Philippine Business Report (Oct.2012)

1October 2012

Volume 23 No. 10 October 2012

instituting real and long-term reforms,” said del Rosario.

“I think the public is giving him continued positive rating. The business community is rooting for the President.We’re impressed at how he’s determined in pursuing his reform agenda,” he added.

The latest report indicated that the country’s global competitiveness index score was 4.23, placing the Philippines in the upper 45 percentile of economies from its spot in the 53 percentile in 2011.

The report noted that the Philippines made important strides this year in improving competitiveness, especially with respect to public institutions which improved by 23 notches to 94th ranking.

Notably, macroeconomic environment likewise showed improvement at 36th, up 18 places and is “one of the strongest aspects of the Philippines’ performance” along with the market size pillar at 35th.

“The sustained and rapid advance of the Philippines in the global competitiveness index owes a lot

The Philippines’ global competitiveness ranking improved by 10 places to 65th this year from 75th last year, the latest World Economic Forum’s (WEF) Global Competitiveness Report 2012-2013 showed.

Out of 144 economies included in the survey, the country is one of only 15 economies in a similar performance which measured the microeconomic and macroeconomic levels that determine national competitiveness.

It was the second straight year that the country’s rankings moved up 10 places. In 2010, the ranking was 85th from 87th in 2009, indicating that the country’s competitiveness has advanced 22 places since its lowest mark in 2009.

The WEF defines competitiveness as the set of institutions, policies, productivity, and factors that determine the productivity level of a country based on 12 key categories.

Makati Business Club (MBC) Chairman Ramon R. del Rosario Jr. and National Competitiveness Council (NCC) Co-Chair Guillermo M. Luz expect the country to be in the top one-third ranking in the world by 2016 or by the time the administration of President Benigno S. Aquino III ends.

“I think it’s his determination to governance and to fight corruption, and he’s not just uttering words but he’s acting on it. He has done a lot in improving the judiciary and is pointing to the right direction and

to improvements in 11 out of the 12 pillars of competitiveness considered by the Global Competitiveness Report,” del Rosario said.

PHL competitiveness advantages

• Affordability of financial services• Availability of airline seat kilometers• Availability of financial services• Cooperation in labor employer

relations• Degree of customer orientation• Domestic market size• Ease of access to loans• Extent of marketing• Extent of staff training• Foreign direct investments (FDIs)

and technology transfer• Financing through local equity market• Firm level technology adoption• Foreign market size• Government budget balance• Gross national savings• Intensity of local competition• Local supplier quantity• Quality of management schools• Quality of the educational system• Regulation of securities exchanges• Reliance on professional

management• Soundness of banks• State of cluster development• Willingness to delegate authority

PHL competitiveness up by 10 notches

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INDUSTRYTReNDS

ecozone investments rise 14.9% Investments in economic zones grew by 14.9% to P105.7B in the first seven months of the year from P91.9B recorded in the same period last year on the back of investors’ confidence in the country, the Philippine Economic Zone Authority (PEZA) reported.

These investments generated 876,792 jobs, or 12.9% more than the 776,851 employment opportunities spawned in the same period in 2011.

PEZA investment approvals were mostly for expansions, accounting for roughly 70% of the total projects.

Japanese investors led in terms of new investments made, followed by the Americans.

One of the biggest Japanese investments in the period was put by Canon Group, which recently announced the start of the commercial operations of its P20-B laser printer manufacturing facility in Batangas next year.

“Because of this, we are optimistic of achieving our previous targets this year of 12-% growth for investments, 12% for employment, and 12% for exports,” PEZA’s Manager of the Promotion and Press Relations Group Elmer H. San Pascual said.

Peza is targeting to generate P323-B investments in 2012.

PHL most popular expansion destinationThe Philippines continued to be the most preferred country for expansion

among American firms operating in the Association of Southeast Asian Nations (ASEAN) region.

This was contained in a survey conducted by the U.S. Chamber of Commerce and The American Chambers of Commerce in ASEAN where a total of 356 American executives remained optimistic in the overall business prospects in the region.

Notably, 83% of ASEAN-based U.S. firms are expanding in the Philippines as the country remains the most popular country for expansion and where business satisfaction is at its highest point.

The top three reasons for expansion in the Philippines are availability of trained personnel/efficient manpower, increasing market share, and diversification of customer base.

Healthcare outsourcing upbeat The Healthcare Information Management Outsourcing Association of the Philippines (HIMOAP) said the country’s healthcare outsourcing sector generated 24,700 new jobs in 2011.

Already, the Department of Labor and Employment (DOLE) has categorized the healthcare information management (HIM) sector as one of the fastest-growing sectors in the information technology-business process outsourcing (IT-BPO) industry.

With its competitive salaries and benefits, healthcare BPO is a viable option for the 400,000 unemployed nurses as of February this year, DOLE said.

Total Transcription Solutions, Inc.(TTSI) Managing Director Myla Reyes said the increased healthcare spending is driving countries to create health reforms that will not only ensure additional coverage to members but also introduce technology solutions such as electronic health records.

HIM outsourcing generally involves organization, maintenance,

documentation, and analytics of health information to facilitate real-time healthcare delivery and critical health-related decision making for multiple purposes across diverse organizational settings and disciplines.

PFA eyes more productsThe Philippine Franchise Association (PFA) is planning a program designed to make some One Town, One Product (OTOP) items suitable for franchising.

PFA Chairman Samie Lim said the PFA intends to cluster certain products and tap an expert to create a franchise program for these goods.

Lim identified some of the OTOP products with promising potentials, including fruits and delicacies from the Bicol region and many variations of lechon.

