Philippine Business Report- August

1August 2013

Volume 24 No. 08 August 2013

To help boost the Philippines’ global competitiveness, the government and the European Union (EU) recently launched the third phase of the EU-supported Trade Related Technical Assistance 3 (TRTA 3) Project.

With additional P456-M financial support from EU, this project aims to promote trade and investments in the Philippines as drivers of economic growth, job creation, and poverty reduction. During the launch, Department of Trade and Industry (DTI) Secretary Gregory L. Domingo and EU Ambassador Guy Ledoux delivered messages highlighting the Philippine government’s current accomplishments and the expected achievements of this cooperation which started in 2005. The financing agreement will be used to promote the country’s further integration into the international and regional trading and investment system.

PHL gets another boost in global competitiveness from EU

It seeks to expand the country’s trade with the rest of the world and to attract more local and foreign investments. The project enhances the government’s capacity to implement some of the key policies and technical priorities identified in the Philippine Development Plan (PDP) 2011-2016, namely:

• Support policy and regulatory reforms to strengthen

the industry and promote genuine competition

• Contribute to the consolidation and establishment of new systems to reduce costs

and delays of engaging in trade• Strengthen food safety measures

and control systems for local products to gain access

to international markets• Provide on-demand services

to public sector and business associations to address their urgent needs.

TRTA 3 builds upon the successes of its first two phases which contributed to the country’s improved ranking — from 61st

to 68th — in the “trading across border” index of the World Bank’s “Business Report.” Various government agencies, in collaboration with the business sector, academe, and civil society, developed the work plan that will operationalize TRTA 3. Domingo believed that TRTA 3 would pave the way for more economic breakthroughs for the Philippines and strengthen cooperation between the country and the EU. Stressing that economic reforms are a long-term undertaking, Ledoux, for his part, emphasized the EU’s commitment to help the country undertake the necessary steps to see a Philippine economy that creates jobs and take the country further on a sustainable growth path.

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INDUSTRYTReNDS

Factory output expands in MayFactory output continued to expand in May due to the positive performance of the petroleum products, chemical products, basic metals, furniture and fixtures, and electrical machinery sectors, the National Statistics Office (NSO) reported.

The latest Monthly Integrated Survey of Selected Industries (MISSI) showed manufacturing output as measured by the Volume of Production Index (VOPI) grew 20.4% in May, much faster than the revised 8.7% expansion posted in April.

Major contributors to increased factory output for May 2013

May2013April2013%growth %growth

Petroleum products 139.4 -54.5Chemical products 84.8 84.7Basic metals 68.1 111.5Furniture and fixtures 56.6 21.4Electrical machinery 12.0 22.8Non-metallic mineral 4.7 8.9 productsRubber and plastic 2.9 8.5 productsFood manufacturing 2.6 5.7Machinery except 1.7 16.4 electrical

The Value of Production Index (VAPI) also improved in May as it grew 9.7%, reversing the revised 1.6% contraction seen in April.

Increase in the Volume of Net Sales Index (VoNSI), which grew 16.8% in May, was due to the three-digit growth in sales of furniture and fixtures (110.6%) and chemical products (106.6%).

The average capacity utilization for the month was at 83.1%.

Five-month tourist arrivals reach over 2MThe Philippines attracted over 2M tourists from abroad from January-May, the highest

five-month total ever, according to the Department of Tourism (DOT).

The number covered both foreign tourists and overseas Filipinos (OFs) who visited their relatives here during the period.

The DOT said arrivals grew by 10.54% from only 1.82M in the same period last year.

The Philippines’ traditional markets for tourists posted record growth, particularly the United States (U.S.) and Japan, whose economies are recovering from the recent slowdown.

DOT data showed that South Korea remained the country’s main source of tourists, with 489,389 arrivals for the period, up by 23.22%.

The second-highest arrivals for the period were from the U.S., which increased by 2.58% to 306,056.

The other main sources of foreign tourists were China, Australia, Taiwan, Singapore, Canada, Hong Kong, the United Kingdom (UK), Malaysia, and Germany.

The number of Japanese tourists that visited the country in the first five months of the year reached 179,984, up by 7.51%.

Tourist arrivals from Singapore, Hong Kong, and Malaysia grew by over 10% owing to the increased number of intraregional flights, mostly provided by budget airlines.

Approved Q1 foreign investments up 87%The country’s seven major investment promotion agencies (IPAs) approved P34.6B foreign investments in the first quarter of 2013, up by 87% from P18.5B in the same period last year, the National Statistical Coordination Board (NSCB) reported.

Philippine Export Zone Authority (PEZA) recorded the highest increase at 157.1%, reaching P32.9B in the first quarter from P12.8B in the same period in 2012.

The top three prospective investing countries for the period included the British Virgin Islands with investment commitment of P19.6B, followed by Japan with P5.2B, and the Netherlands, P2.2B.

Major IPAs in the country

• Board of Investments (BOI)• Philippine Economic Zone Authority (PEZA)• Clark Development Corp. (CDC)• Subic Bay Metropolitan Authority (SBMA)• Authority of the Freeport Area of Bataan (AFAB)• BOI-Autonomous Region in Muslim

Mindanao (ARMM)• Cagayan Economic Zone Authority (CEZA)

Approved investments from Filipino and foreign nationals rose by 103%, reaching a total of P89.4B in the review period from P44B in the same period last year.

