Philippine Business Report (Oct.2013) by Department of Trade and Industry

Volume 24 No. 10

October 2013

Up 26 slots in 3 years

PHL now 59th most competitive economy The Philippines is now the 59th most competitive economy in the world, the 2013 Global Competitiveness Index (GCI) released by the World Economic Forum (WEF) showed.

Areas where the country improved

Pillar The latest ranking also marked the third year in a row the country went up the ladder of competitive economies, climbing a total of 26 places since 2010. The country’s competitiveness improved by six notches from its 65th ranking in 2012, pushing it to the upper 40th percentile of 148 economies included in the survey. Notably, the WEF cited the increase in the country’s competitiveness level in nine out of 12 pillars, adding that this is due to the government’s anti-corruption efforts.

October 2013

Ranking 2013 vs 2012

Innovation Institutions Financial Market Development Goods Market Efficiency Labor Market Efficiency Infrastructure Health and Primary Education Technological Readiness Market Size

69 79 48 82 100 96 96 77 33

94 94 58 86 103 98 98 79 35

“The current government, which came into power in 2010, has made the fight against corruption an absolute priority,” the WEF said.

Various sectors have lauded the improvement in the country's rankings. The business sector sees the improvement to 69th place in the innovation pillar as an indicator that the nation has made progress in driving business with the Filipinos’ inherent talent, creativity, and ingenuity. Meanwhile, Department of Trade and Industry (DTI) Secretary Gregory L. Domingo said the Philippines could easily make it to the top one-third GCI in a year or two with the implementation of some of the private-public partnership (PPP) projects as these would significantly cure the infrastructure concerns cited in the latest GCI.

INDUSTRY TRENDS PHL posts fastest economic expansion in SEA The Philippines posted a strong 7.5-% expansion in the second quarter of the year to match China as the fastest-growing economy in Asia, the National Statistical Coordination Board (NSCB) reported. The 7.5-% gross domestic product (GDP) growth in the period topped the 7.2-% median forecast by analysts as well as the 6.3-% growth recorded a year ago. “The growth came mainly from consumer and public spending, buttressed by increased investments in fixed capital,” NSCB Secretary General Jose Ramon Albert said, adding that the services sector and manufacturing and construction supported the growth. For the first half of the year, GDP rose 7.6%, faster than the 6.4% recorded in the same period last year. “The composition of our growth shows signs of an economy that is in the process of rebalancing, moving from being largely consumption-driven to becoming investment-led and industrialized, with the ability to provide higher quality jobs for Filipinos,” Socioeconomic Planning Secretary Arsenio M. Balisacan said. For the past three quarters, capital formation has been growing more rapidly than household consumption and the industry’s growth has so far outpaced that of the services sector. Notable are the double-digit growth rates in fixed capital and the manufacturing subsector in the last quarter. With the latest GDP results, the Philippines remains the fastest growing economy among emerging 2

economies in the Association of Southeast Asian Nations (ASEAN) region. “The 7.5-% growth, which is the same as that of China, surpasses the growth rates of our Asian neighbors,” Balisacan said. GDP growth in select ASEAN countries (Q2 2013) Country Philippines Indonesia Viet Nam Malaysia Singapore Thailand

Growth rate (in %) 7.5 5.8 5.0 4.3 3.8 2.8

“This only confirms that the Philippine economy is now on a higher growth trajectory,” Balisacan added. The Philippines has overtaken emerging economies such as Indonesia as a safer investment bet due to prudent fiscal and monetary policy management. Recently, the country secured investment grade from international ratings agencies—Standard & Poor’s, Fitch, and Moody’s. DTI sees sustained growth The Philippines is expected to sustain its positive economic performance for the rest of 2013 and in the next two years as new manufacturing facilities open and existing plants increase output, the Department of Trade and Industry (DTI) said. “Economic strength is seen to continue,” DTI Secretary Gregory L. Domingo said, citing that growth would be supported by the manufacturing sector’s strong performance. Domingo said the economic performance seen in the second quarter may even be sustained for the next two years at least, as the plants which recently opened and being constructed ramp up production.

Business groups said that while it is likely for the country to continue to see strong economic growth for the rest of the year, efforts to further improve the business environment to support the private sector would be needed. “I am confident that growth is sustainable given that the rate is not distant from first quarter,” Management Association of the Philippines (MAP) President Melito S. Salazar Jr. said. For the economy to continue to post strong growth, the government would need to further support the private sector through a facilitative business environment, Salazar said. “More government expenditures on infrastructure and support to poverty-challenged groups, and greater efforts to eliminate corruption will mean more growth in the future,” he said. For his part, Makati Business Club (MBC) Executive Director Peter Perfecto said the group expects the economy’s positive trend would be sustained with the industry and services sectors’ support. “Additionally, support for growth in manufacturing and agriculture will further this positive trend,” Perfecto said. DTI plans business missions to Europe The Department of Trade and Industry (DTI) will conduct business missions to Europe this month to attract more investments to the country. “There will be a business mission to London,” DTI Undersecretary for Trade and Investment Promotions Group (TIPG) Ponciano C. Manalo Jr. said. Manalo said the business mission to London will be conducted together with the Makati Business Club (MBC). Philippine Business Report