He is optimistic about the continuing growth prospects for the Philippine franchising sector.

"We will be very happy if we could maintain a 30-% growth. We are about 35% of the total retail business," he said.

Coco water exports double in H1The value of coconut water exports in the first six months of the year rose 100.5% to USD 11.2M from USD 5.6M in the same period last year, the Philippine Coconut Authority (PCA) reported.

Volume of exports likewise rose by 81% to 10.2M liters during the first semester from 5.7M liters in the same period in 2011.

The United States (U.S.) remained the Philippines’ top export market, accommodating the country’s shipments worth USD 8.7M, up 127% from USD 3.8M.

Notably, the value of virgin coconut (VCO) oil exports in the covered period rose by 116.6% to USD 18.2M from USD 8.4M.

3October 2012

PCA Administrator Euclides G. Forbes said the government intends to increase the number of fertilized coconut trees next year to as much as 25M from 20M this year as well as the planting of new coconut trees from 13M to 17M.

Plastic makers upbeat on growth prospectsLocal plastic manufacturers could expect business growth with the entry of Japanese printer manufacturers into the country.

The Department of Trade and Industry (DTI) said Japanese printer manufacturers would need raw materials for packaging, as noted by plastic manufacturers during the recent technical consultation on the Philippines-Japan Economic Partnership Agreement (PJEPA).

“The prospects for business for the plastic manufacturers and packaging materials suppliers are looking up,” a member of the Philippine Plastics Industry Association (PPIA) Vicente Co said.

Plastic manufacturers said there was a need to explore other product tariff lines under the agreement because the industry is not limited to supplying packaging products but can also diversify its product mix.

The Nomura Research Institute said big-ticket investments that entered and expanded in the country last year amounted to USD 1.05B, including investments from printer companies like Canon, Brother, and Epson.

More OFs venturing into businessMore overseas Filipinos (OFs) are opting to return home for good and put up their own businesses in the country, the Department of Labor and Employment (DOLE) reported.

DOLE Secretary Rosalinda D. Baldoz said close to 500 OFs have put up their own enterprises over a year since the government launched a P2-B reintegration program.

The Land Bank of the Philippines, which is the Overseas Workers Welfare Administration’s (OWWA) partner in the program, has already approved 410 loan applications.

“The total loan amount has already reached P261.7M,” Baldoz said.

OFW-borrowers largely came from the Cavite, Laguna, Batangas, Rizal, and Quezon (CALABARZON) Region, followed by Central Luzon, Western Visayas, and Bicol Region.

The business ventures engaged in food production, trading business, agribusiness, and services, generating 1,458 jobs.

The loan program carries an annual rate of 7.5% in declining balance with a flexible payment scheme maximum of five years and an incentive grace period of two years. A borrower can borrow a maximum of P2M.

PHL mobile commerce on the riseMobile commerce (m-Commerce) in the Philippines is experiencing a rapid growth, presenting opportunities not only to adopt mobile technology to deliver banking products and services but also to diversify into a full m-Commerce strategy to open new revenue lines, technology solutions provider SAP Philippines Inc. reported.

m-Commerce services make it possible for people to perform everyday financial transactions from their mobile phone.

“Mobility solutions for business transactions are now becoming a trend as people do transactions through mobile instruments. It is simply the way people today are doing business,” SAP Philippines Managing Director Darren Rushworth said.

A study by research firm Gartner predicted that Asia-Pacific and Africa would account for more than 60% of global mobile payments volume by 2016.

OFs remittances boost real estate industryThe country’s real estate industry is on an upswing as remittances, worth P1.8B in the first half of the year, from overseas Filipinos (OFs) remain to be the largest contributor to its growth.

“OFs remittances were still the major player in the real estate,” said Colliers International Research Analyst Karlo Pobre.

Among the market indicators in the country’s real estate industry, the office, residential, and hotel and leisure subsectors all posted positive figures in the first half.

As for offices, Colliers International Associate Director and Department Head Julius Guevara said vacancy in Makati marginally declined to 3.9% in the second quarter of 2012 and is seen to stabilize at the sub 4-% level by yearend.

Guevarra said the hotel and leisure subsector is advancing in terms of occupancy rates and other factors.

“Occupancy rates are expected to exceed 70-% level by end of 2013, as the number of foreign arrivals is seen to grow by an additional 660,000 by the end-2012,” he said.

TRADe ANDINVeSTMeNTS

AGRICULTURE/AGRIBUSINESS AND FISHERY

Del Monte to invest USD 60M in ARMM banana ventureThe Autonomous Region in Muslim Mindanao (ARMM) is hosting a USD 60-M banana plantation

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project by Del Monte Fresh Produce (Philippines) Inc. as part of efforts to grow investor confidence in the region.

Del Monte, through its subsidiary Delinanas Development Corp., wants to develop up to 3,000 has. of banana plantations with direct employment opportunities for thousands of locals, according to the Regional Board of Investments (RBOI)-ARMM.

Leyte firm seeks BOI perksLeyte-based firm SC Global Coco Products is seeking registration with the Board of Investments (BOI) as a new export producer of coconut products.

SC Global intends to produce 18.72M liters or 15,600 bags of coconut water at 1,200 liters per bag; 7,510 metric tons (MT) of virgin coconut oil; 4,243MT of coconut meat or coco flour; and 2,503MT of coco cream per year.

First Pacific interested in big farm projectsPT Indofood Sukses Makmur Tbk, the Indonesian food unit of Hong Kong-based industrial conglomerate First Pacific Co. Ltd., has expressed interest in putting up a large-scale farm venture in the Philippines.

