PHILIPPINE
Vol. 22, No. 9 September 2010
FACTSHEET The Month’s Highlights
Political
Malacanang furnished the Chinese government a copy of the probe results on last month’s bus hostage crisis. The report recommends filing charges against 13 persons and three media networks. The President confirmed his choice of former senator Manuel Roxas II as his unofficial senior adviser. The US granted the Philippines US$ 434 million in financial assistance under the Millennium Challenge Corp., hoping if would lead to economic reforms and fight poverty and corruption. The Supreme Court ordered the House to suspend impeachment proceedings against Ombudsman Gutierrez, citing a one-year prohibition under the Constitution. The President decided not to attend the AsiaEurope Meeting in Brussels in early October.
Economic
The Philippines could soon be taken off the list of countries not fully compliant with OECD-backed standards as officials rush to finalize guidelines implementing a law mandating the sharing of tax information. The Philippines and its ASEAN peers have taken issue with US policies that reportedly restrict trade. High US tariffs on garments and crops, trade distorting subsidies favoring American agriculture and ‘frequent recourse’ to antidumping probes are among the concerns raised. A ban on open-pit mining in South Cotabato that is threatening a US$ 5.2 billion coppergold prospect of Xstrata Plc will take effect on 3 October, although it is expected to be reviewed.
The country posted a balance of payments surplus of US$ 40 million in August, raising the eight-month tally to US$ 3.478 billion. The Aquino government achieved a surprising budget surplus in August, even after its two revenue agencies fell sharply below their targets. August’s P1.3 billion surplus is the result of spending ‘wisely’, Finance Sec. Purisima said. The budget deficit in the eight months to August reached P228.1 billion, 8.6% higher than the deficit posted last year. The government has moved back the official presentation of PPP projects by a month, citing the unavailability of a venue for expected investors. The announcement comes as the country’s neighbors have also announced ambitious investment plans to help fuel economic growth: Malaysia unveiled a US$ 440 billion, 10year investment plan that will be funded primarily by the private sector, and Indonesia said it needed US$ 140 billion – of which two thirds is to come from the private sector – over the next five years for infrastructure development. A regional trial court in Aparri town affirmed the ban on the importation, registration and distribution of secondhand vehicles at Port Irene in Santa Ana, Cagayan. The country’s current account surplus inched up 3.2% to US$ 4.4 billion in the first half. House Speaker Belmonte said he was in favor of reviewing fiscal incentives granted to foreign and local big businesses to find out if they do more harm than good to the economy. Belmonte issued the statement after discussions with officials of the Dept. of Finance during which the DOF offered to submit a list of revenue-eroding laws to Congress for review as the government tries to contain the fiscal deficit.
The external debt of the country hit US$ 57 billion as of June, up from US$ 52 billion in June 2009.
The BSP said it was considering relaxing foreign-exchange rules, especially on capital outflows, in a bid to temper the sharp rise of the peso, which has triggered complaints from the export sector.
The government plans to put up an insurance scheme that will compensate private investors involved in big-ticket infrastructure PPP projects to eliminate ‘risks’ arising from adverse court or regulatory decisions.
The Philippines has officially signaled its interest in a free trade agreement with the EU, firming up the new administration’s plan to increase the country’s engagement with its trading partners.
Exports climbed 35.9% to US$ 4.5 billion in July. The export performance in the first seven months reached US$ 20.538 billion, up 37.4% from last year. New independent power producer administrators (IPPAa) – firms that will win the right to sell the contracted output of IPPs – will no longer be eligible for incentives from the BOI, as the agency decided to suspend such privileges. The government has allocated P15 billion of next year’s proposed national budget as its counterpart fund for projects under the PPP scheme. The Aquino administration is bent on selling PAGCOR, its third largest revenue contributor after the BIR and Customs. PAGCOR has hired financial advisors to assist in the planned sale. DTI Secretary Domingo said that they will be going after industries that have cartel-like operations to bring down the prices of good and protect consumers. The passage of anti-trust laws is one of the priorities of the Senate. The energy sector has incurred a staggering P932 billion in outstanding and contingent liabilities, more than half of which would likely be shouldered by electricity consumers. Inflation inched up to 4% in August. The average inflation for the 8-month period stands at 4.2%. Gross International Reserves stood at US$ 49.578 billion as of the end of August. Bank lending grew at an even faster pace of 11.7% in July, helped by huge liquidity in the system and low interest rates. The auto industry continued to reap the rewards of a recovering economy and increased consumer confidence with vehicle sales jumping 37% to 112,454 units as of end-August. The Departments of Finance and Energy will spearhead the creation of an inter-agency team that would specifically focus on oil smuggling. All power generation and distribution utilities will be required to offer at least 15% of their shares to the public, according to the new rules being crafted by the ERC.
