Davao cancels P40-B reclamation JV agreement with Mega Harbour
DAVAO CITY -- Mayor Sara Duterte-Carpio
said the city government has terminated the joint venture agreement
(JVA) with Mega Harbour Port Development, Inc. in connection with the
latter’s unsolicited proposal for a P40-billion reclamation project.
In a statement, Ms. Carpio said, “On July
19, 2017, we communicated to Mega Harbour Port Development our decision
not to proceed with the Davao Coastline and Development Project.”
The JVA was signed in June last year by then-mayor Rodrigo R. Duterte,
the incumbent mayor’s father, just before he assumed office as the
country’s President.
Ms. Carpio said the decision to abort the contract “came about after
more than a year of careful review and study of the available documents
and after weighing out the intentions of the project against its
commercial viability, legal and social implications, and the project’s
possible effects on the environment.”
“Our decision to terminate the joint venture agreement is coupled with a
resolve that Davao City can really move forward and answer the call of
economic growth by implementing highly sustainable projects, both
commercially and environmentally,” she added.
Upon taking office last year, the mayor hired independent consultants to
undertake a review of the JVA and the project plan, which involved the
development of four islands covering 200 hectares from the Sta. Ana
Wharf to the Bucana area for an international port and a mixed-use
complex with commercial, residential and government office components.
Earlier this year, Mega Harbour, owned by businessman Reghis M. Romero
II, agreed to the city government’s request “for better terms” under the
contract, particularly a bigger land share for the government complex.
In a Feb. 21 letter to Mega Harbour, the mayor acknowledged the expanded
offer and said it will be submitted to the “technical advisers for
further study.”
In her statement yesterday, Ms. Carpio said the city government is
prepared to answer for the “various legal repercussions” that will
accompany the JVA’s termination.
Mega Harbour officials could not be immediately reached for comment yesterday.
In April, the company released a report saying that its technical
studies showed encouraging results about the projects as “nothing goes
adversely beyond the norm, except for the abrupt steepening of the slope
of the sea bed, which can raise the cost of reclamation significantly
because of the length of concrete piles that it entails and various
other structural requirements.”
The company also said that there are “sea grass and corals in the area
near the Sta. Ana wharf, which we will have to avoid by moving the
project site further southward.” -- Carmelito Q. Francisco
source: Businessworld
Tuesday, July 25, 2017
Gov’t told to pay Maynilad for losses
AN ARBITRAL TRIBUNAL has ordered the
Philippine government to reimburse Maynilad Water Services, Inc. at
least P3.4 billion for losses incurred by Metro Manila’s west zone water
concessionaire from delayed implementation of its rebased water rates.
“The Tribunal ordered the Republic to reimburse Maynilad the amount of P3,424,690,000 for losses from 11 March 2015 to 31 August 2016, without prejudice to any rights that Maynilad may have to seek recourse against MWSS for losses incurred from 1 January 2013 to 10 March 2015,” Maynilad’s parent firm, Metro Pacific Investments Corp. (MPIC), told the Philippine Stock Exchange on Tuesday, referring to the Metropolitan Waterworks and Sewerage System (MWSS).
“Further, the Tribunal ruled that Maynilad is entitled to recover from the Republic its losses from 1 September 2016 onwards. In case a disagreement on the amount of such losses arises, Maynilad may revert to the Tribunal for further determination.”
Maynilad holds the exclusive concession granted by the MWSS to provide water and sewerage services in Metro Manila’s west service area.
MPIC -- which owns 52.8% of Maynilad -- is one of three key Philippine units of Hong Kong-based First Pacific Company Ltd., the others being Philex Mining Corp. and PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in BusinessWorld through the Philippine Star Group, which it controls.
In an interview, Randolph T. Estrellado, Maynilad chief operating officer, said the company has received a copy of the ruling and has given its approval to have it posted at the Permanent Court of Arbitration at the Hague, although it withheld announcement pending government clearance.
Mr. Estrellado said he was confident that the government would honor the decision, although he could not give the possible next step for Maynilad given that the arbitral ruling is the first of its kind for the company.
“It’s our first time to go through this process,” he said.
Sought for comment, Finance Secretary Carlos G. Dominguez III told reporters: “[We] will check if there is budget space for this.”
In its July 24 decision, the three-man tribunal upheld the validity of Maynilad’s claim against the undertaking letter issued by the Republic of the Philippines -- through the Department of Finance (DoF) -- to compensate the company for the delayed implementation of tariffs for the 2013-2017 rebasing period.
The letter provides, among other things, that the government will indemnify Maynilad for losses caused by delay attributable to any state agency in implementing any increase in the standard water rates, beyond the date of its implementation in accordance with the concession agreement dated Feb. 21, 1997.
Ramoncito S. Fernandez, Maynilad president and chief executive officer, said in a statement that the tribunal’s decision “is an affirmation of the trust and confidence” that the company had placed in the concession agreement (CA), which he said had been responsible “for the significantly improved water and wastewater services in its concession area.”
