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Volume 23 No. 04

April 2012

Business confidence high Local businessmen’s confidence and sentiments for 2012 have improved from cautiously positive to optimistic due to government’s increased public spending, the latest Business Expectations Survey (BES) by the Bangko Sentral ng Pilipinas (BSP) showed. Filipino entrepreneurs, mostly from the big industries, have renewed their optimism on what 2012 would bring in terms of business expansion, employment, and trading prospects. The confidence is backed by an increase in orders, new contracts and projects, more public spending, more business expansion, sound macroeconomic fundamentals, political stability, the expected credit upgrades for the Philippines, and the improving sentiments for the recovery of the US, Germany, and Indian economies.

quarter, based on the confidence index (CI) which rose 40.5% from 38.7% in the last quarter of 2011. Businessmen think macroeconomic assumptions will remain predictable and stable. They expect the peso to remain stronger and interest rates to remain at low levels.

Business sentiment continues to improve in the first quarter this year and even up to the next

The CI for the second quarter was higher at 55.4% versus the previous quarter’s 36.1%.

Gov't sets P5.2-T investments target The Aquino administration has set P5.2-T investments target within six years (2011-2016), banking on the 13 investment promotion agencies’ (IPAs) enhanced marketing programs to attract more foreign capital.

IPAs are targeting accelerated investments inflow at P920.6B in 2015 and at P966.6B in 2016.

From the P757.3-B total investments generated by IPAs in 2011, the government expects to generate P795.2B this year. The investments inflow is expected to increase in 2013 to P835B and to P876.8B in 2014. April 2012

To enhance its investment campaigns, the Board of Investments (BOI) has launched the Global Marketing and Intelligence System (GMIS) to harmonize the trade and investment promotion activities of the Department of Trade and Industry (DTI) and other government agencies. DTI Undersecretary for Trade and Investments Promotion Group

Businesses located in the National Capital Region (NCR) continue to display higher confidence level compared to business in areas outside of the region. For the second quarter, business confidence was more bullish across all sectors, especially the services sectors, because of improving financial intermediation, positive outlook for the real estate, community and social services, and business activities.

(TIPG) Cristino L. Panlilio said they have a good list of prospects for this year led by the investment agreements signed during Aquino’s visit to China. Panlilio expects US$3B worth of Chinese investments this year. “We are seeing more Japanese investors coming. They may be our biggest in 2012,” Panlilio added, noting a surge of Japanese investments in the first month of the year. 1

The shortlist of Japanese companies with keen interest in investing here consists of those that are operating in Fukushima and in Thailand with sister-company operations in the Philippines.

Crisostomo said the group expects increase in revenues this year, both in the voice and non-voice subsectors, with companies seeking to become extra competitive and focus on their core operations.

“These investors are easier to convince because they have already existing affiliations with Japanese companies in the country,” he added.

The voice subsector is seen to grow and to drive higher revenues this year as the Philippines continues to be a preferred customer care supplier given the Filipino’s English proficiency.

PHL’s 13 IPAs

• Aurora Pacific Economic Zone and Freeport Authority (APECO) • Bases Conversion Development Authority (BCDA) • Board of Investments (BOI) • Cagayan Economic Zone Authority (CEZA) • Clark Development Corporation (CDC) • Freeport Area of Bataan • Philippine Economic Zone Authority (PEZA) • Philippine Retirement Authority (PRA) • Phividec Industrial Authority • Regional BOI-Autonomous Region in Muslim Mindanao (BOI-ARMM) • Subic Bay Metropolitan Authority (SBMA) • Tourism Infrastructure and Enterprise Zone Authority (TIEZA) • Zamboanga City Special Economic Zone Authority (ZCSEZA)

INDUSTRY Trends BPO sector eyes US$13-B revenue this year The country’s business process outsourcing (BPO) sector is targeting a 19-% growth in revenues this year on the back of a predictable increase in demand for outsourcing services. “Our target for revenues this year is US$13B, which is an additional US$2B from last year,” Business Processing Association of the Philippines (BPA/P) Executive for External Affairs Director Martin Crisostomo said. The BPO sector generated US$10.9B last year. 2

He added the country’s non-voice subsector is seen to expand this year with more companies in need of fresh services connecting complex skills such as financial services or secretarial, health services information organizations and software development. 10-% export growth projected for 2012 The National Economic and Development Authority (NEDA) is confident that the country's export earnings will further improve this year, with the government projecting a 10-% growth. Socio-economic Planning Secretary Cayetano W. Paderanga, Jr. said the Philippine Economic Development Plan (PEDP) 2011-2013 is keeping its target of US$62.3-B export revenues for 2012. Paderanga called for more extensive government and private sector commitment to the implementation of the strategies in the PEDP, adding that diversification strategies should be more aggressively adopted to minimize the country's vulnerability to adverse shocks, both external and domestic. “Medium-term reforms should continually be implemented to improve trade logistics, business and policy environment, labor productivity, the link between exporters and micro, small and medium enterprises (MSMEs), research and development (R&D, and technology in order to move up the value chain and enhance the competitiveness of the export sector,” he said.