“We are trying to interest them to invest in plantations here. It has to be the right plantation and the right size because they are big,” First Pacific Managing Director and Chief Executive Officer (CEO) Manuel V. Pangilinan said.

To date, the plantations division of Indofood has 254,989has of palm oil, sugarcane, rubber, cocoa, and tea farms in Indonesia and Malaysia.

The Department of Agriculture (DA) tries to stimulate investor interest in farm ventures by offering large chunks of idle land.

MPIC, SL Agritech to form rice ventureMetro Pacific Investment Corp. (MPIC) and SL Agritech Corp. will establish a 1,000-ha. hybrid rice area to help the Philippines

achieve self-sufficiency in the P450-B rice sector.

SL Agritech Chairman Henry Lim Bon Leong said they are identifying initial target areas through the Philippine Agribusiness Development Commercial Corp. (PADCC).

“SL Agritech will provide the hybrid rice variety seeds together with the technical assistance,” Lim said.

He said MPIC has committed a preliminary investment of USD 10M for the agriculture sector, one of the core businesses of MPIC’s parent firm, First Pacific Group.

AVIATION PAL buys 54 aircraft; eyes new international airportThe Philippine Airlines (PAL) has placed a USD 7-B order with Airbus covering 54 aircraft as part of its 100 aircraft requirement in the next three years – the biggest aircraft deal in the country to date.

The budget covers the purchase of single-aisle A321s and widebody A330-300s, the latest High Gross Weight (HGW) models which are expected to be delivered starting 2013.

The 10 long haul A330-300s will be operated on regional routes and longer range services to the Middle East and Australia while the 44 jet planes from A321s family will enhance the airline’s product offerings on domestic and regional routes.

The airline intends to acquire 100 jets within the next five to seven years to regain dominance in local market. It also eyes purchasing both Airbus and Boeing for its tranche of planes.

Meanwhile, PAL is eyeing to put up a new international airport to support its massive re-fleeting

and expansion program that involves the acquisition of 100 aircraft.

PAL President and Chief Operating Officer Ramon S. Ang said the airport would be situated in a 2,000-ha property and would boast of a modern passenger terminal and four runways.

Ang added that with two initial runways, the planned airport could handle 1,500 events per day putting the Philippines at par with the airports in Sydney, Australia as well as Heathrow in London.

The proposed international airport would also be accessible via elevated six-lane highways and would feature hotels, malls, and other facilities.

CeB expands workforceCebu Pacific (CEB) is expanding its workforce with additional 200 positions for pilots, cabin crew, and technical and non-technical support crew.

“With our expansion plans in the Asia-Pacific Region, CEB remains committed to providing high-paying jobs, a fun work environment, and unlimited travel benefits to even more people,” CEB Vice President for Marketing and Distribution Candice A. Iyog said.

The airline has already launched flights in Iloilo and Kalibo as part of the expansion program, while another five domestic routes were introduced this October. In November, the firm will also inaugurate an Iloilo hub with direct flights to Hong Kong, Singapore, General Santos, and Puerto Princesa.

ENERGY

Galoc group to invest USD 188MThe Galoc field consortium is expected to invest USD 188M to implement the second phase of the oil field’s development in northwest Palawan.

Otto Energy Ltd. Chief Executive Officer (CEO) Gregor McNab, a consortium member, said the final

5October 2012

investment decision for the Galoc Phase 2 development was “imminent.”

McNab said of the total USD 188M capital expenditure, Otto’s share would be USD 62M, representing its 33-% share in Service Contract (SC) 14-C. Otto Energy holds a 33-% direct ownership in the Galoc Project through Galoc Production Co.

Galoc field consortium

Firm % sharelGaloc Production holds 59.8

of SC 14-ClNido Production Ltd. 22.88lOriental Petroleum 7.785 and Minerals Corp. and Linapacan Oil Gas and Power Corp. lThe Philodrill Corp. 7.214lForum Energy Philippines 2.275

The Galoc Phase 2 development involves drilling and completing two 2,000-m horizontal section subsea wells and installation of a second production riser.

Total signs deal to find oil in SuluTotal of France has entered the oil and gas exploration industry in the Philippines after acquiring a 75-% interest in a contract area in Sulu Sea.

Total E&P Philippines B.V., a unit of the oil giant, said it acquired the 75-% stake in offshore block Service Contract (SC) 56 from Mitra Energy of Malaysia. The 75-% stake was previously owned by ExxonMobil Exploration and Production Philippines B.V. (50%) and BHP Billiton International Exploration Pty Ltd (25%).

The block covers 4,300 sq km in water depths ranging from 200 m to 3,000 m.

GREEN PROJECTS

ADB, P&G explore green energyThe Asian Development Bank (ADB) and Procter & Gamble Co. (P&G) are teaming up to explore the feasibility of building “waste-to-worth” energy plants in the country that would generate up to two megawatts (MW) of power using

solid waste collected from homes and businesses.

“The disposal of municipal solid waste is a serious environmental and social challenge. This is the kind of innovative project that brings the public and private sectors together to tackle a problem seen throughout the developing world,” ADB Investment Specialist Jose Manuel Limjap said.

The project aims to eliminate the need for landfill, as less than 1% of the waste is expected to remain after processing, and this will mostly be recyclable materials usable in products like asphalt.

ADB has approved a USD-385,000 technical assistance plan, equivalent to 60% of the total cost, to help determine the viability and sustainability of waste-to-energy projects. If deemed viable and sustainable, a lead waste-to-energy plant will be piloted in the Philippines by 2016.

Taiwan, local firms tie up for e-bus projectTwo Philippine companies have tied up with a Taiwanese electric car technology firm for the manufacture of electric buses (e-buses) in the country.

