Philippine Business Report (Feb.2012)

1February 2012

Volume 23 No. 02 February 2012

Combined investments registered with the Board of Investments (BOI) and Philippine Economic Zone Authority (PEZA) grew by 30% in 2011 to P657.6B from P506.4B in 2010.

“The investment numbers reflect economic optimism towards a better year this 2012 as the country moves forward from the global incidents and its challenges in 2011,” Department of Trade and Industry (DTI) Secretary Gregory L. Domingo said.

The BOI accounted for P368.9B of the total investments, up 22% from P302B recorded a year ago, while PEZA contributed P288.7B, up 41% from P204.4B.

“These figures represent a renewed confidence in the reforms instituted by the present administration and in our country’s strong macroeconomic fundamentals. We are committed to sustaining and increasing investments in the next few years with a sharper focus on developing industry roadmaps,” said DTI Undersecretary for Industry Development and Trade Policy Group (IDTPG) Adrian S. Cristobal, Jr., who is also the BOI Managing Head.

Cristobal said BOI investment commitments breached 2011’s target with 332 projects compared with 246 in 2010.

He said the projects were expected to boost employment opportunities by 67,211 jobs once operational, almost double 2010’s 36,751 jobs.

He said the top-performing sectors that generated majority of the BOI investments last year were low-cost mass housing at P72.7B with net value added of 85% to 99%.

Cristobal said it included raw materials such as bathroom and kitchen fixtures as well as elevators and generators.

He said other high-performing sectors were energy, P87.8B; mining, P63.3B; tourism, P10.8B; and agriculture, P1.9B.

Based on the BOI data, local investments saw an unprecedented growth level at P345.7B while commitments from foreign investors amounted to P23.2B.

“Remarkable growth in investments came from local businesses, generated by a larger demand from the domestic market. Their increased stake in the economy reinforces overall investor

confidence which will attract more local and foreign infusions,” added Cristobal.

“We want to balance this portfolio by attracting more investments in agriculture and tourism in line with the Philippine Investments Priorities Plan (IPP),” said Cristobal.

Under the BOI’s IPP 2011, priority sectors include agriculture, tourism, shipbuilding, mass housing, energy, infrastructure, research & development, motor vehicles, green projects, creative industries, disaster prevention, and public-private partnership (PPP).

The biggest chunk of investments for the year went to Central Luzon at 22%. The others were in the National Capital Region (NCR), 20%; Region 4 (Southern Luzon), 13%; Region 13 (Caraga), 13%; and Region 11 (Southern Mindanao), 10%.

BOI, PEZA investments rise 30% in 2011

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INDUSTRYTReNDS

Foreign investment projects approved came mostly from Japan followed by the Netherlands, South Korea, United States, and China.

On the same note, PEZA was able to beat the odds in 2011 ending the year with sterling performances in terms of investment generation, employment, and exports.

PEZA Director-General Lilia B. De Lima announced a 41-% increase in investments, 15% in employment, and 4.5% in exports over 2010 figures.

“Despite the odds, we are lucky to beat our 12-12 growth targets in investments and employment generation,” said De Lima.

De Lima reported that PEZA was able to generate a total of P288.3B in investments for the whole of 2011 or 41% higher than the P204.3B investments haul in 2010.

Employment generation was also up 15% to 837,136 total jobs in the various ecozones registered with PEZA as against 728,318 direct jobs generated in 2010.

De Lima even noted that jobs generated in PEZA ecozones have six times multiplier effect in terms of indirect jobs creation and eight times for the electronics sector.

De Lima further said that prospects for 2012 are good with the manufacturing and information technology (IT) sectors to continue leading the growth.

Socioeconomic Planning Secretary Cayetano W. Paderanga, Jr. said there are several factors for this optimism-increased business and consumer confidence, a more stable macroeconomy, and steady consumer sentiment.

“We will also experience the full implementation of the P72-B disbursement acceleration program of the government this year,”said Paderanga.

Public construction and government consumption and services are likely to pick up in the coming quarters due to quick releases and faster utilization of the program.

The services sector is expected to support growth, particularly real estate. Production in the agriculture sector will be boosted by the implementation of the Food Staple Self-Sufficiency Roadmap for 2011-2016.

Private consumption will be driven by increased spending of households in the yearend, particularly on items related to food and utilities.

Spending will be supported by broadly stable commodities prices and consumer sentiment indicates more optimism for 2012, said Paderanga.

Despite recent relatively slow economic performance, First Metro Investment Corp (FMIC) and University of Asia and the Pacific (UA&P) Capital Market Research said the economy has shown signs of recovery amid the continued peso appreciation.

Key policy rates would likely be reduced in the first quarter of 2012 as inflation rate would decelerate further at the same time that advanced economies continue to hobble.

The Asian Development Bank (ADB) has projected a 4.8-% growth of the country's gross domestic product (GDP) in 2012 while the government has maintained its forecast of 5% to 6%.

Meanwhile, the World Bank (WB) said the higher 2012 growth hinges on improvement in exports, acceleration of public-private partnership (PPP) projects and private sector investment, and a full recovery of public spending.