Semiconductor industry anticipates recovery The Philippine semiconductor industry expects to stage a recovery this year and is hopeful that the peso-dollar exchange rate will stay relatively stable to help ensure it. “We expect 2012 to be a snap-back year for electronics. The first quarter still won't be exciting but by the middle of the second quarter we should see some movement,” Semiconductor and Electronics Industries in the Philippines Inc., (SEIPI) President Ernesto B. Santiago said. The country’s electronics exports generated US$23.7B in 2011, down 24% from the US$31.1-B level in 2010 but still accounted for 49.5% of total exports last year. The government expects merchandise exports to increase around 10% this year after contracting 6.9% last year. Stronger earnings from exports could undermine the US dollar exchange rate against the peso. Santiago said early indications suggest the industry could return to the export level in 2010. He said electronic manufacturers' inventories are already depleted and some SEIPI members are reporting growth of around 40% in their order books. “But what will drive demand for technology products is killer apps,” said Santiago, referring to software applications including games used on various gadgets such as cellular phones and tablets. NEDA sees robust manufacturing growth The National Economic and Development Authority (NEDA) is expecting a significant growth for the manufacturing, food, and electronic sectors in the second half of the year as election spending starts providing an impetus up to the 2013 elections. Philippine Business Report

NEDA predicts that private construction will remain robust particularly in the property sector, given the upward momentum in the office and residential sectors. “The performance of the services sector will benefit from the surge in tourism as we improve our infrastructure, intensify our tourism marketing campaigns, and maintain a favorable peace and order situation,” Socio-economic Planning Secretary Cayetano W. Paderanga, Jr. said. “We continue to be guided by our economic blueprint for inclusive growth, which is the Philippine Development Plan (PDP) for 2011-2016 and ensure that all approved projects do not only meet the feasibility criteria, but also more resistant to climate change and disasters, protect the poor from such vulnerabilities and ensure that money does not get wasted by having to make up and rehabilitate from disasters and keep on re-investing in certain projects,” Paderanga said. Food exports seen to recover Industry leaders believe there is great potential for the Philippine food sector not just to catch up with neighbors but also to be the leading food exporter of some agro-food products where the country has the competitive advantage. Philippine Food Exporters (Philfoodex) President Roberto C. Amores said the government has just to step up its productivity enhancement programs to reverse the problem of declining agricultural production. Amores, who is also the Chairman of the Philippine Okra Producers and Exporters Association (POPEA), also mentioned that there is a need to speed up the market and trade protocols to expand access to markets of our agro-food products like China and Korea. Philippines food export sales as of November 2011 reached US$2.4B or 24.1% higher than last year’s US$1.9B. April 2012

By product groups, processed food/ beverages contributed US$941.8M; fruits and vegetables, US$907.5M; and marine products, US$507M. More firms to increase workforce More companies plan to hire additional workers this year to cope with an expected increase in demand for their goods and services amid a likely faster growth of the economy, the Bangko Sentral ng Pilipinas (BSP) said.

The results of the survey substantiated projections that the Philippines could accelerate growth this year despite the problems confronting the global economy due to the debt crisis in Europe. Efforts to increase trade with Asian markets as well as the rising demand for Filipino workers in alternative labor markets are expected to help offset the impact on the Philippines of the eurozone problems. Expectations that consumption of Filipino households would increase further this year was favorable to businesses and was expected to help the domestic economy grow faster this year despite the crisis in Europe.

Trade and INVESTMENTS The employment outlook index, based on BSP’s survey conducted between 6 January and 14 February, showed that the intention of firms in the country to expand their workforce this quarter settled at a favorable +24%. This was better than the +16.8% registered in the previous survey and the +23% stronger than the results of the survey conducted a year ago. A positive index means the percentage of respondent-firms that cited plans to hire more workers in the coming quarter exceeds those that do not have such plans. Intentions to hire workers are seen to help reduce the country’s unemployment rate, which stood at 6.4% in end-October last year. “Favorable employment prospects are anticipated across sectors, as companies gear up for the expected pickup in demand,” the BSP said.

AGRICULTURE/ AGRIBUSINESS AND FISHERY BOI okays P686-M Mindanao rubber project The Board of Investments (BOI) has approved a P686-M rubber plantation project of Zanorte Palm-Rubber Plantation, Inc. covering 2,000 has. in Zamboanga del Norte. Zanorte Palm-Rubber plans to sell rubber as raw materials to manufacturers of tires and shoes and targets buyers such as Dunlop, Bridgestone, and Yokohama. “This project will benefit the rubber industry as among the new growth sectors we want to nurture for industry development. Its multiplier effect will bring in more export revenues and jobs,” DTI Secretary Gregory L. Domingo said. The company will start developing nurseries this year by planting seedlings in a 2,000-ha. plantation. 3

BOI okays Anflo Banana project The Board of Investments (BOI) has approved a P216-M project of Anflo Banana Corp. for the production of Class-A fresh cavendish bananas for export.

both for exports and investments,” Department of Trade and Industry (DTI) Undersecretary for Industry Development and Trade Policy Group (IDTPG) Adrian S. Cristobal, Jr. said. The project will involve production of frozen fish fillets for exports. It will have a capacity of 2.3M kgs. for export annually and is expected to generate 256 jobs once commercial operations start next month.