Some 61.3% of this amount would be supplied by ventures from Filipino investors. Investment pledges from Filipino nationals were at P54.8B, up by 114.8% from P25.5B in the same period in 2012.

These projects are seen to generate 33,746 jobs with 81.8% or 27,620 jobs coming from projects with foreign interest.

PeZA expands IT free zonesThe Philippine Economic Zone Authority (PEZA) is leading efforts to expand the network of industrial and information technology (IT) free zones and further boost the presence of multinational companies in the country.

The network of free zones had grown to 277 as of end-2012 from 16 when PEZA was set up in 1995.

IT centers, which include business process outsourcing (BPO) facilities, accounted for 139 of this total, followed by manufacturing, with 69 free zones.

3August 2013

Multinationals that set up shops in these areas benefit from a number of financial incentives, including up to six years of tax exemptions.

Notably, the First Philippine Industrial Park (FPIP), located in Batangas, has played a key part in spearheading industrial growth since it was established in 1996. The zone houses businesses across a broad range of industrial and manufacturing activities.

The park’s exports reached USD 1.4B in 2011, creating 40,000 jobs last year.

The FPIP said it was looking to develop new industrial parks in Subic, Clark, and other key areas in Southern Luzon on the back of increased demand from potential investors.

“As the Philippines becomes a favored foreign investment destination, we will continue with the acquisition of additional industrial land, the development of recurring revenue businesses, and the creation of new ancillary services,” FPIP Board of Directors Member Elpidio L. Ibañez said.

BOI updates database, urges makers to registerThe Board of Investments (BOI) encourages Philippine manufacturers and producers to register on its database as it starts work on new industry development and international trade projects.

The BOI is currently updating its database of local product manufacturers in connection with the agency's work on industry development including international trade negotiations.

The BOI seeks to expand its database for 41 products, including articles of plastic used to pack semiconductor products, transformers, motor vehicle parts, loudspeakers, amplifiers, optical media equipment, solid-state storage devices, semiconductor

production parts, thermometers, coin or bank note operated gaming equipment, and video game consoles.

Many of the products are electronics, which comprise the largest chunk of the country’s merchandise exports.

UAe lifts ban on PHL fowlThe United Arab Emirates (UAE) Ministry of Environment and Water has lifted the ban on fowl importation from the Philippines.

The UAE environment office said it now allows the importation of all kinds of live birds, meats, products, hatching eggs, and one-day old chick from the Philippines as cited in their Administrative Resolution No. 104 of 2013.

The resolution is in response to the Philippines’ application to lift the said ban and in line with UAE ministry’s goal to achieve food security for its country.

The Gulf state had banned such trade from Asian countries in 2011 amid the avian flu pandemic.

PHL mango exports enter AustriaThe Philippine government added Austria to the growing number of foreign markets for local mangoes.

The direct entry of fresh mangoes into the Austrian market is a landmark achievement since Philippine food products normally enter through big distribution companies in some European countries.

Mango is among the country's top three fruit exports, next to pineapple and banana.

Foreign markets for Philippine mangoes

• Australia • New Zealand• Canada • Singapore• Hong Kong • Switzerland• Japan • United Kingdom• Korea • United States

Subic seen to be the next GuamSubic Bay Freeport could be the next Guam, according to Century 21 Subic Bay Chairman Ronald Wang.

"Subic is the next Guam in terms of economic growth," Wang said.

He said that when he was invited by Grand Pillar International Development, Inc. Chairman Johnson Yang to Subic several years ago, he felt the passion in Subic and the opportunity in leisure and commercial development.

"This is the reason why when I attended the 10th Asian Real Estate Association of America Global Summit held in Hawaii in May 2013, I was inspired and had the confidence to present to all the delegates and participants of the summit that Subic could be the next Guam," he said.

Subic is said to have the potential to replicate Guam's real estate boom because of its natural attractions that include mountain forests and a bay.

"There is now a continuous increase of tourist arrivals in the Freeport that investors see it as a good sign to start tourism-related businesses," Subic Bay Metropolitan Authority (SBMA) Chairman and Administrator Roberto V. Garcia said.

Government to implement manufacturing map next yearGovernment will start implementing next year the initial phase of a draft plan for the manufacturing roadmap jointly formulated by the government and private sectors.

The draft Comprehensive Manufacturing Industry Roadmap identifies various strategies and measures that will make the country’s manufacturing sector competitive in the short, medium, and long term, Philippine Institute for Development Studies (PIDS) Vice President Rafaelita M. Aldaba said.

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TRADe ANDINVeSTMeNTS

The Department of Trade and Industry (DTI) tasked PIDS to weave together the 23 sectoral roadmaps submitted by various industry groups last year.

DTI and local businesses are revving up for a manufacturing renaissance, as the country has landed on a “sweet spot” among investors.

Aldaba said the first phase of the roadmap to be implemented from 2014 to 2017 aims to strengthen the country’s emerging products, maintain the competitiveness of “classics,” and rebuild existing capacity of industries.

