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09 April 2012 1
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09 April 2012 Vol. 16, No. 08
A bi-monthly digest of global and domestic industry trends and developments. Published by the Trade and Industry Information Center, Department of Trade and Industry Manila, Philippines Tel. (632) 895.3611 Fax (632) 895.6487 To subscribe, email: publications@dti.gov.ph Online: http://www.dti.gov.ph
In this issue Focus PEZA sees 2012 a ‘banner year’ Inside DTI 1. DTI presents 2nd TID talks 2. SB Corp. earns strong credit rating
Consumer News 1. Ecozone rate cheaper by P0.42/kwh 2. How to screen a franchisor 3. Important reminders on LPG Feature Marked improvement in LGU business permit, license processing
Good News, Philippines! 1. Local franchising posts 17-% growth 2. IIF sees sustained PHL expansion ASEAN Watch 3. Businessmen bullish Japanese business leaders push cooperation MSME/OTOP News Visayas MSMEs more competitive Statwatch and responsive What’s New?
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Focus PEZA sees 2012 a ‘banner year’
Vol. 16, No. 082
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he Philippine Economic Zone Authority (PEZA) projected 2012 as a “banner year,” counting on the overwhelming foreign investors’ appetite for the Philippines as an alternative investment destination.
1. DTI presents 2nd TID talks
Even investors from Israel are keen in investing in the country in the electronics sectors.
PEZA Director-General Lilia B. De Lima reported that new investments registered by the agency jumped 46.9% in the first two months of the year to P16.2B from P11B in the same period last year.
She said huge investments of Canon and Brother for printer facilities are going to attract other related investors from Japan. These two firms could even produce other products here like projectors or imaging solutions.
“This is a banner year,” said De Lima at the sidelines of Toyota Motor Philippines 500K Production Unit Ceremonial Line-Off in Sta. Rosa, Laguna plant.
Investors flock to PEZA zones not only because of its generous incentives package, but also because of the agency’s no-red tape policy.
She said Japanese investors will drive the growth in PEZA investments, noting that Japanese investments would be a combination of new and relocation projects of those affected by flooding and calamities in Thailand and Japan.
Among the incentives being granted by PEZA include maximum of eight-year income tax holiday (ITH), 5-% tax on gross income earned, duty-free importation of capital equipment, additional tax deduction from expenses on personnel training, and employment of foreign nationals.
“But we are also now in the big screen of European Union (EU) so we are
Inside DTI
pushing our presence there,” De Lima added.
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he Philippines has a competitive advantage on business environment and human capital compared with other Asian countries,” Japan External Trade Organization (JETRO) Executive Director Ryoichi Ito said during the monthly Trade and Industry Development (TID) Talks held last March at the Audio Visual Room (AVR), Board of Investments (BOI) Building.
Open to the entire DTI, other government agencies, academe, and the private sector, TID talks aims to provide relevant and up-to-date data and information that will help the Department in crafting and implementing policies and programs.
Launched last January 2012, TID Talks is one of the major strategic initiatives undertaken by Department of Trade and Industry-Industry Development and Trade Policy Group (DTI-IDTPG) Undersecretary Adrian S. Cristobal, Jr.
National Economic and Development Authority (NEDA) Planning and Policy Assistant Director-General Dr. Ruperto P. Majuca said the country’s 2012 economic growth may be boost by the DTI’s trade and investment policies.
For the March session, the TID Talks focused on the economic growth and investments target for 2012.