Department of Trade and Industry (DTI) Secretary Gregory L. Domingo said the plantation located in Compostela Valley is expected to boost economic activities in the region. “Agriculture-related investments will help diversify our export offerings consistent with the Philippine Export Development Plan (PEDP). These investments strategically help boost our revenues and create jobs in the countryside,” he said. DTI Undersecretary for Industry Development and Trade Policy Group (IDTPG) Adrian S. Cristobal, Jr. said the project, which has the capacity to produce 1.1M boxes of bananas annually, will open export opportunities to key markets like Japan. The company also plans to expand its seedling plantations to 256 has. Chinese firm relocates to Cebu for fish exports An P86.3-M agro-industry investment project from China will relocate to Mandaue, Cebu, which is expected to further boost the Philippines’ agribusiness industry. “Agribusiness is a key sector under the Investments Priorities Plan (IPP) that will generate income and jobs in the rural areas. We are actively engaging China as a high-growth emerging market 4

The project also involves acquisition and installation of equipment such as tunnel freezers, cold storage, air conditioning, generators, vacuum-packaging machines, and waste water facility. Packaging materials for the project, including corrugated cartons and plastic sacks, will be sourced locally. The fish products will be sourced from suppliers in Norway, Japan, New Zealand, Argentina, and the Netherlands.

AVIATION LTP opens US$30-M hangar The Lufthansa Technik Philippines (LTP), the joint venture company of Lufthansa Technik and Philippine MacroAsia Corporation, opened a US$30-M hangar in Manila consisting of 8,500-m2 hangar. Lufthansa Technik AG’s Executive Board Chairman August Wilhelm Henningsen said the new hangar will increase the demand for technical services for long-haul Airbus aircraft particularly in Asian market. Henningsen said the additional A380 capability will underscore LTP’s role as a global competence center for Airbus overhauls. CEB buys four new Airbuses The Cebu Pacific Air (CEB) signed lease agreements with CIT Group Inc. (CIT) – CIT Aerospace in purchasing four new Airbus A330-300 for its longhaul flight to Australia, India, Middle East, Europe, and the US.

CIT Aerospace finances 300 commercial aircraft and caters to clients ranging from operators of commercial and business aircraft to manufacturers and suppliers in the aerospace and defense industries. CEB’s leased Airbuses are expected to be delivered by 2013-2014, which will allow the airline to serve new markets beyond the range of its current fleet of Airbus A320.

BPO STI plans P2-B office building In its first foray into business process outsourcing (BPO) sector, private school operator STI Group estimates to spend more than P2B for a mixed-use office building. The company intends to develop its 3,300-sqm. property on Sen. Gil Puyat Avenue in Makati City. by June this year, with the completion expected by 2014. STI President Monico V. Jacob said the development cost ranges from P2B to P2.5B. To partly house STI’s Makati City campus, the building will offer a total of 41,000 sqm. in terms of net usable space to be offered to both BPO and knowledge processing outsourcing (KPO) companies. Jacob said STI continues to expand to new areas, expecting to start work on new school sites in Cubao, Ortigas, Cebu, and Caloocan. STI is opening its newest campus in Novaliches this year. Indian BPO firm to open 500-seat facility Indian business process outsourcing (BPO) firm HCL Technologies Ltd. (HCL) is set to open a 500-seat facility in Quezon City that will initially employ 1,000 agents within the year and will operate in at least two shifts. “In setting up this center, we recognize the Philippines’ growing prominence as a BPO hub,” HCL Philippine Business Report

Financial and Business Services Units President Rahul Singh said. The facility in the country will serve as a critical component of HCL’s Integrated Global Delivery Model (IGDM) focusing on non-voice applications and will be linked to HCL’s existing 11,000-person global network of BPO operations in India and Europe. “The Quezon City center will anchor HCL’s Pacific Basin operations and will leverage on Filipinos’ innate creative talent, linguistic skills, cultural affinity to America, and proximity to Australia and New Zealand,” Singh said. It added a critical pillar in HCL’s global delivery of next-generation BPO services as customers now seek sector-specific specialization beyond voice support and flexibility of time zones and geography.

ENERGY NGCP allots P100B for new transmission lines The National Grid Corp. of the Philippines (NGCP) will spend nearly P100B in the next 10 years for the establishment of new transmission lines and substations and the expansion of existing facilities nationwide. Massive capital expenditures will allow the NGCP to provide a more efficient power transmission amid increasing generation capacity in the areas involved. NGCP Transmission Planning Department Deputy Manager Giovanni R.A. Galang said under the Transmission Development Plan 2011-2020, the NGCP plans to spend P95.8B up to P102.8B in six major transmission line expansion projects. He added most of the projects will be completed in the next five to eight years, with four of the six major investments to be located in Luzon. April 2012

Alsons raises US$280M for power projects in Southern Mindanao Alsons Consolidated Resources Inc. (ACR) plans to borrow from local banks to partly fund a US$280-M power expansion project in Southern Mindanao. ACR Chief Financial Officer (CFO) Luis R. Ymson, Jr. said the company is likely to tap Banco de Oro (BDO) Unibank Inc., Development Bank of the Philippines (DBP), and Rizal Commercial Banking Corp. (RCBC) to provide financing for a 100-megawatt (MW) coal-fired power plant in Sarangani province. “We hope to get the tariff that we signed which is now under Energy Regulatory Commission (ERC) review. Once we get ERC approval, we hope to get financial close with our lenders,” Ymson said. He said the financing structure consists of 70-% debt and 30-% equity to come from stakeholders and possible partners, such as Electricity Generating Co. of Thailand or Japan’s Toyota Tsusho Corp. The planned project represents the first phase of the 200-MW power facility in Sarangani province.

