PHILIPPINE
Vol. 23, No. 3 March 2011
FACTSHEET The Month’s Highlights Political
The House votes 210-47 to impeach Ombudsman Merceditas Gutierrez in a voting that more or less followed party lines. Senators are also preparing for the impeachment trial which will proceed when Congress resumes on May 9. Malacanang and Congress reached ‘broad consensus’ on the priority bills submitted by the President for immediate passage. The final priority list includes: Fiscal responsibility; Rationalization of fiscal incentives; Anti-trust; Amendments to the BOT-Law; Amendments to the government procurement law; Amendments to EPIRA; Amendments to the Anti-MoneyLaundering Act; Amendments to the Labor Code; Water utilities reform; Better protection of whistle-blowers. The Commission on Appointments confirmed the appointment of Lt. Gen. Oban as chief-ofstaff of the Armed Forces of the Philippines, while bypassing the nomination of 6 cabinet members (Purisima, de los Reyes, Paderanga, Soliman, de Lima, del Rosario). The President named Air Force commander Lt. Gen. Eduardo Oban Jr. as the new chief of the Armed Forces of the Philippines, after Gen. David Jr. retired. He ordered Oban to pursue reforms. The President appointed newly retired Gen. David as the new immigration commissioner and asked him to undertake reforms in the bureau. A P500 million 1-month fuel subsidy for jeepney and tricycle operators has been approved by Malacanang as part of efforts to mitigate the impact of rising crude oil prices.
Economic
Key interest rates were raised with monetary authorities warning of stronger inflationary pressures and the possibility of further tightening. The move – a 25-basis point increase that pushed the BSP overnight borrowing and lending rates to 4.25% and 6.25% respectively – marked the first adjustment since July 2009. Gross international reserves of the country reached US$ 64 billion at the end of February.
The BIR has issued Revenue Memorandum Order No. 12-2011, dated March 17, prescribing the collection goals of the bureau’s units, which increased across the board, targeting P940 billion, up 9.25% from the goal in 2010. The ‘Larger Taxpayers’ unit is entrusted with a bigger share of the target.
new jobs were still not enough to keep up with the increasing number of Filipinos joining the work force.
The exposure of banks operating in the Philippines to the real estate sector posted a 10.2% increase in 2010 to P433.6 billion, representing 14.6% of the industry’s total loan portfolio.
While incurring a net deficit of US$ 133 million in February, the balance of payments surplus reached US$1.47 billion in the first two months of the year, up 32% from 2010.
South Cotabato’s ban on open pit mining will be implemented after the province’s governor signed the implementing rules and regulations of a disputed environment code. The BIR has asked Customs to require importers to present their latest income tax return in order to get permits for their shipments as the former noticed that a number of the country’s importers were not listed among the largest taxpayers. Two executive orders on ‘pocket open skies’ dated 14 March 2011 have been issued by Malacanang: EO 29 authorizing the Civil Aeronautics Board (CAB) and negotiators to ‘pursue more aggressively the international civil aviation liberalization policy’ and EO 28 which again splits the country’s negotiation panel into two. EO 28 recreates the Philippine Air Negotiating Panel and the Philippine Air Consultation Panel. Remittances of overseas Filipinos climbed 7.6% in January to US$ 1.476 billion. The Philippines emerged as the world’s fourth biggest recipient of remittances in 2010, behind India (US$ 55 billion), China (US$ 51 billion) and Mexico (US$ 22.6 billion). The report stated the remittances going to the Philippines at US$ 21.3 billion. The government posted a budget surplus of P13.4 billion in January as revenues jumped 47%. The January fiscal position reversed a deficit of P37.1 billion in January 2010. The government incurred a budget deficit of P314.4 billion in 2010, equivalent to 3.7% of GDP. Unemployment rose to 7.4% in January as
The net inflow of portfolio investments jumped 135% to US$ 727.17 million in the first two months of the year.