Greentech Motors Corp. and Statemotors, both all-Filipino companies, signed a memorandum of understanding (MOU) with Taiwanese company RAC Electric Vehicles Inc. for a tripartite collaboration that will enable the manufacture of environment-friendly and energy-efficient e-buses in the country.

This will hopefully reduce, if not eradicate, smoke-belching and dilapidated public utility buses from polluting the country’s major thoroughfares and highways

Greentech Motors President Jan Vincent Kierulf said with the alliance firmed up, they hope to assemble an initial batch of 10 electric buses here in the country before the yearend.

Kierulf said that with the local e-bus assembly, they hope to make the environment-friendly e-buses more affordable for Philippine public utility bus companies.

Greenergy, Cleantech sign investment agreementGreenergy Holdings Inc. said it signed an investment agreement with Switzerland-based Projekgesellschaft mbH (Cleantech).

Under the deal, Cleantech will subscribe to P415.54M worth of shares in Greenergy. Proceeds of the investment will be used to invest in the new biomass power plant of San Carlos BioPower Inc. in the Visayas.

The deal also involves the establisment of a joint-venture subsidiary.

UPC Renewables eyes 2 more wind projectsUPC Renewables Philippines is pursuing two more wind power projects in Burgos, Ilocos Norte with a combined capacity of 134 megawatts (MW).

UPC Renewables, through Northern Luzon UPC Asia Corp., has pending wind service contract applications with the Department of Energy (DOE) for the 90-MW Bayog project and the 44-MW Buduan facility.

The company plans to develop over 450 MW of wind projects around the country. Its first project, Northern Luzon UPC Asia, is the 80-MW wind station in Pagudpud, Ilocos Norte.

INFRASTRUCTURE/PUBLIC-PRIVATE PARTNERSHIP PROJECTS

SMC eyes more airport projects under PPP San Miguel Corp. (SMC) is keen on bidding for public-private partnership (PPP) airport contracts in Palawan, Bohol, Caraga, Tacloban, and Dipolog, among others.

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“We will bid for all PPP projects,” SMC President Ramon S. Ang said.

SMC is currently refurbishing and building new tourism facilities at the Godofredo P. Ramos airport in Caticlan, the main gateway to the world-famous Boracay Island. The conglomerate has committed to invest USD 300M in this project.

SMC, which co-owns Philippine Airlines, said the flag carrier is looking to build the biggest airport in the country that could handle 36 flights per hour.

Maynilad allots P360M for Cavite pipelayingMaynilad Water Services, Inc. (Maynilad) is allocating P360M to expand services in Cavite to serve roughly 20,000 households in the province.

Some 24.43 km of new pipelines will be laid along Molino, Bayanan, and Mambog roads in Bacoor and along Buhay na Tubig Road in Imus, Cavite.

Maynilad said the new pipelines can bring potable surface water to over 15,340 households in Bacoor and 4,691 additional households in Imus once completed.

The water service firm said 8,980m of new pipelines have already been laid to date.

Maynilad President and Chief Executive Officer (CEO) Ricky P. Vargas said he is optimistic that the project will be completed before yearend.

Water firm invests in sewage facilitiesManila Water Co. Inc. said it has invested over P6.6B for the collection and treatment of wastewater in its east zone concession area.

The water distributor said it built and operated 36 sewage treatment plants and two septage treatment facilities, with a combined capacity of 135M liters per day.

This raised its wastewater treatment coverage from 3% of its

area at the start of its concession period to 23%.

GT Capital eyes PPP projectsFirst Metro Investment Corp. (FMIC) and Global Business Holdings Inc. (GBHI) President Francisco C. Sebastian said GT Capital is eyeing investment opportunities in all sectors.

“We are opportunistic. We’re looking at opportunities where we can come in,” Sebastian said.

Both FMIC and GBHI are subsidiaries of GT Capital.

According to Sebastian, they would continue to invest in power-related projects, particularly in Luzon and the Visayas.

IFC plans significant investment in ClarkThe International Finance Corp. (IFC), the private sector lending arm of the World Bank, will invest up to USD 50M to bankroll the first phase of the Sabah Al Ahmad Global Gateway Logistics City, a large-scale greenfield business park and infrastructure development at the Clark Freeport Zone in Pampanga.

The first phase of Global Gateway Logistic includes the construction of a medical city, commercial plaza, office towers, warehouse, and a university campus.

The project is being spearheaded by Global Gateway Development Corp. (GGDC), a special purpose vehicle owned by private equity fund The Port Fund L.P.

MASS HOUSING

Century Properties to expand affordable housing The Century Properties Group Inc. has revealed its plans to expand affordable housing market segment

following the company’s P4.1-B Residences at Commonwealth.

Century Co-Chief Operating Officer Jose Marco R. Antonio said the Commonwealth project is only the start of the planned nationwide developments, noting that the demand for residential property outside Metro Manila underpins the expansion plans.

In the second quarter of the year, the firm generated P5.4B in pre-sales, 19% of which were from the luxury, 40% from the middle income, and 41% from the affordable market.

“The market is hungry for unique products with intrinsic value, and attainable monthly amortizations stretched over a two-year to five-year period,” Antonio said.

MINING

Marcventures to build mining capacity in SurigaoMarcventures Holdings Inc. is building up a mining capacity within its 120-ha mine site in Surigao del Sur from the current 1M wet metric tons (WMT) output per year.

Marcventures President Ramon A. Recto said the firm is eyeing to hit 16-20 shipments for 2012 with a total of 800,000WMT to 1M WMT.