GREEN PROJECTS Bacavalley lines up US$430-M RE projects Bacavalley Energy Inc. is keen to engage in several renewable energy (RE) projects worth more than US$430M starting this year.

is finalizing the agreement with the landfill builders. Construction will start in September and the methane power project will be operational after a year. Fernandez said it will invest US$7M for the initial 2MW or a total of US$14M for the entire 4-MW project. DOE fast-tracks rollout of RE projects The Department of Energy (DOE) said it will fast-track the rollout and approval of renewable energy (RE) projects this year. As many as 15 renewable power generation projects under application might be approved every month while around 50 hydroelectric sites in Luzon and Visayas will be bid out starting in the second half. “What we are set out to do this year is that every month, we will process all applications. Our target will be 10-15 service contract approvals every month,” DOE Undersecretary Jose M. Layug, Jr. said. To date, there are 222 pending applications for service contracts on renewable energy, the bulk of which are for hydropower projects. Coca-cola bats for ‘green’ bottling plants Things are greening up at Coca-Cola Bottlers Philippines’ facilities and bottling plants across the country through widening of its sources for renewable energy (RE), particularly its plan to use biomass technology in their production.

The company is already in talks with numerous foreign firms interested in geothermal, biomass, and hydropower projects around the country. “We are putting up a 4-megawatt (MW) methane project in Navotas. Initially, it will be 2-MW in the 32-ha. landfill,” Bacavalley Energy President Peregrino P. Fernandez, Jr. said. Fernandez said the company, which has a foreign partner,

Coca-Cola Export Corp. Media Relations Manager Wally Panganiban said the company is piloting the use of biomass fuel in its operations with the aim to reduce the bottling plants’ carbon emissions and other environment hazards. 5

“As the urgency of climate action becomes more apparent, a fundamental change is needed to the way the company operates without increasing its carbon footprints with the use of green technology such as biomass,” Panganiban said. The biomass in the Coke plant is the first green fuel biomass in the region.

INFRASTRUCTURE P24-B elevated road project achievable San Miguel Corp.(SMC)-backed Citra Metro Manila Tollways Corp. (CMMTC) said its proposed overhead toll road could solve big problems like the chronic congestion of Metro Manila’s thoroughfares. CMMTC President Shadik Wahono said the SMC-CMMTC Road was the result of more than a decade of rigid financial and technical studies and models conducted by reputable international and domestic firms and these studies and models have validated the financial and technical usability of the project. P1B in loan facility okayed for Clark airport Clark International Airport Corp. (CIAC) and Land Bank of the Philippines (LBP) recently signed a P1-B loan facility for the second phase of the expansion of Clark International Airport’s passenger terminal. CIAC President and Chief Executive Officer (CEO) Victor Jose I. Luciano and LBP President and CEO Gilda Pico led the signing of the loan deal at the LPB building in Malate, Manila. Luciano said CIAC started the bidding for Phase II expansion of the P360-M passenger terminal. The loan will also be used for the improvement of other support infrastructure facilities including navigational equipment, which is vital in the airport operation. 6

North Harbor gets P570-M facelift Manila North Harbor Port Inc. (MNHPI), a joint venture of Harbour Centre Port Terminal Inc. and Petron Corp., is investing P570M for the modernization of North Harbor, the first concession agreement for domestic trade entered into by the Philippine Ports Authority (PPA). MNHPI Chief Executive Officer (CEO) Richard D. Barclay said the Board of Investments (BOI) has approved the project on a pioneer status entitling its port modernization project to six years of income tax holiday (ITH). The Manila North Harbor is the largest and leading domestic port in the country and is recognized a key hub for domestic commerce in the country. “We will be modernizing this port completely. We will be building and reconstructing piers, new container, new passenger terminals, ship to shore cranes, and latest facility for comfort and safety, among others,” Barclay said. MNTC earmarks P131M for ongoing road projects Manila North Tollways Corp. (MNTC), concessionaire of the North Luzon Expressway (NLEX), has earmarked P131M to fund operating expenses of ongoing road projects.

The Balagtas Interchange in Bulacan is the 16th of such facility for the NLEX. The 24.61-km. Plaridel bypass road will be connected to the new NLEX Balagtas Interchange. The said road, which spans from Burol, Balagtas, Bulacan to San Rafel, Bulacan, is composed of four contract packages. Phase 1 has already been completed while work for the second phase is still ongoing. MPIC, Maynilad build 2 treatment plants Metro Pacific Investments Corporation (MPIC) and DMCI Holdings-led Maynilad Water Services, Inc. (Maynilad) are putting up a sewage treatment plant in Brgy. Sto Domingo in Quezon City and a septage treatment plant south of Manila. Over P616M will be spent to build these facilities and their corresponding conveyance systems. Once completed, the sewage treatment plant will have a treatment capacity of 15,500 cubic meters per day (CMD), allowing it to serve some 25,300 Quezon City households and establishments. The septage treatment plant will have a treatment capacity of 250 CMD and will serve about 75,000 households annually in Pasay, Parañaque, Las Piñas, Muntinlupa, and Cavite. More importantly, these plants will help clear the San Juan River Basin, which empties to major water systems such as the Pasig River and Manila Bay.

