Philippine Business Report (Jun2014)

1June 2014

Volume 25 No. 06 June 2014

PHL to sustain growthSound fundamentals, domestic demand, healthy government fi nances, and a relatively stable political environment will continue to propel Philippine economic growth in the near term, Moody’s Investors Service said.

Moody’s is expecting a6.5-% gross domestic product (GDP) growth this year, followed by a slightly slower 6.4% next year.

The government is targeting a GDP growth of 6.5%-7.5% this year and 7%-8% in 2015.

The economy expanded by 7.2% last year, above the offi cial 6%-7% target.

“The Philippine economy has entered a structural shift to higher growth, accompanied by low infl ation. We continue to expect growth conditions to be robust,” Moody’s said.

Moody’s currently rates the Philippines a Baa3, an investment grade, with a positive outlook.

“Moreover, sustained political stability points to better prospects for reform over the second half of the current presidential administration,” it added.

Even the International Monetary Fund (IMF) remains confi dent that the Philippine economy will remain robust this year.

“We think potential growth is around 6.2%,” IMF Representative

to the Philippines Shanaka Peiris said.

Notably, IMF sees private investments to remain among the growth drivers.

“But public investment will be higher this year and next year because more of the reconstruction will happen next year. Net exports will increase a bit (and) the key this year will be on the fi scal,” Peiris said.

He expected the Philippines to post higher growth in exports in 2015 citing that “exports

are recovering gradually but it is making a big jump.”

On the same note, Standard & Poor’s (S&P) upgraded the Philippines’ investment grade rating to ‘BBB’ with stable outlook from ‘BBB-’ its ratings on the country a year after giving it an investment grade rating.

S&P said the ratings were upgraded “because we now believe the ongoing reforms to address shortcomings in structural, administrative, institutional, and governance areas will endure beyond the current administration.”

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INDUSTRYTRENDS

DTI sees more biz missions from TaiwanMore business delegations from Taiwan are expected to visit the country for potential investments as the government promotes the country as a gateway or hub for the Association of Southeast Asian Nations (ASEAN) region, the Department of Trade and Industry (DTI) said.

DTI Trade and Investment Promotions Group (TIPG) Undersecretary Ponciano C. Manalo Jr. said more business missions from Taiwan are expected in the country following his recent visit there to encourage Taiwanese fi rms to explore trade and investment opportunities in the Philippines.

“With its strong economic performance, fl ourishing business opportunities, and proximity, the Philippines is in a fi rm position to encourage Taiwan in closely considering our country as their gateway or hub for the ASEAN market,” Manalo said.

During the investment seminar held in Taiwan attended by about 100 participants engaged in the electronics industry, particularly in photonics light emitting diode (LED) applications, imaging devices and photovoltaic, and green technology, Manalo cited the advantages of pouring in funds here such as the country’s strategic business location to the ASEAN market, rich talent pool, fi rst-class lifestyle, and attractive investment incentives.

Manalo met with Taiwanese companies engaged in the global electronics supply chain which have expressed keen interest in investing in the Philippines.

He said other Taiwanese fi rms were also interested in opportunities

Foreign fi rms relocating to PHLNoting the available high-quality labor in the country, several foreign manufacturing companies operating in China and in Southeast Asian countries are eyeing to relocate to the Philippines, the Foreign Buyers Association of the Philippines (FOBAP) said.

FOBAP President Robert M. Young said two French investors are coming to Manila while a number of Canadian, Chinese, and American companies are visiting the country to scout for investment opportunities.

Young said these are mid-sized manufacturers of garments, apparel, shoes, toys, and housewares looking to invest around USD 500M and employ 1,000 to 3,000 workers.

“These people are fi nancially capable, they are ready, they mean business, they are serious... We are lucky if we get at least 10 initially from all parts of China and other Association of Southeast Asian Nations (ASEAN) countries,” Young said.

Companies are moving out of China amid increasing labor unrest resulting in reduced labor pool, as well as higher capital costs.

“They went to other ASEAN countries but they do not like (it there). They used to be buying from Manila. They know that Filipinos are really good in skill, quality control, and workmanship. So this is actually our number one attraction,” Young said.

The group is looking forward to the country becoming a benefi ciary of the European Union’s Generalized Scheme of Preferences Plus (EU GSP+) citing that such will make the country an attractive and cheaper source of goods.

The Department of Trade and Industry (DTI) submitted the Philippines’ application

in software park development; electric vehicle production; and aircraft maintenance, repair, and overhaul services.

DTI convenes IDCThe Department of Trade and Industry (DTI) has convened the Industry Development Council (IDC), a body formed to support the country’s overall industrial development.

The DTI said the IDC will serve as the coordinating body to implement different industry roadmaps as well as the Comprehensive National Industrial Strategy.

The IDC was created in December 1996 by virtue of EO 380 signed by then President Fidel V. Ramos to recommend approval of the Industrial Development Plan of the Philippines in line with the Medium-Term Philippine Development Plan (MTPDP) and the Philippine Export Development Plan (PEDP).

However, the Council stopped convening a decade ago.

The DTI decided to revive the IDC as part of its thrust to promote the growth of local industries amidst the Association of Southeast Asian Nations (ASEAN) economic integration and other free trade agreements (FTAs).

