Philippine Business Report (May2014)

1May 2014

Volume 25 No. 05 May 2014

The Philippine economy will be the fastest growing economy in Southeast Asia for 2014 and 2015, the Asian Development Outlook 2014 (ADO) published by Asian Development Bank (ADB) showed.

The ADB projected the country’s gross domestic product (GDP) growth rate in 2014 and 2015 to be at 6.4% and 6.7%, respectively, higher than the growth rates of other Association of Southeast Asian Nations (ASEAN) member economies.

The report said the Philippine economy’s strong performance will be pushed by private consumption benefiting from remittance inflows and positive consumer sentiment this year.

Sectors of construction, business process management (BPM), tourism, manufacturing, and government spending will underpin the positive outlook for the country’s GDP growth.

Activities in the constructionsector are seen to increase this year after rapid growth in building approvals. There are also strong demand specifically in segments of office space, shopping malls, and housing.

“From the production side, manufacturing is expected to perform well during the forecast period, underpinned by robust domestic demand and an improvement in exports as demand picks up in the United States (U.S.) and the euro area,” ADB said.

Moreover, the ADB reported that the Philippines will continue to benefit from the growing investment confidence here.

“Improved business confidence and rising inflows of foreign direct investments (FDIs) will support private investment. Confidence has been reinforced by the achievement last year of investment grade sovereign credit ratings and improvements in several global competitiveness indices,” ADB said.

PHL top in SEA until 2015

ADB forecast GDP growth (in %)

Country 2014 2015

Philippines 6.4 6.7Indonesia 5.7 6.0Viet Nam 5.6 5.8Malaysia 5.1 5.0Singapore 3.9 4.1Thailand 2.9 4.5

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INDUSTRYTReNDS

DTI cites possible export winners by 2030The country’s furniture industry is aiming to be the top exporter of furniture and furnishings in Southeast Asia by 2030, as laid out in the industry road map presented to the Department of Trade and Industry (DTI).

“The strategic vision is the Philippine furniture industry in the year 2030 shall be the global design center or hub for products using sustainable materials, with thriving domestic and international markets and a competitive and motivated labor force,” Chamber of Furniture Industries of the Philippines (CFIP) Executive Director Salvio Valenzuela Jr. said.

Of the USD 347B worth of world production of furniture in 2012, only 0.2% was accounted for by the Philippines, which shows there is room for the industry to grow.

Under the roadmap, the local furniture industry intends to achieve a 2-% growth in exports for every market this year and for a 5-% increase next year.

By 2016, the plan is for the country’s furniture exports to rise by 7% per market and to climb further by 10% in 2017.

While the objective is to grow exports, he said, the industry also sees opportunities in the local market given the rising number of condominiums, hotels, and corporate offices being built.

Private sector groups are coming up with their respective roadmaps in line with the initiative launched by the DTI in January 2012 to promote the revival of the manufacturing sector, which is seen to generate jobs and allow more Filipinos to benefit from the country’s strong economic growth.

DTI Industry Development and Trade Policy Group (IDTPG) Undersecretary Adrian Cristobal Jr. said that of the 26 industry roadmaps the DTI received, 22 are considered final and many are being implemented already.

DTI eyes new markets in 2014The Department of Trade and Industry (DTI) will embark on more roadshows this year to increase the number of markets for Philippine industries.

DTI Secretary Gregory L. Domingo said the DTI is planning to hold trade and investment missions in Scandinavian countries and Canada on top of trips to the country’s established markets such as Japan, Korea, Western Europe, and the United States (U.S.).

“We will be pushing for various sectors. In Japan and Korea, we will push for investments in manufacturing, while in Europe, it will be a mix, from services, small and medium enterprises (SMEs) type of manufacturing to maybe, some aircraft type of work,” Domingo said.

“In the Scandinavian countries, a lot of the things that we will offer would be in high technology industries including services and information technology (IT). In Canada, it will be resource-based, but we are still researching which specific industries we can offer for investments,” he said.

DTI to open more SM-based business service centersThe Department of Trade and Industry (DTI) has forged an agreement with the SM group for the establishment of Business Service Centers (BSCs) in all SM malls nationwide to provide more venues for business name (BN) registration.

The DTI BSCs would initially cover 24 SM malls in Metro Manila as well as those in Bacoor and Dasmariñas, Cavite; Santa Rosa and Calamba, Laguna; and Marilao in Bulacan.

The BSCs are being put up in line with the government’s aim of encouraging more business activities in the country.

“We want to encourage more businesses in the country to help generate jobs and support economic growth,” DTI Secretary Gregory L. Domingo said.

DTI bats incentives for low-cost condosDepartment of Trade and Industry (DTI) Secretary Gregory L. Domingo said the government may consider tax incentives to affordable medium-rise condominiums in Metro Manila that will house ordinary workers near factories and offices.

“I’m biased against horizontal development subdivisions because that’s a very inefficient use of land. It takes away land that could be used for agriculture. The preference should be on vertical developments. If you look at well-planned economies, they try really to minimize horizontal development,” Domingo said.

