government launches 5-year investment promotion...

1August 2010

Volume 21 No. 08 August 2010

The government is expecting to generate P2.4T worth of investments in the next five years with the launching of the five-year Philippine Investments Promotion Plan (PIPP) which harmonizes all the investment promotion activities of the 11 government investment promotion agencies (IPAs).

Covering the period 2011-2014, the PIPP will serve as the roadmap for all the IPAs to synchronize strategies in investment promotion. It specifies roles and action plans in carrying out IPAs’ promotional efforts.

The IPAs agreed to work on achieving investment growth of 10% in 2010, 15% in 2011-2012, and 20% in 2013-2014.

The plan aims to more than double the current investment approvals to P658B at the end of 2014 or an accumulated P2.4T in five years.

Government launches 5-year Investment Promotion Plan

Investments generated by the government’s IPAs in 2009 reached P315.3B from P473.3B in 2008.

The PIPP is positioning the Philippines to become one of the core investment destinations in Southeast Asia in the eight targeted sectors. The key sectors were chosen based on prevailing government plans, their potential as shown by historical data, free trade agreements, and plans of multinational companies.

Aside from improved investment efforts, factors expected to lure projects into these industries include the natural and human resources available locally, existing groundwork like laws and locational plans, and the country’s competitiveness in these sectors.

An integral component of the PIPP is the Japan Investment Market

Strategy, which specifies strategic approaches for the IPAs to generate more direct investments from Japan, the country’s top source of foreign investments today.

In the manufacturing sector, the strategy calls for Japanese investments in transportation parts industry like battery manufacturers of hybrid and electric vehicles. The plan has also identified big four Japanese iron and steel manufacturers such as Nippon Steel, JFE, Sumitomo Steel, and Kobe Steel.

The plan recommends that marketing activities be shared by IPAs through joint road shows and uniform collateral materials to ensure that investors are referred to the suitable economic zone and are provided comprehensive information.

Investment growth drivers identified in PIPP

■ Agro-industry ■ Business Process Outsourcing-

Information Technology ■ Electronics-semiconductor ■ Energy ■ Logistics ■ Mining ■ Shipbuilding ■ Tourism

US retains perks for RP goodsPhilippine exports will continue to enjoy duty-free entry to the US this year after Washington completed an annual review of its trade preference program for developing countries.

The Philippines thus continues to join 130 other beneficiary countries eligible to export roughly 5,000 types of products duty-free to the Western economy.

Even those Philippine exports which last year exceeded the quota – defined as the instance when a product from a specific country

corners more than half of total US imports of that commodity – will continue to enjoy 0% tariff.

These include Philippine citrus fruit, coffee, rattan mats, palm leaf crafts, abaca twine, car batteries, and exposure meters.

Bureau of Export Trade Promotion (BETP) Executive Director Senen M. Perlada welcomed the US government’s decision but noted that Philippine exporters needed to take more advantage of the Generalized System of Preferences (GSP) program. In 2008, for instance, local exporters did not

claim over 800 types of goods eligible for zero tariff.

Only 36% or US$626M of the US$1.7B worth of eligible exports from January to August that year took advantage of the program.

“We’re losing out on the opportunity. Certainly, it requires more paperwork but exporters have to get out of their comfort zone,” Perlada said.

Philippine export sales to the US amounted to US$6.8B in 2009, or 17.7% of the country’s total sales to the world.

Philippine Business Report2

industrytrends

Electronic exports to grow by 20%The country’s electronics exports may increase over 20% this year on the back of a recovery in global demand, possibly lifting exports to levels last seen in 2008, Semiconductor and Electronics Industries in the Philippines Inc. (SEIPI) President Ernie Santiago said.

“Hopefully, 2010 export sales can surpass the 2008 figures,” said Santiago. SEIPI’s initial growth projection for the year was between 10% and 15%.

In 2009, the value of electronics shipments went down by 22% to US$22.2B from US$28.5B in 2008. Electronics exports hit a record high of US$31B in 2007.

In the first four months of the year, electronics shipments reached US$8.7B, up 45% from the US$5.9B recorded in the same period in 2009, data from the National Statistics Office (NSO) showed.

Total Philippine exports in January-April period grew by 39% year-on-year to US$14.9B, fuelling optimism for stronger economic growth this year.

On the same note, the Philippine gross domectic product (GDP) in the first quarter of the year grew by 7.3%, the fastest pace since 2007.

Investments in the electronics sector are also heating up to possibly surpass the US$484.2M recorded last year.

Santiago said the electronics industry has already generated new investments worth US$418.5M in the first five months of the year, much stronger than the US$394.3M posted in end-2008.

He said the drivers of export growth for the electronics industry will primarily be the increasing demand for consumer products such as LED TVs, blue ray DVDs, netbooks, and smartphones.

RP well positioned to become hub for refrigerated container servicesThe Philippines is well positioned to become one of the world’s top markets for refrigerated container services in the next five years, with the strengths of its agricultural sector and exporters’ willingness to shift away from break bulk shipping, A.P. Moller-Maersk Group officials said.

“The Philippines could develop into the top three markets for reefer [refrigerated shipping] services,” Thomas Eskesen, Senior Director of Maersk Line’s Reefer Division said, referring to the country’s expected share in the global volume of refrigerated cargo.

Refrigerated containers allow exporters to ship out perishable goods to far destinations, he explained.

The firm encourages commercial banana farms in Mindanao to tap this service and penetrate the US and Europe, aside from exporting to nearby Asian destinations.

Philippine Ports Authority (PPA) General Manager Oscar M. Sevilla said the company will be carrying the country’s first pineapple and banana shipments to South Korea this month.

“Customers are now looking for modern containers. They’re shifting from break bulk to containers,” Eskesen said.

Outlook for mining upbeatThe Philippine mining industry is headed for a good year, buoyed by higher metal prices and the prospect of more investments, Mines and Geosciences Bureau (MGB) officials said.

