July 2014
Volume 25 No. 07
PHL to attract higher FDIs Officials are confident the strong foreign direct investment (FDI) showing from last year will be maintained in 2014, with an improved business climate along with political and economic stability as the Philippines’ main selling points, The Economy said in a report. Competition for investments is likely to remain keen. Department of Trade and Industry (DTI) Secretary Gregory L. Domingo said the government expected FDI growth to match the 20-% increase posted in 2013. “We expect at least a 20-% growth in FDI this year to be driven by the increasing competitiveness of the Philippines, in particular the increasing capability of our workforce,” Domingo said. If the government's target is met, it will mean the Philippines will attract around USD 4.7B this year, after almost USD 3.9B flowed into the economy in 2013, the highest figure in more than a decade.
abroad to their local subsidiaries/ affiliates to support existing operations and to fund the expansion of their businesses in the country,” the BSP said. Should the BSP be correct in its assessment of outflows, the weaker-than-expected February result could be a one-off, with a stronger movement of inbound capital to be expected in subsequent months.
Domingo’s forecast came after Bangko Sentral ng Pilipinas (BSP) issued a report on FDI inflows for February, showing net inflows of USD350M, 59% down on the same month in 2013. The sharp decline took FDI for the first two months of 2014 to USD 1.3B, 24.7-% less than the same period last year. One of the reasons given by the BSP in its report issued on May 12 was a higher than usual outflow of funds.
If FDI does continue its strong inward flow, the manufacturing sector could be one of the leading beneficiaries. Indeed, overseas high-tech firms are being tapped as one segment that could make the move to establish a base in the Philippines over the longer term, according to the Philippine Chamber of Commerce and Industry (PCCI). In part, this would be a result of improved investment opportunities and also from the Philippines recently being removed from the US Trade Representative Office’s Special 301 Watch List, meaning Washington has reduced the level of violations, the PCCI said.
“This resulted from sustained lending by parent companies
Alongside manufacturing, the chamber said other sectors
July 2014
that could attract greater FDI this year were software and information technology (IT), chemicals, and food processing. In March, the BSP forecast that FDI inflows would remain strong for 2014, with a number of factors contributing to expected high investment levels being maintained. Among these, BSP cited continued growth, stable inflation and the country’s solid external payments position as domestic factors that could attract FDI, while an external push could come from the ongoing recovery of the global economy. Meanwhile, HSBC in a report said the country was best placed of the ASEAN-5 economies to attract higher levels of FDI, while both Malaysia and Thailand could fall back. Compared with Singapore, Malaysia, Indonesia, and Thailand, the Philippines was in a relatively favorable situation, given the lower degree of leverage and its current account surplus, the report said. These factors made its less vulnerable to a tightening in global financial conditions and more appealing to overseas investors. 1
INDUSTRY TRENDS PHL export earnings up Value of the country’s merchandise exports rose to USD 4.54B in April this year, up by 0.8% from USD 4.51B in the same period last year, the Philippine Statistics Authority (PSA) reported. Higher export earnings from total agro-based products, petroleum, minerals, and forest products kept exports in a positive territory in April 2014, the National Economic and Development Authority (NEDA) said. “Overall, the gradual recovery of the global economy continues to firm up as demand from the Philippines’ other major export markets picked up strongly in April 2014 particularly for Singapore, Hong Kong, Thailand, Germany, Taiwan, and the Netherlands,” Socioeconomic Planning Secretary Arsenio M. Balisacan said. “It is also of note that the Semiconductors and Electronics Industries of the Philippines remains optimistic that the country’s semiconductor exports will bounce back, keeping the 5-% growth target in electronics exports for 2014,” Balisacan said. Notably, the first four months of 2014 registered an increase in Philippine merchandise exports, amounting to USD 18.9B, up by 5.4% from USD 17.9B in the same period last year. PHL attracting more foreign brands The Philippines is expected to attract more foreign brands as global retailers are starting to notice the vastly improved purchasing power of Filipinos, the Philippine Retailers Association (PRA) announced. PRA Chairman Emeritus Samie Lim cited some 50 global brands that entered the Philippines in the last two years. 2
“This is a clear indication that people now have more disposable income. For food, we literally have hundreds of franchises that came in. Luxury goods also continued to perform at robust levels. This was a direct result of the improvement in consumer purchasing power,” Lim said. He said this is the best time to enter the Philippine market. “The economy is getting stronger; the natural love of Filipinos for shopping is now fuelled by strong purchasing capacity. Our new government’s campaign on good governance, integrity and accountability are bearing results in our economy,” he said. Medium-term 7%-8% growth seen The National Economic and Development Authority (NEDA) expects the domestic economy to grow by 7%-8% in the medium-term. Socioeconomic Planning Secretary Arsenio M. Balisacan is confident that the full-year economic growth target could be achieved at 6.5% -7.5%. He said measures to further reduce the cost of doing business in the country are a priority of the government. “We have taken steps to hasten the process of registering business, securing business permits and clearances,” Balisacan said. He said the government has made huge strides in improving the situation in security risk areas following the framework agreement for peace and development in Mindanao. “At the same time, we continue to support priority sectors that contribute positively to quality employment and increased productivity,” he said. The government, in partnership with the private sector, is pursuing the liberalization of contractors' licensing and registration, promotion and development of domestic and overseas construction, and efficient implementation of the dispute resolution mechanism.
