the end of his term in 2022. (see story on p20) FUTURE DEVELOPMENT Ombudsman indicts Aquino over DAP, Abaya for MRT Harnessing the disruptive force of Industry 4.0 through controversy connectivity Ombudsman Conchita Carpio-Morales has found probable cause Compared with the previous industrial revolution, the 4th to indict 2 high-ranking officials from the previous administration Industrial Revolution is evolving at an exponential rather than – Former President Benigno Aquino III and Former Department a linear pace, and digital connectivity is the key to harness its of Transportation (DOTr) Secretary Joseph Emilio Abaya – over full potential. (see story on p48) 2 separate controversial cases that occurred during their term. (see story on p22) Mining Economy FUTURE DEVELOPMENT Mining sector to slowdown in 2018 PRESENT DEVELOPMENTS The Philippines’ mining sector is seen to slow down this year due 1.5Mn in net new jobs created in 1H18 to the impact of Tax Reform for Acceleration and Inclusion (TRAIN) The April 2018 (2nd quarter) labor force survey reported that on mining operations, self-imposed closures, and uncertainty employment had reached 40.87 million, an increase of 570,000 in policies, the Mines and Geosciences Bureau (MGB) said. It over a 12-month period. But the January 2017 to January 2018 was also reflected on the low value of the country’s metallic (see story on p49) net job creation of 2.41 million meant that, on the average, production in 1Q2018. 1.49 million in net new jobs were created in 1H2018. The 2nd highest during the 21st century after the 1.69 million posted IT Update in 2016. (see story on p26) PRESENT DEVELOPMENTS Business, consumer confidence down on higher inflation PH digital competitiveness drops Business confidence has continuously drifted down since reaching its 3rd highest point in 4Q2015, while consumer confidence The Philippines continues to be lackluster in terms of digital dipped from their year-ago levels, according to the Bangko competitiveness performance. This is according to International Sentral ng Pilipinas (BSP) expectations survey conducted in Institute for Management Development’s (IMD) latest report 2Q2018. (see story on p29) and released in the country with its local partner, the Asian Institute of Management Rizalino S. Navarro Policy Center for BSP raises policy rates anew Competitiveness. (see story on p51) The Bangko Sentral ng Pilipinas (BSP) or central bank raised its DICT tie-up with Transco, NGCP for broadband plan policy rates for the 2nd time this year on June 20 in an effort to temper inflationary pressures. (see story on p32) Despite the initial dispute, the Department of Information and Communications Technology (DICT) has partnered with the FUTURE DEVELOPMENT National Grid Corporation of the Philippines (NGCP) and the National Transmission Corporation (TransCo) for the utilization of Government to sell $1B in Samurai bonds spare optical fiber to boost the implementation of the National The government plans to float $1 billion worth of yen- Broadband Plan (NBP). (see story on p53) denominated bonds, or more popularly known as Samurai bonds, sometime in the 3rd or 4th quarter of this year, its third fund- raising exercise in the international capital market in 2018. (see story on p32) Philippine ANALYST June 2018 2 the month’s highlights Infrastructure CongressWatch PRESENT DEVELOPMENTS PRESENT DEVELOPMENTS NAIA Consortium to obtain original proponent status Duterte signs mental health law The group of the country’s 7 conglomerates that offered to rehabilitate the Ninoy Aquino International Airport (NAIA) is set to President Rodrigo Duterte has signed a landmark legislation on obtain original proponent status (OPS) for its proposal following mental health which intends to protect the rights and welfare of a recommendation made by the Department of Transportation both mental health patients and professionals. (see story on p71) (DOTr). (see story on p65) House approves ‘Telecommuting’ bill WESM starts independent operation The House of Representatives has approved on 3rd and final reading the Telecommuting Act which allows private sector The wholesale electricity spot market (WESM) is now under an employees to work outside the office through telecommuting. independent market operator (IMO), nearly 20 years after the Its counterpart measure at the Senate has also been approved Electric Power Industry Reform Act of 2001 (EPIRA) mandated on 3rd and final reading. Both bills are now up for bicameral its transition to an IMO. (see story on p66) committee approval. The proposed measure’s ultimate goal is to promote employees’ right to work-life balance and flexible FUTURE DEVELOPMENT work arrangement. (see story on p73) Korean firms eye $4.4 Bn in PH energy projects FUTURE DEVELOPMENT Four Korean firms plan to invest a total of $4.4 billion in various energy projects in the Philippines. (see story on p67) Lawmakers support BSP Charter amendments Lawmakers are pushing for the swift passage of a bill amending the charter of the Bangko Sentral ng Pilipinas (BSP) or central bank. The proposed bill strengthens the country’s monetary authority and gives the central bank more flexibility in regulating and managing the Philippines’ financial system. Once enacted, the measure would broaden the central bank’s examination authority to include banks’ and quasi-bank’s subsidiaries and allow full flexibility to enable the BSP to conduct risk-based supervision. (see story on p74) Philippine ANALYST June 2018 CORPORATE BRIEFS 3 wordfor word “Let me underscore that great countries do not need strongmen. They need strong institutions. Great men eventually perish, but great institutions outlast them all.” Ombudsman Conchita Carpio-Morales on the importance of institutions such as the Office of the Ombudsman. “We cannot afford a war at this time because it will result in a massacre. I am not prepared to lose my soldiers and policeman for a simple adventurism. If I do that, either I am inviting trouble within my country or the military and police will oust me.” President Rodrigo Duterte on the criticisms against his administration’s response to Chinese militarization at the West Philippine Sea “For us to leapfrog and to be in the top 20 percent in 2020, we cannot do these incremental changes. We really have to think differently, change mindsets. We need drastic changes and forget and scrap old ways of doing things.” DTI Secretary Ramon Lopez on the country’s ranking in the Ease of Doing Business Survey of the World Bank. “If China successfully solidifies its presence within its 9-dash line, the Philippines will lose effective control over its exclusive economic zone, which is larger than the land area of our country. This is why China’s encroachment on Philippine territories is the most serious external threat to our country since the Second World War.” Vice President Leni Robredo on China’s continuous militarization in the West Philippine Sea. “Heads will roll. Big names, small names, past and present. There will be no sacred cows.” Health Secretary Francisco Duque III on the alleged billion-peso irregularity in the DOH’s barangay health stations project. “I have to be consistent with my position that quo warranto is not the proper way to remove a sitting member of the Court. So I don’t want to benefit from the decision to which I disagreed.” Acting Chief Justice Antonio Carpio on declining any nomination for chief justice.