He added that the government would continue to provide support to socialized housing and middle-income housing projects in the upcoming 2014 Investment Priorities Plan (IPP), but new projects should involve vertical developments.

He also encouraged real estate developers to launch low to mid-rise, low-cost, and mid-range housing projects for ordinary employees, instead of dispersing them to far-flung areas away from worksites.

“Why should we allow them to have a three- to four-hour ride everyday? We should encourage people to be able to live in more

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affordable housing closer to work. Maybe, it is now possible to do socialized housing in a vertical platform,” he said.

Decongesting Metro Manila by dispersing families to the rural areas was not an option yet because of the lack of infrastructure, such as rail lines, schools, utilities, and roads, Domingo said.

“Until such a time that infrastructures are in place, it doesn’t make sense to push people out of Metro Manila. The cost to the economy in lost productive hours shall be recovered if they live near their places of work,” he added.

Domingo said the government would allow the private sector to take a shot at vertical socialized housing.

“The government’s role is to provide what the private sector cannot to the extent that the private sector could fill the gap. We should allow them to do so. We should not compete with the private sector. The government should only step in if the private sector fails,” he said.

A group of real estate developers and builders earlier expressed optimism about continued government support for socialized housing projects in the 2014 IPP.

DTI urges LGUs to support‘inclusive growth’ driveDepartment of Trade and Industry (DTI) Secretary Gregory L. Domingo urged local government unit (LGU) leaders to work harder in helping local entrepreneurs expand their small businesses to support the government’s drive in delivering ‘inclusive growth’ to all segments of the population.

“Inclusive growth simply means that the economic gains of the country should be felt not just by the upper class, but by everybody,” Domingo said during the general assembly of the League of Municipalities of the Philippines (LMP).

Through the Shared Services Facility (SSF) program, the DTI has provided P163.79M worth of machinery and equipment to local entrepreneurs, and assisted 32,878 micro, small, and medium enterprises (MSMEs) all over the country to date. The facilities were delivered to the 609 poorest municipalities and are expected to generate a total of 12,092 jobs.

The DTI drew 16,790 participants to its SME Roving Academy program in the country covering 16 regions, with 167 sessions conducted nationwide last year.

The sessions were designed to develop entrepreneurial attitude and mindset, enhance managerial capabilities and knowledge in marketing and technology.

To step up the promotion of Philippine products in foreign markets, the DTI plans to intensify the entrepreneurs’ participation in international trade fairs this year in Asia and Europe to help them become more competitive in the domestic and international markets.

The events lined up include the Maison et Objet Asia in Singapore, Salone Internazionale del Mobile in Italy, Maison et Objet in Paris, and SIAL Paris in France.

More Japanese firms flock to PHLMore Japanese firms see the Philippines as a promising market for business in the next three years, a survey conducted by the Japan External Trade Organization (JETRO) showed.

JETRO’s 2013 Survey on the International Operations of Japanese Firms showed that out of 1,315 firms covered

by the survey in November to December 2013, 19.2% said they see the Philippines as a promising market compared to only 4.8% in 2008.

In the Philippines, reasonable labor costs and abundant workforce, as well as very little language or communication problems were cited as advantages.

Among the issues raised by Japanese firms doing business in the Philippines were inadequate infrastructure, political risks or problems in social conditions and law and order, and natural disaster risks or environmental pollution problems.

More investments urged in oil, gas searchMore investments in oil and gas explorations are needed given the expected depletion of gas field reserves of the Malampaya natural gas by 2024, a report of the Congressional Policy and Budget Research Department (CPBRD) titled “Intensifying Oil and Gas Exploration” said.

The CPBRD said initiatives currently being undertaken to expand the Malampaya operations, estimated to cost USD 1B, were designed to improve existing production capacity.

“However, the potential effects of these expansion projects are perceived to be inadequate,” the CPBRD said.

“Thus, it is imperative that the government strongly promote investments in oil and gas explorations in partnership with the private sector to ensure that the country’s energy and power requirements in the future are met sufficiently,” it added.

Fitch keeps PHL’s investment grade rating Fitch Ratings affirmed the country’s investment grade rating, citing strong economic growth, steady inflow of remittances from overseas Filipinos (OFs), continued expansion

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of business process outsourcing (BPO) industry, and low interest rates.

The rating firm affirmed the country’s long-term foreign and local currency issuer default ratings at ‘BBB-’ and ‘BBB,’ respectively. The outlook on both ratings is stable, which means no change is expected in the next six months at the least.

Fitch sees 6.5-% economic expansion for the Philippine economy this year.

With the country’s growth momentum, Fitch said the risk of an overheating economy remains limited.

“A sustained boom in the Philippines’ property market could potentially increase both economic and financial volatility in the event of a large-scale downturn in prices,” Fitch said.

At the same time, Fitch said,the fundamentals of the country’s banking sector remain stable as capitalization is high and liquidity remains adequate.

“These strengths should help offset the risks of higher credit growth particularly those related to the property market,” it said.

The firm said its outlook on the Philippine credit rating may be upgraded to positive if further improvements will be made to enhance business climate and accelerate domestic and foreign investments in the country.

