Philippine Business Report (Apr.2013)

1April 2013

Volume 24 No. 04 April 2013

The Philippines has emerged as the most favored country in the Association of Southeast Asian Nations (ASEAN) region in terms of economic growth and investor confi dence, the latest survey by the Standard Chartered Bank revealed.

In a survey of over 900 investors, Manila has been chosen as the frontrunner among other key cities in the region, the British banking fi rm reported.

“The Philippines was the standout country in terms of the strength of on-the-ground sentiment. We expect the Philippines to see stronger investment growth this year, sustaining the strong momentum from 2012,”Standard Chartered said.

Remarkably, some 74% of investor-respondents in Manila

expect to see better business prospects in 2013 compared to the previous year, dwarfi ng scores in Jakarta (46%), Bangkok (44%), Singapore (44%), and Kuala Lumpur (41%).

The survey also found that investors in Manila are most worried about the European, American, and Chinese markets this year. Notably, not one cited the Philippines as a concern.

In comparison, 47% of investors in Kuala Lumpur said their own country worried them, followed by Singapore (43%), Jakarta (35%), and Bangkok (19%).

“We are optimistic that the Philippines will outperform the region and enjoy another year of strong growth momentum in 2013,” Standard Chartered said.

It said the country could grow by 5.8% this year and 6.1% next year, beating its 10-year average of 5.2%, mainly on the back of robust domestic consumption.

It also expected further progress in the public-private partnership (PPP) program, after eight projects were rolled out last year and others lined up for launch this year.

“We expect at least two of the three main credit rating agencies to upgrade the Philippines to investment grade by end-2013,” it said.

In a related development, the Philippines has fi nally been upgraded to its fi rst-ever investment-grade status by Fitch Ratings recently.

PHL emerges most favored country in ASEAN

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INDUSTRYTRENDS

quarter. Construction fi rms noted that favorable business conditions are expected to help sustain demand for construction services, with new projects in the pipeline,” said the BSP.

Gov’t to further relax investment climateThe government is bent on further liberalizing investment climate in the country by pushing the passage of three bills that would open up more economic areas with clearer economic policies to lure more foreign direct investments (FDIs) here.

Department of Trade and Industry (DTI) Secretary Gregory L. Domingo particularly cited the bills on mining that would provide a more equitable government revenue sharing scheme, overall review of the foreign investment negative list (FINL), and the bill seeking to harmonize fi scal incentives.

The course of the review is to liberalize the FINL, a list of economic areas where foreign investments are limited to as much as 40-% equity participation.

There have been several areas that foreign businesspeople, led by the Joint Foreign Chambers (JFC), would like to be opened up especially on economic areas where foreign investors’ participation are limited.

One restriction that the JFC has been really pushing hard to make the FINL less negative is the ban on the practice of certain professions, which are reserved for Filipinos.

Also, the DTI and the Department of Finance (DOF) are working on the harmonization of fi scal incentives, with the two agencies nearing an agreement on the incentives that would be granted to investors.

Gov’t plans harmonized information systemThe Department of Budget and Management (DBM) said the government will implement inter-agency programs that allow

the timely exchange of information across the bureaucracy.

DBM Secretary Florencio B. Abad said they have already set the implementation of the Medium-Term Information and Communications Technology Harmonization Initiative (MITHI).

The initiative aims to enhance the government’s information and communications technology (ICT) resources in line with budget preparations for fi scal year 2014.

Launched in January this year, MITHI is designed to synthesize ICT operations among all government departments and agencies, as well as ensure the consistency of the government’s ICT platform.

Under MITHI, departments and agencies have been asked to submit a comprehensive inventory of their existing, ongoing, and proposed ICT-related programs, projects, and resources, as well as rationalize these same resources and translate them into a strategic, three-year e-Government Master Plan (EGMP).

“Through this project, we intend to broaden the ICT capacity of our departments and agencies, and consequently, boost the delivery of key goods and services to the public,” Abad said.

“Healthy” bread market growing 30%Healthy bread is becoming more popular with a 30-% increase in demand in whole wheat bread alone in the past three years.

To meet the demand, bakers have responded by cooking up healthy bread such as whole wheat bread, high fi ber, and with no chemicals added, less additives, with no sugar added.

Filipino-Chinese Bakery Association Inc. (FCBAI) Honorary President Henry Ah said the demand for healthy bread is growing 10% annually in the past three years.

Business more upbeat in Q2Filipino businesspeople were more optimistic in the second quarter than in the fi rst quarter, reaffi rming their confi dence in the economy, the latest Business Expectations Survey (BES) of the Bangko Sentral ng Pilipinas (BSP) showed.

The BSP noted that for the second quarter outlook, entrepreneurs anticipate an increase in demand during the secondary harvest season, graduation/enrollment periods, tourism during summer, business expansion, new projects, and new/improved product lines, aside from the expected increased business in relation to the May elections.

“Businesses were also of the view that the country’s strong macroeconomic fundamentals (such as stable prices and exchange rate), good governance, and expectations of an investment grade credit rating for the Philippines augur well for their operations,” said the BSP.

The overall confi dence index (CI) for the second quarter is at 56.4% compared to the fi rst quarter CI of only 41.5%.

The effect of fi nancial and economic indicators on business confi dence remains positive, said the BSP. Industry sectors outlook has remained positive while the construction sector had a more “broadly steady outlook.”