“The IDC is a collaboration to further strengthen local industries and enhance their competitiveness to take advantage of the opportunities with the implementation of the ASEAN Economic Community (AEC) in 2015 and the other free trade agreements (FTAs),” DTI Secretary Gregory L. Domingo said.

Participants of IDC meeting

• Department of Trade and Industry (DTI)• Department of Foreign Affairs (DFA)• Department of Environment and Natural

Resources (DENR)• Department of Energy (DOE)• Department of Labor and Employment (DOLE)• National Economic and Development

Authority (NEDA)• National Competitiveness Council (NCC)• Philippine Chamber of Commerce and Industry (PCCI)• Federation of Philippine Industries (FPI)• Filipino Federation of Chinese Chambers of Commerce and Industry Inc. (FFCCCII)

3June 2014

to the EU GSP+, a scheme which will allow more goods to enter the bloc at zero duty, in December.

French fi rms interested in PHLA French business delegation composed of more than 20 companies from France’s biggest business organization MEDEF International is looking at potential investment opportunities in the Philippines.

Department of Trade and Industry (DTI) Trade and Investment Promotions Group (TIPG) Undersecretary Ponciano C. Manalo Jr. said the French business delegation are interested in public-private partnership (PPP) projects, aerospace, energy, and in opportunities in Mindanao.

“We’re very happy the French delegation is here and they can have a view on the Philippines,” Manalo said.

MEDEF’s business delegation is a return visit to the country following the trade and investment mission conducted by DTI in France in September last year.

Manalo said the DTI is planning to visit France again sometime this year in line with its aim of increasing trade and investment ties with European countries. MEDEF International Business Delegation President Philippe Matiere said there has always been strong interest from French companies to do business in the Philippines.

“This is because of the continuous growth of the economy and success of French companies in the Philippines,” Matiere said.

He said the Philippine government has facilitated an environment more conducive for business.

“We support the European Union Generalized Scheme of Preferences Plus (EU GSP+) status leading to a free trade agreement (FTA)with the EU,” French Economic

Counsellor Gilles Vernet said, noting that being a benefi ciary of the trade scheme would allow the Philippines to increase trade with France.

The EU GSP+ covers 6,274 products that could enter the EU at zero duty.

Currently, the Philippines is a benefi ciary of the regular GSP which covers 6,209 products, with 2,442 products subject to zero duty and the rest slapped with lower tariffs.

Luxembourg, Russian biz delegations to visit PHLTwo business delegations from Luxembourg and Russia are expected to visit the country next month for investment opportunities, the Philippine Chamber of Commerce and Industry (PCCI) said.

PCCI President Alfredo M. Yao said the 30-member business delegation composed of fi rms engaged in the information technology (IT) and tourism sectors from Luxembourg would visit the country.

Another business delegation from Russia is likewise expected to visit the country within the year.

“With Association of Southeast Asian Nations Economic Community (AEC), they are looking at using the Philippines as a hub for ASEAN,” Yao said.

The AEC, to be in place by December next year, seeks to create a single market economy with free movement of goods, services and investments throughout the region.

Yao said the PCCI is promoting the Philippines as a potential hub in the region to foreign fi rms

and the group’s partner business councils in other countries.

“We are looking for them to invest here and use the Philippines as a hub for the ASEAN market,” he said.

The PCCI is also encouraging partnerships between foreign fi rms and local companies.

Yao said among the advantages of the Philippines over its peers in the region is the availability of a Filipino workforce which speaks the English language and could easily be trained.

“The Filipinos are fast learners. We work well with others,” he said.

PHL food exporters urged to tap opportunities in U.S.The country’s exporters should tap food and beverage opportunities in the United States (U.S.) through active promotion and more engagement with the government.

Philippine Ambassador to the U.S. Jose Cuisia Jr. said while there has been growth in the entry of Philippine food and beverage products to the U.S. market, there are still export opportunities yet to be tapped by the country’s exporters.

Cuisia said food exports from neighbors in Southeast Asia, including fi sh sauce from Thailand and cat fi sh from Viet Nam, are now on the shelves and freezers of mainstream U.S. supermarkets.

Such exports, he said, are prepared and labeled to attract U.S. consumers, a larger market compared to the niche Filipino-American community.

“The government cannot do it alone. We really need to see more engagement from the private sector to promote themselves and in so doing, promote the Philippines,” he said.

Aside from strengthening promotion efforts, Cuisia said the private

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sector will also need to work with government in preparing for the country’s possible entry to the Trans-Pacifi c Partnership (TPP) agreement.

“I also ask you to be active in your engagement with the government, in particular, in giving information on the costs and benefi ts of the TPP to the private sector and recommendations on appropriate steps to take and prepare the country for a 21st century agreement,” he said.

Department of Trade and Industry (DTI) Secretary Gregory L. Domingo said earlier it is in the interest of the Philippines to become a member of the TPP as the trade pact is an avenue to get access to markets, primarily the U.S.

“It is something we have to engage in. We have no choice because the U.S. is our second largest trading partner and many of our neighbors will become members of TPP. If they have duty-free access, for example, in the U.S. and we don’t, it will really handicap the Philippines and affect us in a signifi cant way,” Domingo said.

PHL eyed as data analytics hubA business consortium in the country intends to bring data analytics into the stream of data management services to capture an initial 10% of the USD 70-B sector and bolster the country’s bid to become the global center in the next two to three years.