MNTC President Rodrigo E. Franco said P109M will be used to pay for various fixed and non-fixed operating equipment while the remaining P22M will be spent for operation and maintenance expenses of the Balagtas Interchange and a portion of the Plaridel bypass road that was built by the Department of Public Works and Highways (DPWH).

Maynilad currently maintains and operates three wastewater treatment plants and over 480 km. of sewer lines. Additional wastewater facilities are set to be commissioned in the next few months.

MOTOR VEHICLES TMPC to assemble new Vios The Toyota Motor Philippines Corp. (TMPC) is seeking pioneer incentives Philippine Business Report

for its P1.4-B investments in the assembly of new Vios generation. The TMPC is seeking for a pioneer status to enjoy six years of income tax holiday (ITH) for the full model change of Vios. Chevrolet launches dealership hub in Mandaue City The Chevrolet Philippines opened their 4,040-m2 dealership hub in Highway Ibabao, Mandaue City under the management of Genesis Motor Corp. Chevrolet said it intends to penetrate the markets of Bohol, the Southern District of Cebu, and Siquijor. Terra Motors Corp. to establish e-motorcycles Drawn by the strong local demand for motorcycles, Japanese firm Terra Motors Corp. expressed keen interest to establish an electric motorcycle (e-Motorcycle) assembly plant in the country. Officials of Terra Motors have already met with Board of Investments (BOI) officials to relay their plans. Terra Motors officials said their e-motorcycles would be priced competitively with that of the traditional motorcycles. Terra Motors has expressed preference for the Philippines because of the huge domestic market. They are also looking at the possibility of exporting e-motorcycles to other Association of Southeast Asian Nations (ASEAN) countries to take advantage of the zero duty trading regime in the region. The Japanese firm has also plans to later embark into the assembly of e-cars depending on the progress of the e-motorcycle project.

PUBLIC-PRIVATE PARTNERSHIP Government readies 16 PPP projects The government had identified 16 public-private partnership (PPP) April 2012

projects in various stages of development and would be ready for private sector’s participation. “We also see PPP as a viable and creative solution to our other infrastructure needs in addressing social concerns like hospitals, schools, grain centers, storage facilities for our agriculture sector, among others,” Socio-economic Planning Secretary and National Economic Development Authority (NEDA) Director General Cayetano W. Paderanga, Jr. said. Paderanga noted that there has been much interest from the private sector to collaborate with the government and build these projects soonest which include traditional infrastructure projects like airports, railroads, and water projects. List of approved PPP projects • • • • • • • • • • • • • • • •

Angat Hydro Electric Power Plant Automatic Fare Collection System BALARA water hub Bohol Airport CALA (Cavite and Laguna side) Expressway Establishment of Cold Chain Systems Covering Strategic Areas in the PHL Grain Central Project Laguindingan Airport in Misamis Oriental LRT Lines 1 and 2 Mactan Airport Metropolitan Waterworks and Sewerage System North Luzon Expressway-South Luzon Expressway Connector Road Philippine Orthopedic Center 700-bed upgrade Puerto Prinsesa Airport School Infrastructure Project in Northern Luzon, Central Luzon, and CALABARZON Vaccine self-sufficiency program of the Department of Health (DOH)

Megawide to develop state-run hospitals The Megawide Construction Corp. aired interest in pursuing government contracts to develop state-run hospitals under the government public-private partnership (PPP) scheme which shall include upgrading of the 700-bed in Philippine Orthopedic

Center and other 25 regional hospitals to redevelop in the future. “We would definitely like to get more projects such as hospitals. We are interested in hospitals because of the fact that we have already been doing high-rise condominium,” Megawide Construction Vice-President for Marketing and Chief Information Officer Louie B. Ferrer said. Megawide Construction also confirmed that it had finalized plans to bid for the government’s P10.4-B PPP for school infrastructure projects. JICA interested in PPP The Japan International Cooperation Agency (JICA) is conducting peripheral studies on at least three public-private partnership (PPP) projects including the 5.2-km Ninoy Aquino International Airport (NAIA) expressway, the P8-B Bohol airport project, and another road project. JICA Representative and Economic Growth Section Chief Yoshida Toru said the agency is planning to participate in financing the projects and complete the feasibility studies by June in providing long-term concessional loans for three infrastructure projects. “We are looking at concessional loans. It could be a 25-year loan with a concessional rate of 1.4%,” Toru said.

MANUFACTURING Pepsi Phils. starts P500-M expansion Pepsi-Cola Products Philippines Inc, (PCPPI) has implemented a P500-M expansion project for its bottling plant in Cagayan de Oro (CDO) to firm up and significantly boost its market share in the southern Philippines. The move is a “sound decision that demonstrated PPCPI’s confidence in Mindanao’s potential as a viable market,” PCPPI CDO 7