IMF, S&P hike PHL growth forecastsThe International Monetary Fund (IMF) has raised its growth forecast for the Philippines to 6.5% from the previous estimate of 6.25% for this year on the back of higher demand due to reconstruction-related efforts in Visayas.

Last year, the Philippine economy grew by 7.2%—the fastest for any major Southeast Asian economy.

On the same note, Standard & Poor’s also raised its growth projection for the Philippines to 6.6% for 2014.

“Growth in the Tiger economies will likely pick up this year, in step with global trade improvements driven by the United States (U.S.)and Europe,” S&P said.

“The Philippines is well-positioned to absorb a gradual tightening of U.S. financial conditions to implement timely, measured action on the domestic policy front,” IMF Philippines Mission Chief Rachel Van Elkan said.

The IMF would support further reforms that would bolster the strength of the Philippine economy. Among these were the rationalization of fiscal incentives, which would help the government expand its tax base, Van Elkan said.

Construction to drive growth in next 3 yearsThe construction industry is expected to be a key economic driver in the next three years due to its strong growth potential, the research arm of Metropolitan Bank & Trust Co. said.

“Given the base and seasonal effects, the construction industry still has a substantial upside potential in the next three years and would be one of the fast movers in the Philippine economy,” Metrobank Research Analyst Mabellene Reynaldo said.

Private construction is seen to be propped up by steady real estate demand, especially as tight supply in Metro Manila drives growth in other regional hubs.

“Reconstruction efforts in typhoon-damaged areas will also support both private

and public construction values,” Reynaldo said.

BPO centers outside NCR to attract more investorsDemand for quality spaces outside the National Capital Region (NCR) is seen to increase, as the projected USD 16.5-B revenues that the business process outsourcing (BPO) sector could generate this year are also expected.

“We see expansionary growth in Metro Manila’s fringes and provinces such as Clark, Metro Cebu, and Mactan,” CB Richard Ellis (CBRE) Philippines Chairman Rick Santos said.

These BPO lifestyle destinations provide work-play components similar to central business districts (CBDs) where workspace and facilities are developed alongside leisure elements such as restaurants, parks, recreational establishments, and retail choices.

“Seventy percent of the country’s potential labor pool are located in these areas. The need for workforce with a higher level of English proficiency will make it even more convenient for BPOs to move from, rather than populate, the congested districts. Developing these areas will provide more job opportunities for people within and in neighboring places,” Santos said.

Other expanding business operations seen to drive demand are from banking and finance, insurance, medical, logistics and manufacturing, and computer and hardware electronics.

MBC sees brighter prospectsMakati Business Club (MBC) members were optimistic that the strong gross domestic product (GDP) growth last year could be sustained this year, MBC’s H1 2014 Executive Outlook Survey showed.

MBC Executive Director Peter V. Perfecto said the group’s members see

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brighter prospects in investments, exports, and imports as the drivers of this year’s economic expansion.

Some 30% of the respondents expect the economy to expand at a faster pace this year. Expecting a sustained robust economic growth, majority of the respondents see higher revenues and net profits.

Notably, 78% of respondents project their company’s gross revenues to rise above 2013 levels by an average of 18%, while none expects a decline this year. In terms of net income, over 67% of respondents anticipate an average of 17-% increase.

As many companies project higher revenues and net income, additional investments are also being made with 51% of the respondents saying they would pour in additional funds this year at an average amount of P520.4M.

The survey was conducted from 3 February to 6 March with 73 business executive respondents.

TRaDe aNDINVeSTMeNTS

One of IFC’s major thrusts this year is to acquire more rural banks as part of its support to the Philippine banking industry, said IFC Resident Representative to Manila Jesse Ang.

“Our 2014 plan will include investment in financial institutions. The financial sector is very important for us. We are looking at big rural and microfinancing institutions,” Ang said.

ELECTRONICS Huawei, On Semiconductor to expand presence in PHLHuawei Technologies Phils. Inc. plans to expand its business in the Philippines, Huawei Philippines Chief Executive Officer (CEO) Gavin Dai said.

Huawei would particularly hire more Filipino workers and start developing its enterprise and consumer business, Dai said.

The firm has already spent at least USD 100M for its subcontracting activities and would be introducing various devices operating on the Android OS to the Philippine market this year, Dai added.

Meanwhile, On Semiconductor, a manufacturing company based in Phoenix, Arizona, will invest an additional USD 40M in its Philippine manufacturing plants over the next two years to better serve growing global demand for electronic goods.

Some USD 30M will be set aside for the probe, assembly, and test facility in Carmona, Cavite while the remainder will go to the assembly and test factory in Tarlac City, On Semiconductor Philippines, Incorporated President and General Manager Sunil Banwari said.

The semiconductor manufacturer will install ‘very high-tech’ assembly, probing, and testing

equipment in its Philippine sites, said Banwari.

The industry could expect more foreign firms to invest in the country, now considered by most to be a viable manufacturing site, Semiconductor and Electronics Industries in the Philippines Inc. (SEIPI) President Danilo C. Lachica said.

ENERGY

Seaoil to open P500-M oil storage facility in DavaoSeaoil Philippines Inc. is set to open another oil storage facility, “its biggest so far” in Sta. Cruz, Davao del Sur.