The mining firm now holds 4,977-ha Mineral Production Sharing Agreement (MPSA) with only 2.5% explored or equivalent to 20 ha.

Atlas Consolidated invests in mine facilities upgradeThe Atlas Consolidated Mining and Development Corporation is investing USD 105M in upgrading the mine facilities and boost copper production of its operating subsidiary Carmen Copper Corporation (CCC).

“The upgrading of the facilities would help the company increase production to 10M pounds of copper concentrates per month

7October 2012

or roughly 120M pounds per year,” Atlas Vice President Adrian S. Ramos said.

The expansion budget covers the USD 50-M facility upgrade; USD 30-M operation optimization; and USD 25-M mine fleet to deliver copper ore upgrades.

Ramos said they are expecting the new milling facility to start operations by end of the first quarter or early second quarter of 2013.

Meanwhile, Ramos said they are now in various stages of exploring some 4,000 ha of tenements surrounding Toledo’s highly mineralized areas.

POWER

Aboitiz invests to boost capacityThe Aboitiz Power Corp. will spend USD 2.85B for the next three years to boost generating capacity to combat power shortfalls in some parts of the country.

Aboitiz President Erramon I. Aboitiz said the company will partner with other companies to build plants with 1,350-megawatt (MW) capacity. Of the total, it will directly own 700MW, increasing its portfolio by 30% or 3,050MW.

Aboitiz said they are currently building 300-MW coal-fired power plant in Mindanao as the deficit in the region ranges between 50MW and 300MW a day.

Aboitiz has also plans to bid for several state power plants with combined capacity of more than 1,400MW in addition to its portfolios.

Ayala invests USD 2.5B in powerAyala Corporation’s energy arm is lining up USD 2.5B worth of investments to hit its targeted1,000-megawatt (MW) capacity in the next five years.

Ayala Corporation Managing Director Eric T. Francia said the targeted installations could be a combination of greenfield developments and acquisitions.

Francia said the company is also looking at a few Greenfield opportunities for the conventional technology, noting that Visayas and Mindanao are possible areas for the new power plant.

This will add up to the Ayala group’s power portfolio which has been kick-started by their 135-MW coal plant in Batangas.

Toyota partners with Alsons to build coal-fired plantA unit of Toyota Corp. of Japan is investing more than P1B for a 25-% stake in Sarangani Energy Corp. to build a 210-megawatt (MW) coal-fired power plant in Mindanao.

Alsons Consolidated Resources Inc. Chief Financial Officer Luis R. Ymson Jr. said the agreement with Toyota Tsusho over a stake in Sarangani Energy was expected to be concluded within the month.

The plant will have a capacity of 105 megawatts (MW) for the first phase of the project which is expected to begin operations by early 2015. The firm also has a power sales agreement with South Cotobato II Electric Cooperative Inc. in covering 70MW of electricity.

The power plant, with a full two-phase capacity of 210MW aims to provide a long-term solution to the current shortage in Mindanao.

eDC eyes 17 projectsThe Energy Development Corp. (EDC) is planning to work on 17 new projects to boost its power portfolio in the long term.

Most of the targeted 17 new projects will be geothermal and the rest a mix of wind- and solar-power projects, EDC Senior Vice President Agnes C. de Jesus said.

EDC is looking at 12 sites for possible geothermal development. Five sites are for expansion, another five for exploration, and two for development. The company is also eyeing three sites for wind

development and two areas for solar projects.

In the next five years, EDC will develop six greenfield projects with a total capacity of 200 megawatts (MW). The project includes the 86-MW Burgos wind project in Ilocos Norte and geothermal facilities in Albay and Sorsogon, Southern Negros, and North Cotabato.

Hanjin firms up plans for power plant Subic-based shipbuilder Hanjin Heavy Industries and Construction Co. Ltd. Philippines Inc. (HHIC-Phil) has formally informed the Department of Energy (DOE) of its decision to pursue its first power plant project in the country, which will cater to the increasing needs of the company and provide additional electricity to the grid.

DOE Undersecretary Josefina Patricia Magpale Asirit said the Korean ship builder is already looking for a construction site.

Asirit said the investment decision came at the heels of HHIC-Phil’s planned construction of a third drydock worth USD 300M in its shipyard facility.

Meralco, Metrobank Group mull partnership for power projectsMeralco Power Generation Corp., the electricity producing unit of Manila Electric Co, is exploring the possibility of collaborating with Metrobank Group’s Global Business Power Corp. (GBP) for future power generation projects.

Meralco President Oscar S. Reyes said they are in exploratory talks with GBP for partnership in power projects in Luzon and Mindanao where there would be a need for additional power in the next few years.

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GBP earlier indicated that it plans to build around 1,000 megawatts (MW) of power capacity in the next three to five years to help augment electricity needs in Luzon.

Sagittarius Mines, Alsons tie up for power projectSagittarius Mines, Inc. (SMI) and Alsons Energy Development Corp. (AEDC) have entered into an agreement for a joint feasibility study for the development by AEDC of a coal-fired power station in Maasim, Sarangani to meet the electrical power requirements for SMI’s Tampakan copper-gold project located in Tampakan, South Cotabato.

The potential power plant will be located in the Kamanga Agro-Industrial Ecozone operated by the Kamanga Agro-Industrial Ecozone Development Corp. (KAIEDC) in Kamanga, Maasim.

Under the joint feasibility study, SMI and AEDC will look into the environmental, technical, and financial aspects of the prospective power station.

REAL ESTATE

Picar builds in Alabang, CebuPicar Development is developing a P2.2-B residential condominium in Alabang and an office building for the business process outsourcing (BPO) industry in Cebu.

