boi, peza eye p482-b investments this...

1February 2011

Volume 22 No. 02 February 2011

The Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA) are targeting P482B in combined investments this year as the two agencies geared toward hitting a 10-% gross national product (GNP) expansion.

BOI and PEZA are setting their sights on new markets such as Europe and the Middle East to attain their respective goals.

PEZA Director General Lilia B. de Lima said the agency hoped to increase ecozone investments by 10% this year to at least P224B by tapping new sectors and new markets for possible fresh investments as well as companies seeking to expand. These companies usually account for around 60% of new infusions each year.

De Lima said the new sectors PEZA will focus on are agro-industrial and tourism. The new markets, on the other hand, are those in the Middle East for agro-industrial projects, Germany for manufacturing and renewable energy, and Australia and New Zealand for manufacturing, information technology, and business process outsourcing (BPO).

PEZA will likewise pay more attention to investors from Japan, South Korea and the United States, which are all considered PEZA priority markets.

In terms of ecozone exports, PEZA is eyeing to achieve at least a

BOI, PEZA eye P482-B investments this year

10-% growth to US$44.5B from last year’s US$40.5B. Direct employment at ecozone locators is expected to reach 809,239 this year, 10% higher than last year’s 735,672.

From 2011 to 2014, PEZA is targeting to haul in P1.2T in investments, produce US$247.1B in exports, and generate 1,077,097 new jobs.

These cumulative targets could be met if at least 10-growth were to be achieved each year over the next four years.

The BOI, on its part, seeks to register P258B in new investments this year, a decline from the previous year’s P302B due to a reduction in the number of priority sectors and the delisting of independent power producer projects.

Of these new investments, the BOI hoped that foreign investments will be at par with domestic infusions this year, Department of Trade and Industry (DTI) Undersecretary and BOI Managing Head Cristino L. Panlilio said.

Last year, BOI-approved investments came mostly from local sources with P280B. Only P22B came from foreign entities.

Panlilio said the original BOI target in 2010 was only P224.6B billion, but this was adjusted to P287B following the influx of independent

power producer administrators (IPPAs) seeking BOI registration.

The BOI, however, has decided not to register any IPPAs this year because they do not bring in new power capacities nor entail new investments for major rehabilitation to make the acquired assets more efficient.

IPPAs, which are the power plants being privatized by Power Sector Assets and Liabilities Management Corp. (PSALM), accounted for almost half of the total P301-B investments approved by the BOI last year.

Sans the IPPAs, big investments would come from the registration of five projects under the Public-Private Partnership (PPP) program.

Aside from PPPs, the BOI also expects to generate more investments from the 11 priority sectors under the planned 2011 Investment Priorities Plan (IPP).

The 11 priority sectors are agriculture/agribusiness and fishery, creative industries, shipbuilding, mass housing, energy, infrastructure, research and development, green projects, tourism, strategic projects and projects under the PPP program.

Projects identified under these sectors would be entitled to tax and fiscal incentives of the government based largely on their impact to the domestic economy.

Philippine Business Report2

INDUSTRYTReNDS

Business sector sees better economy this yearThe business community expects 2011 to be a better year than 2010 and that a 7.5-% economic growth should be reasonable with more local businesspeople fuelling the growth.

Philippine Chamber of Commerce and Industry (PCCI) President Francis Chua said the growth drivers this year would be the robust outlook across all economic sectors, with the infrastructure sector particularly the Public-Private Partnership (PPP) projects leading the expansion.

“It would be an investment-led growth particularly for infrastructure, mining and exports,” Chua said, noting that most of the infrastructure projects should be in partnership with Filipinos.

He said the PCCI is vigorously implementing its Matrix Program, wherein the group will guarantee a small and medium enterprise bank loan once it has secured a purchase order from any of the country’s big companies. It aims to make them credit worthy for bank financing to enable entrepreneurs become suppliers to big firms.

Sustained 2011 export growth seenThe Department of Trade and Industry (DTI) projected the export receipts of about US$50B last year to double within five years under a trade strategy blueprint it drafted with local exporters.

“We need to put our efforts in areas where we can be competitive. In this day when borders are falling among nations, we need to explore new growth industries with potential to achieve what we did

for business process outsourcing (BPO) and call centers,” DTI Secretary Gregory L. Domingo said before a planning conference with exporters and members of the DTI’s Foreign Trade Service Corps (FTSC).

The conference was held at the sidelines of the National Exporters Week with the theme “Level Up, Double Up” to highlight initiatives that will facilitate the expected increase in exports receipts.

Domingo emphasized that it is important to assess the country’s market’s thrust and search for industries with high impact.

“We are not talking of business as usual nor incremental steps, but innovations and programs that will generate hundreds of thousands, if not millions, of jobs and contribute to the economy,” he said.

He cited the BPO and call center industry that was non-existent 10 years ago, but now employs close to 550,000 from a 5,000 workforce in 2001. The industry generates US$9B annual revenues.

Aside from the BPO sector, the Philippines also has a thriving shipbuilding industry that includes the Hanjin facility in Subic and Tsuneishi shipyard in Cebu.

The Philippines is also a leading exporter of coconut products including coco peat, coconut oil, coco water, and coco coir that serve as erosion control nets.

Also part of the export strategy is increasing exporters’ utilization of free trade agreements (FTAs) through business information sessions led by the Philippine Chamber of Commerce and Industry (PCCI) and Philippine Exporters Confederation (Philexport) with the DTI, Bureau of Customs (BOC), and Tariff Commission.

It had conducted FTA consultations in Manila, Iloilo, Zamboanga, Davao, Cebu, Legaspi, Tagaytay, Cagayan de Oro, Baguio, General Santos City, and Clark, Pampanga.

On the same note, the Philexport is optimistic that the export sector's strong recovery in 2010 would be sustained this year.

Philexport President Sergio Ortiz-Luis, Jr. said that although exports to the United States and Europe continued to decline until

September last year, sales to the Association of Southeast Asian Nations (ASEAN) trade bloc, in contrast, have accounted for 30% of the total receipts. And for East Asia, Philippine exports already represented close to half of all exports at 41%.

Ortiz-Luis sees bright market prospects in Asia, particularly China and India.

