04 JULY 2019

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51.00 52.00 53.00 54.00 55.00 PESO-DOLLAR RATES 3 JULY 2019 51.16 25700 25200 24700 24200 DOW JONES 3 JULY 2019 69.25 7900 7700 STOCK MARKET 7500 7300 0.92 3 JULY 2019 3 JULY 2019 INDEX SUMMARY INDEX VALUE CHANGE % CHANGE PSEi 8,092.68 -0.92 -0.01 ▼ All Shares 4,939.63 -2.08 -0.04 ▼ Financials 1,721.11 -6.70 -0.39 ▼ Industrial 11,921.16 79.09 0.67 ▲ Holding Firms 7,814.47 -3.30 -0.04 ▼ Services 1,698.67 -15.86 -0.93 ▼ Mining and Oil 7,566.59 123.54 -1.61 ▼ Property 4,352.00 9.53 0.22 ▲ B12 BUSINESS Thursday, 4 July 2019 Daily Tribune Moving forward with an independent BSP The independence of the BSP was likewise essential in establishing the stability of the financial system and providing for a more conducive environment for both financial intermediation and robust economic activity By Diwa C. Guinigundo One of the significant reforms instituted in the 1990s was the passage into law of Republic Act 7653, also known as the New Central Bank Act, on 10 June 1993. Under this Act, the Philippine government restructured and recapitalized the central bank. Fundamental changes were undertaken, including the adoption of a new charter and the renaming of the Central Bank of the Philippines to Bangko Sentral ng Pilipinas (BSP). Consistent with modern central banking, the New Central Bank Act established price stability as the overriding objective of the BSP. 2 An important provision of the new central bank act was the granting of fiscal and administrative authority to the BSP. Central bank independence, in its broadest sense, implies the independence of the central bank to define its objectives and policy tools, sans the influence of the government or an institution of authority. Nonetheless, the importance attached to central bank independence did not gain ground until the 1970s. The stagflation experienced during this decade led to a change in view that governments must have control not only over fiscal but also monetary policy. Cukierman (2006) 3 reasoned that in the absence of independence, accountability was unnecessary and, as political entities, governments and ministries of finance have no incentives to improve transparency on the conduct of monetary policy. In the midto-the late GUINIGUNDO 1960s, the Marcos administration engaged in heavy deficit spending with the government floating bonds in substantial volumes for infrastructure projects. 4 By 1969, the country had to grapple with the twin problem of fiscal deficit and chronic balance of payments deficit. The government sector was massively borrowing from the monetary system, particularly the central bank, to finance its expenditures. In other words, the fiscal challenge was partially addressed by an accommodative monetary policy. On hindsight, this was to be expected from a non-independent central bank and an extraordinarily strong political leadership. The CBP was not an independent institution. This was evident in the composition of its Monetary Board. Representatives of key government offices constituted the majority and with the exception of the Governor, all were part-time members of the Monetary Board. Thus, the requirements of the National Government in terms of fiscal stimulus took precedence over the equally important need of the economy for a sound monetary policy. An important provision of the new central bank act was the granting of fiscal and administrative authority to the BSP. Argentina, likewise, provides a case in point. Its national government tried to subvert the independence of the Central Bank of Argentina. In 2010, Argentina’s President Cristina Fernandez de Kirchner and Central Bank of Argentina Governor Martin Redrado had a standoff over the plan of the government to use $6.5 billion of reserves to pay the country’s mounting debt. Governor Redrado adamantly rejected the plan, invoking the independence of the central bank. However, under mounting political pressure, Governor Redrado eventually resigned. The national government proceeded to ignore the independence of the Central Bank of Argentina and used its reserves to finance public spending. In 2016, former president de Kirchner was charged with fraudulent administration through her manipulation of the central bank’s foreign exchange operation which substantially damaged the country’s finances. Also charged were her former economic minister, the governor of the Central Bank of Argentina who succeeded Redrado, and the members of the central bank’s board. Today, Redrado appears to be more than vindicated given that Argentina continues to struggle with worsening economic recession compounded by soaring inflation rates. Central banks were granted independence and the attainment of price stability became their primary mandate. Thus, one can say that the enactment of the New Central Bank Act of 1993 actualized the stipulation of the 1987 Constitution for an independent central monetary authority. The BSP Charter formally established the BSP as an independent central bank. Price stability became its overarching and primary responsibility. Private sector representatives constituted the majority of the Monetary Board and full instrument independence was accorded to the monetary authority. 5 Subsequent amendments in 2019 further strengthened the independence of the central bank. The increase in BSP’s authorized capitalization, to be funded by its own declared dividends, would help ensure that it would not be dependent on the National Government and Congress for recapitalization. The need for central bank independence has very strong empirical support. Empirical studies have shown that economies with independent central banks have experienced lower and more stable inflation. This has been evident in the case of the Philippines. 6 Central bank independence granted the BSP a wider latitude in the pursuit of its primary mandate of price stability. This, in turn, has resulted in relatively low and stable inflation. The independence of the BSP was likewise essential in establishing the stability of the financial system and providing for a more conducive environment for both financial intermediation and robust economic activity. 