“The construction sector was the most bullish during the current

3April 2013

“We are using more natural ingredients like raisin or apple to ferment yeast. Before, we use food coloring. But now, it is more on natural ingredients,” Ah said.

Demand for sandwiches, too, among the fast food sector is growing exponentially.

“They are selling more sandwiches than chicken,” Ah said, whose Kilpatricks Corp. is also big on serving bread for the fast food sector.

These institutional clients include KFC, Brother's Burger, and Smokeys. These stores are not using the regular burger buns but the Ciabatta bread.

Prices, however, for healthy breads are higher by 10% compared to the ordinary breads. These breads cater mostly to the upper end of the market.

FCBAI is composed of over 100 medium-sized bakeries mostly from the National Capital Region (NCR). Its members, excluding biscuits producers, account for 25% of the total 1.2M metric ton annual fl our consumption in the country.

15-% export growth target maintainedThe Department of Trade and Industry (DTI) is sticking to the 15-% exports growth target this year with electronics, garments, and wood manufactures expected to lead the expansion.

DTI Secretary Gregory L. Domingo said this as the country's exports reached a record USD 51.99B in 2012 or 7.6-% growth over USD 48.3B in 2011.

Other positive factors for exports are the improving economy of the United States (U.S.), the growth in the local indigenous exports, and the improving electronics industry.

The electronics sector, which accounts for over 50% of the country's export revenues, is also a big boost to achieving higher growth goals.

“It looks like the electronics sector is continuing its upward trend starting October last year,” Philippine Exporters Confederation (PhilExport) President Sergio Ortiz-Luis said.

The 2012 growth came on the back of expanded markets opened by free trade agreements (FTAs) signed by the Philippines with preferred trade partners in the Association of Southeast Asian Nations (ASEAN) and other neighboring countries such as China, Japan, Korea, and Australia-New Zealand; and despite the continued economic slowdown among its major traditional markets such as the U.S., Japan, and the European Union (EU).

DTI Undersecretary for Industry Development and Trade Policy Group (IDTPG) Adrian S. Cristobal Jr. said the 2012 growth was fueled by the country's product-diversifi cation program that highlighted the export of machinery and transport equipment, woodcraft and furniture, and fruits and vegetables.

The National Statistics Offi ce (NSO) showed that the country’s export receipts were boosted by the 89.23-% sales growth of the machinery and transport equipment that rose from the USD 2.81B in 2011 to USD 5.31-B sales last year.

Manufacturing to drive economyThe government is eyeing the manufacturing sector to lead the domestic growth, with the expected momentum of manufacturing this year following the infl ow of more investments in the last two quarters last year.

“The best is yet to come,” said Department of Trade and Industry (DTI) Secretary Gregory L. Domingo, noting that the growth can be gleaned from the P698.74-B combined investments of the Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA) in 2012.

DTI Undersecretary for Industry Development and Trade Policy

Group (IDTPG) Adrian S. Cristobal Jr. said that of the combined BOI and PEZA investments last year, the industry sector accounted for 32.07%, of which the share of the manufacturing sector was 22%.

The Federation of Philippine Industries (FPI) also noted that based on the 2009 United Nations Industrial Development Organization (UNIDO) study, the manufacturing sector accounts for 21% of GDP and is growing at 9% a year.

The UNIDO study also said the Philippines ranked 20th out of 120 countries with the highest manufacturing percentage to gross domestic product (GDP).

Gov’t vows conducive environment for PPP projectsThe government has vowed to sustain a more conducive environment for its Public-Private Partnership (PPP) program amid plan to bid out more projects.

PPP projects in the pipeline

• NLEX-SLEX Connector Road • Cavite-Laguna Expressway• Civil Registration System-Information

Technology Project Phase II• Vaccine Self-Suffi ciency Project Phase II • Talisay City Plaza Complex Heritage

Restoration and Redevelopment• Enhanced Operation and Management

(O&M) of Panglao Airport • O&M of Laguindingan Airport• Establishment of Cold Chain Systems• Grains Center Project• O&M of LRT Line 2• O&M of Puerto Princesa Airport• New Centennial Water Supply • Rehabilitation of Quirino Highway • Integrated Transport System • Bulacan Bulk Water Supply • El Nido Water Supply and Sanitation System • Regional Prison Facilities

PPP Center Executive Director Cosette V. Canilao said the government has 17 projects in the pipeline after it successfully awarded nine projects.

To craft a more conducive environment, Cosette said President Benigno S. Aquino III has already directed all line

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Department of Trade and Industry (DTI) Secretary Gregory L. Domingo welcomed the Fitch investment grade rating of the country saying “expect more investments to come.”

He said the rating could be attributed to the “tremendous endorsement of President Benigno S. Aquino III’s initiatives on good governance.”

The upgrade, Domingo said, opens the Philippines to investors that require investment grade ratings before making a move. This would enable the country to attract more investments, both portfolio and direct, which were once elusive.

With the upgrade, the cost of borrowing of both public and private debt would be reduced, which would give investors more access to cheaper funds for investments.

Domingo has also been touting a Japan External Trade Organization (JETRO) survey which cited the Philippines as one of the most profi table business locations in Asia.

PHL brands eye int’l trademarksTwenty-three Filipino brands, comprising of small but authentic homegrown concepts, have sought trademarks protection in 86 countries as they plan to expand their businesses and services abroad.