“We will continue to honor our commitments under the CA and pursue the capital expenditure projects that will improve further the quality of service to our customers, as well as support the government’s initiative in ensuring the sustainability of our country’s water resources,” Mr. Fernandez said.
Maynilad said in the coming days, it would coordinate and cooperate with the government “in finding the most efficient way to implement the judgment.”
MWSS Chief Regulator Joel C. Yu said he was not in a position to comment on the arbitral decision, saying the entities involved on the government side are the DoF and the Office of the Solicitor General, while MWSS Administrator Reynaldo V. Velasco said in a mobile phone message that his office had yet to receive a copy of the decision.
MATERIAL EFFECT
Under its concession agreement with the government, Maynilad may apply for tariff rate adjustments based on movements in the inflation rate, foreign exchange currency differentials, a rate rebasing process scheduled every five years and certain extraordinary events.
Any rate adjustment needs the approval of MWSS and the agency’s regulatory office.
“Any tariff adjustment that is not granted, in a timely manner, in full or at all, could have a material adverse effect on Maynilad’s results of operations and financial condition as well as MPIC,” the listed infrastructure conglomerate said in its 2016 annual report.
Water and sewerage service revenues contributed the biggest chunk at P20.224 billion, or 45%, to MPIC’s P44.82-billion operating revenues last year, with toll, health care and railway businesses accounting for smaller shares.
“There was a first arbitration because we disagreed with the MWSS on the rate rebasing of 2012,” Mr. Estrellado recalled, referring to its application for rates covering the next five-year regulatory period.
The approved rate adjustment of Maynilad for the 2013-2017 period consists of a 9.8% hike in the 2013 average basic water charge of P31.28 per cubic meter (/cu.m.), inclusive of the P1 currency exchange rate adjustment that MWSS has included in the basic charge.
The increase translates to an average P3.06/cu.m. hike.
“MWSS changed the rules and said income taxes were not recoverable even though for the last 17 years, the return was computed post-tax. We disagreed with them and we brought that to arbitration. That was a local arbitration and we won,” Mr. Estrellado said.
In 2014, Maynilad won the arbitration for its 2013-2017 water tariff, which centered on corporate income taxes being a recoverable expense.
MWSS has not implemented the award while awaiting clarification from the Supreme Court.
“December 2014, we got the result of the first arbitration saying that the panel agreed with our number and it should be executed,” Mr. Estrellado said.
“MWSS, even though it was a final, binding judgment and unappealable, they decided not to implement the tariff.”
As a result, Maynilad notified the government that it was calling on the written undertaking to compensate the company for losses arising from the delay.
On March 27, 2015, Maynilad served a notice of arbitration against the government. Hearings were completed in December last year in Singapore.
“They decided that government’s liability started March 2015 when we, I guess, went after the undertaking letter,” Mr. Estrellado said.
“Because the hearings happened last December, we submitted all our documentations [in] September. So only up to August 2016 ang data namin,” he added.
“It’s easy to compute the claim. It’s just what should be tariffed [sic] minus what is the actual tariff times the billed volume,” he explained.
“Part of the ruling also was… Maynilad and the government can talk among themselves on the treatment of September [2016] onwards, but if you don’t get to an agreement then go back to us if you need to and we will determine that amount.”
“Because of the undertaking letter, it’s government that is taking care of it.”
He said the three-man tribunal was comprised by a separate nominee from Maynilad and the Philippine government, and a chairman, which the two agreed to select from a list presented by the court.
“We don’t know exactly how the government will pay,” Mr. Estrellado said.
For losses incurred from September 1, 2016 onwards, he quantified the amount at roughly P200 million a month or around P2 billion for the 10-month period ending in July 2017.
“Roughly every month that rebasing tariff is not implemented, we have forgone revenues of P200 million,” he said.
Maynilad serves most of Manila, parts of Quezon and Makati cities, as well as the cities of Caloocan, Pasay, Parañaque, Las Piñas, Valenzuela, Navotas and Malabon. Its franchise area includes the cities of Bacoor and Imus and the municipalities of Kawit, Noveleta and Rosario in Cavite.
MPIC shares went up by as much as 4.18% yesterday before paring gains to increase 2.09% to P6.84 apiece at the end of trading.
“I believe this decision could help Maynilad use its claims to further improve its service through its capex projects,” said Katrine Eunice L. Dolatre, investment analyst-equity research, F. Yap Securities, Inc.
Maynilad has set aside around P11 billion for its 2017 capital expenditure, up from P9 billion last year.
source: Businessworld
“The Tribunal ordered the Republic to reimburse Maynilad the amount of P3,424,690,000 for losses from 11 March 2015 to 31 August 2016, without prejudice to any rights that Maynilad may have to seek recourse against MWSS for losses incurred from 1 January 2013 to 10 March 2015,” Maynilad’s parent firm, Metro Pacific Investments Corp. (MPIC), told the Philippine Stock Exchange on Tuesday, referring to the Metropolitan Waterworks and Sewerage System (MWSS).
