Cebu Pacific and 7 LCCs form Value Alliance

Cebu Pacific

The Philippines’ leading airline, Cebu Pacific and seven other market champions in Asia Pacific, have formed the world’s largest low-cost carrier (LCC) alliance – the Value Alliance.

Lance Gokongwei, President and CEO of Cebu Pacific said: “All of our airline partners are champions in their local markets and well regarded for their value and service regionally and nationally. The Value Alliance is a clear example of how LCCs can accomplish more by working together than we could do individually.”

CEB, Jeju Air, Nok Air, NokScoot, Scoot, Tigerair Singapore, Tigerair Australia and Vanilla Air – will provide greater value, connectivity and choice for travel throughout Southeast Asia, North Asia and Australia, as they bring their extensive networks together.

Customers will be able to view, select and book the best-available airfares on flights from any of the airlines in a single transaction, directly from each partner website, thanks to groundbreaking technology developed by Air Black Box (ABB). This means more destinations, more routing options and greater convenience for customers of each airline.

Unlike typical interline technologies, ABB also allows guests to enjoy the full suite of ancillary choices they have come to appreciate from LCCs, such as seat and meal selection, variable baggage allowances and other inflight features – across all partner airline sectors in a single itinerary.

ABB’s Air Connection Engine (ACE) platform has filed for NDC Certification with IATA and is expected to complete full certification soon.

The Value Alliance airlines, who together cover a third of the earth and serve more than 160 destinations with a collective fleet of 176 aircraft across the Asia Pacific region, will strengthen distribution in their non-home markets, expand their saleable networks via the provision of interline itineraries, retain their ancillary revenue opportunities and offer their customers a better, one-stop-shop experience.

“We are extremely excited by the opportunities this partnership presents to our guests.  The Value Alliance partners are leaders in their respective territories, having forged loyal followings by providing value, service and commitment to their home markets.  By working together we can offer our guests a wider choice of destinations and flights – at the most competitive airfares – all in one go,” said Scoot CEO Campbell Wilson.

Patee Sarasin, CEO of Nok Air, said: “The opportunity enabled by ABB and the Value Alliance to offer ancillary products through interline channels is a significant benefit over other partnerships, given LCCs typically earn 10-25 percent of their revenues from such items.”

Scoot, Nok Air and NokScoot are already offering each other’s flights and fares powered by the new ABB technology and other alliance members will follow in the coming months.

“The technology enables us to interface with other airlines within the Value Alliance, including those using different passenger service systems (PSS), to provide a solution to a guest’s travel query – even on routes Vanilla Air may not itself serve to connect Japan to the rest of Asia Pacific,” noted Katsuya Goto, President of Vanilla Air.

Asia Pacific’s tourism industry is the largest in the world, offering travellers experiences as diverse as visiting the Great Barrier Reef in Australia, exploring Tokyo’s mix of traditional shrines and modern shopping, or island hopping in the Philippines or Thailand.

With more than 500 million visitors expected to arrive in Asia Pacific by 2020, the new Value Alliance will connect travellers to more of the unique destinations they wish to explore that are typically found in secondary cities.

PIDS push institutionalization of conditional cash transfer program

State think tank Philippine Institute for Development Studies (PIDS) has called for the institutionalization of the government’s conditional cash transfer program or the Pantawid Pamilyang Pilipino Program (4Ps).

PIDS Senior Research Fellow Celia Reyes pointed out that institutionalizing the 4Ps will have massive implications on the national budget. However, policymakers should first refine the 4Ps by identifying areas in the program that need to be improved.

Reyes noted that programs like the 4Ps have produced encouraging results and was even ranked by the World Bank as one of the “best-targeted social safety net programs in the world” in its 2015 report.

“The proportion of children attending school has been increasing over time. This is something that is actually consistent,” said Reyes. However, she noted that the potential impact of such programs can be stunted when certain conditions are not fully considered.

“Initially, while the 4Ps was designed to assist children ages 6-14 years old, it has been noted that the school participation rate for that age group is already very high. It is really in the older group where you have the problem.”

