Volume 23 No. 05
May 2012
Streamlined BPLS boosts PHL competitiveness Efforts to streamline the Business Permits and Licensing System (BPLS) have resulted in high client satisfaction among the country’s entrepreneurs, a nationwide survey conducted by the National Competitiveness Council (NCC) showed. “We are addressing some of the major constraints to our economic growth in an effort to improve our competitiveness. Simplifying bureaucratic processes, particularly acquiring business permits at the local level, is one of the programs we have initiated together with the Department of the Interior and Local Government (DILG),” Department of Trade and Industry (DTI) Secretary Gregory L. Domingo said. More than half of the respondents were micro enterprises (57%), followed by small enterprises (21%), medium (12%), and large businesses (10%). Notably, 93% of 763 respondents reported that they did not pay facilitation or grease money to secure their business permits. “Streamlining business permits and automation are important in achieving transparency and honest public service,” said DTI Undersecretary for Industry Development and Trade Policy Group (IDTPG) Adrian S. Cristobal, Jr., NCC Alternate Co-chair. May 2012
“The survey provides valuable feedback from the private sector to improve government services as we continue to work on achieving better job generation and sustained, inclusive growth in the country,” Cristobal said. Based on the survey, businessmen suggested the following to further improve the business licensing system in the country: reducing the number of steps, procedures, and transaction time; publishing/ posting requirements, fees, and taxes; improving information dissemination on process and requirements; and establishing online application and payment systems. Half of the total respondents said they used a single form when applying for new permits and renewal. Some 31% said they were required to use three or more forms.
Of the 185 local government units (LGUs) who were part of the survey, 72 have reportedly adopted the BPLS while the remaining 113 are still in various stages of streamlining efforts. “We are supported by 355 LGUs and 289 more are expected to join the BPLS. The model provides opportunities to scale up and to be adopted in more cities and municipalities,” said Cristobal. President Benigno S. Aquino III had earlier called for increasing the number of LGU participants in the BPLS program from the original target of 480 LGUs by 2014 to 1,634 cities and municipalities by 2016. The DTI and DILG co-lead the BPLS project.
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INDUSTRY TRENDS US$50-B ICT industry revenues likely The country’s local information and communications technology (ICT) industry can contribute US$50B in annual direct revenues to the Philippine economy by 2016. This was the assessment in an ICT Industry Stakeholders Consultation Workshop conducted by the Department of Science and Technology InformationCommunications Technology Office (DOST-ICTO). Attendees to the ICT Industry Stakeholders Consultation Workshop • • • • • • • • • • • • •
Animation Council of the Philippines (ACPI) Business Processing Association of the Philippines (BPA/P) Computer Manufacturers, Distributors, and Dealers Association of the Philippines (COMDDAP) Contact Center Association of the Philippines (CCAP) Healthcare Information Management Outsourcing Association of the Philippines (HIMOAP) Information Technology Association of the Philippines (ITAP) Institute of Electronics Engineers of the Philippines (IECEP) National ICT Confederation of the Philippines (NICP) Philippine Chamber of Telecommunication Operators (PCTO) Philippine Computer Society (PCS) Philippine Electronics and Telecommunications Federation (PETEF) Philippine Society of Information Technology Educators (PSITE) Philippine Software Industry Alliance (PSIA)
The government is highly supportive of the industry and is looking at investing significantly in programs, policy, marketing, research, and talent development, said DOST2
ICTO Deputy Executive Director Alejandro Melchor III. “With government support behind the ICT industry the upside for the country is tremendous. Other than the US$50B in direct revenues, we are also projecting US$150B in indirect investments in the economy, through real estate, transport and telecommunications, banking, taxes, and others,” Melchor said. Industry leaders from various ICT industry associations were present at the workshop, contributing ideas and brainstorming next steps to meet targets set during the event. This was the first time that industry associations and stakeholders from a broad section of the ICT industry were gathered with the objective of planning and mapping out strategies for the industry after consultations for the development of the Philippine Digital Strategy (PDS) in 2010. PHL has fourth ‘most optimistic’ business leaders globally The Philippines has the fourth “most optimistic” community of business leaders in the world due to government efforts in easing the cost of doing business, a survey by Grant Thornton’s local audit, tax, and advisory firm Punongbayan & Araullo (P&A) showed. The country’s high spot is based on the latest Grant Thornton International Business Report (IBR) for the first quarter of 2012, which ranked the Philippines just behind Peru, Brazil, and the United Arab Emirates (UAE). The report said 82% of Filipino respondents were upbeat about the next 12 months. Peru, Brazil, and the UAE had a confidence index (CI) of 90%, 86%, and 84%, respectively. Following the Philippines in the global ranking of territories with optimistic business leaders were Georgia (78%), India (74%), Chile (68%), Germany (64%), and Mexico (62%).