“Further, the Tribunal ruled that Maynilad is entitled to recover from the Republic its losses from 1 September 2016 onwards. In case a disagreement on the amount of such losses arises, Maynilad may revert to the Tribunal for further determination.”
Maynilad holds the exclusive concession granted by the MWSS to provide water and sewerage services in Metro Manila’s west service area.
MPIC -- which owns 52.8% of Maynilad -- is one of three key Philippine units of Hong Kong-based First Pacific Company Ltd., the others being Philex Mining Corp. and PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in BusinessWorld through the Philippine Star Group, which it controls.
In an interview, Randolph T. Estrellado, Maynilad chief operating officer, said the company has received a copy of the ruling and has given its approval to have it posted at the Permanent Court of Arbitration at the Hague, although it withheld announcement pending government clearance.
Mr. Estrellado said he was confident that the government would honor the decision, although he could not give the possible next step for Maynilad given that the arbitral ruling is the first of its kind for the company.
“It’s our first time to go through this process,” he said.
Sought for comment, Finance Secretary Carlos G. Dominguez III told reporters: “[We] will check if there is budget space for this.”
In its July 24 decision, the three-man tribunal upheld the validity of Maynilad’s claim against the undertaking letter issued by the Republic of the Philippines -- through the Department of Finance (DoF) -- to compensate the company for the delayed implementation of tariffs for the 2013-2017 rebasing period.
The letter provides, among other things, that the government will indemnify Maynilad for losses caused by delay attributable to any state agency in implementing any increase in the standard water rates, beyond the date of its implementation in accordance with the concession agreement dated Feb. 21, 1997.
Ramoncito S. Fernandez, Maynilad president and chief executive officer, said in a statement that the tribunal’s decision “is an affirmation of the trust and confidence” that the company had placed in the concession agreement (CA), which he said had been responsible “for the significantly improved water and wastewater services in its concession area.”
“We will continue to honor our commitments under the CA and pursue the capital expenditure projects that will improve further the quality of service to our customers, as well as support the government’s initiative in ensuring the sustainability of our country’s water resources,” Mr. Fernandez said.
Maynilad said in the coming days, it would coordinate and cooperate with the government “in finding the most efficient way to implement the judgment.”
MWSS Chief Regulator Joel C. Yu said he was not in a position to comment on the arbitral decision, saying the entities involved on the government side are the DoF and the Office of the Solicitor General, while MWSS Administrator Reynaldo V. Velasco said in a mobile phone message that his office had yet to receive a copy of the decision.
MATERIAL EFFECT
Under its concession agreement with the government, Maynilad may apply for tariff rate adjustments based on movements in the inflation rate, foreign exchange currency differentials, a rate rebasing process scheduled every five years and certain extraordinary events.
Any rate adjustment needs the approval of MWSS and the agency’s regulatory office.
“Any tariff adjustment that is not granted, in a timely manner, in full or at all, could have a material adverse effect on Maynilad’s results of operations and financial condition as well as MPIC,” the listed infrastructure conglomerate said in its 2016 annual report.
Water and sewerage service revenues contributed the biggest chunk at P20.224 billion, or 45%, to MPIC’s P44.82-billion operating revenues last year, with toll, health care and railway businesses accounting for smaller shares.
“There was a first arbitration because we disagreed with the MWSS on the rate rebasing of 2012,” Mr. Estrellado recalled, referring to its application for rates covering the next five-year regulatory period.
The approved rate adjustment of Maynilad for the 2013-2017 period consists of a 9.8% hike in the 2013 average basic water charge of P31.28 per cubic meter (/cu.m.), inclusive of the P1 currency exchange rate adjustment that MWSS has included in the basic charge.
The increase translates to an average P3.06/cu.m. hike.
“MWSS changed the rules and said income taxes were not recoverable even though for the last 17 years, the return was computed post-tax. We disagreed with them and we brought that to arbitration. That was a local arbitration and we won,” Mr. Estrellado said.
In 2014, Maynilad won the arbitration for its 2013-2017 water tariff, which centered on corporate income taxes being a recoverable expense.
MWSS has not implemented the award while awaiting clarification from the Supreme Court.
“December 2014, we got the result of the first arbitration saying that the panel agreed with our number and it should be executed,” Mr. Estrellado said.
“MWSS, even though it was a final, binding judgment and unappealable, they decided not to implement the tariff.”
As a result, Maynilad notified the government that it was calling on the written undertaking to compensate the company for losses arising from the delay.
On March 27, 2015, Maynilad served a notice of arbitration against the government. Hearings were completed in December last year in Singapore.
“They decided that government’s liability started March 2015 when we, I guess, went after the undertaking letter,” Mr. Estrellado said.