She said the emerging sectors are agriculture-related goods, glass, machinery, and new chemical products.

The so-called “classics,” which have revealed comparative advantage (RCA) that remain high since the 1990s, include capital- and labor-intensive garments, cereals, chemicals, forest products, machinery, and raw materials.

To boost these industries, additional investments are needed to introduce technological innovations that would improve productivity, Aldaba added.

The second phase, which will run from 2018 to 2021, involves implementing measures that will attract investments in upstream or core sectors; shifting to high value-added activities; and linking and integrating industries within the economy. This will entail aggressive marketing and promotions to lure in investments that will bring new technologies.

“By 2020, our goal is to see a globally competitive manufacturing industry with strong forward and backward linkages,” she said.

PIDS recommended that DTI put in place industry councils that will closely coordinate with the agency in implementing the roadmap.

She added that robust manufacturing is key to achieving faster and more inclusive growth, creating employment, and ultimately addressing poverty in the country.

Open access ‘good so far’Based on feedback the Department of Energy (DOE) received from initial customers, the commercial implementation of retail competition and open access (RCOA), which began recently, is off to a good start.

"Some 239 registered contestable customers went online. We haven’t gotten any complaints from customers," DOE Secretary Carlos Jericho L. Petilla said.

Contestable customers are electricity end-users whose average monthly peak consumption is at least one megawatt (MW).

Under the RCOA, contestable customers can choose their own suppliers, who in turn can provide tailored supply packages based on each customer’s consumption and preferences.

More rice exports plannedThe Department of Agriculture (DA) exported another batch of long-grain, aromatic rice last month to Indonesia and Malaysia as the agency targets a trial shipment of 100 metric tons (MT) in 2013.

“The export initiative is a trial export to test if our high-value specialty rice can be accepted in the international market in terms of quality and price. Initial feedback is positive,” DA Assistant Secretary and National Rice Program Coordinator Dante S. Delima said.

Exports of heirloom rice, another kind of gourmet rice grown in Cordillera, are also seen to supply European countries such as Germany, the Netherlands, Rome, and France.

In May, the country shipped to Dubai 35 MT of aromatic and organic rice varieties, 15 MT of which were organic black rice and 20 MT, Jasponica or long-grain aromatic white rice.

The country also shipped 15 MT of black, brown, and red rice to Hong Kong that month.

Farmer-members of the Don Bosco Farmers’ Multi-Purpose Cooperative (DBFMPC), in partnership with the Don Bosco Foundation for Sustainable Development, Inc. (DBFSDI), produced the organic black rice, which was milled and packed in Matanao, Davao del Sur.

Meanwhile, farmers in Talavera, Nueva Ecija produced the Jasponica rice.

AGRICULTURE/AGRIBUSINESS AND FISHERY

Marsman Coop gets Chinese buyers for banana fiberThe Marsman Agrarian Reform Beneficiaries Cooperative is finalizing discussions with Chinese buyers of its banana fiber.

Chinese buyers have asked the cooperative for product samples and have been finalizing marketing contracts, Marsman Agrarian Reform Beneficiaries Cooperative Chairman Avito M. Magdalaga said.

The cooperative is also hoping to produce banana fiber textiles for new buyers, Magdalaga added.

5August 2013

DOST eyes Palo, Leyte as country’s coco wine capitalThe Department of Science and Technology (DOST) and the municipal government of Palo are gearing up to make the town, one of the top tuba and bahalina-producing towns in Leyte, as the bahalina or coco wine capital of the country.

Bahalina is the aged tuba, a local wine made from the sap of coconut and popular in the Visayas islands.

“We know that Palo has plenty of bahalina producers; they produce the best tasting bahalina in this province and we want to organize them to sell their product in one place and at the same time make that place a tourist site,” DOST Regional Director Edgardo M. Esperancilla said.

Tuba wine tasting and the display of different tuba concoction will be set in the site, wherein visitors will have the chance to see how tuba is processed to become bahalina, he said.

BANKING

Maybank eyes local bank acquisitionMaybank Philippines Inc. (MPI) is mulling over acquiring or merging with a publicly listed bank to accelerate its plans to expand its domestic branch network.

The company said they can do a straightforward initial public offering (IPO) or buy a listed bank.

At the start of the year, Maybank of Malaysia officials expressed their expansion plans.

From the 55 Philippine branches they had at the end of 2012,

they expect to have 200 branches by 2017.

MPI President and Chief Executive Officer (CEO) Herminio M. Famatigan Jr. said by November this year, they would have added 25 more banks for a total of 80.

Plantersbank opens new branchesPlantersbank has opened four new branches to expand its network in key growth areas across the Philippines, bringing its total branches to 79 nationwide.

It opened branches in Banawe, Quezon City; Tuguegarao City, Cagayan; Santiago, Isabela; and Naga City, Camarines Sur.

“We are opening these branches to expand our reach to more SMEs in the country especially in areas where entrepreneurs are thriving and yet underserved,” Plantersbank Chairman and Chief Executive Officer (CEO) Ambassador Jesus P. Tambunting said.