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“We are growing faster than them [ASEAN 5, composed of the Philippines, Viet Nam, Indonesia, Malaysia, and Thailand]…a reason for hope and rosy prospects in the future,” Majuca said. Likewise, Japan International Cooperation Agency (JICA) Representative Toru Yoshida noted three windows of opportunity open for prioritizing sectors and targeting public sector support. These are the consolidation of industry roadmaps; the hyper
2. SB Corp. earns strong credit rating
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appreciation of Japanese Yen, labor issues in the neighboring countries, supply chain diversification due to tsunami or flood; and the Philippine Development Plan’s (PDP) pursuit of “sustained growth that creates jobs, draws the majority into the economic and social mainstream, and continuously reduces mass poverty.” “We hope that our development partners from Japan can help us not only with studies, but also with bringing in Japanese investors [in the Philippines],” Cristobal said.
he Philippine Rating Services Corporation (PhilRatings) assigned a PRS Aa minus rating to the Small Business Corporation (SB Corp.), the funding arm of the Department of Trade and Industry (DTI) tasked to assist micro, small and medium enterprises (MSMEs).
to slower rate of increase in net interest income and a decline in investment income.
A PRS Aa minus rating means that a company has a strong capacity to meet its financial commitments.
PhilRatings also noted that SB Corp.’s reserve coverage has been consistently increasing in the past three years (2008-2010).
In assigning the rating, the PhilRatings considered the government’s supportive regulatory framework for growth and development of the MSME sector and SB Corp.’s sustained positive performance in terms of profitability. SB Corp. sustained its positive profit performance, boosted by the robust performance of its financing programs. Projections for 2012 show moderate revenue growth due
The GFI’s asset quality likewise showed notable improvement in 2010, with its past due rate and non-performing assets (NPA) ratio decreasing from year-ago levels.
The following measures are being implemented by SB Corp. to lower past due levels: Improvement in organizational structure, with better-defined roles for Credit Risk Management; More proficient application of the agency’s Borrowing Risk Rating (BRR) system; Strict implementation of loan monitoring covenants; and Establishment of an Early Warning Signal System.
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Good News, Philippines!
1. Local franchising posts 17-% growth
Vol. 16, No. 084
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he domestic franchising industry remains robust with a 17-% growth in sales to US$11B in 2011 from US$9.4B in 2010 as more Filipinos tried their hands at entrepreneurship. Franchising comprises an estimated 30% of total retail sales in the Philippines. The industry registered a staggering 262-% jump from 2000 to 2011. Francorp Philippines, a member of the worldwide network of Francorp International, cited a report by Bloomberg, a premier business website, confirming that the Philippines is now the leading Asian Tiger Economy that is beating China’s growth in franchising.
2. IIF sees sustained PHL expansion
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he Institute of International Finance (IIF) is projecting that the Philippine economy would grow 5.8% this year and 7% in 2013 due to its stable macroeconomic fundamentals amid global uncertainties. In its latest report, IIF said the country’s macroeconomic stability has bolstered its gross domestic product (GDP) against recurrent
3. Businessmen bullish
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ajority of businessmen believed the domestic economy this year would grow better than the 3.7-% gross domestic product (GDP) growth recorded in 2011, a survey conducted by the Makati Business Club (MBC) showed. The MBC Executive Outlook Survey was conducted from 14-19 February 2012 wherein 93 members or 12% out of 734 total MBC membership responded.
“Franchising has a high success rate. Filipinos believe in the system and once entrepreneurs put 10% of their attention to their business, the results are simply unimaginable,” Francorp Philippines Chairman Samie Lim said. The Philippines offers the most strategic place for expanding and investing in franchising, said Lim. “Consumer index is at an all-time high. This is highlighted by new investors’ confidence in the country. Would-be franchisees include overseas Filipino workers (OFWs) and new entrepreneurs who need to be guided by a ‘big brother’ in ensuring that their venture is a success,” Lim said. (MAB 03/15)
turmoil in the global financial markets and should pave the way for a strong revival in growth over the near term. The drag on growth from exports should soon run its course, while accommodative monetary measures should help stimulate domestic demand, the IIF said after the country’s exports grew by 3% in January after eight consecutive months of contraction. (MAB 03/16)
“Despite the positive tone, there is still a need for a watchful eye in light of the developments in the European Union (EU) and the Middle East as we live in a volatile world,” MBC Chairman Ramon R. Del Rosario, Jr. said. Based on the survey, as much as 79.6% of senior business executives believed the economy would perform better this year than last year, a much improved number than the 44.8% in February 2011.