"China and India alone have a combined population of 2.5B people, millions of them getting more prosperous each day. We need to find out what we can produce in abundance that the Chinese and Indians may want to buy," he said.

The government is helping industry players open and expand markets with these two huge markets as well as with other new trading partners like New Zealand and Australia.

"This new decade, more Asian countries are riding on the crest of the third and perhaps final wave of rapid development in the rest of Asia. We now know where we are going and must move in concert now and get there," he said.

Ortiz-Luis said the aggressive push in opening up new markets with the country's trading partners in Asia plus the market for halal food in the Middle East was specifically spelled out in the new Philippine Export Development Plan (PEDP).

The 2011-2013 PEDP is now being fine-tuned in time for implementation starting next month.

Apart from this initiative, another new strategy that has been added in the plan is the strengthening of the value chain.

This is through new investments and long-term partnerships for each of the export industries, particularly those that use indigenous raw materials like food processing, furniture, handicrafts, fine and fashion jewelry, and Christmas décor.

electronics exports up 36% in 2010The country’s electronics exports rose by 36% to US$30B last year from US$22B in 2009, the Semiconductor and Electronics Industries in the Philippines Inc. (SEIPI) reported.

SEIPI President Ernesto B. Santiago said the sector’s strong

3February 2011

performance last year was “better than expected,” noting that initial projection for 2010 was placed only at 30% but statistics showed that for the first 10 months of last year, the industry was growing by 46% indicating a “strong start and encouraging finish.”

Electronics investments were also expected to reach more than US$1.3B last year. The industry has once again attained the billion-dollar level of foreign direct investments (FDIs) which it last experienced in 2000 and 2007.

These investments came from new industry entrants and from expansions of existing companies with base operations here. SEIPI sees no global electronics “crash” in early 2011.

Moreover, the local electronics industry expects to generate US$50B of exports revenue in six years and hit US42B worth of electronics investments this year.

“We will double up in the coming years. We have finished the roadmap and we will hit US$50B in exports by 2016,” Santiago said, noting that they have already presented the electronics exports roadmap to President Benigno S. Aquino III.

BPO sector expects US$11-B revenue The Philippine information technology-business process outsourcing (IT-BPO) sector expects to haul in US$11B in revenue this year, a 20-% increase over 2010’s US$9B, the Business Processing Association of the Philippines (BPA/P) and the Commission on Information and Communications Technology (CICT) announced.

The two agencies said the targeted revenue could generate 84,000 new jobs, bringing the total number of local IT-BPO workers to 610,000.

They came up with the projection after international consultant Everest Research declared the Philippines as the world’s number one in the voice BPO services sector, with the country’s US$5.7-B revenue compared with India’s US$5.6B in 2010.

“The key to achieving the US$11-B goal is aggressive marketing both locally and internationally,” said BPA/P CEO Oscar Sañez.

“We have to increase the awareness of our potential employees of job opportunities in IT and BPO companies, including those in the knowledge process outsourcing and other non-voice sectors. We also have to improve our visibility internationally to market new services in new territories,” added Sañez.

In the next five years, the global non-voice services sector is expected to grow by as much as 25% a year, while the voice BPO market is expected to double in size to US$50B

“With seamless government and private sector support and cooperation, I am almost certain that the 2011 industry growth figures can easily be achieved,” CICT Chairman Ivan Uy said.

“The CICT will be working very closely with BPA/P and the rest of the industry players in implementing the President’s directive and mandate for the new P62-M promotions budget,” Uy said.

Non-voice services sector

• Financialservices• Healthcare• Legaloutsourcing• Animation• Gamedevelopment

Retail industry sees 15-% growth The domestic retail industry is expected to sustain double-digit growth this year on the back of renewed confidence in the economy, the Philippine Retailers Association (PRA) announced.

“We are experiencing robust sales across all sectors, across all segments from fashion to appliances and food,” PRA President Bernie H. Liu said.

Liu noted that good economic fundamentals will sustain the expansion this year to duplicate last year’s 15-% growth performance.

President Benigno S. Aquino III cited the Philippine retailing industry for having been a major contributor to the growth of the national economy.

PHL to get a bigger share in global engineering services The Philippines is well positioned to get a bigger share of the engineering services market as the global demand for engineering services exceeds supply in 2011, a study by the Philippine Services Coalition (PSC) showed.

With its big pool of qualified engineers, bolstered by adjustments on engineering curricula to match the needs of the marketplace, the country is expected to benefit from the fast-growing export of professional services.

"The Philippines continues to produce many engineers deemed suitable for employment by multinational companies," the PSC said.

"On a per thousand population basis, it has more qualified engineers than China and India and only a little less so than some Eastern European countries," it added, noting that Filipino engineers who hold credentials that meet international standards make up 20% of graduates.

Even without opening new engineering schools, the PSC said, the local colleges and universities can increase the percentage of world-class engineers. But this demands more reforms in engineering education.

On top of the reforms is for local engineering schools to upgrade the technical content of the engineering curricula to international standards. The new curricula should also include soft skills like English proficiency and communications skills.

The coalition suggested that the Philippines join international agreements on standards of engineering education. Most important, the country should join the Washington Accord that gives Filipino engineers a chance to be part of the registry of international professional engineers.

It also urged the Philippines to focus on the development of

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TRaDe aNDINVeSTMeNTS

BANKING Plantersbank to expand this yearPlanters Development Bank (Plantersbank) wants to increase its market reach in Northern Luzon by putting up more branches in the next five years.

Tambunting-led Plantersbank aims to have a total of 130 branches nationwide in the medium term as it plans to expand operations in other regions including Northern Luzon.

“We are planning to open 30 branches in the next two years. And I think we could easily grow that to another 20-30 in five years,” Plantersbank Chairman Jesus P. Tambunting said.

DBP opens its 79th branchFinancing needs of key industries and businesses in the Clark Freeport Zone in Pampanga would get a boost from the opening of the 79th branch of the state-owned Development Bank of the Philippines (DBP) in the area.

The new DBP branch is located at Pavilion 1, Berthaphil III Clark Center along Jose Abad Santos Avenue, Clark Freeport Zone.