Trademark applications of local businesses increase Local brands have overtaken foreign brands in trademark application in the country in the past years, according to Intellectual Property Office of the Philippines (IPOPHL). Number of trademark filings
Year Local brands Foreign brands 2011 10,555 8,019 2012 11,667 8,980 2013 12,275 10,632 2014 5,406 3,248 Source: Intellectual Property Office of the Philippines (IPOPHL)
IPOPHL Director General Ricardo R. Blancaflor attributed these growing numbers to the number of applications filed in the IPOPHL offices outside Metro Manila. Meanwhile, he noted that with the lifting of the Philippines from the United States Trade Representative (USTR) Special 301 Watch List, foreign companies are now more eager to enter the Philippine market with the improved intellectual property rights system. “In the last one and a half year, we have over 3,000 brands that have designated Philippines. That means they want to be registered in the Philippines…they want their brand to be protected in the Philippines,” Blancaflor said. PHL infrastructure thrust on right track The Philippines is on the right direction in doing the PublicPrivate Partnerships (PPP) to meet the country’s insatiable demand for public infrastructure, global insurance broker and risk advisor Marsh said. Department of Finance (DOF) Undersecretary Jose Emmanuel Reverente highlighted the need for infrastructure development in nation-building. Reverente said the government’s early focus on PPPs to encourage private participation has contributed to the healthy Philippine Business Report
pipeline of bankable projects, which now stands at around 50 projects worth USD 22B. “The government will continue to work on ways to streamline and standardize the PPP process, as well as provide incentives and safeguards to facilitate private investment, from both local and international parties,” he said. Marsh’s Global Infrastructure Practice Chairman Edwin Charnaud said the Philippines is a great example of a country recognizing the need for infrastructure funding early, and actively taking steps to put in place policies and regulations to promote private investment. Charnaud said as the competition across Asia for infrastructure investment continues to intensify, all stakeholders need to draw from local and international experience for the country’s PPP projects to be an attractive proposition for investors. DBM releases P878.5M for infra The Department of Budget and Management (DBM) has announced the release of P878.5M to the Department of Science and Technology-Information and Communications Technology Office (DOST-ICTO) to support the second phase of the Integrated Government Philippines (iGovPhil) project. iGovPhil aims to maximize the use of ICT resources through shared ICT infrastructure, services, and applications for national government agencies. DBM Secretary Florencio B. Abad said the project harmonizes government processes and interoperability within the bureaucracy, leading to a faster and more efficient delivery of government services to the people. “We remain committed to harnessing technology and developing relevant mechanisms to improve the way government agencies work with each other,” Abad said. July 2014
Most of the P875.5-M release has been allotted for the deployment of fiber-optic cables and the establishment and operation of data centers. “The government believes in the power of information technology in transforming governance in our country,” he said. Turkish firms seek PHL partners Turkish companies into general trading and manufacturing visited the Philippines recently to forge possible partnerships with Filipino companies, the Philippine Chamber of Commerce and Industry (PCCI) reported. PCCI President Alfredo M. Yao said 24 Turkish companies participated in a business matching activity with the members of the largest business organization in the country. As of end 2013, Turkey’s exports to the Philippines stood at USD 135.5M while imports from the Philippines came in at USD 181.2M. Turkish business delegation
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Alacati Ice Cream Aykut Ucar Ballioglu Insaat Ve Taahhut Cagatay Elekt. Malz. Cem Matbacilik Ve Davetiye Doner and S&L Ego Emlak Ve Dis Ticaret Fatih Hose Hismar-Istanbul Gida Teks. Ins. Ve Yapi Mar. Tic. San. Ltd. Sti. Huseyin Toraman Murat Kececi, Technopian Nevsat Orme San. Ve Tic. A. S Ozar Group Chicken House Rahsim Silahli Tuncay Cebe United Towers Philippines Vendeka Group Yerciler Et Mangal Ve Sut Zorlu Holding
Source: Philippine Chamber of Commerce and Industry (PCCI)
Electronics sector remains biggest PEZA investor The Philippine manufacturing sector continues to lure investors with the country’s competent work force, stable wages and industrial peace, Philippine Economic Zone
Authority (PEZA) Director General Lilia de Lima said. De Lima said the electronics sector remains the biggest PEZA investor followed by the transport sector, information technology (IT) services, garments, shoes and bags, as well as agro industrial products. “The Philippines has been successful in attracting investments in the manufacturing sector due to regulatory reforms under the Aquino administration,” she said. She said among the competitive advantages of the Philippines in the regional and global market include highly competent work force that have good command of the English language. Workers’ wages have been stable in the past few years, a factor that continues to attract foreign investments, de Lima said. She said the turnover of workers in the IT sector has remained at 2% in the last decade. Industrial peace, or the lack of major labor unrest, has also attracted investments in the manufacturing sector. Vehicle sales up 22% The Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) and the Truck Manufacturers Association (TMA) reported total vehicle sales for the first five months of the year reached 89,335 units, up 22.4% from 72,988 units in the same period last year. In May alone, combined sales reached the new record-high 19,598 units. May 2014 total sales were higher by 23.6% than the 15,860 units sold in the same month in 2013 due to introduction of new models and aggressive promotions from the different brands supported by sufficient supply. Both passenger car (PC) and commercial vehicle (CV) 3
categories’ sales increased compared with May 2013 results. Growth can be attributed to continued strong demand of new models in the PC segment and extended promotional support. The passenger car segment’s sales reached 7,507 units, an impressive growth of 44% or 2,306 units year-on-year. On the other hand, the commercial vehicle segment achieved 12,091 sales and grew by 13% or 1,432 units versus May 2013. PHL top car sellers January-May 2014 (In %)
Company
Market Share
Toyota Motor Philippines Corporation Mitsubishi Motor Philippines Corp. Ford Motor Philippines Isuzu Philippines Corporation Honda Cars Philippines Inc.
