Philippine Business Report (Sept.2012)

1September 2012

Volume 23 No. 09 September 2012

The Board of Investments (BOI) sticks to its P400-B investments target this year, confi dent that it has up to P150B worth of new projects coming this second semester.

Department of Trade and Industry (DTI) Undersecretary for Trade and Investment Promotions Group (TIPG) Cristino L. Panlilio said they are expecting huge investments in power and infrastructure ventures to register in the second semester.

The BOI registered P166-B projects in the fi rst semester.

“We are working on it. We are still confi dent of our target,” said Panlilio.

He said the BOI expects investment pledges during President Benigno S. Aquino III’s trips to London and Washington to register in the second semester. These investments include the USD 1-B compressed natural gas (CNG) project and the USD 1-B project of GN Power in Subic.

There are also prospects for new shipbuilding projects from Japan after the BOI conducted an investment mission there where they met members of the Japanese Shipbuilders Association, who have been encouraged by the successful operation of Tsuneishi Corp. in Cebu.

“Different provinces have offered sites for shipbuilding projects. Of course, Subic Freeport still has enough land in the Redondo Bay to accommodate other shipbuilders,” he added.

The BOI is also reviewing a list of non-Chinese investors in China like South Koreans and Taiwanese to relocate to the Philippines, which offers lower cost of doing business.

Other targeted investors in Asia are from Turkey and the Middle East countries that include Kuwait, United Arab Emirates (UAE), and Saudi Arabia for both exports market and investment sources.

BOI eyes P400-B investments

Investor confi dence in PHL risesThe Philippines has seen renewed investor confi dence over the past few months largely due to President Benigno S. Aquino III administration’s good governance thrust, Department of Trade and Industry (DTI) Secretary Gregory L. Domingo said.

“P-Noy’s [President Aquino’s] good governance has really restored confi dence in the Philippines among foreign investors,” said Domingo,

noting that in the fi rst semester ths year, the country had seen more visits from foreign company offi cials compared to that of the whole of 2011.

DTI Undersecretary for Trade and Investment Promotions Group (TIPG) Cristino L. Panlilio said the Philippines entertained 28 in-bound missions in the fi rst semester, exceeding the 18 recorded in 2011. An in-bound mission involves the visit

to the country of a group of businesspeople coming from at least fi ve companies.

Panlilio said some 320 foreign companies visited the country in the fi rst semester.

He said the administration’s good governance thrust meant every Department did its part to fi ght corruption and promote transparency in government processes.

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INDUSTRYTRENDS

Business optimism soars in PHLConfi dence among local business leaders improved in the second quarter of the year, the latest survey by the Grant Thornton International Business Report (IBR) showed.

Survey results, released by audit, tax, and advisory services fi rm Punongbayan & Araullo (P&A), showed the Philippines ranked second with 90-% rating, just behind Peru (96%) and at par with Chile.

In the fi rst quarter, the Philippines was at fourth spot, behind Peru (90%), Brazil (86%), and the United Arab Emirates (UAE) (84%).

For the second quarter, a balance of 40% of local respondents expected increased profi tability.

On employment, Filipinos who are already employed can expect to be aptly compensated for the next 12 months.

An overwhelming majority of the respondents (80%) plan to increase salaries either in line with infl ation or by more than infl ation, and none of the businesses intend to reduce pay.

PHL consumers second most confi dent Consumer confi dence in the Philippines is the second highest in Asia Pacifi c, 23 index points higher than the regional average, the latest Nielsen Global Consumer Confi dence Survey showed.

Some 77% Filipinos believe the state of their personal fi nances looks good or excellent, considerably higher than the Asia Pacifi c average of 52%.

Also, 47% of Filipino consumers think the next 12 months is a good or excellent time to buy the things they want or need, 13 percentage points higher than the Asia Pacifi c average (34%). This makes Filipinos the third most likely to purchase the things they want and need within the region in the next 12 months.

“Strong consumer sentiment and confi dence in personal fi nances provides an exciting time for businesses in the Philippines. Consumer willingness to spend means companies must compete for share of wallet,” said Nielsen Philippines Managing Director Stuart Jamieson.

Foreign business groups eye opportunities in PHLBusiness delegations from Europe and Latin America are visiting the country in October to look for investment opportunities, the Philippine Chamber of Commerce and Industry (PCCI) said.

“Europe and Latin America will be sending delegations here in October. They want to see what business opportunities are available for them here,” PCCI President Miguel B. Varela said.

The foreign companies, which would come from Europe, Brazil, Argentina, Chile, and Peru, are interested in investment opportunities in manufacturing, services, semiconductors, tourism, and business process outsourcing (BPO). Some are interested in the government’s public-private partnership (PPP) projects.

CITEM cites opportunities in exportsThe Center for International Trade Expositions and Missions (CITEM) urged the local industry to take advantage of a looming food export boom in Asia, which has emerged as the world’s leading tropical food source, supplier, and consumer.

CITEM Executive Director Rosvi C. Gaetos said such developments had prompted the government to rethink its position and focus its export strategies and efforts on Asia, both as a priority market and as a major regional trading bloc for the rest of the world.

“We are now promoting our food exports for intra-Asian and inter-regional trade as part of the Asian bloc,” said Gaetos, citing it as the reason for the transformation of the country’s International Food Exhibition (IFEX) from a Philippine to Asian and global marketing event.