Intellectual Property Offi ce of the Philippines (IPOPHL) Executive Director Atty. Ricardo R. Blancafl or said the 23 applications that have been fi led with them will ensure these local brands of trademarks protection in countries under the Madrid Protocol.

The 23 brands have sought a total of 375 international designations where they target to market their products particularly in countries with huge pool of Filipino migrant workers.

Without the Madrid Protocol, companies going abroad to market their products either through franchise or other schemes have to spend an estimated P800,000 for trademark application in four countries alone.

manufacturing sectors recorded positive growths.”

The manufacturing sector‘s Value of Production Index (VaPI), however, picked up at a slower rate of 5.4% in December from 6.6% expansion in November.

The Value of Net Sales Index, meanwhile, continued to grow, refl ecting an annual increment of 9.7% in December from the revised 6.5% in the previous month.

Footwear and wearing apparel was a major contributor to the continued growth of the volume of net sales, followed by non-metallic mineral products, miscellaneous manufactures, food manufacturing, textiles, machinery except electrical, publishing and printing, and electrical machinery.

PHL seen as next hot investment destination The Philippines, which has recently received its fi rst-ever investment grade rating from Fitch Ratings, is projected to be the next hot investment destination, according to the digital magazine, The Financialist.

The digital magazine cited recent developments in the country’s economy, such as the 6.6-% gross domestic product (GDP) growth in 2012 and the 3-% infl ation.

The report also cited the Philippine stock market’s performance, which soared 33% last year, and the 7-% rise of peso against the US dollar.

It also expected an upgrade in credit rating from the big three credit rating agencies, namely Standard & Poor’s, Moody’s and Fitch, the latter being the fi rst one to upgrade the country’s rating to investment grade.

Fitch, cited the country’s sovereign balance sheet as being comparable to those of ‘A’-rated nations. It also noted that the “persistent current account surplus, underpinned by remittance infl ows” has made the country a “net creditor” from its previous defi cit position.

agencies to establish a PPP unit as well as the establishment of PPP sub-committees in the Local Development Councils of local government units (LGUs).

The government has also increased its capacity undertaking through the establishment of project development and monitoring facility fund as well as more capacity development interventions.

Cosette also cited the creation of the PPP strategic support fund which is a lump sum appropriation lodged in the budget to fund the government share for PPP project components.

Legal and regulatory framework has been enhanced, like the amended implementing rules and regulations (IRR) of the built-operate-transfer (BOT) law, issuance of Executive Order No. 78 or the Alternative Dispute Resolution, and the extension of the Bangko Sentral ng Pilipinas (BSP) Circular No. 770 on single borrower’s limit.

Factory output up in 2012Manufacturing output, as measured by the Volume of Production Index (VoPI), grew by a faster 7.2% in 2012 from a growth of only 1.1% in 2011, the latest Monthly Integrated Survey of Selected Industries (MISSI) released by the National Statistics Offi ce (NSO) showed.

The faster expansion was achieved with the strong performance of the food manufacturing, footwear and wearing apparel, leather products, wood products, publishing and printing, and machinery sectors.

Notably, the NSO said the result came as “half of the 20 major

5April 2013

TRADE ANDINVESTMENTS

The fi ling fee with the IPOPHL is only P4,000, the lowest among the Madrid protocol member countries. But the fi ler has to pay for its designated countries, which have varied rates. For France, it is P33,000 while China, P15,000, and the United States (U.S.), P20,000.

Swedish fi rms keen on PHL manufacturing sectorSwedish fi rms manifested their interest to invest in the Philippine manufacturing sector following their participation in a trade and investments briefi ng organized by the Department of Trade and Industry (DTI).

Representatives from fi rms such as Atlas Copco, Celemi, Clean Motion, Comex International, Electrolux, Ericson, Handelsbanken, Ikano, SEK, Tetra Pak, Volvo, and the Swedish Foreign Trade Association (FTA) attended the briefi ng. “What is encouraging for us is the heightened interest of foreign investors in the Philippines. There is a solid stream of business missions coming in and we believe this as a vote of confi dence in our government’s capacity to effect signifi cant long-term structural and policy reforms,” DTI Undersecretary for Industry Development and Trade Policy Group (IDTPG) Adrian S.Cristobal Jr. said.

During the briefi ng, investment opportunities in the country were presented in the areas of infrastructure or public-private partnership projects (PPP), renewable energy (RE), information technology-business process outsourcing (IT-BPO), tourism, and agribusiness.

“Strategic investments in these high-potential growth sectors, especially in manufacturing, generate employment opportunities and stimulate more development in the rural areas,” Cristobal said.

Swedish companies present in the country are Ericsson Philippines, Astra-Zenica, Magnitron Technology Philippines, ABB Philippines, SCA

AGRICULTURE/AGRIBUSINESS AND FISHERY

Local fruit growers seek BOI perksLocal fruit grower Mont Manna Fruits, Inc. is seeking incentives from the Board of Investments (BOI) for a project in Ormoc, Leyte.

The BOI said Mont Manna is applying for registration with the BOI as new producer of pineapple buckers on a non-pioneer status.

The project has an annual capacity of 3.5M pieces.

Purefoods seeks tax perks for Cavite meat processing plantPurefoods Hormel Co. Inc., a unit of San Miguel Corp. (SMC), is seeking tax perks for a meat processing plant in Cavite.

