Duterte attacks on Big Businesses led to Investors losing Billions Stocks; More Investors leaving PH

PSEi drops as Duterte steps up attack vs big businesses; More ‘hot money’ leaving Philippine markets; Thousands more Filipino to Lose Jobs as US companies massive moves to India from Philippines in 2020; Duterte unfazed by investors’ threat to withdraw

Articles Inside:

More ‘hot money’ leaving Philippine markets - business.inquirer.net

PSEi drops as Duterte steps up attack vs big businesses - philstar.com

Stock market: P127B lost after Duterte hits water firms - newsinfo.inquirer.net

Duterte's Bull Market In The Philippines May Not End Well - forbes.com

Philippine Peso Declines After Duterte Unveils Tax Revamp Plan - bloomberg.com

Uncertainty over Duterte alarms investors - business.inquirer.net

Stocks, Peso Drop As Foreign Investors Start Worrying About Duterte’s Course - investvine.com

Thousands more Filipino to Lose Jobs as US companies massive moves to India from Philippines in 2020 - business.inquirer.net

Duterte unfazed by investors’ threat to withdraw - philstar.com

More ‘hot money’ leaving Philippine markets

Hot money flows out as more investors leave stock market

Photo Source: https://cnnphilippines.com/business/2018/08/16/foreign-portfolio-investments-july-2018.html

Short term investments were leaving the Philippines in 2019 quicker than they did in 2018, resulting in more so-called hot money going out in 2019, a reverse of 2018’s record of hot money inflow.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that portfolio investments recorded a net outflow of $685.3 million from January to May in 2019 in stark contrast to the net inflow of $813.8 million tallied in the same period in 2018.

At least 75.7 percent of all investments in the Philippines in May 2019 were from the United Kingdom, the United States, Malaysia, Singapore, and Luxembourg. China was notably not on the top despite hallelujah sang by President Rodrigo Duterte about how China is a good friend.

PSEi drops as Duterte steps up attack vs big businesses

The stock market opened the week on a sour note yesterday, nosediving to the 7,500 level after the Duterte administration issued a new round of attacks on businesses particularly the latest threat on the Ayala Group.

The benchmark Philippine Stock Exchange index (PSEi), the stock market barometer, ended at 7,552.60, plunging by 169.98 points or 2.20 percent.

Likewise the broader All Shares index slipped by 76.92 points, or 1.69 percent, to settle at 4,474.27.

Most sectoral indexes were down led by the property sector.

The Duterte administration lashed out anew at the Ayala Group, this time threatening to amend Ayala Land Inc.’s contract for the lease of the University of the Philippines-Ayala Technohub along Commonwealth Avenue.

“Heightened regulatory risks amid plans to review the UP-Ayala Technohub project pulled down index heavyweights Ayala Corp. and Ayala Land Inc. by 6.60 percent and seven percent respectively,” Philstocks Financials said.

Ayala Corp. shed 6.60 percent to end at P750 per share while Ayala Land Inc. shed seven percent to end at P40.50 per share.

On top of these, President Duterte’s relentless focus on the water concessionaires are also dragging market sentiment, traders said.

The president also said that he also wants to file plunder charges against the water concessionaires. Ayala-owned Manila Water is the water concessionaire for the east zone while Pangilinan and Consunji owned Maynilad Water Services Inc. is the west zone concessionaire. Pangilinan-led Metro Pacific Investments Corp. (MPIC), Maynilad’s parent firm is a listed company.

Luis Limlingan of Regina Capital said that developments abroad added to the uncertainties.

“Investors fled to safer haven assets after reports that Libya declared force majeure as the country’s ongoing civil war ahead of peace talks aimed at ending the conflict met with resistance. Supporters of Khalifa Haftar on Saturday blocked exports at ports under his control, trimming output by about 800,000 barrels a day and forcing the National Oil Corp to declare the ultimatum,” he said.

In terms of specific stocks, newcomer Fruitas Holdings defied the market ending  higher at P1.68 per share or higher by 4.35 percent.

Universal Robina Corp. meanwhile said the Court of Tax Appeals cancelled its tax liability assessment of P2 billion.