Known as “Analitika,” the consortium is comprised of nine big local and multinational companies that aim to create additional 100,000 jobs in the Philippines every year starting in 2015.

“We are expecting global demand to hit 4.4M jobs requiring data analysis by 2015, but only 30% or a third of this will be supplied. We hope to fi ll the gap from our local pool of talents,” IBM Country General Manager Mariels Almeda Winhoffer said.

By 2015, the Philippines would have initial 10,000 graduates from 12 pioneering universities offering undergraduate degrees on data analytics.

These so-called “data scientists” will be employed to analyze and interpret data based on available information on retail, banking, telecommunications, and government, and will help translate the data into business outcomes.

Department of Trade and Industry (DTI) Secretary Gregory L. Domingo said the huge gap in required skills for data analysis was a huge opportunity for the Philippines.

“The Philippines has the potential to fi ll this shortfall in advanced business analytics talent. Our country has the right mix of ingredients. With the confl uence of fresh insights and brilliant ideas that Analitika is sure to provide, the Philippines is well-prepared and well-positioned to become the global center for data analytics,” Domingo said.

Southern Mindanao growth corridor dev’t pushedForeign chambers of commerce and industry in the country are pushing for the development of the Southern Mindanao Growth Corridor.

The American Chamber of Commerce in the Philippines (ACCP-Davao), Japanese Chamber of Commerce in Mindanao, and the European Chamber of Commerce in the Philippines have forged together for the further development of the said corridor by exploring its investment potentials.

ACCP-Davao President Philip Dizon said the growth corridor

encompasses the areas from Davao Oriental to South Cotabato.

The three chambers have agreed to draw around 200 investors to look at the possible investment sites and discuss opportunities in the said corridor especially with the expected integration to the larger market of the Association of Southeast Asian Nations (ASEAN) by 2015.

Dizon said they will focus on companies with interests in the fi elds of fi nance, infrastructure, property development, power and utilities, agriculture, and business process outsourcing (BPO).

Board of Investment (BOI)-Davao Regional Head Gil Dureza welcomed the agreement among the chambers and looked forward that the merger will lead to tangible results.

“Hopefully, these activities will spur more the development in Mindanao in alleviating poverty and integration of combatants after the signing of the peace deal and the impact of calamities brought about by typhoons,”Dureza said.

IT-BPO sector remains strongThe country’s information technology and business process outsourcing (IT-BPO) sector players see no sign of slowing down for the sector as global companies continue to express interest in considering the country as their outsourcing hub.

DTSI Group President and Chief Executive Offi cer (CEO) Miguel Antonio C. Garcia said this optimism is based on his meetings with top offi cials of several companies and industry organizations at the recent 2014 International Outsourcing World Summit (OWS) held in Florida, United States (U.S.).

“More and more multinationals and other enterprises in the U.S. have been seriously considering

5June 2014

TRADE ANDINVESTMENTS

the Philippines as their outsourcing hub,” Garcia said.

He said the targets set by the Information Technology and Business Processing Association of the Philippines (IBPAP) of generating USD 25B in revenues and 1.3M jobs by 2016 are well within reach.

“We really need to be more aggressive than ever as the country’s competitors are trying to capture a bigger share of the market,” he said.

PHL up 8 notches in WEF ICT rankingThe Philippines has advanced by eight notches in the Global Information Technology Report (GITR) 2014 to move up to rank 78th from its previous 86th spot in 2013.

The Network Readiness Index (NRI) measures the competitiveness of a country’s information and communications technology (ICT) and its impact to the well-being of the citizens.

The latest report has assessed the ICT preparedness and competitiveness of the countries through four sub-indices including:

• Environment sub-index, measuring business and innovation environment,

and the political and regulatory framework;

• Readiness sub-index, evaluating the ICT infrastructure cost

of access and the presence of the necessary skills to ensure

an optimal use;

• Usage sub-index, assessing uptake and use of ICT among governments, business, and individuals; and

• Impact sub-index, rating the economic and social impacts accruing from ICT.

Notably, the Philippines has improved in three out of four indices and maintained its position in one index.

AGRICULTURE/AGRIBUSINESS AND FISHERY

2 Korean fi rms invest P130.8M for coconut products Two Korean-owned coconut product exporters have secured tax perks from the Board of Investments (BOI).

The BOI said it approved the registration of Coco Davao Inc. and Cocoplus Inc.’s projects with investments worth a total of P130.8M.

Coco Davao’s P125-M project involves the production of coconut water for export to the United States (U.S.). The project is located in Sta. Cruz in Davao del Sur. Itwould have an annual capacity of 2.16M liters.

Cocoplus’ P5.8-M project, meanwhile, involves the production of coconut fi ber and coconut peat. The facility, located in Digos City in Davao del Sur, would have a capacity of 1,757 tons of coco fi ber and 2,635 tons of coco peat per year.

Cocoplus’ output would be exported to China and South Korea.

“Both Coco Davao and Cocoplus Inc. projects are expected to provide a total of 215 jobs when fully operational,” the BOI said.

AVIATION

PAL allots USD 261M to replace aging aircraftPhilippine Airlines Inc. (PAL) will own one of Asia’s youngest fl eet

of jets, with an average age of 3.5 years, following the completion of a USD 261-M modernization program.

The upgrading program involved the replacement of 20 aging aircraft with modern, fuel-effi cient planes that were expected to reduce costs, PAL President and Chief Operating Offi cer (COO) Ramon S. Ang said.