The value of metallic mineral production rose by 28% in the first quarter, the MGB reported.

Latest MGB data put the value of first-quarter metallic mineral output at P20.7B, up from P16.2B in the same period last year. Gold accounted for the bulk at P13.1B, followed by copper concentrate at P3.9B, and nickel concentrate at P2.1B.

“Mineral production for the second quarter is also expected to increase year-on-year because the higher metal prices are a driver for more production,” said Glenn Marcelo C. Noble, Chief of the MGB’s Mining Economics Information Division.

A 39-% growth in output value worth P107B was recorded in 2009. The MGB is targeting to lure US$13.5-B mining investments by 2013. It expects to generate US$1.4-B investments this year versus last year’s US$640.2M.

Investments will come from expansions of existing projects and from new entrants, primarily from Australia, Japan, China, and Canada, said Richard Mills, Chairman of Chalre Associates.

“Global metal prices have certainly improved. And I think the overall good impression that the Philippines made with the successful elections would attract investors,” Mills said.

The MGB said the 11-% rise in value for gold came via higher prices, which was above US$1,000 per ounce, in the first three months of the year. Considered as a "safe haven" investment, gold is expected to continue gaining this year as the global economy slowly recovers.

Copper concentrate production also rose by 45% to 58,078 metric tons (MT) during the period, with copper prices soaring by 94%. The prices are expected to rise even further as no new major mines are expected to come onstream worldwide in the next three years.

Nickel concentrate output was up 72% to 9,742MT while its value increased by 36%. Nickel ore shipments also rose by 42% to 1.2M MT. Value was up 105% to P1.1B.

Zinc posted the highest growth in value, or by 149% to P116.6M. The value of silver also rose by 135% to P310M as output expanded by 70% to 12,410kg. Prices during the period averaged US$16.90 per ounce, with the MGB noting

3August 2010

declining world supplies and significant industrial and jewelry demand.

Direct selling sees strong growthDirect selling firms in the country can expect brighter growth prospects this year as more employed workers look for additional incomes, the Direct Selling Association of the Philippines (DSAP) reported.

Comprising 26 member companies, the DSAP has projected its combined sales to reach P25B this year, an increase of 14% over last year’s. The group, which counts over 2.2M distributors nationwide as of this year, also expects dealerships to grow.

“What we’re doing now is making people aware of opportunities to earn more,” DSAP Director and Tupperware Brands Philippines President Perry C. Mogar said.

Amid the bright prospects for the industry, the group is pushing for legislation regulating direct, or person-to-person selling, and multilevel marketing operations, noting that the Philippines remains the only country in Southeast Asia without such a law.

“We have prepared a draft and we are reviewing it now. We looked at direct selling laws in Asia and selected provisions that are applicable in the Philippines,” said Ador Bonquin, DSAP Chairman and Amway Philippines Country Manager.

Direct selling operations in the country are currently covered by Republic Act No. 7394, or The Consumer Act of the Philippines.

DSAP is promoting legitimate direct selling and multilevel marketing through its livelihood caravan dubbed "Lakbay Hanapbuhay."

More business using social networking toolsSocial networking has become a mainstream business tool in the Philippines with some 51% of businesses having successfully used social networks to win new business, a survey conducted by the global workplace solutions provider Regus showed.

The survey showed that 38% of businesses in the Philippines have actively set aside a proportion of marketing budget devoted to social networking activities.

Some 72% of respondents in the country used social networking to keep in touch with contacts although only 49% had found employment through social networks. Around 77% believed that the main usefulness of social networks was the possibility to manage and connect to customer groups.

Roughly 67% of respondents declared that they were impressed by audio/visual animations on a company profile.

Globally, social networks are still used for their original range of functions. The most popular use of social networks is staying in touch with business contacts, with 58% of respondents around the world declaring they use networks this way.

Regus said 54% of firms globally used social networks to find out useful business information. Over a quarter of businesses worldwide (27%) had set aside a proportion of marketing budget specifically for social networking activities.

On sectoral basis globally, the information and communications technology (ICT), retail, media, and marketing and consultancy sectors made an above-average use of social networking, while manufacturing, financial services, and the health sectors lagged behind.

Only 19% of companies in the financial services sector had devoted budget to their social networking activities compared to 38% in the retail and media and marketing sectors.

“Our groundbreaking global survey has revealed that social networking has finally become a mainstream business tool,” said William Willems, Regional Vice President of Regus Southeast Asia, Australia, and New Zealand.

Auto sales up 37% in H1Car sales in the country continued to record an upward swing, posting 37.1-% growth in the first six months of the year. In June alone, 15,189 units were sold – the highest for a month so far this year.

The robust sales in the first semester prompted the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) to revise its initial annual growth forecast of 4% to 11% to 147,000 units for 2010.

Commercial vehicles (CV) continued to dominate sales with a 65.6-% share of total number of vehicles sold nationwide, a robust 39.8-% sales growth in the first half of the year. Total CV sales already hit 53,925 units. In June alone, 9,717 units were sold.

Within the CV category, light commercial vehicles (LCV) remained the sub-segment which exhibited the strongest growth (50.1%). LCVs include the popular vans, pick up trucks, and compact and full size sports utility vehicles (SUVs). Total LCV sales reached 35,033 units.

Asian utility vehicles (AUVs) also grew by 27.8% to 7,750 units in the same period. Passenger cars continued to grow as well with a 32.2-% expansion, or 28,222 vehicles sold.

“Previously, due to the sharp double-digit growth, supply for some models had to catch up with the increased demand. Supplies of stocks have started to normalize, serving the growing demand that continues to be robust. The industry sees continued strong growth for the coming months,” CAMPI President Elizabeth H. Lee said.

Vehicles’ sales growth is positively correlated to economic growth. With the country’s gross domestic product (GDP) seen to grow by 5% to 6% this year, auto sales are likewise expected to remain positive.

