PHILIPPINE
Vol. 23, No. 5 May 2011
FACTSHEET The Month’s Highlights Political
President Aquino has formally restructured his Cabinet into five groups that will serve as advisory bodies, a move seen to increase productivity and efficiency in governance. Under E.O. 43 signed by the President on May 13 and effective immediately, the Cabinet has been organized into five clusters, namely, good governance and anti-corruption, headed by the President and co-chaired by Budget Sec. Abad; human development and poverty reduction, chaired by DSWD Sec. Soliman; economic development, chaired by Finance Sec. Purisima; security, justice and peace, chaired by Executive Secretary Ochoa; and climate change adaption and mitigation, chaired by DENR Sec. Paje. Despite public uproar over the deal, the Sandiganbayan Second Division approved the plea bargain between former military comptroller Carlos Garcia and government prosecutors over his P303 million plunder case. The ruling is a blow to the anticorruption campaign of the Aquino administration. The government is urging the Sandiganbayan to reverse its decision approving the plea bargaining agreement between government prosecutors and former military comptroller Carlos Garcia. Three cabinet members still have to pass the Commission on Appointments: Finance Sec. Purisima, Justice Sec. de Lima, Social Welfare Sec. Soliman, and Public Works Sec. Singson. The President stated that DILG Sec. Robredo and DENR Sec. Paje will stay in the Cabinet and will not be replaced by people who lost in the last election.
Economic
Economic growth eased to 4.9% in the first quarter, pulled down by factors such as government underspending that, analysts said, have place the 7-8% target for 2011 at risk. While well within the official forecast of 4.8-5.8% for the period, it was significantly slower than the revised 8.4% GDP growth recorded in the first quarter of 2010. The industry sector grew 7.2%, the services sector by a low 3.7% and agriculture by 4.2%. The National Statistical Coordination Board’s (NSCB) released preliminary results of the “revised and rebased” national accounts, which now use 2000 instead of 1985 prices and include new components. As a result, the Philippine
economy officially grew by 7.6% in 2010, faster than the record 7.3% rise in gross domestic product (GDP) based on 1985 constant prices. The revisions were done in partnership with the World Bank. The government will continue with the privatization of the remaining Napocor assets, scheduling the bidding of the Cebu-based Naga power complex (149-MW) next month. Other assets that still need to be privatized are the 850-MW Sucat thermal plant and the 630-MW Malaya thermal plant. The bidding program will resume in July, with geothermal plants in Naga (149-MW IPPA contract) and Leyte (640-MW Unified Leyte Complex IPPA contract) to go first. Unemployment remains high and has appreciably increased from late last year, the SWS said in a new report. Joblessness among Filipinos at least 18 years old rose by 27.2% in March, up from 23.5% in November 2010. This means that an estimated 11.3 million are out of work. The government saw its budget return to the black last month as continued underspending, coupled with strong yet-below target revenue collections, allowed to achieve a P61 million surplus in the period January to April. Merchandise imports posted a 21.2% growth to US$ 5.52 billion in March, with a trade deficit of US$ 1.17 billion for the month. The first quarter import bill grew to US$ 15.59 billion, up 22%, resulting in a trade deficit of US$ 3.3 billion. Export growth slowed to 4% in March, reaching US$ 4.350 billion. Exports for the first quarter rose by an annual 7.8% to US$ 12.215 billion. Total foreign investments approved in the first quarter of the year by 4 major investment promotion agencies (BOI, Clark, Subic and PEZA) declined to P22 billion, 52.8% lower as investment applications approved during the same period of 2010.