BSP data show that Foreign Direct Investments (FDI) reached US$ 1.71 billion in 2010, 12.7% lower than the FDI recorded in 2009. The Philippines will start the bidding process for 5 PPP projects worth US$ 1 billion later this month. Unfortunately, these initial contracts are saddled with ownership issues and lack guarantees. The Philippines remains the least preferred site in Southeast Asia for Japanese investment, a survey among 473 Japanese firms undertaken in November last year shows, at a time when Japanese firms are increasingly relocating from their homeland and from China. The BSP reported that bank lending growth accelerated further, posting an 11% expansion in January. The government has promised to increase the budget for easement and right-of-way costs in most of the PPP projects to facilitate their construction and hasten their completion to P15 billion. The country’s inflation spiked to a nine-month high of 4.3% in February from the revised 3.6% in January due to higher oil and food prices. The average inflation for the two months of the year stands at 3.9%. The National Telecommunications Commission (NTC) has ordered a review of the standards to be used for the country’s shift to digital television broadcasting technology. The NTC is considering the adoption of the new technology, the secondgeneration Digital Video Broadcasting (DVB2)
from Europe, to replace the Japanese Integrated Services Digital Broadcasting (ISDB) standard. The country’s current account surplus narrowed 9.5% last year to US$ 8.465 billion or 4.5% of GDP. The country’s imports rose by 23.9% to US$ 5.313 billion in January. Exports were up 11.8% to US$ 4 billion in January. Inflation is expected to top 5% in the coming months – likely prompting further changes to monetary policy – but the average rate for the year will still be with the 3-5% target, the BSP said. The Philippines continues to be viewed as having a serious corruption problem, with its overall score in a regional survey worsening even though it did not slip in a ranking of 16 economies. On a scale of one to ten – with ten being the worst – the country garnered a score of 8.9, worse than 2010’s 8.25. Factory output accelerated by 25.8% in volume in January.
Business
The Energy Development Corp. (EDC) will be investing P14.5 billion for a wind energy project in Burgos, Ilocos Norte. The project has a capacity of 86-MW and will be operational by December 2014. PLDT moved to increase its dominance of the local telecommunications industry, announcing that it would be taking control of Gokongweiled Digitel Communications Philippines, Inc. (Digitel). In the transaction valued at P69.2 billion, PLDT will acquire 51.55%. An Aboitiz Power Corp. unit has gained full ownership of the 70-MW hydroelectric plant in Ilocos Sur after the company bought out its project partner for US$ 30 million.
Several branches of Banco Filipino Savings and Mortgage Bank were closed for a bank holiday due to heavy withdrawals from depositors worried about its financial health. The BSP has placed Banco Filipino under receivership. Ayala Corp. has purchased a 50% interest in the country’s only wind farm as part of plans to diversify into the power business. The acquisition of the North Wind Power Development Corp. stake marks Ayala’s bid to build a portfolio of over 1,000 MW from both renewable and traditional energy sources. The Court of Appeals has cleared the officers of PIATCO of criminal charges with the alleged monopoly of ground handling, catering, fueling and other airport services at NAIA Terminal 3. The IFC is acquiring a 7.2% stake in RCBC for P2.1 billion, which will entitle it to one board seat. Jesse Ang, IFC resident representative, said the IFC is interested in investing in banks to help these institutions expand their lending services. The hospitals group of Metro Pacific Investments Corp. will fasttrack its expansion from the current 5 hospitals to 15 within the next three years. Metro Pacific Investments Corp. has increased its stake in Metro Rail Transit Corp. which owns the MRT3 railway project along EDSA, to 48%.
Investments
Lopez-led Philec Solar Corp. is investing US$ 100 million to put up a joint venture with Koreabased Nexolan for the supply of some 400-MW in ‘wafering’ capacity to the Korean company. Federal Land, Inc. will be putting up a US$ 300 million hotel in Fort Bonifacio to be run by Hyatt Corp. The 6-star, 66-floor Grand Hyatt Hotel is expected to start commercial operations by 2014.
Credit Suisse has opened its stockbrokerage operation in the Philippines, becoming the first foreign group to enter the local equities brokerage business in a decade.
The Canlaon Alco Green Industrial Corp. will invest P5.2 billion for a bioethanol plant in Bago, Negros Occidental. The plant will have an annual capacity of 52.2 million liters and is expected to go on stream in 2012.
Phinma Corp. has sold its stake in AB Capital and Investment Corp. to Vicsal Investment, Inc., a Gaisano company, for P96.7 million, to focus on its core low-cost housing, power generation and education businesses.
Monheim Group of Companies, makers of Vernel liquid detergent, has announced they will invest P300 million for a manufacturing plant in the Philippines. Monheim was given the manufacturing and marketing license by Henkel, Germany.
Aboitiz Power Corp.’s planned US$ 500 million coal-fired power plant in Davao City has been met with protests from residents despite the company’s efforts to explain design features claimed to ensure environmentally friendly operations.
Infrastructure
Meralco is about to conclude a joint venture for the construction of a 300-MW base-load coalfired power plant as part of the power distribution utility’s move to go into power generation.
