retail sector growth to remain steady - the wallace...

BUSINESS

Philippine ANALYST July 2014

53BUBUBUBUSISISISINENENENESSSSSSSSBUSINESS

Retail sector growth to remain steadyThe Philippine retail sector will remain robust over the next few years as growth intensifi es in the convenience store and online segments.

The retail sector remains an important part of the local economy, accounting for 13.3% of GDP in 2013 and 11.8% in 1Q2014. Retail sector growth was at 6.2% in 2013 and

5.7% in 1Q2014. Retail trade also accounted to 78% of the total trade in 2013. The growth in retail will continue to be supported by strong household consumption, which is one of the largest in the world (69% of GDP compared to the 63.5% global average in 2013). The rise in consumer spending in turn is attributed to remittances from Filipinos abroad, reaching a record high of $25.1 billion in 2013. This is also supported by the Philippines’ stable economic condition, heightened spending of the younger population and rising incomes in the middle and upper classes.

The current retail market is characterized by a shift from traditional units such as sari-sari stores to more organized forms like supermarkets and convenience stores. According to the Oxford Business Group report on Philippine retail trade, there are 700,000 sari-sari stores nationwide comprising 60% of the retail market and catering mostly to the low-income class. Sari-sari stores are expected to remain buoyant as they provide for their niche market – small, local communities, but they will be facing stiffer competition from convenience stores as these expand to more and more towns. Research-fi rm Kantar said that convenience stores are growing 4 to 5 times faster than traditional ones. Moreover, expansion plans of players indicate that about 4,000 to 5,000 convenience stores will be opening in the next 5 years (see table).

Supermarket and hypermarket chains are also expanding rapidly especially to less-served rural areas. SM Group, through its SM Food and Retail Group, will be putting up at least 20 Savemore and Hypermarket stores outside Metro Manila to add to its portfolio of 193 food stores and 48 department stores. SM Retail is also planning to venture in the convenience store sector through a foreign brand. Meanwhile, SM’s main competitor Puregold will be constructing 25 new stores in 2014 to add to its 218 stores. Robinsons Retail, the third largest retailer, is targeting Visayas and Mindanao for 300 new stores this year.

The growth in retail will continue to be supported by strong household consumption.

54 BUSINESS


EXPANSION PLANS IN THE CONVENIENCE STORE SEGMENT

Source: Various press releases.

Lawson Inc. - Puregold 2,000 in the long-term

FamilyMart Co. Ltd. 700 in 5 years

7-Eleven 950 in 3-4 years

Robinsons Retail Holdings Inc. (Ministop) 330 in 2014

According to the Oxford Business Group, leading retail chains take away a large share of the market from small independent retailers through actively acquiring smaller retail chains and luring away sari-sari stores from other distributors. However, the reduction in smaller vendors (sari-sari stores) may mean the loss of a strong customer base for giant retailers as these stores purchase their goods from supermarkets. Some areas where retailers could fi nd alternative growth include planned communities where consumer-oriented youth and business process outsourcing (BPO) companies thrive as well as online retailing. Online retailing has a niche market for gadgets such as smartphones, tablets and laptop computers. But this will inevitably expand as the worldwide trend to online buying expands.

The local retail sector is also expected to be more competitive as more foreign brands enter the market as a result of the incoming ASEAN integration. Local players could take advantage of franchising or partnering with foreign brands using their familiarity with the market and the consumers to their advantage. Heightened competition should also develop the productivity, creativity and innovation of retail players, thus posting developments in brands, concepts and retail trends.

However, foreign investments in the retail sector remain limited, even with the passing of the 2000 Retail Trade Liberalization Act. According to the Oxford Business Group, the law allows big foreign retailers to operate in the country but sets minimum limits that restrict those that can invest (see list). Since the passing of the law, only around 15 foreign fi rms had invested in the country’s retail sector. Investments are also limited by a slew of constitutional restrictions, including the ban on ownership of land by foreigners and companies with greater than 40% foreign ownership.

Supermarket and hypermarket chains are expanding rapidly especially to less-served rural areas.

U.S. power fi rm to invest $2 Bn for expansion, storage facilities

AES Philippines Power Partners, an American power fi rm, will invest up to $2 billion in the Philippines to support the country’s development and help stabilize power supply in the central provinces. This is allotted for the expansion of its power plant in northwestern Philippines and to create power storage facilities in central Visayas.

AES president and chief executive offi cer Andres Gluski said the company will spend $1.2 billion to double the current capacity of its 600-megawatt coal-fi red power plant in Masinloc, Zambales. The expansion of the Masinloc has already been granted its environmental permits, and is now undergoing consultation with local and international banks to fi nance the project. The power plant is targeted for commissioning in the 3rd quarter of 2017.