DBP President and Chief Executive Officer (CEO) Francisco Del Rosario, Jr. said the new branch will cater to the needs of key sectors in the area, particularly manufacturing; retail; tourism; and micro, small, and medium enterprises (MSMEs).

BPO accenture opens new Cebu facilityAccenture opened its second facility in Cebu City and has expanded the range of its information technology (IT) and business process outsourcing (BPO) services.

The company now counts more than 20,000 people in 13 sites in Metro Manila and Cebu. It expects its total headcount to reach approximately 25,000 by August 2011, with Cebu more than doubling its current employee size.

“Our facilities in Cebu are integral to our global delivery capabilities and the overall growth of Accenture Philippines. The addition of Robinson’s Cybergate Cebu and expanded IT and BPO services delivered from our Cebu facilities strengthen our capability to address the demands of our clients around the world,” Accenture Technology Delivery Lead for the Philippines George Son Keng Po said.

Accenture’s two locations in Cebu currently employ more than 500 people.

aDP inaugurates PHL centerADP, a provider of HR, payroll, and benefits administration services, recently opened its new Solutions Center in Manila.

The new Solutions Center will provide a broad range of support services for multiple segments of ADP’s global business, enabling extended service coverage and faster service delivery capabilities to its clients around the world.

“In the Philippines, ADP has found an abundance of highly qualified talent that will provide world-class service to our clients, and we expect these associates to enjoy successful, long-term careers with our company.” ADP President and Chief Executive Officer (CEO) Gary Butler said.

ELECTRONICS

TI’s Clark investments reach P37BTexas Instruments, Inc. (TI), the world’s largest chipmaker for mobile phones and other precision instruments, has already poured in a total of P37B out of its US$1-B investment commitment for its new manufacturing facility in the Clark Special Economic Zone (CSEZ).

Philippine Economic Zone Authority (PEZA) Director General Lilia B. de Lima said the agency has already approved the investments, which TI registered in two tranches.

“On its first year, we approved P20B in initial investments and last year we approved P17B in additional investments,” De Lima said.

allegro invests P2.6B for expansionThe Board of Investments (BOI) has given tax breaks to American firm Allegro MicroSystems Philippines, Inc. for its P2.6-B investment in the country.

engineering services related to energy, environment, infrastructure, transportation, communications, and information technology.

Car sales hit new record high Some 20 automotive firms sold 168,490 units in 2010, a 27-% sales growth over the previous year and even surpassing the 1996 record by roughly 4%, the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) reported.

Commercial vehicles like Asian utility vehicles (AUVs), vans, and trucks accounted for two-thirds of total sales, with 109,799 units sold and topping the 2009 figure by 27.4%. Moreover, some 58,681 units of passenger cars were sold in the period.

"We are hopeful that this year will bring in new investments on the back of government’s direction to support the expansion of local assembly operations, create jobs, and create a competitive environment where the Philippines can participate on a larger scale, regionally," CAMPI President Elizabeth H. Lee said.

Top Sellers

Firm No.ofunitssold

Toyota 56,855Mitsubishi 32,422Hyundai 18,696

AVIATION Cebu Pacific gets two new aircraftCebu Pacific (CEB) is set to acquire its two new aircraft this month as it positions itself to compete with other international low-cost carriers.

“Our Airbus fleet will significantly increase in size by 2014, positioning us for further growth and stronger output and of course, for fair and legitimate competition, which ultimately benefits the public,” CEB VP for Marketing and Distribution Candice Iyog said.

CEB will end 2011 with 10 Airbus A319, 19 Airbus A320 and 8 ATR 72-500 aircraft. An additional 16 Airbus A320 aircraft will be delivered from 2012 to 2014.

5February 2011

Allegro is the subsidiary of Allegro MicroSystems Inc. (AMI) of the United States. It is involved in the manufacturing of electronic components and sub-assemblies.

The P2.6-B investment is for the expansion of its existing operations here. This project will require a capital outlay of about P400M for buildings and about P2B in machineries and equipment.

At full capacity, the investment is expected to generate additional employment for 1,113 workers.

Commercial operation for the expansion is projected to start in June 2011.

ENERGY

P810B to fuel Re projectsThe Department of Energy (DOE) is expecting over P810B in new investments to be poured in the local renewable energy sector over the next 20 years, based on its latest list of planned power projects.

Data from the DOE showed that up to 6,940 megawatts (MW) could be generated from the renewable energy projects that had been put forward by prospective investors. These projects fall under the “indicative” category, which means that the proponents still need to secure the necessary permits, clearances, and finances.

The DOE is banking on 27 geothermal power projects to contribute 1,405MW in additional capacity within 20 years. Costs were estimated to reach P141.2B.

For wind-power projects, the DOE expects close to 50 new projects worth P302.4B that may add 1,491MW in new capacities.

Petroenergy invests P2.8B for third Re projectThe Board of Investments (BOI) has given tax incentives to the P2.8-B renewable energy project of Petroenergy Resources Corp. (PERC).

PERC is a wholly Filipino-owned firm that applied for incentives for its 20-MW Maibarara Geothermal Plant in Mt. Makiling covering areas in Sto Tomas, Batangas and Calamba, Laguna.

The proposed activity is the firm’s third renewable energy project applied for BOI registration. The two previous registrations are wind energy projects in Sual, Pangasinan (30MW) and Nabas, Aklan (30MW).

FPSC pushes P230-M expansionFirst Philec Solar Corporation (FPSC), the sole provider of wafering or wafer slicing services in the country, opened its new expansion facility worth P230M at its manufacturing plant in First Philippine Industrial Park (FPIP), Sto. Tomas, Batangas.

The 12,700-sqm. facility will house 60 wire saws, increasing FPSC’s capacity by 150M wafers annually or about 400 megawatts (MW). The new investment will increase the workforce from 450 to 1,090 by end-year.

FPSC is looking to start construction of Building 3 by Q1 2011, two years ahead of schedule. This will house another 60 wire saws.

Phoenix to raise stations to 200Listed independent oil company Phoenix Petroleum Philippines, Inc. plans to expand its retail base to about 200 stations next year to continue business growth.

The company expects to end the year with P14B in revenues, surpassing its 2009 revenues of P5.9B.

Phoenix Petroleum Chief Operating Officer (COO) Romeo B. de Guzman said the company was planning to open an additional 40 retail stations next year.