Metro Pacific Investments Corp. is in talks with Malaysia’s MTD Capital Berhad for the acquisition of the latter’s 80% stake in the South Luzon Expressway. The National Grid Corporation of the Philippines (NGDP) is pursuing the planned interconnection of the Visayas and Mindanao grids. NGDP has filed a query with the ERC about the Leyte-Mindanao Interconnection Project. To jumpstart the interconnection, the local partner One Taipan Holdings of Henry Sy Jr., is willing to advance P24 million. PSALM finally approved the sale of the IPPA of the Naga 149-MW coal-fired facility in Cebu. PSALM is seeking to recover P230 billion in stranded costs through universal charge across all power consumers which would further burden power consumers by 12 to 15 centavos per kilowatt-hour. First Gen Corp., through a wholly-owned subsidiary, is putting up a multipurpose dam and hydroelectric power plant in Nueva Ecija, marking the Lopez family’s foray into the bulk water supply business. Metro Pacific Tollways Corp. has committed to spend more than P300 million to integrate the North Luzon Expressway (NLEX) with the Subic-Clark-Tarlac Expressway (SCTEX).
CongressWatch
The House has approved on third and final reading House Bill 4115 – the proposed Data Privacy Act - that will protect individual personal data from unauthorized disclosure. The House approved the proposed Customs Modernization and Tariff Act which sets up a ‘check and balance’ system on issuing warrant, seizure and detention orders on suspected illegal shipments. The House committee on ways and means has approved a bill simplifying the net income taxation scheme (SNITS) that will limit the allowable business deductions from gross revenues for self-employed individuals and professionals to reduce corruption and increase government revenues. The House of Representatives has passed on third and final reading a bill that seeks to mandate hospitals and other healthcare providers to clearly display in their premises a full price list of their services and products. The House has approved on third and final reading a bill strengthening the anti-money laundering law to make it compliant with international standards and a more effective tool against terror financing (HB 4275).
Economic Indicators BANKING INDICATORS
MERCHANDISE EXPORTS In Million USD
T-Bills primary issues (%p.a.) WAIR Auction Auction Date - (March 21, 2011 ) 91 days
1.125
182 days
1.753
364 days
2.865
JAN 2011 2,142
JAN 2010 2,034
(%) Change 5.3
Clothing Accessories
162
125
29.9
Coconut Oil
160
102
57.0
Woodcraft & Furniture
106
78
36.4
Elect. wiring harness
96
74
30.3
Gold
41
7
492.5
Metal Components
62
56
12.1
Bananas
40
27
49.1
Tuna
24
18
31.9
(NI - no issuance) Reserve Money (March 7 - 11, 2011) 1,053,228 (million PHP)----Dollar Deposit Rates (% per annum) (March 14 - 18, 2011) Savings Deposits 0.345
Petroleum Products
Time Deposits
Electronics and Components
41
30
36.4
Footwear
1
1
8.0
60 days and below
0.843
Pineapple
15
14
2.2
61-90 days
0.888
Shrimp and Prawns
5
3
68.7
91 - 180 days
1.068
Basketwork
4
3
12.9
1.186
13
9
45.8
181 days and above LIBOR/SIBOR (% per annum) (March 29, 2011) Libor 90 days
0.3070
Sibor 90 days
0.3080
Libor 180 days
0.4605
Dessicated Coconut OTHERS
1,089
999
8.9
TOTAL EXPORTS
4,000
3,579
11.8
MERCHANDISE IMPORTS In Million USD Electronics and Components Telecommunication Eqpt. and Electrical Machinery Industrial Machinery
JAN 2011 1,839
JAN 2010 1,337
(%) Change 37.6
110
76
44.2
270
175
54.9
Mineral fuels, lubricants
919
829
10.9
Transport Equipment
273
380
-28.1
Textile Yarns, Fabric
70
43
64.0
Cereals
70
186
-62.3
121
84
44.2
63
49
29.0
147
87
69.4
Iron and Steel Chemicals Plastics Metal Products
64
69
-7.8
Power Generating Machinery
35
37
-4.3
Misc. Manufactured Articles
60
42
44.6
Paper and Paper Products
56
47
19.4
Dairy Products
75
50
52.0
OTHERS
1,139
799
42.6
TOTAL IMPORTS
5,313
4,287
23.9
Sibor 180 days 0.4645 Banking Lending Rates (% per annum) (March 14 - 18, 2011) All maturities 6.759 (one year and below)
6.759
(more than 1 yr. - 2 yrs.)
6.759
(over than 2 yrs.)