Aside from the expansion of its Masinloc plant, AES also plans to install a Battery Energy Storage facility in central Visayas, where there is a shortage in energy supply. This requires an investment of $300 million to $500 million and is expected to support renewable energy projects in the Philippines. Data from the Department of Energy (DOE) show that this 40-megawatt (MW) battery storage project in Negros is one of the indicative power projects for the Visayas grid and is expected to come online by March 2015. The energy storage facilities will be installed via lithium ion batteries, which, according to Mr. Gluski, “…work particularly well on islands, so we think they are very well adapted to the Philippines.” The project can be completed within 12 to 18 months.

Foreign investments in the retail sector remain limited.

Foreign companies (excluding retailers of luxury items) are allowed to invest in the Philippine retail business under the following terms:

A minimum net worth of $200 million;

Operate through a Philippine subsidiary with at least $2.5 million of paid-up capital;

Have been in business for at least 5 years;

Operate at least 5 stores globally, or at least 1 store with capital of at least $25 million;

Invest at least $830,000 in each store in the Philippines, and;

If foreign ownership exceeds 80%, divest at least 30% of the Philippine subsidiary’s equity within 8 years of starting operations through a public offer on a local stock exchange.

INVESTMENT CLAUSES IN THE 2000 RETAIL TRADE LIBERALIZATION ACT

Source: The Oxford Business Group Philippine Report 2014 and R.A. 8762, also known as “An Act Liberalizing the Retail Trade Business”.

55BUSINESS


A power capacity of at least 2,500 MW is needed by 2017 to sustain the annual economic growth forecast of over 6%.

In the Philippine Energy Development Plan, the country needs to add power capacity of at least 2,500 MW by 2017 to sustain the annual economic growth forecast of over 6%. Electricity consumption in the Philippines increased by 50% from 2002 to 2012, which is more than the 16% growth rate of the country’s generating capacity over the same period. U.S. Secretary of Commerce Penny Pritzker, who was in the Philippines as part of her 3-country tour to deepen the U.S.’ economic ties and trade in Southeast Asia, said that the Philippines’ power needs have to match the growth that is occurring. Last year, the country recorded a gross domestic product (GDP) of 7.2%, which creates “need and opportunity.”

Data from DOE show that the Philippine power outlook is critical, with a projected reserve for 2015 of only 11% for the Luzon grid, 21% for the Visayas grid, and 21% for the Mindanao grid assuming that committed power projects would push through on time (see chart). Without the committed projects, reserve for 2015 will be -0.03% in Luzon, 9% in Visayas, and -5% in Mindanao (see chart).

Immediate action is needed to address the growing needs of the Philippine power industry. AES’ investment is especially welcome, particularly at a time when President Aquino is seeking investments in the country to help resolve the current problems in power supply. More investments like this are necessary to sustain the growth in the country’s GDP, and to allow this growth to translate into more opportunities for the Philippines.

Local cigarette fi rm under BIR probe

The Bureau of Internal Revenue (BIR) is auditing the tax payments of local cigarette company Mighty Corp. This was among a series of government investigations Mighty Corp. has been facing.

The probe came amid allegations that the locally-owned tobacco company has been declaring lower production volume and has been involved in illicit trade, which could have resulted in foregone revenues for the government’s excise taxation efforts. An earlier study from the International Tax and Investment Center (ITIC) and Oxford Economics (OE) released by the Wallace Business Forum, estimated that illicit consumption of cigarettes in the country increased from 5.9% of total consumption in 2012 to 18.1% in 2013. A bulk of this was in the lower-priced cigarette segment where Mighty Corp. has gained a controlling consumer share since the implementation of the new tax regime.

BIR Commissioner Kim Henares said that a bureau personnel has been already assigned to monitor Mighty’s manufacturing facilities. Results of the BIR investigation are kept confi dential, as mandated by the Tax Code which said any unlawful disclosure is subject to criminal liability. Comm. Henares also refused to tell when the investigation will be concluded.

This was not the fi rst government investigation Mighty Corp. has been subjected to, as it was also under a Bureau of Customs’ reassessment of duties and taxes of entries earlier this year. The BOC demanded Mighty pay P852.9 million for the importation of raw materials used for cigarette production where taxes hadn’t been properly paid. Mighty settled in February 2014. According to the BOC report, Mighty’s reported imported raw materials did not match the volume of fi nished goods exported. The Department of Finance said P4.4 billion in excise taxes could have been foregone due to this operation. The BOC also ordered the shutdown of Mighty’s customs bonded warehouse which stops the tobacco fi rm from channeling duty-free export cigarettes into the domestic market.