She also noted a huge disparity between the proportions of children aged 16-18 years old who are attending school in the poorest deciles compared to children of the same age group in the richest deciles.

“As we would expect, the average years of schooling would increase with income. So, that’s eleven years average schooling for those belonging in the richest decile, and only about five years for those belonging in the poorest deciles. If you wanted to provide some assistance, you would really need to target the poorest,” suggested Reyes.

“If you want to fine-tune the program, we would need to shift the assistance from elementary to high school, and probably revisit the amount of grants that we give to high school,” recommended Reyes.

In relation to the need to help young and poor Filipinos attend high school, Reyes presented a comparison of average daily wage rates based on the level of education.

“It is no surprise that high school graduates earn higher income at about PHP 284 a day, higher than those who are not high school graduates at only about PHP 171 per day. Meanwhile, those who are college graduates earn around PHP 623 pesos per day while those who have completed post-graduate studies earn around PHP 1,216 per day.”

Reyes is not keen on extending the 4Ps to tertiary. However, she advised policymakers to explore ways to link up 4Ps recipients and broaden their opportunity of reaching tertiary level of education.

She reiterated looking at the possibility of shifting resources from elementary to high school and strengthening support at the high school level as a policy starting point.

Reyes also emphasized that there should be different interventions or programs for chronic poor, or those people living in poverty over extended period of time, and for transient poor, or those who move in and out of poverty.

“Addressing the needs of the chronic poor requires structural and long term solutions like investing in education and human capital strategies. The transient poor, on the other hand, require a different and more specific approach, not to mention the policy input of other government agencies and sectors—like labor, finance, and disaster resilience—which are just as equally important to combating poverty,” Reyes said.

“Studies show that there has been a slight decline in poverty incidence in recent years, but the actual number of poor people has increased due to rapid population growth. Policymakers must tailor solutions to minimize the occurrence of poverty because poor people are not uniform and their needs are not uniform as well,” Reyes concluded.


Philippines to sustain robust economic growth

The Philippines is expected to remain one of the fastest growing economies in Asia, with its gross domestic product (GDP) growth targeted to reach 6.2 percent in 2017.

Economic Planning Secretary Emmanuel Esguerra said this vibrant view on the Philippine economy is also shared by the private sector which forecasts real GDP growth to reach 5.8 to 6.3 percent by 2017.

“The growth-enhanced fiscal space has allowed major investments in infrastructure, with spending on public infrastructure more than tripling.  The bulk of investments are slated for transportation, covering 43 percent of total infrastructure investments from 2013-2016 and beyond which is estimated to reach more than 7 trillion pesos,” said Esguerra.

“This will be complemented by private investments in public infrastructure amounting to about 1.5 trillion pesos based on the status of PPP projects as of April 2016.”

Secretary Esguerra said the implementation of the three-year infrastructure rolling program (TRIP) by in July 2016 has tightened the link between investment programming and budgeting, ensuring the funding of ongoing programs and projects during the life of the project’s implementation.

He also noted some issues on Mindanao sea transport sector which included the limited capacity of Mindanao seaports and the need to reduce domestic cargo rates given the more expensive rates in Mindanao compared to foreign cargo rates.

With Mindanao playing a critical role in the ASEAN Economic Community, Secretary Esguerra stressed the need to establish and improve the following sea linkages –  Zamboanga-Sandakan (Malaysia), Davao/General Santos-Bitung, Manado (Indonesia), Zamboanga-Muara (Brunei), and Tawi-Tawi-Tarakan (Indonesia).




Japanese solar electricity technology rolled out

JapPhil Solar projectJapan is expecting Japanese solar technology to be rolled out throughout the Philippine public buildings following the recent turnover of another solar electricity generation system project to the Philippine government.

Ambassador Kazuhide Ishikawa turned over solar project at the Philippine National Police Headquaters in Queson City, Metro Manila and attended by the Energy Secretary Zenaida Y. Monsada, Local Government Secretary Mel Senen S. Sarmiento and the Police Director General Ricardo C. Marquez.