Seaoil Chief Operations Officer (COO) Stephen Yu said the storage facility, which would have a 41-M liter capacity, aims to service up to 200 retail stations.

“The investment for the terminal is about P500M,” Yu said.

He added that the Sta. Cruz Bulk Terminal has a berthing facility that can receive medium-range vessels of up to 50,000 deadweight tonnage (DWT). It can also handle domestic size tankers for local distribution and sales.

By 2015, the oil company is aiming to have 500 stations nationwide, all bearing revised signage and price board designs, plus brighter light-emitting diode (LED) lighting.

Solane opens refilling plantLiquefied petroleum gas (LPG) solutions provider Solane recently inaugurated its refilling plant in Canlubang, Laguna.

Located in a 2.4-ha. property, the new Solane plant features filling and safety equipment. Solane also established the mechanized cylinder handling system and cylinder maintenance station.

The plant utilizes an integrated transport system that will make its delivery of Solane products safer and faster anywhere in the region.

BANKING

IFC to invest P650M in Isabela thrift bankInternational Finance Corp. (IFC) is investing P650M into Philippine Resources Savings Bank (PR Savings), a multi-branch thrift bank in Cauayan City, Isabela.

“IFC’s partnership will give us access to its global knowledge in microfinance, agribusiness finance, and small and medium enterprise (SME) banking, as well as to best practices in risk management and corporate governance,” PR Savings President and Chief Executive Officer (CEO) Roberto P. Alingog said.

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GREEN PROJECTS

URC to build P2.5-B RE plantUniversal Robina Corp. (URC) has jumpstarted its foray into the power generation sector with a P2.5-B renewable power plant in Negros Occidental.

Construction of its bagasse-fired power plant has started, with commercial operation scheduled in August 2014, URC said.

The 46-megawatt (MW) plant would use bagasse, a sugarcane by-product of the company’s sugar mill in Kabankalan, Negros Occidental.

aboitiz, Gazasia to build USD 50-M biogas plantAseagas, the joint venture company of the Aboitiz Group and Gazasia Ltd. of the United Kingdom, is building a USD 50-M biogas plant in Lian, Batangas.

The plant would produce carbon neutral fuel in the form of liquid bio methane (LBM). It would utilize the organic waste of Absolute Distillers Inc., a subsidiary of Tanduay Holdings Inc. through an effluent waste supply agreement.

The company would sell the product to commercial vehicle fleets and public transport running on gas engines.

San Carlos energy to start operations of 1st solar plantSan Carlos Solar Energy Inc. (SaCaSol) is set to start commercial operations of the country’s first utility scale 22-megawatt (MW) solar power plant in Negros Occidental.

SaCaSol is a renewable energy joint venture between Bronzeoak Philippines Inc. and the ThomasLloyd Group.

Bronzeoak Philippines Project Manager Anabele Natividad said the company will officially inaugurate the first phase of the plant (13 MW) this month in San Carlos City, Negros Occidental.

Bronzeoak Communications Manager Carlos Villa-Abrille Jr. said the company hopes to complete the second phase of the plant, also with a capacity of 13 MW, by June.

The project is one of seven renewable energy facilities that the partners are working to build in Negros, along with four solar plant sites and three biomass plant sites.

NorthWind boosts wind farmNorthWind Power Development Corp., a company controlled by Ayala Corp., will start the third phase of the Bangui Bay wind farm in Ilocos Norte province to add 18 megawatts (MW) to the existing 33-MW project.

Department of Energy (DOE)-Renewable Energy Management Bureau Assistant Director Marissa P. Cerezo confirmed the expansion project, saying NorthWind expected to complete the project by the third quarter.

The Bangui Bay wind farm sells electricity to the Ilocos Norte Electric Cooperative.

The expansion project is expected to cost USD 50M.

HOSPITAL/MEDICAL SERVICES

MPIC to acquire 4 hospitalsMetro Pacific Investments Corp.’s (MPIC) healthcare group is increasing its portfolio with the acquisition of four hospitals this year.

“We continue to talk to hospital owners all over the country to see where our next investments should go,” MPIC Healthcare Group President and Chief Executive Officer (CEO) Augusto P. Palisoc Jr. said.

The healthcare arm of infrastructure conglomerate MPIC allotted up to P4B for its capital spending requirements this year.

Palisoc said it includes the funding needs for acquisition and operational requirements for individual hospitals.

INFRASTRUCTURE/PUBLIC PRIVATE PARTNERSHIP

DOTC unveils P135-B subway projectThe Department of Transportation and Communications (DOTC) recently unveiled major railway projects including the proposed P135-B project to build an underground mass rail service between the Makati central business district and Pasay City.

During a meeting with prospective investors, DOTC Assistant Secretary Jaime Raphael C. Feliciano said the government is looking at increasing urban mass transport ridership to 2.2M per day by 2016 or 2017 from the current level of 1.2M per day under the government’s Rail Transport Development Plan.

Under the plan, Feliciano said the DOTC would develop intermodal facilities and at the same time improve transport linkages and efficiency to production and consumption markets.

