Philippine Business Report (Mar.2014)

1March 2014

Volume 25 No. 03 March 2014

The Philippines is expected to become one of the world’s 30 biggest economies by 2028 with its strong macroeconomic fundamentals, United Kingdom (UK)-based think-tank Centre for Economics and Business Research (CEBR) reported.

“We forecast that the Philippines will rise gradually from 42nd position in 2012 to 28th in 2028,” the CEBR said in its World Economic League Table (WELT) report for 2013.

Released annually, the WELT identifies the world’s 30 biggest economies based on nominal gross domestic product (GDP), forecasting which countries will be in the top 30 in five, 10, and 15 years.

The think-tank said the Philippine economy was currently being weighed down by the aftermath of super typhoon Yolanda (international name: Haiyan), which devastated parts of the country last November.

“But the Philippines is expected to recover in 2014 and 2015. Meanwhile, the improved outlook for the United States (U.S.) economy is important for the Philippines, which has much closer economic links with the U.S. than other Association of Southeast Asian Nations (ASEAN) economies,” CEBR said.

The country’s projected rise in the rankings, it noted, has to do with an expected reordering among world’s economies.

CEBR predicts that by 2028, China will replace the U.S. to become the world’s largest economy. India is likewise seen to overtake Japan to become the world’s third largest economy. Japan will fall to fourth, and Brazil, seventh in 2013, will climb up to fifth.

More emerging economies will start climbing up the ranks

by 2018, it said, a trend seen to continue in the following 10 years.

“By 2028 as symbols of the new world order, Nigeria, Egypt, Iraq, and the Philippines will break into the top 30. The latter group depends on maintaining or in some cases regaining political stability,” it said.

PHL seen at the top 30 by 2028

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INDUSTRYTReNDS

Higher export growth seenThe country’s exports are seen to post a higher growth rate this year amid expected strong demands for automotive electronic products and other non-electronic goods.

“We expect that merchandise exports will post a higher growth rate in 2014, perhaps even in the low double digits,” Department of Trade and Industry’s Bureau of Export Trade Promotion (DTI-BETP) Director Senen M. Perlada said.

For 2013, Perlada said merchandise exports could post a growth rate ranging from 3.5%-6%.

Merchandise exports were valued at USD 51.99B in 2012.

“Expected drivers are automotive electronics, chemicals, forest products, wood manufactures, furniture and furnishings, processed food and beverages, fruits and vegetables, among others,” said Perlada who also sits as Export Development Council (EDC) Executive Diretor.

Data from the National Statistics Office (NSO) showed that as of end-October 2013, the country’s merchandise exports rose by 1.3% to USD 45.08B from USD 44.52B in the same period of 2012.

Gov’t raises ‘14 infrastructure budget by 32.6%The government has significantly increased its infrastructure budget for 2014 to help meet the reconstruction needs in areas devastated by typhoon “Yolanda.”

Data from the Department of Budget and Management (DBM) showed that under the 2014 national budget, the government would spend P431.65B for capital outlays, up by 32.6% from last year’s budget.

“Infrastructure spending is a key priority in the 2014 budget. We want to make sure reconstruction activities move forward,” DBM Secretary Florencio B. Abad said.

Of the amount earmarked for infrastructure this year, some P100B would be for the reconstruction activities in areas affected by calamities such as Central, Eastern, and Western Visayas.

The allocation for infrastructure spending this year accounts for 19% of the P2.26-T national budget.

PHL sees record harvest in 2014The government expects corn production to hit a new record level this year on the back of over 10-% rise in production in 2013 to adequately cover domestic demand.

The Department of Agriculture (DA) said corn harvests were expected to surpass the corn self-sufficiency level in 2014 as the agency focused on corn as a primary crop.

“Because of the continuing increase in livestock production, there is a need to sustain the main ingredient for feeds which is corn,” DA Secretary Proceso J. Alcala said.

The Philippines had a competitive edge in corn production over neighboring countries such as Malaysia and Indonesia, which were highly dependent on the United States (U.S.) for imports, Alcala said.

“Due to progressive cultivation methods, the country can produce corn all-year round which is a definite advantage over other ASEAN countries,” Alcala said.

The agency earlier said the country had enough corn supply, with harvest probably reaching 8.2M metric tons (MT) this year.

It said production this year would include 5.726M MT of yellow corn and 2.487M MT of white corn.

The estimated corn harvest in 2013 represented a 10.8-% growth over the previous year’s output of 7.4M MT.

The national corn program forecast a national corn production of at least 8.4M MT this year.

Oil palm industry roadmap draftedThe country’s first oil palm industry roadmap seeks to develop 56,641.71 hectares (ha.) of land with bearing and non-bearing oil palms and about 1M ha. of land suitable for expansion by 2023.

Based on the industry’s draft 2014-2023 roadmap, the industry is expected to benefit about 300,000 farmers.

The Philippine Coconut Authority (PCA) led the crafting of the roadmap during a summit in Cebu attended by representatives from the Department of Trade and Industry (DTI), Philippine Palm Oil Development Council, Inc. (PPDCI), Department of Agrarian Reform (DAR), University of Mindanao (UM), local government units (LGUs), and private stakeholders.

PCA is hoping to build and develop a strong industry of oil palm and to establish a viable product via profitable ventures.

“We believe that palm oil can emerge as another significant agricultural crop if we work hand-in-hand in nurturing and development of the oil palm industry,” PCA Administrator Euclides G. Forbes said.

The roadmap aims to develop the oil palm industry through gainful production, processing, and marketing of oil palm products and by-products and make it a dynamic, innovative, and self-sufficient industry that complements the coconut industry by planting at least 300,000 ha.