“Because the hearings happened last December, we submitted all our documentations [in] September. So only up to August 2016 ang data namin,” he added.
“It’s easy to compute the claim. It’s just what should be tariffed [sic] minus what is the actual tariff times the billed volume,” he explained.
“Part of the ruling also was… Maynilad and the government can talk among themselves on the treatment of September [2016] onwards, but if you don’t get to an agreement then go back to us if you need to and we will determine that amount.”
“Because of the undertaking letter, it’s government that is taking care of it.”
He said the three-man tribunal was comprised by a separate nominee from Maynilad and the Philippine government, and a chairman, which the two agreed to select from a list presented by the court.
“We don’t know exactly how the government will pay,” Mr. Estrellado said.
For losses incurred from September 1, 2016 onwards, he quantified the amount at roughly P200 million a month or around P2 billion for the 10-month period ending in July 2017.
“Roughly every month that rebasing tariff is not implemented, we have forgone revenues of P200 million,” he said.
Maynilad serves most of Manila, parts of Quezon and Makati cities, as well as the cities of Caloocan, Pasay, Parañaque, Las Piñas, Valenzuela, Navotas and Malabon. Its franchise area includes the cities of Bacoor and Imus and the municipalities of Kawit, Noveleta and Rosario in Cavite.
MPIC shares went up by as much as 4.18% yesterday before paring gains to increase 2.09% to P6.84 apiece at the end of trading.
“I believe this decision could help Maynilad use its claims to further improve its service through its capex projects,” said Katrine Eunice L. Dolatre, investment analyst-equity research, F. Yap Securities, Inc.
Maynilad has set aside around P11 billion for its 2017 capital expenditure, up from P9 billion last year.
source: Businessworld
Sunday, July 16, 2017
Clark is preferred airport project because of shorter timeline
AMID unsolicited proposals to establish new
and modern airports in Bulacan and Sangley Point in Cavite, the
government’s chief economic planner still views Clark International
Airport as the “superior” option to decongest Ninoy Aquino International
Airport (NAIA).
“I think the Clark seems to be superior in terms of location, and also it’s much more advanced in terms of development,” Socioeconomic Planning Secretary Ernesto M. Pernia told reporters last week when asked whether the unsolicited proposals will be the best alternative entry point of international flights.
He said that the government is prioritizing those projects that can be completed within the Duterte administration’s term.
“We want to focus on things that are finishable within three years or at least within the term of the President,” said Mr. Pernia.
The government is currently implementing the Clark International Airport’s P15.34 billion new terminal building, which is expected to be completed in 2020. The Clark airport will also be linked with the Philippine National Railway line running from Malolos to Clark Green City.
However Mr. Pernia said airport bids are not being ruled out, and will still be part of the investment pipeline under the National Economic and Development Authority-Investment Coordination Council (NEDA-ICC).
“That is what we need in the immediate and short term. So in other words the unsolicited proposals are on the back burner,” he said.
“The (unsolicited) airport projects are still not dead. We are looking at them, we’ll let them go through the process. They are going through the ICC board, then the ICC, and then we will make sure that there will be no conditions,” Mr. Pernia added.
There have been at least two unsolicited proposals to build a new airport near Metro Manila submitted to the current government. One is led by San Miguel Corp.’s Ramon S. Ang with a $14-billion airport in Bulacan, involving a 2,500-hectare property that can accommodate up to six runways.
The other was proposed by All-Asia Resources & Reclamation Corp., the Tieng family’s team-up with the Sy family’s Belle Corp., for a $50-billion airport and economic zone at Sangley Point in Cavite.
The Bulacan airport feasibility study is complete, and is currently in the pipeline with the ICC technical board, while studies for the Sangley airport are awaiting submission, according to Mr. Pernia.
Still, the proposals -- which are considered public-private partnership projects and subject to Swiss challenge -- are likely to be completed by the next administration.
“They will take some time to build. The new Hong Kong airport took 10 years, I understand, to build. So that’s really going to be more of interest to the next admin rather this one. But in terms of processing, they have been submitted and we are looking into it,” said Mr. Pernia.
“They’re going to go through the usual process. There’s no special treatment,” he said. -- Elijah Joseph C. Tubayan
source: Businessworld
“I think the Clark seems to be superior in terms of location, and also it’s much more advanced in terms of development,” Socioeconomic Planning Secretary Ernesto M. Pernia told reporters last week when asked whether the unsolicited proposals will be the best alternative entry point of international flights.
He said that the government is prioritizing those projects that can be completed within the Duterte administration’s term.
“We want to focus on things that are finishable within three years or at least within the term of the President,” said Mr. Pernia.
The government is currently implementing the Clark International Airport’s P15.34 billion new terminal building, which is expected to be completed in 2020. The Clark airport will also be linked with the Philippine National Railway line running from Malolos to Clark Green City.