The Philippines has been conditionally ruled compliant with the OECD’s global tax information sharing standard following the approval of a relevant law. Remittances by overseas Filipinos grew by 4.1% to US$ 1.62 billion in March; the first quarter remittances stood at US$ 4.49 billion, up 5.9% from the same period of last year. Draft rates for renewable energy subsidies were submitted to the Energy Regulatory Commission which has to approve the feed-in tariffs. Meanwhile, DOE Sec. Almendras has expressed exasperation over local energy developers who are urging the government to increase the limit on the renewable energy capacity that would be installed over the next three years. Almendras remains keen on limiting capacity to 830 MW. Indicative schedules have been set by the government for the rollout of the next seven PPP deals it intends to offer this year – LRT 1 south extension (P70 billion) in August; Puerto Princesa airport development (P4.4 billion) in September; the new Bohol and Legaspi airport developments (P7.6 and 3.2 billion respectively) in October; and the Cavite-Laguna expressway extension (P10.5 billion) in December. Two other PPP deals have been delayed: Daang Hari-South Luzon Expressway link (P1.6 billion) and the NAIA Airport expressway (P10.59 billion) will be rolled out next month. Increased earnings from the central bank’s foreign exchange investments on government and private securities pushed the country’s balance of payments surplus to reach US$ 1.08 billion in April. For the four months to April, the BOP reached US$ 4.6 billion, compared to US$ 2.29 billion in the same period of last year.
A P22 cost of living allowance (COLA) will be added to Metro Manila’s current floor daily wage of P367 – 404, bringing the range to P389 – 426. The adjustment took effect on May 26.
The Development Budget Coordination Committee (DBCC) has agreed in principle to move away from tax credit certificates (TCCs) to cash refunds. The proposal is now under study by the technical board. The most important considerations include how the refunds will be appropriated in the 2012 budget and how these will be disbursed.
Direct foreign investments fell by 70% in February to US$ 97 million, bringing the two-month FDI net inflows to US$ 326 million, a decline of 39%, according to BSP data.
The Philippines has been kept in the US’ piracy watch list given its failure to enact key intellectual property right legislation and strengthening the judicial system.
The government (NEDA) has started reviewing rules of the BOT law in order to better support its PPP program. Inflation rose to a one-year high of 4.5% in April on the back of higher pump prices for petroleum products and more expensive power rates. Average inflation for the first four months reached 4.2%, from 4.3% in the same period of last year. Policy rates were increased anew by the Monetary Board by 25 basis-points as the inflation in April picked up to 4.5% from 4.3% a month earlier. The move brought the overnight borrowing and lending rates to 4.5% and 6.5% respectively. The country’s gross international reserves reached US$ 68.5 billion in end-April, compared to US$ 46.94 billion a year ago.
Business
First Gen Corp. will invest up to US$ 600 million in the next five years for wind energy projects under its expanded plans to tap renewable energy. Philex Mining Corp. has sealed a deal to acquire a controlling interest (60%) in Manila Mining Corp.’s Kalayaan gold-copper reserve in Surigao del Norte. Private equity group CVC Capital Partners will invest P4.96 billion in RCBC, giving it a share of 15% and two board seats. Singaporean private investment firm STT Communications Ltd. has infused P3.6 billion of fresh capital into SkyCable to fund the expansion of SkyCable’s broadband Internet and pay TV services. A unit of STT now owns 40%.
CustomerContactChannels (C3), a global provider of BPO services, is expanding its operations in the Philippines with the addition of 1,000 seats to its existing operations in Fort Bonifacio. Metro Pacific Investments Corp. has expressed fears its tollway unit may lose a contract as the BCDA is reviewing the contract. Should MPIC lose the contract, it would be a major blow to the government’s PPP program and further undermine trust in government’s political will to accept the sanctity of contracts. Pilipinas Shell Petroleum Corp. will spend as much as P3 billion for capital expenditures this year; a major portion going to the expansion and upgrade of the company’s oil depot, retail stations and refinery. The Pasay City Regional Trial Court awarded Piatco, the firm that built NAIA Terminal 3, US$ 175.79 million in just compensation for the expropriation of the terminal in 2005. The court rejected Piatco’s claim of US$ 846.42 million and a special Board of Commissioners’ recommendation that the consortium be paid US$ 376.14 million. Piatco is going to appeal the decision at the Court of Appeals. A joint venture between PLDT and Metro Pacific Investments Corp. has increased its stake in Meralco, bringing the Pangilinan camp’s holdings to 45%. Meralco posted a modest 6% growth in its consolidated net income to P2.1 billion in the first quarter. The Aboitiz-led Therma South Inc. received the BOI approval to develop a 300-MW coal-fired power plant in Davao City; it was granted tax perks.