She said a complete product development program and packaging assistance would be made available to the participating regional micro, small, and medium enterprises (MSMEs) of a partner

The anti-corruption efforts, he said, allowed investors to see the government treating everyone fairly, particularly in bidding processes. National Competitiveness Council (NCC) Private Sector Co-Chairman Guillermo Luz said apart from more transparent bidding processes, there was an improvement in investors’ level of trust in the government as anti-corruption efforts have also resulted in better project implementation.

Luz said the better and faster implementation of infrastructure projects meant the government is making progress in addressing infrastructure gaps, which have hindered investments to the country in the past.

The government has cut red tape and streamlined processes to make the environment more conducive to businesses.

The economy expanded by 6.4% in the fi rst quarter, the second strongest growth posted in the region, with support from accelerated government spending and exports rebound.

3September 2012

province under the show's Partner Region Program.

As preparation for their participation in IFEX, local exhibitors will be provided with trainings, seminars, and one-on-one consultations in production, food quality and safety, packaging and labeling, marketing and promotions, pricing and costing, and basic negotiation techniques.

Relaunching itself as “Asia's Ethnic Food and Ingredients Show,” IFEX Philippines is the country’s biggest and most important food trade event featuring fresh, natural, halal, and organic food products. It will be held at the SMX Convention Center, Pasay City on May 16-19 next year.

Expected to join the event are over 700 exhibitors from the Philippines and such other countries as China, India, Japan, Korea, Singapore, Malaysia, Brunei, Indonesia, Thailand, Viet Nam, Taiwan, and Turkey.

“Thus, local exhibitors can look forward to global exposure and more opportunities to connect with their leading Asian counterparts," Gaetos said.

DTI seeks improved Turkish tradeThe Department of Trade and Industry (DTI), through the Bureau of Export Trade Promotion (BETP), is seeking to improve business and trade ties with investors from Turkey, one of the new and emerging markets for Philippine exporters.

The government is currently preparing for a business mission next month in Turkey, specifi cally in Ankara and Istanbul.

“We will make sure that that they will fi nd the Philippines an investment destination of choice,” DTI Undersecretary for Trade and Investment Promotions Group (TIPG) Cristino L. Panlilio said.

Philippine exports to Turkey have been improving from 2009 to 2011, with shipments amounting

to USD 33.9M in 2009, USD 61.8M in 2010, and USD 66.4M in 2011.

“In our cursory view and consistent with options from both donor and multilateral agencies that we speak with, Turkey could be the next bright spot in Europe for economic bilateral relations,” BETP Assistant Director III Jason T. Lao said.

Turkey is one of the fastest growing economies, with a gross domestic product (GDP) growth rate of 8.5% in 2011.

“Given the quick fi nancial lay of the land for Turkey, what comes to mind is its huge stock value for both inward and outward direct and indirect portfolio investment as well as the surging buying behavior of its relatively affl uent consumers,” said Lao.

Animation industry pushedGlobal fi lm and animation companies are in town to explore local talents and to help small and medium enterprises (SMEs) to develop a regional creative focus to market their stories and products abroad.

“We're always looking for new talent and to get involved in new areas. We see the Philippines' potential as unrealized, that's why we're here,” Pixar Co-founder and now Alligator Planet LLC Chief Executive Offi cer (CEO) Ralph Guggenheim said.

Guggenheim and a number of international fi lm and animation industry players were here to conduct several workshop sessions during the two-day annual fi lm, animation, and gaming congress put together by the Department of Trade and Industry (DTI) with

Cinemalaya, Cultural Center of the Philippines (CCP), Half Ton Truck, and ActivAsia Inc.

DTI Undersecretary for Trade and Investment Promotions Group (TIPG) Cristino L. Panlilio said the government and the private sector have been working together to push for the creative services sector’s development.

"The BOI [Board of Investments] is working to encourage the different sectors of the creative industry to develop with new technologies. This is one of the areas of the IPP [Investment Priorities Plan],” said Panlilio.

The BOI is looking for more investors in the BPO sector especially in the creative services industry. The fi rst congress which had a theme “Made in the Philippines: Storytelling to Storyselling” gathered industry players, investors, and the media to discuss issues, challenges, and potentials. Non-voice BPO gaining strengthWhile the Philippines is set on maintaining its global leadership in voice information technology-business process outsourcing (IT-BPO) or contact centers, it is rapidly expanding its share of the global non-voice IT-BPO services market, the Business Processing Association of the Philippines (BPA/P) said.

Last year, the IT-BPO industry grew at an impressive rate of 24%, but the non-voice sector expanded by an even more impressive rate at 30%, the BPA/P said.

BPA/P Senior Executive Director Gillian Virata attributed the expansion in the non-voice services to the strengthening of service delivery in the fi nancial services, insurance, human resources, logistics, engineering, software, media, healthcare, IT, and legal industries.

“The demand for new outsourced services is increasing and the potential for non-voice and other

Philippine Business Report4

TRADE ANDINVESTMENTS

emerging services is enormous,” Virata said.

“IT-BPO has now evolved into an ‘industry of industries’ with a broad range of new sectors seeking to leverage opportunities in the delivery of non-voice services,” she added.