The PAL’s old fl eet retirement was a part of a turnaround strategy aimed at transforming the fl ag carrier into Asia’s airline of choice through a simple game-changing program of fl eet modernization, network expansion, and service innovation, Ang said.

BPO

Convergys takes over StreamConvergys has fi nally completed acquisition of Stream Global Services, creating the world’s second largest customer management services provider in the process.

Convergys, which is already the Philippines’ largest private employer since 2010, further expanded its employee base from 41,000 to 55,000 with the addition of Stream’s complementary client base in March.

Together, Convergys and Stream anticipate further growth by more than 6,000 additional employees throughout the year, including positions in customer service, technical support, and sales.

Convergys also deemed Stream’s geographic footprint and service capabilities useful in expanding and strengthening its global presence in the USD 55-B outsourced customer management services industry.

CREATIVE INDUSTRIES German game developer eyes PHL operationsCrytek GmbH, a game developer and publisher based in Germany, is seeking tax incentives from

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Corp. (EDC) for the construction of the 49.4-megawatt (MW) Nasulo geothermal power plant.

The geothermal power plant, which is eligible for incentives and is listed under the Investment Priorities Plan (IPP), is located in Sitio Nasulo, Barangay Pugahan, Valencia, Negros Oriental.

The project will start commercial operation in January 2016.

INFRASTRUCTURE/PUBLIC-PRIVATE PARTNERSHIP

Gov’t plans 15 PPP projects until Q1 2015The government plans to rollout 15 projects under the public-private partnership (PPP) program with a total cost of over USD 14B from now until the fi rst quarter of next year.

15 projects under the PPP

Project Amount in USD• North South Commuter Rail 6.03B• Mass Transit System Loop 3B• Light Rail Transit 1.46B Line 2 extension and O&M• Laguna Lakeshore 1.44B Expressway Dike • New Prison Facility 895M• Bulacan Bulk Water Supply 542.22M Project• Davao Airport O&M 476.39M• New Centennial 417.33M Water Supply Source Project• Laguindingan Airport Operation 354M and Maintenance (O&M) • Iloilo Airport O&M 322.34M• Motor Vehicle Inspection 313.16M Project• Bacolod Airport O&M 208.98M• Integrated Transport 115.56M System Southwest Terminal• Puerto Princesa Airport O&M 71.13M• New Bohol (Panglao) Airport O&M 52M

2 PPP projects to boost FDIsThe Department of Transportation and Communications (DOTC) said the recent awarding of two major infrastructure projects worth P19B under the Aquino administration’s public-private partnership (PPP) scheme is expected to boost the fl ow of foreign direct investments (FDIs) into the Philippines.

the Board of Investments (BOI) as it plans to set up Philippine operations soon.

The Game Developers Association of the Philippines (GDAP) said representatives of Crytek GmbH met with BOI offi cials, but had yet to formally register with the incentive-giving body.

“They really want this to happen. It is not the fi rst time that a game developer operates from the Philippines, but Crytek is defi nitely one of the more well-known ones,” GDAP Director and GameOps Inc. Chief Executive Offi cer (CEO) Andro Baluyot said.

He said once Crytek sets up operations in the Philippines, it would create a new wave of interest among gaming operators, developers, and publishers in the Philippines as the next destination for game development.

ENERGY Puregold starts commissioning P1-B biomass plantThe company of Supermarket chain owner Lucio Co expects to start commissioning this month its 9.9-megawatt (MW) biomass plant in Nueva Ecija.

Co of the Puregold supermarket chains earlier bought a majority stake in San Jose City I Power Corp. (SJC I Power), a renewable energy that will build the biomass plant.

According to SJC I Power Chief Operating Offi cer (COO) Edgardo Alfonso, commercial operations will start in October this year.

The project is estimated to cost P1B.

Roxol’s ethanol plant in full swingRoxol Bioenergy Corporation, an affi liate of listed sugar fi rm Roxas Holdings, Inc., announced that its ethanol production is now in full swing.

In a statement, Roxol said it was able to produce 15.07M liters

of bioethanol from October 2013 to March 2014.

The plant’s six-month bioethanol production of 15.07M liters for fi scal year 2014 is 558% higher than the 2.29M liters produced in the same period last year.

Nido plans to reactivate West Linapacan oil fi eldNido Petroleum Ltd. of Australia said it will pursue the redevelopment of the West Linapacan oil fi eld northwest off Palawan, with commercial production expected by the third quarter next year.

Nido is part of the consortium holding service contract 14C2, which covers the West Linapacan oil fi eld. It has a 22.3-% stake in the project.

West Linapacan, discovered in 1990, produced 8.5M barrels from 1992 to early 1996, with a peak production rate of over 18,000 barrels of oil per day, before production was stopped.

Nido bared plans of redeveloping the West Linapacan oil fi eld in northwest Palawan involving a development cost of USD 100M as early as 2012.

Gas2Grid starts testing of oil fi nd in CebuAustralian oil exploration fi rm Gas2Grid started actual commercial fl ow testing of its oil fi nd in the southern Cebu town of Aloguinsan.

The fl ow testing will determine the commercial viability of the oil fi nd.

Aloguinsan town offi cials have expressed support for the oil exploration project as it would generate jobs for residents and earn revenues for the town.