WB Country Economist Karl T. Chua noted that the government is instituting important measures to improve transparency and accountability in public spending. Once these institutional reforms are in place, spending is expected to fully recover at cost-effective levels with more resolute impact on the country’s growth and development.

The WB maintains that the Philippines is well-positioned to cope with any new financial shock that might evolve from the current global turmoil.

“The country is well-insulated from the global financial crisis owing to a significant improvement of macroeconomic fundamentals and regulatory reforms already in place following the Asian financial crisis of 1997-98,” it said.

The OECD Southeast Asian Economic Outlook predicted a higher growth for the six Southeast Asian economies – Indonesia, Malaysia, the Philippines, Singapore, Thailand and Viet Nam – at 5.6% this year.

Gov't to spend P438B to rev up domestic economyThe government plans to spend P438.8B to usher rapid, inclusive and sustainable economic growth this year, the Department of Budget and Management (DBM) announced.

economy to recover this yearThe government is confident that prospects for this year and the near term are positive, given the current performance and significant developments in the local and global economies.

3February 2012

DBM Secretary Florencio B. Abad said this year’s economic sector budget comprises 24.2% of the P1.8T 2012 National Budget.

“The economic sector budget will focus on supporting the government’s five priority areas for job generation and economic development,” Abad said.

He added the government would give emphasis on the tourism, agriculture, fisheries, and general infrastructure developments this year.

The 2012 economic sector budget will fund P182.2B for the government infrastructure program, 25.6% higher than the 2011 level and represents 1.6% of gross domestic product (GDP) from last year’s 1.4%.

“This direction is expected to benefit the poor and the vulnerable sectors,” he added.

The budget will also provide funding for agriculture’s sector’s thrust to ensure rice self-sufficiency by 2013.

The P951-M budget for the Department of Agriculture (DA) National Corn Program is almost twice the 2011 level of P484M with a production target of 7.6M metric tons (MT). Of the increment, 75% will be used for post-harvest facilities to generate a steady supply of white corn to reduce rice demand.

The P1.9-B budget for the National Fisheries Program under the Bureau of Fisheries and Aquatic Resources (BFAR) is slightly higher by 6% compared with the 2011 budget of P1.8B with a targeted 5.6M MT fisheries products from commercial, municipal, and aquaculture.

The P1-B support for the National Livestock Program is 50.2% higher than last year’s level of P682M with a target of 2M MT hogs and 1.5M MT of chicken production this year.

In line with the rice and food sufficiency, irrigation development

will be the centerpiece program and is allocated with P24.5B.

This substantial increase aims for the construction, restoration, and rehabilitation of irrigation systems.

Manufacturing to flourish this yearThe manufacturing sector is expected to flourish this year following the huge investments in various industries that were approved in the past two years, Department of Trade and Industry (DTI) Undersecretary for Trade and Investment Promotions Group (TIPG) Cristino L. Panlilio said.

“The prospect for manufacturing is very good because of the projects that we registered in 2010-2011,” Panlilio said.

In 2011, investment projects approved for the manufacturing sector amounted to P104.8B, a significant increase of 122% from last year’s P47.2B. Investment projects include those in petroleum products, basic metals, motor vehicles, non-metallic mineral products, and food products.

“The manufacturing sector is a proven catalyst in employment generation. We will maximize this sector’s opportunities with a comprehensive roadmap and milestones to market their progress and development, along with other key sectors of the Investment Priorities Plan (IPP),” DTI Undersecretary for Industry Development and Trade Policy Group (IDTPG) Adrian S. Cristobal, Jr. said.

“These are creating jobs, adding purchasing power that would lead to increased demand for basic goods and services. So what will follow next is the manufacture of goods,” Panlilio noted.

Panlilio added that imports have been factored in already in the domestic economy’s growth.

"Exports and imports combined are economic contributors. Both create jobs," he added.

Decor industry hopeful this yearThe Christmas Decor Producers and Exporters Association of the Philippines (CDPEAP) is optimistic of the outlook of the country's holiday decor industry this year as the export demand starts to recover.

CDPEAP President Romeo Balderrama, Jr. noted that the holiday décor was the highest selling sector during a recent trade exhibit. Most of the booked orders and sales under negotiation are for delivery this year.

Balderrama is also confident that industry players will get more foreign buyers this year on the back of the expected global economy recovery.

“Our target is the Brazil, Russia, India, China (BRIC) countries. But we will continue selling in the United States because in the last Manila FAME show, it remained the biggest buyer of Philippine exports even as it is experiencing financial difficulties,” he said.

Goat's milk eyed as high-value personal care product ingredientThe government is exploring the more expansive use of raw goat’s milk in value-added cosmetic and personal care products, which have high profitability prospects in the market because of strong demand for organic or natural sources of raw materials.

The Philippine Council for Agriculture, Forestry, and Natural Resources Research and Development (PCARRD) has embarked on an exploratory work

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on the business prospects of goat’s milk for processing into soap and other personal care products following the lead of Filipino manufacturers Splash Corp. and Kalapana Co.

It has recommended a stronger partnership between government agencies, mainly the Department of Agriculture (DA), with goat farmers; and micro, small, and medium enterprises (MSMEs) for the use of goat’s milk for these products.

Farmers’ cooperatives, it suggested, must also be organized to collect a bulkier volume of raw material supply and likewise provide goat raisers with higher income.