“Our strategy when looking at countries is always to check where there are opportunities for trade and investment,” he said. The government wants more foreign firms to invest here and setup facilities to create more jobs which could, in turn, promote economic growth. The promotions are being conducted even as many foreign companies are coming to the Philippines to explore investment opportunities. Most of the business missions in the country come from Japan, Korea, and Taiwan. Many foreign firms from the United States (U.S.), Europe, and the Middle East are likewise visiting the Philippines to look for business opportunities. Data from the National Statistical Coordination Board (NSCB) showed that total foreign investments approved by the seven investment promotion agencies (IPAs) went up 87% to P34.6B from P18.5B in the same period last year. In 2012, total approved foreign investments went up 12% to P289.1B from the previous year’s P258.2B. Seven major IPAs in the country

• • • • • • •

Board of Investments (BOI) Clark Development Corp. (CDC) Philippine Economic Zone Authority (PEZA) Subic Bay Metropolitan Authority (SBMA) Authority of the Freeport Area of Bataan (AFAB) BOI-Autonomous Region of Muslim Mindanao (ARMM) Cagayan Economic Zone Authority (CEZA)

Tourism revenues to hit P1.15T by 2016 The local tourism industry is expected to sustain growth in the next three years to generate October 2013

P1.15T by 2016, the Department of Tourism (DOT) announced. DOT Secretary Ramon R. Jimenez Jr. said they are keeping track of the total annual tourism gross value added (GVA) as this reflects the actual revenues generated by the tourism industry for the country’s overall economy. GVA is defined as the grand total of all revenues, from final sales and net subsidies, which are incomes of businesses. For 2013, tourism GVA is seen to reach P748.3B, 15% higher than the P650.8B registered in 2012. The DOT said tourism GVA is seen to further increase to P835.4B in 2014, P974B in 2015, and P1.15T in 2016. The DOT is also optimistic that the total visitor receipts would help boost the government’s coffer in the near term. For 2013, total visitor receipts — money spent by foreign visitors traveling to the country — are expected to hit P1.5T from P1.1T in 2012. This level is seen to further increase to P1.67T in 2014; P1.95T in 2015, and P2.3T in 2016. It would be noted that tourism is also a labor-intensive industry, providing direct and indirect employment to the Philippine workforce. DOT data showed that tourism’s employment for this year is projected to increase to 4.9M from 4.2M in 2012. This level is seen to steadily rise to 5.4M in 2014, 6.3M in 2015, and 7.4M in 2016. Investments in tech-based industries pushed The Department of Science and Technology (DOST) has called on the business sector to take advantage of strong local and foreign markets by investing in local technology-based industries.

“I hope they will now shift their focus to technology-based industries after investing in real estates, malls, and condos,” DOST Undersecretary for Scientific and Technological Services Fortunato T. De La Peña said. He said it is high time for the country's big investors to think of technology-based businesses looking at the market outside. De La Peña gave as an example the success of lagundi products penetrating the local market. “If lagundi can penetrate the whole Association of Southeast Asian Nations (ASEAN) market, it can generate more employment, more products and income,” he said. Bright prospects in PHL retail sector seen Filipinos’ spending habits continue to fuel the country’s retail sector, making the industry a bright prospect for investment, a ranking oil company executive said. PTT Philippines Corp. (PTT) President and Chief Executive Officer (CEO) Wisarn Chawalitanon urged investors to consider investing in the Philippines, particularly in retail business. “Filipinos’ shopping and spending habits are obviously driven by the Philippines’ economic growth. And this is the best time for investors to come in and invest especially on retail business,” Chawalitanon said during a recent business forum and networking in Manila hosted by Thailand’s Department of International Trade and other agencies. “Middle-income level is into consumer goods spending and there’s a lot of impulse buying that makes Philippine retail a growing market,” he said. He said one company that has expanded into the retail business is PTT, the local subsidiary of Thailand’s biggest oil firm PTT Public Co. Ltd. 3

PTT expanded its operations into retail business after starting out with the commercial trading of fuels.

that Filipino women cared about their looks. About 72% of them specifically liked to improve their hair and complexion.

To date, PTT has 65 service stations nationwide and more are scheduled to open by yearend.

Barra said Filipino women tended to equate “beauty” with “being fair,” resulting in a 10-% increase in whitening products against just a 1-% increase in non-whitening products from 2011 to 2013.