URC was questioning its assessed liability for improperly accumulated earnings tax (IAET) for the year ending on Sept. 30, 2010 worth P2 billion. It was assessed for the alleged deficiency of P2.5 billion, which consists of IAET, income tax, value-added tax, expanded withholding tax, documentary stamp tax, and withholding tax on compensation,” URC said.

Source: https://www.philstar.com/business/2020/01/21/1986396/psei-drops-duterte-steps-attack-vs-big-businesses



Stock market: P127B lost after Duterte hits water firms

An estimated P127 billion worth of fortune has been wiped out of the stock market over the past eight trading days after Manila Water Co. and Maynilad Water Services Inc. incurred the wrath of President Duterte over what he called onerous provisions in their contracts, which jeopardized their operations beyond 2022.

Worst hit by the sell-off was businessman Manuel V. Pangilinan-led Metro Pacific Investments Corp. (MPIC), parent conglomerate of Maynilad, which lost P53 billionas stock prices tumbled 38.4 percent.

The worst drop was seen in the last two days, when MPIC’s shares fell 15.67 percent on Tuesday and 13 percent on Wednesday. Its share price closed at P2.69 per share on Thursday, down P1.68.

In terms of percentage decline, Manila Water suffered the most as its share price slid 41.8 percent.The share price closed on Thursday at P11.04 per share from P18.98 on Dec. 2, translating to a loss of P16.4 billion in market capitalization.

Manila Water’s parent conglomerate Ayala Corp. saw a more modest share price decline of 7.5 percent. Given Ayala’s large market capitalization, however, this decline cost it P39.52 billion

Consunji family-led DMCI Holdings, for its part, suffered a 21-percent drop in value over the eight-day period, shaving off P17.93 billion in its market capitalization.

Photo Source: https://cnnphilippines.com/business/2019/12/13/Manila-Water-MPIC-stocks-water-deal.html

Jitters among banks

Nicky Franco, head of research at local stock brokerage Abacus Securities, estimated that the recent declines in the share price of four companies with interest in the water concessionaires gnawed on the equity position of state-run pension funds Social Security System (SSS) and Government Service Insurance System (GSIS) by almost P4 billion.

The government decision not to extend the concession contracts of Manila Water and Maynilad beyond 2022, as earlier agreed upon during the term of President Gloria Macapagal-Arroyo, is seen to cause jitters among banks.

Manila Water alone has about P17 billion worth of debt owed to seven local banks.

“There are too many angles,lots of collateral damage and very poor visibility on what happens next,” Franco said.

Source: https://newsinfo.inquirer.net/1201237/stock-market-p127b-lost-after-duterte-hits-water-firms

Duterte's Bull Market In The Philippines May Not End Well

Duterte: We should kill 'crazy rich people'

Source: https://news.abs-cbn.com/news/01/23/20/duterte-we-should-kill-crazy-rich-people

It’s become a cliché to point out that stock market rallies rarely reflect events in the real economy. Sometimes, though, surging valuations can be a contrarian indicator.

Take Manila, where the Philippine Stock Exchange is on a tear. The market slumped in 2018 to become one of the globe’s worst performers. The 13% drop marked the weakest showing since the 2008 Lehman Brothers crisis. Selling reflected high inflation, a chronic current-account deficit and a fears Donald Trump’s trade war would slam Asian growth.

Fast-forward 228 days, from the market’s late-November low, and all’s seems forgiven. The 22% jump since then puts Rodrigo Duterte’s market in bull-run territory. Local media gathered a few theories for why. Inflation cooled to a 2.7% annualized rate. The peso is no longer cascading lower (it’s up 2.8% this year). And the central bank is now in easing mode.

Trouble is, much of the change to which investors are responding is happening beyond Philippine borders. Inflation, for example, is easing virtually everywhere. The specter of Federal Reserve rate cuts has Asian currencies rising. Look no further than Thailand, where the baht’s 4.5% rally has stumped officials in Bangkok.

What’s more, rate cuts by Bangko Sentral ng Pilipinas aren’t the risk-on signal investors assume. The Philippines, remember, is still stuck with the same political uncertainty and policy drift that slammed both stocks and the peso in 2018.