However Mr. Pernia said airport bids are not being ruled out, and will still be part of the investment pipeline under the National Economic and Development Authority-Investment Coordination Council (NEDA-ICC).
“That is what we need in the immediate and short term. So in other words the unsolicited proposals are on the back burner,” he said.
“The (unsolicited) airport projects are still not dead. We are looking at them, we’ll let them go through the process. They are going through the ICC board, then the ICC, and then we will make sure that there will be no conditions,” Mr. Pernia added.
There have been at least two unsolicited proposals to build a new airport near Metro Manila submitted to the current government. One is led by San Miguel Corp.’s Ramon S. Ang with a $14-billion airport in Bulacan, involving a 2,500-hectare property that can accommodate up to six runways.
The other was proposed by All-Asia Resources & Reclamation Corp., the Tieng family’s team-up with the Sy family’s Belle Corp., for a $50-billion airport and economic zone at Sangley Point in Cavite.
The Bulacan airport feasibility study is complete, and is currently in the pipeline with the ICC technical board, while studies for the Sangley airport are awaiting submission, according to Mr. Pernia.
Still, the proposals -- which are considered public-private partnership projects and subject to Swiss challenge -- are likely to be completed by the next administration.
“They will take some time to build. The new Hong Kong airport took 10 years, I understand, to build. So that’s really going to be more of interest to the next admin rather this one. But in terms of processing, they have been submitted and we are looking into it,” said Mr. Pernia.
“They’re going to go through the usual process. There’s no special treatment,” he said. -- Elijah Joseph C. Tubayan
source: Businessworld
Gov’t studying 6 power proposals for Laguna de Bay
THE Department of Energy (DoE) has accepted
six project proposals that seek to use water from Laguna de Bay to
produce power using pumped-storage hydroelectricity.
The process generates electricity from the release of pumped and stored water in a reservoir.
“We have accepted six service contract applications over Laguna Lake,” Mario C. Marasigan, who heads the Department of Energy’s renewable energy management bureau.
“All of these projects are pumped storage,” he said, identifying Citicore Power, Inc. and Phinma Energy Corp. as among the project proponents.
He said the proposals would require pumping water from Laguna de Bay and storing it in a reservoir at a higher elevation. When there is a demand for electricity, the stored water is released through turbines to produce power.
He said the range of capacity targeted by the proponents is from 400 megawatts (MW) to 600 MW. The final figure will depend on the outcome of their feasibility studies, he added.
Mr. Marasigan said the six projects would total around 3,000 MW depending on whether Laguna de Bay is able to accommodate the projects. The projects are distributed around the Rizal and Laguna sides of the lake, he said.
He said the feasibility studies of the proponents would answer whether Laguna de Bay has sufficient water to allow the construction of the power generation facilities. The government has a similar project installed -- the Caliraya-Botocan-Kalayaan power generation complex in Laguna, which has a combined capacity of around 379 MW.
Mr. Marasigan said interest in putting up a pumped storage facility in Laguna de Bay follows the passage of the Renewable Energy Act of 2008 and the Mini-hydroelectric Power Incentive Act of 1990.
He said before the passage of the two laws, only government agency National Power Corp. held the exclusive authority to exploit the country’s river systems and water bodies for power development.
“All six projects are in the pre-development stage,” Mr. Marasigan said.
Sought for comment, Rio Q. Balaba, Citicore energy regulations manager, said the company was awarded about a month ago a service contract to develop certain areas in Laguna.
Citicore’s technical working group was “formulating the project development landscape and procedure on how to move with the project,” he said.
“We are given under the service contract a pre-development stage of five years. But we are as aggressive and very committed for our renewable energy development,” he told reporters.
“We wanted, as much as possible, earlier than five,” he said, adding that the project will depend on the outcome of the feasibility study. -- Victor V. Saulon
source: Businessworld
The process generates electricity from the release of pumped and stored water in a reservoir.
“We have accepted six service contract applications over Laguna Lake,” Mario C. Marasigan, who heads the Department of Energy’s renewable energy management bureau.
“All of these projects are pumped storage,” he said, identifying Citicore Power, Inc. and Phinma Energy Corp. as among the project proponents.
He said the proposals would require pumping water from Laguna de Bay and storing it in a reservoir at a higher elevation. When there is a demand for electricity, the stored water is released through turbines to produce power.
He said the range of capacity targeted by the proponents is from 400 megawatts (MW) to 600 MW. The final figure will depend on the outcome of their feasibility studies, he added.
Mr. Marasigan said the six projects would total around 3,000 MW depending on whether Laguna de Bay is able to accommodate the projects. The projects are distributed around the Rizal and Laguna sides of the lake, he said.
He said the feasibility studies of the proponents would answer whether Laguna de Bay has sufficient water to allow the construction of the power generation facilities. The government has a similar project installed -- the Caliraya-Botocan-Kalayaan power generation complex in Laguna, which has a combined capacity of around 379 MW.