Investments pledged to the PEZA amounted to P70.96 billion as of end-August, up 31.2% from the same period of last year. Personal consumption expenditure rose 4.1% to P1.152 trillion in 2009. The finance department is conducting a review of laws passed during the previous administration to see if amendments will allow the government to recapture lost revenues. The net inflow of portfolio investments surged by 385% to US$ 883.4 million in the first eight months of the year. Foreign direct investments swung back to a net inflow of US$ 128 million in June. It brought the first half results to a net inflow of US$ 732 million, lower than the US$ 1.27 billion recorded in the first semester of 2009. Credit cards receivables grew by 4.9% to P136 billion as of end-June. The Mines and Geosciences Bureau will purge stale mining applications and scrap inactive mining tenements. The country’s unemployment rate fell to 6.9% in July, the lowest since October 2008. Remittances from Filipinos abroad rose 8.2% in July to US% 1.617 billing; remittances in the first seven months reached US$ 10.679 billion, up 7.1% from last year. The Bureau of Customs missed its August collection target of P23.5 billion by about 20%. The DOE is seeking long-term financing for energy investments, particularly for renewable energy projects, from multilateral lenders.
Business
British Gas has forged a US$ 400 million deal to sell its 40% stake in the Sta. Rita and San Lorenzo power plants to Korea Electric Power Corp. (Kepco). The Lopez Group is studying the possibility of exercising its right of first refusal over the BG stake in the two plants. Petron Corp. will finally start relocating operations out of its Pandacan facility, hoping to complete the move in five years’ time. Lopez Inc. (formerly Benpres Holdings Corp.) is in talks with creditors to restructure P1.8 billion of debt in line with its goal to further pare down obligations. Baggerwerken Decloedt En Zoon, the Belgian dredging company that bagged the P18.7 billion Laguna Lake rehabilitation project, obtained a guarantee from Belgium through its export credit facility. Belgium-based Enfinity, which specializes in
renewable energy, is set to construct a P3 billion, 20-MW solar power plant in Zamboanga. Rainmaker Systems Inc. plans to double the size of its Philippine workers by hiring another 1,000 employees in the next 12 months. The eldest son and namesake of Henry Sy is acquiring a 45.5% stake in listed investment holding firm UEM Development Philippines in line with plans to expand his personal portfolio to include infrastructure and public utilities. Robinson Land Corp. is aiming to build at least 30 budget hotels across the country over the next five years to meet the growing demand for affordable accommodation particularly by local tourists. Jollibee Foods Corp. is selling its Delifrance business to a newly formed unit of listed EuroMed Laboratories Philippines, Inc. for P100 million in cash. MacroAsia Corp. has secured an environmental clearance certificate for its Infanta nickel mine in Brooke’s Point in Palawan, which covers a total land area of about 1,114 hectares. Takenaka Corp. and Ashaikosan Corp. of Japan, the contractor and supplier of the NAIA Terminal 3, have won their foreign judgment enforcement suit in the amount of US$ 83 million versus Piatco. Lotte Chilsung Beverage Co. Ltd., a unit of South Korea’s Lotte Group, has acquired a 34.4% stake in Pepsi-Cola Products Philippines, Inc. for around P4.4 billion, gaining a foothold in the Philippine market.
Infrastructure
San Miguel Corp. has started preparations for a US$ 6 billion capital rollout for coal and LNG power generating facilities that can produce an additional 3,000-MW electricity (1,200-MW for the Luzon grid; 600-MW for the Visayas grid and 1,200-MW for Mindanao. Manila Water is building a new P570 million water reservoir in Quezon City, to be finished in 2012. A public bidding for the P18.7 billion dredging project for Laguna de Bay is in the offing following the decision of Finance Sec. Purisima to freeze it in the meantime. Dutch firm GN Power Ltd. is exploring the possibility of building a 300-MW wind farm facility in Bataan, ASec. Marasigan of the DOE said. State-run National Transmission Corp. (Transco) expects to sell P4.19 billion worth of subtransmission assets in line with its privatization thrust. The ERC has given the go-signal for National Grid Corp. to implement P5 billion worth of new projects. International airports and new LRT lines will make up part of the list of 10 priority projects that will be implemented in 2011 through government partnerships with the private sector. Budget Secretary Abad said ‘the government is looking forward to generating P180 – 200 billion in PPP undertakings’. The amount is distributed equally among the departments of Public Works and Highways, Transportation and Communication, and Agriculture.