44.8 23.0 8.0 5.9 5.3
Source: Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI)
Petroleum raises factory output The Philippines’ factory output registered a double-digit growth of 12.8% in April, due to the increased production of petroleum products. According to the latest Monthly Integrated Survey of Selected Industries, manufacturing output in April, as measured by the volume of production index, expanded faster than the 9-% growth registered a year ago. The Philippine Statistics Authority (PSA) said petroleum products led the sectors that contributed to the performance of production output in April, as it posted a triple-digit expansion of 128.7%. The exports data also showed that petroleum products substantially expanded by 38.5% in April, amounting to USD 41.7M.
4
Major sectors and %-growth in April 2014 (in %)
• • • • • • •
Petroleum products Printing Machinery except electrical Tobacco products Fabricated metal products Beverages Furniture and fixtures
128.7 96.8 90.7 78.2 43.1 30.7 12.6
Source: Philippines Statistics Authority (PSA)
The average capacity utilization in April for total manufacturing stood at 83.4%. More than half of the 20 major sectors were running at 80% or more of their capacity. These are:
• • • • • • • • • • •
Basic metals Chemical products Electrical machinery Food manufacturing Machinery except electrical Non-metallic mineral products Paper and paper products Petroleum products Publishing and printing Rubber and plastic products Wood and wood products
Source: Philippines Statistics Authority (PSA)
Mindanao posts USD 7.6-B trade receipts The Mindanao Development Authority (MinDA) has disclosed the remarkable increase in the trade sector for Mindanao in 2013. “We are happy to announce that Mindanao’s trade performance remains bullish amid the natural calamities that beset the island-region from 2012 onwards,” said MinDA Chairperson Luwalhati Antonino. Mindanao’s 2013 total trade clinched USD 7.6-B freight-on-board (FOB) receipts, which registered a remarkable 15-% increase, Antonino said, adding that the island-region had also secured around USD 6.6-B FOB receipts in 2012. “Banana remained as our top dollar earner in 2013,” she said. MinDA said the banana industry garnered the highest record in FOB receipts – reaching up to USD 0.9B in 2013, which is 45% higher than the USD 0.6B it registered in 2012.
TRADE AND INVESTMENTS AGRIBUSINESS DA secures new South Korea agri deals The Department of Agriculture (DA) said the Philippines can now look forward to additional exports of corn silage and other animal feedstock, following the signing of a memorandum of understanding for “better business efficiency and friendly relations” between Hapchon Livestock Cooperative Union and Filipino groups Benacorn Corp. and Ploughshares Inc. The Philippines is now looking to increase corn silage exports to South Korea to 2,000-3,000 metric tons (MT) by the third quarter of 2014 from the current monthly level of 1,000 MT, DA Secretary Proceso Alcala said. “At present, this is the volume that we can commit,” he said, adding that South Korea needs about 7,000 MT of corn silage monthly to meet its domestic requirement. Based on Bureau of Agricultural Statistics (BAS) records, Manila shipped some 1,000 MT of poultry products valued at USD 37,800 to South Korea in the first two months of 2014. Production of white onion, shallot up; PHL exports to ASEAN With production generally successful and supply in the domestic market stable, farmers have exported white onions and shallots since December of last year, the Philippine Vieva Group of Companies (Vieva) reported. “Harvest was generally successful this year, resulting to bumper harvests, and the adequate supply of the commodity is reflected in its stable price in the local market,” the report said. Philippine Business Report
About 124 metric tons (MT) at a USD 850 freight-on-board (FOB) price of white onions were exported to Malaysia in March of this year, Vieva disclosed in its report. The export shipments were produced by the Katipunan ng mga Samahang Magsisibuyas ng Nueva Ecija, National Onion Growers Cooperative Marketing Association, Anak Bukid and Magtutumana ng Santa Rosa MPC, the report said, noting that the exporters were all based in Nueva Ecija. Just before the rainy season set in, harvest of shallot have already been completed, Vieva said, adding that “just like in the case of white onion farmers, shallot producers have also accessed foreign markets.” Since December of last year, and up to June 5 of this year, “a total volume of 1,300 MT of shallot valued at USD 600 FOB were exported by companies accredited by the Department of Agriculture (DA) for compliance with Good Agricultural Practices (GAP),” the report also said. The ports of destination of shallot exports are Indonesia, Malaysia, and Singapore. Unilever to export tamarind products Consumer goods manufacturer Unilever Philippines disclosed a plan to increase local production of tamarind-based products and export them to other countries. “We are now getting 100% of our requirement locally. After we satisfy domestic demand, we will be exporting excess output and maybe rival Thailand in tamarind production,” Unilever Philippines Vice President for Corporate Development Chito Macapagal said. He said Unilever was also linking smallholder farmers to the company’s supply chain, working on its goal to source 100% of raw materials sustainably. July 2014
BANKING Filinvest to expand EastWest Bank The Filinvest Group is committing to further strengthen its banking subsidiary, EastWest Banking Corp., through acquisitions and organic growth. Officials of Filinvest Development Corp. (FDC) have been aggressively allocating internal funds to grow the distribution network of EastWest. FDC allots P1.9B of its P38-B capital expenditure (capex) budget for the bank’s expansion program. “The reason we are expanding a lot on our distribution network is because we realize that while there would be opportunities to acquire...for every one open for acquisition there would be 10 or more banks competing for it. We don’t want to be relying much on those opportunities. So we have to grow organically,” EastWest President and CEO Antonio Moncupa Jr. said. The bank will be raising capital by P10B through Tier 2 notes and preferred issuances. AUB to open 44 branches, eyes key cities outside Manila In its bid to almost double its deposit base to hit the 400,000 mark this year, Rebisco Group’s publicly-listed banking unit Asia United Bank (AUB) is planning to add 44 new branches to its network by the end of 2014. The AUB Group has 178 branches at present, including the 56 additional branches it opened in 2013 and those of its two rural bank subsidiaries. The wider branch network allowed it to boost its deposit level by an annual 56% to P73.9B last year. AUB President Abraham T. Co said business outside the capital has become more promising that it practically calls for expansion. “Before, when you have a boom, it’s only Metro Manila. Now, you
have a boom, it’s country-wide. That’s why before we were thinking of a 70:30 ratio for our branches— Metro Manila versus outside. Now we are eyeing about 50:50,” Co said. Some major cities AUB is eyeing for expansion
• • •
Davao General Santos Cebu
• • •
Iloilo Bacolod Isabela
Source: Asia United Bank (AUB)
The bank still has to seek approval from Bangko Sentral ng Pilipinas’ (BSP) to open the new branches.