DTI eyes 300,000 car marketHitting a 300,000-unit motor vehicle market by 2015 is highly probable based on the growing per capita income of Filipinos, Department of Trade and Industry (DTI) Secretary Gregory L. Domingo said.

Domingo was reacting to the new automotive study by the University of Asia & the Pacific (UA&P) that projected local automotive demand would hit 300,000 units by 2015.

“Sales of cars have been proven to shoot up if per capita income exceeds US$2,500,” he said.

He even said that the 300,000-unit demand level could be attained in two to three years as the domestic automotive market has been continually growing. In 2010, total sales increased by 27% over 2009 or more than 160,000 units.

Based on the new automotive study “Invigorating Philippine Automotive

Manufacturing: A Policy Proposal”, UA&P stated there is a positive outlook of a 300,000 vehicle market by 2015.

The UA&P study said the size of the country’s population plus the rising per capita income can further stimulate vehicle ownership.

It cited positive relationship between income and car sales. It noted an earlier automotive study conducted by Deloitte Consulting Inc., which showed that ownership rates grow twice as fast as income when income is within the range of US$3,000 to US$10,0000 per capital gross national income.

In the Philippines, the study said, per capita income has been steadily growing and is now at US$4,060.

Other positive signs are the steady flow of overseas Filipino workers’ (OFWs) remittances and rising agricultural incomes which boost purchasing capacity.

In addition, attractive financing terms have led to higher automotive loan availments especially by entry-level buyers for their business or personal use, the study showed.

The study further said that the country’s archipelagic make-up and improved infrastructure can also be a source of growth for vehicle ownership.

“Given the aforementioned growth factors, an increase in the size of Philippine automotive manufacturing can be expected,” the study added.

Aside from the domestic market, the study also painted a further expansion of the vehicle demand in the context of the Association of Southeast Asian Nations (ASEAN) market.

The ASEAN region has agreed to attain the ASEAN Economic Community (AEC) by 2015 wherein the member countries conduct business in a seamless and borderless market.

“The expansion of Philippine automotive manufacturing may

yet be realized by tapping nearby foreign markets. At present, only Ford Motor Group Philippines has been able to consistently export completely built-up packs during the last 10 years,” the study said.

TRaDe aNDINVeSTMeNTS

AGRICULTURE/AGRIBUSINESS AND FISHERY

Gov’t invests P90.3M in agriculture sectorThe government has invested P90.3M in the agriculture sector to boost the industry’s competitiveness by funding a comprehensive scholarship program of at least 1,050 students in agriculture, forestry, fisheries, and veterinary medicine education.

Department of Budget and Management (DBM) Secretary Florencio B. Abad said the program would help maximize the potential of the country’s agriculture sector and is part of the overall goal to make the Philippines rice self-sufficient by 2013.

The scholarship will be charged against the Agricultural Competitiveness Enhancement Fund (ACEF) and covers the full amount of tuition and other fees, and will be paid directly to the school.

Nestlé to buy more coffee beans, sets up additional facilitiesNestlé Philippines, Inc. (NPI) is set to increase its coffee-buying capacity as it plans to buy more coffee beans from local markets by putting up more buying facilities in the country.

At the Coffee Investors’ Forum held recently in Davao City, Nestlé Philippines Head of Corporate Affairs and Senior Vice President

5February 2012

Edith de Leon disclosed the company’s plans of purchasing more coffee beans from local farmers.

“Currently we’re sourcing 25% of our raw coffee requirement for soluble coffee manufacturing locally and we’re trying to compensate the shortfall by importing coffee beans,” de Leon said.

At present, Nestlé buys 75% of its coffee beans abroad. The target is to reverse this trend by 2020.

The company is also expanding its facilities in the country by putting up additional satellite buying stations in various regions. These stations have been established to support local farmers through Nestlé’s direct buying policy.

Farmers can sell their products directly to Nestlé and get paid immediately based on the prevailing world market price of coffee beans.

Nestlé satellite buying stations

Agusan del Sur Cavite Palawan Alabang Cotabato SolanoBacolod Davao Tagum CityBohol Iloilo TuguegaraoCalamba Isabela Zamboanga

Cargill, agriNurture sign investment dealAmerican trading firm Cargill Inc. has finalized the acquisition of a 28.1-% stake in publicly listed AgriNurture Inc. (ANI).

ANI said it executed an investment agreement to sell 125.5M shares to Black River Capital Partners Food Fund Holdings (Singapore) Pte. Ltd. for US$30.4M.

The shares consist of 76.3M in common shares, which Black River will acquire through a regular or special block sale through the Philippine Stock Exchange (PSE), and 49.2M in common shares from an increase in the authorized capital stock in the local farm and vegetable company.

ANI has also recently purchased a 51-% controlling interest in The Big Chill, Inc. (TBC), which sells fresh

and preservative-free fruit juices and shakes under four brands.

TBC operates a total of 40 stores nationwide under the brands Big Chill, Fresh Bar, C’Verde, and Canefusion.

Peter Paul finalizing expansion plansPeter Paul Philippine Corp., the world’s biggest desiccated coconut producer, is finalizing plans to expand production in 2012.