Investments
The government firm that operates the LRT has rejected the P56 billion joint venture proposal by Reghis Romero to manage and extend LRT Line 1. The proposal by Ecorail was backed by the China Railways 18th Bureau Corp.
South Africa’s Gold Fields Ltd. has entered into option agreements with two firms (Lepanto Consolidated Mining and Liberty Express) to buy a 60% interest in an undeveloped gold-copper project in the Philippines for US$ 340 million.
A private sector proposal to rehabilitate the Agus hydropower plant in Mindanao has been received by the DOE, and the agency wants to get the permission to lead the project. The plant is supposed to be privatized, and the government is barred by the law that mandated the sale of state power assets from entering power generation anew.
National Grid Corp. has identified 36 priority projects for implementation in 2011 to 2015, with investment requirement seen to reach P35.84 billion.
Gardenia Bakeries Philippines Inc. is building another factory in Cebu and planning a similar facility in Davao to expand its reach outside Luzon. The Rustan’s retail group of the Tantocos will continue the expansion of its supermarket chain under a ‘niche strategy’. Shopwise is investing P700 million to open two new branches this year and another two next year. Australia-registered CGA Mining Ltd., through its local partner Filminera Resources Corp., has earmarked an additional US$ 25 million to raise production at its Masbate gold project.
PNOC-EC is investing close to P5 billion to develop a coal production mine and 100-MW power plant in Isabela. PNOC has thumbed down the unsolicited proposal of a consortium led by investors from Italy and Abu Dhabi for the construction of the US$ 1.2 billion Batangas-Manila natural gas pipeline, finding the local partner of the consortium to be financially and technically incapable of undertaking what could become the largest natural gas development project in the country.
Economic Indicators MERCHANDISE EXPORTS In Million USD
BANKING INDICATORS
JAN-JUL 2010 17,035
JAN-JUL 2009 11,674
(%) Change 45.92
Clothing Accessories
953
890
7.06
Coconut Oil
710
281
152.62
Woodcraft & Furniture
605
529
14.34
Elect. wiring harness
612
329
86.02
81
189
-56.98
439
236
86.16
Electronics and Components
Gold Metal Components Bananas
169
242
-30.21
Tuna
196
209
-6.46
Petroleum Products
157
178
-12.09
Footwear
5
15
-66.76
Pineapple
123
147
-16.29
Shrimp and Prawns
23
26
-9.30
Basketwork
24
22
11.76
Dessicated Coconut
79
90
-11.51
5,618
4,256
32.01
28,223
20,538
37.42
OTHERS TOTAL EXPORTS
MERCHANDISE IMPORTS In Million USD JAN-JUL 2010 10
JAN-JUL 2009 9
(%) Change 19.6
539
370
45.7
1,355
931
45.6
Mineral fuels, lubricants
5,444
3,906
39.4
Transport Equipment
1,774
1,229
44.3
323
349
-7.4
1,789
1,510
18.5
Iron and Steel
678
485
39.8
Chemicals
399
326
22.3
Plastics
641
424
51.2
Metal Products
312
252
23.9
Power Generating Machinery
261
204
28.0
Misc. Manufactured Articles
296
301
-1.8
Paper and Paper Products
327
271
20.9
Electronics and Components Telecommunication Eqpt. and Electrical Machinery Industrial Machinery
Textile Yarns, Fabric Cereals
Dairy Products OTHERS TOTAL IMPORTS
404
250
61.5
2,358
2,084
13.1
30,911
24,405
26.7
T-Bills primary issues (%p.a.) WAIR Auction Auction Date -(September 20,2010 ) 91 days 182 days 364 days (NI - no issuance) Reserve Money (Sep. 6-9, 2010) (million PHP)----Dollar Deposit Rates (% per annum) (Sept. 13-17) Savings Deposits Time Deposits 60 days and below 61-90 days 91 - 180 days 181 days and above LIBOR/SIBOR (% per annum) (30 SEPT.. 2010) Libor 90 days Sibor 90 days Libor 180 days Sibor 180 days Banking Lending Rates (% per annum) (Sept. 13-17, 2010) All maturities (one year and below) (more than 1 yr. - 5 yrs.) (more than 5 yrs.)