The Philippines ranked higher than the likes of the United States (US) (46%), China (23%), Thailand (8%), and Singapore (2%). “The Philippines has done a good job of staying resilient despite the economic volatility around the world. Perhaps some business leaders are starting to feel the effects of the government’s drive to improve the ease of doing business in the country,” P&A Managing Partner Marivic Españo said. She said the Department of Trade and Industry’s (DTI) Philippine Business Registry (PBR) project is a good start. But we’ll see and look forward to what other concerned government agencies will contribute to this effort. Gov’t extends tax benefits of new, expanding businesses The government has extended the exemption from the payment of tariffs on capital equipment, spare parts, and accessories imported by new and expanding businesses registered with the Board of Investments (BOI) or those located in the country’s freeports and economic zones. President Benigno S. Aquino III signed Executive Order (EO) No. 70 to reduce the rates of duty on certain articles spelled out in an earlier issuance, EO No. 528 released in 2006, upon the recommendation of the National Economic and Development Authority (NEDA). “The effectivity of EO No. 528 is only for five years, from 2006 or until the enactment of a law amending EO No. 226, or the Omnibus Investments Code of 1987, which aims to facilitate investment in the country through a cohesive and consolidated investments incentives law,” Executive Secretary Paquito N. Ochoa, Jr. said. Ochoa said the new EO will ease the cost of importing capital equipment by investors for their start-up operations and expansion in the Philippines. Philippine Business Report
“There is a need to continue providing this incentive because allowing 0% duty importation will make our country more competitive in its efforts to lure investors amid the progressively competitive Asian market for foreign direct investments (FDIs) today,” he said. EO No. 70 mandates that the 0% duty shall be granted to BOI-registered new and expanding enterprises on articles or equipment classified under specific chapters of the Tariff and Customs Code of the Philippines upon the issuance of a certificate of authority by BOI. It also bans the selling, transfer or disposal of the articles exempted from duty without prior approval of the BOI within five years from the date of its importation. The EO said violators will be fined twice the amount of the duty foregone or P500,000, “whichever is higher,” without prejudice to other applicable penalties under the investments code. Furniture exporters see 2012 recovery Furniture manufacturers and exporters have started receiving big orders from new foreign buyers and those that halted purchases in the midst of global crisis, boosting hopes of a rebound for the sector this year.
of Southeast Asian Nations (ASEAN) countries. Padiernos has expressed optimism that 2012 would be a better year for the furniture industry. CFIP Executive Director Salvio L. Valenzuela, Jr. attributed the success of the bigger trade show to the merging of world-class event brands: the Manila FAME, Manila Now, Cebu Next, and Bijoux Cebu. Manila FAME is the country's premier trade show for lifestyle exports, covering a wide array of designintensive products in furniture and furnishings, holidays and gifts and fashion. “The prospect is good, the result was very positive for the exhibitors. Many buyers came back because they saw the merging of these trade shows. They were looking forward that their sourcing would be good,” Valenzuela said. Patent libraries franchising network up The Intellectual Property Office of the Philippines (IPOPHL) has entered into a franchising network agreement with 38 institutions for patent data exploration that is hoped to lead to business collaborations.
The big volume of orders was gained during their participation in the recently held biannual Manila Furniture and Furnishings, Holiday and Gifts, Fashion and Accesories (Manila FAME) trade show organized by the Center for International Trade Expositions and Missions (CITEM). “They were happy with the result in terms of attendance of quality foreign and local buyers,” Chamber of Furniture Industries of the Philippines (CFIP) Vice President for Market Development Emmanuel P. Padiernos said. CFIP continued to receive orders from Europe, South America, Russia and neighboring Association May 2012
While majority of these agencies are university-based, the franchising network includes six support institutions. These are the Technology Application and Promotion Institute, Ayala Foundation Inc., Departments of Trade and Industry (DTI) and Science and Technology (DOST), and Cebu Chamber of Commerce and Industry (CCCI). Other members of the FNPL are the Technology Resource Center, Product Development and Design Center of the Philippines (PDDCP), University of the Philippines (UP), Benguet State University (BSU), Cebu Institute of Technology (CIT), and Mindanao State University (MSU)-Iligan. The FNPL will not only ensure that R&D works in the country are coordinated but may also dig into important information accessible from the 75M patents globally that can be used for business. “Sometimes you don’t even need to research further. Just go to the patent document, and you will find a solution,” said IPOPHL Deputy Director General Andrew Michael S. Ong. The FPNL can have access to a wealth of knowledge from a free global database through a Patentscope search with the World Intellectual Property Organization (WIPO). While a patent protects a person’s or institution’s right over a knowledge or IP, there are many information disclosed in a patent document that are valuable to researchers.
The network, called the Franchising Network of Patent Libraries (FNPL) that is similar to the Patlib (Patent Library) Network of Europe or the PIZnet (Patent Informations Zentren) of Germany, is envisioned to create intellectual property (IP) strategies for research and development (R&D) institutions in the country.
