During the general membership meeting of Bank Marketing Association of the Philippines held on Tuesday, BSP Governor Benjamin Diokno said the country’s gross domestic product (GDP) is likely to shrink by 7 to 9 percent this year.

Upon clarification, Diokno told The Manila Times in a message that the figure is “the BSP’s unofficial estimate based on first semester’s actual performance.”

It can be noted that the Philippines plunged into a technical recession after domestic output fell by a record 16.5 percent in the second quarter and 0.7 percent in the first. This brought the contraction in GDP to 9 percent in the first half.

The central bank’s latest estimate is worse than the government’s adjusted assumption of a 5.5-percent GDP contraction for 2020.

It also surpasses World Bank’s -6.9 percent, Sun Life Philippines’ -6.5 percent, MUFG Bank Ltd.’s -6.3 percent, HSBC Private Bank’s -3.9 percent, International Monetary Fund’s -3.6 percent, and ING Bank Manila’s -2.9 percent.

But it is better than S&P Global Ratings’ -9.5 percent, Fitch Solutions and ANZ Research’s -9.1 percent.

Meanwhile, the Bangko Sentral’s estimate compares with the International Monetary Fund’s -8.3 percent, Fitch Ratings’ -8 percent, Capital Economics’ -8 percent, Asian Development Bank’s -7.3 percent, Moody’s Investors Service’s -7 percent, and Rizal Rizal Commercial Banking Corp.’s -5 to -7 percent.

Despite this, Diokno said that latest indicators suggested that the Philippine economy already approached what he called its “inflection point” amid the coronavirus disease 2019 (Covid-19) pandemic.

Financial website Investopedia defines an inflection point as “an event that results in a significant change in the progress of a company, industry, sector, economy or geopolitical situation and can be considered a turning point after which a dramatic change, with either positive or negative results, is expected to result.”

“At this point, I can report that the worst is over. While we’re not out of the woods yet, there has been progress as the economy gradually opens up from the strict lockdown in March to June to less stringent quarantine measures,” Diokno added.

For instance, he pointed out that the country’s Purchasing Managers’ Index moved past the growth threshold of 50 as it settled at 50.1 in September, while foreign direct investment net inflows also sustained its uptrend in July as it recorded a rise of 35.2 percent year-on-year to $797 million.

The BSP chief added the unemployment rate improved from a record high of 17.7 percent in April — which was the height of the lockdown — to 10 percent in July.

Contraction of imports slowed down from 65.3 percent in April to 22.6 percent in August. And the decline in exports eased from 49.9 percent in April to 18.6 percent over the same period, he also said.

“Major indicators suggest that financial markets are responding well to our policy responses,” Diokno said, adding that the Philippine Stock Exchange index reached 6,941.19 last October 26.

He also stressed the strength of the Philippine peso, which remains market-driven and supported by sound macroeconomic fundamentals.

On Tuesday the local currency closed at P48.37 to a dollar, gaining 2 centavos from the P48.39:$1 finish the previous day.

“With all these developments as backdrop, we expect an even firmer economic recovery next year,” Diokno added.

For 2021, the government sees the economy recovering by 6.5 to 7.5 percent, taking into consideration the availability of Covid-19 vaccines by the middle of next year.

During the bi-annual meeting of the nine-person Advisory Council (where I serve as a member) of the Asian Development Bank Institute (ADBI) held early October, I raised the concern that the huge stimulus funds created by most countries to stave off economic recession due to the coronavirus disease 2019 (Covid-19) pandemic gave rise to two serious financial challenges: one is the growing indebtedness of developing countries (DCs); and two is the difficulty in raising additional revenues by DCs to pay their future debt obligation and finance their development projects.

ADBI is a key think tank organization of the Asian Development Bank (ADB) located in Tokyo, Japan and is recognized as one of the best publicly-funded think tanks in the world. Its advisory council reviews and recommends future research and training activities for
ADBI.

Applying my concern to the Philippine case, our debt to gross domestic product (GDP) ratio is projected to rise from around 40 percent in 2010 to more than 50 percent of our GDP this year (the highest recorded was in 2004 at 71.6 percent), and that our budget deficit will increase from around 4 percent in 2019 to hover around 9 to 10 percent of our GDP this year. Undeniably, the question I raised in the ADBI meeting is a key macroeconomic issue that will soon confront countries in the Asia-Pacific region. Other eminent members of the council from various countries around the world agreed.