GDP growth to breach 7% this year The Philippine economy is expected to grow over 7% this year, eclipsing the high end of the government’s official 6%-7% target. In separate reports, New York-based think tank GlobalSource Partners and the Bank of the Philippine Islands (BPI) said gross domestic product (GDP) growth would hit 7.2% this year. BPI’s growth forecast has been upgraded from the previous 6%-6.5% range. GDP expanded 7.5% in the second quarter, matching China as the fastest-growing economy in Asia. Growth this year was primarily due to the mid-term elections in May which helped drive government and household spending for the first semester, GlobalSource said. Health, hygiene concerns drive PHL consumption The consumption of beauty, hygiene, and health products is growing in the Philippines even among the lower-income groups, the latest study conducted by the Kantar Worldpanel firm showed. Kantar Commercial Director Luz Barra identified four “big” trends while analyzing data on Filipino consumers’ purchasing habits from June 2009 to 2013. Overall, fast-moving consumer goods in the country grew by 3.1% in terms of absolute purchase value, with subcomponents like beverages and household care growing by over 5%, and personal care by 3.6%, outpacing the 1.5-% growth in food. The theme on beauty stood out in the study, which showed 4

“Our strong brand has made the Philippines less vulnerable to competing countries in the contact center sphere. Clients place a premium on our competitive advantage on language, affinity to Western culture, and the authentic desire to provide exceptional service,” CCAP President Benedict Hernandez said.

During the same period, spending on whitening body lotion rose by 8% while non-whitening lotion grew by only 5%.

On the same note, Everest Group Vice President for Global Sourcing H. Karthik said the Philippines enjoys competitive advantage in skill, quality, and cultural affinity.

While the trend is apparent across different segments, more notable growths were observed in the Visayas and Mindanao regions across income segments C and E.

Contact centers in the Philippines should offer differentiated services and reduce cost to maintain its leading position, Karthik said.

The study covered about 3,000 respondent households. Businesses to hire more employees by Q4 The overall employment outlook index of local businesses in the country rose to a record high of 31.7% from the previous 24.1%, the recent employment and expansion plans survey by the Bangko Sentral ng Pilipinas (BSP) showed.

For his part, Genpact Services LLC Country Manager Danilo Sebastian L. Reyes said while currency stability was important to business forecasts, global companies could always hedge their position in countries where they operate to mitigate the impact of foreign exchange fluctuations.

The employment outlook index is an indication of companies’ hiring plans for the following quarter. A higher score means more companies surveyed would increase the number of their employee than those that would keep their headcount steady. Construction companies were the most optimistic in their employment outlook for the fourth quarter. Likewise, services, wholesale, and retail trade firms were bullish on their hiring plans. PHL remains preferred location of call centers The Philippines remained the preferred location for contact center and healthcare services in the world despite the cheaper cost of doing business in other countries, the Contact Center Association of the Philippines (CCAP) reported.

TRADE AND INVESTMENTS AVIATION SEAIR forms new company for domestic operations Southeast Asian Airlines (SEAIR) has formed SEAIR International, Inc. to handle its domestic operations after divesting its international operations to Tiger Airways. “We can’t abandon our operations in the exotic destinations like Philippine Business Report

Basco, Caticlan, El Nido, and Busuanga so we decided to continue with that mission. So we have set up that another airline,” SEAIR President and Chief Executive Officer (CEO) Avelino DL Zapanta said. Zapanta said they expect to start the operations within the fourth quarter of this year. Tigerair eyes lease of more aircraft Tiger Airways Philippines (Tigerair) is acquiring additional two to three aircraft next year as it expects to open up new international and local routes, Tigerair Chief Executive Officer (CEO) Olive C. Ramos said.

used as an ATM card if they opt to withdraw funds from their SSS loans and benefits. EastWest eyes 350 branches by 2014 EastWest Banking Corporation (EastWest) is planning to grow its branch network to 350 by next year to effectively reach out and provide convenient banking services to customers in key areas all over the country. Three new branches were opened in October last year and over 60 branches consecutively opened in the next few months. The bank opened 10 more branches in a single day on February this year, bringing its total to 255.

BPO IBM opens BPO facility in Laguna International Business Machines Corporation (IBM) has opened a business process outsourcing (BPO) facility in Sta. Rosa, Laguna. Tigerair earlier announced plans to expand its fleet to 25 aircraft in three to five years. Meanwhile, the airline was looking at untapped markets in North Asia like Japan and South Korea.

BANKING PNB, SSS tie up for ATM transactions The Philippine National Bank (PNB) has tied up with the Social Security System (SSS) for an automated teller machine (ATM) project to be offered to all SSS members within the year. PNB Chairman Florencia Tarriela and SSS President and Chief Executive Officer (CEO) Emilio de Quiros Jr. signed a memorandum of agreement (MOA) on the SSS Unified Multi-Purpose Identification System (UMID) Card - ATM project. The project will allow SSS members to simply go to a PNB branch to enable their UMID cards to be October 2013

“The Philippines remains one of the strategic locations in IBM’s global delivery network that integrates capabilities, assets, and skills without borders,” IBM Global Process Services (GPS) Delivery Country Leader Cassandra Soto said. The country is among the top 20 priority growth markets globally and the Sta. Rosa BPO opening reinforces its growing importance to IBM.