GREEN PROJECTS

BOI approves EDC’s P4.64-B geothermal plantThe Board of Investments (BOI) has approved the P4.64-B investment of Energy Development

7June 2014

DOTC Secretary Joseph Emilio A. Abaya said the decision to award the P17.5-B Mactan-Cebu international airport expansion project and the P1.72-B automated fare collection system (AFCS) would enhance the perception of the international community on the Philippines as an investment destination.

The DOTC inked a 10-year concession agreement with the AF Consortium led by conglomerate Ayala Corp. and infrastructure fi rm Metro Pacifi c Investments Corp. (MPI) last 31 March for the single ticketing system for both the Metro Rail Transit and Light Rail Transit (MRT-LRT).

DOTC awarded the expansion project of the country’s second largest international gateway to the consortium of Filipino-owned Megawide Construction Corp. and Bangalore-based GMR Infrastructure.

Abaya believes that part of the process in attracting FDIs, which will boost the Philippine economy, is enhancing confi dence in the country’s institutions.

Megawide-GMR remits P16.1-B payment for Cebu airport projectThe Megawide Construction Corp. and GMR Infrastructure remitted to the government the P16.1B payment for the country’s fi rst airport public-private partnership (PPP) project.

The premium payment remittance paved the way for the signing of the concession agreement for the P17.5-B Mactan Cebu International Airport expansion project led by Department of Transportation and Communications (DOTC), GMR Infrastructure, and Megawide offi cials.

The company is spending P17.5B for the construction of a new passenger terminal building starting January or February next year, Megawide Chairman and Chief Executive Offi cer (CEO) Michael C. Cosiquien said.

Cavitex allots P8.8B for C-5 link projectCavitex Infrastructure Corp. (CIC) is spending P8.8B for two major road projects further expanding the 14-km. Manila-Cavite Expressway (CAVITEX).

The Department of Public Works and Highways (DPWH) has already approved the alignment of its proposed P8B Circumferential-5 (C5) link project, CIC President and Chief Executive Offi cer (CEO) Jose Luigi Bautista said.

The 7-km. road would start from C5 and cross through the South Luzon Expressway (SLEX) and pass through the Better Living Subdivision beside the Ninoy Aquino International Airport (NAIA), Bautista said.

The proposed expressway would end at the CAVITEX headquarters at the Road 1 portion of Cavite where the toll plazas are situated.

BCDA allots P1.3B for Poro Point dev’tThe Bases Conversion and Development Authority (BCDA) has pegged the Poro Point Free Port Zone (PPFZ) development cost in La Union at P1.3B.

The PPFZ’s initial development would involve Phase 1A which focuses on the 14-ha. area of the Poro Point Lighthouse, and Phase 1B covering the existing 70-ha. industrial area of the former military base, BCDA Chairman Rolando P. Gosiengfi ao said.

The aim is to develop PPFZ into a major growth driver for North Luzon by attracting investors, under the master development plan (MDP) prepared by Palafox Associates.

SM Foundation begins rehabilitation of Tacloban Hospital, 10 health centersSM Foundation Inc. and the Offi ce of the Presidential Assistant for Rehabilitation and Recovery (OPARR) signed a memorandum of agreement (MOA) for the rehabilitation of Typhoon Yolanda-devastated Tacloban City Hospital.

Target date for the Tacloban City Hospital entire completion is this month.

At the same time, 10 rural health units in various provinces in the Visayas and in Mindanao will also be rehabilitated and repaired by SM Foundation in partnership with BDO Foundation.

2 road projects operational mid-2015San Miguel Corporation-led concessionaire of Metro Manila’s two major road projects has assured that public could expect some ease in traffi c congestion by the middle of next year.

The fi rst phase of Skyway Stage 3 and Ninoy Aquino International Airport (NAIA) Expressway Phase 2 will be operational within the second half of 2015, Skyway O&M Corporation (SOMCO) President Manuel Bonoan said.

Bonoan also revealed that NAIA Expressway Phase 2 project will provide access to NAIA Terminals 1, 2, and 3 as well as link the Skyway in SLEX and the Manila-Cavite Expressway (CAVITEX).

Mactan-Cebu airport modernization given green light The Department of Transportation and Communications (DOTC) has given the go signal for the Mactan-Cebu International Airport (MCIA) upgrade with the formal signing of the concession agreement with the winning consortium GMR-Megawide.

The construction of a new passenger terminal building (PTB)

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should begin by January 2015 and be completed in three years.

“This new terminal will be dedicated to international fl ights and will rise next to the existing PTB, to which it will be connected. The existing PTB will then be renovated for completion in January 2019, when it will begin to serve the airport’s domestic clientele exclusively,” DOTC said.

Bulacan water joint ventureMaynilad Water Services Inc. and Manila Water Co. Inc. plan to form a 50:50 joint venture to bid for the P24.4-B bulk water project to address the water supply requirements of Bulacan towns.

Both parties were in talks to jointly bid for the next water project to be implemented by state-run Metropolitan Waterworks and Sewerage System, Manila Water President and Chief Executive Offi cer (CEO) Gerardo C. Ablaza Jr. said.

Both camps are waiting for the fi nal terms of reference (ToR).

LOGISTICS

BOI okays P2.6-B port projectThe Board of Investments (BOI) approved the P2.6-B transportation and storage expansion project of port operator San Vicente Terminal and Brokerage Services Inc. (SVTBSI) under a non-pioneer status.