Philippine bamboo bikes hit market With its low carbon footprint, the bamboo bike is turning into the latest hot item in the local market, especially for environmentalists. The bikes are made by KawayanTech, a company whose objectives are to develop 3
indigenous forms of bikes and other alternative means of transport including bamboo bikes and bamboo skateboards as social entrepreneurship. “People will usually think metal bikes are better because they've been tried and tested. But bamboo bikes can be symbolic of being environmental. They show support of a livelihood program or social cause,” said Tammy Villanueva, wife of one of the KawayanTech founders. Villanueva said more than just being a means of transportation, the bamboo bike is also a work of art. Typically, the company sells the frames only. Bikers can pick out their own components so that each of the bikes can have a custom, personal feel. Each one is handmade. The company gets its bamboo materials from suppliers in different parts of the Philippines, relying on hard and durable varieties. FDA to require GMP certification for drug manufacturers The Food and Drug Administration (FDA) is set to require this year drug manufacturers, including herbal drug makers, to comply with Good Manufacturing Practice (GMP) in compliance with global standards. Companies will not be able to register with FDA without GMP. “Hopefully, we’re trying to swing it this year. They cannot register when we impose it already as mandatory,” said FDA Secretary General Suzette H. Lazo. However, the details of this proposed regulation has yet to be worked out as some small and medium enterprises (SME) may be adversely affected. The Technology Licensing Office (TLO) of the University of the Philippines (UP) has invited micro, small, and medium 4
enterprises (MSMEs) to avail of the free assistance for their GMP compliance. “UP Manila is now the licensor for all 10 medicines including lagundi and sambong. Any potential licensee is now required to have GMP. If not, they’re not given a license. But as part of our licensing agreement, we send our industrial pharmacy experts to applicants to help them. The licensor itself has experts on GMP,” said TLO Officer-In-Charge (OIC) Atty. Elizabeth R. Pulumbarit. “We like to develop herbal medicine in our country because we have a wealth of flora, unlike other countries that use animal source for traditional medicine,” Lazo said.
TRADE AND INVESTMENTS AGRICULTURE/ AGRIBUSINESS AND FISHERY Purefoods to build P2.5-B grains terminal San Miguel Pure Foods Co., Inc. is spending P2.5B to build a bulk grains terminal in Mabini, Batangas in line with its strategy to control production costs and protect its margins.
Telecom, infras to pace growth The country’s telecommunications sector, along with other major infrastructure industries – airports, power, roads, rail, seaports, and water – will boost economic growth by 7% to 10% in the next 10 years. Economist Bernardo M. Villegas made the forecast, citing a paper published by the Joint Foreign Chambers (JFC) of the Philippines. Philippine Long Distance Telephone Co. (PLDT) Executive Vice President and Head of Enterprise and International & Carrier Business of PLDT, & SMART Eric R. Alberto supported Villegas statement, saying telecommunications are enablers of economic growth.
Purefoods said the facility, adjacent to its two flour mills, is slated to start operations in the fourth quarter of 2013 and has a payback period of seven years. Due to the terminal’s proximity to seaports, freight costs for the flour and feeds milling operations are expected to significantly decrease.
“PLDT provides primary telecommunications and technology solutions support to critical industries like business process outsourcing (BPO), financial services, tourism, mining, and electronics manufacturing,” Alberto said.
As part of efforts to enhance productivity in raw materials use, Purefoods has started using cassava as an alternative to high-priced corn. It is estimated that nearly P500M in savings last year has saved with the substitution.
PLDT works with other industries to deliver information and communications technology (ICT) requirements so the Philippines can compete in the global market, he added.
The company has contracted 50,000 has. for cassava production equivalent to 200,000 metric tons (MT) per year. It hopes to double this supply within the next five years. Philippine Business Report
DISASTER PREVENTION NEDA approves P11.9-B environment projects The National Economic and Development Authority (NEDA) Board has approved environment and disaster risk reduction-related projects worth P11.9B aimed at promoting the ecological integrity and mitigating the impact of environmental factors. These are the Integrated Natural Resources and Environmental Management Program (INREMP) of the Department of Environment and Natural Resources (DENR) and the Integrated Disaster Risk Reduction (DRR) and Climate Change Adaptation (CCA) Measures in Low-Lying Areas of Pampanga Bay Project of the Departments of Public Works and Highways (DPWH) and Education (DepEd). The P7.2-B INREMP using the Integrated Environmental Management (IEM) approach will be implemented within the priority watersheds of four critical river basins: Chico River Basin, Bukidnon River Basin, Wahig-Inabanga River Basin, and Lake Lanao Watershed.
ENERGY Meralco sets P40-B investment for smart grid, electronic vehicles Manila Electric Company (Meralco) will invest up to P40B for its venture into smart grid that will integrate prepaid electricity and electric vehicles into its system. Meralco Senior Executive Vice President Oscar S. Reyes said their capital outlay for the project will span across two regulatory periods in their performance-based regulation as the investment timeline cast in their smart grid blueprint may require gradual implementation of at least 10 years. “We would like to drive service to be able to respond to critical issues, like the Philippines being among the higher cost countries in Asia. We would like to be able to help address productivity and May 2012
competitiveness issues. And we would like to be able to help the electric industry make a difference for Philippine business,” Reyes said. Shell investing additional P3B Pilipinas Shell Petroleum Corp. will spend another P3B this year to expand its retail network.
“We are very bullish on the situation in the market. We have a very good government in terms of the leaders sending the right tone. We are bullish enough to invest in many areas,” Shell Country Manager Edgar O. Chua said. Last year, Shell also spent P3B for its expansion and marketing program. US$210-M LNG hub to rise in Quezon Hong Kong-based Energy World Corp. (EWC) is on track to completing the construction and starting operations of a US$210-M liquefied natural gas (LNG) hub in Quezon province this year. The firm has partnered with InterOil Corp. and Pacific LNG Operations Ltd. for the LNG facility. “Site works and construction of phase one of the hub terminal have already started and commercial operation is planned for 2012 to 2013,” EWC said. The LNG terminal is divided into two phases. EWC said capital expenditures for phase one of the project has been set at US$130M and US$80M for phase two. The first phase of the project will include a 130,000-cubic meter LNG storage tank, regasification facility, jetty, and supporting infrastructure. The second phase will include an additional 130,000-cubic meter LNG storage tank.