The continued robust growth is attributed to the improvement in the global economy, a brighter economic outlook, increased business and consumer confidence, stronger growth in remittances, aggressive financing packages, and increased activity.

“Based on the performance of the past two quarters, the pace has been set for yet higher sales volume opportunities for the coming months. There may be an opportunity as well to review and re-adjust the forecast for the year-end,” said Lee.


trade andinVestMents

AUTOMOTIVE Keen Innovation invests P78.5M for Bulacan plantThe Board of Investments (BOI) has approved the registration of Keen Innovation Motortech Inc.’s P78.5-M parts production facility in Pandayan, Meycauayan, Bulacan. The facility would start commercial operations by March next year.

The factory would churn out box cover, Cycra plastic kit, disc guard, frame assembly, fender, headlight body, lens, mud guard, reflector, seat assembly, side panels, swing arm subassembly, and wiring harness.

These parts would be distributed to local motorcycle assemblers such as the company’s affiliate Blaze Motortech Corp.

The company plans to export to Indonesia, Singapore, and Thailand.

2 Chinese firms eye RP assemblyChina’s biggest carmakers – Chana and First Auto Works (FAW) – plan to invest in an assembly facility in the country once their sales volume hit at least 100 units a month, which is expected to be attained in a year or two, and once the proliferation of chop-chop cars has lessened.

Focus Ventures Inc. (FVI) President Stephen D. Sy said his Chinese principals have been urging them to put up an assembly plant in the country. FVI is the local distributor of Chana and FAW automobiles in the Philippines.

Sy said they will concentrate in the niche small cars, small and mid-sized vans. Investments in an automotive assembly facility may cost up to US$8M.

Zonda Motor eyes electric car plant in RPZonda (Zhongda) Motor Group Company, China’s leading bus and coach manufacturer, is conducting a feasibility study for its planned electric car manufacturing facilityin the country.

The company plans to export the electric cars to the Association of

Southeast Asian Nations (ASEAN) member-countries and sell in the local markets.

AVIATION CEB acquires 3 new planesCebu Pacific Air (CEB) expects delivery of three more brand-new Airbus A320 aircraft during the last quarter of this year as part of its expansion plan, thereby increasing frequencies to several domestic and international flights.

Starting 27 October 2010, CEB will increase flight frequencies from Manila to Cagayan de Oro (six times daily), Zamboanga (thrice daily), Pagadian (five times weekly), Davao (six times daily), Tagbilaran (twice daily), Coron (12 times weekly), and Kalibo (16 times weekly).

On 24 November 2010, the following flights will also have increased frequencies: Manila-Boracay (79 times weekly), Manila-Cebu (13 times daily), Cebu-Boracay (twice daily), Cebu-General Santos (daily), Cebu-Puerto Princesa (daily), and Cebu-Bacolod (twice daily).

The Cebu-Zamboanga and Davao-Zamboanga routes will also be upgraded from an ATR72-500 to an Airbus A319, increasing capacity for its daily flights.

Meanwhile, Taipei flights will become daily starting 31 October 2010 and Jakarta flights will be four times weekly starting 19 December 2010. Seoul (Incheon) flights will be twice daily starting 24 January 2011.

BANKING

BPI allots P5B for sustainable energy projectsThe Bank of the Philippine Islands (BPI) has set aside P5B for its sustainable energy finance (SEF) program over a period of two years.

The BPI is targeting a loan portfolio of P2B for the program which is expected to increase to over P5B by 2011.

BPI signed a risk-sharing facility agreement with the International Finance Corp. (IFC), the private investment arm of the World Bank (WB). It aims to support the creation of a commercial financing market for sustainable energy projects in the country.

StanChart expands RP operationsMultinational firm Standard Chartered Bank (StanChart), which caters to the middle- to high-income market, said it was open to acquire smaller banks in the Philippines to focus on small and medium enterprises (SMEs) as clients.

StanChart said they intended to step up their operations in the Philippines and that lending to SMEs was one way to do so.

The SME sector in the country is promising as far as lending opportunities are concerned, StanChart said.

BPO Accenture to expand Cebu operationsAccenture, a total solutions outsourcing company, expressed interest to expand its operations in Cebu.

Accenture said they intend to grow in Cebu and are now evaluating options on its expansion location.

The company is looking at expanding information technology (IT) and business process outsourcing (BPO) components, expressing confidence on the kind of manpower Cebu offers.

5August 2010

ELECTRONICS

Samsung unit to investUS$135M in ClarkSTS Semiconductor and Telecommunications Co. Ltd., a Samsung Electronics Co. Ltd. subsidiary, is building a US$135-M semiconductor plant in Clark, Pampanga.

The facility is expected to produce up to US$3.5B worth of electronic products annually after plant construction is completed in December.

Philips pushes RP as good investment sitePhilips Electronics and Lighting Inc. will bat for the Philippines as a good investment destination should its Dutch headquarters decide to relocate some of its operations from China.

Chief Executive Officer (CEO) Rico A. Gonzales said the Philippines could be a good location since the cost of labor in China is becoming very expensive.

He said should this happen, this would support its bid to expand Philips’ economic footprint in the Philippines.

ENERGY ADB allots US$1B for clean energy projectsThe Asian Development Bank (ADB) and its co-financing partners are considering investing some US$1B in various renewable energy and energy efficiency projects in the Philippines over the next three to four years, beginning 2011.

ADB Principal Energy Specialist Sohail Hasnie said it was ideal for the country to shift to renewable energy sources since the Philippines has high electricity tariffs, a lot of renewable energy available, and a good regulatory framework.

PNOC-EC readies P6.2B for 2010The Philippine National Oil Company-Exploration Corp. (PNOC-EC) has earmarked P6.2B this year to further intensify the exploration and development of prospective petroleum and coal resources within its service contracts.