Japan has assisted the installation of solar photovoltaic power generation systems to public buildings in Metro Manila and conducted necessary training to operate and maintain the facilities.

The solar system is expected to support the Philippines to cut greenhouse gas emissions by reducing consumption volume of fossil fuels for thermal power generation in the country and promote the efforts of the Philippine government to address climate change with the improvement of access to clean energy.

This solar project is also expected to further foster the strategic partnership between the two countries and serve as a model for other disaster-prone areas in the Philippines.

PIDS recommends proper documentation in school feeding program

State think tank Philippine Institute for Development Studies (PIDS) has recommended proper documentation in implementing school-based feeding program of the Department of Education.

PIDS Consultant and UP Prof. Ana Maria Tabunda said there are constraints in the program such as  inaccuracies in recorded nutrition status such as age, height and weight measurements of children in public schools.

Tabunda noted that there were inaccuracies in documenting the date of activities undertaken as part of the feeding program as well as the height and weight measurements and nutrition status of children before and after the feeding program. She added that there were also errors in the entries for birth dates and ages.

“Glaring errors include inconsistent recorded heights such as children having lower post-feeding height than pre-feeding height and missing post-feeding weight or height measurements. These inaccurate data in school documents as well as those obtained during the survey by PIDS researchers constrain proper assessment not only of the initial nutrition status of would-be program beneficiaries but also the improvement in such status,” Tabunda said.

“All schools need to be provided with the equipment, since non-beneficiary schools also need to submit accurate nutrition status reports, which serve as the basis for determining which schools should implement the feeding programs.”

Tabunda also suggested that school heads, school nurses, and teachers must be trained on the proper use of such equipment and instil in them the importance of proper documentation of the pre-feeding, feeding, and post-feeding phases of the program.

According to Tabunda, help must be provided in the proper selection of beneficiary schools and  pupils as well as in monitoring and evaluating program outcomes. In addition, she suggested that DepED should provide schools with an application program such as Microsoft Excel to help them correctly compute a child’s age to the nearest month.

Given that the administration component of the budget has been increased, it was also recommended that food budget allocation must be increased. Likewise, the effect of inflation should also be considered in food budget allocation.

Tabunda suggested that DepED should review its basis for the 70-percent nutrition target for the SBFP, which has since been increased to 80 percent in the school year 2015-16 implementation.

The link between malnutrition and poor performance in school such as absenteeism, early dropout, and poor classroom performance of school children is well established in the literature. Likewise, evidence shows that school-based nutrition and health interventions are effective in improving school performance. The DepED has been conducting conditional food transfer programs since 1997.

DepEd’s feeding program was first offered as the breakfast feeding program in 1997 to address short-term hunger among public school children. It eventually shifted focus to addressing under-nutrition or malnutrition after SY 2008-2009.

For school year 2014-15, the national government targeted all the 562,262 severely wasted children enrolled in kindergarten to Grade 6 in public schools for the SBFP or about 3.8 percent of approximately 14.9 million children enrolled in public schools. Previously, DepED had been targeting only a fraction of the total number of severely wasted pupils due to budget constraints.

The school-based feeding program (SBFP) provides food to severely wasted children or those whose weight-for-height measurements are below the minus-three standard deviation cut-off established by the World Health Organization for well-nourished populations. It is conducted in schools over a period of 100 to 120 feeding days for a given batch of program beneficiaries.

According to the PIDS paper jointly authored by Tabunda, PIDS Senior Research Fellow Jose Ramon Albert, and PIDS Consultant Imelda Agdeppa, the SBFP was generally implemented well, with majority of the school heads, teachers, and parents expressing appreciation for the program and with many of them expressing a desire to see the program continued, and if possible, expanded.

Although the target goal of having at least 70 percent of beneficiaries attain normal nutrition status by the end of the feeding program may have not been attained in SY 2013-14, the paper noted that these are caused by problems beyond the control of program implementers.

The goal of improving school attendance by beneficiaries to at least 85 percent for the entire school year had been attained. However, the authors pointed out that children who are not beneficiaries of the program also have good school attendance records. They added that the feeding program appears to help improve attentiveness in class and sociability of beneficiary pupils.