3March 2014

and add a milling capacity of about 500 tons per hour.

PCA Deputy Administrator for Research, Development, and Extension Branch (RDEB) Carlos B. Carpio said no trees will be cut just to give favor in planting oil palm trees.

The Mindanao Economic Development Council (MEDCo) said palm oil’s domestic demand will continue to increase by 5% a year in the next 10 years.

Property sector remains optimisticThe country’s property industry players remain bullish and see more areas for growth, the Market Insight Report titled “Opportunities are Abound” showed.

Released by Pinnacle Real Estate Consulting Services Inc. in December 2013, the study reported that the Philippine real-estate sector still has chances for further expansion on the back of strong industry demand, robust economies, and attractive business environment.

“The Philippines is in a very good position to sustain the upbeat property market,” the company said.

“Even with the negative impacts of Yolanda, the Philippines is still at par with or even has a slightly higher growth rate than most ASEAN countries,” it said.

Coco exports soar by 64% in NovemberThe volume of coconut-based exports grew by 64% year-on-year in November last year despite the damages brought by typhoon “Yolanda” in the Visayas.

Preliminary data from the United Coconut Associations of the Philippines (UCAP) showed that the country shipped out in November 133,876 metric tons (MT) of coconut products.

The November 2013 volume represented a 23-% surge from the 109,022 MT exported in October.

For the 11 months to November, the volume of coconut exports showed strong expansion at 36% with a total of 1.84MMT.

All product categories, except copra, showed double-digit increases during the 11-month period.

ARMM investments hit P1.46BInvestments registered with the Regional Board of Investments (RBOI) in the Autonomous Region in Muslim Mindanao (ARMM) in 2013 grew by 157% to P1.46B over the previous year’s P569M.

It was the second time that the agency hit the P1-B mark, the first being in 2011.

The remarkable increase was partly attributed to the positive perception on the region brought about by the signing of the “Framework Agreement on the Bangsamoro” between the Philippine Government and Moro Islamic Liberation Front (MILF) in October 2012.

“Let us make the business environment conducive and friendly to our investors,” ARMM Regional Governor Mujiv S. Hataman said.

RBOI said some 1,743 jobs were generated out of the four firms registered with RBOI in 2013, a rise of 72% compared to the 1,016 jobs opened in 2012.

Top Projects in ARMM in 2013(In Million Php)

Company Project AmountAl-Tawitawi Nickel Mining/ 707.9Corporation (ANC) quarrying Bumbaran Mass housing 365.0Development Corporation (BDC) La Frutera, Inc. Cavendish 300.0 bananaIron Blaze Oil depot 90.0Petroleum

PHL records 3.7M tourists in 2013Over 3.7M foreign tourists visited the country in 2013, or 3% higher compared to the previous year,

Bureau of Immigration (BI) data showed.

The South Koreans remained as the top foreign visitors, replacing the United States (U.S.) as the foreign country with the most tourists in the Philippines.

Cebu and other Visayan provinces were the top destinations of foreign tourists, particularly Boracay in Aklan.

Arrivals included tourists, investors, expatriates, students, and balikbayans with foreign passports.

Returning Filipino travelers totaled 3.9M, bringing the total number of international travelers who arrived in the country to 8M.

Top Sources of Tourists in PHL 2013

Country NumberSouth Korea 1,015,802U.S. 649,664Japan 371,122China 313,395Taiwan 196,383Australia 167,262

Cargo volume rises 2.9%The volume of cargo shipped in and out of the Philippines rose 2.9% in the January to September period last year as the country recorded strong economic growth in the first half of the year, the Philippine Ports Authority (PPA) reported.

The country’s cargo volume reached 149.55M metric tons (MT) in the first nine months of 2013, or 4.2M MT higher than the 145.36M MT recorded in the same period last year.

Cargo shipped within the Philippines rose 1.25% to 57.08M MT from 56.38M MT while cargo shipped in and out of the country climbed 3.92% to 92.46M MT from 88.98M MT.

Biodiesel producers up capacity by 70.3M litersBiodiesel producers have expanded their capacity by 70.3M liters, ahead of the implementation

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of a higher biodiesel blend in petroleum products.

Documents from the Department of Energy (DOE) showed the agency approved the registration for additional capacity from nine accredited coco-methyl ester production plants in the country, including five that expanded their plants.

Biodiesel producers with expanded plants and increased capacities

• Chemrez Technologies Inc., to 90M liters from 75M liters• Pure Essence International Inc., to 72M liters from 60M liters• Mt. Holly Coco Industrial Co Ltd., to 60M liters from 50M liters• Tantuco Enterprises, to 60M liters from 30M liters• JNJ Oleochemicals Inc., to 63.3M liters from 60M liters

The industry players together with the Philippine Coconut Authority (PCA) were pushing for a higher biodiesel blend of 5% (B5) from the current 2% (B2) to spur the development of the coconut industry.

The government was supposed to implement B5 by 2015, but the PCA and other stakeholders called for an earlier implementation of the higher biodiesel blend.

The National Biofuels Board (NBB) recommended increasing the mandated biodiesel blend to 5% from 2% under the Biofuels Act of 2006.

economic growth seen with the rising demand for marble products in RomblonA growing demand is now being experienced by marble miners and producers in Romblon because of the sculpture and functional products the local manufacturers are producing.

Romblon Provincial Economic Investment Promotion Officer (PEIPO) Roberto R. Madera said at the entry of the year 2000, a high demand for marble products was noticed by the local producers

with the interest shown by the foreign tourists visiting the island.