EWC said the LNG hub terminal will be used to facilitate the distribution of natural gas to the proposed 300-megawatt (MW) combined cycle gas turbine power plant. It is adjacent to the 764-MW Pagbilao coal-fired thermal power plant. Government to build US$200-M gas pipeline The government will construct and operate a pipeline that will deliver natural gas from Southern Luzon to Metro Manila to allow as many end-users to benefit from the service. “The Philippine National Oil Co. (PNOC) will own and operate the Batangas-Manila (Bat-Man) pipeline,” Department of Energy (DOE) Undersecretary Jose M. Layug, Jr. said. Bidding for the engineering and procurement contract of the 105-km. natural gas pipeline will start in the first quarter of 2013. Construction is targeted to start in the same year and will take three years to complete, the DOE said. Several private firms have expressed interest in the project after the government said it was considering including it in the public-private partnership (PPP) program. Total to open 20 new stations this year Total Philippines Corp. is fast tracking its expansion of gasoline stations this year on the back of better economic prospects. The bulk of new gas stations will be located in Luzon and the Visayas. “Our target is to open 20 new stations this year. We are 174 now,” Total Philippines Corporate Communications Manager Malou L. Espina said. The growth pace is faster than the previous years’ tally of 18 new branches annually, Espina said. Total Philippines, whose main branch network is in the Luzon 5
mainland, is the local subsidiary of Total SA of France. Earlier, Total Philippines said benchmark investment for every gas station is around P30M. This year’s expansion will require some P600M in capital. Japanese firms eyeing gas pipeline Heavy industries firm Mitsubishi Corporation and Tokyo Gas are among the two Japanese firms eyeing to invest in the 105.3-km Batangas-Manila (Bat-Man) high pressure gas pipeline, which in entirety is estimated to require US$2.2B worth of investments.
The Philippine government has been targeting to auction this huge project within the year via a public-private partnership (PPP) arrangement. The Japan External Trade Organization (JETRO) said it noted the revived interest of investors in the Philippines, primarily in the manufacturing sector as well as in infrastructure projects, including those on road, water, transport, disaster management technologies, and energy. “Mitsubishi Corp. and Tokyo Gas are interested to join the Bat-Man pipeline project if the government will bid it out under PPP,” JETRO Deputy Director for Plant and Infrastructure Business Support Division Hiroshi Yoneyama said. JETRO has been helping Japanese investors with information which shall guide them in exploring business opportunities in various jurisdictions, including the Philippines. US firm to invest over US$2.6B in PHL Texas-based Quantum International Group, Inc. intends to invest more than US$2.6B on five plasma gasification plants in the country 6
that can produce as much as 13,000 megawatts (MW) of electricity, which can cut the cost of electricity by 25% in five years, Quantum International President and Chief Executive Officer (CEO) Al Johnson said. Johnson said the benchmark investment will be US$250US$300M for a plasma plant that can gasify 1,000 metric tons (MT) of garbage, US$450M for the 2,000-MT plant, and US$850M for a 4,000-MT unit. The plasma technology gasifies materials like coal and industrial waste at 5,000 to 7,000 degrees Celsius, converting it to electricity. For every MT of garbage, Quantum can produce 800 kilowatts (kW) up to one MW of electricity. Four plasma plants capable of gasifying 2,000 MT of garbage per day will be put up in Davao and Surigaodel Norte. A plant with the capacity of gasifying 5,000 MT of garbage per day will be built in Surigao del Norte. “The only thing that we require is garbage. We need long term contracts with a minimum of 1,000 MT per day,” Johnson said. To date, the Luzon, Visayas, and Mindanao grids have a peak demand of 7,047 MW, 1,350 MW, and 1,256 MW, respectively.