Much of the excitement rests on the central bank’s about-face on interest rates. Last year, BSP officials tightened five times. The May rate cut–by 25 basis points to 4.5%–is seen as the first of many. But looser credit conditions merely treat the symptoms of what ails Southeast Asia’s No. 5 economy. In other words, the Philippines needs much more than rate cuts.

While one can cite many figures to dramatize the point, the most important, arguably, is 99. That is Manila’s ranking in Transparency International’s annual corruption perceptions index. When predecessor Benigno Aquino passed the baton to Duterte in 2016, Manila was No. 95. In 2010, Aquino inherited a 134th place economy, one that trailed even Nigeria.

Aquino set out to clean up a graft-plagued political system. He strengthened institutions, increased public accountability, went after tax-cheating tycoons and increased online public services to cut out myriad middlemen and women. Those efforts won Manila its first-ever investment-grade ratings, morphing the “sick man of Asia” into an investment darling.

In June 2016, Duterte took office with a mandate to accelerate the Aquino boom. Aquino, after all, merely put the Philippines on the right path. A single six-year presidential term is hardly time enough to repair a long-neglected financial system. And voters figured Duterte was just the man.

Duterte’s 23-year track record running Davao City in the south won him national acclaim. Davao consistently generated rapid growth and featured better infrastructure, lower crime rates and less bureaucracy than the national average.

Yet as the nation’s 105 million people are funding, what works in a high-urbanized region of a couple of million people can’t easily be applied nationally. Indians are learning as much about Prime Minister Narendra Modi. His fabled success running the western state of Gujarat has yet to translate into success remaking Asia’s No. 3 economy.

In Duterte’s case, slippage in Transparency International rankings tells a more troubling story. Aquino raised Manila’s score a whopping 34 rungs–an average of 6.5 per year. Or consider Manila’s precipitous slide in the World Bank’s ease-of-doing-business tables. In 2016, the Philippines was in 103rd place. Today, it’s 124th. On Aquino’s watch, the Philippines bested Argentina by 18 spots; now it trails Buenos Aires by five.

Investors can debate why, but complacency on reform is the most obvious problem. Rather than focus on financial upgrades, Duterte pivoted to a war of choice against the drug trade, and a spectacularly bloody one at that. Many Southeast Asian nations face challenges with dealers and users. But Duterte’s putsch is raising hackles with the Human Rights Watch crowd and denting the nation’s soft power.

Duterte’s main economic contribution, meantime, suffers from its own overkill dynamic. At the center of his plan to get growth back into the 7%-8% range is a $180 billion “Build, Build, Build” infrastructure extravaganza. Who can quibble with increasing competitiveness via better roads, ports and power grids? Also, Manila’s “carmageddon” crisis, how locals refer to its epic traffic jams, is undermining gross domestic product and productivity.

The worry isn’t what Duterte wants to achieve but how he’s going about it. Predecessor Aquino favored a public-private-partnership model that relied heavily on investor capital and high levels of transparency and environmental sustainability. True, Aquino did himself no favors by moving glacially. But the speed with which Duterte is green-lighting projects, and his financing model, raise concerns about increased graft.

Debt, too. By relying far more on government funding than on cash from the private sector, there’s reason to worry about a return of runaway borrowing. Duterte’s welcome mat for Chinese cash, meantime, comes with big strings attached. There also are reports that the infrastructure push suffers from a shortage of local skilled workers.

Again, Aquino left the reform job unfinished. Though he strengthened the national balance sheet and altered the narrative, job growth lagged. Nor did Aquino do enough to change Manila’s reliance on remittances and slow the flow of talent abroad. Duterte has gone the other way, institutionalizing the brain drain by creating a bank for overseas Filipinos. When he travels abroad, he holds Trump-like rallies with overseas workers, treating them like a vital part of his base.

At home, though, there’s little afoot to improve education and training to better compete in the globalized information economy. Laws concerning foreign investment and domestic venture capital dynamics are less attractive than those of neighbors. To date, Indonesia has created four tech unicorns. The Philippines, none.