I believe that this is the context by which the Department of Finance (DoF) raised the issue last week that we need to take a second look at our mining industry as a possible source of revenue, given serious revenue shortfalls as a result of the severe contraction of our economy caused by the pandemic.

The Philippines is one of the richest mineral resource-endowed country in the world as it is geologically located at the ring of fire that stretches from the north of Japan down to the south of the Indonesian archipelago. The country is ranked the world’s fifth most mineral-rich country. It has the world’s third largest gold reserve deposits, and accounts for 6.4 percent of the world’s estimated reserves of nickel as of 2018. According to the Board of Investments (BOI) and the Mines and Geosciences Bureau (MGB), the Philippines has the potential to be among the top ten largest mining powers in the world as (in terms of occurrence per unit area) it ranks fourth in copper, fifth in nickel and sixth in chromite resources. Out of its 30 million hectares of land area, 30 percent (or 9 million hectares) has been found to be geologically prospective for metallic minerals, while an additional 17 percent (or 5 million hectares) of its total land area is potentially rich in non-metallic deposits.

The Department of Environment and Natural Resources estimated in 2012 the country’s metallic reserves at around 14.5 billion metric tons and the non-metallic reserves at 67.66 billion metric tons with a total value appraised at $1.4 trillion. Gold, nickel and copper contribute roughly about three fourths of the appraised value. Mindanao island has more than 70 percent of the country’s gold reserves and 62 percent of copper; while Luzon is rich in nickel (53 percent), zinc (85 percent), and chromite (47 percent). Despite these potentials, only 703,090 hectares have been awarded mining permits and exploration permits as of 2019, corresponding to only 7.8 percent of the 9 million hectares that are potentially geologically mineral endowed.

Opposition to mining development

The doctoral dissertation of Karlo S. Adriano (our eldest son) titled “Mining the Mining Industry” listed a number of economic reasons, besides its adverse environmental impacts, for the strong opposition against the development of the mining industry. Among which are as follows:

a. Contribution to the country’s gross value added (GVA) is minimal;

b. Share of mineral exports to total exports is negligible;

c. Limited job creation because of its capital-intensive nature;

d. Mining investments had the smallest contribution to foreign direct investments (FDI);

e. Government revenues from mining are low compared to countries in Africa, Latin America, among others, where a substantial mining industry operates; and

f. Fully developing the sector will result in the so-called “resource curse” phenomenon.

Addressing the criticisms

Each of these concerns was systematically tackled in Karlo’s dissertation with the use of time-series data, simulations, and employment of a computable general equilibrium (CGE) model. There is not enough space in this column to discuss in detail his arguments.

But the elephant in the room, which our policy makers and anti-mining groups conveniently forget, is the operation of small-scale mining players. The “People’s Small-Scale Mining Act of 1991” (Republic Act 7076) provides the legal framework for the operations of small-scale mines. They contribute around 35 percent of total mineral outputs (which are practically not taxed by the government), cause severe environmental degradation, a major source of corruption (including the ‘revolutionary tax’ imposed by the communist insurgents), particularly at the local government unit level, and operate with hardly any environmental monitoring done by the government.

‘Small is beautiful’

In 1973, a book was written by a Leftist thinker, E.F. Schumacher, titled Small is Beautiful.

The book inspired many idealistic youth (including this author) to romanticize the virtue of being a small producer tending to one’s family needs, producing without a tinge of greed that often characterized the operations of big corporations. This model well encapsulated Karl Marx’s socialist utopia: “From each according to his ability; to each according to his needs.”

The problem with the analysis is that it presupposes that greed is uniquely owned by big corporations and alien to small producers. Adam Smith’s proposition that “man is by nature greedy” in his classic book Wealth of Nations proved to be a far realistic assumption about the nature of man than Marx’s socialist utopia.

However, advances in welfare economics, which brought about the idea of “corporate social responsibility” (CSR), influenced big corporations to transform themselves to become partners in the country’s economic development to gain more consumers’ support. Many of the big responsible mining firms have made CSR an important component of their operations.

Along this line, my concrete suggestion, if we allow mining firms to fully develop in the country as a major revenue source, is that they contribute significant funds in the procurement of Covid-19 vaccine, once fully tested and publicly released, for free distribution particularly to the poor Filipinos.