The Board of Investments (BOI) said Purefoods is applying for registration as expanding producer of processed meat (breaded, buttered, and fried) on a non-pioneer status, with project site located in Sitio de Puego, Brgy. San Francisco, Gen. Trias Cavite.

The project has a capacity of 7,575 metric tons (MT) per year.

BANKING

IFC approves USD100-M investments in RCBCThe World Bank Group’s International Finance Corp. (IFC) has approved a USD 100-M investment in Rizal Commercial Banking Corp. (RCBC) to increase lending to micro, small, and medium enterprises (MSMEs) and other underserved communities.

“We are happy to receive this signifi cant capital commitment from IFC, which allows RCBC to comply with the Basel III capital requirement set for January 01, 2014. The capital will be deployed to grow RCBC’s SME loan book and consumer loan book by 28% and 30%,” RCBC Chief Executive Offi cer (CEO) and President Lorenzo V. Tan said.

AGFUND to open a micro-fi nance bankThe Arab Gulf Programme for Development (AGFUND) is set to open a micro-fi nance bank in the Philippines with an initial investment of USD 5M.

AGFUND Executive Director Nasser B. Al-Kahtani said they are planning to expand the Southeast Asian operations and the Philippines, their fi rst Asian site, will be the regional hub.

AGFUND plans to put USD 2-M seed money to be matched by a counterpart investment from the Philippine government and the private sector.

The fi rm has also completed the feasibility study for its microfi nance

Hygiene Products Corp, Swedish Match Philippines Inc., and Lux Manufacturing.

Swedish investments in the country amounted to only P168.4M from 2006 to 2012.

Swedish Business Delegation Head Eva Walder said there is room to strengthen the investment and trade relations between the two countries.

“I believe that there is great potential for an increased bilateral dialogue between the Philippines and Sweden and strengthened business and industrial relationships,” Walder said.

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bank and has recently discussed with the Philippine Chamber of Commerce and Industry (PCCI), the Department of Finance (DOF), and the Bangko Sentral ng Pilipinas (BSP).

“The government is very supportive. Once we get our partner, we will submit our application for a license,” Al-Kahtani said.

BPO

Safeway plans BPO expansionAmerican supermarket chain Safeway, Inc. is planning to expand its business process outsourcing (BPO) operations in the Philippines.

The Department of Trade and Industry (DTI) said Safeway executives are looking forward to taking opportunities in BPO that is seen to add signifi cant value to its global operations.

DTI Foreign Trade Service Corps (FTSC) Assistant Secretary Josephine C. Romero has advised Safeway to expand their operations to reap the benefi ts of the vibrant economy during the meeting with the fi rm’s top executives.

The Philippine government, on the other hand, is actively promoting the country to foreign fi rms to encourage them to invest here to create jobs in line with achieving higher economic growth.

Transcom to hire additional workersLuxembourg-based Transcom Worldwide S.A. is set to hire additional 5,000 workers to maintain the Philippines as its largest operations in terms of workforce in its global business.

Transcom Worldwide, Inc. President and Chief Executive Offi cer (CEO) Johan Eriksson said the company is bullish about the business process outsourcing (BPO) industry in the Philippines as things grow rapidly.

Transcom currently plans to utilize the full capacity of their sites

in EDSA Mandaluyong, Pasig City, Bacolod City, and Iloilo City.

“The Philippines is very interesting after tremendous growth last year and we are excited about that,” Eriksson said.

ENERGY

Otto Energy fi rming up investment for Mindoro-Cuyo Oil BlockAustralian fi rm Otto Energy has indicated that it is now fi rming up its investment of the Mindoro basin-Cuyo platform petroleum block’s exploration.

This is Area 7 of the service contracts (SCs) auctioned by the Department of Energy (DOE) under Philippine Energy Contracting Round-4.

Otto Energy noted that upon execution of its contract with the Philippine government, it will commit to reprocessing the existing seismic study with a minimum fi nancial commitment of USD 0.5M within 18 months initially.

Basic Energy gets exploration partnerBasic Energy Corp. and Malaysian fi rm Petrosolve Sdn. Bhd. have agreed to enter into a joint venture for the identifi cation, exploration, development, management, and operation of oil wells.

Basic Energy said that the two parties will form a joint venture company to act as a corporate vehicle that will “enter into business relationships and transactions with respect to management and operation of oil wells.”

GREEN PROJECTS

Eastern Petroleum to start USD 60-M biomass plant in Q3Eastern Petroleum Corp. will start construction of its USD 60-M, 20-megawatt (MW) biomass power plant in the third quarter of the year.

The plant, which marks the independent oil fi rm’s entry into the biomass sector, would be operational in 2015, Eastern Petroleum Chief Executive Offi cer (CEO) Fernando L. Martinez said.

To rise in Agusan del Sur, the plant would source its feedstock requirements from a 10,000-ha industrial tree plantation.

The oil company has signed an agreement with a Manobo Tribal Council for the cultivation of an industrial tree plantation to secure the plant’s feedstock requirements.

Aboitiz, UK partner allot USD 30M for biomass projectAseagas, the joint venture between the Aboitiz Group and Gazasia Ltd. of the United Kingdom (UK), is setting aside roughly USD 30M for the construction of a biomass facility in the country, Aseagas Director Juan F. Alfonso said.