No doubt, the Philippines is blessed with a vibrant corporate sector. It has evolved and often prospered despite a succession of chaotic governments. What’s most important now, though, isn’t that SM Investments Corp., BDO Unibank, Ayala Corp. and other giants expand their empires. It’s that the government create the conditions necessary for a startup boom.

At the moment, stock punters are enamored with the former narrative. If only the Philippines can hasten its 6.2% growth rate in 2018, the nation’s stock bourse can extend this year’s 12% surge. And perhaps it can. But there is little afoot below the surface to strengthen corporate governance, tame government corruption, revolutionize human capital or churn out unicorns at a pace even close to that of its neighbors.

In the longer term, the optimism coursing through Philippine stocks confront a sobering reality: there’s little going on in Manila to justify a rally based more on spin than reality.  

Source: https://www.forbes.com/sites/williampesek/2019/07/16/dutertes-bull-market-in-the-philippines-may-not-end-well/#1aafdf201834

Philippine Peso Declines After Duterte Unveils Tax Revamp Plan

The Philippine peso shrugged off President Rodrigo Duterte’s tax plans, with the currency declining as traders focused on falling bets for an aggressive easing by theFederal Reserve this month. Stocks rose after staying lower for most part of the day.

“The dollar is generally stronger as prospects of a 50-basis point cut by the Fed next week is fading,” said Andre Ibarra, senior vice president and chief dealer at Security Bank Corp. in Manila. The peso’s fall has “nothing to do” with Duterte’s state of the nation address, he said.

Duterte, in his annual speech to Congress on Monday, pushed for bills that would cut corporate taxes, streamline incentives that cost the government billions of pesos in foregone revenue, and raise levies on tobacco and alcohol products. He didn’t discuss a plan to shift to a federal form of government, a move that would require changing the Constitution.

“It’s good that the focus is on the economy and tax reform in the last stretch of his term,” said Gerard Abad, chief investment officer at AB Capital & Investment Corp. in Manila. “By not mentioning federalism, Duterte has removed one source of noise that investors would rather not talk about. This is a positive development.”

Source: https://www.bloomberg.com/news/articles/2019-07-22/philippine-stocks-peso-may-rebound-as-duterte-keeps-tax-focus

Uncertainty over Duterte alarms investors

Philippine President Rodrigo Duterte’s bloody anti-drug war and his foul-mouthed outbursts in defense of the campaign have unnerved foreign investors in one of Asia’s fastest-growing economies.

Analysts and businessmen point to uncertainties about Duterte’s policies and flip-flopping pronouncements as largely to blame for foreign selling in the stock market and the peso’s plunge to a seven-year low, reversing the initial optimism after his June 30 inauguration.

Some experts say unpredictability is slowing longer-term foreign investment in the Philippines. Photos and reports in the media of killings of suspected drug dealers and users — more than 3,000 since July 1 — have contributed to sagging confidence.

“We can all deal with risks. We can put measures in place to provide for risks,” said Guenter Taus, the head of the European Chamber of Commerce in the Philippines. “But uncertainty is a factor that we do not like in business, and that is exactly what we’re experiencing right now because we don’t know where we are heading.”

Taus said several companies that had intended to establish operations to the Philippines now prefer to wait and see what happens under Duterte. He declined to say which companies had changed their plans.

He said investors unsure about the Philippines may choose to look at other Southeast Asian countries to gain access to the region’s common market of more than 600 million people.

The American Chamber of Commerce of the Philippines said in September that while the country’s economic fundamentals are strong and its potential high, there is growing concern that Duterte’s policies and behavior could affect long-standing optimism by American businesses in the Philippines.

The chamber said that the large number of deaths in the anti-drug campaign is harming the Philippines’ image, and that some investors are asking if the drug war “reduces the rule of law.”

“In addition, traditionally excellent bilateral relations between the U.S. and the Philippines have recently been strained by language from Philippine leaders,” the chamber said.