“We are still waiting for some document approvals before we proceed,” Peter Paul Plant Manager Renato S. Pavon, Jr. said.

Peter Paul’s plant in Candelaria, Quezon, is capable of producing 22,000 metric tons (MT) per year of desiccated coconut for domestic consumption and export to countries like the US and China.

Company officials said during a recent plant tour of Department of Trade and Industry (DTI) Secretary Gregory L. Domingo that Sorsogon could be a potential expansion site because of abundant coconut trees.

ENERGY

eastern Petroleum to spend P500M on 15 new stationsEastern Petroleum Corp. (EPC), one of the most aggressive independent oil players in the country, will spend about P500M to build 15 new retail stations in 2012, a top company official said.

EPC Chairman and Chief Executive Officer (CEO) Fernando Martinez said as of end-2011, the company had 35 stations and the additional stations will bring its total retail network to 50 by yearend.

He said the company is also studying the possibility of putting up two more oil depots next year in Cebu and Mindanao.

“We already acquired a site in Gen. Santos City in Mindanao to augment the requirements of our GenSan

mega stations. The terminal depots will have a capacity of 4M liters each,” he said.

DOe signs Re contract for 600-MW apayao hydropower projectAnother hydro project with 600-megawatt (MW) potential is up for final signing by the Department of Energy (DOE), making it the second project to be sealed following some injected improvements in the renewable energy (RE) template contract.

The proposed facility, wherein the RE service contract was already pre-signed recently, was proposed by Pan Pacific Power Corporation.

The contract has been subsequently elevated to DOE Secretary Rene D. Almendras for final signing. It will involve developments at the twin rivers of Apayao and Abulug in the Cordilleras, considered the watershed cradle of Northern Luzon.

It is not known yet who would be the developers’ project partners, but developing a 600-MW facility will merit investments ranging from US$1.2B to US$1.5B.

Meralco plans 300-MW hydro plant in LuzonThe Manila Electric Co. (Meralco) is planning to put up a total of 300-megawatt (MW) capacity of hydroelectric power in Luzon in the near term, a ranking company official said.

Meralco Chief Operating Officer (COO) Oscar S. Reyes said this will form part of the second wave of the power generation projects that the

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company intends to put up after it completed its 600-MW coal-fired facility in Subic.

Based on initial studies, Reyes said they are looking at 150-300MW impounding hydro projects anywhere within the Luzon area.

Aside from the hydro power projects, Reyes said they are also eyeing another 600-MW coal facility or a liquefied natural gas (LNG) power plant.

The company, he said, is currently conducting studies on these new proposed facilities and they hope to put them in place in 2016-2017.

PNOC-eC to pursue coal mine-mouth projectsThe Philippine National Oil Co.-Exploration Corp. (PNOC-EC) will actively pursue its coal mine-mouth projects in Mindanao this year.

PNOC-EC Vice President Joseph Omar A. Castillo said they would be seeking joint venture partners for these projects.

“We will be putting priority to joint venture selection for our mine-mouth power plants,” he said.

The power plants would have a capacity of 100 megawatts (MW) each and are estimated to cost US$200M each.

He said once completed, these projects, to be located in Zamboanga Sibugay and Isabela, would be the first of its kind in the country.

Sagittarius Mines plans own power plantSagittarius Mines, Inc. (SMI) is planning to put up its own coal-fired

power plant with targeted capacity of 250 megawatts (MW) within the Tampakan Copper-Gold project.

The SMI power plant project is contained in the National Grid Corp. of the Philippines’ (NGCP) Transmission Development Plan (TDP) for the next 10 years.

Based on the plan, apart from meeting the mine’s power demand, excess power will be exported to the Mindanao grid.

The power station, according to the TDP, is expected to be operational in 2014.

Nido, Total team up for oil search projectsAustralia-based Nido Petroleum Ltd. has joined forces with Total of the United Kingdom to bid for areas under the Philippine Energy Contracting Round (PECR) 4.

In a report, Nido said its Philippine subsidiary and Total have executed a joint study and bid agreement (JSBA) to evaluate exploration acreage released in the PECR 4 by the Department of Energy (DOE).

“PECR 4 is the first release of new acreage by the DOE for a number of years and offers a diverse range of exploration potential across multiple basins, providing Nido with the opportunity to potentially augment its exploration asset base within the Philippines,” Nido Head of Exploration Jon Pattillo said.

MMPC plans 3 more power plantsMontalban Methane Power Corp. (MMPC) is planning to put up three more methane power plants all over the country.

MMPC President Peregrino P. Fernandez, Jr. said they are planning to construct another methane power facility in Urdaneta, Cebu, and Rizal.

The project cost for each methane power plant would amount to about US$4M.

He said they expect to start construction of the additional methane-based facilities by middle of this year.

TeaM energy nears completion of power project in Quezon TeaM Energy Corp. is nearing the completion of its rural electrification program in Quezon province.

TeaM Energy President and Chief Executive Officer (CEO) Federico E. Puno said the program, being undertaken in partnership with the Department of Energy (DOE) and the Quezon II Electric Cooperative, started in 2010.

The project, he said, has led to the electrification of 3,400 households in the Polilio Group of Islands through solar power.