“In order to sustain the Philippines’ growing economy, our search for indigenous energy sources must be intensified and firmly reinforced with the support of our

government, the industry, and local communities,” PNOC-EC President and Chief Executive Officer (CEO) Rafael del Pilar said.

The amount earmarked for 2010 is slightly higher than the previous year’s budget of roughly P5B.

Lucky PPH’s P903-M RE project okayedThe Board of Investments (BOI) recently approved the application of Lucky PPH International Inc. (LPPHI) as a new renewable energy developer under Republic Act (RA) 9513, otherwise known as the Renewable Energy Act of 2008.

The P903.3-M project involves the construction and operation of a 7.2-megawatt (MW) biomass power plant in Alicia, Isabela.

This will generate electricity through gasification of biomass materials such as rice stems and rice husks, corn stalks, and other agricultural wastes. It will supply the electricity requirements of 13 municipalities in Isabela served by the Isabela 1 Electric Cooperative (ISELCO 1).

ExxonMobil starts drilling third wellExxonMobil Exploration and Production Philippines B.V. has started drilling its third exploration well in the South Sulu Sea early last June, in view of encouraging indications from the first two wells it earlier drilled.

The cost of drilling the third well was estimated to hit US$100M, similar to the costs of drilling each of the first two wells.

SN Power to expand operationsNorwegian firm SN Power Invest is now gearing up for expansion opportunities as well as ventures

into planned Greenfield power projects in the deregulated Philippine power industry.

The company emphasized that onward investments will all be undertaken with their local partner, Aboitiz Power (AP) Corporation.

Preference remains for hydropower projects although there are aspirations for the Norwegian firm to explore wind power undertakings, such as what they have done in other areas of operations, Chile in particular.

FOOD Nestlé to invest P4.3B in new RP plantNestlé will invest P4.3B over the next two years for its new factory to be built on a 27-ha. site in Tanauan, Batangas. Construction of the new factory will start this month and is expected to be completed in March 2012.

The facility will produce Coffee-Mate non-dairy creamer and Bear Brand powdered milk drink.

Nestlé Philippines chair and Chief Executive Officer (CEO) John Miller said the demand for the two brands, both of which are market category leaders, continued to grow and the investment in the new factory would address the need to increase production.

“Nestlé has been present in the Philippines as a part of everyday life for 99 years. The investment in the Tanauan factory starts a new chapter in Nestlé’s commitment to the country as we look forward to the next 100 years of nurturing Filipino families by offering healthy and tasty products,” Miller said.

Figaro pushes P78-M expansionThe country's largest Filipino-owned coffee company, Figaro Coffee Co., plans to open one to two outlets each month or about 18 stores this year for total investments of P78M to accelerate expansion of its existing 65 coffee shops nationwide.

"Figaro Coffee Company is now keeping a critical eye on expanding in our home market, which will focus mostly on business districts around the country as we want more and more people to experience our local barako coffee," Figaro Coffee Systems Inc. Marketing Manager Ace L. Azarraga said.


The expansion program is in line with the company's tradition to continue serving the finest native barako coffee in the country by opening more Figaro outlets.

“As we continue to expand, more and more Filipino coffee farmers are benefited as Figaro Coffee Company only buys local coffee beans,” Azarraga said.

Pancake House bares P850-M expansion plansPancake House is investing P850M to fund plans of expanding its domestic and Southeast Asian operations.

Pancake House Chairman Martin Lorenzo said they are allotting US$10M to US$15M for the acquisition of two foreign franchises, one in Thailand and another in Indonesia.

He said these acquisitions are seen to boost contribution of their overseas businesses to 40% of total revenues from current contribution of less than 5%.

Meanwhile, the firm will also spend P150M to P170M for the acquisition of a local grilled chicken roadside restaurant which currently has five branches.

Lorenzo added that they intend to grow the local franchise to 60 branches in two years.

ICT IP Converge Data Center’s P74.9-M project gets BOI perksThe Board of Investments (BOI) approved the application for incentives of IP Converge Data Center, Inc. whose latest venture

involves a P74.9-M new data center located at the Bonifacio Technology Center, Fort Bonifacio Global City in Taguig City.

IP Converge Data Center is expected to provide internet data services (IDS), international managed bandwidth services (IMBS), managed IT solutions/system development and voice over internal exchange suit (VOICES).

Prospective clients include small and medium enterprises (SMEs), telecommunication companies, financial institutions, business process outsourcing (BPOs) and other enterprises.

INFRASTRUCTURE Manila Water to spend P3.2B for Rodriguez treatment plantManila Water Co. has begun constructing a new P3.2-B water treatment facility that will serve parts of Rizal province. The plant can handle 150-M liters of water per day and bring water down to consumers in Marikina, San Mateo, and Rodriguez, Rizal.

The facility will ensure greater water supply reliability and would decommission five deep wells in the Rodriguez area.

Likewise, the Rodriguez water treatment facility will include the construction of a reservoir with a capacity of 40-M liters of water.

MANUFACTURING Terumo unveils US$45-M plant expansionTerumo Philippines Corp., the world’s leading producer of medical accessories, announced a US$45-M expansion program of its existing factory in Laguna Technopark.

Terumo Philippines Corp. President Maki Takizawa said the company will transfer the production of syringe products to its Philippine plant from Belgium.

The Philippine plant produces syringes, intravenous catheters, urinary drainage bag, safety syringes, and needles.

With the expansion, the Philippines would become Terumo’s biggest production hub for syringes.

3 export firms granted incentivesThe Board of Investments (BOI) granted tax and fiscal incentives

to three export-oriented projects with combined investments of P163.8M.

The approved projects are AGS Industrial Development Corp., Riverdale Confectionary Industry Inc., and Zamboanga Carageenan Manufacturing Corp.

These projects are entitled to income tax incentives and 1-% tariff on imported capital equipment and additional tax deduction on expenses for personnel training, among others.