2. Other important provisions in RA 7653 included the constitution of a new Monetary Board (MB) and the transfer of certain assets and liabilities from the old Central Bank to the BSP. This was completed on 20 December 1993. Additional measures were put in place to enhance the efficiency of and maintain stability in the financial system including the relaxation of rules governing the establishment of automated tellering machines (ATM); reduction in the reserve requirement on banks’ deposit and deposit substitute liabilities by an aggregate of three percentage points; lowering of the liquidity floor requirement on government deposits/funds with government depository banks from 75 percent to 50 percent to provide banks with greater loanable funds for production and investment as well as to reduce intermediation costs of banks; and the continued relaxation of rules and regulations governing the establishment and relocation/voluntary closure of branches and other banking offices of commercial and thrift banks (BSP Annual Report, 1993). 3. Cukierman, A. (2006). Central Bank Independence and Monetary Policymaking Institutions — Past Present and Future, Central Bank of Chile, Working Paper 360. 4. Paderanga Jr., C. (2013), “Macroeconomic Policy Regimes in the Philippines,” Paper presented at the BSP-UP Centennial Professor of Money and Banking, 29 November. 5. While the 1949 Charter filled up the Monetary Board with public officials starting with the Finance Secretary who once headed it, subsequent amendments (PD 72 and PD 1771) and legislations (RA 7653, RA 11211) assigned and continued, respectively, the chairmanship of the Monetary Board to the Governor of the BSP. This is of singular, critical and strategic importance to the effective discharge of independent monetary policy. This was further strengthened with the charter provision to appoint the majority of the Members of the Monetary Board as full-time members. 6. For instance, Cukierman, Webb and Neyapti, 1992; Alesina and Summers, 1993; Eijffinger and Schaling, 1998; de Haan and Kooi, 2000. Metrobank secures P11.25B from bond sale The bank has earmarked P4 billion for capital expenditures this year alone, half of which will go to information technology as it ramps up digital transformation By AJ Bajo Ty-led Metropolitan Bank & Trust Co. (Metrobank) raised P11.25 billion from its public offer of two-year peso bonds, which will fund its lending activities and diversify its funding sources. The oversubscribed bonds carry a coupon rate of 5.5 percent to be paid quarterly, and were issued and listed on the Philippine Dealing Exchange on 3 July. The offer is the fourth tranche out of Metrobank’s P100-billion bond and commercial paper program approved by the lender’s board of directors in September 2018. The lender will time its fund-raising activity in keeping with market conditions. “To accommodate robust demand from institutional, high net worth and retail clients, Metrobank’s initial target of P5 billion was upsized to P11.25 billion,” the country’s second largest bank in terms of assets said in a disclosure to the stock exchange. Metrobank said it has raised an aggregate amount of P56.75 billion peso bonds since November last year. Metrobank’s first quarter net income rose 15 percent to P6.8 billion from P5.9 billion in the same period last year owing to loan growth and margin expansion. The lender’s consolidated assets have reached an all-time high on March at P2.3 trillion, with equity of P289 billion. Its shares were sold for P71.50 apiece as of Wednesday, down 1.24 percent. On Tuesday, Metrobank also launched a new campaign underlining technological innovation and financial literacy targeted towards a “purpose-driven” market. The country’s second largest lender in terms of asset said the campaign aims for clients of all demographic to “save, manage, invest, upgrade and grow” with the bank. “The way that we can step up our ‘you’re in good hands’ promise is to express the way we would like to deliver banking in the future for these purpose-driven go-getters,” Metrobank chief marketing officer Digs Dimagiba said during the campaign launch at the Bonifacio Global City on 2 July. The bank has earmarked P4 billion for capital expenditures this year alone, half of which will go to information technology as it ramps up digital transformation. He said the campaign is also directed towards improving the bank’s electronic services in line with the rising number of users preferring to transact online. Dimagiba said one in three customers prefer to do their bank transactions digitally, with the number seen to grow at a double-digit annual rate. A SIGN of JPMorgan Chase Bank is seen in front of the headquarters tower in Manhattan, New York, the United States. The Chinese market will soon witness the first joint venture firm where a foreign company will take an absolute controlling stake as part of the deeper opening up of the country's financial sector. CHINA DAILY The Bangko Sentral ng Pilipinas in its latest State of Financial Inclusion in the Philippines reported that the number of deposit accounts in the country rose 6.8 percent to 57.1 million in 2017 from 53.5 million in 2016. Alongside the accelerating number of banked Filipinos, Dimagiba said there is still work to be done to expand the number of the financially literate. A 2014 report by World Bank indicated that only 25 percent of Filipino adults were literate in basic finance, far from the global average of 33 percent. In line with the goal, Metrobank will launch a website by the end of July or early August, dubbed ‘Earnest,’ which will feature user-friendly content on a broad range of financial lessons. The lender will also be launching a new range of co-branded debit cards (Mastercard) tailored-fit to clients of different lifestyles. The bank has earmarked P4 billion for capital expenditures this year alone, half of which will go to information technology as it ramps up digital transformation. Metrobank registered a 15 percent increase in net income in the first three months of the year, to P6.8 billion from P5.9 billion in the same period of 2018 on the back of consistent loan growth and margin expansion.