Utilizing a substantial grant from the DOE, TeaM Energy Foundation Inc. (TEFI), the corporate social responsibility arm of TeaM Energy, made possible the installation of solar home systems in the three municipalities in Polilio Island, namely Burdeos, Panukulan, and Patnanungan.

Liquigaz mulls new LPG plant in LuzonLiquigaz Philippines, Inc. is planning to put up another liquefied petroleum gas (LPG) plant in Luzon as an indication of its continued confidence in the Philippine oil industry’s growth prospects.

Liquigaz President and Managing Director Santanu Guha said they have also started initiatives to introduce the use of dual fuel-auto LPG products in the public transport sector and would soon offer LPG conversion kits for private cars.

He said they are also looking at the use of LPG-run airconditioning system for industrial customers.

INFRASTRUCTURE

NeDa okays 2 infra projects worth P14.4BThe National Economic and Development Authority (NEDA)

7February 2012

Board approved two infrastructure projects worth P14.4B, designed to enhance the country’s trade activities in Southeast Asia and improve the quality of education in the country.

These projects are the public-private partnership (PPP) for School Infrastructure Project (PSIP) costing P0.9B and the Puerto Princesa Airport Development Project (PPADP) costing P4.5B.

The PSIP will construct a total of 9,623 classrooms within one-storey and two-storey buildings for 2,300 elementary and secondary schools in Regions I (Ilocos), III (Central Luzon) and IV-A (CALABARZON).

“The project will expand the supply of classrooms in all public school system in the shortest time possible and solve the current shortages nationwide,” NEDA Director-General and Socioeconomic Planning Secretary Cayetano W. Paderanga, Jr. said.

MCa-P, Japan firm sign US$4.1-M Samar project Millennium Challenge Account-Philippines (MCA-P) signed with Katahira Engineers International (KEI) a US$4.1-M contract for the Project Management and Construction Supervision Services for the Secondary National Roads Development Project (SNRDP) under the Philippine Compact with Millennium Challenge Corporation (MCC).

KEI’s major projects in PHL

• LRT Line-1 Capacity Expansion• LRT Line-2 Construction Project• Metro Manila Interchange Construction

Project• Metro Cebu Development Project Phase III • Pan-Philippine Highway Rehabilitation Project• 2nd Mandaue-Mactan Bridge Construction

Project

KEI will assist MCA-P and the Department of Public Works and Highways (DPWH) in managing the road project and ensuring that it is completed on time and complies with high engineering standards.

KEI is an independent international engineering consulting firm based in Tokyo, Japan with over 20 years of international development experience behind it.

Manila-Clark express railway pushedThe 12-km. connector road between the South Luzon Expressway (SLEX) and North Luzon Expressway (NLEX) will be redesigned to accommodate the plan of the Department of Transportation and Communications (DOTC) to construct an express rail alongside the elevated tollroad.

Department of Public Works and Highways (DPWH) Assistant Secretary Carina Cabral said this during an investment briefing with the UK Mission on the country’s public-private partnership (PPP) program.

The Manila North Tollways Corp. (MNTC) has proposed to build the connector road (Buendia skyway to Caloocan) for P17B.

GREEN PROJECTS

Midamerican energy to invest in solar installation in asiaMidAmerican Energy Holdings set its eye to put up a large or utility-scale solar installation in Asia.

In the mid of December 2011, the MidAmerican Energy acquired 49-% interest in Agua Caliente solar project that operates a 290-milligram (mg) solar photovoltaic (PV) project sited in Yuma, Arizona.

“We are aggressively pursuing opportunities to expand our presence in the renewable energy sector, and the Agua Caliente project is another important step toward that goal,” MidAmerican Chairman and President Gregory E. Abel noted.

Basic energy Corp. to explore renewable energy sources in PHLThe Basic Energy Corp. and Australia’s Energy 2035 Ltd. signed a non-exclusive and non-specific memorandum of understanding (MOU) to jointly explore opportunities and develop

renewable energy (RE) sources in the Philippines.

Basic Energy aims to develop modern and efficient technologies that will benefit biofuel and bio-component production using wide selection of non-edible feed stock and industrial waste.

Foreign investors to support e-vehicles industryThe country’s alternative fuel industry has drawn support from foreign companies which include LG Corp., Nissan Motor Co., Sanyo Electric Co. Ltd., Yamaha Motor Co., Toyota Motor Corp., and Hitachi Ltd. to create e-vehicles in the country.

Department of Energy (DOE) Undersecretary Loreta G. Ayson reported that an electric vehicle maker in United Kingdom and Yamaha expressed their interest with the government’s e-vehicle program, while Toyota plans to develop charging stations.

Ayson added that Hitachi offered to supply electric motors while Nissan, Sanyo, Dow Chemicals, LG, and GB Systems proposed to produce lithium ion batteries.

She also said that DOE is looking forward to Malaysian companies in producing e-tricycles locally.

She also noted that the government is formulating the Alternative Fuels Roadmap or the Fuelling Sustainable Transport Program that will give fundamental policy framework on diversifying fuels for transport use in the country.