MINING Philex earmarks up to US$800M for Silangan projectPhilex Mining Corp. is allocating up to US$800M in capital for the Silangan project development that is expected to begin commercial operation by 2015.

In the meantime, the company had commissioned the conduct of a feasibility study for its Silangan project in Surigao del Norte that is expected to be completed next year.

Philex has acquired full control of the Silangan mine project in April this year after buying back the minority shares of Philex Gold Inc.

P474-M Surigao nickel project okayedFilipino-owned Merchant Mining and Development Corporation is investing P474M to mine nickel ore in Cantilan, Surigao del Sur.

The project will provide the much needed economic boost to the province with the employment of 215 personnel and the increase in municipality revenues.

Operations are expected to start this month.

7August 2010

POWER Korea Water to invest US$440M for Angat projectKorea Water Resources Corporation (K-Water) is sticking it out in the US$440-M deal it clinched for the Angat power facility’s privatization.

The Korean firm’s bid bond is equivalent to 2% of their winning offer, or about US$8.8M.

NorthPoint to invest US$120M in wind farmNorthPoint Wind Power Corp. plans to invest as much as US$120M (roughly P5.4B) to develop a wind farm in Aparri, Cagayan that can power a 40-megawatt (MW) plant.

North Wind Power Development Corp. Business Development Manager Giovanni Macapobre said the amount was based on the estimated spending of about US$2.6M to US$3M to produce a MW of power from wind resources.

Macapobre said the company had put in place a wind mast on the prospective wind site and had been gathering wind data for over a year.

Steag, Aboitiz to build 150-MW coal plantSteag State Power, Inc.’s power complex in Misamis Oriental is adding a 150-megawatt (MW) plant that will go on stream in 2013 to boost its existing 232-MW capacity.

Aboitiz Power, Evonik Steag GmbH of Germany, and La Filipina Uy Gongco Corp., co-owners of the coal-fired plant, agreed to form a new corporation to run the new plant to be built next to the existing power facility at the Phividec

Industrial Estate in Villanueva, Misamis Oriental.

The power to be generated would be sold to distributing units and industries in the form of long-term power agreements.

The new corporation will retain the same ownership structure: Evonik Steag, 51%; Aboitiz Power, 34%; and La Filipina Uy Gongco, 15%.

REAL ESTATE M Castle Philippines pours in US$1B for Bataan resort projectKorean property developer M Castle Philippines Ltd. recently boosted its investment commitment to US$1B for a 615-ha. resort project in Morong, Bataan.

Data from Subic Bay Metropolitan Authority (SBMA) showed that the firm initially pledged US$350,000 in January, following the registration of its business at the Freeport.It made an additional commitment in May, increasing its investment pledge to US$1B.

The leisure resort project, to be called Resom Resort City – Subic, will feature beach condo units and villas, a five-star casino-hotel, a marina club, a water park, a convention facility, shopping mall, and a 36-hole golf course.

Cathay Land to build P2.5B IT parkCathay Land Inc. will build a P2.5-B Information Technology (IT) Park within the firm’s flagship development project, South Forbes Golf City along the Metro Sta. Rosa – Silang – Tagaytay growth corridor.

The project covers 28 has. within South Forbes’ Business Cluster, named the Cyberpark, and is expected to draw IT locators such as those in software and content development project, business process outsourcing, and IT research and development, among others.

Being registered with the Philippine Economic Zone Authority (PEZA), locator investors in the IT Park are entitled to special incentives, including income tax holiday for a specified period.

The Cyberpark is an integral part of the South Forbes’ Five Clusters of Excellence, where the Residential Cluster works in synergy with the Education Cluster, Wellness Cluster, Leisure Cluster, and Business Cluster where the Cyberpark is located.

P959-M Tagaytay project upThe Board of Investments (BOI) has approved Cityland Inc.’s P959.2-M vertical housing project to be built on 7,847sqm. of land in Barangay San Jose, Tagaytay City.

Cityland will construct a 21-storey tower having 1,026 units measuring 28.36sqm each.

Gaisano to spend P300M for new mallsRetailer Benito S. Gaisano is putting up three more shopping centers across Cebu province, investing at least P100M in each of the three pocket malls that would carry the Gaisano Grand brand and bringing to 16 the total number of Gaisano Grand shopping centers in Visayas and Mindanao.

The new mall in Toledo City, Western Cebu was due to open in July while the Minglanilla branch is to be opened towards the end of the year. The third, Gaisano Grand Mall in Mandaue City, Cebu, is currently also under construction.

Gaisano is also studying building one or two more shopping centers in Mindanao next year.

IVQ’s P200-M townhouse project gets incentivesBoard of Investments (BOI) granted Iloilo property developer IVQ Landholdings Inc. tax perks and incentives the for its North Springville Townhomes’ low-cost housing project in Barangay Tacas, Iloilo.

The project will cost a total of P198.6M and will have 300 housing units on a 1.98-ha. lot, with each townhouse having a 44-sqm. floor area fitting two bedrooms, a toilet and bathroom, living spaces, and front lawn.


MaJOr PrOJeCts

P5.4-B Palawan road project nears completionWith the substantial completion of the P5.4-B El Nido - Bataraza Road Project, easier access to major tourist destinations in the province of Palawan is now possible.

The project was divided into three packages.

First, the 112-km., P1.8-B worth El Nido – Taytay – Roxas section includes the construction of a 43-km. new Portland Cement Concrete Pavement (PCCP) and 10 new bridges, widening of three bridges, and the construction of drainage and slope protections.

The second package, Puerto Princesa – Aborlan – Abo-abo section worth P1.7B includes the

COMPany nOtes

San Miguel to enter airport projectSan Miguel Corp. (SMC) will formalize its entry into an airport project through the purchase of a 60-% majority stake from Philco Aero, Inc., the proponent of the P6-B Diosdado Macapagal International Airport (DMIA) Terminal 2.