Sculptures, functional, and ornamental products are gaining more buyers. Chairs, rolling pins, and sculptures are now produced by local carvers with inputs from foreign buyers on design specifications.

Madera said the local marble industry is the means of livelihood of some 5,000 families. Local workers were hired from quarrying to the processing of marbles.

TRADe ANDINVeSTMeNTS

and the Middle East, after a recent industry conference they held in Cagayan de Oro.

ENERGY

Filipino oil firm to put up depot in ARMMFilipino oil company Iron Blaze Petroleum Inc. is putting up a P90-M oil depot in the Port of Polloc in Maguindanao, one of five provinces under the Autonomous Region in Muslim Mindanao (ARMM).

“The reception of the market was quite positive as it brought fresh oil supplies and the next step now is to increase the volume of shipments of oil in Polloc Port and for that a bigger oil tanker boat is needed,” ARMM Regional Board of Investments (RBOI) Information Officer and Senior Investment Specialist Shamera Abobakar said.

The depot will have a capacity of about 9M liters and has already made two deliveries of 260,000 liters of fuel from Sabah since December.

DOe sets PeCR 5 auctionThe Department of Energy (DOE) is eyeing new investors to explore potential coal and petroleum fields around the country under a new petroleum contracting round set for launching within this month and the next.

The DOE is giving interested investors until March and April this year to submit applications for another round of petroleum and coal exploration contracts under the Philippine Energy Contracting Round 5 (PECR 5), DOE Secretary Carlos Jericho L. Petilla said.

The tentative submission for coal contract applications is in March and April for petroleum contract bids, he said.

The goal is to showcase the petroleum exploration opportunities in the country and to attract energy investors to develop the country’s indigenous oil and gas resources.

AGRICULTURE/AGRIBUSINESS AND FISHERY

Foreign firms seen to invest in palm-oil biz in MindanaoAt least six foreign companies have expressed keen interest to invest in several palm-oil ventures jointly with Filipino partners in Mindanao.

In a report presented to consultants of Japan International Cooperation Agency (JICA), Palm-Oil Cluster Industry Chairman Raul Nuevas said most of these foreign investors are looking for “big contiguous area” of 100,000 hectares that they can lease for 100 years.

Foreign companies keen to invest in palm oil ventures

• New Britain Palm Oil Ltd.• Pertamina Indonesia• Perkeburas Nasuntara• Univanich• Bali Palm Oil• Marubeni Corp.

The palm-oil industry cluster based in Caraga Region, according to Nuevas, had been receiving several serious inquiries from many foreign investors in the Asia-Pacific region, like Malaysia, Indonesia, Japan,

5March 2014

GREEN PROJECTS

Trans-Asia earmarks funds for wind farmTrans-Asia Oil and Energy Development Corp. (EDC) earmarked more funds to help finance construction of its 54-megawatt (MW) wind farm in San Lorenzo, Guimaras.

According to the company’s 2012 annual report, the project is estimated to cost around P6.3B.

The report also noted that construction of the wind farm will involve installation of 27 wind turbines with installed capacity of 2MW each.

DOe clears four wind power projects to proceedFour wind power projects with a combined capacity of 174 megawatts (MW) are set to be developed after the Department of Energy (DOE) declared these ventures as commercially feasible.

Wind power projects declared commercially feasible

• Energy Logics Philippines, Inc. to proceed construction of its 48-MW wind project

in Pasuquin• Energy Development Corp. (EDC) for the 63-MW expansion of its existing

wind project in Burgos• Northern Luzon UPC Asia Corp. (NLUPC)

will develop a 45-MW wind project in Pagudpud • Northwind Power Development Corp., for the 18-MW expansion of existing 33-MW wind farm in Bangui.

These four wind projects add to the five existing wind projects that had already secured similar certificates on “declaration of commerciality.”

These projects are:

• EDC’s 87-MW project in Burgos• Alternergy Wind One Corp.’s

67.5-MW project in Pililla, Rizal• Trans-Asia Oil and EDC’s 54-MW

project on Guimaras Island• PetroEnergy Resources Corp.’s

50-MW project in Nabas, Aklan• NLUPC’s 81-MW project in Pagudpud, Ilocos Norte

Hybrid bus operator to add more buses to Buendia-Kalayaan routeGreen Frog Transport Corp. is expanding its operations by increasing its number of hybrid buses plying the Buendia-Kalayaan route in Makati City.

The company brings to eight its total number of buses with the addition of six more buses, Green Frog Founder and Managing Director Philip G. Apostol said.

The company plans to have 38 hybrid and euro IV buses operating by end-2014 with plans to import more in 2015, Apostol said.

Eventually, the company plans to expand in other cities and is currently in negotiations with adjacent cities to open up more routes, Apostol said.

BOI approves SaCaSol incentivesConstruction of San Carlos Solar Energy, Inc.’s (SaCaSol) 22-megawatt (MW) stand-alone solar power plant project has started immediately after the Board of Investments (BOI) approved its application for incentives.

The incentives approved by BOI in accordance to the Renewable Energy Act of 2008 or Republic Act No. 9513 (RA 9513) gives the project a seven-year income tax holiday (ITH) and 10-year duty-free importation of machinery, equipment, and materials, among other perks.

The P1.9-B power plant, to occupy 35 hectares (ha.) in San Carlos Economic Zone, Negros Occidental, will be developed in two phases—13MW for phase one and 9MW for phase two and is expected to be running by the second quarter of 2014.