Research and consultancy fi rm Everest Group recently forecast the global market for outsourced services to reach between USD 220B to USD 280B this year, with 90% expected to be non-voice work.

Last year, 33% of USD 11B in Philippine IT-BPO revenues was generated by non-voice sectors, expanding to USD 3.6B from USD 2.8B.

The sector formerly referred to as medical transcription now includes healthcare information management, while animation services are now grouped with other creative services such as game development and graphic design.

Business services for industries such as banking, transportation, manufacturing, retail, and pharmaceutical are also gaining foothold.

The Philippine IT-BPO industry last year accounted for about 5% of the country’s gross domestic product (GDP). One-third of the output consisted of non-voice work, delivered by roughly 220,000 employees.

the Zamboanga City Special Economic Zone and Freeport Authority (ZamboEcozone & Freeport) this month.

The P150-M feed mill plant would supply feeds and other inputs to the poultry and livestock industry in Western Mindanao.

“The entry of B-Meg would have a big economic impact on the city and Zamboanga Peninsula because local farmers would be contracted to supply yellow corn and cassava for the plant,” ZamboEcozone & Freeport Investments Director Edgar B. Lim said.

The Zamboanga plant would have the capacity to produce 10 metric tons (MT) of feed per month.

ENERGY

Eastern Petroleum investing USD 108M in biomass power plant in MindanaoEastern Petroleum Corporation’s renewable energy (RE) unit will invest up to USD 108M for a two-phased biomass power plant project in Agusan del Norte, Mindanao.

Eastern Petroleum Chairman Fernando L. Martinez said the fi rst unit will command a capital outlay of USD 60M for the facility’s designed capacity of 20 megawatts (MW), which is targeted on stream by 2015.

The next phase of investment amounts to USD 48M and will double the facility’s capacity in three years.

The facility will be fed with wood chips and other so-called agricultural wastes like coconut husks.

Otto Energy commits USD 12M Australian upstream oil fi rm Otto Energy Ltd. has programmed several exploration projects for its offshore gas fi elds in the Philippines.

The energy fi rm committed to spend more than USD 12M for production and exploration projects.

Specifi cally, Otto Energy said it scheduled two well developments for next year as its fi nal investment decision for the Galoc Phase 2.

The Galoc joint venture has pre-invested in the required infrastructure, including wellheads, fl owlines, and umbilical lines to ensure drilling occurs in 2013.

Chevron keeps PHL operations largest in Asia Pacifi cChevron Philippines Inc., one of the country’s major oil players, is putting up as much as 250 new service stations in the next four to fi ve years, keeping the Philippine operations the largest in Asia Pacifi c.

“We have a network of 2,000 sites across Asia and we are looking to add 500 in the next couple of years and the large part of that is going to come to the Philippines,” Chevron General Manager for Asia Pacifi c Sales and Marketing Support Shahid Ahmed said.

Ahmed said 25%-50% of the 500 new service stations or 125-150 branches will be put up in the Philippines in the next four to fi ve years.

To date, Chevron has more than 850 branches in the Philippines.

Jetti Petroleum seeks BOI perksJetti Petroleum Inc., a fi rm engaged in the import, blending, and distribution of petroleum products, is applying for registration with the Board of Investments (BOI) to qualify for incentives for its two storage facilities.

Jetti is investing in a facility with a total storage capacity of 70M liters in Mariveles, Bataan and 6M liters in its Western Visayas terminal in Iloilo City.

AGRICULTURE/AGRIBUSINESS AND FISHERY

San Miguel to establish P150-M feed factorySan Miguel Corp. will start making B-Meg products inside

5September 2012

GREEN PROJECTS

EGCO eyeing solar, wind projectsBeyond the planned expansion of its 460-megawatt (MW) Quezon power plant acquisition, Thai fi rm EGCO PCL Group will also explore renewable energy (RE) opportunities in the country, primarily solar and wind power projects.

EGCO Senior Executive Vice President John Matthew Palumbo said a go-signal was already given to Quezon Power Managing Director Frank Thiel to fi rm up plans and strategies on these proposed ventures.

Palumbo said they are studying options on how to pursue solar installations even without the support of feed-in-tariffs.

For wind development prospects, Quezon Power already made previous studies on targeted sites. It may just need to update some data or re-calibrate investment plans according to existing policies.

Butuan attracts huge foreign projectsButuan will host three huge foreign investments in hydro, solar, and biomass power projects and a commercial establishment by Robinsons.

Butuan City Mayor Ferdinand M. Amante Jr. said the three foreign investors are the Japanese Chodai Group and 8 Japan, Enfi nity of Belgium, and Malaysian Transport Division (MTD).

Amante said the Japanese investors are now undertaking a feasibility study for a 15-megawatt (MW) hydro power generation project and another 6-MW biomass power

project that would entail the development of a tree plantation over an 11,000-ha property to be leased by the local government.

Enfi nity would be investing in a 50-ha solar farm to generate a 10-MW power plant.

MTD is investing P1.5B for a township project on a 5.5-ha property complete with commercial center and clustered government offi ces. The project also includes the establishment of a big convention center and a hotel.

Amante said Robinsons is investing P1B for the development of a 6-ha property into a commercial center and a hotel.