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MASS HOUSING

GK, SMDC push mass housing projectsThe Gawad Kalinga (GK) and SM Development Corp. (SMDC) entered a Memorandum of Agreement (MOA) as part of the developers’ 20-% compliance with socialized housing requirement imposed by the Board of Investments (BOI) on registered housing project.

This is the first MOA entered by GK that authorizes them to receive cash or in kind contributions from registered vertical housing developers for the construction of socialized housing units and educational facilities.

The SMDC contributed land located in Paliparan, Dasmariñas, Cavite, which could accommodate more than 200 families.

The development includes road network system, drainage system, and complete water distribution system.

SMDC will also contribute cash for 24 homes and a kindergarten construction.

“The GK way is an innovative approach and is potentially an effective, sustainable, and replicable model that would help address the problem of urban housing in the country,” BOI Governor Geronimo D. Sta. Ana said.

MINING

SCG acquires cement firmThailand’s manufacturing company Siam Cement Group (SCG)

announced their US$100-M increase of investments in the Philippines and is looking forward to buying an existing cement manufacturing in the country.

“We are looking at the Philippines. For our investment in cement, we have two options. First is Greenfield and the second is acquisition,” SCG President and Chief Executive (CEO) Kan Trakulhoon said.

Trakulhoon noted that SCG prefers acquisition and is looking at some cement manufacturing in the country.

Marcventures signs a 3-year contract with Dunfeng International Inc.Marcventures Mining & Development Corp. (MMDC) signed a three-year contract with Dunfeng International, Inc. for a 3-M metric tons (MT) nickel laterite ore supply.

MMDC Assistant Corporate Secretary Ana Maria A. Katigbak said this is MMDC’s strategy in combining fixed sales contract with spot sales for the nickel ore production.

Nickel is commonly used for stainless steel, super alloys, electroplating, batteries, coinage, and magnets and MMDC is aiming to produce 600,000MT of nickel ore and planning to increase by 800,000MT and 1.2MT for the next years.

SMI to continue Tampakan projectSagittarius Mines, Inc. (SMI) is strictly keeping its schedule for Tampakan Copper-Gold project in South Cotobato while waiting for environmental compliance certificate (ECC) from the Department of Environment and Natural Resources (DENR).

The ECC, a requirement before operating mining projects issued by the DENR, certifies that the project will not bring unacceptable environmental impact.

“We will seek further clarification from the DENR in order to progress

the status of our application,” SMI Communications Director John B. Arnaldo said.

MOTOR VEHICLES

Foton Motor Phils. to raise assembly facility in ClarkA 50,000 sqm assembly facility is soon to rise in Clark Freeport zone as the Clark Development Corporation (CDC) signed a US$20-M lease agreement with Foton Motors Phils., Inc.

CDC President Felipe Antonio B. Remollo said the agreement is good for 25 years. He noted that with the initial US$20M for the next three years, it can generate at least 120 jobs in its opening stage.

“In Asian region, Foton was acknowledged as the leading Asian distributor, owing to its aggressive service-driven sales and brand marketing promotions through its network of 14 dealers and 63 accredited service centers nationwide,” Remollo said.

In October 2011, CDC and Foton signed an agreement with United Asia Automotive Group, Inc. (UAAGI) that opened for Foton’s lease agreement signing with the state-owned corporation.

Toyota to look at niche vehicle assemblyToyota Motor Philippines (TMP) is willing to look at the government’s call for a niche vehicle assembly model in the country.

However, they seek for specific support measure that is tied up to local production to compete against the imported completely built-up (CBU) packs.

TMP Vice President Atty. Rommel Gutierrez said the corporation has no plans of withdrawing their regional operations; instead, they will strengthen its presence with local partners.

He added that Toyota is eyeing to build new future through automobile manufacturing.

9February 2012

Centro Manufacturing Corp. assembles Filipino designed i-VanThe Centro Manufacturing Corp. started their local assembly of the Filipino designed 16 and 18-seater i-Van on a specially configured Isuzu Elf NHR chassis cab that can move more people whether in urban or rural areas.

Centro President Raphael T. Juan said they upgraded stamping facilities to increase production capacity and will give the company better control of the quality, cost and delivery of the metal parts in response to the company’s daunting task.

“This will ensure that the various metal parts needed to assemble the i-Van body are available when needed and probably make us the technical leader in truck body building technology,” Juan said.

MaJOR PROJeCTS

Projects under the National Roads Improvement and Management

Program-Phase II

Project Amount

• 58.2-km Pagalungan-Junction P977.5M Cotabato road section • 53.1-km Digos-Kidapawan P623.6M road section • Improvement of the 31.6-kilometer P549.6M (km) Malita-Don Marcelino section of the Malalag-Malita-J.A. Santos road costing • Project on landslide risk mitigation P512.2M along Digos-Gen. Santos City road and Davao-Calinan-Buda road costing• 50-km Kidapawan-Pagalungan P379.1M road section costing

Palace okays P1.2-B fund for NaIa 1 rehabilitationThe government has approved the release of almost P1.2B for the rehabilitation of the Ninoy Aquino International Airport Terminal 1 (NAIA 1) and make it a world-class transport facility.

Department of Budget and Management (DBM) Secretary Florencio B. Abad said that the Department of Transportation and Communications (DOTC) will use the fund for urgent structural retrofitting and other rehabilitation work, as well as the construction of a rapid-exit taxiway.