With rosy prospects for the Philippine economy today, increased business activity is seen in industries prevalent in these regional areas, such as agriculture, trade, tourism, and export.

ENERGY

Shell taps Dutch firm to construct USD 60-M platform off PalawanShell Philippines Exploration BV (SPEX) tapped Royal Boskalis Westminster N.V. of the Netherlands for the installation of a depletion compression platform at the Malampaya gas field off Palawan.

The USD 60-M contract covers seabed preparation, rock installation, platform transportation, and installation work.

The project forms part of a planned USD 750-M Phase 3 expansion for the field.

Malampaya Phase 3, set to be completed by 2015, will involve the installation of compressors and a platform.

Ingasco invests P1.35B to build air separation plant in ClarkJapanese gas firm Ingasco is constructing a P1.35-B air separation plant in Clark, Pampanga.

“Ingasco will establish and operate an air separation plant facility for the existing and future needs for industrial, medical, and specialty gases of several firms, including semiconductor facilities, inside Clark,” Clark Development Corporation (CDC) President Arthur P. Tugade said.

The fuel facility will be built on a 32,928-sqm land along Panday Pira Avenue.

Pitkin signs Palawan exploration contractPhilex Petroleum Corp.’s British subsidiary, Pitkin Petroleum PLC, recently signed the service contract for exploration and development of potential oil source in Area 5 of Northwest Palawan.

Pitkin, with its partner for the project, Philodrill Corp., is waiting for the go-signal from the Department of Energy (DOE) to kick off oil exploration in the area.

According to DOE, the Area 5 comprises 424,000 ha, with an oil well built before —Linapacan-1 —that proved oil sources are present and existing in the area.

Otto energy starts drilling in LeyteAustralian firm Otto Energy started drilling last month at Duhat-2 exploration well for prospective petroleum finds.

The Department of Energy (DOE) has awarded the onshore exploration acreage under Service Contract 51.

The drilling, as programmed, will have to reach approximately 1,000 m within 31 days.

Initial data signified potential petroleum finds of 23M barrels or up to 59M barrels on the higher-end target of reserves.

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SLTeC expands Calaca coal plantSouth Luzon Thermal Energy Corp. (SLTEC) has secured a P7-B loan facility with three banks to fund the second phase of expansion of its Calaca power plant.

SLTEC, the joint venture company established by AC Energy Holdings Inc. and Trans-Asia Oil and Energy Development Corp, said the loan proceeds will be used specifically to fund the expansion of the plant’s capacity up to 270 megawatts (MW).

GREEN PROJECTS

Suweco to supply hydro power in Antique, Cagayan ValleyLocal renewable energy developer Sunwest Water and Electric Co. Inc. (Suweco) has inked a supply agreement with Antique Electric Cooperative Inc. (Anteco) for the supply of power in the province.

The 8-megawatt (MW) Villasiga-1 Hydropower project would be the first hydropower plant on Panay Island. It is a run-of-river renewable energy type of power development that will optimize the potential use of the main Paliuan River to generate power.

With a total P1.6-B investment, the project is expected to be completed by January 2014 and projected to generate 31.48M kilowatt hours (kWh) annually.

Suweco also targets to complete its 9.4-MW Villasiga-2 hydropower plant on Panay Island in 2017.

Full construction of the P2-B project is expected to start in the first quarter of next year.

“We hope to start construction within the end of the year. Hopefully, early 2017, it would

already be operational,” Suweco President Jose Silvestre Natividad said. Aside from Villasiga-2, Suweco also hopes to start the construction of the 6-MW Penablanca hydropower plant in Cagayan Valley.

“Hopefully, we can start with the construction of that next year and have it operational by 2017,” he said.

Suweco already started the construction of the access roads for the P1.1-B Penablanca project.

Local e-vehicle manufacturer gets incentivesThe Board of Investments (BOI) has given tax perks to Philippine Utility Vehicle Inc. (PHUV) for their P18.9-M project as new domestic of electric vehicles, specifically e-trikes and e-jeepneys.

PHUV plans to produce 6,000 e-trikes and 200 e-jeepneys yearly under the project.

The Investments Priorities Plan (IPP) includes the manufacture and assembly of motor vehicles among the priority activities that are eligible for incentives.

Largest solar power plant soon in S. CotabatoNV Vogt Philippines Solar Energy One Inc. will start constructing a P1-B solar power plant in Surallah, South Cotabato next month.

At 5 megawatts (MW), it would be the biggest photovoltaic power project in the country, surpassing the 1-MW solar facility in Cagayan de Oro City.

Intended to produce power for the South Cotabato I Electric Cooperative Inc. (Socoteco I), the project is expected to be completed in January 2014.

Trans-Asia releases P80M for wind projectTrans-Asia Oil and Energy Development Corp., under the Philippine Investment Management

Inc. (Phinma), has released P80M for the P1-B, 54-megawatt (MW) wind energy project in Guimaras.

According to Trans-Asia records, the 10-MW will come from Barangay M. Chavez and the other 44-MW from Barangays Suclaran and Cabano.

Each of the wind turbines, which is about 64 m high with 76-m diameter rotor blades, would generate 2-MW power.