Mighty Corp. had already been accused of tax evasion and smuggling that could have allowed them to sell cheaper tobacco products in the local market. The fi rm has been selling Mighty brands at P14.70 per pack, a far cry from the breakeven price including the cost of materials, VAT and excise tax levied for cigarettes. The latter 2 amounted to P13.58, leaving only P1.12 for production, sale and profi t. The issue was fi rst raised in a column

Source: Department of Energy

-15

-10

-5

0

5

10

15

20

25

30

2014 2015 2016 2017 2018 2019 2020

PROJECTED POWER RESERVE IN THE PHILIPPINES, 2014-2020

LUZON VISAYAS MINDANAO

-70

-60

-50

-40

-30

-20

-10

0

10

20

2014 2015 2016 2017 2018 2019 2020

PROJECTED POWER RESERVE IN THE PHILIPPINES, WITHOUT COMMITTED PROJECTS, 2014-2020

LUZON VISAYAS MINDANAO

Source: Department of Energy

56 BUSINESS


The Sin Tax Law resulted in 2.3 million less smokers and averted approximately 32,000 deaths.

by Mr. Peter Wallace where he pointed out the impossibility of manufacturing for only P1.12 and the huge discrepancy between Mighty’s buying price of new materials versus that of other manufacturers. Comm. Henares said that there’s no law prohibiting companies to sell at a loss but noted that the move is unsustainable in the long-term, so questionable. Since January 2013, the time of the passage of the sin tax law, Mighty’s share in the cigarette market has increased remarkably to 20% from the previous 3%.

Advocacy fi rm Action for Economic Reforms (AER) said that the practice of artifi cially-depressing the price of cigarettes could also force other tobacco manufacturers to follow suit as a means to protect their consumer base. This has led to a consumption shift from higher-priced to lower-priced cigarettes. The AER said that the increasing demand on fi rms to shift to underpriced products will eventually impair the health and revenue goals of the sin tax law if continued.

Mighty recently launched its premium brands King and Chelsea, which will be categorized in the highest tax bracket for cigarettes. Mighty said that the expansion of their product lines aims to fi rm up its position as the country’s 2nd-biggest tobacco manufacturer after Philip Morris – Fortune Tobacco Corp. Inc. (PMFTC).

Sin Tax Law shows positive effects but limited by illicit trade and downshifting

A year-and-a-half since its implementation, the Sin Tax Law has been successful in reducing smoking prevalence and increasing the funds for health care. However, downshifting and illicit trade have reduced the potential gain for the BIR.

Republic Act 10351 or the Sin Tax Law was signed into law by President Aquino on December 20, 2012. The bill had been pending in Congress for nearly 2 decades. The law’s ratifi cation had 4 objectives: (1) reduce tobacco and alcohol consumption, (2) generate additional revenue to fund the universal healthcare program and alternative livelihood programs for tobacco farmers, (3) improve fi scal health and macroeconomic stability, and (4) simplify the administration of excise taxes on tobacco and alcohol products.

The effects of the law were discussed by members of the public and private sector at the “Katas ng Sin Tax: Realizing the Law’s Gains for the Filipino People” forum on June 23. A year and a half after its implementation, the Sin Tax Law had signifi cant effects in terms of revenues, tobacco and alcohol consumption, and tax

Selling at a loss is unsustainable in the long term.

A shift to underpriced products will eventually impair the health and revenue goals of the sin tax law.

administration. Data from the Social Weather Stations’ (SWS) “National Survey on Usage, Attitudes, and Behavior of Filipinos Towards Tobacco” show that smoking prevalence among those aged 18 to 24 years old dropped by 17 percentage points to 18% in the 1st quarter of 2014, while smoking prevalence among those in class E dropped 13 percentage points to 25%. Dr. Antonio Dans, president of the Philippine Society of General Internal Medicine (PSGIM), added that the Sin Tax Law resulted in 2.3 million less smokers and averted approximately 32,000 deaths.

The implementation of the Sin Tax Law also led to higher excise tax collections, which had been relatively fl at over the past 16 years. Data from the Bureau of Internal Revenue and the Department of Finance show that collections increased by 82% from P56.8 billion in 2012 to P103.4 billion in 2013, well above the P85.8 billion target for that year. As a result, the Department of Health received a 57% increase in the 2014 national budget from P53.2 billion in 2013 to P83.7 billion this year, most of which went to the PhilHealth insurance coverage of the poorest families.