Da to allot P500M for irrigation infraThe Department of Agriculture (DA) is allotting more than P500M for irrigation and infrastructure projects in the six provinces of the Cordillera region.

Of the total fund, P268M is allotted for the repair and rehabilitation of several irrigation systems in Ifugao, Mt. Province, and Benguet that were damaged by recent typhoons, including some portions of the Ifugao rice terraces.

Of the P268M, National Irrigation Administration (NIA) Administrator Antonio S. Nangel said P100M is for the Butigue irrigation system (IS) in Atok, Benguet; P40M

for the Hapid IS in Lamut, Ifugao, and P10M, for the repair of eroded and damaged portions, and reinforcement of the irrigation systems of the rice terraces at Batad town.

The balance would be for the repair of communal irrigation systems and the construction of irrigation canals and road openings in other towns and provinces.

Gov't upgrades weather, disaster infoThe Department of Budget and Management (DBM) said it will release P1.6B to tap state-of-the-art technology for more accurate weather and disaster information.

DBM Secretary Florencio B. Abad said the fund to be released issued to the Department of Science and Technology (DOST) will be used for its “Nationwide Disaster Risk Exposure, Assessment, and Mitigation (DREAM) Program.”

Under the DREAM program, DOST will acquire geospatial data-gathering technologies, particularly Light Intensity Detection and Ranging (LIDAR) and Airborne Radar Interferometry (INSAR).

These technologies will produce detailed topographic information that will enable the creation of relatively more accurate flood inundation maps.

P3-B Mindanao road projects startThe Department of Public Works and Highways (DPWH) has started construction activities on the P3-B World Bank (WB) road projects geared to provide multi-modal, safe, integrated, sustainable, environmentally sound, and competitively priced transport system in Mindanao.

“Southern Mindanao is fast becoming the center for agro-industrial business, trade, and tourism. Its products such as bananas, pineapples, fresh asparagus, and fish products are now being exported abroad. These road improvement projects are necessary to transport these agri-products from the production areas to the centers of commerce and trade,” DPWH Secretary Rogelio L. Singson said.

Philippine Business Report10

aSeaNWaTCH

BILaTeRaLaGReeMeNT

PHL next aSeaN investment hubThe Philippines has the inherent attractiveness and ability to seize upcoming business opportunities as it has the potential to step up as the next favored destination among the Association of Southeast Asian Nations (ASEAN) members.

This is according to Synovate Business Consulting Head for the Philippines and Singapore Group Director Anand Kumar during

Qatar eyes US$1-B investments in PHLThe oil-rich state of Qatar is ready to invest up to US$1B mainly for infrastructure projects in the Philippines.

Department of Trade and Industry (DTI) Undersecretary Cristino L. Panlilio said they are in talks with Qatari authorities for the terms of the investment agreements expected to be signed during the upcoming visit in mid-January of the Emir of Qatar.

He said the US$1-B fund will be provided by the state-owned Qatar Investment Authority. This amount, however, is only a small portion of the US$300-B investible fund earmarked by Qatar for foreign investments over the next 10 years.

Puregold sets P10B in 5 years to reach 200-store targetPuregold Price Club, Inc. plans to double its grocery and hypermarket chain in five years.

Puregold Chairman Lucio L. Co said the company plans to spend P10B to boost the network to 200 stores by 2016.

The company, which opened its 50th

store in July 2010, will open a record 38 stores this year.

Puregold plans to add 25 stores next year.

FCSI expands store chainFinds Convenience Stores, Inc. (FCSI) expects to invest a total of P1B to expand its store network to 100 in the next 12 months.

The retail and service group is now embarking on expanding significantly with the economy doing well with the influx of remittances and steady growth of the business process outsourcing (BPO) industry.

Company converts trash into cashPontmain Resources, Inc. (PRI) converts trash into cash, producing environment-friendly products out of coconut husks.

The Development Bank of the Philippines (DBP) has been assisting the company since 2002, providing

loans for the purchase of its machinery and equipment.

Since then, PRI has been producing coconut fiber which is made into coco twine or yarn and used in hop farms in the United States (US) and Europe. Hop is the plant from where brewers derive the ingredient for adding bitterness to beer.

Coco twine can also be processed further into coir geonets or cocomats for controlling erosion in degraded areas like mountains and riverbanks.

Coconut fiber is likewise in demand in China to replace synthetic materials like foam in car seats, furnitures, and mattresses.

In addition, PRI produces coco dust or peat which is used for animal bedding, organic fertilizer or soil conditioner.

Banana plantations buy coco dust for the tissue culture of their seedlings.

Generika on expansion modeGenerika Drugstore is strengthening its market presence with a major push for nationwide store expansion.

Generika announced plans to expand its franchising operations nationwide, particularly to key cities in Visayas and Mindanao, as well as in untapped areas of Luzon to augment its strong presence in Metro Manila and nearby provinces.

Jollibee goes into café businessJollibee Foods Corp. (JFC), through its wholly owned Singapore-based unit JSF Investments Pte. Ltd., is venturing into the coffee business in Asia through a joint venture with Viet Thai International Joint Stock Co.