Trans-Asia targets to start operating the wind farm by the first quarter of next year.

Alternergy constructs wind farm in RizalAlternergy Wind One Corp. will use a USD 130-M loan to construct a 67.5-megawatt (MW) wind project in Rizal.

The Pililla wind farm is expected to be completed by late 2014 to early 2015.

MPMC proposes to improve Agus 6 hydro plantThe Mindanao Power Monitoring Committee (MPMC) has proposed to improve the government-owned Agus 6 hydroelectric power plant to boost energy capacity in Mindanao.

The proposed P495-M Agus 6 Unit 4 uprating is projected to add 15 megawatts (MW) on top of the present 35MW in a bid to increase the dependable capacity of Mindanao power generation.

The uprating of Agus 6’s Units 1 and 2, which was recently approved by the National Economic Development Authority (NEDA), would prolong the plants’ economic life and increase output from 50MW to 69MW.

INFRASTRUCTURE/PUBLIC-PRIVATE PARTNERSHIP

SMC makes payment for NAIA expressway contract San Miguel Corporation’s (SMC) Optimal Infrastructure

7August 2013

Development, Inc. paid the Department of Public Works and Highways (DPWH) P11B after receiving the Notice of Award (NOA) for the Ninoy Aquino International Airport (NAIA) Expressway Project of the Public-Private Partnership (PPP) Center.

The 7.75-km, 4-lane elevated expressway would connect NAIA terminals 1 to 3 to Philippine Amusement and Gaming Corporation’s (PAGCOR) Entertainment City located in the reclaimed area of Manila Bay in Parañaque City.

The P15.52-B expressway would also be linked to the Skyway and the Manila-Cavite Toll Expressway.

Metro Pacific allots P3B for road constructionMetro Pacific Tollways Corp. (MPTC) has set a P3-B capital expenditure program for its road construction projects this year.

Of the budget, P1.7B will go to the Segment 9 project which involves a 2.4-km stretch from Valenzuela City to MacArthur Highway. The project is expected to be completed by the middle of next year.

These expansion projects will promote tourism, particularly in the northern part of Luzon where most of their facilities are located, MPTC President and Chief Executive Officer (CEO) Ramoncito Fernandez said.

Changi Airport keen on Mactan-Cebu airport projectChangi Airports International (CAI) technical experts led by CAI Chief Executive Officer (CEO) Lim Liang Song recently paid a visit to Manila and Cebu in relation to the company’s Public-Private Partnership (PPP) bid to turn the Mactan-Cebu International Airport (MCIA) into a world-class aviation gateway.

Singapore’s Changi Airport Group (CAG), through CAI, is the consortium partner of Gotianun-led Filinvest Development Corp.

The Filinvest-Changi Airport consortium is one of the seven bidders the Department of Transportation and Communications (DOTC) prequalified for the P17.5-B MCIA project, which involves the construction of a new world-class passenger terminal that can accommodate up to 8M travelers yearly.

The Filinvest-CAI partnership is looking at replicating the Changi Airport experience in the Philippines to boost the country’s tourism and aviation industries.

Maynilad constructs P190-M reservoir in QCThe Maynilad Water Services, Inc. has recently begun building a concrete reservoir worth P190M in Novaliches, Quezon City and targets to complete it by April 2014.

Two bolted reservoirs worth P48M, along Magdalena and J.P Ramoy Streets, have been commissioned by the water company last year.

The new reservoir would be able to contain 10M liters and would help increase water pressure to provide over 555,000 residents of North Caloocan with stable water supply for 24 hours.

GSIS in talks for infra project The Government Service Insurance System (GSIS) is in negotiations for their first infrastructure project under the Public-Private Partnership (PPP) program to be financed through the USD 625-M Philippine Investment Alliance for Infrastructure (PINAI) fund after an exploration of over a year.

The PINAI fund was collectively created by the Asian Development Bank (ADB), Dutch pension asset manager Algemene Pensioen Groep (APG), Macquarie Group, and the GSIS that contributed USD 400M.

The fund targets five to 10 equity and equity-linked infrastructure investments allocating USD 50M-125M each.

Seven companies qualify for three airport projectsThe Department of Transportation and Communications (DOTC) reported that seven potential bidders qualified for the P68.5-M semi-permanent airport terminals project will help decongest three of the country’s busiest airports in the next few years.

“These semi-permanent structures are interim solutions to make passenger experience at the highly congested Clark, Puerto Princesa, and Tacloban airports more convenient,” DOTC Spokesperson Migs Sagcal said.

Qualified bidders for airport projects

• For the P27-M Clark International Airport component:

- Jo Builders - AQA Global Construction Inc. - Jerry R. Santiago Construction - Joint venture of E.M. Cuerpo

Inc. and Ascutia• For the P22.7-M Puerto Princesa

Airport component: - D.G. Sarmienta Group• For the P18.78-M Tacloban Airport

component: - Jo Builders - H.N.R. Construction & Supply

MASS HOUSING

Axeia applies for incentivesThe Axeia Group of Companies, through Axeia Development Corp. and Basic Housing Solutions, Inc., seeks to gain incentives from the Board of Investments (BOI) for projects of each company on a non-pioneer status.