ENERGY Foreign firms eye new PHL oil, gas blocks Major international oil and gas players have expressed interest in bidding for new oil and gas blocks that the Philippines will offer to investors starting this year. Parties interested in joining Philippine Energy Contracting Round (PECR) 5
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Conoco Phillips U.S. ROC Oil Malaysia PT Chevron Pacific Indonesia Total France Petronas Malaysia
Source: Department of Energy (DOE)
The Department of Energy (DOE) said it was set to conduct another roadshow in Singapore to draw more investors in PECR 5, which will also include 15 areas for coal exploration and development. Officials said local and international firms presently involved in the country’s oil and gas industry were also keen in participating in PECR 5. “Through PECR, we created an equal playing field for all interested parties, in which the government ensures that all service contracts and offered areas are in accordance with existing Philippine laws and policies,” DOE Secretary Carlos Jericho Petilla said. 5
PECR 5 blocks
•
•
Petroleum - Area 1 in Southeast Luzon - Areas 2 and 3 in Masbate and Iloilo - Areas 4 and 5 in northwest Palawan - Area 6 in southwest Palawan - Area 7 in west Palawan - Areas 8, 9, 10 and 11 in West Luzon Coal - Areas 1, 2 and 3 in Surigao - Areas 4, 5, 6 and 7 in Agusan and Davao - Area 8 in Surigao, Agusan and Davao - Area 9 in Surigao - Area 10, 11, 12, 13 in Zamboanga - Area 15 in Cotabato and Sarangani
Source: Department of Energy (DOE)
Petilla said there were three potential areas for petroleum under the Bangsamoro jurisdiction, but the national government excluded these temporarily and promised to put the areas back in concurrence with the Bangsamoro government once this is duly formed. USD 450-M waste-to-energy plant to rise in Pampanga A USD 450-M modern waste treatment and energy facility will soon be operational in San Simon, Pampanga through the local government’s partnership with United States industrial services company Quantum International Group Inc. that specializes in plasma gasification facilities. The process of plasma gasification involves the conversion of organic matter into synthetic gas, electricity, and slag using plasma. Quantum International will finance the construction of the plant, the purchase, importation and setup of all plasma equipment, and the compensation for the technology required in the plasma processing. The plasma gasification plant will handle the processing and disposal of at least 2,000 metric tons (MT) of municipal and industrial wastes daily. 6
Basic to spend P244M for oil and geothermal Basic Energy Corp. has earmarked P244M to finance the exploration and development of oil and gas and geothermal and oil prospects in the Philippines and Indonesia this year. “The company’s cash requirements for the operations of its oil and gas business in the Philippines and Indonesia for the whole year is budgeted at P124.9M, which will be adequately funded by its cash and short-term investments,” Basic Energy reported. The company said it would continue its business in oil and gas explorations, along with other companies, in service contract areas situated in offshore Mindoro under service contract (SC) 53 and onshore Mindoro (SC 47). The SC 47 consortium has sought approval of the Energy Department on a proposed work program for sub-phase 3 covering three years. The plan includes two years of geological and geophysical works and the drilling of one exploration well on the third and final year. Energy has a 1-% participation in SC 47. The SC 53 consortium, meanwhile, agreed to drill the Progreso-2 oil prospect to fulfill one of the well obligations under the sub-phase 3 program. Preparations are under way for the drilling job, with spudding scheduled in October. Basic Energy has a 3-% participation in SC 53.
GREEN PROJECTS P8M solar power to treat wastewater Manila Water Co. Inc. is now using solar power to treat wastewater in its Taguig facility. Manila Water Operations Group Director Geodino Carpio said P8.09M was used to install the solar power facility at the South septage treatment plant at the Food Terminal Complex in Taguig City.