On top of the list was the P135-B Mass Transit System including a “subway” or underground rail system to address the growing concern on traffic congestion in the fast growing urban centers in the cities of Makati, Pasay, and Taguig.

The proposed 20-km. loop would consist of 16-km. tunnel and 4-km. elevated railway especially in the reclaimed area in Pasay City. The project would have 11 stations consisting of five underground, four interchanges, and two elevated, Feliciano said.

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DOTC is looking at forwarding the project to the National Economic and Development Authority (NEDA) for approval in the second or third quarter of the year after which the government would bid out the project in the second quarter of next year.

DOTC awards P21.6-B projectsThe Department of Transportation and Communications (DOTC) has awarded 100 projects involving airports, seaports, and transport systems through competitive bidding last year.

DOTC Secretary Joseph Emilio A. Abaya said the agency had a hitting average of 70% as it awarded P21.6B worth of projects as against its total allotment of P30.7B last year.

“The DOTC awarded no less than 100 projects in 2013 alone from the rehabilitation and improvement of numerous ports and airports across the country to the supply of Coast Guard rescue equipment, to the master planning of Metro Manila transport systems. These projects are now in various stages of implementation and completion,” Abaya said.

Projects approved by the agency last year included port improvements in Meycauayan, Marinduque, and Siargao as well as airport upgrading works in Naga, Catarman, and Butuan and the installation of airfield lighting systems for the airports in Ozamiz, Dipolog, Roxas, and Cotabato.

MANUFACTURING

Thai fiber cement maker eyes PHL facilityThai fiber cement products maker Mahaphant Group plans to spend USD 20M to put up a manufacturing plant in the Philippines as part of its expansion in South East Asia.

Mahaphant Group Vice President for Marketing Veerasak Kittinanthakool said the company is currently undertaking a feasibility study that would provide

the location as well as other details of the planned facility.

Expected to be operational by 2017, the plant would have an initial capacity of 10-sqm. board of fiber cement products per year.

The Mahaphant Group’s three-year expansion plan program in the country includes opening 4,000 retail outlets, qualifying 5,000 carpenters and contractors, and establishing SHERA solution center as a one-stop service center.

“Starting this year, we are implementing a full marketing program to expand our distribution network, build customer relationships, and communicate brand awareness for SHERA in order to penetrate our target segments including architects, designers, contractors, and homeowners,” Kittinanthakool said.

Eaton to build new PHL manufacturing plantPower management company Eaton announced the groundbreaking of a new industrial facility in the Philippines to expand its operations in the Asia-Pacific region.

The plant, which will be located in Tanauan City, Batangas, will manufacture single-phase uninterruptable power supply (UPS) products for the global markets.

Construction of the 29,000-sqm. facility is expected for completion by early 2015. This plant is projected to employ up to 1,500 people over the next four years.

“The increased UPS manufacturing capabilities in the Philippines will allow us to better serve our growing business in the information technology (IT) and small and medium data center markets,” Eaton’s Electrical Business in Asia-Pacific President Ivo Jurek said.

MASS HOUSING

Vista Land unit seeks BOI perksThe Board of Investments (BOI) said Household Development

Corp., a unit of listed Vista Land and Lifescapes Inc., has filed applications for incentives for the expansion of its low-cost mass housing project.

In particular, Household Development wants to register Phases 2 and 3 of the Lessandra Bucandala in Imus, Cavite.

The property developer is seeking fiscal incentives such as exemption from income tax and other perks from the BOI.

MOTOR VEHICLES

4 car firms eyemanufacturing plants in PHLFour automotive firms are looking to invest in facilities for assembly of vehicles and plastic moulding parts, Department of Trade and Industry (DTI) Secretary Gregory L. Domingo said.

As the economy grows, the auto firms are becoming interested in the Philippines as vehicle purchases are also seen to improve, Domingo said.

He added that the government is hopeful the four firms would be able to firm up plans to invest in manufacturing facilities in the country within the year.

Chery Cars eyes production hub in PHLChery Cars is eyeing the Philippines as its third production hub after Malaysia and Indonesia.

The company is going to decide in two to three years for the establishment of a manufacturing facility in the country, said Chery Cars International Vice President Guibing Zhang.

Zhang said a car assembly facility with a production capacity of 20,000 units could entail USD 100M initial investments.

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eMotors opens Iloilo e-trike dealershipEMotors, Inc. (EMI), a 100% Filipino-owned electric tricycle (e-trike) maker, recently launched its ZUM electric trikes and opened its ZUM dealership in Iloilo City.

“This marks another milestone in our goal to serve the needs of Filipinos for an affordable, low-cost, low-maintenance, innovative, and easy-to-use vehicle, one that helps increase one’s income while at the same time, help clean our air,” EMI Chief Executive Officer (CEO) Elizabeth H. Lee said.

POWER

SLRB puts up P27-B hydropower plant in SamarLocal power developer San Lorenzo Ruiz Builders and Developers Group Inc. (SLRB) is building a P27-B, 300-megawatt (MW) pumped storage hydropower plant in Eastern Samar.