Axeia Development Corp. has applied for registration as a new developer of low-cost mass housing to gain four years tax perks for their 646-unit project in Sto. Tomas, Batangas.

Meanwhile, Basic Housing Solutions, Inc. looks to add 27 units to their project in Kawit, Cavite and also applied for registration as an expanding developer of low-cost mass housing project that would give them tax perks for three years.

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Villar housing unit seeks tax perksHousehold Development Corp., a subsidiary of Vista Land and Lifescapes Inc., is seeking registration with the Board of Investments (BOI) to get incentives for a mass housing project in Bulacan.

The firm is applying for registration as a new developer of a low-cost mass housing project, the Camella San Jose Del Monte, with a total capacity of 217 units on a non-pioneer status.

POWER

Philex, Meralco mull power project in SurigaoPhilex Mining Corp. and Manila Electric Co. (Meralco) are considering putting up an 80-megawatt (MW) coal-fired power plant in Surigao del Norte.

The Surigao del Norte mine involves the Silangan project and combines the development of the Boyongan and Bayugo deposits, comprising of gold, copper, and silver.

Silangan mine’s commercial operations are expected to start by 2017.

Hedcor starts works on Sabangan hydropower projectHedcor Inc., the hydropower arm of Aboitiz Power Corp., has broken ground for the 14-megawatt (MW), P1.9-B Sabangan hydropower project in the Mountain Province.

The Sabangan hydropower plant uses a run-of-river system that will harness energy from the Chico River.

It is expected to generate an annual total of 55M kilowatt-hours (kWh) of clean and renewable energy, Hedcor President and Chief Operating Officer (COO) Rene B. Ronquillo said.

DMCI Power lone bidder for Calapan plant dealDMCI Power Corp. emerged as the lone qualified bidder for the construction, operation,

and maintenance of a 15-megawatt (MW) bunker-fired power plant in Calapan, Mindoro.

The Oriental Mindoro Electric Cooperative (ORMECO) launched last month a competitive selection process for the facility aimed at providing reliable and sustainable power supply in the province.

DMCI bested two other bidders, the Sta. Clara Power Corp. and Mindoro Grid Corp., which moved for reconsideration of their disqualification.

DMCI’s qualification is still subject to evaluation prior to the auction of the project.

REAL ESTATE

Federal Land allots P12B for 2013 projectsFederal Land committed to spend P12B for its property projects this year, up from the P9B it spent in 2012.

Of the capital spending this year, P4B-5B will be spent for the Fort Bonifacio developments.

Federal Land currently has 35 projects composed of 11,000 units.

SMDC constructs condo towers in Taguig, ManilaSM Development Corp. (SMDC) has started the construction of the four-tower Grace Residences, its first condominium project in Taguig City.

Planned to be constructed over a three- to five-year period, the project will offer approximately 3,500 units over a gross floor area of about 170,000 sqm.

SMDC launched the 12-storey Tower A and the 20-storey Tower B in November 2012; Towers C and D will be launched late this year and in mid-2014, respectively.

The property firm said the 36-sqm units were already sold out while the 31-sqm units are still available starting at P2.5M.

Meanwhile, SMDC’s 38-storey Breeze Residences condominium project will be built on a 6,028-sqm location along Roxas Boulevard in Manila.

Construction is already underway, with the turnover of units to buyers slated by the last quarter of 2016.

Century Properties work on 3 more projectsCentury Properties Group, Inc. (CPG) is working on two office space projects and a residential project.

The company believes this is a good time to take advantage of the continued projection of increased employment and revenues that the business process outsourcing (BPO) sector is generating.

They have already signed a long-term lease for two lots in Fort Bonifacio for their planned four office buildings totaling to 30,000 sqm. The other office space project is set to stand in Makati City.

Aside from these projects, the property developer is also preparing an affordable mixed-use development with concentration of residential project in Pampanga, which will be undertaken through joint venture.

Full steam ahead for Megaworld’s P65-B township projectMegaworld Corp. expects Uptown Bonifacio, its P65-B integrated township project in Taguig City, to complete ongoing construction works by 2016 to 2017.

The 15-ha Uptown Bonifacio project includes two luxury condominiums, a high-end mall, and five corporate office towers.

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COMPANY NOTeS

The capex will provide for the expansion of their pasta and bread manufacturing operations.

Their ice cream distribution network, milk and juice facilities will also benefit from the capex.

The food and beverage company will also upgrade their supply chain competencies through constant marketing support and product innovations.

“We expect these efforts to lead to higher purchase frequency and per capita consumption that will lead to growing the market size,” RFM President and Chief Executive Officer (CEO) Jose Ma. A. Concepcion III said.

Jollibee sets aggressive overseas expansionJollibee Food Corp. (JFC) gets on an aggressive expansion as it plans to open at least 100 stores in different parts of the Philippines by the end of the year and another 100 stores abroad.

JFC targets to add branches in China, Viet Nam, Middle East, and the United States (U.S.).

JFC’s goal is to put up 500 new stores across its brands in China by the second half of 2014.

In spite of the overseas expansion, the fast food chain still makes up bulk of its overall revenues in the Philippines comprising 80%, while foreign operations share the remaining 20%.