GREEN PROJECTS Marubeni readies solar project Marubeni Philippines Corp. is planning to put up a 30-megawatt (MW) renewable energy (RE) facility in Davao City. The company has approached the local government to identify a suitable site for a solar power project, City Planning and Development Office Chief Roberto P. Alabado III said. “The company is looking for flat land,” said Alabado, noting that the location requirement is about 60 has. considering that it takes
two hectares of land to produce 1MW of solar energy Team Energy explores RE sites Japanese joint venture firm TeaM Energy has been exploring at least 10 areas in Luzon and Visayas for prospective renewable energy (RE) projects. TeaM Energy President Federico E. Puno said his company’s interests are generally focused on hydro, biomass, and geothermal energy developments. The sites it has been evaluating include those for mini-hydro in San Juan, La Union; Tabuk, Kalinga; Tuba, Benguet; and Mountain Province. The larger-scale hydro targets are in Tuba, Benguet’s site at the tailings pond of Philex Mining Corporation. The rest of the hydro prospects are in various sites in Luzon and Visayas. Incidentally, the company is currently a buyer of TeaM Energy’s excess capacity in the Sual plant. Geothermal developments, Puno said, are eyed for the sites being evaluated in Mountain Province and Mount Natib in Bataan Daclan, also in Benguet. NEDA okays e-tricycle project, Agus VI hydro power uprating The National Economic and Development Authority (NEDA) Board approved two energy projects worth P24.1B aimed at promoting sustainable transport, achieving energy efficiency, and thus addressing market transformation in the sector. The P21.5-B market transformation, through the introduction of energy efficient electric tricycle (e-Trike) project, is expected to reduce fuel consumption of tricycles by 2.8%, equivalent to 560,926 oil barrels. “The project will distribute 100,000 e-Trikes to tricycle operators on a lease-to-own arrangement, Philippine Business Report
replacing their old gas-fed and two-stroke gasoline engine units. This way, we are also able to protect our environment,” Socio-Economic Planning Secretary Cayetano W. Paderanga, Jr. said. The other approved project is the P2.6-B Agus VI Hydroelectric Power Plants (Units 1 and 2) Uprating Project. Power uprating means increasing the capacity of power plants to ensure availability of sufficient and stable supply of electricity. “This power uprating project aims to address the power supply gap in Mindanao to support large-scale industrial and power-intensive manufacturing industries in the region,” Paderanga said. Through the project, the economic life of power plants will be extended for a minimum of 30 years and their rated capacity will be increased by 19 megawatts (MW) from 50MW to 69MW. This will increase the dependable capacity of the power plants from 27MW to 39MW. Funding for this project will be sourced from the budget of the Power Sector Assets and Liabilities Management (PSALM). Greenergy invests in S&T venture Start-up firm Greenergy Holdings, Inc. will invest P680M in its expanded ventures on science and technology (S&T) that shall also cover aspects of renewable energy (RE) developments.
In a filing to the local stock exchange, EDC said it holds seven service contracts for geothermal power ventures and three for wind projects. EDC said it holds the service contracts for the Leyte geothermal production field in Tongonan, Leyte; Southern Luzon geothermal production field in Palinpinon, Negros Oriental; Bacon-Manito geothermal production field in Bacon, Sorsogon and Manito, Albay; Mindanao geothermal production field in Ilomavis, Kidapawan City; and Northern Negros geothermal production field in Negros Occidental. The listed energy producer is also in charge of the Labo and Mainit geothermal projects in Camarines Norte and Surigao del Norte, respectively. For wind projects, its existing service contracts are the 86-megawatt (MW) Burgos wind power project and the Balaoi-Pagudpud wind project.
INFRASTRUCTURE Carmen water project on stream in 2013 The Manila Water-led consortium expects its P1.6-B Carmen bulk water supply project to come on stream by the third quarter of 2013.
Its targeted projects will include RE projects, solid waste management, and environment-friendly products. The company will be forming a joint venture with a Chinese firm and will particularly target economic zones. EDC keeps robust portfolio of green energy projects The Energy Development Corp. (EDC) maintains a robust portfolio of green energy projects around the country. May 2012
Manila Water has signed a joint investment agreement with the provincial government of Cebu for the development and operation of the project for a period of 30 years, renewable for another 25 years. The project is 51%-owned by the Manila Water-led consortium while 49% remained with the Cebu government.
The projects shall supply 35M liters of potable water from Luyang River in Carmen. It is expected to benefit the residents in towns of Carmen, Compostela, Liloan, and Consolacion and cities of Danao, Madaue, and Lapu-Lapu. Maynilad to supply water in South Greenheights and San Jose Subdivision The Maynilad Water Services, Inc. (Maynilad) has completed its P57-M pipe-laying project covering 18km of pipes to serve San Jose Subdivision and South Greenheights Subdivision in Muntinlupa. “We continue to invest in our water infrastructure so that people in the South no longer have to pay private water tankers for expensive and unsafe water,” Maynilad President and Chief Executive Officer (CEO) Ricky P. Vargas said. Vargas said they are looking to raise P2B in the latter part of the year to fund development projects. The planned borrowing would be on top of its P8.5-B capital expenditures for this year.
PUBLIC-PRIVATE PARTNERSHIP Qatar, Kuwait to invest 1.5B The Board of Investments (BOI) is pursuing talks for the US$1.5-B investment funds from Qatar and Kuwait, which have expressed interest to invest in the country’s various sectors including food, security, property, tourism, energy, and the public-private partnership (PPP) projects. The investment fund being finalized by both countries include the proposed US$1-B Philippines-Qatar Joint Investments Fund, the US$500-M Private Equity Kuwait KGL Philippine Infrastructure Fund, and the Abu Dhabi-based Investment Funds. Of the US$1-B joint QatarPhilippines investment fund, the latter is expected to take up 15-% counterpart while Qatar will shoulder the bulk of 85%. 7
The Kuwait fund, however, is solely an initiative of the Kuwaiti government for investments in the Philippines. Citi to venture in PPP Citibank Philippines is keen to fund power and energy infrastructure projects listed under the public private partnership (PPP) scheme. “Infrastructure is critically important to sustain economic growth,” Citibank N.A. Chief Executive Officer (CEO) Eugene M. McQuade said. Citibank officials disclosed several initiatives that they are planning to explore. The company considers bringing more services that will require expansion of employees. GT Capital keen on Bohol airport project GT Capital Holdings is eyeing the privatization and operation of the Bohol airport under the government’s public-private partnership (PPP) framework.