Under the plan, JSF Investments will own a 50-% stake in SuperFoods Group, which owns and operates various brands including Highlands Coffee Shops in Viet Nam, Highlands Coffee Packaged Products and Hard Rock Café franchised stores in Macau, Hong Kong, and Viet Nam.

COMPaNY NOTeS

The agreement signed on 20 May 2011 states that JFC would invest US$25M for a 50-% stake in SuperFoods and provide a US$35-M loan to VTI.

11February 2012

ON THeCaLeNDaR

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equipment, and technology dubbed as the Philippine International Food and Beverage Expo (PIFBEX) 2012 will be held at the World Trade Center Metro Manila in Pasay City, Philippines on 01-04 March 2012.

The three-day event aims to bring together food and beverage industry players and professionals from the Philippines and around the world to interact, transact, and explore unlimited business opportunities.

PIFBEX opens the gateway by offering innovative business opportunity to reach decision makers and new potential customers on the latest in food, manufacturing, machinery, equipment, and technology related to food processing, handling, and packaging.

Worldbex 2012Worldbex 2012, the show that adds new dimensions and directions to the construction industry will be held at the World Trade Center Metro Manila in Pasay City on 14-18 March 2012.

A wide array of new and interesting products which represent the greatest advances in materials, tools, or equipment will be featured.

Philippine International Food and Beverage expo (PIFBeX) 2012The 5th international exposition on food service, catering systems, specialty foods, beverages and wines, food franchising, supplies,

a roadshow titled, “Developments in ASEAN markets — Assessing the Risks and Opportunities.”

The seminar tackled the potential of ASEAN countries, including the Philippines, and identified them as the most promising emerging growth markets next to the giants of India and China.

Anand said that the country needs to immediately seize this opportunity.

“Take full advantage of the coming ASEAN Free Trade Area (AFTA) agreement. Expand to offering higher-value added services,” he said.

NeDa okays 2 projects to boost Sea tradeThe National Economic and Development Authority (NEDA) Board has approved two infrastructure projects that are expected to enhance the country’s trade activities in Southeast Asia.

These projects are the Puerto Princesa Airport Development Project (PPADP) and the public-private partnership (PPP) for School Infrastructure Project (PSIP).

Under the PPADP project, the government will improve the existing Puerto Princesa Airport through the construction of a new passenger terminal complex and put in place a new access road off the national highway of Puerto Princesa City.

The government also plans to widen the runway strip and install new security fencing, among others.

“The project revitalizes the transport and trade linkages under the Brunei Darussalam, Indonesia, Malaysia and the Philippines-East ASEAN Growth Area (BIMP-EAGA),” NEDA said.

The government puts the total cost of the project at P4.5B. It is under the Official Development Assistance (ODA) financing of the Korean Economic Development Cooperation Fund (EDCF).

The second project, the PSIP, will construct a total of 9,623 classrooms in 2,300 elementary and secondary schools in Regions I (Ilocos), III (Central Luzon), and IV-A (Calabarzon).

The PSIP is estimated to have a total project cost of P9.9B.

Climate change to form part of school curricula in SeaEnvironmental issues, notably climate change, will be integrated in the school curricula in Southeast Asian countries.

Spearheading the program is the Southeast Asian Ministers of Education Organization (SEAMEO), an inter-government body founded in 1965 to foster cooperation among Southeast Asian nations in the fields of education, science, and culture.

Along this line, a teachers’ guidebook titled “Integrating Climate Change Issues in Southeast Asian Schools: A Teachers’ Guidebook” has been published.

The 350-page teachers’ guidebook on integrating climate change issues in school offerings in Southeast Asia was the product of the collective efforts of eight regional “centers of excellence (COE)’” of SEAMEO over the past few years.

The publication is intended for use by teachers, educators, curriculum innovators, and instructional administrators responsible for connecting academic concepts with climate change issues in their respective schools and communities in Southeast Asian countries.

Philippine Business Report12

Entered as Third-Class Mail at theMakati Central Post Office

under Permit No. 504valid until 31 December 2012

Philippine Business ReportFebruary 2012

Philippine Business Report is published monthly by the Trade and Industry Information Center (TIIC), Department of Trade and Industry, 2F Trade and Industry Building, 361 Sen. Gil J. Puyat Avenue, Makati City 1200, Philippines • Phone (+632) 895.3611 • Fax (+632) 895.6487 • To subscribe, e-Mail: [email protected]

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

economic Indicators

*GNI - Gross National Income

4.684.694.7

4.714.724.734.74

Oct-11Sep-11Aug-11Jul-11Jun-11May-11

Interest Rate (%)

41.542

42.543

43.544

Dec-11Nov-11Oct-11Sep-11Aug-11Jul-11

Peso per US Dollar Rate

01234567

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

GNI Growth Rate (%)

01234567

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

GDP Growth Rate (%)

126126.5

127127.5

128128.5

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

Consumer Price Index(2000 base year)

010002000300040005000

Dec-11Nov-11Oct-11Sep-11Aug-11Jul-11

exports (In US$Billion)

4445555

Nov-11Oct-11Sep-11Aug-11Jul-11Jun-11

Imports (In US$Billion)

0

2

4

6

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

Inflation Rate (%)(1994 base year)