Operations General Manager Virgilio Salvador said. PCPPI’s bottling facility is capable of manufacturing both carbonated and non-carbonated beverages. The firm chose CDO as host community because of the city’s strategic location and accessibility. PCPPI President Partha Chakrabarti underscored the need for operational expansion to cope with Mindanao’s growing market and sustain dominance in the soft drinks sector. With the plant upgrade, PCPPI officials see production capacity to grow by as much as 80%. The CDO plant began operations in 1967 and had been expanding since, servicing more than 25,000 outlets across Mindanao. Spanish dairy group investing US$30M in PHL Spanish yogurt maker Leche Pascual is seriously studying the construction of a US$30-M manufacturing facility in one of the country’s special economic zones in the first quarter of 2014. Department of Trade and IndustryIndustry Development and Trade Policy Group (DTI-IDTPG) Undersecretary Cristino L. Panlilio said the planned manufacturing facility is expected to employ 200 workers. Yogurt production would be carried out in the facility but the cream base to be used in the production would be imported from Australia and New Zealand since the Philippine dairy industry still cannot supply the demand. For now, Leche Pascual has partnered with Asia Brewery for the distribution of non-refrigerated canned yogurt in supermarkets. “Leche Pascual is one of the pioneers in canned yogurt. Now you can buy yogurt in sari-sari stores. With the health benefits of yogurt, it should not be a luxury (good), but an easy accessible food,” Panlilio said. 8

He said the Philippines would be the first in the Association of Southeast Asian Nations (ASEAN) region where Leche Pascual would build a manufacturing facility. The company, he said, is using the Philippines as a platform for expansion in the ASEAN. Scale maker looking for new production site Filipino-owned First Philippine Scales Inc. (FPSI), maker of Fuji-branded weighing scales, is looking for a new production site as it expands manufacturing operations, preferably inside an economic zone. FPSI Manufacturing Director Charlie Policarpio said the company’s production plant in Malabon is now running at 80% of its rated capacity while servicing mostly the domestic market. Once it ramps up its export program, Policarpio said the company would eventually need to locate to a facility accredited by the Philippine Economic Zone Authority (PEZA) so it could avail of government incentives. The company is eyeing Subic and Batangas as they have their own ports. Policarpio said FPSI is exporting mechanical table scales to Japan, New Zealand, and Mauritius. It is also reportedly getting a lot of inquiries from other countries “as the company has already proven that its quality is at par with the weighing scales made in Japan,” he said.

MINING Longer mine life seen for Batangas gold project Canadian Miner Crazy Horse Resources, Inc. is mulling extending the mine life of its copper-gold project in Batangas as the project’s resource estimate showed reserves that were more than expected.

Taysan copper-gold project’s resources were found to have 459 metric tons (MT) versus the 411 MT cited in October 2011 estimates. This means that the project’s contained gold had 15% more than initially thought while its contained copper was 7% higher at 2,579M lbs. The previously expected life of the mine was at 15 years, with an estimated total production of 1.34B lbs. of copper, 0.41M oz. of gold, 2.72M oz. of silver and 4.09M MT of magnetite. This overall increase in the project’s resources will now allow for a longer mine life of 24 years for the Taysan project, “with possibility of a further increase to over 40 years,” Crazy Horse Resources President and Chief Executive Officer (CEO) Mitchell Alland said.

REAL ESTATE Shang Properties allots P35.5B for condos, hotel Real estate development arm of Malaysia-based conglomerate Kuok Group in the Philippines Shang Properties is spending more than P35.5B to develop luxury high-rise residential buildings in Ortigas and Makati and at Shangri-La Hotel in Bonifacio Global City. The group has allotted an additional P2B to refurbish the existing Shangri-La mall, its carpark building, and the Shangri-La estate. The company’s newest project, Shang Salcedo Place, will require about P5B in capital outlay. Located in Makati, the 65-storey residential project will have over 700 units and is slated for sales launch in the second quarter of the year. Some P1B of the programmed capital budget was earmarked for the 60-storey Shangri-La hotel at the Fort, which will house 577 guestrooms and 97 hotel residences. It will also include the construction of 96 exclusive residential condominium units. Philippine Business Report

More than P12.5B was allotted for One Shangri-La Place, a 64-storey twin tower mixed-use project in the Ortigas central business district. The project will have more than 1,300 residential units atop a high-end six-level mall podium that will be home to about 150 luxury shops and restaurants. Target completion date of the mall expansion is 2013 while the upscale residences is 2014. Festival Mall bares P3.5-B expansion Filinvest Alabang, Inc. is investing P3.5B for the expansion and modernization of Festival Supermall to transform it into a more inclusive shopping and entertainment hub.

“The sprawling 20-ha. fourstorey mall will have to expand and modernize after 15 years in operation to cater to its growing clientele and to catch the expanding affluent market in the south,” Filinvest Alabang, Inc. Managing Director Danilo A. Antonio said. The 10-ha. expansion of Festival Mall is included in the 244-ha. Filinvest Corporate City makeover. Once completed, Festival Mall would become a 30-ha. sprawling shopping and entertainment center in the south. Filinvest Land to develop Cebu City property for BPO sector Filinvest Land Inc. (FLI) is expanding its office leasing portfolio in Cebu City on expectations that demand will increase with the growth of business process outsourcing (BPO) sector. Under a build-operate-transfer (BOT) scheme with the government, FLI said it recently won the right April 2012

to develop a 1.2-ha. property in Salinas Drive in Lahug, Cebu City, which used to house the Bagong Buhay Rehabilitation Center and the Cebu City Treatment and Rehabilitation Center. “FLI remains bullish on the BPO sector and is rapidly expanding its office portfolio to meet the needs of the industry. FLI believes that Cebu, in particular, has good potential for this business,” the company said. CPG eyes hotel development The Century Properties Group (CPG) is eyeing hotel development to further expand its revenue stream. “We hope to grow recurring income base to more than 10% of the portfolio. With opportunities in the pending real estate investment trust law, it may serve as an impetus for us to create a recurring income stream,” CPG Managing Director Marco R. Antonio said. Antonio said CPG is currently building lifestyle center in Makati and added that the group is planning to put up office buildings on its landbank as well as develop convenience retail within its residential and townships projects. CPG is positioning itself in the tourism business and teamed up with other companies to start building major resort and leisure community that will cater to both local and foreign markets. CPG also manages 51 properties including Asian Development Bank (ADB) and Makati Medical Center.