Carpio said the investment is part of the firm’s continuing efforts to conserve energy through the use of renewable energy. With the new facility, Carpio said power consumption of the treatment plant will be reduced by about 20%-30%, translating to more than 9,000 kilowatt-hour (kWh) monthly savings or about 110,000 kWh savings annually. Davao investment center eyes solar panel business as priority investment The Davao City Investment Promotion Center (DCIPC) is considering solar panel manufacturing as a priority investment. DCIPC Chief Ivan Chin Cortez said DCIPC is planning to sell the idea of solar panel manufacturing to a Chinese businessman soon. He however, opted not to identify the Chinese businessman in order not to pre-empt the negotiation. DCIPC is pushing promotion of the solar panel business after seeing a potential Korean property developer that is currently scouting for a big property in Buhangin and Mintal in Davao City to develop a housing subdivision. The developer plans to adapt retrofitted roofs in which the solar panels could be very useful, Cortez said. Aboitiz to build USD 50-B biomass facility in PHL Cebu-based conglomerate Aboitiz Equity Ventures Inc. (AEV) is constructing a USD 50-M biomass power facility, its first in the country. AEV subsidiary Aseagas Corp. entered into a notes facility to finance the construction of Aseagas’ first liquid biomethane plant that will produce transport fuel from organic waste in Lian, Batangas. Construction starts this year and will be completed in 18 months. Philippine Business Report
It will have a capacity of around 9,000 metric tons of biomethane per year.
INFRASTRUCTURE/ PUBLIC-PRIVATE PARTNERSHIP Gov’t eyes bidding of USD 7-B Manila to Laguna commuter rail project The government plans to auction off a multibillion-dollar key infrastructure project seen to connect Manila to Laguna as early as the fourth quarter this year, a government official said. Public-Private Partnership (PPP) Center Executive Director Cosette V. Canilao said the Department of Transportation and Communications (DOTC) has requested for an allocation from the Project Development and Monitoring Facility (PDMF) for the USD 7-B Commuter Rail Project. Japan International Cooperation Agency (JICA) is currently conducting a feasibility study for the 90-km. elevated rail system that will link northern and southern Luzon. It is seen to serve the mass base of Mega Manila. It will be the first mass transportation that will serve as far north in Malolos, Bulacan, and as far south in Calamba, Laguna. USD 1.1-B PPP water projects unveiled Invest Water PH: A Water Infrastructure Projects Forum Towards Water Security, a market sounding conference, was held last month to promote three PublicPrivate Partnership (PPP) water infrastructure projects worth USD 1.1B to foreign and domestic investors. Of the three projects of the Metropolitan Waterworks and Sewerage System (MWSS) through their Water Security Legacy Plan, the USD 416.1-M New Centennial Water Source – Kaliwa Dam Project (NCWSP) and USD 542.22-M Bulacan July 2014
Bulk Water Supply Project (BBWSP) are under Build Operate Transfer (BOT) while the USD 134-M Angat Water Transmission Improvement Project (AWTIP) is under Official Development Assistance (ODA) to be funded by the Asian Development Bank (ADB). Invitation for bidding of the projects was scheduled last month while the auction is targeted to be held in the second half of the year. The NCWSP will see the construction of a dam with a capacity of 600 million liters per day (MLD) and a water conveyance tunnel with 2,400 MLD capacity, among others, to supply raw water and ease the supply demand from Angat Dam. Meanwhile, under the BBWSP, facilities for drawing, treatment, and transportation of treated bulk water would be built, operated, and maintained, to provide for water districts in Bulacan. Lastly, the AWTIP will build a 6.4-km. tunnel with 19 cubic meter per second capacity, connecting Ipo Dam to Bigte Basin, as part of the rehabilitation and improvement of the raw water transmission system to La Mesa dam. MCIA project push through, more PPP airport projects for bidding Preparation for the construction of the P17.5-B Mactan-Cebu International Airport (MCIA) is already underway while several provincial airports and the Ninoy Aquino International Airport (NAIA) are being considered for auctioning by the Government under PublicPrivate Partnership (PPP) deals. The DOTC has also requested assistance from the Project Development and Monitoring Facility (PDMF) to hire consultants to conduct a feasibility study on bidding the operations and maintenance (O&M) and development of the NAIA. DOTC is currently evaluating a proposal for the construction of a 2.3-km parallel runway in NAIA
to supplement the current 3.4-km primary runway. Meanwhile, the PPP Center is looking at one bidding process that would include several packages that combines O&M and expansion contracts for various provincial airports. Provincial airports considered for auction
• • •
Bacolod Davao Iloilo
• • •
Laguindingan Panglao, Bohol Puerto Princessa
Source: Public-Private Partnership (PPP)
DOTC pushes for transport projects under PPP The P4-B Integrated Transport System (ITS) South Terminal project and P2.5-B ITS Southwest Terminal project of the Department of Transportation and Communications (DOTC) under the Public-Private Partnership (PPP) scheme have been approved by the National Economic and Development Authority (NEDA) following revision of the contract terms to entice bidders. Of particular concern to interested parties was the bid parameters of the projects, one of which, the Southwest Terminal, was already undergoing the bidding process, while receiving of bids was targeted last June 16. The ITS aims to ease traffic in Metro Manila’s main roads by banning operations of provincial bus terminals in the city, while the Southwest Terminal along Coastal Road and South Terminal in the former Food Terminal Incorporated (FTI) Complex, now Arca South, will be built for passengers alighting from provincial buses and embarking on in-city transportation. Following NEDA’s assent for the Cebu Bus Rapid Transit (BRT) project, the DOTC is now also hoping for the approval of the BRT project for Metro Manila which will be built along Quezon Avenue and Circumferential 5 (C5) Road. The feasibility study for the P4.9-B Quezon Avenue BRT was already 7
given to the NEDA-ICC for its review and consent for funding either through the General Appropriations Act (GAA), Official Development Assistance (ODA) or PPP deal. The Quezon Avenue BRT will be 27km long with stations at Commonwealth Avenue, Philcoa, Quezon City Memorial Circle, Espana Boulevard, and Manila City Hall. Meanwhile, the feasibility study for the C5 BRT is still underway. Both studies were financed by the World Bank. Other NEDA approved DOTC PPP projects
Projects Project details Light Rail Transit (LRT) - Worth P1.33B Line 2 Contract - 3 years to Operate concession period - Covers 13.8km Recto to Santolan line and 4.19km Masinag to Rizal extension - Target for bidding was on the second quarter of the year Cebu Bus Rapid Transit (BRT) System Construction
- Worth P10.6B - 23km corridor with segregated bus lanes - 33 stations - 176 high-quality buses - Bidding scheduled on the second quarter of 2015
Source: Department of Transportation and Communications (DOTC)
IT-BPO TECO Electric to build USD 250-M software park in PHL The Manila Economic and Cultural Office (MECO) disclosed that Taiwanese groups led by TECO Electric & Machinery have proposed a USD 250-M software park in either Subic or Clark to house IT companies that are interested to locate in the country. MECO Chairman and CEO Amadeo R. Perez Jr. said he received 8
in Manila last May a Taiwanese business delegation led by TECO Electric Chair Emeritus Ted Huang to scout for a 15- ha area either in Subic or Clark, where it could put up the proposed software park. The proposed local software park could employ a maximum of 21,000 people and generate revenues and income that could reach USD 10B once it becomes fully operational.