“This hydro project will stabilize and make power available to Samar residents. As of today, Lawaan, where the river Bolusao is located, has two hours of power only. With the project, they will have power 24/7 and this will also promote tourism,” SLRB President Oscar Violago said, adding that the plant is the first in the entire Samar area.

The company is hoping to start construction within the year after it secures the environmental compliance certificate (ECC) and National Commission for Indigenous People clearance.

Violago said they are expecting to complete the project in three years.

Aboitiz’s Davao coal plant gets go-signalThe Davao City government has given the Aboitiz Power Corp.

(APC) subsidiary Therma South the green light for its 645-megawatt (MW) coal-fired power plant project.

“This expansion will ensure that Mindanao will have enough power when demand catches up with supply again in 2017 and 2018,” Therma South President and Chief Operating Officer (COO) Benjamin A. Cariaso Jr. said.

Set for commercial operations in the first half of 2015, the first 300-MW capacity of Therma South is almost contracted out to distribution utilities and electric cooperatives in Mindanao.

The company plans to complete the expansion in 2017 and 2018, when demand for power in Mindanao will be expected to exceed supply once again.

REAL ESTATE

Century to construct P20-B complex in PampangaCentury Properties Group Inc. (CGP) is launching a P20-B mixed-use project in Pampanga this year, marking its first venture outside Metro Manila.

Century Properties Chairman and Chief Executive Officer (CEO) Jose E.B. Antonio said the project would make Pampanga the Azure North, adding that it will feature the second beach club of Hollywood celebrity Paris Hilton.

Based on the company’s studies, Pampanga is one of the biggest bases of overseas Filipinos (OFs). Hence, they are targeting OFs families for their 8- to 12-storey condominium projects.

The P20-B estimate is the revenue level CPG expects to generate from the project. The complex would be built on an 8-ha. property located in one corner of a crucial junction going to the Olongapo-Gapan road.

Megaworld launches P15-B Davao projectMegaworld Corp. has beefed up its mixed-use project portfolio anew with the launch of its

P15-B township project in Davao and the continued development of its flagship project in Cebu.

Megaworld is allocating P15B in the next five to seven years to develop the Davao Park District into the central business district and business process outsourcing (BPO) hub in Mindanao.

Megaworld First Vice-President Jericho P. Go likened the project to bringing Eastwood City to the region.

Meanwhile, the company has fast-tracked the construction of its Mactan Newtown office towers in Lapu-Lapu City.

Its first tower, the One World Center, is now fully leased out by international BPO-information technology (IT) companies Enfra USA and Results Manila. Both companies employ more than 2,000 employees today.

The company said the 28.8-ha. Mactan Newtown project is projected to help generate 45,000 jobs in the next five to seven years.

ALI spends P7B for new Bulacan township projectAyala Land Inc. (ALI) is expanding its presence north of the National Capital Region (NCR) by investing almost P7B for Altaraza, a township project in Bulacan.

ALI President and Chief Executive Officer (CEO) Antonino T. Aquino said northern Metro Manila is an important element in ALI’s plan to create an estate or township project in every major location in the country.

The 98-ha. Altaraza is ALI’s first master-planned township project in San Jose Del Monte, Bulacan. It is being built in partnership with Gregorio Ma. Araneta III’s Araza Resources Corp. and would benefit from infrastructure projects like MRT-7, C-6 road, and inter-modal transport systems.

The first phase of Altaraza would involve 100-ha.of mixed-use development.

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GeRI to build shopping mall in SouthwoodsGlobal-Estate Resorts Inc. (GERI) subsidiary Southwoods Mall Inc. (SMI) has signed a deal with Southwoods Ecocentrum Corp. regarding the shopping mall it plans to build in the fully-integrated township development Southwoods City.

Under the deal, SMI agreed to lease a 1.9-ha. land owned by Ecocentrum at the Southwoods City Commercial Center in Biñan, Laguna.

“[The land] shall be used and developed by SMI as a commercial shopping mall with related facilities such as department stores, supermarket, restaurants, cinemas, parking, and commercial building to house business process outsourcing (BPO) companies and for other office and retail establishments,” GERI said in a disclosure with the Philippine Stock Exchange (PSE).

Located in parts of Cavite and Laguna, the 561-ha., P10-B Southwoods City development is GERI’s largest township project.

RESEARCH AND DEVELOPMENT

STI raises P3B to expand school network this yearSTI Education Systems Holdings Inc. (STI) raised P3B to expand its schools network this year.

Its unit STI Education Services Group Inc. (STI-ESG) said it entered into a corporate notes facility agreement with China Banking Corporation (China Bank).

“Pursuant to the agreement, the issue manager and noteholder granted a notes facility to the issuer in the aggregate principal amount of up to P3B,” STI said.

The net proceeds from the notes issuance will be used by the issuer for capital expenditures (capex) and other general corporate purposes, it added.

RETAIL

SMIC allots P80B for 2014 capexThe SM Investment Corporation (SMIC) is allotting P80B for capital expenditures (capex) this year, a bulk of which will be part of its massive expansion program that includes residential, mall, and tourism-related projects.