Bohol to accommodate an increased influx of tourists. Govt’ readies vaccine project The Investment Coordination Committee (ICC) has approved the P900-M Vaccine Self-Sufficiency Project (VSSP) Phase II under the Department of Health (DOH). “The vaccine project is part of the agenda of the ICC Cabinet Committee meeting,” National Economic and Development Authority (NEDA) Public Investment Staff Director Jonathan L. Uy said. The VSSP involved the establishment of facilities for the formulation, packaging and labeling of the pentavalent that is used for diphtheria, pertussis, tetanus, hepatitis B and haemophylus influenza B; tetanus toxoid; and single dose hepatitis B vaccines, Public-Private Partnership (PPP) Center Executive Director Cosette V. Canilao said. “Private sector participation will include construction of the facilities, purchase of equipment and operation and maintenance for the next 10 years,” Canilao said.
GT Capital President Carmelo Maria L. Bautista said the company is actively considering and evaluating new business initiatives in sectors that complement its existing portfolio that include banking, real estate, power generation, automotive, and insurance. “Bohol airport seems to be a very interesting play. It’s in our own backyard. If we supply power to Bohol, imagine what kind of development multiplier you will have there, not just for tourism but also for commerce,” he said. The government wants to speed up the construction of a new airport in 8
The project, which will be implemented through DOH’s Research Institute for Tropical Medicine (RITM), is expected to reduce annual vaccine procurement costs by 20%-30%. “The government can save approximately P240M to P360M out of the P1.2-B annual purchase cost of the vaccines,” the PPP Center said.
RESEARCH AND DEVELOPMENT MSU identified as research center The Philippine Council for Health Research and Development (PCHRD) has selected Mindanao State University – Iligan Institute of Technology (MSU-IIT) as one of the three Natural Substance
Research Centers (NSRC) nationwide that will develop drug sources that have market potentials. “We are establishing a Drug Discovery Database which will store information on all natural products research. It will be a tool in guiding researchers on which species have the potential for further studies leading to the discovery of new drugs,” PCHRD Research and Development Management (R&D) Director Antonio D. Ligsay said. PCHRD Executive Director Jaime C. Montoya said the health sector is receiving more than 100-% increase in budget this year. The budget increase will include financing of moringga or malunggay drug development project that will cure high cholesterol, diabetes, and cancer. “We have to declare it as our traditional knowledge. Others can’t claim it as theirs if we publish it as our national heritage,” Ligsay said. Aquino administration continues ERDT The government has adopted the Engineering Research and Development for Technology (ERDT) as a regular program to encourage developing the integrated circuit (IC) design. The ERDT was previously budgeted with P3B by the Arroyo administration. For 2012 its budget will be from the General Appropriations Act (GAA) after going through a three-year groundwork stage. The continuation of ERDT will create Ph.D and masters graduates that are efficient in the industry and will do hard work for the government, Integrated Microelectronics Inc., (IMI) President Arthur R. Tan said. The technical advisory committee is making sure that all research and development programs of ERDT will have use in the commercial market. Philippine Business Report
AVIATION PAL, AirPhil set up to US$1-B refleeting programs San Miguel Corporation (SMC) plans to invest US$1B in the fleet modernization program of Philippine Airlines (PAL) and Air Philippines (AirPhil). The 500-M minimum requirement is what SMC is infusing into several holding firms that will result in its equity investment in PAL and AirPhil.
PAL’s modernization program • Purchase rights for two Boeing 777300ER aircraft for delivery in 2012 • Acquisition of four Boeing 777-300ER aircraft from the original delivery schedules of fiscal year 2010, 2011 and 2012 to fiscal years 2013 and 2014 • Lease of two Airbus A320-200 aircraft set for delivery in March and May 2012 Zest Air adding more destinations Zest Air is adding five international destinations this year with the acquisition of two A320 planes to meet growing passengers and robust growth since the start of January this year. Zest Group of Companies Chairman Alfredo M. Yao said these new destinations include Kuala Lumpur, Hong Kong, Singapore, and two more destinations. Zest Air will also launch Clark-Hong Kong, Clark-Bangkok and Clark-Singapore flights in the last quarter of the year. Yao said the airline would be able to mount new routes starting May this year because one A320 airbus arrived last February and another A320 will be delivered by May.
MANUFACTURING Pepsi completes P500-M Zamboanga bottling facility Pepsi Cola Products Philippines, Inc. (PCPPI) began operations of a newly completed P500-M expansion and systems upgrade May 2012
project for its existing bottling plant in Zamboanga City. The project involved the installation of a state-of-theart bottling line, new water treatment and filtration systems, and added inventory of containers, PCPPI Senior Vice President for Technical Operations Daniel D. Gregorio, Jr. said. “This sophisticated bottling line which is capable of producing carbonated soft drinks in returnable glass, will triple the company’s production capacity and enable it to provide stable supply of Pepsi products to the provinces Zamboanga del Norte, Zamboanga Sibugay, Zamboanga del Sur and the islands of Basilan, Jolo, Tawi-Tawi, and Bongao,” Gregorio said. Earlier this year, the PCPPI commissioned a similarly modern P500-M bottling line in Cagayan de Oro City, and bought a prime lot in Davao City for the same capacity expansion purpose. Subic firm makes lighting solutions Subic-based company BandaSolar is now producing cost-efficient and environment-friendly energy and lighting solutions. With its solar panels and light emitting diode (LED) lamps that could cut down power bills by more than 50%, the company is now offering consumers renewable energy (RE), which has prompted Subic Bay Metropolitan Authority (SBMA) Chairman Roberto V. Garcia to call for a study on the installation of solar panels for all street lights in the free port. Solar power used to be limited only to those living in remote locations with no other choice but to device a solar power generator with a cost equivalent to P100 per watt, or P100,000 per kilowatt, enough to light a small house. “But that was before the solar panels were in mass production,” BandaSolar President Robert Silvers said.