ENERGY Eastern Petroleum invests P90M in LPG re lling plants Eastern Petroleum Corp. is investing P90M for three liquefied petroleum gas (LPG) refilling plants to be constructed next year. The LPG refilling plants will be located in Cebu, Davao, and General Santos. “In the first quarter of 2014, we will expand and put up refilling plants for P30M each and we expect

to have 300 retail outlets from 100 at the end of this year,” Eastern Petroleum President Fernando Martinez said. Otto Energy invests USD 500,000 for Mindoro exploration Otto Energy formally obtained government permission to explore Service Contract (SC) 73 off Mindoro. The company said it would start reprocessing existing seismic data “with a minimum financial commitment of USD 500,000 within an initial period of 18 months.” Oil has been discovered in SC73 through an extended production test conducted in 1994 at certain wells near the block. “The occurrence of oil seepages in the Mindoro Island region also confirms the presence of an active petroleum system in the area,” the company said. Flying V builds new biodiesel plant TWA Inc., the oil company behind the Flying V brand, will put up another biodiesel facility in the Visayas with 30-M liters capacity. The company has an existing 30-M liter biodiesel plant in Sasa, Davao City, which catered to the biodiesel needs not only of Flying V but also of other small oil players. The Visayas biodiesel facility is estimated to cost around P40M, or almost the cost of the facility in Davao. Kampac Oil eyes Quezon oil depot Dubai-based Kampac Oil Middle East plans to invest in a multi-billion dollar oil depot project near the boundary of Laguna and Quezon provinces. The company had started looking for employees, including lawyers and accountants, in preparation for the project’s initial phase. Kampac Oil plans to distribute and sell oil in Southeast Asia with the Philippines as its distribution hub in Asia. 5

Pitkin bags contract for Palawan prospect The Department of Energy (DOE) has awarded a service contract (SC) to Pitkin Petroleum Plc. to explore and develop northwest Palawan for oil and gas reserves. “SC 74 has been formally awarded to the consortium of Pitkin Petroleum Plc. and the Philodrill Corp. for Philippine Energy Contracting Round (PECR) 4-Area 5 on the Northwest Palawan basin,” Philex Petroleum said.

INFRASTRUCTURE/ PUBLIC-PRIVATE PARTNERSHIP PHL studies USD 2.5-B Luzon railways The feasibility study for the proposed USD 2.5-B Philippine National Railways (PNR) integrated Luzon project will start soon and is expected to be completed within the year, the Bicol Regional Development Council (RDC) said.

GREEN PROJECTS

ATI to expand Manila, Batangas ports Asian Terminals Inc. (ATI) is jointly expanding the ports of Manila and Batangas backed by its P4.2-B capital investments over the next three years.

Italpinas to put up green buildings in Mindanao Property developer Italpinas Euroasian Design and Eco-Development Corp. (ITPI) is putting up green buildings in Mindanao.

The structure would also have shaded facades to reduce direct sun illumination on the windows and the internal temperature of each unit. Major Pagudpud wind project breaks ground The construction of Northern Luzon UPC Asia Corp (NLUPC)’s USD 220-M, 81-megawatt (MW) wind project in Pagudpud, Ilocos Norte has begun. The groundbreaking ceremony for the UPC’s Pagudpud wind project at Brgy. Caparispisan was held last month. “Commercial operations will begin by late 2014 or early 2015,” Department of Energy (DOE)-Renewable Energy Management Bureau (REMB) Director Mario Marasigan said. The project’s initial phase is expected to be connected to the grid by June 2014. 6

Meanwhile, the new Corella substation will serve as an alternative drawdown substation of the Ubay substation and will reduce the said substation’s load by providing a new power delivery point. It will be situated near Tagbilaran City, one of the island’s load centers. Both the transmission line and substation projects begun construction in November 2010 and are expected to be completed by the last quarter of 2013.

Area 5 covers 424,000 ha. within the site’s offshore deepwaters.

The initial plan would comprise two towers of mixed-used 10-storey green buildings each. It would have an inner courtyard and a cross-ventilation layout to increase the natural airflow and light.

The new transmission line spanning 95 km. will pass from the northeast to the southwest area of Bohol.

The Bicol RDC said it will work with the Public-Private Partnership (PPP) Center and help provide data for the study. The PPP Center tapped CPCS Transcom Ltd., a Canadian consultancy firm, to undertake the project study, starting with the Bicol section and explore the viability of an expanded Luzon railway system as a convenient, affordable, and environment-friendly alternative transport for people and goods. Bicol Governor and RDC Chairman Joey S. Salceda said the PPP Center’s feasibility study would cover the entire PNR’s 700-km. north and south mainline networks.

Developments at Manila South Harbor are on schedule and are primarily anchored on expanding pier- and land-side infrastructure, improving current facilities and acquiring new equipment to sustain the port’s reliability, efficiency, and high productivity, ATI Vice President (VP) Sean L. Perez said. Perez said the Batangas Port container terminal would continue complementing Manila ports with a capacity of 300,000 twenty foot equivalent units (TEUs) to support the thriving industries of CALABARZON (Cavite, Laguna, Batangas, Rizal, Quezon).

MASS HOUSING

P1.9-B NGCP project in Bohol on track The National Grid Corp. of the Philippines (NGCP) said its P1.9-B Bohol transmission line project will be completed before 2013 ends.