SMIC Investor Relations Head Cora Guidote said P70B of the amount would be spent for SM Prime Holdings Inc.’s projects, P5B to P6B for retail operations, and the rest for banking subsidiaries Banco de Oro Unibank Inc. and China Banking Corporation.

SM’s capex increased by 23% this year, as they only allotted P65B to fund their businesses in 2013.

Some projects involved in SM Group’s expansion program

• SM mall in Cauayan, Isabela• SM mall in Angono, Rizal• SM Zibo in China• Expansion of SM Lipa, SM Bacolod, and SM Megamall• 15 Savemore branches• One department store• One supermarket• Three hypermarkets• Five residential condominium projects

Super8 earmarks P1.5B for expansionSuper8 Retail Systems, Inc., retail arm of wholesale distribution company Suy Sing Commercial Corporation, aims to reach a total of 60 to 75 stores by 2016, with the project seen to cost at P1.5B.

“We expect to hit between 60 to 75 stores by 2016, to be able to cater more to mini marts and sari-sari stores, and probably establish our presence in Visayas and Mindanao,” Super8 President Ulysses Y. Dy said.

Super8 currently has 37 stores and plans to open another eight within the year.

The company targets to put up 35 stores in three to five years,

each spanning 500 to 1,300 sqm.and costing from P20M to P45M.

The company has also obtained the Philippine franchise for Circle K, an American convenience store brand, with two stores already opened and eight more planned within the year.

More stores eyed by Rustan's for 2014Rustan’s Supercenters Inc. (RSI), the operator of supermarkets and groceries of the Rustan’s Group of Companies, looks to open more stores within the year.

“Last year, we opened 13 new stores. This year, we will also open 13 in all our formats,” RSI President Bienvenido V. Tantoco III said.

RSI brands include the Rustan’s Supermarket, which targets the upper-class, and Shopwise aimed at the middle and working class.

The company also operates the local branches of Wellcome supermarkets by Hong Kong-based Dairy Farm International Holding Limited.

Dairy Farm had previously acquired 36% of RSCI, while its parent company, Jardine Matheson Group, bought 14% of Spinnaker Group’s shares in RSI.

RSI opened three retail outlets last 2012 and at present has 50 stores throughout the country.

SHIPPING 2GO Travel launches latest addition to fleet2GO Group, Inc.’s passenger transport brand, 2GO Travel, launched its newest ship—the Marine Vessel (MV) St. Francis Xavier (SFX).

The 11,000-ton, 151-m MVSFX, with a passenger capacity

Philippine Business Report10

COMPANY NOTES

Pinoy diner ramps-up marketingTapa King, Inc. (TK) built its own production facility and commissary, upgraded its store design and products, and is now preparing to open more shops locally and internationally to increase market share and presence.

The production plant and commissary is situated in the Laguna Technopark Special Economic Zone.

TK recently opened a store in Iba, Zambales, to be followed by stores in San Fernando, La Union and Farmers Market, Cubao.

To add to their international profile, with an existing branch in Singapore, the company approved franchises to be opened abroad.

Spain extends dev’t partnership with PHLSpanish Ministry of Foreign Affairs and Cooperation (Ministerio de Asuntos Exteriores y de Cooperación) Minister José Manuel García-Margallo y Marfil recently inked the Statement of the VI Philippines-Spain Joint Commission on Development Cooperation with National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan and brought along a business delegation to look at opportunities in the country during his visit.

The signed agreement extends the development partnership between the countries for four years and allows for a grant of 50M euro from 2014 to 2017.

The grant would be allocated to programs and projects listed in the Philippines-Spain Country Partnership Framework (CPF)

COUNTRY-TO-COUNTRY

for Development Cooperation 2014-2017 that focus on issues on good governance and the rule of law, and disaster risk reduction and management.

Meanwhile, the delegation brought by Minister García-Margallo represent 12 companies in various industries.

Particularly, the delegates were interested in the infrastructure sector, with focus on the Public-Private Partnership (PPP) program of the government.

The Philippine government expressed hopes that Spanish companies would also be interested in the manufacturing, tourism and agribusiness sectors.

The High Council of Chambers of Commerce, Industry and Navigation of Spain, Confederation of Employers and Industries of Spain (COEO), and the Makati Business Club (MBC) signed a memorandum of understanding (MOU) to hold business missions, exchange information, and promote participation in international exhibitions and trade fairs, to strengthen the countries’ business relations.

Fund allocation and implementer

• Cooperation—Partnered Spanish-Filipino non-government organizations (NGOs)

• Development cooperation—Philippine Government agencies

• Multilateral cooperation—United Nations (UN) agencies

aSeaNWATCH

DTI aims borderless trade mechanism for aSeaN integrationThe Department of Trade and Industry (DTI) pushes for the development of a borderless trade mechanism for small and medium enterprises (SMEs) as the Association of Southeast

8 new Gerry’s Grill to open in H1 2014Gerry’s Grill operator, Prime Pacific Grill Corporation (PPGC), authorized five franchises and co-ventures of their restaurant and plans to open three fully-owned branches within the first half of 2014.