SaCaSol was issued with a renewable energy service contract and certificate

of registration by the Department of Energy (DOE) last November, and targets to be qualified for the feed-in-tariff (FIT) scheme.

The plant, seen to add 31.6 Gigawatt hour (GWh) annually to the Visayas grid, is a joint venture project of Bronzeoak Philippines (BP) and Swiss-German investments firm Thomas Lloyd Group, with German firm Conergy AG drafted to supply 22 solar power inverters and 88,000 photovoltaic modules.

INFRASTRUCTURE/PUBLIC PRIVATE PARTNERSHIP

DMCI renovates NAIAThe Department of Transportation and Communications (DOTC) awarded the P1.3-B contract for the rehabilitation of the Ninoy Aquino International Airport Terminal 1 (NAIA-1) to DMCI Holdings Inc. (DMCIHI) that began on the project last January.

Rehabilitation of the NAIA-1 to be overseen by DOTC and the Manila International Airport Authority (MIAA) will be done in six phases that will take 60 days each, during which the section of the terminal undergoing renovation will be closed-off.

The project is expected to be completed by January 2015, while the Asia Pacific Economic Cooperation (APEC) has given DOTC until December this year to finish the project for the APEC Summit that will be hosted by the country next year.

The terminal’s original architectural and engineering firm, Leandro V. Locsin and Associates, is again tapped for the rehabilitation, while the collaboration of Kenneth Cobonpue, Budji Layug, and Royal Pineda Group will serve as airport design consultants.

The Department awarded previously the consultancy and construction management services contract

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to TCGI Engineers which submitted a bid of P34M for the project with an initial estimated cost of P38.7M.

NAIA-1 currently services 8M passengers per year which is over by almost half from its intended capacity of 4.5M.

Some contract coverage

• Structuralretrofitting• Improvement of mechanical, electrical, plumbing,andfire(MEPF)

protection facilities• Architectural works

earlier completion of TPLeX eyedThe proponent of the P24-B 88.85-km Tarlac-Pangasinan-La Union Expressway (TPLEX) Public-Private Partnership (PPP) Project is positive they will finish the expressway by 2015, three years ahead of the 2018 original target completion.

President Benigno S. Aquino III inaugurated last December the completed section of the TPLEX that runs through Tarlac City and towns Gerona and Paniqui, while the 17-km Phase 1A that runs from Tarlac City to Victoria Pura and Gerona was opened for free use by the public last October; bringing the total opened section of the expressway to 23 km.

Work on the 27-km stretch from Paniqui to Moncada, Tarlac and Carmen, Pangasinan, including the 950-m Agno viaduct, is ongoing.

Section 1 of the project, a stretch of 49.30-km from Tarlac to Rosales, Pangasinan with four lanes, is seen to be completed as early as April this year and is perceived to cut the two-hour travel time from Tarlac to Rosales, Pangasinan to 30 minutes.

The TPLEX is implemented by the Department of Public Works and Highways (DPWH) under a Build-Operate-Transfer (BOT) program with San Miguel Corp. unit, Private Infra Development Corporation, Inc., as project proponent and D.M. Consunji Inc. among the contractors.

AFCS contract awardedContract for the P1.72-B Automated Fair Collection System (AFCS) project has been awarded by the Department of Transportation and Communications (DOTC) to AF Consortium of Ayala Corp. (AC) and Metro Pacific Investment Corp. (MPIC) last February after a customary post-bid evaluation last December, with signing of the concession agreement seen to follow soon.

AF Consortium won the contract after submitting a bid P103,900 better than SM Consortium’s negative bid of P1.088B, which means the bidders intend to pay the government for the project.

Under the agreement with a concession period of 10 years, the AFCS should be fully incorporated to the Light Rail Transit (LRT) and Metro Rail Transit (MRT) systems by September 2015; replacing the current magnetic card ticketing system for contactless smart-card technology.

The department is set to bid out the P1.39-B contract for the designing and building of an LRT-MRT Common Station.

Contracts for the LRT 1 and 2 extension project and the MRT-3 coach supplier are to be awarded.

Contract inclusions

• Design, development, installation, and implementation of single ticketing system• Provision of contactless media• Maintenance of system for the whole

concession period• Operation of AFCS central clearing house

Other improvements eyed by DOTC• Increase MRT-3 capacity and buy-out its current private owner• Extend LRT lines 1 and 2• Develop MRT-7

Japanese, Koreans show interest over LRT extension consultancy contractsThe Department of Transportation and Communications (DOTC) received bids from two Japanese

groups for the consultancy contract to improve Metro Manila mass transit systems as well as the capacity of the Light Rail Transit (LRT) lines 1 and 2 proposed extension.

The groups that submitted their bid were PADECO Co. Ltd. and CMX Consortium, both based in Tokyo.

Meanwhile, DOTC assessed bids for the P350-M consultancy contract for the civil works of the P9.7-B LRT-2 extension and may award it soon.

The Department is also to present within the year a proposed LRT-2 Operations and Maintenance (O&M) contract for bidding to the National Economic and Development Authority Investment Coordination Committee (NEDA-ICC) for approval.

The P64.9-B LRT-1 extension project that intends to add 20.7km to its existing 32.4km from Baclaran station to reach Bacoor, Cavite is set for rebidding on April 28.