The project, which is located within the Davao International Container Terminal (DICT) in Panabo City, Davao del Norte, aims to expand the capacity of the port to 400,000 forty-foot equivalent units (FEUs) from 200,000 twenty-foot equivalent units (TEUs).

The container terminal aims to be the most modern cargo terminal in Mindanao and boasts of two ship-to-shore cranes and modern handling equipment. It has an average draft of 15.5m. which allows it to accommodate large panamax vessels.

MANUFACTURING

ARC opens new plant in MisOrARC Refreshments Corp. (ARC), the licensed bottler of American brand RC Cola in the Philippines, has put up a new fi ve-ha. plant in Tagoloan, Misamis Oriental.

Goals in building the new soft drink plant

• Meet market demand for affordable soft drink in the region• Provide additional employment

opportunities• Drive down the cost of distribution in the

area for the company’s business partners

The Misamis Oriental plant is the eighth in the company’s planned expansion this year, with ARC providing more business opportunities for existing and potential soft drink dealers, sub-dealers, retailers, and suppliers in many regions across the country.

MASS HOUSING

Vista Land to spend P7B in Davao, IloiloVista Land & Lifescapes Inc. will spend P7B to develop commercial projects of low-end housing unit Communities Philippines Inc. in Davao, Iloilo, and Cagayan de Oro cities.

Vista Land said in a registration statement fi led with the Securities and Exchange Commission (SEC) that it earmarked P3B for projects in Iloilo, P2B for Davao, and another P2B for Cagayan de Oro.

Vista Land said it would use the proceeds from the planned P5-B bond offering to partially fi nance the Communities Philippines and its subsidiaries commercial developments.

MINING

Mining investments exceed 2013 targetInvestments in the mining sector projected a 61.4-% growth in 2013, totaling USD 1.31B on continued capital expenditures (capex) of existing mining projects and

potential big-ticket projects that are still in the pre-development stage.

The total exceeded the USD 817.58-M target last year. This year, the sector is expected to invest a total of USD 1.32B in the local extractive industry.

Recipients of mining investments

• Palawan HPAL Project of Coral Bay Nickel Corp.• Canatuan silver-gold project of TVI Resource Development Philippines• Teresa Gold Project of Lepanto Consolidated Mining• Nickel projects of Surigao Integrated

Resources Co. in Surigao del Norte• Philsaga Co-o Gold Project of Philsaga Mining Corp.• Toledo Copper Project of Atlas Mining and Development Corp.• Didipio copper-gold project of Oceanagold Corp. • Tampakan copper-gold project of Sagittarius Mines, Inc.• Silangan Copper Project of Philex Mining Corp.• Far Southeast Gold Project of Lepanto• King-King copper-gold project of St. Augustine Copper and Gold Ltd.• Agata copper-gold-nickel project of TVIRD

MOTOR VEHICLES Chinese car fi rm mulls investment in PHLA Chinese automotive fi rm is looking to invest in a manufacturing facility in the Philippines, the Philippine Economic Zone Authority (PEZA) said.

The Chinese fi rm’s offi cials visited the country recently to learn about available opportunities here, PEZA Director General Lilia B. de Lima said.

“They want to start with auto parts, then they will do assembly,” said de Lima.

“They are looking for a local partner, but they can also do it alone. Right now, I am looking for a partner for them,” she said.

POWER

Filinvest unit starts P40-B power projectFDC Utilities Inc., the power unit of Filinvest Development Corp.,

9June 2014

has started building a 405-megawatt (MW) coal-fi red power project in Misamis Oriental.

FDC Chairman Jonathan T. Gotianun said the fi nancial requirements for the over P40-B power plant at the Phividec Industrial Estate were completed, paving the way for the start of its construction.

The project is a thermal circulating fl uidized bed power plant that will use the latest in clean coal technology, where 95% of sulfur emissions are removed.

The fi rm is undertaking the project without a joint venture partner. It expects all three units of the power plant be operational by 2016.

MVP, Gokongwei partnership zeroes in on power projectsGokongwei-owned JG Summit Holdings and Pangilinan-led Manila Electric Co. (Meralco) are open to entering into more joint venture projects in the power sector.

At present, the partnership between the two fi rms is focused on a power supply deal for JG Summit’s planned naphtha and polyethylene facility in Batangas, which is expected to open this year. “They have a requirement for their plant in Batangas. They want to be connected to the grid so we’re building out the connectivity to the grid from their plant,” Meralco Senior Vice President Al Panlilio said.

As part of the connectivity project, Meralco would be building a 69-kilovolt (KV) transmission line which spans 15 km. He said the target is to have the lines ready by the fourth quarter of the year.

AP to expand geothermal exploration, activates 200-MW bargesThe Department of Energy (DOE) awarded Aboitiz Power

Corp. (AP) the new Geothermal and Renewable Energy Service Contracts (GRESC), paving the way for the expansion of the company's geothermal exploration and development niche in Mindanao.

AP said its two new exploration blocks straddle Mt. Apo traversing North Cotabato, Davao del Sur, and Davao City.

Meanwhile, Therma Marine Inc. (TMI), an AP unit, is extending the operating hours of two power barges with a combined capacity of 200 megawatts (MW) to nearly 24 hours.