NEDA warns of medium-term risks

NEDA April inflation

The National Economic and Development Authority (NEDA) has warned of medium-term risks in the Philippine economy due to a potential recovery in oil prices, El Niño, and the possible occurrence of La Niña in the latter part of 2016.

“International oil prices remained below 2015 levels and this is projected to become unstable on the back of a potential oil production freeze over the medium term by Russia and selected members of the Organization of the Petroleum Exporting Countries,” says Socio-economic Planning Secretary Emmanuel Esguerra.

Esguerra stressed that with the El Niño phenomenon likely to last until July 2016, appropriate timing of rice importation remains critical to avoid supply disruptions which could result in unstable rice prices.

He noted that further intensification of La Niña in the second half of the year could provide upside pressures on the prices of agricultural commodities and utilities.

“To help mitigate the impact of El Niño and prepare for the highly likely occurrence of La Niña, government agencies should coordinate and study various response measures on their possible effect towards agricultural production,” said Esguerra.

“Price movements for major commodity groups remained unchanged, while the slight price increases in some commodities were offset by downward price adjustments in others,” said  Esguerra.

The April 2016 inflation is below the market expectation of 1.2 percent but within the central bank’s forecast of 0.7-1.5 percent.

Core inflation, which excludes volatile prices of energy and food, likewise remained at 1.5 percent and lower than the 2.5 percent in April 2015.

For the first four months of 2016, year-to-date inflation stood at 1.1 percent, lower than the 2.3 percent of the same period a year ago.

“This supports favorable demand prospects and is broadly in line with the expectation of brisker operations during the election period and anticipated pick-up in the economic activity during the summer season,” said Esguerra.

Prices of commodities in the food subgroup have been on a declining trend since January 2016, though a slight uptick in April was observed relative to the previous month.

Esguerra noted that the monthly downward trajectory of prices of rice, which was partly due to the timely arrival of additional rice importation. This ensured sufficient supply during the start of the year.

Inflation in the non-food subgroup inched up by only 0.1 percent despite upward price movements in several commodities.

“This is largely due to the stable prices of housing, water, electricity, gas and other fuels. The decline in electricity, gas and other fuels, as well as in the actual rentals for housing offset the upward price adjustment in water supply and miscellaneous services relating to the dwelling,” Esguerra added.


Cebu Pacific to buy new A321neo aircraft

Cebu Pacific

Cebu Pacific Air (CEB) has sold four Airbus A319 aircraft to a subsidiary of US-based Allegiant Travel Company and plans to buy new Airbus A321neo aircraft.

Allegiant is the parent company of Las Vegas-based low-cost airline, Allegiant Air. Delivery of the four aircraft to Allegiant is scheduled from 2017 to 2018.

Cebu Pacific Air president and CEO Lance Gokongwei said his company aims to expand its operations both in the Philippines and abroad.

“We continue to invest in upgrading our fleet with fuel efficient, versatile aircraft. Between 2016 and 2021, we are anticipating the delivery of 30 Airbus A321neos, for long-range capability, and 16 ATR 72-600 turboprop planes, for better inter-island connectivity,” says Gokongwei.

CEB currently operates one of the most modern fleets in the world, with an average age of 4.82 years. Its 57-strong fleet is comprised of 7 Airbus A319, 36 Airbus A320, 6 Airbus A330, and 8 ATR 72-500 aircraft.

As part of its fleet renewal program, CEB will be taking delivery of 30 brand-new Airbus A321neo aircraft, the largest model in the A320neo series.

The A321neo incorporates new engines and wing-tip devices called Sharklets, which could deliver fuel savings of 20 percent and additional payload or range capability. The aircraft has a flying radius of over 6 hours and can be configured to have up to 240 seats, allowing CEB to access new markets in the Indian subcontinent and Australia.

CEB flew 4.8 million passengers in the first quarter of 2016, a system-wide growth of 13% compared to the same period last year. On average, CEB’s flights between January to March were 87% full.

In the month of March alone, CEB’s passenger volume soared to 1.6 million passengers, up by 7% from the 1.5 million passengers carried in March 2015.