They also target to expand into “difficult markets” like Indonesia and India.

“These countries are developing and we feel that maybe we can focus on those populated countries,” JFC Chairman Tony Tan Caktiong said.

Over USD 1-B capex for JG SummitJG Summit Holdings Inc. will spend a record of USD 1B this 2013 for the expansion of their holdings.

Where will capex go

CompanyAmount (inUSDM)

Robinsons Land Corp. (RLC) 320JG Summit Petrochemical Corp. 300Cebu Pacific 275Universal Robina Corp. (URC) 120 Robinsons Bank 18

JG Summit’s 2013 capital expenditure (capex) is higher than the USD 926M they spent in 2012.

In the company's 2012 annual report, JG Summit President and Chief Operating Officer (COO) Lance Gokongwei said that their expansion plans are driven by their "rosy outlook" for the year.

“Coming from the higher-than-expected economic performance in 2012, this year promises to be even better,” Gokongwei added.

empire east rolls out P25-B 5-year capexEmpire East Land Holdings Inc., the housing subsidiary of property firm Megaworld Corp., is allocating P25-B capital expenditure (capex) for the next five years as it targets to roll out more units, acquire more land banks, and develop more projects.

The firm is also involved in few ongoing acquisition talks for some land properties in Metro Manila and the south, Empire East President Charlemagne C. Yu said.

Yu also said the company plans to roll out more than 2,000 units this year after launching 12 new towers in 2012 across its six urban projects.

Moreover, Empire East is looking to spend about P4B-4.5B for the development of new and current projects this year. This is higher compared to the P2.5B the company spent the previous year.

RFM earmarks P1-B capex Food and beverage company RFM Corp. is spending P1B for their capital expenditures (capex) this year. This is 186% higher from their P350-M capex in 2012.

The 45-storey One Uptown Residence is already 100% sold and is scheduled to be completed by July 2016. The all-suites 45-storey Uptown Ritz will be finished by June 2017, Megaworld Senior Vice President for Marketing and Sales Noli D. Hernandez said.

Five office buildings of 15-30 storeys high, which will serve both business process outsourcing (BPO) firms and other corporate offices, are also scheduled for opening in 2016.

The Uptown Place Mall, also set for completion in 2016, will cater to both retail and office areas.

RETAIL

Shimano will expand in PHLJapanese bicycle parts manufacturer Shimano Inc. will build a manufacturing plant in Tanauan, Batangas, Japanese Ambassador to the Philippines Toshinao Urabe said.

The company will build high-end bicycles and produce bicycle components.

Shimano’s 106,620-sqm production plant will be put up in the First Philippine Industrial Park (FPIP). It will be established by the company’s Singapore unit.

The P1.5-B plant already started construction and is projected to be completed by July 2014.

The Japanese company is expected to start business in the Philippines in December 2014.

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PHL, Thai groups to explore tradeTrade and economic ties between the Philippines and Thailand are expected to be strengthened with an agreement signed by the Philippine Chamber of Commerce and Industry (PCCI) and the Federation of Thai Industries (FTI).

Through the cooperation agreement, it is envisioned that more business opportunities will be explored and more cooperation will be realized as the two chambers take the lead in business promotion activities, PCCI said.

Sectors which have potential for future collaboration between businesses in both countries include infrastructure, construction, agriculture, food, and energy.

Japan manufacturers eye PHLJapanese manufacturing companies are planning to set up businesses in the Philippines, Japanese Ambassador to the Philippines Toshinao Urabe said.

Urabe said that aside from the manufacturing companies that are already present in the Philippines, there is a long list of new companies that are looking to enter one of the best performing economies in the world.

The most recent is Shimano, the Japanese bike manufacturer. The mountain bike brand will set up manufacturing facilities next year for export to the emerging markets of Brazil, Russia, India and China, or the BRIC economies.

DTI Secretary Gregory L. Domingo, who signed for the Philippines’ side, said this agreement is among the government’s priorities.

The agreement institutionalizes a mechanism for regular dialogue and exchanges between the two countries on issues related to among others, the business environment to improve and facilitate bilateral trade and investment flows. The JEC will also serve as the platform to conclude other mutually beneficial economic agreements between the parties and provide the mechanism to organize consultations and official visits through delegations or missions to deal with specific economic and trade issues.

It will also provide the opportunity for private sector participation and the development of initiatives with relevant business organizations.

Trade mission to Argentina seenA business mission from the Philippines to Argentina is in the works to boost trade between the two countries, the Philippine Chamber of Commerce and Industry (PCCI) said.

PCCI said consultations will be held among the group, the Philippines-Argentine Business Council, and the Argentine Embassy to determine the best schedule for the business mission, when delegates from one country visit another to set up or further economic partnerships.

The Philippines mostly exports machinery, rubber, garments, resins, and some electronic equipment to Argentina.

The Philippines hopes to push for more exports of wearable

PHL, Switzerland ink agreementThe Philippines and Switzerland signed an agreement which established the Joint Economic Commission (JEC).

The JEC demonstrates the commitment of the two countries to strengthen and move forward their economic relations, Department of Trade and Industry (DTI) Undersecretary for Industry Development and Trade Policy Group (IDTPG) Adrian S. Cristobal Jr. said.