INFRASTRUCTURE/PUBLIC-PRIVATE PARTNERSHIP PROJECTS (PPP)

Manila Water spends P23.6B for pipesThe Manila Water Company has spent P23.6B of its P50-B capital investment program to replace old and leaking pipes since becoming the East Zone concessionaire of the Metropolitan Waterworks and Sewerage System in 1997.

The fi rm said saving water has always been a top priority because of the huge demand for water brought on by the increasing population in the concession zone, especially since 98% of Metro Manila’s water supply come only from Angat Dam.

The pipe program covers the replacement and laying of new tertiary, secondary, and primary lines that will ensure increased reliability and access to water of more people.

8 PPP projects billed as key to faster growthThe Philippine economy could grow by additional two percentage points this year if the government is able to bid out all eight infrastructure

projects under its public-private partnership (PPP) program.

Given these estimates, Department of Finance (DOF) Undersecretary for Domestic Finance Group and Management Gil S. Beltran said the Philippine economy has the potential to grow by 7%-8% this year from the offi cial target range of 5%-6% if the PPP projects are rolled out as planned.

Among the PPP projects set to be rolled out this year is the P15.8-B Ninoy Aquino International Airport (NAIA) Expressway project which has a total length of 9.4 km and is expected to ease traffi c going to and from the Manila International Airport at the NAIA complex.

Furthermore, it will provide direct links to passenger terminals 1 and 2, including the International Cargo Terminal.

With the NAIA Expressway Project up for bidding, the government is on track to hitting its target to bid out eight PPP projects this year, PPP Center Executive Director Cosette V. Canilao said. Sun Life assessing PPP projectsSun Life Financial Philippines Inc. is interested in investing in the government’s public-private partnership (PPP) projects.

Sun Life Financial President and Chief Executive Offi cer (CEO) Rizalina G. Mantaring said the parent company of Sun Life in Canada has about 15% of its assets in insurance invested in PPPs.

But while the local subsidiary is not yet considering allotting the same amount in infrastructure-related projects here, it is something that is under assessment.

“There’s defi nitely a lot of experience in Canada in investing in PPP projects and we already have a criteria for assessing a project. So, if a project passes the criteria, then we are certainly interested,” said Mantaring.

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In the Philippines, Mantaring noted roads and toll roads have particular appeal because of its steady income streams.

GSIS, Macquarie set up USD 625-M fund The Government Service Insurance System (GSIS) and Australia’s Macquarie Group have set up a USD 625-M fund to invest in infrastructure projects in the Philippines, including those to be offered under the public-private partnership (PPP) program.

Macquarie Infrastructure and Real Assets (MIRA) Senior Managing Director Frank Kwok said the fund, Philippine Investment Alliance for Infrastructure (PINAI), is the fi rst of its kind in the country and well-timed to capitalize on various infrastructure opportunities in the Philippines.

Kwok said other investors in the fund include Dutch pension fund asset manager Algemene Pensioen Groep (APG) and the Asian Development Bank (ADB).

The state-run provident fund GSIS contributed the bulk worth USD 400M while the ADB accounted for USD 25M.

PINAI will invest equity and equity-linked instruments directly in infrastructure projects across sectors such as transport, renewable energy (RE), and telecommunications.

MacroAsia looks at airport projects MacroAsia Corp. is keen on investing in airport projects to be bid out under the government’s public-private partnership (PPP) program, including the Ninoy Aquino International Airport (NAIA) as well as airports in Cebu and in Pampanga.

MacroAsia Corp. President and Chief Executive Offi cer (CEO) Joseph T. Chua said the company is waiting for the implementing rules that would guide its decision on the airport project investment. Other regional airports being studied by the government include those in Bohol, Laguindingan in Misamis Oriental and Puerto Princesa in Palawan.

The government is seeking private-sector participation to upgrade the country’s underdeveloped transport infrastructure as it aims to attract investments and boost tourist arrivals to 10M by 2016 from 3.5M visitors last year.

Some of the country’s biggest business groups have expressed interest in the program, including Aboitiz Equity Ventures Inc., Ayala Corp., JG Summit Holdings Inc., Metro Pacifi c Investments Corp., and San Miguel Corp. (SMC).

AVIATION Cebu Pacifi c to invest USD 1B in new planesCebu Pacifi c (CEB) is spending nearly USD 1B next year to acquire new planes to undertake long-haul fl ights for the fi rst time.

CEB President Lance Y. Gokongwei said the airline will use bank fi nancing by export credit agencies in buying seven A320s costing USD 85M each and two A330s costing USD 160M each amounting to USD 915M. These aircraft are expected to be delivered next year.

Gokongwei said CEB is looking for long-haul fl ights in the Middle East and an additional destination in the United States (U.S.).

“We are exploring serving cities where large Filipino community resides. Data indicate that more than half of Filipinos deployed in these regions take multiple stops and connecting fl ights because no home carrier can fl y them there non-stop,” he said.

For this year, CEB is taking in three new A320s and another fi ve planes.

The airline has also placed orders for eight A330s, two of which are scheduled to be delivered by the third quarter of 2013.

Cebu Air, SIAEC sign USD 236-M contractCebu Pacifi c (CEB) budget carrier operator Cebu Air Inc. has inked a USD 236-M contract with SIA Engineering Co. Ltd. (SIAEC) for the maintenance, repair, and overhaul services of its fl eet.