PNOC will invest P74.78 billion for the full conversion of its Limay refinery to cleaner white oil. The BOI has registered the project for entitlement to income tax holidays and other incentives.
SMC Shipping and Lighterage Corp., a 70% subsidiary of San Miguel Corp., has acquired a 72% controlling stake in Keppel Cebu Shipyard Land Inc. for P596 million.
Manila Water reports a system loss of 11%, while Maynilad is trying to get its system loss down from 43% to 30%.
Sumitomo Metal Mining Co. is acquiring a 25% stake in Cordillera Exploration Co. Inc. with an option to increase its stake to 40%.
Ayala-led chipmaker Integrated Micro-Electronics, Inc. (IMI) has moved to exchange a 12% stake in the company along with cash for a Belgium-based technology firm’s three subsidiaries in Bulgaria, Mexico and the Czech Republic. IMI’s payoff to EPIQ NV, valued at Euro 43 million, will broaden the company’s manufacturing base abroad and boost its engineering know-how.
Accenture Philippines said it will hire an additional 4,000 new employees this year to fill up its newly opened Eastwood City facility. The company’s goal for this year is to have 25,000 employees all over the Philippines. Currently, their local operation is 21,000 strong.
Philex Mining Corp. has acquired a 5% stake in Lepanto Consolidated Mining Corp. at a cost of P1.4 billion. The Bureau of Customs filed a P5 billion smuggling case against listed oil firm Phoenix Petroleum Philippines, Inc. Teradata Corp. has put up a consulting facility in Taguig – the company’s first in Southeast Asia, with an initial 200 seats.
Investments
Korean firm CPNP Holdings, together with the USbased Overseas Private Investment Corp. – will be investing US$ 40 million for the first phase and another US$ 60 million for the second phase of its project to produce paper from corn in Isabela. Initial production capacity is 40,000 tons of pulp a year, utilizing 150,000 tons of corn stalks. SM Hotels and Conventions, Corp. is putting up a P750 million hotel in Davao City. SM tapped global hospitality and travel group Carlson to manage the hotel under the mid-scale brand Park
Inn by Radisson. The Korean firm Donggwang Clark Corp. has broken ground for a US$ 200 million project that will develop a hilly 304-hectare area in Clark into a tourism, recreational and leisure estate that will include a 36-hole golf course.
Infrastructure
The BCDA plans to construct an elevated monorail that interconnects with existing rail transit systems (MRT, LRT, PNR) and connects also into Taguig, making use of the PPP program. The NEDA Board has approved two multibillion infrastructure projects – the first phase of the National Road Program and the Manila Wastewater project. It has also given the green light to the government’s first PPP project involving the construction of a four-kilometer, four-lane toll-road from Bacoor, Cavite to the South Luzon Expressway. Firms looking to bid for a P15 billion contract to maintain and operate two Metro Manila rapid transit railways will have to deal with stiffer qualifications. The investors must demonstrate that they have the expertise to operate the railways (which could favor foreign companies). The DOE has completed a national roadmap for the renewable energy industry, providing a more stable direction toward the development and more efficient use of these resources. Filinvest Development Corp. plans to develop four liquefied natural gas (LNG) power plants across the country with a total capacity of 1,500 – 1,800MW over the next five years. The project will be implemented by its wholly owned subsidiary FDC Utilities which is expected to invest US$ 1.8 billion.
CongressWatch
A consolidated whistle-blowers bill was approved by the House committee on justice. The Anti-Money Laundering Council is calling on lawmakers to expand the coverage of the AntiMoney Laundering Law to include corruption, plunder and other offenses. A resolution seeking to review the current law liberalizing retail trade in the country has been filed at the Senate by Sen. Villar to determine whether the measure succeeded in opening up the industry to foreign investors. The House Ways & Means Committee approved the fiscal incentives bill which overhauls the criteria by which businesses can qualify for tax breaks.