Metro Manila mass transit improvement consultancy

contract bidders

• PADECO Co. Ltd. with uPhilipp’s Technical Consultants Corp. uPertconsult International uTransportandTrafficPlannersInc.Sub-consultants:• Advanced Geotechnical Engineering Services• CH2MHill Halcrow• TUV Rheinland Philippines Inc.• CMX Consortium —Katahari & Engineers International uTonichi Engineering Consultants Inc. uJapan Transport Consultants Inc. uJapan International Consultants for Transportation Co. Ltd.Local partners:• Applied Planning & Infrastructure Inc.• DCCD Engineering Corp.• Development Engineering & Management Corp.• Engineering & Development Corp. of the Philippines• J.F. Cancio & Associates• Key Engineers Co. Consultants Inc.• Schema Konsult Inc.• TCGI Engineers

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Tasks of winning bidder for the LRT 1 and 2 extension

• Drawuptechnicalspecifications• Bidding assistance• Construction supervision• Warranty supervision

Bidding for the P9.7-B LRT-2 extension project that seeks to expand the 13.8km line to 4.14km to Antipolo failed last February 2013.

Proposed funding for the LRT-2 extension project would come from Government appropriations and the official development assistance (ODA) loan from the Japan International Cooperation Agency (JICA).

Pre-qualified civil works consultancy contract bidders

• Foresight Development and Surveying Co. with: u Korea Rail Network Authority u Soosung Engineering Co. Ltd.• J.F. Cancio & Associates with: u Development Engineering & Management Corp. u Engineering & Development Corp. of the Philippines u Filipinas Dravo Corp. u Oriental Consultants Co. Ltd. u TCGI Engineers u Urban Integrated Consultants Inc.• Schema Konsult Inc. with: u DCCD Engineering Corp. u KE Asia Inc. u Key Engineers Co. u Pertconsult International u Proconsult Inc.• Systra Philippines with: u Philipps Technical Consultants Corp.• Science and Vision for Technology Inc. with: u Yooshin Engineering Corp.

DOTC bids out P2.5B ITS-Southwest TerminalBid documents for the P2.5-B Southwest Terminal of the Integrated Transport System (ITS) project has been made available by the Department of Transport and Communication (DOTC) last January 10.

The documents worth P150K are required for interested bidders

to attend the pre-bid conference last February 10, while deadline of submission and opening of bids is scheduled on May 15.

The 2.9-ha terminal to be built in the Philippine Reclamation Authority (PRA) property in Parañaque is part of the P7.7-B ITS project approved by the National Economic Development Authority (NEDA) Board last November.

The ITS project includes construction of three terminals and will be realized under Public-Private Partnership (PPP) following a Build-Operate-Transfer (BOT) scheme.

Construction of the two other centralized bus terminals under the ITS project will also be bid out.

ITS-Southwest Terminal contract coverage

• Financing, design, and construction of: u Passenger terminal building u Arrival and departure bays u Public information system u Ticketing and baggage handling facilities u Park-ride facilities• Operation and maintenance of terminal for 35 years

ITS Terminal locations

• Paranaque City• Food Terminal Inc. (FTI) complex Taguig City• Quezon City

USD 5-B Malolos-Calamba commuter mulledThe Department of Transportation and Communications (DOTC) is seeking the approval of the National Economic and Development Authority (NEDA) for the proposed USD 5-B North-South Commuter Railway, a medium-term project of the Philippine National Railway (PNR).

The Japan International Cooperation Agency (JICA) finances the feasibility study for the project that aims to connect Malolos, Bulacan to Calamba, Laguna via semi-elevated commuter rail using PNR’s right of way.

DOTC plans to present the project to NEDA early or within the first half of this year, to be immediately followed by bidding once approved.

The government contemplates if the project, seen to be completed in five to six years after awarding, should be implemented through Public-Private Partnership (PPP) scheme or Official Development Assistance (ODA) loan given its large cost.

JICA North-South Commuter Railway design proposal

• 91.37km railway with 27 stations• 10 coaches per train set• 18 hours per day operation up to midnight• Elevated tracks from Malolos to Paco and Bicutan to Sucat, underground from Buendia to Food Terminal Inc. (FTI)

stations, and at-grade tracks from Alabang to Calamba

• Maximum running speed of 100km/h

Batangas pushes bypass road for PPPThe local government of Batangas City has pitched to the Department of Public Works and Highways (DPWH) to include under the Public-Private Partnership (PPP) scheme a bypass road project connecting to the Southern Tagalog Arterial Road (STAR) Tollway.

Some Batangas locators

• First Gas Power Corp.• First Philippine Industrial Corp. (FPIC)• Himmel Industries• J.G. Summit Petrochemical Corp.• Kepco Ilijan Power Plant• Malampaya On-Shore Gas Plant facility• PilipinasShellPetroleumrefinery• San Miguel Foods Corp.• Shell Gas Eastern Inc.

Details for the Batangas Bay Road Project are yet to be polished, but it is proposed for a 25-year concession agreement.

Batangas is crusading for infrastructure developments, such as of two economic zones, to entice investors and spur business.

The bypass road connecting to the Cavite-Laguna-Batangas-

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Rizal-Quezon (CALABARZON) Expressway will ease transport of numerous locators that may find it advantageous to utilize the Batangas International Port than the Manila Port.

Boracay airport runway extension finished by year’s endThe runway extension of the Godofredo P. Ramos Airport, also known as Boracay or Caticlan Airport, from its existing 950m to 2,100m is seen to be completed by the end of the year.

The extension is part of the airport’s USD 300-M upgrade which will include construction of a new terminal and commercial facilities within the vicinity, as well as installation of new equipment.

San Miguel Corp. (SMC), parent company of TransAire Development Holdings Corp. (TADHC) which manages the airport, will finance the upgrade project.

Boracay Airport is the closest aircraft terminal to the tourist destination Boracay Island and served more than a million passengers in 2012 which is expected to reach around 3M in 2015.