“Our target now is to be the leading independent oil player in the country in 2012. We have a total of 30 stations in Luzon and not much in Metro Manila,” de Guzman said.

The company has a total of 163 stations in the country.

FPSC puts up solar facilityLopez-led First Philec Solar Corporation (FPSC) has put up the country’s first rooftop-installed solar facility of “utility scale,” a significant proof of the viability of solar energy in the country.

According to the Philippine Solar Power Association (PSPA), the

opening of the facility demonstrated how solar electricity could be easily deployed within a few month’s time. It also showed the adaptability of solar plants to grid conditions and how solar energy could be used for industrial and residential purposes.

The PSPA claimed that this was the first solar facility installed in a rooftop that could generate at a so-called utility scale, meaning 100 kilowatts (kW) and above.

FOOD Gardenia invests P820M in Cebu plantInvestments of Gardenia Bakeries Philippines Inc. in Lapu Lapu City may reach as much as P820M as the company transforms its new bread plant in the area to be its supply base for the growing bread market in the Visayas and Mindanao areas.

Gardenia President Simplicio P. Umali, Jr. said that aside from the P20M that it already poured for the remanufacture of the start-up plant, they also need to invest an additional P100M-P150M before end-2011.

The new investments would be used for the installation of new equipment to improve its processes and come up with new bread variants, and for the addition of new delivery trucks to strengthen its distribution network.

Kraft to spend US$4M for sustainability projectsKraft Foods Philippines, Inc. will invest around US$3M-US$4M for sustainability projects for 2011 to 2015.

“For 2008 to 2010, we invested approximately US$2M-US$3M for sustainability programs and going forward to the next five years, our ambition is to invest around another US$3M-US$4M,” Kraft Operations Director Gautam Pal said.

Kraft Foods Philippines is a fully-owned subsidiary of US$54-B food and beverage firm Kraft Foods, Inc.

INFRASTRUCTURE NeDa okays P53-B infra projectsThe National Economic and Development Authority (NEDA) Board has approved various infrastructure projects, road networks, school buildings, air navigation, and agrarian reform projects worth P53B.


Among the approved projects were the Regional Infrastructure for Growth Project (RIGP), Road Upgrading and Preservation Project (RUPP), School Building Project for Basic Education (SBP4BE), Malitubog-Maridagao Irrigation Project (MMIP) and the Agrarian Reform Communities Development Support Program (ARCDSP).

The NEDA Board also approved the financing of the air navigation facilities for the ongoing Laguindingan Airport Development Project, as well as the change in scope, cost increase, and supplemental loan of the Northrail-Southrail Linkage Project (NSLP) Phase I.

MRT 3 capacity to be doubledThe Metro Pacific Investments Corporation (MPIC) and Fil-Estate Land, Inc. groups, which recently teamed up over a strategic stake in Metro Railway Transit 3 (MRT 3), are seeking a new contract with the government to double the capacity of the 73-train fleet now serving the high-traffic EDSA highway.

Fil-Estate Corp. Chairman Robert John L. Soprepeña said that under the agreement relating to his group’s rights and interests in the MRT 3 companies, consisting of Metro Rail Transit Holdings Inc., Metro Rail Transit II Inc., Metro Rail Transit Corp. (MRTC), and Monumento Rail Transit Corp., there would be a capacity expansion to increase the ridership to 1M.

“We felt it would be good to bring the Metro Pacific in to raise funds and for the project’s finance requirements for capacity expansion,” he said.

By doubling MRT 3’s fleet, Sobprepeña said the railway – already the busiest in the country – would be able to boost its ridership and create new cash flow for the railway system.

Manila Water to put up four more facilitiesThe Ayala-led Manila Water Co. Inc. plans to complete four more facilities using the combined sewer-drainage system by 2011, an undertaking that will help keep Metro Manila’s rivers clean and free from contamination.

Manila Water explained that construction of the treatment facilities was part of the company’s efforts to expand sewerage services to its more than 6M customers in the east zone concession.

The firm is currently operating 36 such facilities capable of treating 115M liters of wastewater a day.

IT Informatics to build three IT collegesInformatics Philippines will transform three of its learning centers, all outside Metro Manila, into full-fledged information technology (IT) colleges to make quality and affordable IT education more accessible, especially to people in the provinces.

Informatics Chief Executive Leo Riingen said that instead of adding more centers or campuses to its 38 networks nationwide, the academic institution planned to just convert its centers in Baguio, Cagayan de Oro and Cebu into full-fledged colleges.

The Baguio campus, he said, should be ready by 2012.

IP Converge readies two data centersLeading local data services provider IP-Converge Data Center Inc. (IPC)will put up new data centers in Bonifacio Global City and Cebu.

Local expansion plans involving the construction of additional data centers are meant to widen IPC’s slice of the regional market.

A second data center in Global City, costing around P150M, will be launched by mid-2011 while IPC will invest P45M to start building the third data center in Cebu by the end of next year.

MANUFACTURING HLD Clark Metal Pipe to expand operationsHLD Clark Metal Pipe Co. Inc. would expand its operations at Clark Freeport Zone, state-run Clark Development Corp. (CDC) said.

The metal firm would lease another four hectares of space within the freeport for an expanded production line for export.

The company signed a 25-year lease contract with CDC for a metal pipe fabrication plant last year. It had pledged to invest about US$35M and employ 160 people in its first year of operations.

Tsuchiya Kogyo pushes expansionTsuchiya Kogyo (Phils.), Inc. is expanding its operations here as an export of automotive and industrial nameplates, tags, and labels in its existing plant in FTI complex, Taguig City.

The Board of Investments (BOI) has approved its expansion project, which seeks to raise production capacity by almost 40%.

The P6.8-M expansion project seeks to address demand for sophisticated printing designs and colors on their printed materials.

The expansion will result in increase in production capacity by 37% of the firm's total registered capacity of 28,300,000 pieces per annum.

POWER

Conal Holdings to pour in US$1B for Mindanao power plantsConal Holdings Corp. will commission five power plants, four of which will be in Mindanao, within the next five years to help boost power supply in the area.