The fi ve-year contract covers the rapidly growing fl eet of Cebu Air which is beefi ng up its current fl eet of 30 A320/A319 aircraft with the delivery of an additional 22 A320 aircraft over the next fi ve years.

SIAEC Chief Executive Offi cer (CEO) Wiliam Tan said the agreement strengthens synergies and excellent relationship between SIAEC and Cebu Air since the signing of the fi rst fl eet management contract in 2005.

Cebu Air Chief Executive Offi cer (CEO) Lance Y. Gokongwei said the next fi ve years would be an exciting time for the airline as they continue to grow their fl eets and widen networks.

ZestAir considers getting bigger aircraftZest Airways Inc. is considering the acquisition of bigger aircraft such as Boeing 777 or Airbus 330 for its new medium- to long-haul fl ights next year.

ZestAir Chairman Donald G. Dee said the airline is initially adding fl ights to Australia and New Zealand to beef up its regional destinations that now include China, South Korea, and Taipei.

Dee said ZestAir intends to be a major regional player in the coming years by bringing passengers directly to tourist destinations in the country, saying this will help the Department of Tourism (DOT) achieve its 10M visitors target by 2016.

ZestAir Chief Executive Advisor Brian Hogan said the airline is also searching for better priced

7September 2012

second-hand airlines especially with the closure of India’s King Fisher’s Airlines.

BPO/IT

IBM to provide CEMEX outsourcing servicesIBM has signed a 10-year, USD 1-B outsourcing deal with CEMEX to provide a wide range of information technology (IT) services including research and development (R&D).

IBM would offer a full range of outsourced services including consultation, technical, design, build, operate, business process management, infrastructure services, and application services. The company would also work in areas like indirect procurement, asset management, supply chain, and energy management.

CEMEX Chairman and Chief Executive Offi cer (CEO) Lorenzo H. Zambrano said the agreement would transform CEMEX into an increasingly fl exible, agile, and competitive global company.

“IBM’s state-of-the-art IT infrastructure, business processed and applications will help CEMEX achieve its goals of becoming more competitive. We see our strategic relationship with CEMEX as a powerful example of building smarter planet,” IBM Senior Vice President for Sales and Distribution Allen Bruno V. Di Leo said.

Cognizant opens new delivery centerCognizant has opened a 1,000-seat delivery center in Pasig City to serve its American and European clients in the fi nancial services, healthcare, manufacturing and logistics, retail, hospitality, telecommunications, and consumer goods industries.

“The Philippines is among our key global delivery centers along with India and China that provide a broad array of capabilities across industries and service lines,” Cognizant Vice Chairman Lakshmi Narayanan said.

Cognizant is an information technology (IT), consulting, and business process outsourcing (BPO) service provider that started operations in the Philippines in December 2009. It has grown and now delivers a broad range of services from its existing facilities in Manila.

“The new center is a result of our continued investments in people, facilities, systems, and processes. This new development further strengthens our integrated global delivery capability and our success in leveraging the best talent globally,” Narayanan said.

Cognizant also integrates social responsibility in its platform, conducting classes, setting up libraries, and organizing health camps in local schools. The company has also adopted Eusebio C. Santos Elementary School in Taguig City.

Samsung considers PHL BPO servicesSamsung is considering the establishment of business process outsourcing (BPO) operations in the Philippines to augment its existing back offi ce support in South Korea and India.

Department of Trade and Industry (DTI) Undersecretary for Trade and Investment Promotions Group (TIPG) Cristino L. Panlilio said Samsung could easily fi ll-up a 200-seater BPO center.

Panlilio said the planned Samsung BPO site is expected to serve as customer relations and back offi ce support for its global operations.

Samsung’s latest investment is Phoenix Semiconductor worth USD 500M in Clark Freeport Zone that has annual exports of USD 3.5B.

F&M Asia plans expansionGerman information technology (IT) fi rm Fritz and Macziol Asia (F&M Asia) is planning to expand its Philippine operations because of the dynamic economic growth and opportunities here.

“There is an abundance of IT talent here in the Philippines and we see our company growing more in the near future. Its economic performance over the past quarter gives reason to believe in the economy here,” F&M Asia President and Managing Director Lutz Kunack said.

F&M Asia is owned by IMTECH, which is globally known in customer service relations (CSR) activities with the success of Constructing a Future For Homeless People (CRASH).

At present, F&M Asia has contracts with Holcim, Metro Bank and Trust Co., Smart Telecom, Globe Telecom, and SM Shoemart.

MANUFACTURING

Light Engines partners with Cirtek for LED production United States-based original device manufacturer (ODM) company Light Engines will start mass production of light emitting diode (LED) products in the Philippines by partnering with Cirtek Holdings Philippines Corp.

Light Engines has corporate offi ces in the U.S. and a research, development (R&D), and design center in Russia.

The fi rm also designs and manufactures LEDs for various industries including outdoor signs, automobile, railroad signals, giant outdoor full-color LED displays, outdoor lighting, and various novelty products.

Cirtek, on the other hand, provides turnkey solutions that include package design and development, wafer probing, wafer back grinding,

Philippine Business Report8

assembly and packaging, fi nal testing of semiconductor devices, and delivery and shipment to its customers.

