2017 Year in review for business

TWO INDUSTRIES suffered a huge loss as 2017 comes to a close. One was the retail sector when the homegrown shopping center NCCC Mall was razed, affecting another industry, which was the business process management sector, as its tenant Research Now SSI, a contact center firm, was also gutted down.

 The fire incident killed 37 people and left one missing, mostly call center agents who were trapped at the mall’s fourth floor where their office was located.

 “We mourn this loss in the industry and want to point our concern to the possible lack of coordination between the mall security and SSI security,” cited the joint statement of Information and Communication Technology Davao and Business Process Outsourcing Association of Davao Inc.

 Research Now SSI employed a total 500 workforce in its call center operation at NCCC Mall.

 “It is with deepest sadness that lives were lost in a season where families gather to celebrate the birth of Jesus Christ. Most of them were about to end their shifts and go home to their families and prepare for Christmas celebration,” said Davao City Chamber of Commerce and Industry Inc. (DCCCII) in a separate statement.

 The DCCCII called on the authorities that justice has to be served for the fire victims.

 NCCC Mall, which was established in 2003, is operated by homegrown retail operator LTS Retail Specialists Inc. The company was among this year’s top taxpayers in the city both in paying business tax and real property tax.

 “NCCC is deeply affected by the fire that destroyed our mall and caused lives to be lost,” NCCC Mall said in its statement. The mall was earlier planned to be expanded and renovated by LTS Retail Specialists Inc.

 Lapanday’s box plant closed

 One of the banana companies, Lapanday Foods Corp. (LFC), also suffered the wrath of the blaze as its box and plastic manufacturing plants in Mandug, Buhangin District were torched allegedly by the New People’s Army on April 29.

 The fire incident prompted the company to stop the operations of the box and plastic manufacturing plants, displacing about 100 employees. The company started to cease its packaging operations on July 9.

 LFC granted individual separation pay to its workers. After the burning incident, the company already distributed employees’ salaries, cash equivalent of their leave benefits, 13th month pay, productivity incentives and other benefits.

 “The company shares a common loss unnecessarily and unfairly inflicted by this lawless armed group. This loss was not just inflicted on its employees, now rendered jobless. It was a loss for Davao City as well since Lapanday is the seventh top taxpaying company in Davao City, recognized by Mayor Inday Sara Duterte-Carpio last March 17,” LFC said in a statement.

 Besieged farmers under Madaum Agrarian Reform Beneficiaries Association Inc. (Marbai) reportedly sought help from the National Democratic Front of the Philippines in January to mete sanction against the banana company.

 Marbai, through its head Mely Yu, pushed for land ownership of a portion of LFC’s banana plantations in Madaum, Tagum City. The Department of Agrarian Reform also intervened and issued writ of installation in May in favor of Marbai.

 Impact of Martial Law on tourism

 Three days after the declaration of Martial Law in Mindanao on May 23, the tourism sector lost P20 million in revenues. Of the total, the City Tourism Operations Office (CTOO) recorded that bulk or P18 million was from the hotel and accommodation sector as events and room reservations were canceled.

In hotel bookings, data from CTOO showed that as of May 24, hotels such as Park Inn by Radisson, Hotel Uno, Grand Regal Hotel and D’ Leonor Hotel estimated that 95%, 80%, 71.1% and 60% respectively of their total reservation was affected.

 It also affected Casa Leticia, Seda Abreeza Hotel and D’ Japanese Tunnel Family Resort, which affected 47.72%, 30% and 25% of their total reservation.

 Apart from cancellations, CTOO chief Generose Tecson said there was a huge drop in the number of tourist arrivals in June as an effect of Martial Law declaration. The number of tourist arrivals declined by 19.21% in June with only 123,343 visitors from 152, 678 in the same month last year.

 The tourism sector, Tecson said, bounced back especially in August in time for the city’s Kadayawan Festival.

 As of early August, she said they already noted that 85% out of 10,000 accommodation rooms that were filled up specifically on Aug. 17-20. Even there was a decline in June, she said they remained optimistic to hit the 2 million mark in tourist arrivals by the end of the year.