The company will invest roughly US$1B in these power plants, three of them in Maasim, Sarangani including a 200-megawatt (MW) coal-fired power plant where up to half of the total investments would be spent.

The other four proposed plants are coal-fired plant with a capacity of 100MW in Zamboanga City; two hydroelectric plants, 17MW and 30MW, in Sarangani; and a hydroelectric plant, 60MW, in Bago, Negros Occidental in the Visayas.

The contract is expected to be signed next year, with the Maasim plant expected to be operational by 2014.

Global Business Power to invest P22B in three coal plantsGlobal Business Power Corp. (GBPC) plans to invest P22B over the next four years in three more 82-megawatt (MW) coal-fired power plants in the Visayas.

7February 2011

The firm targets to augment its investments in the power generation sector in the Visayas to support the anticipated growth of the island’s energy requirements.

GBPC is looking at adding two 82-MW plants in Toledo City in Cebu, and another 82-MW plant in La Paz, Iloilo City.

These projects are targeted to be completed by 2014.

Investors to infuse P11B into Spug power facilitiesNational Power Corp. (NPC) expects investors to pour in as much as P11B into energy projects and other critical energy infrastructure in far-flung, off-grid areas in the next three years.

NPC President Froilan A. Tampinco said the state-owned company had already signed seven agreements with both local and foreign companies for the conduct of feasibility studies for such projects in rural areas under its small power utilities group (Spug).

NPC and prospective investors are initially eyeing hydropower projects in Oriental Mindoro; natural gas projects in Occidental, Mindoro; and biomass facilities in Lubang, Ticao, Romblon, Kabugao and Batanes.

North Investors aB to spend US$150M in hydroelectric plantsSwedish firm North Investors AB plans to invest some US$150M in Constellation Energy Corp.’s three proposed hydropower projects, which may cost as much as US$248.5M, or about P10B.

North Investors Director Jan Pettersson said the company was interested in the small hydropower projects in Dupinga, Nueva Ecija that will generate 4 megawatts (MW) in additional capacity; in Bongabong, Oriental Mindoro, 28MW; and in Alag, San Teodoro in Oriental Mindoro, 39MW.

Construction of the hydropower facilities is expected to start by late 2012 and that at least one of them could start operations by 2014.

PNOC-eC readies P4.8B for 4 projectsPhilippine National Oil Company-Exploration Corporation (PNOC-EC) is set to invest up to P4.8B this year to jumpstart the implementation of four of its programmed power and gas infrastructure projects.

The SJC has the highest capacity system in the world. The investment of Globe in the SJC system will enable cost-effective and resilient connectivity to other countries and other submarine cable systems.

The landing station will bring traffic from the Philippines to international destinations.

Once installed, the SJC system will link Singapore, Hong Kong, Indonesia, Philippines, and Japan with onward connectivity to the US.

Of the total US$400M required to build SJC, Globe shared US$60M.

REAL ESTATE

Megaworld to launch P60-B building programThe Megaworld Group, which comprises Megaworld Corporation and its associates Empire East Land Holdings and Suntrust Properties, plans to embark on a massive P60-B home building program this year that will roll out some 18,673 residential units with an aggregate floor area of more than 830,000sqm.

Megaworld Corp. takes nearly all of the projects worth to more than P41B consisting of 11,110 units and an aggregate floor area of more than 372,000sqm.

Meanwhile, Empire East Land Holdings and Suntrust Properties plan to show their own residential projects amounting to P19B consisting of 7,500 units in Metro Manila, Cavite, and Laguna with an aggregate floor area of over 466,000sqm.

SMDC get perks for P5-B mass housing projectsSM Development Corporation (SMDC) has received tax incentives from the Board of Investments (BOI) for its two mass housing projects with a combined investment of over P5B.

Light Residences involves a total investment of P3.8B while My Place @ South Triangle invests a total of P1.3B.

PNOC-EC Chairman and Chief Executive Officer Gemiliano C. Lopez, Jr. said P4.1B will be earmarked for investments; P167.8M for capital expenditures (capex); and P533M to P592.7M for operating expenses.

The roll of projects covered the 50-megawatt (MW) Isabela coal mine-mouth power facility; 100-MW Malangas coal-fired facility; 80-MW Batangas gas power plant; and the proposed Batangas liquefied natural gas (LNG) receiving terminal.

TELECOM PLDT completes P2.8-B fiber optic expansionThe Philippine Long Distance Telephone Co. (PLDT) has completed the P2.8-B expansion of its domestic fiber optic network (DFON) extending the reach and strengthening the company’s communications transmission network.

The project, which is part of the company’s DFON Resiliency Improvement Program, involved the installation of 1,300km. new terrestrial and submarine fiber optic cables to carry voice, data, and video traffic in Bicol, the Visayas, and Mindanao regions.

“This latest DFON expansion greatly reduces the risk of downtimes which will benefit not only large corporations but also small businesses and households,” said PLDT Group Head for Customer Service Assurance Rolando Pena.

Provinces covered by DFON Loop 4

• Quezon• CamarinesNorte• CamarinesSur• Sorsogon• Masbate• Capiz• Iloilo• NegrosOccidental• NegrosOriental• Cebu

Globe opens new cable landing station in BatangasGlobe Telecom has opened its new Globe International Cable Landing Station in Batangas which will be the site of the Southeast Asia Japan Cable (SJC) System where it is the exclusive landing party in the Philippines.


MaJOR PROJeCTS

POLICY

Both projects are expected to start commercial operation this March.

They are entitled to three years of income tax holiday (ITH) for locating in the National Capital Region (NCR).

FLI starts P4.5-B projectFilinvest Land Inc. (FLI) has started construction of its P4.5-B residential condominium project called The Linear Makati and expects to turn over units in the first of two towers to homeowners by December 2012.

FLI Vice President and Project Group Head Julian Concepcion, Jr. said the project will cost about P3B to build with a total market value of P4.5B.

The Linear is a two L-shaped towers, each 24-storey high and is being developed on a 7,413-sqm. lot owned by the Yupangco group.

Megawide sets P2-B capex for 2011Megawide Construction Corporation, SM Development Corporation’s (SMDC) major contractor, will spend P2B this year, up 152% from the expected P800M capital expenditures in 2010.