Thursday, 4 July 2019 Daily Tribune WORLD B13 WHAT HE CAN’T SAY TO XI Trudeau banks on Trump help Relations deteriorated between China and Canada following the December arrest in Vancouver of Meng Wanzhou, a top official in China’s telecom giant Huawei TORONTO, Canada — Prime Minister Justin Trudeau said Tuesday that he was “confident” US President Donald Trump brought up Canadians held by Beijing during talks with China’s Xi Jinping. Relations deteriorated between China and Canada following the December arrest in Vancouver of Meng Wanzhou, a top official in China’s telecom giant Huawei, who is wanted by the United States for allegedly circumventing sanctions on Iran. Trudeau ‘confident’ that Trump backed Canada in China G20 talks. Since then, Chinese authorities have arrested two Canadians on suspicion of espionage and blocked imports of Canadian agricultural products, moves Beijing says are unrelated to the Huawei case. Trudeau said he’d spoken to Xi about the detained Canadians — ex-diplomat Michael Kovrig and consultant Michael Spavor — during brief, informal exchanges on the sidelines of the G20 summit in Osaka, Japan last week. Ahead of the summit, Trudeau asked Trump to raise the issue of the detained Canadians with the Chinese leader when they met at the summit. Trump reportedly said that he would do what he could. “I’m confident the Americans brought up the issue, President Trump brought up the issue, of the detained Canadians in China,” said Trudeau, speaking at a joint news conference with visiting Ukranian President Volodymyr Zelensky. “This is an issue we take extremely seriously,” said Trudeau, adding that he has had many conversations with Xi “on this and the larger issue of Canada and China relations.” Trudeau said that Canada is “pleased that so many countries around the world, allies, friends, others have highlighted to China that the situation that these Canadians find themselves in is unacceptable.” Zelensky, who took office in May, is on his first visit to North America and is in Toronto to participate in a conference on reforms in his country. AFP CANADIAN Prime Minister Justin Trudeau reacts to a comment from Ukrainian President Volodymyr Zelenskiy (not pictured) before a dinner during the Ukraine Reform Conference in Toronto on Tuesday. AP Airstrike kills 40 migrants in Tripoli The airstrike targeting the detention center in Tripoli’s Tajoura neighborhood also wounded 80 migrants BENGHAZI, Libya — An airstrike hit a detention center for migrants early Wednesday in the Libyan capital, killing at least 40 people, a health official in the country’s UN-supported government said. The airstrike targeting the detention center in Tripoli’s Tajoura neighborhood also wounded 80 migrants, said Malek Merset, a spokesman for the health ministry. Merset posted photos of migrants who were being taken in ambulances to hospitals. Footage circulating online and said to be from inside the migrant detention center showed horrific images of blood and body parts mixed with rubble and migrants’ belongings. The UN refugee agency in Libya condemned the airstrike on the detention center, which houses 616 migrants and refugees. The Tripoli-based government blamed the self-styled Libyan National Army, led by Khalifa Hifter, for the airstrike and called for the UN support mission in Libya to establish a fact-finding committee to investigate. A spokesman for Hifter forces did not immediately answer phone calls and messages seeking comment. Local media reported that LNA had launched airstrikes against a militia camp near the detention center. Gharyan had been a key supply route for the LNA forces. The LNA launched an offensive against the weak Tripoli-based government in April. Hifter’s forces control much of the country’s east and south but were dealt a significant blow last week when militias allied with the Tripoli government reclaimed the strategic town of Gharyan, about 100 kilometers (62 miles) from the capital. Gharyan had been a key supply route for the LNA forces. The fighting for Tripoli has threatened to plunge Libya into another bout of violence on the scale of the 2011 conflict that ousted longtime dictator Moammar Gadhafi and led to his death. At least 6,000 migrants from Eritrea, Ethiopia, Somalia, Sudan and other nations are locked in dozens of detention facilities in Libya that are run by militias accused of torture and other human rights abuses. Most of the migrants were apprehended by European Union-funded and -trained Libyan coast guards while trying to cross the Mediterranean Sea into Europe. The