They also plan to implement some modification in the lineup of their Toyota brand and introduce products in their Lexus brand which are not yet offered in the country, looking at the Philippines’ economic development as a major driver in their sales. Projects to raise the capacity of their production plans, which only assemble their Vios and Innova models, are either finished or near completion.
MANUFACTURING
Expansion projects
PSPC sets USD 172M for expansion Phoenix Semiconductor Philippines Corp. (PSPC) of Korea’s STC Semiconductor will be building a new production facility seen to cost USD 172M.
Projects Installation of two painting robots
The addition to the firm’s computer servers and laptops memory chip production facility in its 15-ha plant in Clark Freeport, Pampanga will cater to the predicted increase in customers in the smart devices field.
Localization of 15 stamping parts for Vios press shop
Targeted for completion this July
Door and engine line extension
Investment allocated for project
Process rearrangement in welding, painting, and assembly shop
Investment allocated for project
The company has a six-year, mid-term contract to produce memory chips exclusively for Samsung Electronics Company Ltd. until 2017. PSPC will be boosting its annual production from 60M to 65M. TMP boosts investments to P700M Toyota Motor Philippines Corp. (TMP) has increased its capital investment from P500M to P700M this year to expand its manufacturing plant in Sta. Rosa, Laguna. “We are making these additional investments in anticipation of the implementation of the Philippine auto manufacturing industry roadmap, which Toyota believes will make the industry competitive and sustainable,” TMP President Michinobu Sugata said. For this year, TMP is aiming for a production volume of 40,000 units and opening of two new dealership stores this month.
Status Completed
Production line equipment Completed and machinery improvement
Units produced and sold in 2013
• •
Produced units Sold units
35,481 units/vehicles 75,587 units/vehicles
Source: Toyota Motor Philippines (TMP)
MASS HOUSING Ayala looks at more Cebu developments With its five-tower Solinea resortcondominium within the 50-ha Cebu Business Park project almost finished, Ayala Land, Inc. (ALI) is now searching for an area of at least 30ha for a horizontal housing development. “We are very bullish on Cebu. It’s the second biggest economy after Manila and it’s growing even faster than the national economy. We have to be here,” said ALI Head of Sales Rufino Hermann S. Gutierrez. Solinea, the high-rise residential complex under Alveo and the first Philippine Business Report
master-planned project for the company, was unveiled in 2011 and costing P8B.
Project
Partner
600-megawatt (MW) coal-fired plant project
Aboitiz Power Corp. Can’t proceed yet and Taiwan Cogeneration because of a complaint pending Corp. before the Supreme Court. May be completed in late 2017
460-MW coal-fired plant in Quezon province
Electricity Generating PCL of Thailand
It already has three of the planned five towers launched. Another project of Alveo in Cebu is the BPI Cebu Corporate Center, an 18-storey office condominium with 168 units.
MINING Nickel Asia to put up 3rd plant in PHL Nickel Asia Corp. is planning to build its third ferro-nickel plant in the country to add more value to the nickel it exports.
Targeted to start running by 2018
800-MW facility
Targeted to start running by 2018
No partner yet
Source: Manila Electric Company (MERALCO)
Meanwhile, the company is pressing ahead with its USD 7-B plan to build its own plants.
“The study should be finished by next year,” Nickel Asia Senior Vice President Dennis G. Zamora said.
Robinsons Land to start mixed-used property Robinsons Land is planning to start P6B-8B worth of mixed-used property this year, noting the strong demand for residential and office spaces nationwide.
Meralco inks two PSAs, presses ahead to build power plants Manila Electric Co. (Meralco) has signed two separate deals to source power from Montalban Methane Power Corp. (MMPC) and Philippine Power and Development Co. (PPDC). Meralco signed a power supply agreement (PSA) with PPDC for the purchase of 1,051 kilowatts (KW) of electricity from the power firm. Another PSA was signed with MMPC for the purchase of 8,190 KW of electricity from the latter’s power plant in Rizal. Both agreements are subject to the approval of the Energy Regulatory Commission (ERC). July 2014
Partners will soon announce a contractor. Targeted for completion as early as the last quarter of 2017
1,200-MW power plant No partner yet that may run on either coal or gas and will be built together with a partner is in an “advanced pre-development stage
The company has commissioned a study to test whether a new plant or expansion of existing ones will be feasible. Nickel Asia’s first processing plant is located in Coral Bay, Palawan while the second one is in Taganito, Surigao del Norte. Both plants use the high-pressure acid leach (HPAL) process. The third plant will enable the company to export nickel in pellets.