POWER

ERC approves P600-M Opol power plantThe Energy Regulatory Commission (ERC) has provisionally approved the P600-M Opol 138-kilovolt (kv) line of National Grid Corporation of the Philippines (NGCP) that will cater to the growing demand for electricity in Misamis Oriental.

“Rapid progress in Misamis Oriental necessitates the construction of a new, strategically-located substation to accommodate customers’ loads and eliminate possible line overloading and voltage problem,” NGCP said.

The province draws power from the 60-km Lugait-Carmen 69-kv line. For this year, Lugait-Carmen line is expected to hit 90% of its rated capacity and could increase to 103% in 2014.

NGCP is the private concessionaire of the country’s power transmission network. It brings electricity from power plants to private distribution utilities and electric cooperatives.

GBPC eyes expansion in MindanaoThe Global Business Power Corporation (GBPC) is eyeing Mindanao grid as expansion hub.

GBPC President Arthur N. Aguilar said the fi rm is studying the putting up of a bigger plant in Mindanao to achieve economies of scale.

The preliminary design will set up two units with 110 megawatts (MW) to 130MW each that are targeted to go on stream beyond 2016. This will also serve as a longer-term solution after the on-stream operations of the power plants currently being pursued by the Aboitiz and Alcantara groups.

Aguilar emphasized that the salient consideration for expansion would

be in the growing regions of Cagayan de Oro-General Santos-Davao.

DMCI to build power plants in PalawanThe DMCI Power Corp. is readying to build a diesel-fi red power plant and three new coal-fi red power plants in Palawan to cater to the growing demand of electricity in the province.

DMCI Power President Nestor D. Davidas said the diesel-fi red power plant will be up by September 2013 while the two 15-megawatt (MW) coal-fi red power plants will be built in October 2014 and in 2017, respectively.

He said the company is also eyeing for a third 15-MW facility that will use “circulating fl uidized bed technology” that is more environmentally effi cient.

REAL ESTATE

Picar ventures in a P60-B property developmentThe newest member of AMA Group of Companies, Picar Development Inc. (Picar), will invest P60B in real estate projects, which include the Stratford Residences that will rise as the tallest residential building in Makati City.

The investment will be divided into 10 to 15 projects, but the highlight of the P60-B project is the P11-B development of the 74-storey Stratford Residences.

Picar also invested in a mid-range residential and commercial

condominium development, the Chelsea, a 32-storey condominium that is envisioned to rise in the suburban district of Alabang.

Picar will also have the country’s fi rst telepolis (wi-fi enabled township) in the south of Metro Manila with Ara Vista Village, a 50-ha residential-commercial development in General Trias, Cavite.

Aside from the areas of Makati, Alabang, and Cavite, Picar is also considering having future investments in Calamba, Quezon City, Davao, Cebu, and Caticlan.

Empire East, Okada Group in P45-B luxury condo joint ventureEmpire East Land Holdings Inc. (ELI) has signed a joint venture agreement with the Kazuo Okada Group to take a majority stake in a P45-B luxury residential project in the Pagcor Entertainment City.

ELI said the agreement included Tiger Resort Leisure and Entertainment Inc. and Eagle 1 Landholdings Inc. ELI will take the lead with a majority stake in the development of the 12.95-ha luxury residential resort condominium project that will comprise more than 25 residential towers in several phases.

Rockwell Land earmarks P26.3-B for expansion Rockwell Land Corp. has earmarked P26.3B for the development of a new mixed-use complex on the site once occupied by Colgate-Palmolive Philippines.

The company is also slated to have a townhouse project in Quezon City and two condominium projects in Pasig and Makati in line with its bid to double its earnings to P2.2B by 2014.

Around P17.1B has been set aside for the construction of The Proscenium, which will feature fi ve upscale residential towers, a 700-seater performing arts theater and a retail center with an estimated leasable area

9September 2012

of 15,000 sqm. Construction will start in the fourth quarter this year.

TELECOM

PLDT taps U.S. fi rm for P1.3-B upgradeThe Philippine Long Distance Telephone Co. (PLDT) has tapped United States (U.S.)-based network specialist Ciena Corp. to undertake a P1.3-B project that will further increase the utility fi rm’s extensive network in the country.

PLDT President and Chief Executive Offi cer (CEO) Napoleon L. Nazareno said the project is part of the company’s P67-B network upgrade and modernization program that was launched last year. The project would increase the capacity and service fl exibility of PLDT’s domestic fi ber optic network (DFON) through the deployment of Ciena’s coherent 100 gigabites per second technology and optical transport network (OTN) switching solutions.

As the fi rst 100G network in the Philippines, Nazareno said this would put the country at par with Australia, Japan, Hong Kong, Singapore, and South Korea.

The upgrade would complete PLDT’s core network modernization program and support the delivery of next-generation services to customers such as fi ber-to-the-home, fi ber-to-the-building, LTE/4G, IPTV, and triple pay services. The project covering PLDT’s 50,000 km. of fi ber optic nationwide, is expected to be completed by November this year.

Globe completes Cebu network modernization rolloutGlobe Telecom has completed the swap-out of its cell sites and other network facilities in Cebu as part of the company’s massive USD 700-M modernization program across the Philippines.