THE Department of Energy (DoE) will no longer accept new endorsement applications for the construction of greenfield coal power plants, pending a review of the country’s energy needs.

In a statement on Tuesday, Energy Secretary Alfonso Cusi said the DoE’s the periodic assessment of the country’s energy requirements prompted them to declare a moratorium on endorsements for greenfield coal power plants.

Greenfield coal plants refer to those power facilities that are yet to be constructed.

In a message to reporters, Energy Undersecretary Felix William Fuentebella said the moratorium covers new applications and the ban will last until such a time the Energy department determines the need for additional supply from baseload plants or plants that provide uninterrupted power supply.

“Actually, we are guiding our investors in advance. As the DoE makes periodic assessments, we can see the balanced way forward,” Fuentebella said, adding a detailed discussion will follow.

According to Cusi, the agency’s most recent assessment revealed the need for the country to shift to a more flexible power supply mix.

“This would help build a more sustainable power system that will be resilient in the face of structural changes in demand and will be flexible enough to accommodate the entry of new, cleaner and indigenous technological innovations,” he said.

At the same time, the DoE chief announced the Philippines is now allowing 100-percent foreign ownership in large-scale geothermal exploration, development and utilization projects. Large-scale geothermal projects are those with an initial investment cost of about $50 million capitalization through Financial and Technical Assistance Agreements (FTAAs).

FTAAs may be entered into between foreign contractors and the Philippine government for the large-scale exploration, development and utilization of natural resources, and are signed by the President.

“We need to prepare for the influx of RE (renewable energy) under the recent policies issued by the DoE. Hence the need for more flexibility,” Fuentebella told reporters.

But Laban Konsyumer Inc. President Victorio Mario Dimagiba it was the Energy Regulatory Commission that made renewables “too expensive” in the country.

“We have a competitive selection process approved by the Supreme Court. Let that policy mature and to enable power plants and distribution utilities to provide least cost to consumers. Renewable energy was made too expensive by no less than ERC,” he said in a message.

Cusi said he signed last October 20 a department circular providing the guidelines for the third Open and Competitive Selection Process (OCSP3) in the awarding of RE Service Contracts.

“From an investment perspective, OCSP3 allows for 100-percent foreign ownership in large-scale geothermal exploration, development, and utilization projects,” he said.

Cusi also reiterated his commitment to promote RE, as he expressed hope that in time, renewables will figure prominently in the country’s energy future.

“As the Philippine Department of Energy reevaluates the appropriateness of our current energy mix vis-a-vis our energy goals, I am optimistic that this would lead to more opportunities for RE to figure prominently in our country’s energy future,” he said.

Cusi noted that as of 2019, the Philippines still had the highest RE share in the total primary energy supply from among countries within Southeast Asia.

“Despite this, I am determined to accelerate the development of our country’s indigenous resources. We are also pushing for the transition from fossil fuel-based technology utilization to cleaner energy sources to ensure more sustainable growth for the country,” he added.

With the Philippines remaining under varying degrees of quarantine due to the coronavirus disease 2019 (Covid-19) pandemic, a new Economist Intelligence Unit study for TransUnion finds businesses’ shift to digital could be permanent.

The report titled “New Dimensions of Change: Building Trust in a Digital Consumer Landscape,” released on Tuesday included responses from 1,610 executives in Brazil, Canada, Chile, China, Colombia, the Dominican Republic, Hong Kong, India, the Philippines, South Africa, the United Kingdom and the United States, including 115 Philippine executives.

The research uncovered how technologies like artificial intelligence (AI), national digital identification (ID) systems, and super-apps can help overcome hurdles and possibly create new challenges to building digital trust.

Results of the study showed that digital adoption is generally perceived as rising faster in the Philippines compared with the global average mainly due to the large adoption of social media and a growing e-commerce market.

The report noted that nearly 84 percent of Philippine executives surveyed as part of the study said they believe smooth transactions are “essential to business survival” rather than merely a competitive edge during and after the pandemic.

The report, however, said that despite the fast adoption, removing barriers to building bilateral digital trust is a must.

“Covid-19 has dramatically accelerated digital transformation with 78 percent of Philippine executives surveyed as part of our study saying their organization has changed their digital transaction process due to the pandemic,” said Pia Arellano, TransUnion Philippines president and chief executive officer.