SHIPPING UPS to expand back-office unit in PHL The United Parcel Service, Inc. (UPS) is looking at expanding its operations in the Philippines and sees the country as an important part of its operations in the region. “We have a lot of administrative jobs in the Philippines and we continue to look at putting more

of it,” UPS International President Daniel J. Brutto said. UPS President for the Asia Pacific Region Derek Woodward said the Philippines is an important market where business is continuously growing. “We look at the education of the people, the language, skills, the ability for folks to understand technology and we feel that the Philippines has good work force, has young people who are educated, and speak English very well. Right now, Philippines can serve the need of many different countries in a very efficient way,” Woodward said.

TELECOM Globe spends US$790M for modernization President Benigno S. Aquino III hailed Globe Telecom for its five-year US$790-M modernization program as he underscored the importance of the cell phone industry in serving the people. Aquino led Globe officials and its partners Huawei and Alcatel-Lucent in the signing of their respective contracts as well as the ceremonial switch-on of the Globe mobile network modernization program at Malacañang. “We would like to thank Globe for this massive investment, for placing a bet on our country’s future that enables us to address the problems really in a much quicker pace to the ultimate benefit of the people,” Aquino said. Globe Telecom Chairman Jaime Augusto Zobel de Ayala expressed his excitement over what he said was the good performance of the economy, the low inflation rate, and the strong market, which he said was at “its strongest ever.” “We’re investing close to US$800M in upgrading the whole telecommunications infrastructure of Globe and taking it up to a whole different leve,” Zobel de Ayala said. 9

MAJOR PROJECTS NEDA-ICC okays P22.2-B projects The Investment Coordination Committee-Cabinet Committee (ICC-CabCom) of the National Economic and Development Authority (NEDA) Board has recently approved four road and transportation projects worth P22.2B to be funded through official development assistance (ODA).

Number one on the list is the Baler-Casiguran road project which seeks to improve road access within the province of Aurora. It involves completion of the road’s remaining 50.95-km unpaved road out of the 116.37-km Baler-Casiguran road section. Second is the improvement for the 27.75-km unpaved section of the Samar Pacific Coastal Road, which includes the construction of three bridges. It will link the coastal towns of Northern and Eastern Samar and complements and completes the circumferential road loop for the province. P3.8-B allotted for road upkeep The Department of Budget and Management (DBM) has released P3.8B to the Department of Public Works and Highways (DPWH) for the routine repair and maintenance of national roads and bridges. DBM Secretary Florencio B. Abad said the road maintenance program under the DPWH is one of the avenues through which the government can preserve key national assets. 10

The fund release comprises 95% of the P4-B DPWH allocation for routine maintenance activities, currently covered by Republic Act (RA) 10155 of the 2012 General Appropriations Act (GAA).

COMPANY NOTES Maynilad readies P2.6B for expansion The Maynilad Water Services Inc. (Maynilad) allotted P2.6B for its expansion projects in Parañaque, Muntinlupa, Las Piñas, and Cavite that will benefit approximately 47,000 households. Maynilad President and Chief Executive Officer (CEO) Ricky P. Vargas said more than P2B has been earmarked to extend the water company’s primary, secondary, and tertiary pipelines in Cavite, while P446M will be spent to reinforce and replace primary lines along Daang Hari Highway from Muntinlupa and Las Piñas. Among these new customers are households and establishments, which have been waterless for decades and relied on unsafe and expensive water deliveries from private deep well operators. Printing firm starts green efforts Printing company Dimension Industries Incorporated expects strong growth from the environment-friendly digital printing technology. Dimension Industries Vice President and General Manager Daniel C. Go said printing technology has started to adapt green technology, making the machines not just easier to use but more environment friendly. In digital printing, there are no plates or films required, said Go, noting the fewer incidents of print spoilage and rejections

thereby reducing the company’s carbon footprint. MPIC completes purchase of Asian Hospital Metro Pacific Investments Corp. (MPIC) has completed the purchase of 56.5% of the 219-bed Asian Hospital Inc. (AHI) in Filinvest Corporate City in Alabang. Asian Hospital will be the fourth hospital controlled by MPIC in Metro Manila after Makati Medical Center, Cardinal Santos Medical Center in San Juan, and Our Lady of Lourdes Hospital in Sta. Mesa, Manila. MPIC is aiming to have a total of 15 hospitals and a 3,000-bed capacity throughout the archipelago over the next five years. This is in line with its goal to become a P10-B company by 2016. IPVG Corp. expands to refinery business IPVG Corp. will enter the refining business with the planned entry of an unnamed foreign company which has a strategic relationship with a leading builder and operator of refineries in China. The company’s board approved a plan to change its primary purpose allowing it to engage in the refining business for metal ores, precious stone, oil, gas, and minerals for export purposes. IPVG said its board also approved the issuance of 2.8B shares at P1 each and enter into a memorandum of understanding (MOU) with the unnamed foreign company. URC to go into ethanol business JG Summit Holdings Inc.’s food manufacturing unit Universal Robina Corporation (URC) is venturing into the ethanol fuel business. URC’s Board approved a change in the secondary purpose of the company’s articles of incorporation to include the production of ethanol and to engage in such activity. URC’s sugar division has expressed interest to put up a bioethanol plant Philippine Business Report

STI looks at the Visayas for new acquisitions The investment arm of the STI chain of private schools is eyeing to acquire universities outside Metro Manila, including one in Visayas with an attached tertiary hospital. STI President and Chief Executive Officer (CEO) Monico Jacob said STI Investments is in ongoing negotiations with target schools.