The amount will be spent for the acquisition of new equipment such as the Automatic Climbing System (ACS), Liebherr Cranes from Germany and earthmoving equipment from Caterpillar.

Other purchases include new formwork systems from Europe and construction and development of the company’s P1-B pre-cast concrete manufacturing plant in Taytay, Rizal.

DMCI’s P1.3-B mass housing projects get incentivesConsunji-led DMCI Project Developers, Inc. gets an income tax holiday (ITH) for its P1.3-B mass housing project in Las Piñas City, which covers site acquisition and development, condominium construction, and equipment acquisition.

The firm will develop 2.3has. of land and will construct five medium-rise buildings to be called Anahola, Lanikai, Kauai, Lanai, and Hanalei.

These will accommodate a total of 560 housing units with average package price ranging from P1.3M to P2.9M per unit.

PPP projects sure of perksInfrastructure projects under the government’s Public-Private Partnership (PPP) program are expected to make up roughly half of the ventures qualified for incentives this year, Department of Trade and Industry Undersecretary and Board of Investments (BOI) Managing Head Cristino L. Panlilio said.

The draft of the 2011 Investment Priorities Plan (IPP) offers incentives like income tax holidays (ITH) and duty-free importation of equipment to firms undertaking

solicited projects under the PPP program. Those PPP projects were unveiled last November, which included toll roads, rail systems, hospitals, and irrigation networks.

Panlilio said energy projects, which have been retained in the draft, are also likely to make up a bulk of the qualified investments this year.

BOI mulls new project valuation for tax perksThe Board of Investment (BOI) will consider the use of value-added contribution to the economy and cost-benefit ratio as new basis in the valuation of projects seeking tax and fiscal incentives from the government.

Department of Trade and Industry (DTI) Secretary Gregory L. Domingo projects seeking tax and fiscal incentives from various investment promotion agencies (IPAs) would be guided by these two measures.

PHL to benefit from new eU rules of originThe Philippines is among the developing countries to benefit from the new rules of origin (ROO) under the European Generalized System of Preferences (GSP).

Certificates of origins are international trade documents that attest that goods in a particular export shipment are wholly obtained, produced, manufactured or processed in a country of origin.

"This reform will help developing countries to make the most of the trade preferences so that they do not lose out because of unnecessary red tape," said European Commissioner for Trade Karel de Gucht.

"We expect the new rules to give a big boost to the economies of the world's poorest countries," added de Gucht.

P66.5-B Mindanao Railway project to be prioritizedThe government is exploring the possibility of prioritizing the development of the proposed

Pag-IBIG to build houses worth P100,000 eachHome Development Mutual (Pag-IBIG) Fund is looking at building socialized housing units worth P100,000 each to provide homes for Filipinos.

Pag-IBIG Fund Board Member Edgardo G. Lacson said there are about 4M housing backlog and the plan is to build 400,000 units annually.

The agency is looking at partnering with a private construction firm to build the houses.

amaia Land Corp.’s P998-M project gets perks Amaia Land Corporation got fiscal incentives from the Board of investments (BOI) for the firm’s P998.4-M low-cost mass housing project in Barangay Barandal, Calamba City, Laguna.

The proposed project called Amaia Scapes Laguna involves the development of 19.1has. of land and the construction of 1,659 housing units with a package price ranging from P600,000 to P1.3M per unit.

9February 2011

COMPaNY NOTeS

Board approved the second stage of the Malitubog-Maridagao Irrigation project for Japan official development assistance funding.

This five-year project that will seek a P5-B loan from the Japan International Cooperation Agency (JICA) and P1.9B in government counterpart funding will cover 9,784has. in Cotabato and Maguindanao.

P3B allotted for LRT extensionThe government has set aside P3B this year for the expansion of the Light Rail Transit (LRT) train system to reach provinces outside Metro Manila.

LRT Authority (LRTA) Administrator Rafael Rodriguez said the money would be spent to lengthen the train line at both its northern and southern ends to meet the demand coming from the country’s growing population.

Rodriguez said about P2B of the LRTA’s 2011 budget would go into the preparations for the LRT line 1’s extension to Cavite.

He added that about 2,000 families will have to be relocated to make way for the 15 kms. of new track that will be built.

Meralco to spend P45B in four yearsManila Electric Company (Meralco) plans to spend about P45B in the next four years for the strengthening of its distribution network and improvement of its services.

Meralco Chief Operating Officer (COO) Oscar Reyes said the P45B represents the company’s capital expenditure (capex) requirement

to meet the expected load growth in its franchise area, which currently serves more than 4.8M customers in Metro Manila and nearby provinces.

The investment program will cover the distribution system and the improvement and/or construction of existing and new power lines and substations for the third regulatory period (2011 to 2015).

To fund the program, Meralco has been tapping several funding facilities. The distribution utility is getting offers from various local and foreign banks.

SMC acquires eastern TelecomVega Telephone Inc. (Vega), a subsidiary of San Miguel Corp. (SMC) has acquired Eastern Telecommunications Philippines Inc. (ETPI) owned by the Ongpin group that will give synergy to its existing operation and strengthen its network and coverage.

SMC said that ISM Communications Corp. (ISM) sold 100% of the issued and outstanding capital of AGN Philippines Inc. (AGNP) to Vega.

AGNP is the registered and beneficial owner of about 40% of ETPI.

ETPI offers data and Internet services to more than 5,000 corporate subscribers and small and medium enterprises (SMEs).

Besides traditional bandwidth and connectivity solutions, the telephone company also offers wireless access, services for high-end Internet cafés, business applications, and special packages for SMEs and corporations.

In addition, ETPI is laying down a 240-km. fiber network to service industrial parks and economic zones in Tagaytay, Cavite, Laguna, and Batangas.

Robinsons to open 31st mall in PalawanRobinsons Land Corp. will open its 31st shopping mall in the country this coming November, which is being built on a 19-ha. lot at the National Highway in Barangay San Manuel, Puerto Princesa City.

“Robinsons Land also plans to develop a residential subdivision and the Puerto Princesa branch of gohotels.ph,” Robinsons Malls General Manager Arlene G. Magtibay said.

Mindanao Railway following the recent consultation on the chapter on infrastructure under the 2010-2016 Medium-Term Philippine Development Plan (MTPDP).