3 housing units seek BOI incentives Three housing units are seeking tax perks from the Board of Investments (BOI) for projects in Quezon City, Batangas province, and Cebu City.

The backbone project consists of the Ubay-Corella 138-kiloVolt (kV) transmission line and the Corella substation project.

Vista Residences Inc. is applying for registration with the BOI as expanding developer of Pine Crest, a low-cost mass housing Philippine Business Report

project with a total capacity of 367 units on a non-pioneer status with project site located at Aurora Blvd. cor. Balete Drive, Quezon City. The project, which occupies an 8,000-sqm. property, is composed of three low-rise structures. Communities Batangas Inc. has also filed an application to register with BOI as expanding developer of low-cost mass housing project Pine Grove on a non-pioneer status. The project, which has a total capacity of 122 housing units, is located in Lipa City, Batangas. Meanwhile, Property developer Cebu Landmasters Inc. is applying for registration as a new developer of low-cost mass housing project Mivesa Garden Residences with a capacity of 473 units on a non-pioneer status.

(eJeepneys) and electric tricycles’ (eTrikes) mass production. PhUV Vice President (VP) Rommel Juan said new equipment and production facilities will be installed while raw materials and other production inputs will be bought. The company has teamed up with Taiwan’s TECO Electric and Machinery Co. Ltd. Meanwhile, PhUV recently secured its registration and received fiscal and non-fiscal incentives from the Board of Investments (BOI).

RESEARCH AND DEVELOPMENT STI purchases WNU STI Education Systems Holdings Inc. said its board of directors approved the acquisition of a controlling interest in West Negros University (WNU) in Bacolod City.

The project is located at Salinas Drive Extension, Lahug in Cebu City.

ALI said its board had approved the additional capitalization to complete P5.4B based on the 2012 capital expenditure (capex) program. Proceeds of this funding exercise will be used for various land acquisitions in key growth centers.

MOTOR VEHICLES PhUV to allot P100M to produce electric vehicles The Philippine Utility Vehicle Inc. (PhUV) will allot P100M for the electric jeepneys October 2013

NADECOR, SAGC take venture to next level Nationwide Development Corp. (NADECOR) and St. Augustine Gold and Copper Ltd. (SAGC) took to the next level their joint venture to develop the King-king deposit in Compostela Valley. SAGC turned over to NADECOR a document that finalizes the USD 18.25-M purchase from Benguet Corporation. SAGC reached the full and final settlement in August 2011 for the mineral production sharing agreement (MPSA), after making USD-8M down payment and USD 10.25-M final payment.

POWER 2 Mindanao power plants to open this month Mapalad Energy Generating Corp. (MEGC) and EEI Power Corp. are scheduled to come on stream this month to help Mindanao cope with the power crunch.

The Mivesa Garden Residences is a garden community occupying a 1.8-ha property. ALI injects P1.1B into affordable housing unit Ayala Land Inc. (ALI) is set to infuse P1.1B in fresh equity to support the Avida Land Corp. (Avida) capital spending program.

at Barangay Taganito, Claver, Surigao del Norte with officials led by Department of the Interior and Local Government (DILG) Secretary Manuel A. Roxas II.

The purchase of WNU was in line with the company’s strategy to expand its business in education. STI also said it was conducting due diligence on WNU, which is recognized as one of the biggest universities in Negros Occidental, with an enrollment of 9,000 students in school year 2012-2013.

MINING USD 1.6-B mining venture opens Taganito HPAL Nickel Corporation (THPAL), considered the largest single investment in the Philippines’ mineral resource sector built at a cost of USD 1.6B, is scheduled to start commercial production next quarter. THPAL inaugurated its nickel processing plant last month

The Department of Energy (DOE) said MEGC’s P373-M plant is eyeing to start commercial operations after securing financing from the Bank of the Philippine Islands (BPI) and Cagayan de Oro Lending Center. EEI’s P600-M plant is already 75-% complete where financing for the project – 30-% equity and 70% loan – has already been secured from Rizal Commercial Banking Corp. (RCBC) for the loan. SMC, K-Water tie up for power project San Miguel Corp. (SMC) has tied up with Korea Water Resources Corp. (K-Water) for the operation of the 218-megawatt (MW) Angat hydropower plant in Bulacan. 7

SMC would handle the management while K-Water will technically operate and maintain the Angat plant, K-Water Vice President (VP) for Overseas Business Division Byung Hoon Yune said.

Sarangani Energy to complete phase 1 of coal plant in ‘15 Sarangani Energy Corp. (SEC) expects to complete the first phase of its P13-B coal-fired power plant in Maasim, Sarangani by September 2015.

K-Water is eyeing the take-over before the year ends and is optimistic that their investment in Angat is only the beginning of future projects in hydropower.

SEC, which is part of the Alcantara Group’s Alsons Consolidated Resources Inc., said phase 1 of the 210-megawatt (MW) plant will have a capacity of 105MW. The second phase is expected to start operations by 2016.