The Chelsea Residences in Alabang will be a 32-storey building with 696 units ranging from studios to three-bedroom penthouse units, said Picar General Manager Danilo B. Jugno.

Meanwhile, the Cebu expansion entails an office building to be built on a 2,500 sqm lot in Asiatown. The building will have about 24,000 sqm of leasable space. Picar has received an offer from a BPO firm that wants to rent the entire building and they will be designing the building to suit the company’s preferences.

RLC opens 32nd mallRobinsons Land Corp. (RLC) recently opened its 32nd shopping mall called Robinsons Magnolia at the former site of the Magnolia ice cream house.

The brand new four-storey retail complex has a gross floor area (GFA) of 108,000 sqm with a leasable area of 42,000 sqm. It forms part of a master-planned self-contained community that will give rise to four residential towers, which will occupy 2 ha of the total 5 ha-property.

Situated along Aurora Blvd. corner Doña M. Hemady Ave., Robinsons Magnolia is RLC’s third shopping mall in Quezon City and its eighth in Metro Manila.

SM opens GenSan mallSM Prime Holdings, Inc. (SM Prime) recently opened its 45th shopping mall in the country, the SM City General Santos, with a gross floor area (GFA) of 95,764 sqm.

“With its thriving economy, General Santos provides an ideal venue for SM Malls as we see a huge potential for growth in the city,” said SM Prime President Hans T. Sy.

Located in Lagao District, General Santos City, SM City General Santos is SM Prime’s first mall in South Cotabato. It is already 80% occupied by various tenants.

Century builds in Quezon CityCentury Properties Group is creating a 4.4-ha community of healthy pursuits in Quezon City dubbed as The Residences at Commonwealth by Century.

Commonwealth by Century seeks to surpass the standards set for residential projects by introducing pioneering amenities and features

that will exceed what the market has been accustomed to.

An eight-tower mid-rise development, Commonwealth by Century, integrates a world-class design, larger unit cuts with extended balconies, and distinctive, beyond-the-usual amenities that encourage residents to engage in healthy pursuits.

TELECOM

Globe to complete USD 700-M network upgrade next yearGlobe Telecom Inc. expects to complete its USD 700-M nationwide network modernization program by first quarter next year with the completion of the project in key cities in Metro Manila including Makati, Mandaluyong, and Pasig in the fourth quarter this year.

Critical areas in Metro Manila are now entering the completion phase with Quezon City at 90-% completion, said Globe President and Chief Executive Officer (CEO) Ernest L. Cu, pointing out that Pasig and Mandaluyong cities would be done by October while Makati would be completed by November this year.

So far, Globe has rolled out new equipment in high traffic areas such as Davao, Cebu, Caloocan, Malabon, Navotas, Valenzuela, Marikina City as well as the towns of Angono, Antipolo, Baras, Binangonan, Cardona, Jala-Jala, Morong, Pililia, Rodriguez, San Mateo, and Tanay and Teresa in Rizal.

PLDT doubles international bandwith capacityThe Philippine Long Distance Telephone Company (PLDT) can now more than double its international bandwidth capacity after completing its USD 400-M Asia Submarine-Cable Express (ASE) optical fiber cable system project with other leading regional telco firms last August.

PLDT invested USD 55M in the 7,200-km undersea cable network which uses 40 Gigabits per second

9October 2012

MAJOR PROJeCTS

NeDA okays P25-B infra projectsAs part of the government’s efforts to improve the country’s airport and railway systems, the Cabinet-level National Economic and Development Authority (NEDA) Board approved major infrastructure projects worth P25B.

The NEDA Board approved the Light Rail Transit (LRT) 2 East Extension project, the acquisition of new trains for the Metro Rail Transit Line 3 (MRT3), the Bicol International Airport in Daraga, Albay, and the New Bohol Airport in Panglao.

For one, LRT Line 2 East Extension project worth P9.6B would make travel from Rizal province to Manila easier and faster, while construction of the Bicol International Airport project is intended to replace the existing Legaspi Airport that is hampered by limitations and safety concerns.

DOTC bids P215-M port projectsThe government is planning to rehabilitate 31 municipal ports in different parts of the country following the call by the Department of Transportation and Communications (DOTC) for a public bidding for the P215-M infrastructure project.

The DOTC said the latest water transport facilities development program is being initiated in anticipation of the increased passengers and cargo throughput in the country.

The procurement program aligns with the DOTC’s master plan to reengineer the country’s transport system to make it convenient, affordable, reliable, efficient, and safe.

Korea eximbank lends P8.96B for Jalaur River projectThe government has signed a P8.96-B loan agreement with the Export-Import (Exim) Bank of Korea to finance the second stage of the Jalaur River multi-purpose irrigation project in Iloilo.

The agreement was recently signed in Malacañang by Department of

COMPANY NOTeS

Toyota builds P350-M schoolToyota Motor Philippines (TMP) Corp. is investing P350M in a world-class technical school in Santa Rosa, Laguna that will train highly-skilled automotive technicians.

“Skilled Filipino automotive technicians are in high demand not only in the Philippines but all over the world as well. With this new technical school, we expect that we will be able to give more young Filipinos attractive job opportunities in Toyota affiliates here and abroad,” said TMP President Michinobu Sugata.

Toyota said the school would be operational by 2013.