The total project cost is estimated at P66.5B or approximately US$1.33B.

The project aims to cut the present 90-minute travel time by bus between Cagayan de Oro and Iligan to 15-20 minutes.

The Mindanao Railway System is part of the list of projects identified and presented to investors for medium-term rollout at the recently concluded Public-Private Partnership (PPP) forum.

4 Phases of the railway project

• LaguindingantoCagayan deOroCity• LaguindingantoIliganCity• CagayandeOrotoPhividecarea inTagoloan,MisamisOriental• IliganCitytoLinamontown,Lanao

delNorte

P50-B waste water treatment project on a rollManila Water Company Inc.’s (MWCI) P50-B waste water treatment program named the Three-River Master Plan (TRMP) may become the crucial project that will clean Pasig River.

TRMP was initiated last year to clean the waste water discharged into the metropolis’s three most polluted rivers, namely Marikina, San Juan, and Pasig.

MWCI is partnering with the National Housing Authority (NHA), the Housing and Urban Development Coordinating Council (HUDCC), Pasig River Rehabilitation Commission (PRRC), and Maynilad Water Services Inc. (MWSI), among others.

The cleanup of the waste water thrown into the three rivers will require the establishment of sewage treatment plants (STP) in strategic areas.

The TRMP is a 10-year program of MWCI originally set for completion by 2018. It should provide 100% waste water treatment capacity for the three-river system.

P7-B irrigation project okayedThe National Economic and Development Authority (NEDA)


aSeaNWaTCH

Domingo identified the business process outsourcing (BPO) and pharmaceutical industries as among the sectors where Swiss companies are highly encouraged to invest in.

Sieber likewise expressed their interest in expanding the Swiss watch industry in the Philippines.

PHL, Singapore strengthen tiesDepartment of Trade and Industry (DTI) Secretary Gregory L. Domingo and Singapore Ambassador Ampalavanar Selverajah met at the Board of Investments (BOI) to strengthen trade relations between the two countries.

In the meeting, key trade policy events and initiatives were discussed such as the East Asia Summit (EAS), Asia-Pacific Economic Cooperation (APEC), and the Trans Pacific Partnership (TPP).

PHL strengthen ties with MyanmarDepartment of Trade and Industry (DTI) Secretary Gregory L. Domingo and Myanmar’s Deputy Minister of Foreign Affairs U Maung Myint recently had talks to improve trade relations between the two countries.

Domingo discussed the Pocket Open Skies initiative which can open direct flights between Manila and Naypyidaw.

On the other hand, U Maung said Myanmar is rich in high-quality gems and teak wood.

Domingo meets Canadian envoyCanadian Ambassador Christopher Thornley met with Department of Trade and Industry (DTI) Secretary Gregory L. Domingo to discuss areas of collaboration to improve bilateral trade and investments relations between the Philippines and Canada.

eU provides P42M to improve PHL’s access to foreign trade marketsThe European Union (EU) Delegation launched its P42-M Trade Related Technical Assistance (TRTA) Project that will provide short-term technical assistance to the Philippines to improve its access to foreign markets.

The EU Delegation said the Rapid Response Facility (RRF) is a component of TRTA that aims to support the Philippines in the efficient and quick response to emerging international trade issues of its concern and interest.

BILaTeRaLaGReeMeNT

The mall will have a floor area of more than 30,000sqm., hosting retail shops, restaurants, and entertainment and recreational facilities.

“Slated to start commercial operations by November this year, Robinsons Place Palawan will be the only establishment in Puerto Princesa that will have cinema facilities,” Magtibay said.

The mall, which will also have an al fresco dining and wellness centers, is five to 15 minutes away from the Puerto Princesa airport and the town center.

Last year, Robinsons Land began the construction of its first shopping mall in the Northern Luzon province of Pangasinan as part of a P9-B capital spending program.

Robinsons Land, which is into malls, hotels and office spaces, opened its first budget hotel, gohotels.ph, at Pioneer Center in Mandaluyong last May.

The company plans to open new malls in Cebu and Quezon City next year.

The RRF will provide technical assistance in the form of training, workshop, seminar, advisory or mentoring services to agencies, academic and research institutions, and civil society organizations.

TRTA main components

• RapidResponseFacility(RRF)• Provideassistanceforthe

developmentoftradepoliciesincludingexport

• Supportfortheharmonizationofstandards

• Foodsafetycomplianceandtradefacilitation

TRTA goals

• HelpthePhilippinesinbuildinganenablingeconomicenvironment

• Improvetheconditionsforinternationaltradeandinvestment

• FurthertheflowofPhilippineexportstotheEU

• IncreasetheEU’sconfidenceinthequalityandsafetyofPhilippineexports

• Developtheknowledgeandcapacityofgovernmentand

non-stateactorsindealingwiththeWorldTradeOrganization(WTO)andothertrade-relatedissuesintheinternationalarena

PHL-China trade grows by 40.2%Chinese Ambassador to the Philippines Liu Jianchao said bilateral trade between the Philippines and China hit US$22.7B as of October 2010, a 40.2% rise from the same period last 2009. Of the amount, the Philippines exported US$13.3B worth of products to China and imported about US$9.4B.

Liu said the ASEAN-China Free Trade Agreement, signed in November 2002, is a big boost to the trade relations between China and ASEAN countries. The figure itself has shown the Philippines enjoying good trading.

Liu further said he was optimistic that the two-way trade will have reached US$30B by end-2010.

Swiss firms to expand business in PHLSwiss Ambassador Ivo Sieber recently met with Department of Trade and Industry (DTI) Secretary Gregory L. Domingo at the Board of Investments (BOI) and expressed Switzerland’s intent to form stronger trade relations with the Philippines.

PHL 4th in aSeaN productivityThe Asian Productivity Organization (APO) placed the Philippines 4th among the original six Association of Southeast Asian Nations (ASEAN) countries in terms of productivity.

APO’s Asian Quarterly Growth Map showed that the Philippines’

11February 2011

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to put up an economically integrated ASEAN Community by 2015.

Tourism ministers of the 10-member ASEAN recently adopted the ASEAN Tourism Strategic Plan (ATSP) 2011-15 in a meeting in Cambodia.