 “We are encouraging tourists to come and visit Davao in spite of Martial Law. We assure that everything is peaceful here in Davao,” Tecson said.

 Sea link to Indonesia

 On April 30, President Rodrigo Duterte and Indonesian President Joko Widodo launched the sea connectivity from the cities of Davao and General Santos to Bitung in Indonesia. The 500-twenty footer equivalent unit roll-on/roll-off vessel of Asian Marine Transport Corp. was used during the inaugural voyage.

 With the new sea route, President Duterte said businesses from Mindanao can avail of lower logistical cost at a reduced shipping time from five weeks to two to three days. The route, which was then serviced by Asian Marine Transport Corp., charged $700 per TEU that was lower from the cost of $2,200 when shipping from Davao to Manila to Jakarta, Surabaya and Bitung in Indonesia.

 “We are hopeful, that by opening new ports and exploring new routes, we will stimulate trade, tourism and other areas of development among Asean member-states,” Duterte said. The connectivity marked as a milestone for both countries.

 President Joko Widodo, who was also in the launching of the route as part of his state visit, said its inauguration is an important milestone that could help traders save logistics costs and lessen the shipping time.

 “I hope that this new RORO service, the Davao-General Santos-Bitung route, present new opportunities,” Widodo said.

 The sea route is among the most important commitments that President Duterte forged with President Widodo during the former’s state visit in Indonesia in September last year. The link has been found viable for having strong potentials for international trade and commerce, basing on the study of Research Education and Institutional Development Foundation in 2010.

 But this temporarily halted as the Asian Marine did not service the route after the inaugural voyage. This resumed in October when the Indonesia-based shipping company KM Gloria 28 started to service the route.

 Indonesian Consul General Berlian Napitupulu said the company only plied from Davao City to Bitung. He said KM Gloria 28’s vessel was smaller with only 256-ton capacity, which was viable to serve the route, compared to Asian Marine’s 500-TEU vessel.

 “This is part of our efforts to sustain the sea connectivity from Davao to Manado. It is best to start with small vessel,” Napitupulu said.

 Davao-Kuala Lumpur flight

 Apart from the sea link, new international air connectivity was announced in July during the Davao Investment Conference. The city was planned to be connected anew with Malaysia via budget carrier AirAsia after nearly two decades.

 The connectivity was planned to start this month, which the Department of Tourism XI reported that the inaugural flight from Kuala Lumpur to Davao City and vice-versa were already fully-booked.

 Anthony Francis Fernandes, chief executive officer of AirAsia, said during the Davao Investment Conference at SMX Davao Convention Center that the city has vast potentials to attract tourists and investors from Malaysia, which has been touted as among the top chosen destinations with about 2 million tourists a month.

 This, Fernandes said, is their first air link from Davao as they planned to connect the city to nine more other international destinations within the next three years.

 “We will bring the world to Davao,” Fernandes said.

 Mayor Sara Duterte-Carpio said the introduction of the new direct flight between Kuala Lumpur and Davao is timely, which could further boost the tourist and investor influx in the city. As of the first quarter, the City Tourism Operation Office recorded 459,104 tourist arrivals.

 The city government targeted to reach 2 million in tourist arrivals by the end of the year.

 “(The Davao-Kuala Lumpur direct flight) is a key step in this direction to empower local players across various economic activities,” Carpio said.

 The Davao-Kuala Lumpur will be the second international direct flight at Davao International Airport, next to the current route from the city to Singapore. Backed in 1996, there was a direct link to Malaysia specifically from the city to Kota Kinabalu.

 Arturo Milan, a trustee of Davao City Chamber of Commerce and Industry Inc., said the air connectivity was halted following the Asian financial crisis in 1998. Now that the economy has normalized, he said they hoped that new air link will be sustained.

 “We also hope that there would be direct flights to Kota Kinabalu in Malaysia and in Manado and Jakarta, Indonesia,” Milan said.