SMC is interested in airport deals offered by the Government, including the planned bundled operations and maintenance (O&M) contract for the Davao, Iloilo, and Bacolod airports and the P17.5B Mactan-Cebu Airport project they lost to the consortium of Megawide Construction Corp. and Indian firm GMR Infrastructure.

DOTC plans to bid P4.04B Davao portConstruction, operation, and maintenance for the modernization of the Sasa Wharf in the Davao Port may

be bid out by the Department of Transportation and Communications (DOTC) within the first quarter of the year if approved by the National Economic and Development Board Investment Coordination Committee (NEDA-ICC).

DOTC planned to present the Davao-Sasa Port Modernization project to the NEDA-ICC and the Philippine Ports Authority (PPA) early this year.

The project, which is proposed to be implemented under the Public-Private Partnership (PPP) scheme, aims to increase the capacity of the port from its current 700,000TEUs to 1.2M TEUs that the PPA estimated will be hit in five years.

The Department had enlisted a team to serve as transaction adviser for the port modernization project.

Port modernization transaction advice team

• Development Bank of the Philippines (DBP)• Germany-based HPC Hamburg Port

Consulting GmbH• International Finance Corp. (IFC)

P2.243B invested for Albay infra projectsThe province of Albay gears for a Tourism Boom with P2.243-B outlay for infrastructure projects.

Legazpi Airport now caters direct international flights from Xiamen, China after its renovation organized by the provincial government in collaboration with the Department of Tourism (DOT), and welcomed its first batch of Chinese tourists last January 30.

The P11-M refurbishing of the airport is implemented under Public-Private Partnership (PPP) scheme between the provincial government, Leisure and Resorts World Corp. (LWRC)-owned Misibis Bay Casino & Resorts, and China Travel Service (CTS China).

Meanwhile, the P3.5-B Southern Luzon International Airport or Bicol International Airport is expected

to be completed by 2017 with P729M previously released.

However, a P1.3-B balance from the Department of Transportation and Communications (DOTC) 2012 General Appropriations Act (GAA) allocation for the Bicol airport project has not yet been used.

Albay will be hosting some of the ministerial meetings of the Asia Pacific Economic Cooperation (APEC) Summit in 2015.

Albay 2014 targets

• Arts, History, and Culture Renaissance• Boost Sports and Well-Being Program by championing in the 2014 Palarong Bicol• Improve agriculture• Lower malnutrition cases to single digits• Modernize infrastructures• Tourism Boom• Enter Top 20 of the National Achievement

Test results• Gain new members for the Albay- Masbate-Sorsogon (ALMASOR) Tourism Alliance

MANUFACTURING

Korean firm invests USD 3M in ClarkKorean electronics manufacturing company Sambon Precision and Electronics Co. Ltd. is investing USD 3M in Clark Freeport, Pampanga.

Sambon Precision Assistant Vice President for Marketing Evangeline Tejada said the company’s Clark plant is expected to employ 100 workers in its initial operation. The Clark Development Corporation (CDC) reported that the firm is the first investor to locate at Clark this year.

Tejada said they chose Clark because of the zealousness of the CDC administration and the utmost hospitality in their no-nonsense business dealings.

Sambon will build its facility on Claro M. Recto Highway at Clark’s commercial district and will begin manufacturing audio components by July or August this year.

9March 2014

POWER

AeS Corp. prepares P49.45-B power projectThe AES Corp. is now expanding its operations in Masinloc, Zambales. The company will start the construction of another 600-megawatt (MW) coal-fired plant, documents of the Department of Energy (DOE) showed.

The company’s local unit, AES Masinloc Power Partners Co., Inc. has started consulting international and local banks to fund the project, with target commissioning of the plant in the third quarter of 2017.

“No additional land will be acquired as the expansion will be inside the existing Masinloc power plant complex,” the DOE said.

JG Summit eyes coal, biomass plantsThe John Gokongwei-owned JG Summit Holdings Inc. is eyeing a 300-megawatt (MW) coal-fired power plant in Batangas City while its subsidiary Universal Robina Corp. (URC) plans to build a 46-MW biomass power plant in Negros Occidental.

The Department of Energy (DOE) said in a report it has given JG Summit and URC the green light to conduct studies on the power plants’ impact to the Luzon and Visayas grids.

The two projects will further beef up the Gokongwei group’s energy portfolio after its acquisition of a 21.7-% stake in Manila Electric Co. (Meralco).

JG Summit’s plant will be built at a cost of USD 800M. It is designed to primarily produce polymer grade ethylene and propylene.

Veco gets approval on capex loan, seeks okay on projectsThe Visayan Electric Co. Inc. (Veco), an Aboitiz Power Corp. subsidiary in Cebu, has received the Energy Regulatory Commission’s (ERC) go signal to secure loan from any

banking or financial institution to finance its P2.43-B capital expenditure (capex) projects over the next two years.

As of press time, only P407-M capex projects have been approved. Veco is seeking ERC’s approval for the construction, ownership, and operation of the other projects.

Veco capex projects for 2014-2015

Substations• 1x100-megavolt ampere (MVA) AYA• Mabuhay Filcement Switching Station• Cemex Switching Station• H. Cortes 69-kilovolt (kV)/ 23-kV substation project• H. Cortes substation (lot)• South Road Properties TR1 69-kV/23-kV

substation• SRP substation (lot) Sub-transmission lines• SRP 69-kV Line• Cemex-Mabuhay Filcement 69-kV

interconnection• Mabuhay Filcement-Taiheiyo 69-kV

interconnection• Sibonga Line ReroutingTransmission line projectNational Grid Corporation of the Philippines (NGCP) Colon-AYA 138-kV line interconnection

Meralco seeks green light on Taguig station expansionManila Electric Co. (Meralco) is seeking the Energy Regulatory Commission’s (ERC) approval for the proposed P235.5-M expansion of a substation at the Fort Bonifacio Global City (BGC) in Taguig.