• PioDuran(Albay)• Clarin(Bohol)• Baclayon(Bohol)• BienUnido(Bohol)• Maribojoc(Bohol)• Plaridel(Bulacan)• Pulilan(Bulacan)• Balagtas(Bulacan)• Virac(Catanduanes)• Dolores(EasternSamar)

• Lawaan(EasternSamar)

• May-Olo(EasternSamar)

• Waso(EasternSamar)

• Barobo(EasternSamar)

• Bulawan(EasternSamar)

• Maputi(EasternSamar)

• Patag(EasternSamar)

• Canloterio(EasternSamar)

• SanPablo(EasternSamar)

• Bato(EasternSamar)

• PuntaMaria(EasternSamar)

• Cantupa(NegrosOriental)

• Siaton(NegrosOriental)

• Tanjay(NegrosOriental)

• Dapa(Surigao DelNorte)• Lupon(DavaoOriental)

• Gumaca(Quezon)• Mauban(Quezon)• Bansud(OrientalMindoro)

• Castilla(Sorsogon)• Jolo(Sulu)

Ports to be developed

(Gbps) technology upgradeable to 100 Gbps, with a minimum design capacity of 15 Terabits.

“This is the largest-capacity international submarine cable system ever to land in the Philippines,” PLDT President and Chief Executive Officer (CEO) Napoleon L. Nazareno said.

“This will enhance the country’s global competitiveness in attracting investments for business process outsourcing industries (BPOs) and other ventures at a time when investor interest in the Philippines is on the upswing,” said Nazareno.

With its landing station at Daet, Camarines Norte, the ASE provides the first and only direct cable connection from the Philippines to Japan that avoids the earthquake-prone seas south of Taiwan through which the cable systems of other carriers pass.

Finance (DOF) Secretary Cesar V. Purisima and EximBank of Korea Executive Director Sang-Wan Byun.

The loan will finance the construction of a high dam and reservoir, catch dam, bay dam, high line canal, and penstock in Sta. Barbara, Iloilo.

“The project also has a potable water component that will provide one cubic meter per second or 86,400 cubic meters per day for residents of Iloilo City,” National Irrigation Administration (NIA) Administrator Antonio S. Nangel said.

The project, which has a total budget of P11.2B, would service 31,840 ha of agriculture lands, covering 25 municipalities and is expected to be started in the first or second week of 2013 and completed by 2016.

Philippine Business Report10

Puregold allots P200M for Parco refurbishment Puregold Price Club Inc. (PPCI) is allotting P200M for the renovation of its 19 Parco Supermarkets to give them a new, modern look and attract more customers.

Puregold Investor Relations Head Jimmy Perez said Parco contributed 1.2% to the group’s total revenues in the first half of the year amounting to P23.3B.

Traffic growth at Parco increased 7.1% while average net ticket price amounted to P364M.

IPVG to acquire seafood exporterIPVG Corporation has undergone an initial agreement to acquire a leading producer and exporter of high quality, premium frozen seafood and aquaculture products catering to the global market.

The firm said the transaction may involve the issuance of primary shares, the sale of secondary shares, and the acquisition of profitable business assets.

Metrobank Group allots P1B for CSR projects The Metrobank Group earmarked a P1-B fund for its corporate social responsibility (CSR) projects for the next five years.

Metrobank Chairman and Founder George S.K. Ty pledged approximately USD 25M to support the group’s CSR programs during the bank’s 50th anniversary celebration last September.

The fund will boost the Ty family’s GT-Metro Foundation (GTMF), which was formed to integrate the philanthropic undertakings specifically on the fields of health, environment, and environmental health.

ABS-CBN branches out to theme park developmentABS-CBN Corp. is branching out into theme parks and resorts

development, incorporating ABS-CBN Theme Parks & Resort Holdings Inc. with an initial authorized capital of P270M.

ABS-CBN is banking on the flourishing market for family amusement rides and live shows as Asia’s large populations are now moving up into the bottom rungs of the middle classes, triggering a boom in theme park construction. With more disposable income and free time, the continent’s growing middle class tend to spend some of it on thrill rides.

URC in talks to expand sugar businessUniversal Robina Corp. (URC), the listed snack food and beverage arm of JG Summit Holdings Inc., remains in talks to expand its sugar division through a local acquisition.

JG Summit Senior Vice President and Corporate Planning Head Bach Johann Sebastian said URC is in negotiations for the said acquisition.

The deal has a value of roughly P1B. The target acquisition is located near one of the company’s existing mills. The company operates four sugar mills, which are in Negros Oriental, Negros Occidental, Cagayan Valley, and Iloilo.

SM to buy retail stores in the southSM Investments Corp. (SMIC) will boost its retail business by acquiring supermarkets and other retail chains in the Visayas and Mindanao.

SMIC’s retail unit plans to build 30 stores this year alone. The expansion could be faster as some acquisitions are expected to transpire before yearend.

“We want to accelerate the growth of our retail business not just through organic growth but also through acquisitions,” said SMIC Chief Finance Officer (CFO) Jose Sio.

Palawan Pawnshop to expand branches nationwideThe Palawan Pawnshop is on its way to expand nationwide particularly

BILATeRALAGReeMeNT

PHL strengthens trade ties with Viet NamBilateral trade between the Philippines and Viet Nam reached USD 2.3B in 2011, close to hitting the 2016 target of USD 3B, as the two countries continue to strengthen economic relations.

During the Ho Chi Minh City-Manila City Investment and Trade Promotion Seminar and Business Matching held at the Sofitel Philippine Plaza in Pasay City last August, People’s Committee of Ho Chi Minh City Vice Chairman Le Manh Ha said Philippine trade with Ho Chi Minh City alone has reached USD 500M. The city, he said, also received 25 investment projects from the Philippines and a total capital of USD 6.5B.