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A minority of 17.2% said the economy would perform the same as last year and only 3.2% said the economy this year would be worse than last year. In terms of investments, a vast majority of 81.7% believed that approved investments would be higher this year compared to 76.1% in February last year. There were only 11.8% of businessmen who feel the same level of investment inflow as last year’s and only 5.4% believe investments would be lower than last year. The business community is also on a hiring mode, with the survey showing that 61.3% of respondents will hire more people this year
MSME/OTOP News Visayas MSMEs more competitive and responsive
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he Department of Trade and Industry (DTI)’s full support to the micro, small and medium enterprises (MSMEs) in the Visayas Region has resulted in increased competitiveness of local MSMEs in the region as measured by responsiveness of policies and business regulations to business needs of partner cities. DTI Secretary Gregory L. Domingo said the Department’s long-term partnership with the German Agency for International Cooperation (GIZ) greatly contributed to the MSME’s growth through the implementation of Small Enterprises Private Sector Promotion Program (SMEDSEP). The DTI has been working with the local government units (LGUs) to
compared to only 37.3% in February 2011. Conversely, the proportion of respondents’ firms who will maintain the number of their employees at present levels has gone down to close to 25.8% from 35.8% a year ago. With more companies on the hiring mode, businesses are also making additional investments this year. The survey showed that 63.4% of respondents are investing more this year than the 56.7% in last year’s survey, with average amount of investment of P1.7B as against P1.2B last year. (MAB 03/14)
address barriers in doing business and encourage investments in the countryside. In 2010, it signed a memorandum of agreement (MOA) with the Department of the Interior and Local Government (DILG) to streamline business licensing permits and agreed to create a Local Investment and Incentives Code (LIIC) to make investment policies transparent and responsive. The Board of Investments (BOI) supported the program through specific interventions in helping local firms and in assisting MSMEs through reduced application and registration fees, simplified application procedures for incentives, and identifying support services.
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Consumer News 1. Ecozone rate cheaper by P0.42/kwh
Vol. 16, No. 086
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ompared to the P4.3648 per kilowatt-hour (kWh) basic tariff of the National Power Corporation (Napocor), the rate approved by the Energy Regulatory Commission (ERC) for the Cavite Economic Zone (CEZ) is cheaper by P0.4219 per kWh at P3.9429 per kWh, which will be sourced from the 1,200-megawatt (MW) Ilijan natural gas-fired power facility. The ERC noted, however, that the prescribed tariff was just until 25 December 2011. It then required utility firm Manila Electric Company (Meralco) to a file separate application for the one-year extension which will lapse in December this year. The CEZ tariff allowed by the regulator covered the expanded
2. How to screen a franchisor
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ranchising an established enterprise is only a part of the equation and does not guarantee the franchise’s success. If one considers buying into its franchise program, the quality of the management is an even more important consideration.
ecozone rate program (ERP) from July 2011 that was previously announced by the Power Sector Assets and Liabilities Management Corporation (PSALM). The approved ecozone rate was only allowed for billing to CEZ customers. Any contracted capacity which shall be in excess of the economic zone locators’ requirements will have a pass-on tariff based on prevailing rates. Apart from the basic charge of P3.9429 per kWh, the ecozone customers are being billed with franchise and benefits to host communities; Wholesale Electricity Spot Market (WESM) charges; and government charges, among others. (MAB 05/14)
issue a cease-and-desist order on the use of the brand and logos.