3.987 4.295 4.459 973
0.343 0.961 1.029 1.158 1.251
0.2900 0.3125 0.4625 0.4804
7.129 7.129 7.129 7.129
GROSS INTERNATIONAL RESERVES In Million U.S. Dollars January February March April May June July August September October November December
2010 45,592 45,764 45,579 46,944 47,689 48,704 49,042 49,906
Source: National Statistics Office / BSP
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2009 39,248 38,925 39,041 39,316 39,589 39,490 40,169 41,493 42,529 43,173 44,168 44,243
BOI approved investment project
Peso Exchange Rate (end month)
January - March 2010 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Ave.
CAVITE BIOFUELPRODUCERS, INC Bioethanol - project cost P 3,297,659,000
DMCI PROJECT DEVELOPERS, INC. Mass housing - project cost P 3,017,020,000
VGPUYAT LIFESTYLE CORPORATION
2010 USD 46.74 46.16 44.42 44.69 46.49 46.44 45.56 45.18 43.92
2010 EURO 65.30 62.95 59.39 59.08 57.49 57.50 59.41 57.22 59.92
45.51
59.81
2009 USD 47.34 48.24 48.17 48.40 47.54 48.28 48.07 48.79 47.59 47.73 46.75 46.35 47.77
2009 EURO 60.60 61.40 64.04 64.20 66.35 67.93 68.55 69.97 69.40 70.80 70.17 66.66 66.67
Source: BSP
Wakeboard Park Resort - project cost P 503,928,000
Annualized Inflation 2009-2010 Philippines Metro Manila 2010 2009 2010 2009 Jan 4.3 7.1 3.6 4.3 Feb 4.2 7.3 4.1 4.7 Mar 4.4 6.4 5.0 3.2 Apr 4.4 4.8 5.3 2.2 May 4.3 3.3 4.6 0.8 Jun 3.9 1.5 4.1 -0.1 Jul 3.9 0.2 4.1 -1.0 Aug 4.0 0.1 4.5 -1.1 Sept 0.7 -0.3 Oct 1.6 1.1 Nov 2.8 2.0 Dec 4.4 4.0 Ave. 4.2 3.4 4.4 1.7
ITALCAR PILIPINAS INC. Vehicles - project cost P 305,000,000
VELOCI MOTORS PHILS. CORP Three wheeled motorcycles - project cost P 274,565,000
GOKING MOTORS CORP Two-wheeled motorcycles - project cost P 16,000,000
Outside MM 2010 2009 4.6 8.3 4.3 8.4 4.1 7.8 4.1 5.8 4.2 4.2 3.9 2.2 3.8 0.7 3.8 0.6 1.1 1.9 3.1 4.5 4.1 4.1
Source: National Statistics Office (NSO)/BSP
Balance of Trade by Major Trading Partners: Jan – July 2010 (F.O.B. Value in Million U.S. Dollars) Country Total 1. Japan
Total Trade
Imports
Exports
Bal. of Trade
59,133.89
30,910.52
28,223.37
-2,687.15
8,160.44
3,805.42
4,355.02
549.60
2. United States
7,915.52
3,309.33
4,606.19
1,296.86
3. Singapore
6,374.70
3,062.60
3,312.10
249.50
4. China
5,084.94
2,456.75
2,628.19
171.44
5. Korea, Republic of
3,460.40
2,105.80
1,354.60
-751.20
6. Hong Kong
3,256.99
871.49
2,385.50
1,514.01
7. Taiwan
2,885.38
2,039.59
845.79
-1,193.80
8. Others
21,995.52
13,259.54
8,735.98
-4,523.56
The Philippine Monthly Factsheet is prepared by: European Chamber of Commerce of the Philippines (ECCP) For more detailed information, please contact: ECCP 19/F Philippine AXA Life Centre Sen. Gil Puyat Ave. cor. Tindalo St. Makati City, Philippines Tel.: (632) 845.1324 Fax: (632) 845.1395 e-mail: schumacher@eccp.com website: www.eccp.com
CEBU
MONTHLY
FACTSHEET
Vol. 18, No. 9, September 2010
THE MONTH’S HIGHLIGHTS Pres. Aquino Received 7 Priority Issues From Cebu’s Business Sector. A wish list with seven items was submitted to Pres. Benigno Aquino III by Cebu’s business leaders and their counterparts in the neighboring provinces of Central Visayas to make the country’s business climate more conducive to investors. Infrastructure is the top priority in the list of issues submitted by the local business sector amounting to P4.4B projects as endorsed by the Regional Development Council (RDC-7). The P4.4B worth of infrastructure projects that were endorsed by the RDC-7 included drainage improvement, road expansion, road concreting, construction of flyovers and the repair of the 1st Mandaue-Mactan Bridge. Other issues in the list are tourism development, reduction of fuel and power costs, modernization and expansion of the Mactan Cebu International Airport, establishment of the mass transit system, construction of the Panglao International Airport and the building of the Cebu-Bohol Bridge. Power Supply More Stable by January 2011. Energy Sec. Rene Almendras assured that there will be no more brownouts by next