6.759
GROSS INTERNATIONAL RESERVES In Million U.S. Dollars January February March April May June July August September October November December
2011 63,541 63,890
Source: National Statistics Office / BSP
visit us at www.eccp.com
2010 45,592 45,764 45,579 46,944 47,690 48,704 49,042 49,906 53,754 57,154 60,566 62,371
BOI approved investment project October - December 2010
Peso Exchange Rate (end month)
PETRON CORPORATION Operator of 70 MW solid fuel-fired power plant - 60% Filipino, 40% Dutch - project cost P 10,841,900,000
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Ave.
FCF MINERALS CORPORATION Export producer of export gold bullion - 85% British, 15% Filipino - project cost P 7,099,448,000 NESTLE PHILIPPINES, INC. Producer of non-dairy coffee creamer - 100% Swiss - project cost P 4,350,170,550 LUCKY PPH INTERNATIONAL, INC. Renewable energy developer 7.2 MW biomass fired power plant in Isabela - 70% Filipino 30% Chinese
2011 USD 44.09 43.84 43.39
2011 EURO 60.04 60.28 61.13
43.77
60.48
2010 USD 46.74 46.16 44.42 44.69 46.49 46.44 45.56 45.18 43.92 43.31 44.09 43.89 45.07
2010 EURO 65.30 62.95 59.39 59.08 57.49 57.50 57.50 57.50 57.50 57.50 57.50 57.50 58.89
Source: BSP
Annualized Inflation 2010-2011
ORMIN POWER, INC. Operator of 8 MW modular bunker fuel-fired power plant - 60% Filipino, 40% Norwegian - project cost P 456,860,000
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Ave.
FEDERAL LAND, INC. Mass housing in General Trias, Cavite - 97% Filipino, 3% British - project cost P 224,902,000 FERANTI SHIRT FACTORY, INC. Garment export - 60% Filipino 40% British Virgin Island - project cost P 9,055,000 BAREFOOT VENTURES ASIA INC. IT service in the field of BPO - 70% Filipino, 10% Swedish, 10% British, 10 Australian - project cost P 4,000,000
Philippines Metro Manila 2011 2010 2011 2010 3.5 4.3 3.9 3.6 4.3 4.2 4.6 4.1 4.4 5.0 4.4 5.3 4.3 4.6 3.9 4.1 3.9 4.1 4.0 4.5 3.5 3.5 2.8 2.2 3.0 3.6 3.0 3.4 3.9 3.8 4.3 4.0
Outside MM 2011 2010 3.4 4.6 4.2 4.3 4.1 4.1 4.2 3.9 3.8 3.8 3.5 2.9 2.8 2.8 3.8 3.7
Source: National Statistics Office (NSO)/BSP
Balance of Trade by Major Trading Partners: January (F.O.B. Value in Million U.S. Dollars) Country
Total Trade
Imports
Exports
Bal. of Trade
Total
9,313.01
5,312.70
4,000.31
-1,312.39
1. United States
1,185.98
583.77
602.21
18.44
2. Japan
1,126.05
560.24
565.81
5.57
3. Singapore
1,068.80
495.19
573.61
78.42
4. China
939.30
471.12
468.18
-2.94
5. Korea, Republic of
745.59
576.01
169.58
-406.43
6. Taiwan
602.81
434.37
168.44
-265.93
7. Hong Kong
422.83
127.18
295.65
168.47
8. Germany
278.31
103.59
174.72
71.13
9. Netherlands
188.36
23.15
165.21
142.06
2,754.98
1,938.08
816.90
-1,102.74
10. Others
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
FACTSHEET
MONTHLY Vol. 19, No. 3, March 2011
THE MONTH’S HIGHLIGHTS Stop Dumping Coal. Cebu Gov. Gwendolyn Garcia issued an Executive Order (EO) for the Korean Electric Company – Salcon Power (Kepco-SPC) to stop hauling or dumping coal, unless measures to contain coal dust are implemented. She said that the order remains in effect until she is convinced their protective measures are effective. DOT Braces For Japan Fallout. With Japanese nationals ranking second in foreign tourist arrivals in Cebu and in Central Visayas, tourism players are bracing for the loss of a big market. The Department of Tourism (DOT) 7 has been getting feedback from resorts in Mactan about a number of cancellations from Japanese travellers. WESM-Visayas Now Trades at a Rate of 2,000 Megawatts. Following the formal commercial operation of the Wholesale Electricity Sport Market (WESM-Visayas), the facility is now trading at a rate of close to 2,000 megawatts, available for wholesale power consumers in the region. The additional megawatt added through the WESM cannot sustain the long term requirement for the entire Visayas but it is enough to aid the shortage of supply especially in Cebu for the meantime. The wholesale consumers participating at the WESMVisayas is also increasing, including the already largest power distribution company, the Visayas Electric Co. (VECO), and electric cooperatives within the region. Six Start-ups Try Cebu Tech Incubator. Since it began opening last month, a technology business incubator in Cebu is currently serving its start-up companies. The Cebu Business Incubator for IT located at the University of the Philippines Cebu Campus is training the six company owners to refine their business plans and concepts. A common problem with start-ups is that the team members often forget about the market their product is aimed at. The incubator offers office space below market rates and professional services such as accountants, lawyers and marketers. The companies are also assisted to get access to funding. Fiber Optic-To-Home Services Eyed in Cebu Next Year. The speeds brought about by fiber optic-to-home internet connections may be available in Cebu by 2012. The Philippine Long Distance Telephone Co. (PLDT) announced they have done installing such connections in some