In a filing with the ERC, Meralco said the project will involve the expansion of the FBGC-4 115-kilovolt (kV)-34.5kV substation and the construction of underground feeders and overhead lines to serve the power needs of the large load customers and the real estate development in the area.

Rapid development/large load applications in BGC as listed by Meralco

• Megaworld’s Uptown Place Towers 1 and 2• Megaworld’s Uptown Place Mall• Net Group’s Net Park• Federal Land’s Federal Center• Shangri-La at the Fort

Meralco said that without the additional capacity the proposed project will make available by 2015, they will be unable to accommodate additional service or load in the area such as the pipelined load and demand of Park West and Metrobank Financial Center in 2016.

DOe awards Philex-led consortium SC 75 contractPhilex Petroleum Corp. has received a copy of the Petroleum Service Contract No. 75 (SC 75) from the Department of Energy (DOE) under the fourth Philippine Energy Contracting Round for Petroleum (PECR 4).

Members of the consortium

• Philex Petroleum (operator, 50%)• PNOC Exploration Corp. (35%)• PetroEnergy Resources Corp. (15%)

The oil-rich SC 75 area covers about 616,000 hectares (ha.) of the Northwest Palawan Basin, which was referred to as Area 4 in PECR 4. DOE is already preparing a list of oil and coal areas that might be auctioned off under PECR 5.

REAL ESTATE

BCDA to bid out P75-B property contractsThe Bases Conversion and Development Authority (BCDA) plans to bid out a total of P75B property contracts this 2014.

“The contracts are either for land sale or lease, which for the latter means cash flow will come in a staggered manner,” BCDA President and Chief Executive Officer (CEO) Arnel Paciano D. Casanova said.

Among the contracts is the 33.1-hectare (ha.) Bonifacio South Pointe in Taguig City worth P36.3B. BCDA also wants to bid out the contract for the development of Clark Green City’s 1,300ha. amounting to P26.3B, as well as the 16-ha. Poro Point worth P2B.

Likewise, the BCDA wants to conduct the bidding for other Metro Manila camps covering 7.2ha.

Philippine Business Report10

COMPANY NOTeS

valued at P3.5B and lots in other special economic zones covering 12ha. worth P6.87B.

Megaworld expands P20-B Cebu townshipMegaworld Corp. has acquired an additional property in Metro Cebu which will give them more space for the developments of their P20-B township project, “The Mactan Newtown.”

The Mactan Newtown now measures 28.8 hectare (ha.) from 16.8ha. and will be developed in the next five to seven years.

Megaworld, together with Landmark Inc. also plans to develop an 11.5-ha. beach front in Cebu province, which was formerly known as Portofino Beach Resort.

“The expansion will allow us to provide more enhanced features aligned toward resort-style living, perfect for active retirees, and investors,” Megaworld Cebu Properties Inc. President Noli D. Hernandez said.

RETAIL

Puregold to put up 25 new storesPuregold Price Club Inc. is set to continue its rapid expansion programs this 2014 and targets to build a minimum of 25 new stores nationwide.

The grocery chain will spend around P3B to expand its footprint in the vibrant retail sector.

The firm will start operations in at least 25 new branches this year in unserved cities and municipalities nationwide, Puregold Investor Relations Officer Jimmy F. P. Perez said.

Philseven to double store chainPhilippine Seven Corp. (PSC), the local licensee of the 7-Eleven convenience store chain, plans to open 2,000 stores in the next three to four years.

The company invests on the strong retail market and franchising

to maintain its position as the country’s largest convenience store chain.

PSC President and Chief Executive Officer (CEO) Victor P. Paterno said 7-Eleven will put up more than 300 new stores, allowing it to end 2014 with around 1,300 branches.

TOURISM

Melco Crown PHL guarantees USD 1.3-B casino projectMelco Crown (Philippines) Resorts Corp. is providing a USD 340-M guarantee for an operating unit in charge of a USD 1.3-B integrated casino project.

The Melco Philippines said it signed a loan deal with several subsidiaries of Melco Crown.

“MCE Leisure intends to use the net proceeds from the offering for capital expenditure, refinancing of debt, and general corporate purpose,” the company added.

The USD 1.3B will build the City of Dreams Manila that will start commercial operations in July.

City of Dreams Manila will be the second casino complex to open at the Philippine Amusement and Gaming Corp.’s (PAGCOR) 120-hectare (ha.) Entertainment City, which is groomed to become the country’s version of the Las Vegas strip.

Davao hotels to be evaluated for star ratingsIndustry experts will assess Davao’s tourist establishments to give them their star value recognition this 2014.

The Asian Development Bank (ADB) and the Canadian International Agency provided USD 7.1B to the Philippine government to help raise the tourism standards in the regions and meet international requirements.

“If their standards are raised, international travelers will surely notice us as a destination,”

MDH undertakes P1-B expansionManila Doctors Hospital (MDH) has laid the cornerstone for a new medical tower at the newly acquired lot beside the hospital’s complex.

The Metrobank Foundation allots P1B for the project and envisions MDH to be the leading center of healthcare and wellness in the country.

The new medical tower will house more medical and diagnostic services, specialty center, more than 200 patient rooms and 160 parking slots, 64 doctors’ clinic, administrative offices, and a helipad.