“Gerry’s has been receiving many franchise inquiries. We take pride in being a preferred brand among franchisees. We are glad to accommodate new partners in the food business,” PPGC President and Chief Executive Officer (CEO) Gerry Apolinario said.

Recently, the company opened the second branch of its new brand of fast-casual restaurant, Kusina ng Gerry’s, in SM Hypermart in Taguig.

The restaurant also enjoys a global presence with overseas branches in Qatar, Singapore, and the United States (U.S.).

of 1,910 and 180 twenty-foot equivalent unit (TEU), has been revamped, with interiors designed by One Urban, to provide a cruise-like feel for passengers.

Among the MVSFX’s amenities are roomy first class and economy restaurants.

The ship will be plying the Manila-Bacolod-Iloilo-Manila route every Wednesday and the Manila-Cebu-Dumaguete-Zamboanga-Dumaguete-Manila route on Saturdays.

Meanwhile, 2GO Travel has once again started servicing the ports of Dumaguete, Ormoc, and Zamboanga, and will also open new ports—one each in Masbate and Romblon.

11May 2014

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ON THECaLeNDaR

to further enhance and empower their Joomla Web Sites with advanced and extended skills, using the most popular

and well tested Joomla extensions. Registration fee costs P3,000. Contact Eva Ancheta

at [email protected].

uanalyzing Business Markets and Business Buying Behavior,

Dealing with Competition The training discusses the dynamics of organizational

buying with great emphasis on the roles of the participants in the business buying process.

Participants will learn different institutional types and

government markets. They will also discover the different kinds

of competitive strategies as well as how to balance customer

and competitor orientations. Registration fee is P2,000.

Contact Henette Florentino at [email protected].

uSales & Operations Planning Strengthen your company by acquiring the knowledge of keeping businesses on track,

learning to manage forecasts, constraints, inventory,

and other resources to ensure that supply matches demand. Registration fee costs P2,500. Contact Henette Florentino

at [email protected].

The Philippine Trade Training Center (PTTC) is offering the following training courses, to be held in June 2014:

uDocumentation on Hazard analysis and Critical Control Points (HACCP)

Through the HACCP’s proper application, participants will learn all important edge in the highly competitive food industry.

In the three-day seminar, attendees will learn how to identify and assess where hazards in the food production process might occur and apply appropriate preventive measures. Registration fee costs P3,000. Contact Beth Salcedo at [email protected].

uadvanced Webpage Development Using Joomla 3.2

This two-day hands-on workshop is designed to enable participants

Asian Nations (ASEAN) members prepare for economic integration.

DTI Secretary Gregory L. Domingo endorsed the development of this mechanism for SMEs in ASEAN to facilitate the process of integrating them into the regional supply and production network.

“The bulk of trade is in intermediate goods where existing capabilities of SMEs may be tapped,” Domingo said.

PHL, Asia’s 2nd ‘most loved’equity fund The Philippines is the second “most loved” equity fund market in Asia, according to HSBC Global Research’s latest study.

HSBC said the Philippine equities market is also in its favored list.

“In terms of our current views on Asian equities, we overweight the Philippines, Taiwan, Malaysia and Indonesia,” the study said.

PHL pushed as shopping destinationThe Philippines is pushed to be an ideal shopping destination for foreign tourists and guests.

Prime Asia Trade Planners and Convention Organizers (PATEPCO) organized a five-day show in Greenhills Shopping Complex during the 21st National Furniture, Furnishing & Fashion Festival and the 10th Philippine Folk Arts & Crafts Festival.

The event showcased products such as modern and contemporary furniture and furnishing, Philippine arts and crafts, and other products.

The trade fair with about 2,000 stall holders showcased high quality products and goods and sold them at much lower prices. PHL franchisers told to prepare for aSeaN integrationPhilippine franchisers will largely benefit from overseas expansion once the Association of Southeast

Asian Nations (ASEAN) Economic Community (AEC) goes into full swing in 2015.

Department of Trade and Industry-Bureau of International Trade Relations (DTI-BITR) Senior Trade Industry Development Specialist Raymond Astillas said that in the ASEAN integration scenario, there could emerge an “immense business and economic potential.”

Astillas shared that during his meetings abroad, he witnessed a huge interest in the Philippines both as an investment destination and new brands’ source for ASEAN markets.

Senator Paolo Benigno “BAM” Aquino IV also encouraged the Association of Filipino Franchisers Inc. (AFFI) members to prepare well for the AEC “as only the strongest and most effective organizations can take full advantage of the opportunities” and will be presented by regional integration.

Philippine Business Report12

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May-14Apr-14Mar-14Feb-14Jan-14Dec-13

Interest Rate (%)

4343.5

4444.5

4545.5

May-14Apr-14Mar-14Feb-14Jan-14Dec-13

Peso per US Dollar Rate

economic Indicators

As of 13 May 2014 As of 13 May 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, 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 Office

under Permit No. 504valid until 31 December 2014

May 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 (%)

134135136137138139

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

Consumer Price Index(2000 base year)

38004000420044004600480050005200

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exports(In USD Billion)

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2,000

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8,000

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Imports (In USD Billion)

012345

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Inflation Rate (%)(1994 base year)