The Securities and Exchange Commission (SEC) showed Philco Aero increased its authorized capital stock to P100M from P10M.

Robinson’s to build 30th mall in PangasinanRobinson’s Land Corporation (RLC) is set to start this year the construction of its first shopping mall in Pangasinan which will be its 30th Robinsons mall nationwide.

The mall’s location in Calasiao, Pangasinan was chosen due to its proximity to nearby cities of Dagupan and San Carlos.

It will sit on a 5.8-ha. lot with a gross floor area of 31,900sqm. of which 23,000sqm. is the gross area for lease. It will also have an 800-sqm. food court and four cinemas with 1,000-seat total capacity.

The property firm has allotted P9B for capital spending this year, 40% of which will be spent for constructing new malls.

RLC has two malls in Pampanga and one each in Tarlac, Ilocos Norte, Bulacan, and Nueva Ecija. It plans to build a mall in Puerto Princesa in Palawan and new malls in Cebu and Quezon City by 2012.

TELECOM Globe to spend P300M for rehabGlobe Telecom Inc. has allocated close to P300M for rebuilding its damaged infrastructure due to last year’s typhoons Ondoy and Pepeng and aiding subscribers and business partners.

Globe has allocated P148M to repair damage to its infrastructure – P44M to repair its mobile network and at least P104M for its broadband network.

On top of these, the telco also allotted P147M for rebates, free loads, 50-% discounts, modem replacements, and special offers to subscribers as well as retailers in affected areas.

Globe also launched its “Bangon Pinoy” program to aid typhoon-damaged communities in Marikina, Pasig, Antipolo, Cainta, and Tanay, shelling out P4.4M for relief operations, financial assistance and network restoration.

Globe Telecom President and Chief Executive Officer (CEO) Ernest L. Cu said the telco has restored 99% of its wireless network and 92% of its broadband network. It will continue restoration until it attains 100-% service availability.

PLDT units complete P70-M upgradeTwo Philippine Long Distance Telephone Co. (PLDT) subsidiaries – PLDT Clark Telecom, Inc. and PLDT Subic Telecom, Inc. - have completed their P70-M Next Generation Network (NGN) upgrade and can now offer advanced converged voice, data, and multimedia services.

“The shift to NGN is in line with our efforts to offer our customers high-capacity broadband data services via fixed lines,” said PLDT President and Chief Executive Officer (CEO) Napoleon L. Nazareno.

PLDT ClarkTel now has 21 NGN nodes equipped with 6,336 ports and will complete its P25-M 42-km. fiber optic network within Clark by September 2010.

Also, PLDT SubicTel now has 20 NGN nodes equipped with 5,688 ports and already completed laying down its P19-M 36-km. fiber optic cables.

PLDT ClarkTel’s P25-M fiber optic upgrade is on top of the P70-M network upgrade cited earlier.

construction of a 51-km. new PCCP road and drainage and slope protections.

The third package, Abo-abo – Brooke’s Point – Rio Tuba worth P1.9B includes the construction of a 41-km. new PCCP road, three new bridges, and the widening of nine other bridges.

The Department of Public Works and Highways (DPWH) Philippine-Japan Highway Loan Project Management Office is speeding up the construction of the said project in line with President Benigno “Noynoy” Aquino’s thrust to further develop the tourism industry.

P386-M Iloilo flyover opened Another flyover project of the Department of Public Works and Highways (DPWH) that will improve vehicular traffic flow in Iloilo City was opened to motorists last month.

The project will contribute immensely in increasing existing road capacity to mitigate traffic congestion in Iloilo City and adjoining provinces, improve business opportunities, productivity, and job generation in the locality.

9August 2010

Philco Aero Chief Executive Officer (CEO) Ricardo L. Penson said the increase was done as proposed by airport administrator and operator Clark International Airport Corp. (CIAC) upon the issuance of the notice of acceptance as original proponent and also to accommodate SMC’s entry into Philco Aero.

It will be a joint project with Metro Pacific Investment Corp. (MPIC), the local unit of First Pacific Co., Ltd. of Hong Kong.

Estimated to cost US$150M, the airport project will include a modern passenger terminal and a high-speed railway linked to Metro Manila.

This would be the second project after SMC took a majority stake in Caticlan International Airport Development Corp. last year.

SM targets to reach 100 grocery storesSM Investments Corporation (SMIC) will put up 12 more grocery stores in the second half of the year to bring its total to 100 stores before end-year.

SM Hypermarket Executive Vice President Robert Kwee said these store openings will be under the SM Hypermarket, SM Supermarket, and SaveMore stores as part of SMIC’s plan to spend P6.2B for 25 stores this year.

Eastern Telecoms eyes MSMEs Eastern Telecommunications Philippines, Inc. (ETPI) is set to increase its client base for its new P1-B fiber optic line in Luzon by targeting micro, small, and medium enterprises (MSMEs).

“We built a 240-km. fiber ring from here (Makati) to Nasugbu, Batangas to serve over 600 industrial sites,” said ETPI Marketing and Business Development Head Edwin A. Domingo.

RP, EU complete partnership negotiationsEuropean Union (EU) and Philippine negotiators agreed on the final text of a new Partnership and Cooperation Agreement (PCA) which will build a stronger basis for EU-Philippine cooperation in all fields in the coming years.

The negotiations were led by the European Commission's Asia Director James Moran and the Philippine Ambassador to the European Union Enrique Manalo.

“This seventh round of PCA negotiations had been able to conclude on all outstanding points, and establish a final text for the approval of our respective authorities. We can now look forward to the text being initialed in the very near future, and to its formal signature in the coming months,” EU Ambassador Alistair MacDonald said.

The legal foundation for EU-Philippine relations before

ETPI has tied up with Singaporean software firm EStorm Technologies Pte Ltd. to make available cheap business management software as add-on to connection services.