Manila Water unit borrows P833MA subsidiary of Manila Water Company, Inc. has secured an additional P833-M loan to fund projects.

Proceeds of the loan will be used to finance the additional capital expenditures (capex) of Laguna Water to fulfill its service obligations and expansion plans.

The utility said Laguna AAA Water Corp. signed a third omnibus loan and security agreement with the Development Bank of the Philippines (DBP) through the Philippine Water Revolving Fund (PWRF).

Department of Tourism (DOT) Assistant Secretary and Regional Director Arturo P. Boncato, Jr. said.

11March 2014

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COUNTRY-TO-COUNTRY

Manila FAMeManila FAME is Asia's only design and lifestyle event that caters to a wide variety of exceptionally handcrafted products from furniture and furnishings to holiday décor and fashion.

Find endless inspirations and innovations of products with unparalleled design style crafted be Filipino artisans' skilled hands on March 14-17 and October 16-19, 2014 at SMX Convention Center, Pasay City, Philippines.

Philippine International Furniture ShowThe Cebu Furniture Industries Foundation Inc. (CFIF), Chamber of Furniture Industries of the Philippines (CFIP) – National, and Pampanga Furniture Industries Foundation Inc. (PFIF) proudly present the Philippines International Furniture Show 2014 on March 14-17, at SMX Convention Center, Pasay City, Philippines.

Be part of this event with local and international exhibitors offering furniture, lighting, and architectural components, as well as holiday decorations, fashion accessories, home décor, gifts, and spa-based products.

ON THeCALeNDAR

PHL to lead in BPO race among ASeAN membersThe Philippines is seen leading the race in the business process outsourcing (BPO) industry when the regional markets integrate next year as targeted by the 10-member Association of Southeast Asian Nations (ASEAN).

“It certainly depends on services. But if you look at the combination of both cost and quality, and then beyond that the scalability, there is no better offer than in the Philippines,” Teleperformance President for Asia Pacific David Rizzo said.

ASIANWATCH

German group to explore business prospectsMore German companies are looking into investing opportunities in the Philippines, owing to the country’s stronger economy and fiscal reforms.

“We have received interest in the following industries: energy, food, pharmaceuticals, engineering supply, and IT-related medical systems,” said German-Philippine Chamber of Commerce and Industry, Inc. (GPCCI) Business Development Manager Brenda I. Baylon.

Canadian envoy vows more investments in PHLCanada plans to increase trade and investment in the Philippines this year, said Canadian Ambassador Neil Reeder.

Reeder said he is planning to work closely with the Philippine government agencies to build trade and investment ties for both Manila and Ottawa.

“It is a great honor for me to serve as the new Ambassador of Canada to the Republic of the Philippines, especially at a time when the relations between our two countries are pleasantly robust and constantly growing,” he said.

Japan firms to expand in PHLMost Japanese companies with operations in Asia and Oceania including the Philippines intend to expand their business in the next two years, according

to the Japan External Trade Organization (JETRO).

It noted that the proportion of firms responding “easy to secure labor force” as a reason for the planned expansion in the Philippines was relatively high at 12.8%.

In terms of sales outlook, Japanese companies with operations in the Philippines are more optimistic of growth in profits this year than last year.

Sri Lanka looks up to Philippines for training its workersSri Lanka is looking up to the Philippines as the model when it comes to exporting workers to foreign countries.

“It is in this area where we need the help of the Philippines, since the country has good training modules. The labor force is well skilled and in fact being looked up as model of all foreign-workers sending countries,” said Sri Lanka’s Foreign Employment Promotion and Welfare Minister Dilan Perera.

“We want to copy the Philippines in areas such as pre-departure, skills training, recruitment, qualification, and even data base,” Perera said.

Philippine Business Report12

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Mar-14Feb-14Jan-14Dec-13Nov-13Oct-13

Interest Rate (%)

4242.5

4343.5

4444.5

4545.5

Mar-14Feb-14Jan-14Dec-13Nov-13Oct-13

Peso per US Dollar Rate

economic Indicators

As of March 10, 2014 As of March 10, 2014

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, MakatiCity1200,Philippines •Phone(+632)895.3611•Fax (+632)895.6487•Tosubscribe,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 •Jam H. Raposon/Assistant Editor •Cresenciano P. Par, Hazel S. Dizon, Joanna D. Cruz, Airiz A. Casta, Kit S. Andaya/Writers •Ren C. Neneria/Design Layout •Myrna V. de los Reyes/Circulation.

Philippine Business Report

*GNI - Gross National Income

Entered as Third-Class Mail at theMakati Central Post Office

under Permit No. 504valid until 31 December 2014

March 2014

0

2

4

6

8

10

3Q (2012) 4Q (2012) 1Q (2013) 2Q (2013) 3Q (2013) 4Q (2013)

GNI Growth Rate (%)

5.5

6

6.5

7

7.5

8

3Q (2012) 4Q (2012) 1Q (2013) 2Q (2013) 3Q (2013) 4Q (2013)

GDP Growth Rate (%)

132133134135136137138

Jan-14Dec-13Nov-13Oct-13Sep-13Aug-13

Consumer Price Index(2000 base year)

38004000420044004600480050005200

Dec-13Nov-13Oct-13Sep-13Aug-13Jul-13

exports(In USD Billion)

4,000

4,500

5,000

5,500

6,000

Dec-13Nov-13Oct-13Sep-13Aug-13Jul-13

Imports (In USD Billion)

012345

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Inflation Rate (%)(1994 base year)