 The Malaysian-based airline company AirAsia has been servicing the city since five years ago, beginning with Clark-Davao route which was temporarily stopped for a while but resumed this year along with new other routes from the city to Palawan, Cebu and Boracay.

 The company also has a Davao-Manila connectivity since 2015.

 WESM in Mindanao

 Another milestone this year was when the Department of Energy and Philippine Energy Market Corp. launched on June 28 the wholesale electricity spot market (WESM) where generation companies can easily sell their excess power to the market even without contracts.

 The WESM is targeted to start commercial operations next year.

 “The spot market is where the demand and the supply of electricity meet so that there will be an increased efficiency in the use of energy,” Energy Undersecretary Felix William B. Fuentebella said in a statement.

 The launching of the market was also supported by the grid operator National Grid Corp. of the Philippines. Once there would be the interconnection of the grids from Mindanao to Visayas soon, the island can eventually sell power to the rest of the country.

 Fuentebella assured the public there would be fairness and transparency in WESM. “That is the bedrock of the rules to have a level playing field for the good energy participants to shine,” he said. This, he said, is designed to easily trade excess supply.

 The WESM will be administered by PEMC.

 “PEMC is committed in its mandate of operating an electricity market for the whole country that will usher in transparency and competition in the generation sector,” PEMC president Melinda L. Ocampo said in a statement.

 “We are looking forward to our presence in Mindanao as we fully realize the vision of EPIRA (Electric Power Reform Industry Act) in the creation of a one WESM where benefits of efficiencies in electricity trading shall redound to the benefit of Mindanao end-users through transparent and reasonably-priced electricity,” Ocampo said.

 In Luzon, the WESM was set up in 2006, and in the Visayas in 2010 for easy trading of excess in power supply.

 Closure of erring businesses

 Erring businesses were not also able to escape from the brunt of strict laws of the national and local government. Among those that were temporarily padlocked by Bureau of Internal Revenue (BIR) this year included restaurants in the city such as Ahfat Seafoods Plaza and Tuna Express Kamayan Grills.

 The BIR XI reported that the homegrown Chinese restaurant Ahfat Seafoods Plaza, for instance, allegedly under-declared P31 million in about two years. The restaurant violated the tax code due to the understatement of taxable sales by 30%.

 Tuna Express Kamayan Grills, meanwhile, was closed last month for alleged under-declaration of sales worth P6 million this year.

 The BIR is strictly monitoring establishments if they have under-declaration of sales of more than 30%. In a statement of Department of Finance, the tax code cites that “an under declaration of more than 30% constitutes fraud tantamount to tax evasion.”

 Meanwhile, Mayor Sara Duterte-Carpio ordered the Business Bureau to pursue indefinite closure of Huckleberry Southern Kitchen and Bar on Dec. 22 for allegedly violating the liquor ban ordinance.

 The Huckleberry allegedly served liquor beyond the prescribed time. Under the city’s ordinance, the selling of any liquor products is banned from 1 am to 8 am.

 Mega Harbor project thumbed down

 After reviewing the P39 billion reclamation project of Mega Harbour Port and Development Inc., Mayor Sara Duterte decided to terminate the joint venture agreement, considering the implications of the project especially on its potential risks to the environment.

 The joint venture agreement was signed on June 21 last year by President Duterte, who was then the mayor of the city.

 Mega Harbour Port and Development Inc. planned to establish a project that would include reclamation to put up four islands for port operations, recreational and commercial zones, office areas and residential development.

 In the company’s briefer about the project, “the project will benefit some 3,500 families in the coastline communities of Poblacion and Agdao districts up to Barangay Bucana through the following clearing of roads, flood control system and calamity mitigating measures, enhancement of power and water supply lines and street lighting system.”

 Mega Harbour Port and Development Inc., however, called the decision of Mayor Sara as “unfair and unreasonable,” based on the company’s letter to Mayor Sara. The company said it immediately worked on complying the requirements and started the implementation of the initial phase of the project.