ASEAN WATCH PHL among highest users of trade agreements in ASEAN The Philippines was among the economies in Association of Southeast Asian Nations (ASEAN) with high utilization rate of preferential trade agreements in 2010, latest data from the ASEAN Secretariat showed.

The university, considered one of the oldest in the country, is set to undertake an expansion program that will boost its student population from 4,000 to 15,000 in five years.

Philippine utilization rate rose to 41.2-%, a marked increase from the 20% utilization rate in the 2008 survey of the Asian Development Bank (ADB).

STI offers tertiary-level programs in information technology(IT), healthcare, business and management, tourism, hospitality management, engineering, and arts and sciences.

The increase showed that the Department of Trade and Industry (DTI)’s key program “Doing Business in Free Trade Areas (DBFTA)” is gradually making an impact and encouraging more firms to use the FTAs.

bilateral Agreement US to help PHL in free trade negotiations The United States (US) offered to help the Philippines in meeting the requirements for membership in the Pacific free trade that includes negotiations with US, Chile, New Zealand, Brunei, Singapore, Australia, Malaysia, Viet Nam, and Peru. The Obama administration had made Trans-Pacific Partnership pact, a key plank of greater engagement in Asia and aims to complete negotiations this year. US Trade Deputy Representative Demetrios Marantis said he had already updated Philippine officials on ongoing negotiations.

April 2012

“Clearly, capturing data on the utilization of our FTAs is an important step to assess the impact of our trade policies. Have we created more jobs? Are we making a dent on the social development goals of creating jobs and eradicating poverty?” DTI Secretary Gregory L. Domingo said. The Department is also working with National Statistics Office (NSO) and the Bureau of Customs (BOC) to develop a harmonized system of capturing the country’s data on the utilization of preferential trade agreements and address issues on improving the business environment. Investors’ eyes on PHL Foreign investors have maintained setting their sights on the Philippines compared to other Association of Southeast Asian Nations (ASEAN) countries for setting up new business or expanding operations.

“We see an expanding interest in the ASEAN region, and mostly in the Philippines and Indonesia. I have been bullish about the Philippines last year and I remain bullish about the country this 2012,” J.P. Morgan Emerging Market and Asian Equity Chief Strategist Adrian Mowat said. The Philippines proved stability on offshore global services and has attractive business asset such as the strong demography of very young and educated workforce.

On the calendar Philippine Building & Construction Exposition The Philippine Building & Construction Exposition will be held at Cebu International Convention Center in Cebu City on 24-27 May 2012. An innovative and creative trade show, this event showcases masterpieces of advanced and essential materials that will benefit all the players in the construction industry.

Philippine Postal Permit No. 504

in Negros Occidental using molasses as primary feedstock. A bioethanol plant could cost around P6B.


Economic Indicators

GNI Growth Rate (%)

GDP Growth Rate (%)

7 6 5 4 3 2 1 0

7 6 5 4 3 2 1 0 3Q(2010) 4Q (2010) 1Q (2011) 2Q (2011) 3Q (2011) 4Q (2011)

Exports (In US$Billion)

Consumer Price Index (2000 base year)

128.5 128 127.5 127 126.5 126




4.8 4.6




Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12

Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12

(1994 base year)

6 4





42 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12


Inflation Rate (%)

Peso per US Dollar Rate 44

Imports (In US$Billion) 5.2




3Q (2010) 4Q (2010) 1Q (2011) 2Q (2011) 3Q (2011) 4Q (2011)

Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12

Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12

Interest Rate (%) 4.8 4.7 4.6 4.5 4.4 4.3 4.2 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12

*GNI - Gross National Income Entered as Third-Class Mail at the Makati Central Post Office under Permit No. 504 valid until 31 December 2012

Editorial Team: Anne L. Sevilla, Editor-in-Chief • Vic S. Soriano, Assistant Editor • Cresenciano P. Par, Jam A. Hourani, Ariel B. Salcedo, Elaine M. Lazaro, and Emman R. Caleon, Writers • Ren C. Neneria, Design Layout • Myrna V. de los Reyes, Circulation. Philippine Business Report is published monthly by the Trade and Industry Information Center (TIIC), Department of Trade and Industry, 2F Trade and Industry Building, 361 Sen. Gil J. Puyat Avenue, Makati City 1200, Philippines • Phone (+632) 895.3611 • Fax (+632) 895.6487 • To subscribe, e-Mail:

Philippine Business Report


April 2012

Philippine Business Report

Philippine Business Report (Apr.2012)  

A monthly digest of global and domestic industry trends and developments