high-end subdivisions in Metro Manila and will look to Cebu after completing the project. The company announced the completion of its Pesos 2.8 billion domestic fiber optic network last December. It covers Lucena City to Cebu, passing through 11 provinces. Filinvest, SM To Start SRP Projects This Year. Filinvest Land Inc. (FLI) and SM Prime Holdings Inc. will start its development projects at the South Road Properties (SRP) this year. The SM Mall, which will be the biggest shopping in Visayas and Mindanao with a gross floor area of 25 hectares, will be constructed on the 30.4 hectare lot FLI bought from the City Government. FLI is already proceeding with the excavation and construction of their first building project at the SRP called Almafi, which forms part of the Citta de Mare. The mall and the residential buildings are expected to be ready for use by 2012. Ayala Pledges To Bring In More Investments To Cebu. Property developer Ayala Land Inc. (ALI) will bring in more investments to Cebu to contribute to its goal of being the next business hub after Manila. The company’s plan for the Cebu Business Park with Ayala Centre Cebu as its anchor, is to be the next 24/7 and nightlife location with integrated developments like corporate, retail and residential. It will create a Makati-like development, where there can be an art district and an evening and early morning options for the Cebuano populace. Globe Opens Tele-Presence Facility In Cebu. As the world becomes smaller and businesses are constantly pressured to cut cost, communications solutions company Globe Telecoms opened in Cebu its second telepresence facility in the country. Globe decided to provide Cebu a world-class technology on tele-presence, as it recognized the fast growing number of multi-national companies, business process outsourcing investors, as well as dynamic export sector. Located at the ground floor of Globe Telecom IT Plaza at the Asiatown IT Park in Lahug, the facility allows enterprises to connect to colleagues and partners all over the world using three 65-inch full high definition plasma screens and spatial audio. Translation Company To Start 1st Asian Operation in Cebu. The Aberdeen-based
translation company, Lingo24, is set to launch its office in Cebu this April. Lingo24 picked Cebu as its first site in Asia because of its thriving local economy. Cebu could be an important destination for the US $26 billion translation industry. The translation business is a nice offering to Cebuano talents, considering that this is a new industry that offers high employment quality. The company is looking at hiring a hundred employees in Cebu in two years. Lingo24 is a translation company operation for 10 years in Europe and the United States. The company translates corporate internal communication and documents into 25 languages. Tsuneishi Named Best Employer, Gets Award For Community Projects. The Philippine Economic Zone Authority (PEZA) chose Tsuneishi Heavy Industries, Cebu Inc. (THICI) as one of the country’s outstanding employers in 2010. The government also awarded this Balambanbased shipbuilding company for its outstanding community projects. Aboitiz Power Listed As One of Asia’s Best. Aboitiz Power Corp. was recognized by Euromoney in its Asia’s Best Companies Awards 2010, landing in the top three among 16 companies nominated for the “Most Convincing and Coherent Strategy – Philippines” category. Euromoney, a monthly magazine on the world’s financial markets, asked analysts in leading banks and research institutes to nominate their top companies in each of the Asian countries or sectors they covered, based on market strength, profitability, growth and potential and quality of management and earnings. Energizer To Close Mandaue Plant. One of the longest running battery plants in the country will shut down. Energizer Phils. Inc. (EPI) announced that the high operating costs in the country and “excess global manufacturing capacity” led top executives to order the closure of its Eveready carbon, zinc battery plant in May. Following the closure of the plant, all battery requirements in the country will be imported from affiliate plants in Asia. The Eveready carbon zinc batteries that have been produced at the plant in Jagobiao, Mandaue City will soon be sourced from Indonesia. While the Cebu plant will be closing, its commercial head office in Manila will continue to operate, as will the distribution of its brands and products.