Questions such as “Can the management sustain its success after the novelty factor has waned?” or “Does it have the capitalization to take its brand to the next level of growth?” have to be addressed as well. The following are some tips in screening a franchisor:
Check with the Intellectual Property Office of the Philippines (IPOPHL) if the brand name and trademark of the establishment to be franchised is authentically owned by the franchisor. Some companies use a brand name even without IPOPHL approval. If this is the case, the Department of Trade and Industry (DTI) could
Look into its franchisor’s program toward building its brand name. The existence of a plan and budget often indicates the success of a business. Examine the franchisor’s operations manual. The more thorough and user-friendly it is, the better, as it indicates that it has fine-tuned its business processes over time. Look for a five-year advertising charter, for instance. Note that advertising and promotion are two different things. Be sure that the franchisor is looking on the long-term brand development. Check the organization if it has the right people, facilities, and capabilities to render support services. These services usually come in the form of commissary or factory, marketing, operational, and engineering support, among others. A modern and mechanized
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backroom is usually an indication of a long-term commitment to the business. Talk to existing franchisees and get firsthand feedback about the matter.
3. Important reminders on LPG
Make sure that you would get a decent rate of investment’s return. Apart from looking at the gross sales achieved by a franchisor’s existing outlets, look into the gross profit margins the franchisee stands to gain on each product sold. A franchisee still needs to pay his franchisor a royalty fee (RF) and marketing support fund (MSF) on top of the upfront franchise fee. The RF and MSF are usually paid monthly and based on a percentage of gross sales. The franchisee must still have enough left to cover rent, payroll, and other expenses.
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he Department of Trade and Industry-Bureau of Product Standards (DTI-BPS) advises consumers to check every liquified petroleum gas (LPG) unit bought in the market to ensure that it is safe and of high quality. The following should be visible on the LPG cylinder: 1. Every LPG cylinder or tank should have permanent markings on the collar or footring indicating the name of manufacturer, country of manufacture, date tested, tare weight, thickness of cylinder or tank, design and test pressure, and serial number. 2. Every cylinder should have the brand name embossed on it. 3. All markings on the LPG cylinder must be etched on the collar or footring where the distributor or manufacturer can be easily determined. 4. Every LPG cylinder must have the Philippine Standard (PS) mark when locally manufactured or
Know if you would be left with net profit before taxes of between 10 to 20% (of gross sales). As for a decent period to achieve Return on Investment (ROI), a franchisee must be able to recoup his investment in at least half the period of his franchise term. In other words, if his franchise term is good for four years, he must have achieved full ROI in two years. Know your way out. In case you no longer want to pursue the business, you should know if they have a buy-back scheme and how they valuate and pay re-purchases of existing franchise outlets down the road. (MAB 03/05)
Import Commodity Clearance (ICC) when manufactured abroad to indicate that the label or tank had passed the standards implemented by the DTI. Here are some safety measures: 1. Do not place LPG cylinder or tank in closed cabinet or in areas near electrical switches. 2. Use only resistant rubber hose. 3. Always check the connection of the rubber hose to the clamp of the LPG and if it has any hole or damage. 4. In case of gas leak, immediately turn off LPG regulator and open all doors and windows. 5. Make sure that the stove burners and LPG regulators are switched off. 6. When installing brand-new or newly-refilled LPG tank, check for wear, cracks or leaks by wiping soapy water with the use of sponge on the entire rubber hose and clamp.
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Feature Survey finds marked improvement in LGU business permit, license processing
Vol. 16, No. 088
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he National Competitiveness Council (NCC), together with the Departments of Trade and Industry (DTI) and the Interior and Local Government (DILG), conducted a customer satisfaction survey for the period 11 January 10 February this year to gauge the progress of the two-year-old government’s Business Permits and Licensing System (BPLS) project, which seeks to streamline the processes in getting business permits and licenses by enterprises. The survey covered 763 enterprises and 183 enterprises that are renewing their business permits and applying for new ones, respectively. Notably, 60% of the total respondents reported that they are satisfied with their BPLS in their respective local government units (LGUs).