Periodic seat sales, lowest year-round fares, and robust travel demand contributed to the surge in passengers. Some of CEB’s popular destinations for the first quarter include Tagbilaran, Dumaguete and Cagayan de Oro for domestic, and Hong Kong, Singapore and Dubai for international.

The airline also took delivery of two brand-new Airbus A320 aircraft in January, and another one this April, as part of its conservative fleet expansion plan.

“CEB remains committed to stimulating travel and driving trade and tourism opportunities in communities we fly to. We are optimistic that the airline will continue to rise as a significant travel enabler in and out of its home country,” said Atty. JR Mantaring, CEB Vice President for Corporate Affairs.

To cater to the upward travel trend this summer, CEB mounted over 60 additional weekly flights from Manila, Cebu, Iloilo, and Davao to several domestic and international destinations. The airline offers flights to a network of more than 90 routes on 64 destinations, spanning Asia, Australia, the Middle East, and USA.

PIDS underscores SMEs’ role in poverty reduction

A top official of the Philippine Institute of Development Studies (PIDS) has underscored the role of small and medium enterprises (SMEs) in poverty reduction and an engine of economic growth.

PIDS Senior Research Fellow Erlinda Medalla stressed that SMEs could also help improve market access and investment opportunities Philippine small enterprises in the Asean Economic Cooperation (AEC).

Medalla emphasized the sector’s employment and value added contributions to the Philippines, which peaked at 65 percent and 35 percent, respectively. Across Southeast Asia, SME employment makes up 74 percent of all jobs, and contributes 41 percent of the GDP of ASEAN economies.

“The Philippines does not have much of a choice whether or not it wants to partake in this new landscape. In an increasingly economically integrated ASEAN, SMEs have to work within a globalized setting.”

Medalla said that not all SMEs can export and they do not need to. “The goal should be for them to have all the opportunities to participate and engage in business in order to help them grow and contribute in sustaining the expansion of the economy.”

She mentioned a number of factors that the Philippines has to address to encourage SMEs to participate in value chains particularly the lack of access to finance and credit that would enable SME firms to develop competitiveness and connectivity must be prioritized as well.

“Government’s role is to enable and facilitate the linkages and access to markets, finance, and technology, and to remove various barriers to entry and exit. The role of the new Competition Law will be very important,” Medalla said.

Policymakers should also concentrate on enhancing strategic opportunities. Medalla said the kind of policies needed depends on which SME sector policymakers intend to help. She recommended policies that would raise SMEs’ capability to comply with AEC standards, such as developing the halal industry, improving trade facilitation, and identifying standards to enable them to access a “duty-free” ASEAN market.

She also recommended helping each sector gain competitive advantage through industry clustering, sharing services facilities, and developing industry roadmaps.

“The opportunities are there in the supply chains. The business sector has to adopt smart strategies to capture opportunities to participate in the production networks, and policymakers must create the enabling business environment for SMEs to thrive.”

Despite the increasing contribution of SMEs particularly in terms of job generation and contribution to GDP in the Association of Southeast Asian Nations (ASEAN) region, experts argue that they remain one of the region’s untapped resources.

In a recent forum organized by PIDS, the Asian Development Bank (ADB), Department of Trade and Industry, Management Association of the Philippines, and Financial Executives of the Philippines, experts concurred that a lot can still be done to unleash the potential of SMEs.

SMEs comprise the largest number of firms in the ASEAN region. They generate the majority of jobs and substantially contribute to ASEAN’s GDP.

ADB’s Vice President for Knowledge Management and Sustainable Development Bambang Susanto stressed in his keynote address the importance of opening access and opportunities for micro and small and medium enterprises.

To help SMEs play their role in the domestic, regional, and global production networks, Susanto suggested that the ASEAN Economic Community (AEC) must build the physical connectivity of SMEs, raise their labor productivity and skills to standards of global value chains, and improve their access to finance.

Wignaraja lamented that these contributions are not yet reflected in international trade as he noted that high-performing SMEs make up only 21 percent of direct exports across ASEAN economies.