POWER
Status
Meralco President Oscar Reyes said that while their first plant venture is stalled by an environmental case, Meralco is moving ahead with its other projects.
REAL ESTATE
Robinsons Land President Frederick Go said they also plan to put up at least five Go Hotels in the next three to five years. The company ended with 1,623 rooms under its hotels business by the end of 2013 and it aims to increase this to 2,070 rooms. The opening of new Go Hotels will help expand this number. For long-term development, the company has acquired an 8-hectare (ha) property in Quezon City, which is at the corner of C-5 and Ortigas Avenue. Project cost is expected to reach some P30B in the long run, as they can put up as much as 12 towers in the area.
Cebu Holdings allots P7B for mixed-use projects Ayala Land Inc.’s (ALI) Cebu-based affiliate is spending around P7B for two new mixed-use projects that will ride on Cebu City’s economic growth. ALI-branded residential projects, business process outsourcing (BPO) office buildings and retail space will be built in Mactan and Mandaue in partnership with the Aboitiz and Gaisano groups. “We have very exciting projects to fund – a business district in Mandaue and a mixed-use development in Mactan,” Cebu Holdings Director Emilio J. Tumbocon said following the company’s listing of P5B bonds in the Philippine Dealing & Exchange Corp. (PDEx).
RETAIL FSI builds first retail development outside Manila Festival Supermalls, Inc. (FSI) chose to build in Cebu their first retail commercial development outside Metro Manila. The three-storey Il Corso mall has already started construction at the seafront of the city's South Road Properties.
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The mall is expected to open on the fourth quarter of this year. Robinsons Retail buying mom and pop chains Robinsons Retail Holdings Inc. is searching for chains of momand-pop outlets to buy into faster-growing Philippine towns. They are looking for family-owned grocery or pharmacy chains of three to eight outlets outside the capital Manila, according to Robinsons Retail Holdings Inc. President Robina Gokongwei-Pe. The company plans to spend P26B through 2016 on expansion, Robinsons Retail Holdings Inc. Chief Financial Officer Dong Zapata said.
TELECOM Now Telecom allots P2-B budget for capex Now Telecom Co. Inc. reserved a little over P2B for its capital expenditures (capex) over the next two years. Now Corp. President and CEO Mel Velarde said in a press conference that the company is set to finalize plans to fund the capex. “We are looking at various options: one is raising shares in the market and the other one is through borrowing. We are looking at raising P1B or the entire amount immediately,” Velarde said.
TOURISM ALI keen on Sicogon Ayala Land Inc. (ALI) is interested in the redevelopment of Sicogon Island in Carles, Iloilo. The company perceives a lot of business and economic potentials in Sicogon. Sicogon has rich aquatic resources, good snorkeling and diving sites, and has a protected forest area that is home to a diverse flora and fauna. Once redeveloped, ALI sees Sicogon Island raking in some P3.2B in revenues by 2019. 10
ALI also sees Sicogon Island’s revival to generate at least 20,000 jobs by 2019 and some 500,000 visitors by that time, too.
it into Empire East City – a mixedused township, Empire East Land Holdings Inc. President Anthony Charlemagne Yu said.
Projected revenues from land transportation rentals by 2019 is P100M, P85M from boat transportation, and income from sales of souvenirs, P190M.
“We already shook hands with the owners to buy the property. We expect to complete the acquisition within the next few weeks,” Yu said, noting this development would be bigger than Eastwood City, the township of parent Megaworld Corp.
Projected revenues from island tours by 2019 is P200M. A P10-B development project was launched on May 9, 2013 by Sicogon Development Corp. (SIDECO), with the intent of reviving Sicogon as a world-class tourist destination. The project includes constructing a five-star hotel and resort, seaport and an airport on the existing airstrip.
COMPANY NOTES Filinvest budgets P38B for capex Filinvest Development Corp. (FDC) has allotted P38B for capital expenditures (capex) starting this year to expand its property and power businesses. “With the continuing strength of the Philippine economy and the recent credit ratings upgrade, we are optimistic that these investments will sustain the growth of FDC,” FDC President Josephine Gotianun-Yap said. About P25B of this year’s capital spending would go to Filinvest Land Inc., according to Gotianun-Yap. Also, P9B is allotted for its power unit for their 405-MW coal-fired power plant project in Misamis Oriental. Megaworld’s Empire East to spend P25B for various projects Empire East Land Holdings Inc. will spend P25B to buy more land and fund various projects in Metro Manila in the next five years. The developer intends to acquire a 23-ha property in Pasig and turn
Eton to spend P10B over 2 years Eton Properties Philippines Inc. will spend P10B over two years to expand its residential and office portfolio to improve the value of its prime properties. Some of their projects include formulating a new master plan for the Eton City in Laguna and Eton Centris in Quezon City, with commercial development placed at the forefront of the development. Eton Properties is also planning to put up six BPO office towers and a leisure hotel in Eton Centris, a serviced apartment in Eton Tower Makati, and another BPO building in Eton City. For the residential segment, the company plans to re-launch several projects such as economy housing First Homes in Makati.