POWER Aboitiz Power upgrades, lays groundwork for power plants Aboitiz Power Corp., Aboitiz Group’s power generation arm, is investing roughly USD 150M to upgrade the Tiwi and Makban geothermal facilities in Albay and Laguna, respectively.

Alsons said SEC and its contractor, South Korea’s Daelim Industrial Co. Ltd. (Daelim), are currently preparing the power block area that will contain the plant’s steam core components. The Department of Energy (DOE) is counting on the plant to be part of a long-term solution to Mindanao’s current power crunch.

REAL ESTATE

The company has brought down the forced outage rates and has increased both facilities’ availability factors. Bringing the geothermal plants’ capacity to over 460 megawatts (MW) from the current 400MW is possible, Aboitiz Power President and Chief Executive Officer (CEO) Erramon I. Aboitiz said. Meanwhile, the company is laying the groundwork for the construction of a planned 300-MW coal-fired power plant in Toledo City, Cebu. “We continue to develop it. We are writing up specifications and hopefully we will be soliciting bids probably by next month or two. So we are now in the selection of equipment and getting offers from different countries,” Aboitiz said. With preparations and construction scheduled to start next year, Aboitiz is on track to jumpstart commercial operation of the USD 750-M facility by late 2016 or early 2017. 8

Vista Land readies P45-B investment Vista Land and Lifescapes Inc. sees investments in its Lakefront community project in Sucat, Parañaque hitting P45B over the next five to 10 years. The 60-ha mixed-use project started in 2004 that is being developed in several phases, which have done well in terms of sales so far, Vista Residences President Maribeth C. Tolentino said. Tolentino added that the project is 45% developed in terms of land area, at a cost of P5B. She said that they are embarking on these development projects in a bid to attain a 15-% growth in 2013 and another 15%-20% next year.

investment commitment to the 72-ha Iloilo Business Park to P35B, making this township the company’s single biggest project outside Metro Manila. “We are committed to make the Iloilo Business Park the largest, most exciting business and tourism district in Western Visayas,” Megaworld First Vice President Jericho P. Go said. Go added that there will be brandnew components for the residential and commercial markets as they envision Iloilo Business Park to be a premier model of a mixeduse business, tourism, commercial, and residential hub for Region 6. Megaworld earlier committed to invest around P25B in the project. The higher investment commitment followed the expansion of their township at the old Iloilo airport site in Mandurriao district, from 54 ha to 72 ha last May. Alphaland to complete P9-B Makati Place project Upscale property firm Alphaland Corp. is on track to complete its P9-B Makati Place and City Club project in the country’s business capital. City Club is composed of three residential towers on top of a three-storey and a five-storey basement. Makati Place, a 1-ha project at the corner of Ayala Ave. and Malugay St., is a partnership between Alphaland and the Boy Scouts of the Philippines. Alphaland is banking on its unique model wherein buyers of Makati Place residential units will also get a club share.

Company officials expect to book P80B in revenues upon the project’s completion.

Selling activities for City Club have not been formally launched yet and pre-selling activities allowed the company to sell around 500 club shares at P1M each, Alphaland Chief Financial Officer (CFO) Marriana H. Yulo said.

Megaworld boosts Iloilo township investment to P35B Property developer Megaworld Corp. has increased its 10-year

Century Properties to build Forbes Media Towers in Makati Century Properties Group, Inc. will build the world’s first Philippine Business Report

Forbes-branded office tower in Makati, jumpstarting Forbes Media’s plan to put up a global network of commercial buildings. Forbes Media chose the Philippines as the location for the first of its landmark business tower due to the country’s rapidly growing market and strong relations with the United States (U.S.), Forbes Media LLC President and Chief Executive Officer (CEO) Michael S. Perlis said. The Forbes Media Tower in Century City will offer approximately 60,000 sqm. of premium office space, which will be available for sale and for rent to business owners, entrepreneurs, and companies by the first quarter of 2014. “Forbes is synonymous with success and business, and this partnership fits perfectly with our distinguished portfolio of local and internationally renowned brand partners,” Century Properties President and Chief Executive Officer (CEO) Jose E. B. Antonio said.

RETAIL UNIQLO includes PHL in global outreach projects Clothing company UNIQLO put up Waku Work Center in Barangay Lorega, Cebu under its Clothes for Smiles Project.

and Japanese non-profit organization Entrepreneurial Training for Innovative Communities (ETIC) that will set up businesses in the area to generate eventual employment for the trainees.

TOURISM

Cosco to add community mall in portfolio Lucio Co’s holding firm Cosco Capital, Inc. plans to venture into community malls through building and acquisition.

The travel comparison site with local offices in Indonesia, India, and Dubai recently appointed a dedicated market manager in the country.

The company is looking at Tuguegarao City, Cagayan as a possible location, as well as offers of existing malls in Luzon. Eight malls with a capital of P400M each are targeted to be built in three years, with the first aimed to open in 2014. Meanwhile, Cosco started its mass market distribution of imported Excelente brandy last June, and targets to sell 500K to 1M cases in two to three years

The project is established with Waku Waku Work English Inc. October 2013

A local version of their website was launched in November 2011. The country is currently Wego’s sixth largest market in terms of search revenue and seventh in terms of traffic. More plans for Ayala North Point bared Ayala Corporation plans to build a hotel and a small clinic in Ayala North Point in Talisay City, Negros Occidental.