year in Cebu once the three 86megawatt (mw) coal-fired power plants in Toledo City and two 100-mw coal-fired power plants in Naga, Cebu are all fully operational in January. However, the Department of Energy chief also said more power plants must be built continuously because of the soaring demand for electricity. CPA Policy Restricts Access To Ports. The Cebu Port Authority (CPA) will implement a “no ticket, no entry” and “no bill of lading, no entry” policy in local ports next month. This is pursuant to the International Ship and Port Facility Security (ISPS) Code, an international treaty being monitored by the United Nations to secure ports and to
serve as a tool to fight world terrorism. While the new policy might cause some public inconvenience, it is done for their own safety once inside the port. Real Estate In Cebu Strong. Cebu’s strategic location as the central business district in the Visayas has helped real estate developments in the city prosper. The Philippine Association of Realtors Board Inc. – Cebu Realtors Board Inc. said the city’s strong tourism industry and the increased purchasing power of consumers have also helped spur developments, which span north and south of the province.
objectives but will apply different strategies. The councils will tackle problems arising in these sectors such as labour relations, cultural differences and health and safety problems of workers. Lapu-lapu To Spend Pesos 1.5 M On Waste Facility For Olango. Olango Island in Lapu-lapu City will build a Pesos 1.5 million material recovery facility not only to comply with the Solid Waste management Act but to protect its eco-system as well. The island, host to 11 barangays, has marine sanctuaries and a 900-hectare bird sanctuary that have made the place popular among nature lovers.
Cebu ICT Sector Sends Wish List To Government. Cebu’s ICT sector represented by Cebu Educational Development Foundation of Information Technology (CEDF-IT) emphasized its need for support from the government by developing the technology of entrepreneurs; full automation of LGUs (local government units) and national government agencies (NGAs) ; and the revisiting of the need for a national broadband. CEDF-IT also indicated the need for the government to seriously consider installing the Department of ICT. The Department of ICT could mandate the full automation of LGUs and NGAs and support for automation of private firms.
Buyer Proposes SRP Waste-To-Energy Plant. Filinvest wants to enter into another joint venture agreement with the Cebu City government, this time to construct, operate and own a Pesos 1.4 billion waste management facility that will convert solid waste to energy. Filinvest Development Corp. (FDC) submitted to City Hall an unsolicited proposal for an unincorporated joint venture of the construction of the City Waste Management Power Plant at the Inayawan sanitary landfill. If there are no legal problems with the proposal, Mayor Michael Rama said he will convene the joint venture selection committee so the bidding process can start.
Labour, Tripartite Councils Organized For BPO, Tourism. To address labor relations and issues concerning business process outsourcing, information technology and tourism, a tripartite council for these industries has been created. The Department of labor and Employment (DOLE) 7 said they will be launching the Industrial Tripartite Council for BPO and IT and the Industrial Tripartite Council for Tourism on October. Both councils will have the same
Japanese Firm Trains Underprivileged Youth. Japanese led social enterprise Waku Work Inc. hopes to establish a training centre in Cebu to help underprivileged youth to become globally competitive professionals. Waku Work now offers an online English teaching service in Cebu that employs professional English teachers and trains junior and senior students from non-government organizations in Cebu to become English as Second Language teachers.