Last month, before heading to a regional summit in Laos where he had been scheduled to meet with President Barack Obama, Duterte used the Tagalog phrase for “son of a b****” as he told Philippine reporters he wouldn’t accept questions from Obama about extrajudicial killings that have occurred during the drug crackdown. Obama cancelled the meeting.

After the European Parliament recently called for an end to the drug killings and expressed concern over the scale of deaths, Duterte hit back with a profane insult and raised a fist with his middle finger thrust out. And this week Duterte said U.S.-Philippine joint military exercises end this year, though his foreign minister said later that they will continue until 2017 as previously agreed.

On several fronts, Duterte has had an uneasy relationship with Western countries, including the United States, an important treaty ally. He has said he’s charting a foreign policy that is not dependent on the U.S., and has taken steps to bolster relations with Russia and revive ties with China that had been strained under his predecessor, Benigno Aquino III, over territorial conflicts.

He said he won’t allow government forces to conduct joint patrols of disputed waters near the South China Sea with foreign powers, apparently scrapping a deal Aquino reached with the U.S. military earlier this year. Duterte has also said he wants U.S. forces out of the southern Philippines, saying minority Muslims there resent the presence of American troops.

All of this has raised concerns about a Philippine economy that grew 7 percent in the second quarter and 6.9 percent over the first half of the year compared to the same periods last year — among the fastest rates in the region.

The credit-rating agency S&P Global warned Sept. 20 that the stability and predictability of policymaking in the Philippines “has diminished somewhat under the new presidency.” It kept the country’s credit rating at investment grade, with a stable outlook, but said that rating was unlikely to rise over the next two years.

Last Monday, the peso hit its lowest level against the dollar since September 2009. It fell further Friday, closing at 48.50 pesos per U.S. dollar.

Central bank Deputy Gov. Diwa Guinigundo said foreign direct investment continues to grow. It stood at $4 billion for January to June this year compared to $2.2 billion for the same period a year ago. He noted that while Duterte became president June 30, his election victory came nearly two months earlier.

“As far as fundamentals are concerned I think they are outstanding fundamentals, but then the sentiment is something else,” he told reporters late Wednesday on the sidelines of an economic forum. Sentiment is driven by both external and domestic factors and it’s difficult to attribute negative sentiment to a specific factor like Duterte’s statements, he added.

Guinigundo said the government’s economic program follows the broad strokes that have produced 70 quarters of economic growth, low and stable inflation and a healthy banking system. “And yet the stock market is dropping and the exchange rate is moving consecutively down such as we are now the worst-performing currency in the region,” he said.

Budget Secretary Benjamin Diokno said Wednesday that the depreciation of the peso is a result of the strengthening of the dollar more than the weakening of the local currency, and should not be a cause for concern.

But Joey Cuyegkeng, ING Bank’s senior economist in Manila, said the peso was the only Asian currency that slid in the third week of September, despite favorable economic reports, including an increased balance of payment surplus in August.

Presidential spokesman Martin Andanar said that the fundamentals of the economy are solid and strong, and that the anti-drug campaign will enhance the Philippines’ image to attract more foreign investment.

In a speech to troops the day after the S&P Global warning was released, Duterte shrugged off the agency’s remarks. He said if business and the economy are affected, “so be it.”

“Get out, then we start on our own,” he said, apparently referring to Western investors. “I can go to China. I can go to Russia. I had a talk with them. They are waiting for me. So what the hell.”

Source: https://business.inquirer.net/215942/uncertainty-over-philippine-president-duterte-alarms-investors

Stocks, Peso Drop As Foreign Investors Start Worrying About Duterte’s Course

Thousands of extrajudicial killings of alleged drug dealers and users, a “state of lawlessness” declaration and a spreading climate of fear is starting to worry foreign investors in the Philippines as the honeymoon period of acid-mouthed President Rodrigo Duterte seems to reach its end.

One of the most affected sectors is the stock market. Official data from the Philippine stock exchange showed the net foreign transactions on the benchmark Philippine Stock Exchange index fell every week between August 15 and September 16 as investors pulled out money rapidly. Dropping 4.48 per cent over the one-month period, the index was the worst performer in the region. Additionally, the Philippine peso dropped 3.37 per cent against the dollar during this period.