Agriculture
Farm output rebounded with a growth of 4.1% in the first quarter, from a negative 3.04% in the first quarter of 2010, following a recovery in the crops sector which contributes almost 53% to total agricultural production. The crops sector expanded by 8.19%.
Economic Indicators BANKING INDICATORS
MERCHANDISE EXPORTS In Million USD JAN-MAR 2011 6,396
JAN-MAR 2010 6,522
(%) Change -1.9
Clothing Accessories
465
398
16.9
Coconut Oil
467
259
80.1
Woodcraft & Furniture
386
251
53.5
Elect. wiring harness
296
263
12.3
75
23
226.6
Metal Components
207
192
7.5
Bananas
103
80
29.1
69
78
-12.1
151
76
98.6
Footwear
3
3
9.7
Pineapple
57
50
12.4
Shrimp and Prawns
10
8
18.7
Basketwork
11
10
4.4
Dessicated Coconut
53
30
75.4
3,469
3,088
12.4
12,215
11,331
7.8
Electronics and Components
Gold
Tuna Petroleum Products
OTHERS TOTAL EXPORTS
MERCHANDISE IMPORTS In Million USD Electronics and Components Telecommunication Eqpt. and Electrical Machinery Industrial Machinery
JAN-MAR 2011 5,403
JAN-MAR 2010 4,276
(%) Change 26.4
318
223
43.1
718
552
30.2
2,801
2,144
30.7
Transport Equipment
826
832
-0.8
Textile Yarns, Fabric
185
125
48.4
Cereals
249
936
-73.3
Iron and Steel
339
255
33.3
Chemicals
208
167
24.5
Plastics
413
250
65.0
Metal Products
193
140
37.6
Power Generating Machinery
118
129
-7.9
Misc. Manufactured Articles
156
119
30.9
Paper and Paper Products
198
132
50.3
Dairy Products
208
177
17.6
Mineral fuels, lubricants
OTHERS TOTAL IMPORTS
3,249
2,316
40.3
15,586
12,772
22.0
T-Bills primary issues (%p.a.) WAIR Auction Auction Date - (May 16, 2011 ) 91 days
1.889
182 days
N.I.
364 days
N.I.
(NI - no issuance) Reserve Money (May 2 - 6, 2011) 1,066,071 (million PHP)----Dollar Deposit Rates (% per annum) (May 9 - 13, 2011) Savings Deposits 0.354 Time Deposits 60 days and below
0.834
61-90 days
0.915
91 - 180 days
1.071
181 days and above LIBOR/SIBOR (% per annum) (27 May 2011) Libor 90 days
1.179
0.2539
Sibor 90 days
0.2595
Libor 180 days
0.4026
Sibor 180 days Banking Lending Rates (% per annum) (May 9 - 13 , 2011) All maturities
0.4135
6.769
(one year and below)
6.769
(more than 1 yr. - 2 yrs.)
6.769
(over than 2 yrs.)
6.769
GROSS INTERNATIONAL RESERVES In Million U.S. Dollars January February March April May June July August September October November December
2011 63,541 63,890 65,983 68,489
Source: National Statistics Office / BSP
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2010 45,592 45,764 45,579 46,944 47,690 48,704 49,042 49,906 53,754 57,154 60,566 62,371
BOI approved investment project October - December 2010
Peso Exchange Rate (end month)
CEBU AIR Operator of Air Transport Services - 100% Filipino - project cost P 7,507,200,000
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Ave.
SMC SHIPPING AND LIGHTERAGE CORPORATION Shipping Operator - 100% Filipino - project cost P 113,591,000 SHULEY MINE INCORPORATED Producer of lateritic nickel ore - 100% Filipino - project cost P 82,443,000
2011 USD 44.09 43.84 43.39 43.20 43.34
2011 EURO 60.04 60.28 61.13 63.88 62.00
43.57
61.47
2010 USD 46.74 46.16 44.42 44.69 46.49 46.44 45.56 45.18 43.92 43.31 44.09 43.89 45.07
2010 EURO 65.30 62.95 59.39 59.08 57.49 57.50 57.50 57.50 57.50 57.50 57.50 57.50 58.89
Source: BSP
PETER PAUL COCONUT WATER CORPORATION Export Producer of Coconut Juice - 100% Filipino - project cost P 79,050,000
Annualized Inflation 2010-2011
ROMBE PHILIPPINES Producer of Processed Meat - 100% Filipino - project cost P 55,519,340
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ave.