MAJOR PROJECTS Gov't disburses P141B for infra The government has disbursed P141.8B for infrastructure projects under the enacted General Appropriations Act of 2012. Socio-Economic Planning Secretary Cayetano W. Paderanga, Jr. said the 2012 budget is 25.6% higher than the 2011 allocation and represents 1.6% of the country’s gross domestic product (GDP) compared to the 1.4% last year. Paderanga said local governments are considered a major player by developing and implementing their own infrastructure projects using public-private partnerships (PPP) as an alternative scheme. NEDA okays P19-B irrigation projects The National Economic and Development Authority (NEDA) board has approved three irrigation projects worth P19.7B aimed at sustaining rice production and sufficiency for the country’s growing population in the long term. Department of Agriculture (DA) Secretary Proceso J. Alcala said the three irrigation projects will sustain the gains of the country by end of 2013 when the country would have achieved rice sufficiency. The three projects • • •
P11.2-B Jalaur River Multipurpose Irrigation Project-Phase II (JRMIP2) in Iloilo P7-B Casecnan Multipurpose Irrigation and Power Project-Phase II (CMIPP2) in Nueva Ecija and Tarlac P1.5-B Umayam River Irrigation Project (URIP) in Agusan del Sur
The projects will directly benefit 72,900 farm-families in Iloilo, Nueva Ecija, Tarlac, and Agusan del Sur and is expected to be completed in five years. 9
COMPANY NOTES Puregold buying S&R for P16.5B Puregold Price Club has agreed to purchase 100% of upscale retailer S&R Membership Shopping for P16.5B via a share swap with the family of Lucio Co. The company said its board has approved the issuance of about 766.4M common shares from the corporation’s authorized but unissued capital stock at P21.50.
to 171,380 sqm. The Annex will offer 81,204 sqm. of GLA. By the end of 2012, SM Prime will have 46 malls in the Philippines and five in China with an estimated combined GFA of 6.3M sqm. Pascual Lab goes organic farming Pascual Laboratories Inc. (PLI) has created an agricultural unit that now tends a total of 72 hectares (has.) of organic farms planted to medicinal herbs through its agriculture arm Leonie Agri Corp. (LAC). LAC is an integrated herbal drug manufacturing firm with two farms in Bataan and Nueva Ecija.
This means that Puregold will acquire 100% of the outstanding capital of Kareila Management Corp. at a ratio of 450 Puregold shares for every single share of Kareila. This deal will allow Co to consolidate his retailing businesses into a publicly listed vehicle catering to all market segments. Jollibee earmarks P5.8B for expansion Jollibee Foods Corporation is allotting P5.8B for its capital investment budget this year as it aims to continue expanding operations in the Philippines and in China. Jollibee said up to half of the 2012 budget will be spent to increase its store count by 125 stores in the Philippines and 100 stores in China. Jollibee reported that its net income attributable to the parent company inched up 0.5% to P3.21B last year from P3.2B in 2010, boosted by the 10-% gain in profits in the fourth quarter. SM builds P1.4-B Bacolod annex SM Prime Holdings, Inc. (SM Prime) is set to spend P1.4B to expand its existing SM City Bacolod in two phases within 2012 up to 2014. The firm said the SM City Bacolod Annex will add 102,043 square meters (sqm) of gross floor area (GFA) to the main mall, increasing SM City Bacolod’s total GFA 10
The company makes use of organic fertilizers and beneficial microorganisms for fertilization. The farms also grow organic vegetables on top of its medicinal plants. “We decided to go into organic farming because we believe once a patient is cured of an illness, he should be able to maintain good health through the intake of chemical-free vegetables,” LAC President Guillermo F. Saret, Jr. said.