Mr. Marasigan said interest in putting up a pumped storage facility in Laguna de Bay follows the passage of the Renewable Energy Act of 2008 and the Mini-hydroelectric Power Incentive Act of 1990.
He said before the passage of the two laws, only government agency National Power Corp. held the exclusive authority to exploit the country’s river systems and water bodies for power development.
“All six projects are in the pre-development stage,” Mr. Marasigan said.
Sought for comment, Rio Q. Balaba, Citicore energy regulations manager, said the company was awarded about a month ago a service contract to develop certain areas in Laguna.
Citicore’s technical working group was “formulating the project development landscape and procedure on how to move with the project,” he said.
“We are given under the service contract a pre-development stage of five years. But we are as aggressive and very committed for our renewable energy development,” he told reporters.
“We wanted, as much as possible, earlier than five,” he said, adding that the project will depend on the outcome of the feasibility study. -- Victor V. Saulon
source: Businessworld
Friday, July 7, 2017
BPOs to continue high growth under tax reform
The thriving business process outsourcing sector will keep its global
competitiveness in the export market despite the implementation of a
progressive tax reform program because, contrary to the apprehension of
certain industry stakeholders, the foreign services of BPO companies in
special economic zones (SEZs) will remain exempted from the value-added
tax (VAT), while those outside SEZs, including those registered under
the Board of Investments (BOI) will retain their zero-rated status.
Undersecretary Karl Kendrick Chua of the Department of Finance (DOF) said the aim of the proposed Tax Reform for Acceleration and Inclusion Act (TRAIN), the first package of the Duterte administration’s comprehensive tax reform program (CTRP), is to limit the zero-VAT rating to exporters and remove such a preferential treatment similarly accorded to suppliers of exporters, or what are referred to as “indirect exporters.”
“The fear that the Philippine BPO industry will lose its competitiveness because of the proposed tax reform has no basis. Certain industry stakeholders are likely misinterpreting the provisions of the bill,” Chua said. “There is no change in tax policy here for exporters.”
Chua explained that receipts from domestic services are already subject to 12 percent VAT, and will remain so with the proposed tax reform. “This has already been the case even before we proposed the TRAIN bill.”
“Receipts from foreign services within the SEZs of the Philippine Economic Zone Authority (PEZA) will remain VAT-exempt, as is the case now, because they are outside customs territory by legal fiction, or zero-rated if the exporters are outside the special economic zone, including those that are BOI-registered,” Chua said.
“As for exporters outside SEZs, they are zero-rated on VAT payments and are entitled to get back their VAT payments once they apply for such refunds under the proposed 90-day refund system, while all other taxpayers, including suppliers to exporters will have to pay the VAT,” Chua said.
However, Chua made it clear that the proposed TRAIN, as outlined under House Bill No. 5636, explicitly provides that the zero-rated VAT privilege of indirect exporters will be removed only “if and when a credible and enhanced system is put in place” that will allow affected companies to get cash refunds of their VAT payments within 90 days after their filing of VAT refund applications with the Bureau of Internal Revenue (BIR).
“The concerns raised by the BPO sector against tax reform appear to be misplaced. They will remain competitive as demand for their services are driven by the high quality of service and talent they offer. The tax policy in the BPO sector will remain the same even after TRAIN,” Chua said.
HB 5636, which was the version of TRAIN approved by an overwhelming majority of the House of Representatives before the sine die adjournment of the 17th Congress, aims to slash personal income tax rates, lower donor’s and estate taxes, and, at the same time, adjust the excise taxes on fuel and automobiles, broaden the VAT base and implement a tax on sugar-sweetened beverages among other measures.
HB 5636 is a consolidation of the original tax reform bill—HB 4774—filed by Quirino Rep. Dakila Carlo Cua, with 54 other tax-related measures.
President Duterte has certified the proposed TRAIN as an urgent and priority measure, pointing out that it will help ensure the financial sustainability of the government’s ambitious agenda to sustain the country’s growth momentum and accelerate poverty reduction via a massive spending on infrastructure, human capital and social protection for the poor and vulnerable sectors.
Finance Secretary Carlos Dominguez III said the DOF will continue to hold dialogues with senators during the remaining weeks of the congressional break to explain to them the merits of the tax reform package and convince them to retain the original DOF-endorsed version outlined in Cua’s HB 4774.
Dominguez said TRAIN is designed to help guarantee a steady revenue flow for the Duterte administration’s unmatched public investments over the next half-decade to support its envisioned “Golden Age of Infrastructure,” attract investments and create jobs, cut the poverty rate from 21.6 percent to 14 percent, and transform the Philippines into an upper middle-income economy by the time the President leaves office in 2022.
source: DOF
Undersecretary Karl Kendrick Chua of the Department of Finance (DOF) said the aim of the proposed Tax Reform for Acceleration and Inclusion Act (TRAIN), the first package of the Duterte administration’s comprehensive tax reform program (CTRP), is to limit the zero-VAT rating to exporters and remove such a preferential treatment similarly accorded to suppliers of exporters, or what are referred to as “indirect exporters.”