GLOBAL FOODSOLUTIONS, INC. Export Producer of Agri-Marine Products - 100% Filipino - project cost P 34,732,000 CHAGRIN INC. Export Producer of Furniture and Home Furnishings - 100% filipino - project cost P 10,831,000
Philippines Metro Manila 2011 2010 2011 2010 3.5 4.3 3.9 3.6 4.3 4.2 4.6 4.1 4.3 4.4 4.0 5.0 4.5 4.4 4.2 5.3 4.3 4.6 3.9 4.1 3.9 4.1 4.0 4.5 3.5 3.5 2.8 2.2 3.0 3.6 3.0 3.4 4.2 3.8 4.2 4.0
Outside MM 2011 2010 3.4 4.6 4.2 4.3 4.5 4.1 4.6 4.1 4.2 3.9 3.8 3.8 3.5 2.9 2.8 2.8 4.2 3.7
Source: National Statistics Office (NSO)/BSP
Balance of Trade by Major Trading Partners: January - March 2011 (F.O.B. Value in Million U.S. Dollars) Country
Total Trade
Imports
Exports
Bal. of Trade
27,801.25
15,586.19
12,215.06
-3,371.13
1. Japan
3,654.03
1,661.89
1,992.14
330.25
2. United States
3,549.83
1,722.00
1,827.83
105.83
3. Singapore
2,850.38
1,488.86
1,361.52
-127.34
4. China,
2,744.08
1,341.59
1,402.49
60.90
5. Korea, Republic of
1,935.13
1,383.62
551.51
-832.11
6. Taiwan
1,708.75
1,204.79
503.96
-700.83
7. Hong Kong
Total
1,412.60
402.19
1,010.41
608.22
8. Germany
825.98
331.12
494.86
163.74
9. Netherlands
552.14
77.64
474.50
396.86
8,568.33
5,972.49
2,595.84
-3,046.40
10. Others
The Philippine Monthly Factsheet is prepared by: European Chamber of Commerce of the Philippines (ECCP) For more detailed information, please contact: ECCP 19/F Philippine AXA Life Centre Sen. Gil Puyat Ave. cor. Tindalo St. Makati City, Philippines Tel.: (632) 845.1324 Fax: (632) 845.1395 e-mail: schumacher@eccp.com website: www.eccp.com
CEBU
FACTSHEET
MONTHLY Vol. 19, No. 5, May 2011
THE MONTH’S HIGHLIGHTS National Government Allocates Pesos 833 M To Region 7. Some 4,205 classrooms are needed to accommodate 210,360 incoming kindergarten pupils in Central Visayas, according to the Department of Education (DepEd) 7. The National Government has allocated Pesos 833 million to build classrooms and procure under school facilities in Central Visayas. Aside from building classrooms, the amount will also be used to repair old ones, set up school water and sanitation facilities, and procure school furniture like chairs and tables. Metro Cebu Air Safe But Waters Not. While the air in Metro Cebu is still “safe” and “breathable”, many rivers in the metropolis are highly polluted and seawaters even in tourist spots have traces of coliform bacteria. Out of three independent cities, six component cities and 44 towns in Cebu, 73 local government units (LGUs) continue to operate open dumpsites and 49 LGUs still use controlled dumpsites, in violation of Republic Act 9003 or the Ecological Solid Waste Management Act of 2000. Danao, MCWD Sign Pesos 150 M Deal. The Danao City Government and the Metropolitan Cebu Water District (MCWD) signed a Pesos 153.3 million annual bulk water supply contract. In the contract, Danao City will supply to MCWD’s injection point in Barangay Jubay, Liloan in the first six months a minimum of 10,000 cubic meters of water per day. In the 7th and 12th month, it will increase to a minimum of 15,000 cubic meters per day and in the 13th month, and after to a minum of 20,000 cubic meters per day. MCWD will pay for the water delivered by Danao City at a fixed rate of Pesos 21 per cubic meter, inclusive of all taxes and net penalties.The contract price is fixed and not subject to escalation during the 15-year contract period. Business, Government Leaders Sign Deal. For leaders of Cebu’s business community, the signing of the memoranda of agreement and cooperation among stakeholders of the PublicPrivate—Partnership for Better Infrastructure (PPPBI) signals the “beginning of a dream”. The PPPBI is an initiative that aims to broaden