BILATERAL AGREEMENT Australia, PHL sign dev’t cooperation The Philippines and Australia have committed to implement a strategy for a development cooperation program over the next six years. National Economic Development Authority (NEDA) Deputy Director General Rolando G. Tungpalan said
the Australia-Philippine Development Cooperation Strategy 2012-2017 contains the commitments of the governments that will assist the poor to take advantage of the opportunities that can arise from a more prosperous, stable, and resilient Philippines. “This new strategy focuses Australia’s aid (AusAID) program on select key issues where our assistance can make a real difference in improving the lives of the poor,” AusAID Deputy Director General James Batley said. Australian aid will assist the Philippine government to promote opportunities for all by improving learning outcomes of school children in English, Math, and Science and ensuring that more children finish elementary and secondary education. PHL, South Africa cite robust trade The Philippines and South Africa are working to sustain growth in bilateral trade which has been growing steadily at 15% annually over the last five years. Philippine Chamber of Commerce and Industry (PCCI) President Miguel B. Varela recently met with South African Ambassador to the Philippines Her Excellency Agnes Nyamande Pitso to discuss initiatives to strengthen Philippine-South African economic and trade relations. Varela informed the Ambassador that the PCCI will work closely with the South Africa Chamber of Commerce & Industry and the Philippine Embassy in Pretoria to increase total trade between the two countries. For her part, Pitso noted that aside from abundant natural resources, South Africa has well-developed communication, financial, energy, legal, and transport sector. She added that South Africa is interested to source from the Philippines citrus fruits and cattle for its dairy program. Philippine Business Report
PHL cites ASEAN-Australia FTA Philippine trade and investment with Australia and New Zealand is seen as more significant with the revival of the Association of Southeast Asian Nations’ (ASEAN) global and regional position of the ASEAN as a trading bloc. During the 1st Philippines Australia New Zealand Business Forum, trade and investment opportunities were identified between the Philippines, Australia, New Zealand and the ASEAN region in sectors such as business process outsourcing (BPO), agribusiness, information and communication technology (ICT), energy, and infrastructure. The forum aims to enhance business relationships of stakeholders and address vital issues related to economic integration in the Asia Pacific Region and elimination of trade barriers. “The timing of this forum is opportune as we are now in the midst of implementing the ASEAN–Australia-New Zealand Free Trade Agreement (ANZFTA), with tariff reduction starting last 01 January 2010,” Department of Trade and Industry (DTI) Undersecretary for Trade and Investment Promotions Group (TIPG) Cristino L. Panlilio said. The AANFTA is a comprehensive single undertaking FTA covering trade in goods, services, investment, natural persons’ movement, electronic commerce, intellectual property, competition, and economic cooperation. PHL wants more MSMEs in ASEAN The Philippines pushed for an increased participation of micro, small and medium enterprises (MSMEs) in the envisioned Association of Southeast Asian Nations (ASEAN) Economic May 2012
“The main agenda of the government is how the Philippines can fully participate in the regional economic bloc’s integration.” Department of Trade and Industry (DTI) Undersecretary forIndustry Development and Trade Policy Group (IDTPG) Adrian Cristobal, Jr. said. Cristobal said the Philippines is particularly strong in the export of manufactured goods, electronics, autoparts, agricultural products, non-metalic products, oils and fats, coconut oil, wood craft, and furniture. In the Philippines, he said, more exporters are becoming aware of the DTI’s program called Doing Business in Free Trade Areas (DBFTA). Citing a study by the Asian Development Bank (ADB), he noted that as of 2010, utilization rate of free trade agreements (FTAs) reached 41.1% in 2010 from only 20% in 2008.
ON THE CALENDAR Manila Food and Beverage Expo The Manila Food and Beverage Expo (MAFBEX) 2012 will be held on 13-17 June 2012 at the World Trade Center (WTC) Metro Manila in Pasay City. Food and beverage suppliers, distributors, manufacturers, and retailers will be treated to a quality exposition of food products and services to promote local and international food businesses. Latest trends, current technology, and knowledge related to the industry will serve as the show’s highlights. Food Processing and Packaging Technology Expo The Food Processing and Packaging Technology Expo (FPP Mindanao) will
be held on 20-23 June 2012 at The Atrium, Limketkai Center, Cagayan de Oro. It is the specialized equipment show in Mindanao catering to the specific needs of the food and beverage industry. Caterers, chefs, culinary schools, decision makers, distributors, entrepreneurs, exporters, food manufacturers, food processors, government agencies, grocery owners, importers, purchasing officers, restaurateurs, supermarket owners, and the general public are the target visitors. Beauty and Wellness Asia Beauty and Wellness Asia will be held on 29 June-01July 2012 at the Philippine International Convention Center (PICC), Manila, Philippines. An extensive range of natural and organic products, personal grooming equipments, pharmaceutical items, nail and hair care products, lifestyle products, and other related accessories will be displayed at the show. The event aims to bring together more than 280 companies and profitable business opportunities. Professional make up artists, final buyers, industry executives, manufacturers, and decision makers are invited to attend the show.
Philippine Postal Permit No. 504
ASEAN WATCH
Community (AEC) that would be formed by 2015 during the 20th ASEAN Summit in Phnom Penh, Cambodia last 03-04 April 2012.
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Economic Indicators
GNI Growth Rate (%)
GDP Growth Rate (%) 7 6 5 4 3 2 1 0
7 6 5 4 3 2 1 0 3Q(2010) 4Q (2010) 1Q (2011) 2Q (2011) 3Q (2011) 4Q (2011)
Exports (In US$Billion)
Consumer Price Index (2000 base year)
128.5 128 127.5 127 126.5
4000
5
3000
4.8
2000
4.6
1000
4.4
0 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12
(1994 base year)
6
43 42.5 42
4.2 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12
Inflation Rate (%)
Peso per US Dollar Rate 44
Imports (In US$Billion) 5.2
5000
Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12
43.5
3Q (2010) 4Q (2010) 1Q (2011) 2Q (2011) 3Q (2011) 4Q (2011)
Interest Rate (%) 4.8 4.6
4
4.4
2
4.2 4
41.5
0 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12
Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12
3.8 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12
*GNI - Gross National Income Entered as Third-Class Mail at the Makati Central Post Office under Permit No. 504 valid until 31 December 2012
Editorial Team: Anne L. Sevilla, Editor-in-Chief • Vic S. Soriano, Assistant Editor • Cresenciano P. Par, 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. 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: publications@dti.gov.ph
Philippine Business Report
12
May 2012
Philippine Business Report