But the killings are just one problem. Duterte’s rants at the United Nations and at US President Obama make the impression on investors that he is a volatile and unpredictable figure. Remarks against China that cast doubts over the future of the country’s foreign policies are also not helpful.

Analysts say that, initially, many of Duterte’s proposed policies such as liberalising foreign direct investments and increasing infrastructure investment came as positive news for investors, but action on this economic agenda is so far lacking as it seems that the current administration has lost its focus on prioritising economic programmes, being to busy with the war on drugs which was just extended for another six months.

Investors thus are worried that the Philippine economy, whose strong growth in the past was firmly grounded in the policies of Duterte’s predecessor, Benigno Aquino III, will come to an end as Duterte seems to be unwilling to abide by conventional political norms that would retain the country’s relative political stability.

While drugs are indeed a menace to the country, and many in the Philippines think it is only right for the government to fight it aggressively, observers find this stance to be short-sighted. Drug problems almost always have their roots in social disorder and poverty, thus rather than killing drug users the Philippines shoudl walk a more sustainable path and create the jobs it needs to sustain the livelihood of its people.

This is partly done by foreign direct investment, but it is not going to realise its beneficial demographic dividend if the right policy is not in place for investors.

However, domestically, businesses have a more pragmatic stance, and members of the Philippine Chamber of Commerce and Industry (PCCI) countered claims that investors are being scared off by the rising number of drug deaths.

“What companies have said they will close down because of the war on drugs? I would like to ask them, name one or two,” PCCI Honorary Chairman Sergio Ortiz-Luis, Jr. said.

The “cold, hard truth,” he pointed out, is that foreign investors focus only on income.

“They don’t care if 50 per cent of Filipinos are killing each other so long as they’re not affected.”

Source: https://investvine.com/stocks-peso-drop-as-foreign-investors-start-worrying-about-dutertes-course/

Duterte unfazed by investors’ threat to withdraw

President Duterte is unfazed by threats that some investors might leave the country due to his order to renegotiate government contracts with two major water concessionaires. 

In an interview with ABS-CBN anchor Ted Failon, Duterte invoked his mandate to serve and protect the interest of the greater majority and not the business groups.

Duterte said he does not mind losing investors’ confidence as long as the contracts are right.

“You thought they will be getting out of the Philippines? Fine, go out, be my guest. I will not be intimidated or even fear the possibility of reduced investment in this country,” he said. 

“What I am after is justice for Filipino people. For all I care, they can all withdraw, but I still need to maintain a matter of dignity for us,” Duterte said.

He vowed to have all contracts prejudicial to Filipinos corrected before he steps down in 2022.

Duterte said he ordered the Office of the Solicitor General to review all contracts and make sure these are not disadvantageous to the people.

“All contracts that are prejudicial to the Filipino people will be corrected. ’Yan ang maaasahan mo (you can count on that), within the limited time left for me in office, I will correct everything, including contracts that are not in the best interest of the Filipino people,” Duterte said.

The President issued the statement as government lawyers are drafting new contracts for Maynilad and Manila Water.

He said the renegotiations would not spare the water firms from charges.

“They appear to be enriching themselves at the expense of the Filipino people. My issue is you agree to this new contract but I cannot give a guarantee that no charges will be filed,” he said.

Duterte lashed out at a shareholder of the Maynilad Water Services Inc. over a remark on the renegotiated contracts. 

Rather than talking about the water concession issue, the President urged the shareholder to focus on problems about poorly-built buildings. 

“The other day, he talked about water concessions. You have a problem, deal first with problems regarding your workers. If I get peeved, I will not grant you any permit to dig,” Duterte said in Filipino the other night in Pigcawayan, Cotabato, where he led the distribution of agricultural assistance for farmers in Region 12.

DM Consunji Inc. (DMCI) is the developer of a five-story building that collapsed when a magnitude 6.5 earthquake hit Davao in October. Nine persons were killed in the incident.

The President was referring to Isidro Consunji, chairman of DMCI Holdings Inc., who said he did not know where the President was coming from about his rants on the water contracts. 