detention centers have limited food and other supplies for the migrants, who made often-arduous journeys at the mercy of abusive traffickers who hold them for ransom money from families back home. The UN refugee agency has said that more than 3,000 migrants are in danger because they are held in detention centers close to the front lines between Hifter’s forces and the militias allied with the Tripoli government. Libya became a major crossing point for migrants to Europe after the 2011 ouster and killing of Gadhafi, when the North African nation was thrown into chaos, armed militias proliferated and central authority fell apart. AP New hopes amid trade war truce Constructive trade and economic relations between the US and China, as the two largest global economies, will have certainly an affirmative advantage to the global economy ADDIS ABABA, Ethiopia — Positive trade and economic relations between China and the United States would have an affirmative advantage to global economic stability, an Ethiopian scholar said on Tuesday. “Constructive trade and economic relations between the US and China, as the two largest global economies, will have certainly an affirmative advantage to the global economy,” Costantinos Bt. Costantinos, who served as an economic advisor to the African Union (AU) and the UN Economic Commission for Africa (ECA), told Xinhua on Tuesday. The latest positive developments between China and the US to restart economic and trade consultations “is good news to the global trade in general, and investors who were concerned by recent tariff standoff,” he said. China and the United States agreed on the sidelines of the G20 summit in Osaka, Japan, to restart economic and trade consultations on the basis of equality and mutual respect, after trade frictions since last year. Costantinos, also professor of public policy at the Addis Ababa University in Ethiopia, also emphasized the vital imperative to sustain the multilateralism platform as a positive impetus to global economic stability. The scholar also stressed the need to rule out actions and policies that bear the notion of protectionism, saying it “will restrain international trade in favor of protecting local businesses and jobs from foreign competition.” XINHUA Guaido junks Venezuela talks Maduro said he was sure that talks would yield an agreement this year CARACAS, Venezuela — Venezuela’s opposition leader Juan Guaido said Tuesday there were no plans to re-open talks with the “murderous dictatorship” of President Nicolas Maduro, following the death of an officer in custody over an alleged coup plot. “For democrats, there is never a time to negotiate with hostage-takers, human rights abusers, or with a dictatorship,” Guaido said. “We are facing a deadly dictatorship.” He told reporters that if fresh talks aimed at “facilitating the cessation of the usurpation” of Maduro was announced, “we will officially communicate.” Guaido, who has been recognized by more than 50 countries as interim president, was speaking as lawmakers of the opposition-controlled National Assembly met to discuss the suspicious death of retired naval officer Rafael Acosta Arevalo. In contrast to Guaido’s remarks, Maduro said he was “sure” that talks would yield an agreement this year. “We are going to achieve a great agreement” in 2019, Maduro said, speaking at a political event. “I am sure, I have absolute certainty,” he said, promising that “there will be good news in the weeks to come.” Venezuela’s Foreign Minister Jorge Arreaza said that the government was “waiting for the opposition to resume meetings in Norway.” Representatives of Guaido and Maduro met face-to-face in Oslo early last month as part of talks mediated by Norway aimed at resolving the country’s political deadlock. Acosta’s death Sunday sparked international condemnation. UN rights chief Michelle Bachelet said Monday she was “shocked” by the death, adding weight to claims by the United States and the opposition that he may have been tortured. He was one of several people being held over alleged involvement in what the government described as a failed coup. AFP A RESCUER holds a damaged book as people gather outside Tajoura Detention Center after an airstrike killed nearly 40, east of Tripoli early Wednesday. AFP MARTIN Cohen of the US watches the total solar eclipse with binoculars using protective solar filters from El Molle, Chile, along with tens of thousands of tourists on Tuesday. AFP
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04 JULY 2019

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