Many factors obstruct the growth of SMEs, but one of the oft-cited problems is the lack of access to finance and credit. Wignaraja explained that the current banking and credit structure does not know how to deal with SMEs. Bank requirements on collateral and business and finance plans are strict. Unable to comply and lacking financial literacy, SMEs are often forced to rely on informal resources.

SMEs do not have access to the capital they need to expand or participate in larger business and trading activities. Total credit gap or the difference between formal credit provided to SMEs and estimated SME financing needs in ASEAN,  amounts to as much as USD 52.8 billion.

Wignaraja also pointed out that as China begins to slow down and move out of labor-intensive industries, firms in countries like the Philippines, Malaysia, and Thailand will have more business opportunities as suppliers of a range of products.

“International trade itself has fundamentally changed in the 21st century and is no longer about direct exports. Instead, trade increasingly means global supply chains where different production on stages are located across geographical space and linked by trade in intermediate inputs and final goods,” Wignaraja pointed out.

While Wignaraja believes that much of the work must be done by business and private sector in boosting labor productivity, improving the investment climate, raising infrastructure spending, improving information and communication technology infrastructure, and increasing financial access for SMEs, both experts are in agreement that the government also has a critical role to play in SMEs’ success.


Philippines to boost renewable energy projects

The Philippines is expected to further boost its renewable energy projects with the new US$44 million World Bank loan that would help bring electricity to millions of poor families in far-flung areas of the country.
The new loan guarantee under the Philippines Renewable Energy Project (PhRED)  would help reduce risks of commercial lending to electric cooperatives and enable cooperatives to expand their electricity network, invest in renewable energy like small hydroelectric and solar power plants, and expand electricity access for poor households.
The World Bank also approved a US$23 million grant for the Access to Sustainable Energy Project (ASEP), designed to help bring solar power to remote communities and islands not connected to the electricity grid managed by electric cooperatives.
World Bank Country Director for the Philippines Mara Warwick said the two projects can boost the country’s energy sector, strengthen economic growth, and help reduce emissions of greenhouse gases that contribute to climate change.
“Having electricity in the remote areas of the country means that children will be able to study their lessons at night and their parents can also have more opportunities to earn money from entrepreneurial activities,” Warwick said. “Initiatives like these can help address poverty and promote shared prosperity.”
The projects can help the Philippine government achieve its long-term goals of full electrification by the 2020s and a tripling of renewable energy installed capacity by 2030, as part of the country’s sustainable development agenda, said Department of Energy Secretary Zenaida Monsada.
“Electric cooperatives, serving over half the Philippine population, will play a big role in the government’s push to reach full electrification,” said Secretary Monsada. “The Philippine government provides electrification grants to the electric cooperatives, but these cover only a portion of overall investment needs. Commercial loans are essential for strengthening electricity distribution networks, and banks look to the guarantee provided by PhRED to help manage their risks in providing significant funding amounts to the sector.”
“ASEP complements grid electrification by investing in solar home systems.This will allow electric cooperatives meet their electrification targets in a more viable fashion by enabling them to avoid uneconomic line extensions while still providing electricity to remote, poor households.”
The Philippine Renewable Energy Project will provide more financial resources to an existing financial guarantee program of the government – the Electric Cooperative Partial Credit Guarantee program. Implemented by the Local Government Unit (LGU) Finance Corporation, the program has been providing credit guarantees since 2004 to commercial banks in the Philippines that extend loans to electric cooperatives.
PhRED is funded by the Clean Technology Fund under the Climate Investments Funds administered by the World Bank and provide resources for promoting low carbon technologies to help mitigate climate change.
ASEP is funded by the European Union, as a portion of their total support to the Department of Energy amounting to Euro 60 million. The Global Partnership for Output-Based Aid, a partnership that funds initiatives for improving the delivery of basic services to the poor in developing countries, is also contributing US$3 million, specifically for the solar home systems component of the project.
Both PhRED and ASEP will be implemented by LGU Guarantee Corporation, a private entity owned by the Bankers’ Association of the Philippines and the Development Bank of the Philippines.