COUNTRY-TOCOUNTRY U.S. eyes stronger trade ties with PHL The United States (U.S.) reaffirmed its commitment to further deepen its economic and commercial ties with the Philippines and the rest of the region as part of the Obama Administration’s economic rebalancing to the Asia Pacific. The Asia Pacific region had become a significant market for American products and services, as sales to and investments in the region served as the foundation for good jobs in the U.S., said US Commerce Secretary Penny Pritzker. Philippine Business Report
EU, seeks to strengthen trade ties with SMEs in PHL The European Union (EU) seeks to strengthen its ties with small and medium-sized enterprises (SMEs) in the country with the creation of a new business network that will strengthen links between its 28-member bloc and the Philippines. The EU-Philippines Business Network (EPBN), which will be implemented by the European Chamber of Commerce of the Philippines (ECCP) and its partner chambers, is expected to facilitate networking activities of SMEs from the EU and the Philippines and help enhance the success rate of business matching activities, ECCP Vice President for External Relations Henry Schumacher said. New Zealand companies visit PHL A delegation of 10 companies on a trade mission to the Philippines in June led by New Zealand Trade Minister Tim Groser aimed to support ongoing trade activities, bilateral discussions, and relationship building. The New Zealand companies who took part in the trade mission signed a number of business agreements with their Philippine partners in the health and technology sectors. Groser cited the Philippine economy as ‘among the fastest growing in Asia in recent times.’
ASEAN WATCH World leaders push for ASEAN growth Four Southeast Asian countries’ leaders stressed the importance of good governance as July 2014
they discussed ways on how to tackle sources of inequality in the region. Leaders and economic managers also try to foster a business environment in the Association of Southeast Asian Nations (ASEAN) that is conducive to broad-based growth. President Benigno S. Aquino III, Indonesian President Susilo Bambang Yudhoyono, Viet Nam’s Prime Minister Nguyen Tan Dung, and Myanmar’s Vice President U Nyan Tun called for equitable development, as they face the challenges of the upcoming ASEAN Integration during the 23rd World Economic Forum (WEF) opening session which carries the theme, “Leveraging Growth for Equitable Progress.” The ASEAN and Australia agreed to work together to elevate ASEAN-Australia Dialogue Relations as the two sides celebrate the 40th anniversary of their partnership this year. This was highlighted during the Committee of Permanent Representatives (CPR) meeting with Australia’s Foreign Affairs Minister Julie Bishop and Trade and Investment Minister Andrew Robb during the CPR’s visit to Canberra in May. Both sides also agreed that the ASEAN-Australia Commemorative Summit to be held in Nay Pyi Taw, Myanmar in November will be an important opportunity for their leaders to launch a new era of Dialogue Relations. Malaysia, Brunei soon just a drive away via Palawan Driving from south Borneo, Kalimantan and Brunei through Kudat, Sabah, Malaysia to Palawan and Manila, Philippines and vice versa via a Roll On-Roll Off (RoRo) ferry service may become a possibility soon. The long drive will be possible via RoRo once Malaysia’s Economic Planning Unit (EPU) succeeds
in its ambition to construct a ramp under the Brunei, Indonesia, Malaysia, Philippines-East ASEAN Growth Area (BIMP-EAGA) sub-regional economic cooperation initiative, Borneo Post Online said. The EPU, which manages Malaysia’s socio-economic development, is pushing to expedite federal allocation to build a ramp for use by a RoRo ferry service that will link the Borneo Island and Philippines, Borneo’s Special Tasks Minister Datuk Teo Chee Kang said.
ON THE CALENDAR WORLD FOOD EXPO World Food Expo brings together under one roof the many different types of food, beverages, and other related products from all around the globe. Together with its lineup of top-grade seminars and innovative approach to expositions, the event offers an excellent opportunity to see and be seen. It will be held on 06-09 August 2014 at the World Trade Center Metro Manila, Pasay City.
Philippine Postal Permit No. 504
The Philippines, in particular, shares with the U.S. a USD 24-B-a-year trade relationship, generating significant number of jobs in both countries.
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Economic Indicators
GNI Growth Rate (%) 10
8
8
6
6
4
4
2
2
0 4Q (2012) 1Q (2013) 2Q (2013) 3Q (2013) 4Q (2013) 1Q (2014)
140 139.5 139 138.5 138 137.5 137 136.5 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14
(In USD Billion)
6000 5000 4000 3000 2000 1000 0
Imports 8,000
(In USD Billion)
6,000 4,000 2,000 0 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14
Interest Rate (%)
Inflation Rate (%) (1994 base year)
As of 08 July 2014
4.6 4.4 4.2 4 3.8 3.6
Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14
4Q (2012) 1Q (2013) 2Q (2013) 3Q (2013) 4Q (2013) 1Q (2014)
Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14
Peso per US Dollar Rate 45.5 45 44.5 44 43.5 43 42.5
0
Exports
Consumer Price Index (2000 base year)
GDP Growth Rate (%)
10
Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14
6 5 4 3 2 1 0
Lending Regular As of 08 July 2014
Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14
*GNI - Gross National Income
Sources: Bangko Sentral ng Pilipinas (BSP) National Statistics Office (NSO)
Entered as Third-Class Mail at the Makati Central Post Office under Permit No. 504 valid until 31 December 2014
Editorial Team: Patricia May M. Abejo/Editor-in-Chief • Anne L. Sevilla/Managing Editor • Jam H. Raposon/Assistant Editor • Resty P. Par, Hazel S. Dizon, Joanna D. Cruz, Airiz A. Casta, Kit S. Andaya/Writers • Ren C. Neneria/Design Layout • Al Aquino/Circulation. Published monthly by the Knowledge Management and Information Service, 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 • Online: http://www.dti.gov.ph/dti/index.php?p=116
Philippine Business Report
12
July 2014
Philippine Business Report