“But all of this digital progress will be wiped out if we can’t remove these barriers to building bilateral digital trust. For instance, 70 percent of Philippine executives in the study who said their company changed their digital transaction process as a result of the pandemic experienced glitches,” she added.

Approximately 92 percent of Philippine executives say biometrics are likely to be used to authenticate the vast majority of payments in the next 10 years.

About 46 percent of Philippine respondents, meanwhile, noted that improved fraud detection and security is the greatest benefit to using AI.

The report further said that 84 percent Philippine respondents think national digital IDs will help fraud prevention in consumer transactions.

About 77 percent in the Philippines believe a national digital ID gives low-income groups access to consumer services they would have previously been excluded from.

The Philippine Statistics Authority (PSA) has started the pre-registration process for the Philippine national ID. As of October 20, more than 1 million Filipinos have taken the first step in registering with the national ID system.

“Ensuring consumer trust starts with preventing fraud. Our research overwhelmingly showed that biometrics, AI and national digital IDs aren’t just a fad for consumer fraud prevention. They are key for trusted commerce for the foreseeable future,” said Arellano.

According to the report, 82 percent of Philippine executives believe consumers are comfortable sharing personal data with private companies while 79 percent of the respondents think consumers are comfortable sharing personal data with governments.

“Technological innovations like AI, biometrics and national digital IDs paired with proven fraud prevention methods like device intelligence can provide a more convenient and inclusive way for consumers to transact that still protects security and privacy,” Arellano said.

In line with its special focus to serve the needs of the country’s agriculture sector, the Land Bank of the Philippines (LandBank) reported that it had assisted over 2 million small farmers and fishermen (SFFs) nationwide.

As of end-September, LandBank has assisted nearly 2.4 million SFFs, exceeding its full-year target of 2 million and more than double the 1 million it supported in 2019.

About 1.63 million, or 68 percent of the total, were provided assistance through the bank’s regular loan offerings and lending programs jointly implemented with the Department of Agriculture (DA) and the Department of Agrarian Reform (DAR).

Included here were the 716,897 small farmers assisted through the Rice Farmers Financial Assistance and Financial Subsidy to Rice Farmers Programs of the DA. The remaining 48,760 were supported through the Financial Literacy Training Program of the LandBank Countryside Development Foundation Inc. conducted in unbanked municipalities nationwide.

“Three months before the end of 2020, LandBank already surpassed its yearend target of assisting 2 million small farmers and fishers nationwide. This accomplishment attests to our continuing commitment that LandBank, together with the Department of Agriculture and the Department of Agrarian Reform, remains steadfast in its support to the agriculture sector,” LandBank President and Chief Executive Officer Cecilia Borromeo said in a statement.

In terms of its continued expansion in lending, LandBank said outstanding loans to the agriculture sector  grew by P5.68 billion to P230.34 billion in September from P224.66 billion in August.

Of the latest amount, P34.97 billion were lent to small farmers and fishermen, and cooperatives and farmers associations, rural financial institutions and other conduits, while P195.36 billion were provided to other players in the agribusiness value chain.

LandBank expects to further expand its agricultural loan portfolio to P245 billion by the end of the year.

The Philippine Center for Postharvest Development and Mechanization (PHilMech) has distributed, as of October 21, 1,512 pieces of farm machinery nationwide that form part of the P5 billion worth of machines that were bidded out and purchased by the agency for 2019.

In a virtual conference on Wednesday, PHilMech Executive Director Baldwin Jallorina said the agency was bidding out the next batch of machines worth at least P3 billion to complete the P10 billion required for 2019 and 2020. Earlier this year, PhilMech bidded out P2 billion worth of these machines.

Jallorina said the agency was stepping up the distribution of the machines under the Rice Competitiveness Enhancement Fund’s https://atozmarkets.com/brokers/deltamarket/ Mechanization Program, so that rice farmers could cope better with the challenges posed by the coronavirus pandemic and rice imports.

He added that the initial success of PHilMech in distributing farm machines under RCEF and the positive feedback the agency received from farmer-recipients show that the Rice Tariffication Law (RTL) is beneficial to the rice sector.

“If there was no RTL, there would be no machines distributed to qualified farmers cooperatives and associations (FCAs) worth P5 billion every year from 2019 to 2024,” Jallorina said.

The farm machines delivered as of last Wednesday were 213 four-wheel tractors; 220 hand tractors; 376 floating tillers; 52 precision seeders; 106 walk behind transplanters; 118 riding type transplanters; 103 reapers; 310 combine harvesters; and 14 mobile rice mills.