PLDT still bullish on network upgradePhilippine Long Distance Telephone Co. (PLDT) recently completed a P1-B expansion program to fortify its core Internet protocol backbone and international and domestic networks to enable these systems to handle a much larger volume of data, voice, and video traffic for enterprise customers.

PLDT has also upgraded its international network in partnership with international network systems specialist Ciena.

SM Group sets P60-B capex for real estateSM Group is allocating a combined 2013 capital spending of P60B for all the property businesses it intends to merge within this year.

The group intends to establish an integrated development plan for the enlarged SM mixed-use real-estate company first, SM Prime President Hans Sy said.

SM Prime’s merger with SM Land Inc. was already approved by shareholders, which will pave the way for the consolidation of the property-related businesses of the SM Group of Companies.

products, holiday decor, automotive parts, a wider range of electrical goods, and information technology (IT)-related products.

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17th Food & Drinks AsiaIn bridging the gap between the food industry and its entrepreneurs, Food and Drinks Asia’s 17th edition will be held on September 05-08, 2013 at the World Trade Center Metro Manila (WTCMM).

The event is an international exposition on specialty foods, delicatessen, confectionery, beverages, beers, wines, and spirits which will provide a best platform to meet all the professionals from related industry.

AFeX 2013Come and visit Asia Food Expo (AFEX) 2013, the most comprehensive food show in the country bringing in wide array of machines for packaging, food processing, high-tech food service equipment, and sources of kitchen and baking equipment.

The 19th edition of this session will be held at the World Trade Center Metro Manila (WTCMM) on September 11-14, 2013.

34th Manila International Book FairThe Manila International Book Fair (MIBF), one of the longest-running book events in Asia, is now on its 34th year. It is an annual event where publishers, book sellers, authors, and readers come together to celebrate the power of books, reading, and knowledge.

Primetrade Asia, Inc., the event organizer, urged everyone to visit the venue at SMX Convention Center, Mall of Asia Complex, Pasay City on September 11-15, 2013.

energy expo PhilippinesEnergy Expo will feature new, renewable, and alternative sources of energy, green energy, energy efficiency, and coal, nuclear, oil, and gas technologies at SMX Convention Center, Manila on September 25-27, 2013.

The exhibitors will get an opportunity to connect and interact with each other and with the attendees and get the chance of expanding their business prospects and opportunities.

International Beauty, Health and Wellness ShowA great platform for all, SMX Convention Center will have another big trade event on September 26-28, 2013 for International Beauty, Health and Wellness Show. It invites over 200 exhibitors and 10,000 visitors from various corners of the world.

There are roughly 1,700 Japanese companies located in the Philippines and more are planning to come.

Japan manufacturers eyeing the PHL

• Cemedine Philippines Corp. – maker of adhesive, ceiling, and related products• Bandai – toy maker of Power

Rangers and Gundam fame• Fujifilm Corp. – maker of optical

lenses for digital cameras, projectors, and surveillance cameras

• Murata Manufacturing Co., Ltd. – maker of electronics components

Drivers for ASeAN competitiveness citedThe Association of Southeast Asian Nations (ASEAN) aims to be a seamless region with abundant skilled workers and strong investment possibilities, among others, Thailand’s Deputy Prime Minister and Minister of Finance Kittirat Na-Ranong said during the 12th Hitachi Young Leaders Initiative Forum, which centered on the theme “The Road Ahead: ASEAN’s role in Asia and the Global Economy.

Na-Ranong believes that ASEAN is one of the most attractive investment areas in the world.

“Yet to be truly one community, we must also work on competitive enhancement, regional connectivity, development of physical transport, communication and infrastructure, rules and policies to facilitate trade and investment,” he said.

He also said that as the ASEAN economy grows, ties with bigger partners such as Japan and China have to be strengthened to help close the gap between small and medium business and big players and equal the playing field for liberalization and trade.

"Free flow of capitalization and services among ASEAN members and elimination of restrictions on trade and service are also important,” Indonesia's Coordinating Ministry for Economic

Affairs Assistant Deputy for Regional Economic Cooperation and Financing Huda Bahweres said.

She added that in establishing ASEAN as an economic force, regional guidelines of competition policy in terms of infrastructure development, taxation, and e-commerce must be created.

“We are increasingly becoming a trade hub in the world, importing a lot, and more and more creating a significant footprint in exports,” Trade and Industry of Japan Ministry of Economy Director-General for Multilateral Trade System Department Shigehiro Tanaka said.

He cited the importance of a Regional Comprehensive Economic Partnership (RCEP) as companies need to be integrated in the global supply chain.

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economic Indicators

As of August 15, 2013 As of August 15, 2013

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, Associate Editor • Hazel S. Dizon, Joanna D. Cruz, Airiz A. Casta, Kit S. Andaya Writers • Ren C. Neneria, Design Layout • Myrna V. de los Reyes, Circulation.

August 2013Philippine Business Report

*GNI - Gross National Income

Entered as Third-Class Mail at theMakati Central Post Office

under Permit No. 504valid until 31 December 2013

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