participation in the allocation and implementation of investment in infrastructure to support economic development and poverty reduction. It will be implemented by the Research Educational Institutional Development (Reid) Foundation, a policy research and advocacy group. It will work in partnership with the Cebu Business Club, which sees infrastructure development as key to making Cebu more competitive. Business Owners Ask City: Go Slow On Plastics Ordinance. Business establishments to Cebu City expressed reservations on the proposed ordinance banning the use and sale of plastics in the city. While they commend the proposed initiative, the City Council should only regulate the use and sale of non-biodegradable materials. Instead of an outright ban on the use of plastics – including shopping bags, pouches and polystyrene foam, the City is requested to implement it in phases and using categories. School To Build Boutique Hotel. To help ensure enough workers for Cebu’s tourism industry, the University of Southern Philippines Foundation (USPF) recently announced the plan to build its own boutique hotel to serve as training ground for its tourism students. The construction of the Southern Skies Boutique Hotel is meant to help bridge the gap between the academe and industry requirements. The Southern Skies Boutique is a Pesos 60-million facility, three-storey facility that will house lecture and laboratory rooms, a wellness spa room, dining hall, bar, suite, deluxe and function rooms and a function hall that will also be open for public use. Asiatown Expansion Gets Part of Ayala’s Pesos 5Billion Capex. The Ayala Group of companies is earmarking Pesos 5 billion for capital expenditures (capex) this year to finance another set of projects for Cebu’s twin business districts – Cebu Business Park (CBP) and Asiatown I.T. Park. The approximate capex is meant to build more real estate projects such as residential and leasing spaces for the business process outsourcing (BPO) and information technology (IT) offices. A portion of the capex
will also be used for the two-hectare expansion at the Asiatown I.T. Park. AEV Sees Healthy Business Growth. Publicly listed Aboitiz Equity Ventures Inc. (AEV) sees healthy growth in all of its core businesses this year. AEV will be spending Pesos 42 billion this year on its power business and Pesos 2 billion on its food and banking businesses. The company’s power business contributed Pesos 19.1 billion or 85% of its total earnings. The company’s banking and food units contributed 12% and 7% respectively, offsetting the negative share of the Integrated Transport and Logistics Group. New Facility At CIP. The Oriental Port and Allied Services Corp. (Opascor) has invested in a Pesos 250million Cebu Bulk Grain Terminal (CBGT) at the Cebu International Port (CIP). The facility will reduce the time to unload and bag shiploads of bulk cargo from three days to only three hours. The Cebu Port Authority (CPA) allowed Opascor to install the CBGT under an agreement that CPA will receive 20% of the gross revenue. Top Food Manufacturer Expands Into Real Estate. The country’s largest manufacturer and exporter of processed food recently diversified its business by venturing into real estate with J. Centre as its flagship project. JCentre is a mixed-used development that will consist of a J Mall, hotel, service apartments and a contact center. Justin said the development is a 5-year program. The first phase will be the 3-storey mall and 2-storey parking area while the second phase is the construction of hotel and service apartments. Jobless Rate In Region 7 Up Slightly. The unemployment rate in Central Visayas rose to 8.2% in January this year from 8.1% in the same period last year, according to the January 2011 Labor Force Survey conducted by the Department of Labor and Employment (DOLE). DOLE blamed job mismatch for the slight increase. As of January this year, there were 243,000 unemployed individuals in the region according to the survey.