Formerly Alcorn Gold Resources Corporation, the company co-owns Puregold Price Club, Inc.

TELECOM Globe moves to new USD 200-M hub Globe Telecom, Inc. moved its base of operations to their newly constructed USD 200-M The Globe Tower (TGT) in Bonifacio Global City. The 28-storey building is Leadership in Energy and Environment Design (LEED) standards compliant.

It will act as a vocational training and career development center for the community’s adults. It will also serve as an education resource for the children.

Wego establishes PHL operations Singapore-based travel search site Wego extends its localization strategy in the Philippines.

Huawei Technologies’ in-building wireless service (IBS) solution, which would allow up to 70 Mbps data download speed within the whole building, was installed in TGT. The IBS’ integration is complementary to the company’s strive for paperless operations by working through an online platform.

This was disclosed by Ayala Corp. Chairman and Chief Executive Officer (CEO) Jaime Augusto Zobel de Ayala during the turnover of the company’s Text2Teach program in Silay City, and launch of Ayala Museum’s Botong Francisco travelling exhibition in Talisay City recently. The company invested P7B to enhance the mixed-use development project. Last April saw the opening of the company’s The District Mall worth P1B in Ayala North Point.

COMPANY NOTES Jollibee targets up to 300 stores this year Local fast-food company Jollibee Foods Corporation (JFC) looks to open 200 to 300 stores within the year. JFC targets to open 100 stores locally and 100 abroad, allotting a capital expenditure of P5.5B which is seen as sufficient to fund the opening of up to 300 new stores. Meanwhile, the company has set a P6-B budget for its planned expansion next year.

to expand its non-carbonated beverage segment. SM to venture into infra, tourism SM Investments Corporation (SMIC) sees possibilities in Philippine tourism and looks to support the Department of Tourism (DOT) through investments in infrastructure. The Premier Airport Group consortium backed by SMIC looks to bid for the P17.5-B Mactan-Cebu International Airport (MCIA) Public-Private Partnership (PPP) project. The company has also partnered with Chevron to explore possibilities of renewable energy (RE) in Bohol, Palawan, and Samar.

“The trend is to grow the store expansion and capital expenditures at the same pace,” JFC Chief Financial Officer Ysmael Baysa said.

Meanwhile, SMIC adds malls SM Butuan and SM Cagayan de Oro to their portfolio of malls in Mindanao. SM Butuan is set to open next year and SM Cagayan de Oro in late 2014 to early 2015.

PLDT gets Danao LEC Philippine Long Distance Telephone Co. (PLDT) inked agreement with Dana Telecom (Datelco) to take over the latter’s services in Danao City, Cebu as the local exchange carrier (LEC) closes its operations after 20 years.

Subsidiary SM Hotels and Conventions Corp. (SMHCC), through unit SMX Convention Specialist, looks to open convention centers in General Santos and Cagayan de Oro while those in Cebu and Pampanga are already underway.

The Datelco opted to wind down operations as the cost of upgrading its network made it untenable.

Starbucks opens 2 new stores Starbucks Philippines ended the fiscal year by opening two more stores, bringing to 217 their total stores.

Under the agreement, PLDT will assimilate Datelco’s existing customers while both will engage in joint marketing and promotion of PLDT’s products and services in Danao. Pepsi Phils. expands Pepsi-Cola Products Philippines, Inc. (PCPPI) will boost its production capacity and logistics systems following growth in sales. Installation of new manufacturing lines in La Union, Muntinlupa City, and Davao were completed last June. The company has also entered into the powdered drinks and fresh coconut water category 10

“We would have opened 18 stores from October 1 of last year to September of this year,” Starbucks Philippines Chief Operating Officer (COO) Noey Lopez said. Starbucks’ expansion strategy indicates thats company is still on the top of their game despite the rise of rival tea shops in the market, Lopez said.

BILATERAL AGREEMENT PCCI, KOIMA promote trade between PHL, Korea The Philippine Chamber of Commerce and Industry (PCCI) signed an agreement with Korea Importers Association (KOIMA) to expand the trade programs between the Philippines and Korea. “The agreement with KOIMA will not only focus on exchange of information, but also involve us (PCCI) providing assistance to Korean executives on networking activities and business opportunities here,” PCCI President Miguel B. Varela said. Varela said PCCI can link Korean firms to its members so it can explore business opportunities. For 2012, Korea was the country’s sixth biggest market for its exports and the shipments to Korea reached USD 2.9B from 2011’s USD 2.2B. PHL eyes Thai food biz opportunity The Philippines is looking for stronger food business opportunities to strengthen trade relations with Thailand. Department of Trade and Industry (DTI) Undersecretary for Trade and Investment Promotions Group (TIPG) Ponciano C. Manalo Jr. believes that even if the two are trade associates for a long time, there is still room for more collaboration. Discovering opportunities on the food sector will help strengthen the two countries’ ties. The Philippine government also aspires to have Thailand’s development in the coming years as Thailand has improved a lot in their packaging technology and design. Philippine Business Report