The Cebu network change-out comes in the heels of the highly successful rollout phases in Southern

MAJOR PROJECTS

NEDA-ICC approves Cavite-Laguna tollway, Albay Int’l airport projectsThe National Economic and Development Authority (NEDA) Investment Coordination Committee-Cabinet Committee (ICC-CabCom) has approved two new transportation projects worth P48B.

Approved were the Cavite-Laguna Expressway (CALAX) Project and the Bicol International Airport Project, aimed at improving transportation effi ciency in Luzon.

The CALAX Project involves the fi nancing, design, and construction of a new four-lane expressway that stretches 47 km from the end of Cavite Expressway in Kawit, Cavite to Mamplasan Interchange of the South Luzon Expressway in Biñan, Laguna.

The project is estimated to cost P43.3B and is proposed to be fi nanced partly through public-private partnership (PPP) and Offi cial Development Assistance (ODA) from the Japan International Cooperation Agency (JICA).

The Department of Public Works and Highways (DPWH) is the project proponent.

Philippines, particularly in Davao Region, Zamboanga provinces and key areas of Mindanao, parts of Northern and Southern Luzon, as well as in the cities of Caloocan, Malabon, Navotas, and Valenzuela in the National Capital Region (NCR).

The Bicol International Airport Project involves the construction of a new domestic - Principal Class 1 airport of international standards in Daraga, Albay to replace the existing Legazpi Airport due to the latter’s limitations and safety concerns.

DA allots P67M for infra projects in SiargaoTo achieve the government’s rice suffi ciency target, the Department of Agriculture (DA) is allotting an initial P67M to fund a number of agricultural and fi shery infrastructure projects in Siargao Island, Surigao.

The move is expected to transform the place into an adequate producer of rice, white corn, other staple crops, vegetables, and aquamarine products by helping the farming and fi shing communities in Siargao.

Through the National Irrigation Administration (NIA), the DA will sponsor the P30-M construction and rehabilitation of irrigation systems this year.

Infra to boost investments The San Vicente-Gutan-Lubak-Nangaramuan-Anguib-Pozorobio road worth P355M has been completed, the Department of Public Works and Highways (DPWH) reported.

The 10-km infrastructure is geared to attract locators to the north eastern Luzon corridor.

The road network’s construction and rehabilitation will further help develop the whole area into a self-suffi cient industrial, marketable investment, fi nancial, and tourism-recreational center.

In addition, the road would make business and trade opportunities accessible to local entrepreneurs. The infrastructure is vital to the growth of the Cagayan Economic Zone Authority (CEZA), the region’s prime attraction.

Philippine Business Report10

COMPANY NOTES

uncertainty. Second, we would take this as an opportunity to challenge the organization to meet ambitious targets under adverse circumstances,” said PSC President and Chief Executive Offi cer (CEO) Jose Victor Paterno.

PSC’s system-wide sales exceeded P10B for the fi rst time and grew by 17% in 2011 to P10.7B. Net income grew to P356M from P277M in 2010.

PSC operates 447 7-Eleven stores.

BILATERALAGREEMENT

PHL-Germany tax treaty upThe Philippines and Germany concluded the fi nal round of negotiations on the revision of the agreement for the avoidance of double taxation on income and capital.

The treaty is also aimed at preventing fi scal evasion and fostering cooperation between the Philippines and other tax authorities by enforcing their respective tax laws.

An effective international tax treaty is expected to facilitate trade and investments.

Germany is a signifi cant economic partner of the Philippines. From January to November 2011, total trade was valued at USD 2.9B, with Germany as the biggest export market for Philippine goods in Europe.

Canada seeks air talks with PHLThe Canadian government expressed interest in holding talks with the Philippines to amend the existing air services pact between the two countries.

The talks aims to increase passenger traffi c between the two countries.

Canada’s Ambassador to the Philippines Christopher Thornley said while Canada may be open to holding air talks with the Philippines, existing entitlements of the two countries are not being fully utilized at the moment.

SM opens 44th mallSM Prime Holdings, Inc. opened its 44th shopping mall in the country and third in Pampanga.

The new SM City San Fernando has a gross fl oor area (GFA) of 42,625 sqm and a leasable area of 20,416 sqm, 95% of which have already been awarded to various tenants.

Toward yearend, SM Prime will have 46 malls in the Philippines and fi ve in China.

RLC building third Cebu mallRobinsons Land Corporation (RLC) started building its third mall in Cebu City and its 38th in the country.

The company is ramping up investments in Cebu, which is experiencing robust economic growth, a vibrant retail industry, and a booming tourism sector, said RLC President Frederick D. Go.

Robinsons Galleria-Cebu will be RLC’s third mall in Cebu after Robinsons Fuente and Robinsons Cybergate Cebu.

7-Eleven eyes 30 stores in CebuPhilippine Seven Corp. (PSC) will expand outside Luzon for the fi rst time by opening more than 30 stores in Cebu by yearend.

“We would continue with our aggressive expansion plan despite the increasing global

PHL-Sri Lanka partnershipThe Philippines and Sri Lanka have many areas for business cooperation that will mutually benefi t both countries.