Eastern Telecommunications will work with the Financial Executives Institute of the Philippines (FINEX) and the Association of Development Financing Institutions in Asia and the Pacific (ADFIAP) to roll out seminars for MSMEs.

China firm, RP partner forge joint ventureHangzhou Wahaha Group Co. Ltd. (WHH) is forging a joint venture agreement with Liwayway Holdings Co. Ltd. (LHCL) to set up a fruit beverage manufacturing facility in the Philippines for both export and domestic markets.

WHH’s Chairman Zong Qing Hou expressed their willingness to put up a beverage plant here in partnership with LHCL’s Head Carlos Chan.

WHH is not only interested in food but also in the country’s mining sector.

The government said this is an opportunity for exports to China and tap at least 10% or 100M of the over 1B Chinese population.

Nat’l Book Store to open 10 new branchesNational Book Store, Inc. (NBS) is putting up 10 new branches this year, on top of the existing 120 stores nationwide, NBS President Alfredo C. Ramos said.

Opening new stores depends on new SM and Robinsons malls, where NBS is a key tenant.

Ramos said NBS also plans to put up new stores in Southeast Asia. In 2007, the company spent between P60M to P80M to start operations in Hong Kong, marking its first venture outside the Philippines.

bilateralagreeMent

ALI forms new firm to build mini-mallsAyala Land Inc. (ALI) is putting up a new wholly-owned unit called Primavera Town Centre Inc. with an initial capital of P320M for the establishment of some 29 mini-malls in the next five years.

ALI said the new unit will handle the planning, development, and management of small-format retail facilities known as “neighborhood centers” within ALI’s existing and planned growth centers nationwide.

Neighborhood centers will offer a convenient shopping and lifestyle experience to the immediate mixed-use communities in these growth centers and will have a maximum size of 10,000sqm. of gross leasable area.

The P320-M capital will be used to fund the development of five new neighborhood centers within 2010 with another three to six neighborhood centers to be added to the portfolio in each of the succeeding four years.


aseanWatCH

ASEAN-China agreement to benefit both sidesThe investment agreement between the Association of Southeast Nations (ASEAN) and China will benefit both sides, Cheam Yeap, Chairman of Cambodian National Assembly’s Commission on Economy, Finance, Banking and Audit, said recently.

He said the investment agreements are the legal framework to expand investments among ASEAN member-countries with China and South Korea, thereby ensuring the protection of investors from discriminative measures by local governments and guarantee their fair return on and equitable investment.

ASEAN signed the investment agreements in the comprehensive economic cooperation with South Korea and China in June and August last year, respectively.

Partnerships to spur region’s food securityThe partnership of the public and private sectors is essential in generating the needed investments to ensure agricultural productivity and food security in the Asia-Pacific region, officials from the Asian Development Bank (ADB), Food and Agriculture Organization (FAO), and International Fund for Agricultural Development (IFAD) said.

The three multilateral agencies said as much as US$120B in investments is needed until 2050 to guarantee regional food security.

Data from FAO revealed that two-thirds of the estimated one billion hungry people recorded globally still resides in the region.

FAO Assistant Regional Director-General and Regional Representative for Asia-Pacific Hiroyuki Konuma said the current amount invested in agriculture in the region is only US$80B per year.

IFAD Country Program Manager Ganesh Thapa said food security will only be ensured if dynamic private sector investments and political commitment from the national governments are assured.

ADB Vice-President for Knowledge Management and Sustainable Development Ursula Schaefer-Preuss said the ADB has already committed US$2B a year for an “Operational Plan for Food Security” for Asia-Pacific region.

Role of ASEAN CIOs more prominent than global peersUnlike their global counterparts whose role is often confirmed to merely determining what technology to implement, chief information officers (CIOs) in Southeast Asia are more involved in the management of their business organizations.

A recent study conducted by technology giant IBM bore this out as it found that Association of Southeast Asian Nations (ASEAN) CIOs are often included, and are better accepted, as members of the senior management teams as compared to other CIOs in other parts of the globe.

“As a result, ASEAN CIOs are more actively involved in all aspects of setting the business strategy, especially with their fellow leaders, including presenting on/or deciding upon the business strategy,” IBM said.

In a recent visit to the Philippines to discuss the result of the survey,

the PCA had been the European Economic Community-Association of Southeast Asian Nations(EEC-ASEAN) Cooperation Agreement signed in 1980. That agreement was in many respects out-of-date.

The Philippines is the second ASEAN country to complete negotiations on an updated PCA with the European Union. The PCA with Indonesia was signed in November 2009, while negotiations with Viet Nam, Thailand, and Singapore are underway.

Bangladesh seeks expanded trade with RPBangladeshi Ambassador to the Philippines Ikhtiar M. Chowdhury expects bilateral trade between the two countries to improve this year as they start exporting generic medicines to the Philippines.

The two-way trade between Manila and Dhaka reached nearly US$70M last year.

The Philippines is currently exporting metals and electronic products to Bangladesh while they export garments, electrical, and semiconductor products to the country.

Taiwan pushes free trade accord with RPManila Economic and Cultural Office (TECO) Representative Donald Lee said a bilateral trade and investments agreement between Taiwan and the Philippines will continue the development of investment opportunities.

MECO data showed investments by Taiwan to the Philippines reached US$113M last year.

RP-Italy trade improvesThe country’s commodities trade with Italy went up from US$330M in the last 10 years to US$416M in favor of the Philippines with total exports reaching US$229M and imports, US$188M.

Industrial manufactures remained the country’s biggest export, followed by resource-based products, and then consumer manufactures.

On the other hand, the Philippines also imports quite a big amount of industrial manufactures from Italy, which are basically machines, followed by resource-based products, and then consumer manufactures.

Country keen on forging farm-trade ties with Cambodia Agri-businesspeople who joined the first trade-investment mission to Cambodia were keen on forging farm-trade ties with Phnom Penh.