Only 25% are somewhat satisfied; 5%, are somewhat dissatisfied, and 3%, are dissatisfied. “This is highly attributable to the continuous concerted government and private sector initiatives to improve ease of doing business in the country,” NCC Private Sector Co-Chairman Guillermo M. Luz said. Some 27% of the respondents were able to acquire business permits in two to three days. Four LGUs were able to release business permits in less than 10 minutes. On the number of steps needed to get a business permit, a total of 43% reported that they underwent 6 steps or more to acquire business permits, 38% from 4 to 5 steps, 12% with 3 steps and 4% with 2 steps. (MAB 03/01)
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ASEAN Watch Japanese business leaders push cooperation
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eidanren (Japan Business Federation) is pushing for concrete ways of cooperation with the Philippines on infrastructure, power situation, regional economic integration, and development plans. Keidanren is an umbrella organization of Japan’s key business conglomerates and industry associations that are on a three-nation visit to Association of Southeast Asian Nations (ASEAN) member-countries. The Philippines is their last stop after visiting Viet Nam and Malaysia. During the visit, Department of Trade and Industry (DTI) Secretary Gregory L. Domingo gave an update on the public-private partnership (PPP) projects. Domingo also informed the visiting Japanese businessmen of the government’s programs for power generation build-up, particularly on building more power capacity in Mindanao. The Japanese businessmen inquired on the bidding processes, the modified rules, transparency and fair conduct of bidding. They expressed support for the general review of the Japan-Philippines Economic Partnership Agreement (JPEPA), especially on the movement of natural persons. They are also interested in the services sector as they need nurses and caregivers. The mission also shared its perspectives with regards to the pathway towards achieving the Free Trade Area of the Asia Pacific (FTAAP) such as the Trans-Pacific Partnership (TPP) and the Comprehensive Economic Partnership in East Asia (CEPEA), and the development of the key wide area infrastructure in the Greater Mekong Subregion and island areas in ASEAN for concrete actions.
(MAB 03/12)
STATWATCH US$11B Sales in domestic franchising in 2011; US$9.4B Sales in domestic franchising in 2010
P16.2B Investments registered with the Philippine Economic Zone Authority (PEZA) in January-February 2012; P11B in January-February 2011
262% Growth of franchising from 2000 to 2011
46.9% Growth of PEZA-registered investments in January-February 2012 over the same period in 2011
30% Share of franchising in total retail sales in the PHL
17% Sales growth in domestic franchising in 2011
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What’s New? (A synopsis of selected book acquisitions at the DTI-TIIC library)
Vol. 16, No. 0810
Title: Green Jobs and Green Skills in Brown Philippine Economy: Background Country Study Author : Ofreneo, Rene E. Call Number : 45 608/03.06/OFR/ 2010
Author : Bacchetta, Marc/ Jansen, Marion Call Number : 01.01/BAC/2011 The volume takes a closer look at the social aspect of economic creative destruction encouraged by trade reform and openness, and the uncertainty these processes can create for persons and communities. It examines these processes in normal times and in periods of economic crisis, providing a better understanding of the mechanisms through which globalization affects workers and of the measures that governments can take to give globalization a strong social dimension.
Philippine Postal Permit No. PM-04-08
The book shows the formulation of appropriate national action plans on environmental education, skills training, and human resource development in anticipation of a green shift in the industrial, agricultural, and services sectors, including the greening of the environment and the communities that are vulnerable to climate change risks.
Title: Making Globalization Socially Sustainable
Legend: MAB - Manila Bulletin
Editor-in-Chief: Anne L. Sevilla Associate Editor: Vic S. Soriano Writers: Resty P. Par, Jam A. Hourani, Aye B. Salcedo, Elaine M. Lazaro, Emman R. Caleon Design/Layout: Ren C. NeneriaCirculation: Myrna V. delos Reyes To subscribe, email: publications@dti.gov.ph