“Malaysian presence in the Philippines is on the rise given the economic achievements of the country. As far as Malaysian businessmen are concerned, we are going big in the Philippines,” Malaysian Ambassador Dato Mohd Zamri Bin Mohd Kassim said. Malaysian businessmen also plan to set up projects in Mindanao. Areas of interest for Malaysian businesspeople

• • • • • •

Agriculture Construction Energy Food and beverage Hotels Infrastructure

• • • •

Manufacturing Palm oil cultivation Solid waste management Tourism

ASEAN WATCH AEC bene ts PHL contact center sector The formation of the Association of Southeast Asian Nations (ASEAN) Economic Community (AEC) in 2015 is an advantage to the Philippine contact center industry. AEC can transform the ASEAN into a region with free movement of goods, services, investment, skilled labor, and capital. The Philippine contact center industry has already developed a place in the global market and it should extend this by further developing its vast and young pool of potential workers, Gartner Vice President (VP) for Research TJ Singh said. ASEAN biz leaders discuss looming economic integration In the recently held Network ASEAN Forum (NAF), regional business October 2013

leaders gathered in Singapore to discuss the formation of ASEAN Economic Community (AEC) in 2015. The businesspeople agreed that ASEAN has almost limitless potential on being the key global trade and production base. Though, they also discussed that more work is still needed to ensure seamless integration. Indosat Chief Executive Officer (CEO) Alexander Rusli believes that ASEAN should be viewed as a “single unit of business.” “We need to build an ecosystem through the ASEAN spirit with one set of standards defined across the board,” Rusli added. Appliances demand rises in ASEAN region Southeast Asia’s demand for large appliances grew to 20% in the first half of 2013, according to a Singapore-based research firm GfK. Large appliances such as air conditioners, refrigerators, washing machines, and microwave ovens have increasing demands in the Philippines, Singapore, Malaysia, Thailand, Indonesia, Viet Nam, Cambodia, and Laos. These countries sold nearly 11.5M units of appliances. “Rising affluence, coupled with multiple retailers expanding beyond first tier cities, has been effectively stimulating the penetration of big household appliances with more widespread reach, enabling more rural dwellers to buy their first of such appliances,” GfK Account Director for Home and Lifestyle Jasmine Lim stated.

ON THE CALENDAR Export Marketing Plan Workshop Export Marketing Plan Workshop is a one-day workshop that will help

you plan to succeed in the rewarding and challenging export market. It will also cover export market opportunities and topics such as motivations for getting into export marketing and present challenges and difficulties facing exporters. The workshop will be held on October 22, 2013 at the Philippine Trade Training Center (PTTC) with a registration fee of P2,000. Green Workplace: Planning Sustainability A Green Workplace will teach employers and business owners on the going “green” benefits such as saving energy and resources. Business owners will learn how to protect the health and welfare of their workforce thus having competitive and productive enterprises. It will be held on October 23, 2013, 1:00–5:00 p.m. at the PTTC with a registration fee of P250. Philconstruct 2013 Philconstruct 2013 is dedicated to the Philippine building industry. This industry benefits from the economic growth and the inflow of foreign capital and regarded as a very promising market. SMX Convention Center (MOA) will serve as the venue for the event on November 6–9, 2013.

Philippine Postal Permit No. 504

Malaysians expanding more biz in PHL Malaysian investors are currently taking advantage of opportunities in various Philippine industries.

GNI Growth Rate (%)

Economic Indicators

GDP Growth Rate (%)

2 0

1Q (2012) 2Q (2012) 3Q (2012) 4Q (2012) 1Q (2013) 2Q (2013)

Exports

Consumer Price Index (2000 base year)

136 135 134 133 132 131 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13

45 44 43 42 41 40 39

5,400

6000 5000 4000 3000 2000 1000 0

5,000 4,800 4,600 4,400 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13

Inflation Rate (%) (1994 base year)

3 2 1 0

May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13

(In USD Billion)

5,200

Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13

Peso per US Dollar Rate As of October 10, 2013

Imports

(In USD Billion)

Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13

Interest Rate (%) 6 5 4 3 2 1 0

As of October 10, 2013

May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13

*GNI - Gross National Income Entered as Third-Class Mail at the Makati Central Post Office under Permit No. 504 valid until 31 December 2013

Editorial Team: Anne L. Sevilla, Editor-in-Chief • Vic S. Soriano, Managing Editor • Jam H. Raposon, Assistant Editor • Cresenciano P. Par, Hazel S. Dizon, Joanna D. Cruz, Airiz A. Casta, Kit S. Andaya, Writers • Ren C. Neneria, Design Layout • Myrna V. de los Reyes, Circulation. 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 • Online: http://www.dti.gov.ph/dti/index.php?p=116

Philippine Business Report 12

October 2013

Philippine Business Report