“The fear that the Philippine BPO industry will lose its competitiveness because of the proposed tax reform has no basis. Certain industry stakeholders are likely misinterpreting the provisions of the bill,” Chua said. “There is no change in tax policy here for exporters.”
Chua explained that receipts from domestic services are already subject to 12 percent VAT, and will remain so with the proposed tax reform. “This has already been the case even before we proposed the TRAIN bill.”
“Receipts from foreign services within the SEZs of the Philippine Economic Zone Authority (PEZA) will remain VAT-exempt, as is the case now, because they are outside customs territory by legal fiction, or zero-rated if the exporters are outside the special economic zone, including those that are BOI-registered,” Chua said.
“As for exporters outside SEZs, they are zero-rated on VAT payments and are entitled to get back their VAT payments once they apply for such refunds under the proposed 90-day refund system, while all other taxpayers, including suppliers to exporters will have to pay the VAT,” Chua said.
However, Chua made it clear that the proposed TRAIN, as outlined under House Bill No. 5636, explicitly provides that the zero-rated VAT privilege of indirect exporters will be removed only “if and when a credible and enhanced system is put in place” that will allow affected companies to get cash refunds of their VAT payments within 90 days after their filing of VAT refund applications with the Bureau of Internal Revenue (BIR).
“The concerns raised by the BPO sector against tax reform appear to be misplaced. They will remain competitive as demand for their services are driven by the high quality of service and talent they offer. The tax policy in the BPO sector will remain the same even after TRAIN,” Chua said.
HB 5636, which was the version of TRAIN approved by an overwhelming majority of the House of Representatives before the sine die adjournment of the 17th Congress, aims to slash personal income tax rates, lower donor’s and estate taxes, and, at the same time, adjust the excise taxes on fuel and automobiles, broaden the VAT base and implement a tax on sugar-sweetened beverages among other measures.
HB 5636 is a consolidation of the original tax reform bill—HB 4774—filed by Quirino Rep. Dakila Carlo Cua, with 54 other tax-related measures.
President Duterte has certified the proposed TRAIN as an urgent and priority measure, pointing out that it will help ensure the financial sustainability of the government’s ambitious agenda to sustain the country’s growth momentum and accelerate poverty reduction via a massive spending on infrastructure, human capital and social protection for the poor and vulnerable sectors.
Finance Secretary Carlos Dominguez III said the DOF will continue to hold dialogues with senators during the remaining weeks of the congressional break to explain to them the merits of the tax reform package and convince them to retain the original DOF-endorsed version outlined in Cua’s HB 4774.
Dominguez said TRAIN is designed to help guarantee a steady revenue flow for the Duterte administration’s unmatched public investments over the next half-decade to support its envisioned “Golden Age of Infrastructure,” attract investments and create jobs, cut the poverty rate from 21.6 percent to 14 percent, and transform the Philippines into an upper middle-income economy by the time the President leaves office in 2022.
source: DOF
Thursday, July 6, 2017
‘Infra buildup program seen completed in 6 years’
THE Department
of Budget and Management is confident about completing all 75 big
infrastructure projects by the time President Duterte completes his term
in 2022 with the approval of all 75 projects by the National Economic
and Development Authority (Neda) board.
According to Budget Secretary Benjamin E.
Diokno, the government has moved quickly in terms of getting
infrastructure projects completed so that the benefits will be felt by
Filipinos as early as possible and to further spur the country’s
economic growth.
“It takes about a year and half before
any project takes off. It depends on the administration, so we are
actually much ahead compared to the others. These are big projects that
have been approved by [the]
Neda and signed by the President, this shows how fast we work,” Diokno
told financial reporters at the sidelines of the “Rethinking
Infrastructure Building” Forum at the Alphaland City Club in Makati
City on Thursday.
The Budget chief said, at
present, the Neda board already approved around 61 infrastructure
projects, with the government targeting to complete 75 more projects in
total within the term of Duterte.
But the Mega Manila subway project, with a
budget cost of P227 billion to be implemented by the Department of
Transportation, was seen as the only project to be completed in 2024,
with the feasibility study being conducted already by the Japan
International Cooperation Agency.
The Mega Manila Subway project is a
25-kilometer underground mass-transportation system connecting major
business districts and is expected to serve around 370,000 passengers
per day in its opening year.
“[The 75 projects] it will be completed
within the President’s term, except the subway because it will reach
about 2024 before it gets completed. We will have to finish because the
President does not like to start a project and just leave it hanging.
That is why we try to hasten the process,” he added.
The projects will be funded by a combination of official development assistance with
investment aid raked in from Japan and China totaling $33 billion, and
government funds from the general appropriations act. This forms the
government’s hybrid financing scheme.