Board of Investments (BOI) priority sectors for investors

• Agro-processing/dairy development

• Cosmetic industry based on local herbs and medicinal plants

• Creative work including artwork• Establishment of industrial estates,

special economic zones, and knowledge cities

• Fish-based industries• Fitness centers for providing

facilities for sports• Higher education/skills

development• Information technology (IT) and

IT-enabled services• Infrastructure projects (bonded

warehouses, cold and dry storage, and other logistics-based investments)

• Manufacture of apparel, textile, handlooms, and local gift industries

• Tourism and integrated leisure activities

• Urban infrastructure and commercial housing

These investments can be made at the small and medium entrepreneurship (SME) levels or large-scale enterprises, both export-oriented and import-substituting.

ASEANWATCH

Social media’s role in business tackled at Asian Marketing ConfabThe Philippine Marketing Association (PMA) held the second Asian Marketing Conference last July 19-20 in Makati City highlighting the signifi cance of technology, specifi cally social media, in shaping today’s business.

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of Trade and Industry (DTI) Undersecretary for Industry Development & Trade Policy Group (IDTPG) Adrian S. Cristobal Jr.

Cristobal said the symposium’s outcome will serve as a basis for the proposed multi-year programs in developing regulatory frameworks within the ASEAN.

PHL keen on ASEAN plan for power, gas pipeline link The Philippines is keen on joining an interconnected electricity grid and gas pipeline planned by Association of Southeast Asian Nations (ASEAN) members to increase available power and fuel supply.

The country’s participation, however, is dependent on available connection from nearby countries and the resolution of pricing and regulatory issues.

“There is a program called the ASEAN Power Grid (APG), which is supposed to interconnect the countries that can export electricity to countries that need to buy electricity,” Department of Energy (DOE) Secretary Jose Rene Almendras said.

PHL fi rms urged to join Thai trade fairs Filipino businesses are being encouraged to participate in Thailand’s international trade exhibitions and shows to take advantage of opportunities to increase trade between the two countries as well as with other Southeast Asian nations .

“Participation in trade shows organized in Thailand will bring not only networking opportunities with Thai businessmen, but also with regional stakeholders at both government-to-government and business-to-business level. This will open up Filipino businesses to increase their trading value through Thailand’s exhibition platform,” said Thailand Convention and Exhibition Bureau (TCEB) Director Supawan Teerarat.

Supawan said Thailand currently hosts major shows on sectors that are part of those being promoted in the Association of Southeast Asian Nations (ASEAN) such as food, agriculture, machinery, automotive, textiles, energy, jewelry, infrastructure covering information and communications technology (ICT), transportation, and tourism.

In a survey conducted by 24/7 Wall St. last year, the Philippines topped the list of countries with high social network penetration at 95%. Facebook was the most popular website with 93.9-% penetration rate. The Philippines was also the eighth highest Twitter user with 16.1-% penetration rate.

Different marketing experts shared insights on the signifi cant role of social media in attaining marketing success.

PHL, Thailand to lead 5.2-% Southeast Asian growthThe Asian Development Bank (ADB) is forecasting that Southeast Asian economies would grow by 5.2% on the back of the Philippines’ strong growth and Thai economy’s rebound.

According to ADB’s Asian Economic Integration Monitor (AEM), a semi-annual review of Asia’s regional economic cooperation and integration, strong domestic demand and private investment helped drive Southeast Asian growth in the fi rst half.

The region’s economies expanded 4.3% in the fi rst quarter after a weak 2.9% performance in the last quarter of 2011.

ASEAN regulatory reform symposium onAssociation of Southeast Asian Nations (ASEAN) offi cials converged for the fi rst time to discuss the region's regulatory reforms in preparation for the ASEAN full economic integration by 2015.

“The Philippine hosting of the ASEAN Regulatory Reform Symposium (ASEAN ARRS) will advance efforts to institutionalize regulatory reform dialogues within the ASEAN. The symposium will help identify key challenges in policy formulation and address the gaps to achieve a more comprehensive regulatory reform program for specifi c sectors and industries,” said Department

Manila FAMEThe Manila Furnishings and Apparel Manufacturers’ Exchange (FAME), the premiere design and lifestyle trade fair in the Philippines, will be held from October 17 to 20, 2012 at the SMX Convention Center in Manila.

With the theme “The Art of the Craftsman – The Soul of the Philippines,” this year’s Manila FAME aims to heighten the Philippines’ profi le as an innovative design producer of unique, cutting-edge, and sustainable items for home, business, and lifestyle requirements.

For more information, visit www.manilafame.com.

Philippine Business Report12

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

under Permit No. 504valid until 31 December 2012

Philippine Business ReportSeptember 2012

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

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

Economic Indicators

*GNI - Gross National Income

0100020003000400050006000

May-12Apr-12Mar-12Feb-12Jan-12Dec-11

Exports (In USD Billion)

4,2004,4004,6004,8005,0005,2005,4005,600

May-12Apr-12Mar-12Feb-12Jan-12Dec-11

Imports (In USD Billion)

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 (%)

126127128129130131

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

Consumer Price Index(2000 base year)

0

1

2

3

4

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

Inflation Rate (%)(1994 base year)

01234567

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

Interest Rate (%)

40.541

41.542

42.543

43.544

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

Peso per US Dollar RateAs of September 04, 2012