Cambodia Commerce Minister Cham Prasidh urged Filipino investors and businesspeople to invest in rice processing like creating rice mills.

The Cambodia Chamber of Commerce and the Philippines–Cambodia Business Council of Philippines Chamber of Commerce and Industry recently signed a memorandum of understanding (MOU) on business opportunities.

11August 2010

On tHeCalendar

Ph

ilip

pin

e P

ost

al P

erm

it N

o. 5

04

Geographic Integration Executive of IBM Fiona Capstick said the role of CIOs is changing dramatically with ASEAN technology executives leading the charge.

“ASEAN information technology (IT) managers are really more into business…they are standardizing their routine business processes and simplifying their existing IT infrastructure to reduce cost,” Capstick said.

Country Leader for IBM Global Business Services at IBM Philippines Sandy Vann said the roles that CIOs perform today are much wider, hence it’s not surprising to see them spending on growth areas.

RP still biggest geothermal energy producer in ASEANThe International Energy Agency (IEA) said it expects the Philippines to remain the biggest producer of geothermal energy in the Southeast Asian region.

In a paper titled “Deploying Renewables in Southeast Asia” released during the Clean Energy Forum sponsored by the Asian Development Bank (ADB), IEA noted that geothermal electricity and heat are concentrated in Indonesia and the Philippines.

The IEA paper does not only acknowledge the potential growth areas in the Association of Southeast Asian Nations (ASEAN) regarding renewable energy but also investigates the barriers for scaling up market penetration of renewable energy technologies (RETs) in the

Outsourcing and EngineeringOutsourcing and Engineering, the international exhibition for Process Engineering Services in the Philippines, will provide a platform to meet all the professional form related industry on 17-20 August 2010 at the World Trade Center in Pasay City.

Exhibitor profiles include chemical handling, dispensing, transportation and storage, design engineering services, environmental management, fluid and power handling, heat transfer management, humidity moisture management, instrumentation, material handling and storage, process control systems, rebuilding and retrofitting services, valves, pipes and fittings, waste disposal and management, and subcontracting and outsourcing services.

Construction Show ManilaConstruction Show Manila (MANILACON 2010), the Philippines’ building and construction trade exhibit on innovations and sustainability, will be held on 02-05 September 2010 at the SMX Convention Center in Pasay City.

This year’s theme is “Enabling Responsible and Sustainable Solutions for the Built Environment.” One of the highlights of the event is The Green Forum, a two-day in-depth discussions and presentations on the green and sustainable building design practices within and beyond the country.

Asia Food ExpoAsia Food Expo, the most comprehensive food show in the country, is bringing in wide array of machines for packaging, food processing, high-tech food service equipment, sources of kitchen and baking equipment at the World Trade Center in Pasay City on 08-11 September 2010.

Exhibitor profiles include adhesive systems, bag making, bakery materials, beverage processing equipment, bottling equipment, canning machinery, catering equipment, cleaning machines, confectionery products, cooking equipment, dairy products, dispensing machines, filtration and separation equipment, flavors and fragrances, food packaging equipment, hotel equipment, kitchen equipment, refrigeration equipment, water treatment equipment,and weighing equipment.

electricity, heating, and transport sectors in ASEAN countries.

It also examines how to overcome economic and non-economic barriers that slow investment in renewable energy (RE) and offers policy recommendations to encourage its effective and efficient exploitation in the region.

Despite the optimism, the study noted that there are still some barriers that need to be addressed by the ASEAN countries to be ableto pursue growth in renewable energy development.

Non-economic barriers to RE development

■ Administrative hurdles ■ Grid access issues ■ Persistent fossil fuel subsidies ■ Lack of information and training


44.054.1

4.154.2

4.254.3

4.35

May-10Apr-10Mar-10Feb-10Jan-10Dec-09

Interest Rate (%)

3.63.73.83.9

44.14.24.34.44.5

Jun-10May-10Apr-10Mar-10Feb-10Jan-10

Inflation Rate (%) (1994 base year)

43.5

44

44.5

45

45.5

46

46.5


Peso per US Dollar Rate

00.5

11.5

22.5

33.5

44.5

5


Imports (In US $Billion)

00.5

11.5

22.5

33.5

44.5


Exports (In US $Billion)

162.5163

163.5164

164.5165

165.5166

166.5


Consumer Price Index(2000 base year)

012345678

4Q (2008) 1Q (2009) 2Q (2009) 3Q (2009) 4Q (2009) 1Q (2010)

GDP Growth Rate (%)

0123456789

10

4Q (2008) 1Q (2009) 2Q (2009) 3Q (2009) 4Q (2009) 1Q (2010)

GNP Growth Rate (%)

Entered as Third-Class Mail at theMakati Central Post Office

under Permit No. 504valid until 31 December 2010

Philippine Business ReportPhilippine Business Report is published monthly by the Communications and Media Office (CMO), Department of Trade and Industry, 4F Industry and Investments Building, 385 Sen. Gil J. Puyat Avenue, Makati City 1200, Philippines • Phone (+632) 895.3611 • Fax (+632) 895.6487 • To subscribe, e-Mail: [email protected]

economic indicators

August 2010

Editorial Team: Anne L. Sevilla, Editor-in-Chief • Vic S. Soriano, Assistant Editor • Joe A. Barrera, Cresenciano P. Par, Cyrus Kim D. Bautista, Jam A. Hourani, Yhen M. Millena, Ariel B. Salcedo, and Hazel Maryam C. Dizon, Writers • Ren C. Neneria, Design Layout • Myrna V. de los Reyes, Circulation.

GNP Growth Rate (%) GDP Growth Rate (%)

Imports (In US $Billion)

Inflation Rate (%)(1994 base year) Interest Rate (%)Peso per US Dollar Rate

Consumer Price Index(2000 base year)

Exports (In US $Billion)

government launches 5-year investment promotion...

Documents