“Before the end of the year, since [the] Neda works fast, we meet every month,” Diokno said.
The government has programmed an
infrastructure budget of P1 trillion in 2018, which was explained to be
5.8 percent of the country’s GDP.
The priority projects that will take up
the infrastructure budget has yet to be determined, but Diokno pointed
out that countries willing to provide funding can vet for the projects
that they deem should be prioritized.
“We are still negotiating, but we have
identified more or less who will build it. We are going to ask both
Japan and China to vet for their top 3 projects, and we [the Philippine
government] will choose,” he added.
source: Business Mirror
Monday, July 3, 2017
Entirely new government guarantee system in the works
The Department of Finance (DOF) is looking at the likely merger of
the Philippine Export-Import Credit Agency (PhilExim) with other
state-run guarantee firms and creating a single entity providing fresh
funds for a new government guarantee system.
Finance Secretary Carlos G. Dominguez III said that under Republic Act (RA) 10149, which aims to promote the financial viability and fiscal discipline of government-owned and -controlled corporations (GOCCs), the Governance Commission for GOCCs (GCG) can carry out the reorganization, merger or streamlining of state-controlled firms.
Under the law, the GCG can also recommend to the President the abolition or privatization of GOCCs.
The PhilExim provides credit, credit insurance and guarantee facilities primarily to export-oriented industries, including small and medium enterprises (SMEs).
The finance chief added that the consolidation of PhilExim with other state guarantee firms, such as the Small Business Guarantee Corp., Quedan & Rural Guarantee Corp. and the Home Guaranty Corp., can be done through executive fiat as provided under RA 10149, or the GOCC law.
“We have a GOCC law so we can put them all in one organization and then just create a new one without necessarily going to Congress,” Dominguez said.
He directed DOF Undersecretaries Antonette C. Tionko, who heads the Corporate Affairs Group; Bayani H. Agabin, who is in charge of legal services; Karen G. Singson, who heads the Privatization Office; and National Treasurer Rosalia V. de Leon to draw up a plan carrying out the proposed consolidation or merger.
According to de Leon, she recommended a merger separating the old PhilExim structure from the new PhilExim.
The plan is for the old PhilExim to be primarily a collecting agency in charge of handling the existing assets of the firm, while the new PhilExim would be a new corporation exclusively handling guarantee services.
The budget of P500 million of the existing PhilExim would be carried over to the new corporation, but another P500 million would be needed as fresh capital, consistent with Bangko Sentral ng Pilipinas (BSP) requirements. The fresh funds would enable the new PhilExim to grow, according to de Leon.
Singson said the GOCCs involved in the plan would have to take a write-down or a reduction of the book value of their respective assets, before the consolidation can take place.
Among the functions of the PhilExim is the facilitation of international trade, by which it offers financial assistance to Philippine enterprises, particularly SMEs. The agency also facilitates government projects encouraging international trade.
source: Business Mirror
Finance Secretary Carlos G. Dominguez III said that under Republic Act (RA) 10149, which aims to promote the financial viability and fiscal discipline of government-owned and -controlled corporations (GOCCs), the Governance Commission for GOCCs (GCG) can carry out the reorganization, merger or streamlining of state-controlled firms.
Under the law, the GCG can also recommend to the President the abolition or privatization of GOCCs.
The PhilExim provides credit, credit insurance and guarantee facilities primarily to export-oriented industries, including small and medium enterprises (SMEs).
The finance chief added that the consolidation of PhilExim with other state guarantee firms, such as the Small Business Guarantee Corp., Quedan & Rural Guarantee Corp. and the Home Guaranty Corp., can be done through executive fiat as provided under RA 10149, or the GOCC law.
“We have a GOCC law so we can put them all in one organization and then just create a new one without necessarily going to Congress,” Dominguez said.
He directed DOF Undersecretaries Antonette C. Tionko, who heads the Corporate Affairs Group; Bayani H. Agabin, who is in charge of legal services; Karen G. Singson, who heads the Privatization Office; and National Treasurer Rosalia V. de Leon to draw up a plan carrying out the proposed consolidation or merger.
According to de Leon, she recommended a merger separating the old PhilExim structure from the new PhilExim.
The plan is for the old PhilExim to be primarily a collecting agency in charge of handling the existing assets of the firm, while the new PhilExim would be a new corporation exclusively handling guarantee services.
The budget of P500 million of the existing PhilExim would be carried over to the new corporation, but another P500 million would be needed as fresh capital, consistent with Bangko Sentral ng Pilipinas (BSP) requirements. The fresh funds would enable the new PhilExim to grow, according to de Leon.
Singson said the GOCCs involved in the plan would have to take a write-down or a reduction of the book value of their respective assets, before the consolidation can take place.
Among the functions of the PhilExim is the facilitation of international trade, by which it offers financial assistance to Philippine enterprises, particularly SMEs. The agency also facilitates government projects encouraging international trade.
source: Business Mirror
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