Plant construction, which is expected to produce liquid biomethane (LBM) fuel, is targeted to start in the second quarter of the year and will be completed in June 2014.

The plant will have an annual capacity of 8,000 metric tons (MT) of biomethane.

HOSPITAL/MEDICAL SERVICES

P2.1-B medical facility to rise in MakatiReal estate fi rm Century Properties Group Inc. said it is on track to completing the construction of the 28-storey Centuria Medical Makati in 2014.

7April 2013

“The P2.1-B project is positioned to attract local residents, and most especially medical travelers, who are looking for quality treatment in a world-class facility that can offer huge cost savings, as compared to costs of medical treatment in their own countries,” Century Properties Chairman Jose E.B. Antonio said.

The outpatient medical facility will serve as a platform to support the Philippine government’s thrust to offer world-class medical services to foreign patients, Antonio said.

It will house 553 clinics for doctors specializing in various medical practices. Centuria will also offer a day surgery and radiology center, diagnostic laboratory, digital imaging, pharmacy, recovery suites, and an ambulance transfer service.

China Bank funds hospital projectChina Banking Corporation (China Bank) and Global Gateway Development Corporation (GGDC) signed an agreement for the construction of a P900-M hospital facility.

The Medical City (TMC) branch, which will be located at the Sabah Al-Ahmad Global Gateway Logistics City in Clark Freeport Zone, is expected to be completed by 2014.

Middle East health care provider keen on investing in PHLDubai-based DM Healthcare LLC is scouting for investment opportunities in the country.

“We could enter the healthcare sector by partnering with an existing hospital here and providing the fund for the hospital expansion,” DM Healthcare LLC Chairman Azad Moopen said.

Moopen said the group could also set-up its own hospital here.

Another option the group is considering is starting a pharmacy chain or importing medicines from India.

MOTOR VEHICLES

Mitsubishi Motors expands PHL presenceMitsubishi Motors Corp. (MMC) of Japan announced a USD 20-M investment in new transmission assembly for exports as well as plans to assemble two new models in the country — a box-type commercial vehicle and Mirage sedan model.

Mitsubishi aims to enhance production capacity to 50,000 units in two years and 100,000 units in fi ve years from the current 15,000 units in actual annual production.

FOOD Yoshinoya to open 50 chains by 2016Yoshinoya is aiming to open 50 more fastfood chains in the country by 2016 to further grow its business.

The food chain currently has seven stores located in Manila and plans to open three more stores this year in Makati City; Quezon City; and Alabang, Muntinlupa City.

Yoshinoya Century Pacifi c Inc. (YCPI) President Timothy Yang said the chain has been seeing year-on-year growth in sales since it opened its fi rst store.

La Filipino to invest P1.2B for expansionLa Filipino Uy Gongco Corp. is investing P1.2B for the expansion of its corned pork, luncheon meat, and pasta production for domestic and export markets.

La Filipina Uy Gongco Corp. Chairman Alfonso Uy said the company has invested P1B for the pasta manufacturing plant dubbed as Mama Tina Pasta Co. and is putting up a P200-M factory for corned pork and luncheon meat production.

MANUFACTURING

Yokohama to start second phase of expansionThe Yokohama Rubber Co. Ltd. is set to start the P4.8B worth of Phase II expansion program for the Yokohama Tire Philippines Inc. (YTPI).

The expansion will enable the company to increase its annual tire production by P2.5M, bringing its annual tire capacity to P12.5M.

The fi rm also targets expanding its capacity from 7M to 17M tires by 2017.

MINING

DENR issues ECC to Tampakan projectThe Department of Environment and Natural Resources (DENR) has issued an environmental compliance certifi cate (ECC) to the USD 5.9-B Tampakan copper-gold project of the Sagittarius Mining Inc. (SMI).

DENR Secretary Ramon J.P. Paje said the ECC was issued upon the recommendation of the Environmental Management Bureau (EMB), subject to certain conditions.

“SMI should make public the project feasibility, ensure that the area does not cover those where mining is prohibited, and ensure social acceptability through consultation with stakeholders,” Paje said.

Paje also clarifi ed that SMI could only proceed with the project implementation after submitting all other necessary government permits and clearances to the EMB,

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particularly those involving the indigenous people, agriculture and agrarian reform offi ces, and local government units (LGUs).

Minelab to establish gold mining divisionMinelab has announced its plans to establish its gold mining division in the Philippines to support artisanal small-scale gold miners and prospectors.

Minelab General Manager Peter Charlesworth said the new gold mining division would offer a specialized portfolio of products, accessories, and support services such as on- and off-fi eld training.

It would also provide expert advice on the use of gold detectors so that the miners can produce results even in the toughest mineralized soil condition in a cost-effective way and minimal environmental disruption.

Charlesworth said Minelab has also introduced cutting edge technology and provided training and support to enable communities to enhance their gold mining activities.

POWER

Aboitiz to pour P85BAboitizPower will invest P85B over the next four years to expand its power portfolio.

The amount would translate to roughly 1,400 to 1,500 megawatts (MW) of additional capacity and will combine AboitizPower and its respective partners in investments.

The AboitizPower has teamed up with TeaM Energy Corp. to

construct another 400-MW plant of the Pagbilao 3 expansion while completing the Therma South Inc. 300-MW coal power plant in Mindanao.