In a joint statement, the ministers, including Department of Tourism (DOT) Secretary Alberto A. Lim, said the ATSP would contribute to the overall goal of building the Community through promotion of growth, integration and competitiveness of the tourism sector.

The ASEAN ministers also noted that developing the tourism sector included efforts to deepen social and cultural understanding and facilitating travel into and within the region.

ASEAN groups the Philippines, Indonesia, Thailand, Malaysia, Singapore, Brunei, Cambodia, Laos, Myanmar, and Viet Nam.

The 110-page ATSP particularly aims to promote the region as a single tourist destination, developing a set of tourism standards with a certification process, enabling tourism professionals to work in any of the ASEAN member states, and allowing visitors to travel throughout ASEAN with a single visa.

ASEAN governments have agreed to grant increased flexibility to designated airlines to allow them to fly and carry traffic from any ASEAN city with an international airport to its counterpart in other member states, while ensuring the full third, fourth, and fifth freedom traffic rights.

The third freedom traffic rights allow an airline to fly and carry traffic from one’s own country to another while the fourth provides for the reverse.

Fair (NTF) to be held at the SMX Convention Center, Pasay City on 17-20 March 2011.

NTF is led by the Center for International Trade Expositions and Missions (CITEM) and the Department of Trade and Industry’s Regional Operations and Development Group (DTI-RODG), together with the Bureau of Domestic Trade (BDT).

Worldbex to showcase new productsWorldbex, an event that assembles the widest array of new and interesting products, which represents the greatest advances in materials, tools, and equipments, will be held on 16-20 March 2011 at the World Trade Center Metro Manila in Pasay City.

It boasts of visitor profiles that include industry key players, trade professionals, contractors, manufacturers, distributors, exporters, importers, dealers, construction consultants, and end users.

Philippine International Food and Beverage expoPhilippine International Food and Beverage Expo (PIFBEX) 2011, the 4th International Exposition on food service, catering systems, specialty foods, beverages and wines, food franchising, supplies, equipment and technology, will be held on 31 March-02 April 2011 at the World Trade Center Metro Manila in Pasay City.

The three-day event aims to bring together food and beverage industry players and professionals from the Philippines and around the world to interact, transact, and explore unlimited business opportunities.

productivity level improved, and was ahead of Viet Nam and Indonesia.

APO Asian Quarterly Growth Map Ranking

Country 2009 2010 (in %) (in %)

Q4 Q1 Q2

Singapore 3.8 16.9 19.5Thailand 5.9 12.0 9.1Malaysia 5.4 10.1 8.9Philippines 2.1 7.8 7.9VietNam 6.9 5.8 6.4Indonesia 5.4 5.7 6.2

Development Academy of the Philippines (DAP) President Antonio D. Kalaw, Jr. said DAP, being the implementing arm of the APO, aims to enhance competitiveness of small and medium enterprises (SMEs) in the country by developing their capacities through the integration of productivity improvement tools and techniques in their operations.

asian SMes turning to social networking sites for marketingSmall businesses in the Philippines and the Asia-Pacific region are taking advantage of the wide reach of social networking sites to market their goods and services.

“Year 2011 will be marked as a year when organizations increase their social business footprint. We believe the use of social platforms by small and medium sized enterprises (SMEs) will increase in Asia-Pacific, with more than 30% expected to use social networks for promotional purposes by end of 2011,” Information and communications technology (ICT) research and advisory firm XMG Global Inc. announced.

Large firms in the region, meanwhile, are much more traditional and conservative than their North American and European counterparts as they will invest in research studies to understand its potential first before fully committing to integrating social media channel as part of its longer-term enterprise architecture, XMG Global added.

aSeaN adopts 5-year tourism planThe Association of Southeast Asian Nations (ASEAN), including the Philippines, has adopted a new five-year comprehensive plan to promote the region as a single tourism destination along efforts

National Trade Fair slated Discover how a variety of indigenous materials can be fashioned into functional and creative pieces and witness the innovation of new designs and products in line with the global trends at the National Trade


Entered as Third-Class Mail at theMakati Central Post Office

under Permit No. 504valid until 31 December 2011

Philippine Business ReportPhilippine Business Report is published monthly by the Communications and Media Office (CMO), Department of Trade and Industry, 4F Industry and Investments Building, 385 Sen. Gil J. Puyat Avenue, Makati City 1200, Philippines • Phone (+632) 895.3611 • Fax (+632) 895.6487 • To subscribe, e-Mail: [email protected]

economic Indicators

February 2011

Editorial Team: Anne L. Sevilla, Editor-in-Chief • Vic S. Soriano, Assistant Editor • Cresenciano P. Par, Jam A. Hourani, Yhen M. Millena, Ariel B. Salcedo, and Hazel Maryam C. Dizon, Writers • Ren C. Neneria, Design Layout • Myrna V. de los Reyes, Circulation.

0123456789

3Q (2009) 4Q (2009) 1Q (2010) 2Q (2010) 3Q (2010) 4Q (2010)

GDP Growth Rate (%)

0123456789

10

3Q (2009) 4Q (2009) 1Q (2010) 2Q (2010) 3Q(2010) 4Q (2010)

GNP Growth Rate (%)

164.5165

165.5166

166.5167

167.5168

168.5169

Dec-10Nov-10Sep-10Aug-10Jul-10Jun-10

Consumer Price Index( 2 0 0 0 base year)

0

1

2

3

4

5

6

Oct-10Sep-10Aug-10Jul-10Jun-10May-10

exports (In US$Billion)

3.8

4

4.2

4.4

4.6

4.8

5

Oct-10Sep-10Aug-10Jul-10Jun-10May-10

Imports (In US$Billion)

4242.5

4343.5

4444.5

4545.5

4646.5

47

Dec-10Nov-10Sep-10Aug-10Jul-10Jun-10

Peso per US Dollar Rate

0

1

2

3

4

5

Dec-10Nov-10Oct-10Sep-10Aug-10Jul-10

Inflation Rate (%)(1994 base year)

44.054.1

4.154.2

4.254.3

4.35

Nov-10Oct-10Sep-10Aug-10Jul-10Jun-10

Interest Rate (%)

boi, peza eye p482-b investments this...

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