"We are ensuring our customers we have enough fuel supply to meet the power supply requirements of our customers especially this summer," Therma Marine President and Chief Operating Offi cer (COO) Jovy P. Batiquin said.

AP’s main goal in its expansion projects is to generate additional power capacity to address the power shortage in Mindanao.

PSI, SOCOTECO II seek ERC approval Peakpower Soccsargen, Inc. (PSI) and South Cotabato II Electric Cooperative, Inc. (SOCOTECO II) solicited from the Energy Regulatory Commission (ERC) a provisional approval for their Power Purchase and Transfer Agreement (PPTA) in a joint petition in March.

The provisional approval is a requirement for PSI to draw on their loan with Asia United Bank (AUB) which will be part of the funding for the 20.9-megawatt (MW) bunker-fi red power plant project, estimated to cost P1.9B.

The power plant, which would be built in Barangay Apopong, General Santos City, is targeted to start commercial operation by the last quarter of the year.

Under the 15-year PPTA contract, which will start when the plant goes to commercial operation,

PSI will construct, operate, and maintain the power plant, then transfer it to SOCOTECO II for their franchise area.

SOCOTECO II supplies power to General Santos, Sarangani, and South Cotabato.

Alsons sets Zamboanga power plant constructionConstruction of Alsons Consolidated Resources, Inc.’s 105-megawatt (MW) San Ramon coal-fi red power plant in Zamboanga is scheduled to start following the approval of the plant’s contracts seen done last May.

In December 2012, South Korean fi rm Daelim Industrial Co., Ltd. was enlisted as the engineering, procurement and construction (EPC) contractor for the San Ramon power plant which is expected to begin operations by 2016.

Daelim is also the EPC contractor for Alsons’ 210-MW Sarangani Energy plant.

The 105-MW phase one of the Sarangani Energy plant started its engineering and construction stage in 2012, after the notice to proceed was issued, and is seen to be operational by 2015.

Alsons is looking to generate 463MW by 2016 through increasing the generating capacity of its subsidiaries to supply a quarter of Mindanao’s energy needs which the Department of Energy (DOE) predicts will reach 1,829MW in two years.

REAL ESTATE

SM Prime embarks on P 400-B expansion planSM Prime Holdings, Inc. (SMPH) is on a fi ve-year expansion in the Philippines, China, and other countries in Southeast Asia seen to cost at P400B in capital expenditures.

The plan involves increasing the company’s portfolio almost by two across its businesses.

For this year’s capital spending, P70.57B has been earmarked

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COMPANY NOTES

COUNTRY-TO-COUNTRY

with 55% allotted for mall expansion and 28% for their residential portfolio.

During the period, SMPH sees a 10-% annual growth in earnings and return-on-equity performance to play around the mid-teens from 11% in 2013.

Last year, parent company, SM Investments Corp. (SMIC), consolidated its property businesses under SMPH which was formerly the SM Group’s mall operating arm.

ALI sets projects for next 5 yearsAyala Land Inc. (ALI) disclosed several developments in the pipeline for the next fi ve years.

Biggest of the projects is the P80-B mixed-use development in a 74-ha. area in Arca South, formerly the Food Terminal Inc., in Taguig which will see the rise of residential areas, nine offi ce buildings targeted at the business process outsourcing (BPO) sector, two malls, a hotel, and a hospital.

Scheduled to open by 2017 are two of the offi ce buildings and a lifestyle mall, while a regional mall is set for 2020.

Among the residential projects in Arca South is fi ve-tower garden-living condominium Arbor Lanes under Ayala Land Premier (ALP) which will turnover 208 units of its fi rst 13-level tower by 2018.

ALI has also allotted P6B for the development and expansion of its resorts in Palawan, starting with 100 ha. of its 600-ha. landbank.

Megaworld adds beachfront development to Mactan projectMegaworld Corp. once again increased its budget for its 28.8-ha. Mactan Newtown project in Cebu after adding a beach area development.

From P10B, capital expenditure (CAPEX) for the project has gone up to P20B in February, and now to P30B seen to be reached in fi ve to seven years.

The beach area development includes an exclusive beach club and sports facilities.

Starmall to add shopping centersStarmall Inc. has plans of developing more shopping centers to reach 22 malls from its current fi ve over the following years.

Under the Starmalls brand, four new shopping centers are scheduled to be opened in the following months, while four of fi ve existing malls will undergo renovation.

New Starmalls locations• Taguig City• Imus, Cavite• Molino, Cavite• Sta. Rosa, Laguna

Starmalls for redevelopment• EDSA-Shaw• Alabang, Muntinlupa• Las Piñas• San Jose del Monte, Bulacan

Two new malls to rise in Zamboanga this yearCityMall Commercial Centers, Inc. (CMCCI) and Galleria Zamboanga, Inc. (GZI) signed an investment and shareholders agreement to form joint venture company Prime DDG Commercial Centers Inc. (Prime DDG) which will manage two new CityMalls seen to rise in Zamboanga City this year.

CMCCI will operate Prime DDG with 70-% ownership of the joint venture, while GZI will have the remaining 30%.

The malls, seen to start construction by the end of the June of this year, will be located in a 1-ha. property in Tetuan and a 1.4-ha. property in Guiwan, Zamboanga City, both provided by GZI as part of their equity in Prime DDG.