“In the next three to four years, we are looking at adding a little over 100MW of mini-hydro. We are looking here in Luzon, Negros, and also some more in Mindanao,” Aboitiz said.

AboitizPower President and Chief Executive Offi cer (CEO) Erramon Aboitiz expressed optimism on the improving economic environment.

PASSHydro pushes hydropower projectsThe Philippine Association of Small Scale Hydropower Inc. (PASSHydro) is pushing for the implementation of around USD 1B worth of hydropower projects in the country.

PASSHydro President Jose Silvestre M. Natividad said the investment would enable the implementation of hydropower projects that can add 20 megawatts (MW) to the grid in rural host communities.

PASSHydro has also launched the Philippine Hydropower Summit 2013 that highlighted “current” issues and opportunities in the hydropower industry.

Alsons to build USD 890-M powerplantAlsons Energy Development Corp. (AEDC) of Alsons Consolidated Resources Inc. (ACR) is set to build a USD 890-M power plant to supply the needs of Tampakan copper and gold mining operations in Mindanao.

AEDC will develop a 400-megawatt (MW) open-cycle gas turbine and coal-fi red power station, located in Maasim, Saranggani. It will be composed of a 100-MW diesel plant that will back up the 300-MW coal-fi red facility.

“The plant will begin to ramp up power as early as 2017 and full operations are expected to be under way by the middle

of 2019,” Alsons Power Group Corporate Communication Manager Oscar Benedict E. Contreras said.

Semirara incorporates Energy Utilities Inc.The Semirara Mining Corp. of Consunji Group has incorporated Semirara Energy Utilities Inc. to strengthen its presence in the Philippine energy sector and to provide alternative electricity service to remote and viable areas.

Semirara Energy provides power in Semirara, Tinogboc, and Alegria in Caluya, Antique.

Filinvest to start pre-construction of coal plantFDC Utilities Inc. (FDCUI) of Filinvest group is set to start the pre-construction phases of its proposed 405-megawatt (MW) coal power plants to be located at the PHIVIDEC Industrial Estate in Misamis Oriental.

The company’s parent fi rm, on the other hand, announced its planned bond issue of USD 300M to be consummated in the second quarter.

The facility, which will be equipped with a circulating fl uidized bed (CFB) technology, is targeted for commercial commissioning in 2016.

PUBLIC-PRIVATE PARTNERSHIP PROJECTS

MWSS bids out P100-B water projectsThe government is bidding out this year over P100B worth of water generation projects including the P85-B Laiban Dam and the P11.4-B Bulacan bulk water supply project.

All part of Metropolitan Waterworks and Sewerage System’s (MWSS) Seven Legacy Water Security Plan (SLWSP), MWSS will put the Laiban Dam under the bid and procurement process by July this year, which will be among its biggest projects.

9April 2013

Bidding for the Bulacan project is set in June or July this year to benefi t 22 districts in the Bulacan area including Meycauayan, Obando, and Guiguinto.

The projects will be fi nanced under public-private partnership (PPP) schemes.

Maynilad allots P7.63B for southern expansionMaynilad Water Services, Inc. (Maynilad) will invest P7.63B this year to improve and extend its services south of Metro Manila.

Of the total, almost P4.1B will go to the construction of sewage treatment plants in Pasay and Muntinlupa, and conveyance systems in Muntinlupa and Parañaque.

Some P2.4B would be used to extend the company’s primary, secondary, and tertiary water pipelines in Las Piñas, Muntinlupa, Parañaque, and portions of Cavite.

Another P240M would go to projects designed to improve water availability and pressure, while around P194M would go to water loss reduction projects in Bacoor, Muntinlupa, and Las Piñas.

Maynilad has also set aside P700M to enhance the treatment process and expand the capacity of the Putatan Water Treatment Plant by 50M liters per day.

MVP, Gokongwei formalize tie-up for Cebu airport bidMetro Pacifi c Investments Corp. (MPIC) and JG Summit Holdings Inc. formed a joint venture company to formalize their tie-up for the P17.5-B Mactan Cebu International Airport project.

MPIC and JG Summit announced the establishment of MPIC-JGS Airport Consortium Inc. with the signing of a memorandum of agreement (MOA) for the development of the country’s second largest international gateway.

The exclusive strategic partnership would be majority owned by MPIC, followed by JG Summit with 33%, and an airport operator partner with 10%.

REAL ESTATE

OCLP outlines expansion plansOrtigas-led OCLP (formerly Ortigas & Co. Ltd. Partners) Holdings Inc. has outlined a roughly P30-B expansion plan for its shopping centers.

OCLP Shopping Center Division General Manager Cathy Casares-Ko said the redevelopment and expansion of the Greenhills shopping complex includes the 4.8-B 53-storey Viridian residential tower, newer dining, shopping, and entertainment centers, underground parking, open spaces, and canopied walkways.

OCLP Holdings will also increase available spaces in Estancia at Capitol Commons in Pasig by 31,000 sqm which will require P2.7B to introduce a high-end shopping center and 16,712 sqm of offi ce spaces.

The company will spend P720M for the Tiendesitas at Frontera Verde to double the retail area and introduce an upscale feel by 2015.

Lastly, the property developer has launched the 7,000-sqm Industria, an urban retail center that will be built in Circulo Verde township project in Quezon City.