The top brands for the four-wheel tractors that are current supplying PHilMech include Yanmar, Kubota and Massey-Ferguson.

Jallorina said that, with the easing of lockdowns and ongoing quarantines, PHilMech can step up its distribution of farm machines nationwide. He added that the agency could also intensify its training of FCAs that were qualified to receive the machines under the mechanization program at no cost.

“PHilMech has been very active in training the members of FCAs who will receive the farm machines at no cost under the RCEF-Mechanization component, and the agency can step up the trainings with the easing of lockdowns and quarantines,” he added.

The PhilMech director also said his agency would continue to be transparent in the bidding and acquisition of farm machines.

“We will continue to exercising transparency in the bidding process, with the proceedings are aired live over the official PHilMech Facebook page. Even the actual opening of the bids and the awarding are aired live,” Jallorina said.

Under RTL, 50 percent of the annual P10-billion RCEF would go to PhilMech for the delivery of farm machineries and postharvest facilities to farmers through their FCAs.

Regionally, the document highlighted the tremendous effect of land reform and simple investments in rural regions including farm-to-market roads and agricultural enter subsidies within the Philippines, China, India, and Vietnam.

One thrilling end result the examine located, however, that may have some relevance to the Philippines, is that during Central American international locations the usage of focused authorities coins transfers had definitely accelerated rural earnings inequality.

“Rural transformation isn’t always automatic. It is a desire,” stated Nwanze. “The picks made by way of governments and improvement practitioners have an tremendous impact at the lives of humans and countries.”

The document concluded that guidelines need to be inclusive and should carry negative, and frequently marginalized, rural humans into the economic mainstream so that rural improvement is socially, economically and environmentally sustainable. This is the simplest manner to attain the 2030 Agenda for Sustainable Development and get rid of intense poverty and starvation, the file said.

“The findings are a take-heed call to all and sundry who cares about the plight of the poorest children, ladies and men on our planet,” said Nwanze. “Every man or woman, each authorities and every business enterprise engaged inside the battle against poverty should examine it and act on its findings.”

The record particularly checked out the effect of structural transformation (the reallocation of monetary interest past agriculture to encompass manufacturing and offerings) and rural transformation (the diversification of rural earning and profits in agricultural productiveness) on poverty discount.

Major findings of the have a look at had been that nations that transitioned hastily out poverty began diversification of their economies with the agricultural sector. A large a part of the achievement of agricultural improvement became additionally attributed to the growth of rural finance.

The record placed unique emphasis at the latter factor, explaining that two billion human beings globally don’t have any get admission to to regulated financial services, and that seventy three of the sector’s negative population do not have financial institution money owed.

The awareness on rural and agricultural improvement is critical, the file stresses, because the incomes of 2.5 billion humans global nonetheless rely without delay on rural small farms which produce 80 percent of meals consumed in Asia and sub-Saharan Africa.

“We wanted to have a look at the adjustments in the each day lifestyles of humans, no longer as an remoted and person task, but as a part of the financial trends in their international locations and the rural sector,” explained Paul Winters, Director of IFAD’s Research and Impact Assessment Division in comments protected with the record. “We systematically looked at whether economic increase added approximately poverty reduction and while accelerated productiveness in the rural sector created more jobs and extra opportunities to generate higher incomes for rural people.”

Findings

Rural and agricultural development, extra than just GDP boom as shown via the numbers, is the key to removing poverty in growing nations, in keeping with a brand new global examine launched this month by the International Fund for Agricultural Development (IFAD) nowadays.

The Rural Development Report 2016, IFAD’s flagship publication, characterised itself as “a rallying name” to policymakers and development advocates “to win the worldwide struggle towards poverty.”

“The Rural Development Report marks a trade in angle,” said Kanayo F. Nwanze, President of IFAD, in remarks given on the release of the report on the Italian Ministry of Foreign Affairs and International Cooperation in Rome on September sixteen. “It locations the agricultural quarter into the bigger photograph of the united states of america’s improvement. It demonstrates the want for a far more complete and holistic technique to the financial system to make sure prosperity for hundreds of thousands of rural humans. It reinforces IFAD’s view, primarily based on forty years of enjoy, that investing in agricultural and rural development means making an investment in the entire economy.”