Department of Trade and Industry (DTI) Undersecretary for Trade and Investment Promotions Group (TIPG) Cristino L. Panlilio said Vietnamese investors are interested in projects in the mining, energy and agribusiness sectors, noting that the Philippines remains a top investment destination.

BOC, Mexican Customs strengthen cooperationThe Bureau of Customs (BOC) and the Mexican Customs further strengthen cooperation to boost

in the Visayas and Mindanao by building 150 branches this year.

Palawan Pawnshop President and Chief Operating Officer (COO) Bobby L. Castro said besides the pawnshop, the company is also focusing on the expansion of its Palawan Express Pera Padala by strengthening its partnership with other remittance centers and agents.

The Bangko Sentral ng Pilipinas (BSP) said Palawan Pawnshop represents nearly 5% of the entire registered pawnshops in the country.

11October 2012

ASeANWATCH

ON THeCALeNDAR

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the Philippines’ trade with Mexico and facilitate enhanced border control and protection between the two countries by signing a pact last August.

BOC Commissioner Ruffy B. Biazon and Mexican Customs General Administrator Gerardo Perdomo signed the “Agreement on Mutual Administrative Assistance on Customs Matters” at the Manila Hotel.

Under the agreement, application of customs laws between the Philippines and Mexico has been strengthened and the conduct of investigation and information sharing, especially in addressing the global problem on smuggling, has been clearly laid out.

PHL taps Taiwan to revive shoe industryThe Philippines is partnering with Taiwan to provide technical training to a number of Filipino shoemakers to revitalize the shoe industry in the country.

Philippine Footwear Federation Inc. (PFFI) Director General Roger Py said through the agreement signed during the Joint Economic Conference held in August in Taipei, the industry aims to send at least 30 Filipino shoemakers to undergo technical training in Taiwan.

National Statistics Office (NSO) data showed that the country imported more than USD 133M worth of footwear while exporting only USD 21M in 2011. Footwear imports for the first quarter of the year was recorded at USD 39M while exports from January to May this year reached only USD 10M.

Py said the local industry is looking to tie up with Taiwanese investors for production of high-end brands in Metro Manila footwear factories. Production of cheaper brands, he said, will be focused on economic zones to lessen production cost.

Filipinos most active online shoppers in Asia Pacific Filipinos are the most active in Asia Pacific in online deals according to the Nielsen survey. Data showed that the trend in the Philippines toward going online for shopping has been increasing in the last two years.

The study was intended to determine the influence of digital media on shopping habits in the Philippines and the rest of Asia.

How PHL fares with Asia Pacific

August 2012 Philippines Asia PacificOnlineShopping 47% 39%Onlinedealssearch 61% 39%Completedonlinepurchase 34% 62%

“The Internet presents an opportunity for retailers and manufacturers to tap into a broader consumer base and increase engagement levels with consumers. However, clear strategies to build online consumers’ trust and ultimately increase purchase conversion rates need to be ascertained,” said Nielsen Philippines Managing Director Stuart Jamieson.

Se Asia economies stay resilientStrong domestic demand and an ability to increase state spending are expected to cushion much of Southeast Asia from the worst of the global downturn in coming months.

Fixed-asset investment has also been strong in the region so far this year, while investors have been pouring into its equity markets and bonds, further shoring up economies as the global crisis drags on.

The region has two considerable advantages over its more developed counterparts in the West: growing

Philconstruct 2012The Philconstruct 2012, a showcase on the latest products, service, trends in the building industry,will be held on November 07-10, 2012 at the SMX Convention Center in Pasay City.

Architects, builders, building merchants, building and housing institutes and associations, civil and consulting engineers, financiers, government departments, land and quantity surveyors, planners, plumbers, property developers, and specifiers are invited to attend.

ranks of increasingly affluent consumers and governments with healthy finances and relatively low debt levels.

The accelerated Philippine consumer spending is attributed in part to many Filipinos working overseas sending money home.

Meanwhile, Philippine government spending in the first seven months of 2012 surged 15.2% from a year earlier.

Philippine Business Report12

Entered as Third-Class Mail at theMakati Central Post Office

under Permit No. 504valid until 31 December 2012

Philippine Business ReportOctober 2012

Philippine Business Report is publishedmonthly by theTrade and Industry InformationCenter (TIIC),Department ofTrade and Industry, 2FTrade and IndustryBuilding, 361Sen.Gil J. PuyatAvenue,Makati City 1200, Philippines • Phone (+632) 895.3611 • Fax (+632) 895.6487 •To subscribe, e-Mail: [email protected]

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

economic Indicators

*GNI - Gross National Income

01234567

1Q (2011) 2Q (2011) 3Q (2011) 4Q (2011) 1Q (2012)2Q (2012)

GDP Growth Rate (%)

0123456

1Q (2011) 2Q (2011) 3Q (2011) 4Q (2011) 1Q (2012) 2Q (2012)

GNI Growth Rate (%)

4,4004,6004,8005,0005,2005,4005,600

Jul-12Jun-12May-12Apr-12Mar-12Feb-12

Imports (In USD Billion)

0100020003000400050006000

Aug-12Jul-12Jun-12May-12Apr-12Mar-12

exports (In USD Billion)

128129130131132

Sep-12Aug-12Jul-12Jun-12May-12Apr-12

Consumer Price Index(2000 base year)

012345

Sep-12Aug-12Jul-12Jun-12May-12Apr-12

Inflation Rate (%)(1994 base year)

40

41

42

43

44

Oct-12Sep-12Aug-12Jul-12Jun-12May-12

Peso per US Dollar RateAs of October 19, 2012

01234567

Oct-12Sep-12Aug-12Jul-12Jun-12May-12

Interest Rate (%)