Casares-Ko said the long-term retail center development will allow the shopping center’s division to continue accounting for half of the property developer’s revenues.

Megaworld to double investmentsThe Megaworld Corporation is doubling its investment for the 16-ha township development,

The Mactan Newtown, to P20B within the next seven years.

“In the next seven years, we are investing P20B in this township to build luxury residential condominiums, offi ce towers, a world-class lifestyle mall, our very own Richmond Hotel and soon, a sports and leisure facility,” Megaworld Chairman Andrew L.Tan said.

As a cyberpark, two business process outsourcing (BPO) companies that will occupy the fi ve-storey One World Center are now ready to start operations.

“We have fully leased out One World Center, so we will be starting the construction of our second BPO tower, Two World Center, this year,” Megaworld First Vice President for Business Development and Leasing Group Jericho Go said.

RETAIL

7-Eleven sets aside P2B for expansionThe local operator of 7-Eleven is upbeat on earnings this year as it plans to spend P2B for expansion.

Philippine Seven Corp. President Jose Victor Paterno said he expects this year to be a good year for the fi rm as it invests more to expand its reach in the country.

The P2B to be spent this year, he said, is the highest capital expenditures budget set by the fi rm so far. The fi rm has over 800 stores at present and is planning to increase its presence to hit 1,000 stores this year.

Uniqlo eyes 8 more stores this yearJapanese retail brand Uniqlo plans to open eight more stores in the country, three within the fi rst half, including its fi rst provincial branch.

The next store will be in the Fort Bonifacio area in SM Aurora. Other stores are in SM Fairview and Pampanga.

Philippine Business Report10

While the company expects strong sales in Pampanga, the provincial store will start small to test the market.

Uniqlo opened its fi rst store in the Philippines at the SM Mall of Asia on June 15 last year. It opened its second store, in SM North EDSA, later in November.

SHIPPING

PPA pushes P43-B bulk cargo facilityThe Philippine Ports Authority (PPA) is pursuing the planned establishment of a P43.3-B bulk cargo handling facility at the northwest portion of South Harbor to cater to the needs primarily of oil companies.

PPA General Manager Juan C. Sta. Ana said the results of the master plan and feasibility study on the proposed bulk cargo handling facility would be presented to the Department of Transportation and Communications (DOTC) for approval.

The project would involve the dredging and reclamation of a 100-ha area in South Harbor that would cost about P22B and civil works such as the handling equipment, bridges, and roads, among others worth over P20B.

Asian Terminals expands Batangas operationsPort operator Asian Terminals Inc. (ATI) is expanding its operations at the Batangas Port by providing integrated ports and logistics services at the Batangas Container Terminal (BCT).

At the Ports and Shipping Conference hosted by the Philippine Ports Authority (PPA), ATI said all infrastructure and systems are now seamlessly in place at the BCT.

With the addition of BCT, ATI’s modern Batangas Port is now a one-stop competitive hub for containerized and general cargoes, roll-on, roll-off (ro-ro) vessels, and

passengers benefi ting South Luzon and nearby locations.

TELECOM

Globe allots USD 51.5M for provincial landline upgradeGlobe Telecom Inc. has earmarked USD 51.5M this year to modernize its wire line infrastructure in key areas in the central and southern parts of the country through a four-phase project.

The project involves the change-out of old “legacy” digital line concentrators from the core switches down to the street-side cabinets with next generation network equipment providing voice and data.

Globe Chief Technical Advisor Robert Tan explained that the project is on top of the USD 700-M nationwide wireless modernization also currently being undertaken by the company.

“This will make our network more resilient while providing additional capacity to our subscribers,” Tan said.

TOURISM BOI grants tax perks to tourism projectThe Board of Investments (BOI) has approved the application for registration of a unit of Filinvest Development Corp. (FDC), Boracay Seascapes Resort Inc., for its hotel development in Aklan.

Boracay Seascapes Resort is investing about P2B for the construction of the Crimson Resort and Spa Boracay, which is situated on a 2.9-ha land in Barangay Yapak in Boracay.

The project will have almost 200 guest rooms and other amenities such as banquet facilities, food and beverage outlets, swimming

COMPANY NOTES

Lafarge Republic builds cement schoolLafarge Republic Inc. (LRI) recently broke ground for its Cement School located at LRI’s Teresa Plant in Barangay Dulumbayan, Teresa, Rizal. The school is dedicated to hosting various training activities for all LRI employees in the country.

It will offer courses and trainings set to develop plant operation skills, including technical and leadership skills.

Upon completion of the fi rst phase of construction, the school will feature two training rooms designed to hold lectures on different plant procedures like production as well as maintenance trainings.

It will also be the site of a workshop facility where plant operation employees will be given hands-on experience on some machine prototypes of actual equipment being used in cement manufacturing.

All courses are industry-specifi c on key development needs of the fi rm’s technical groups who handle operations in various Lafarge plants.

Splash hikes stake in Barrio Fiesta ManufacturingSplash Corp. decided to increase by another 3% its stake in condiments and canned goods producer Barrio Fiesta Manufacturing Corp.

Splash, manufacturer of skin whitening soap and other personal care products, said it will spend P14M for additional shares in its food manufacturing unit.

pool, game room, water sports facilities, gym, spa, chapel, and salon.

The project groundbreaking is targeted this month and commercial operations, by December 2017. It will employ 285 people.