SM Investments Corporation (SMIC) acquired 34% of CMCCI, a subsidiary of DoubleDragon Properties Corporation, which in turn is a joint venture between Injap Investments Inc. of Mang Inasal founder Edgar Sia II and Honeystar Holdings Corp. of Jollibee founder Tony Tan Caktiong.

Maynilad obtains P6-B loan from DBPMaynilad Water Services has acquired a P6-B loan from the Development Bank of the Philippines (DBP) to improve the Parañaque and Las Piñas sewerage system.

The public-private partnership (PPP) project had a funding support from the Japan International Cooperation Agency.

The project’s goal is to better the sanitary conditions and improve the lives of more than 400,000 families living in the two cities. It will also benefi t Manila Bay and its tributaries.

Manila Water Co., to spend more capex in 2014The Ayala-led water subsidiary, Manila Water Company, Inc. plans to spend more for their projects this year.

“For 2014, the company expects to spend capital expenditures (capex) amounting to at least P5B,” Manila Water said.

The capex will be partially funded by proceeds of the company’s cash from operations, the Manila Water added.

PHL seeks more trade, investments with SingaporeThe Philippines and Singapore aim to increase trade and investments by conducting more business delegation visits.

It is in the interest of Singaporean businesses to take part in available trade and investment opportunities in the Philippines, Singapore President Tony Tan Keng Yam said.

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“I expect this number to grow as more Singapore professionals and entrepreneurs venture to tap the Philippines and facilitate these burgeoning interests,” Tan said.

Singapore businesses such as SingTel, Ascott, Somerset, YCH, Charles & Keith, and Breadtalk are doing well in the Philippines while Philippine brands such as Ayala and Jollibee have made profi table inroads in Singapore’s market too, PSBC Co-chairman and Keppel Corp. Chief Executive Offi cer (CEO) Loh Chin Hua said.

Department of Trade and Industry (DTI) Secretary Gregory L. Domingo expects the trade between the two countries to expand more.

processing, packaging, and labeling requirements for halal fi sh and fi shery products. This will prepare them for the 2015 Association of Southeast Asian Nations’ (ASEAN) economic integration.

“There was a time when our MSMEs brought fi sh products to Malaysia without the halal logo and label but this is all in the past because we are ready to provide them with proper training on the marketing of their products,” BFAR’s Fisheries Post-Harvest Division Consuelo C. Baltazar said.

In October 2014, Davao will host a trade fair initiated under the Brunei, Indonesia, Malaysia, Philippines-East ASEAN Growth Area (BIMP-EAGA) that will benefi t the MSMEs.

Aside from halal certifi cation sessions, hazard analysis critical control point that identifi es, evaluates, and controls hazards that are signifi cant to the safety of a specifi c product will be discussed.

for other questions and inquiries regarding the seminar.

Lean ManufacturingThe course will teach the application of improving material handling of lean manufacturing, inventory management, quality of work, scheduling, human resource, and customer satisfaction. Contact person for inquiries is Len Garcia. You can email herat [email protected].

Analyzing Business Markets & Business Buying Behavior, Dealing with CompetitionThis seminar will tackle the dynamics of organizational buying with great emphasis on the roles of the participants in the business buying process. It will also educate participants on the major infl uences analysis on buying decisions specifi cally in the purchasing and procurement process. Wider understanding on the nature of competitive forces, identifying competitors, analyzing competitors, and studying the competitive intelligence system will be discussed in the course. Contact person for inquiry is Henette Florentino. Email her at [email protected].

(Note: All the training courses above will be held in July 2014 at the Philippine Trade Training Center.)

PHL plans ahead for ASEAN integrationThe Philippines is implementing a national game plan for competitiveness in preparation for the 2015 Association of Southeast Asian Nations Economic Community (AEC).

The Department of Trade and Industry (DTI) and the Committee for AEC organized a forum with support from the United States Agency for International Development (USAID).

Topics discussed during the event were competitiveness as a driver of growth, deeper private sector engagement in the region’s economic integration process, and the adoption of a strong and harmonized national game plan for AEC.

Mindanao MSMEs prepared for ASEAN integrationThe Bureau of Fisheries and Aquatic Resources (BFAR) emphasized that micro, small, and medium entrepreneurs (MSMEs) need to be trained on the proper

Logistics ManagementThe two-day seminar will explain the effective and effi cient ways to manage the fl ow and storage of goods/materials from the point of origin to the point of consumption in order to satisfy customer’s requirements and needs. Registration fee costs P2,500. Contact Henette Florentino at [email protected] for questions and inquiries regarding the seminar.

Problem Solving and Decision Making TechniquesThe seminar’s goal is to provide the participants with knowledge, skills, and framework for a systematic approach to problem solving and decision making process. The registration fee is P2,500. Email Carlo Guiyab at [email protected]

Philippine Business Report12

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Peso per US Dollar Rate

Economic Indicators

As of 05 June 2014

Published monthly by the Knowledge Management and Information Service, 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 • Resty P. Par/Assistant Editor • Jam H. Raposon, Hazel S. Dizon, Joanna D. Cruz, Airiz A. Casta, Kit S. Andaya/Writers • Ren C. Neneria /Design Layout • Al Aquino /Circulation.

Philippine Business Report

*GNI - Gross National Income

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

under Permit No. 504valid until 31 December 2014

June 2014

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As of 04 June 2014