Consunji said “it is good that we’re negotiating, but it would be up to Maynilad’s board of directors whether it would accept the new contract being offered by the government.”

DMCI Holdings has a 25.24 percent stake in Maynilad, along with Japanese firm Marubeni Corp. The remaining balance is held by other shareholders.

Consunji said the previous contract was not drafted by the private sector, with Maynilad having “zero input” in it.

Source: https://www.philstar.com/headlines/2020/01/12/1984097/duterte-unfazed-investors-threat-withdraw

Thousands more Filipino to Lose Jobs as US companies massive moves to India from Philippines in 2020

Wells Fargo downsizing PH operations. One of the biggest banks in the world is laying off 700 tech jobs that are currently outsourced in the Philippines, leaving stakeholders in a struggle to make sense of the wider implications of this massive job loss.

US-based bank Wells Fargo & Co. is downsizing its operations in the Philippines, leaving only 50 tech workers out of 750 by the end of the year, according to a report from Bloomberg on Friday.

Some of these jobs would be transferred to India instead, the Philippines’ main competitor in the information technology and business process management industry. Wells Fargo currently has about 12,000 workers in India.

This is part of a “global workspace strategy,” Bloomberg quoted the company spokesperson saying. Wells Fargo has not yet responded to the Inquirer’s request for further information as of press time.

At this point, it is unclear if the decision was in part influenced by the Duterte administration’s plan to rationalize tax incentives, a move which critics claimed would increase the cost of doing business in the Philippines and make other countries more attractive in comparison.

What is clear, however, is that the move will come at the expense of hundreds of families that depend on IT-BPM workers as their breadwinners. The IT-BPM industry in the Philippines is the largest employer in the private sector, allowing Filipinos to earn big without going abroad.

“This strategy will ultimately provide meaningful benefits to out employees and customers, but we recognize this change will have a significant impact on some employees and their families,” the company statement to Bloomberg said.

Wells Fargo has been undergoing a major corporate restructure since the financial services company appointed a new chief executive officer late last year. Here in the Philippines, the benefits of these changes might get lost in translation as both the private sector and the government saw the news differently.

Charito Plaza, director general of the Philippine Economic Zone Authority, thinks part of the reason must be the Citira, or the Corporate Income Tax and Incentive Rationalization Act—a bill which has made the Philippines a difficult market pitch for potential and even existing investors.

Through the Citira, the Duterte administration is planning to rationalize the tax breaks and lower the corporate income tax in the country, which is currently the highest in Southeast Asia.

Talks about the bill alone have sent pledges on a downward spiral. Last year, total investment pledges registered under Peza fell 16 percent to P117.5 billion, although this was slower than the 41-percent plunge in 2018.

“One of the factors [is likely] the uncertainty [over tax perks]. They [say in the report] that they want to strategize their location. But now, with the uncertainty, of course it’s a wait and see. They can’t make a decision [to expand],” she told the Inquirer in a phone interview.

While the Peza-registered company will be transferring some of its tech jobs, this will only affect around 13.7 percent of the company’s total employment in the Philippines, Peza said in a separate statement. The regulator said there were currently around 5,000 Wells Fargo workers in the country.

“The company assures that they will provide affected Manila-based employees with services to help them find new positions within Wells Fargo or other companies, or those who do not get placed will receive proper separation benefits,” Peza said.

This is not the first major job loss reported this year. Nokia Technology Center Philippines is closing down, leaving 700 workers jobless as the company said that “tough” market conditions prompted it to consolidate its research and development to fewer locations.

The head of the IT & Business Process Association of the Philippines (Ibpap), however, said this was not connected to the Citira at all. Wells Fargo, through its unit Wells Fargo Enterprise Global Services, is a member company under the industry group.

“The Wells Fargo development is in no way related to Citira,” Ibpap CEO and president Rey Untal told the Inquirer.

“Rather, it’s a strategic location optimization strategy at a global level and the banking operations division continues to be [business as usual] where the Philippines continues to be a strategic delivery location,” he added.

Read more: https://business.inquirer.net/290604/wells-fargo-downsizing-ph-operations#ixzz6E1Ag3tu8 Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook

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