11April 2013

BILATERALAGREEMENT

ASEANWATCH

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In August 2011, Splash bought P5.28M shares or an 80-% stake of Barrio Fiesta Manufacturing for P472M from Bonifacio E. Ongpauco Jr. and his children.

Barrio Fiesta Manufacturing is the food manufacturing arm of Barrio Fiesta, which offers a number of food products from sautéed shrimp paste to ready-to-eat canned meals, sauces such as white vinegar, fi sh sauce, soy sauce, and lechon sauce, to fruit preserves and other condiments.

PHL-Israel bilateral trade seen to triple from current USD 200MBilateral trade between the Philippines and Israel is expected to triple from the current USD 200M as more Israeli businesspeople are looking into opportunities in the agriculture, solar energy, and medical services, said Philippine Chamber of Commerce and Industry (PCCI) President Miguel B. Varela.

Varela said the balance of trade has always been in favor of Israel.

Israel's exports to the Philippines comprised mostly technology products and agriculture infrastructure. On the other hand, the Philippine exports to Israel include pineapples and other agriculture products.

According to Varela, the 15-man Israeli business delegation are looking at the Philippines for possible investments in dairy, fi shing, greenhouse, solar energy, medical devices, and diamond trade.

The PCCI has also urged Israeli businessmen to explore opportunities in tourism, mining, irrigation and agriculture, and military hardware. Israel can also bring in medical technologies as it has the highest per capita in medical device.

PHL, U.S. resolve trade issues, banana exports start in AprilThe Philippines and the United States (U.S.) have resolved trade issues paving the way for more exports of U.S. frozen meat and new export market for Philippine bananas and mangoes starting this month.

According to U.S. Embassy in Manila Agricultural Counselor Philip Shull, the agreement, signed last year by the Philippine and U.S. agriculture departments, has resolved the sanitary and phyto-sanitary issues with the crafting of a new protocol on pest risk assessment as a condition for the entry of Philippine Cavendish bananas into the U.S.

Shull further said the agreement did not put a ceiling on the country’s banana exports.

He said both governments are also working on another mango protocol to allow the exports of Philippine mangoes into the U.S. market.

U.S. fi rms urged to invest in PHL, ASEAN infra projectsUnited States (U.S.) fi rms are urged to take part in infrastructure projects in the Southeast Asian region, particularly in the Philippines, given the availability of opportunities in that sector.

U.S. Department of State Assistant Secretary for Economic and Business Affairs Jose W. Fernandez said he would like more American fi rms to participate in infrastructure projects in the region as there are many opportunities available.

Citing estimates of the Asian Development Bank (ADB), Fernandez said the Association of Southeast Asian Nations (ASEAN) would require USD 60B a year for infrastructure over the next

9th IFEX PhilippinesSource from Asia's dynamic food marketplace through International Food Exhibition (IFEX) Philippines, an international trade show of unique tropical fl avors, products, innovations and services.

Organized by the Center for International Trade Expositions and Missions (CITEM), this event will be held on May 16-19, 2013 at the SMX Convention Center in Pasay City.

Now a biennial event, IFEX Philippines is a premier international sourcing hub for the fi nest ethnic Asian food, ingredients, and raw materials.

Since 2004, the show has provided food and beverage companies the key venue to promote their products globally and establish and strengthen links with international buyers, importers, and retailers.

decade to meet the region’s needs to grow.

American fi rms are currently not tapping the huge opportunity available. A number of fi rms from other parts of the world such as Korea, China, Spain, and Brazil, however, are taking advantage of the available opportunities.

Philippine Business Report12

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Apr-13Mar-13Feb-13Jan-13Dec-12Nov-12

Interest Rate (%)

40.240.440.640.8

4141.241.4

Apr-12Mar-12Feb-13Jan-13Dec-12Nov-12

Peso per US Dollar Rate

Economic Indicators

As of April 8, 2013 As of April 8, 2013

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3Q (2011) 4Q (2011) 1Q (2012) 2Q (2012) 3Q (2012) 4Q (2012)

GNI Growth Rate (%)

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3Q (2011) 4Q (2011) 1Q (2012)2Q (2012)3Q (2012)4Q (2012)

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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: [email protected] • Online: http://www.dti.gov.ph/dti/index.php?p=116

Editorial Team: Anne L. Sevilla , Editor-in-Chief • Vic S. Soriano , Managing Editor • Cresenciano P. Par , Assistant Editor • Jam A. Hourani, Elaine M. Lazaro, and Emman R. Caleon, Writers • Ren C. Neneria, Design Layout • Myrna V. de los Reyes, Circulation.

April 2013Philippine Business Report

*GNI - Gross National Income

Entered as Third-Class Mail at theMakati Central Post Offi ce

under Permit No. 504valid until 31 December 2013

0100020003000400050006000

Dec-12Nov-12Oct-12Sep-12Aug-12Jul-12

Exports(In USD Billion)

4,8004,9005,0005,1005,2005,300

Nov-12Oct-12Sep-12Aug-12Jul-12Jun-12

Imports (In USD Billion)

130.5131

131.5132

132.5

Feb-13Jan-13Dec-12Nov-12Oct-12Sep-12

Consumer Price Index(2000 base year)

0

1

2

3

4

Feb-13Jan-13Dec-12Nov-12Oct-12Sep-12

Inflation Rate (%)(1994 base year)