However, downshifting and illicit trade challenge the current system. Price differences effectively caused people to shift to lower-priced cigarettes, which are currently taxed less because of the existing multi-tiered system. A unitary tax rate won’t be applied until 2017, thus still limiting the effect of the Sin Tax Law. The prevalence of illicit cigarette consumption – which rose by 198% from 6.4 billion in 2012 to 19.1 billion in 2013 – also restrains the government’s efforts to fully implement tax reforms. The government reportedly lost P15.6 billion in 2013 because of this. Aside from this, companies such as Mighty Corporation and British American Tobacco (maker of Lucy Strike and Pall Mall) sell underpriced cigarettes as a way to increase their market share. This causes a decline in the market share of bigger companies such as Philip Morris Fortune Tobacco Corp., Inc. (PMFTC), who reported a notable decrease from 97% in 2012 to below 80% in 2013.

To address these problems in the system, BIR Commissioner Kim Henares suggested adopting a minimum fl oor price on cigarette products to prohibit tobacco manufacturers from selling at a loss. Ms. Henares called on Congress to help make this happen, saying: “The BIR has no power to stop any business enterprise to sell at a loss if this is part of their marketing strategies. There should be a law that will be prohibiting companies like cigarette fi rms to sell at a loss.”

57BUSINESS


Tax collections increased by 82% in 2013, while the DOH received a 54% increase in its budget.

While the Sin Tax Law displayed positive results in terms of its health and revenue targets, there are still issues that need to be addressed by the government so that effi ciency of the system would increase. The lost revenues last year could have been utilized for more health programs, thus allowing the law’s gains to benefi t more people. Also, as the sin tax is an example of earmarking taxes raised from cigarettes, wines, alcohol, and spirits, there is a need for civil society to closely monitor the use of these funds to ensure that they are used only for purposes that the law intended, which is for healthcare (85%) and support to tobacco farmers (15%).

Subsidies to state fi rms drop 76% in April

The national government has released a total of P253 million in subsidies to government-owned and-controlled corporations (GOCCs) and fi nancial institutions in April. The amount is 76% lower than the P1.06 billion released in the same month last year. The drop was due to GOCCs’ stable cash position during the month.

Data from the Bureau of Treasury showed that the Philippine Rice Research Institute was the largest recipient in April with P137 million. Other recipients that received large subsidies for the period were the Cultural Center of the Philippines (P68 million), Development Academy of the Philippines (P18 million), Philippine National Railway (P18 million), and Philippine Institute of Traditional Health Care (12 million). (see table)

AGENCYSUBSIDY

APRIL 2014 (IN MN PESOS)

Philippine Rice Research Institute 137

Cultural Center of the Philippines 68

Development Academy of the Philippines 18

Philippine National Railway 18

Philippine Institute of Traditional Health Care 12

TOTAL SUBSIDY

2013 (IN BN PESOS)

TOTAL SUBSIDY

2012 (IN BN PESOS)

TOTAL SUBSIDY

2011 (IN BN PESOS)

TOTAL SUBSIDY

2010 (IN BN PESOS)

TOTAL SUBSIDY

2009 (IN BN PESOS)GOCCs 66.33 42.64 53.71 21.01 17.44

For the 1st 4 months of the year, the total subsidy disbursed reached P1.48 billion, higher than P1.37 billion in the same period last year. The government is aiming at reducing its subsidies to GOCCs this year by 35% to P42.86 billion from P66.33 billion last year.

Meanwhile, GOCCs have remitted a total of P95.38 billion in dividends to the national government for the last 3 ½ years of President Benigno Aquino’s administration. During Gloria Arroyo’s administration, P81.54 billion was remitted to the government or an average annual GOCC turnover of P9.06 billion compared to P27.25 billion average annual turnover under the Aquino administration.

The increase in GOCCs’ remittances was attributed to the reforms implemented by the current administration, particularly the enactment of GOCC Governance Act of 2011.

The increase in GOCCs remittance was attributed to the reforms approved under Aquino’s administration.

17.4421.01

53.71

42.64

66.33

0

10

20

30

40

50

60

70

2009 2010 2011 2012 2013

NATIONAL GOVERNMENT SUBSIDY

NATIONAL GOVERNMENT SUBSIDY

GOVERNMENT SUBSIDIES TO STATE-LED FIRMS

Source: Bureau of Treasury.

Source: Bureau of Treasury.

58 BUSINESS


PEZA APPROVED PROJECTS

1Q 2014

INDUSTRY ACTIVITY EQUITY LOCAL/FOREIGN ZONE

APPAREL AND TEXTILE MANUFACTURES

F & Q NEOPRENE PRODUCTS CO., INC.Manufacture of diving suit, wind surfi ng suit, sports apparels, casual bags, bullet proof vests, and other products made of neoprene

99.95% - Hong Kong Mactan Economic Zone

JIO MHW GLOBAL CHANNEL MANUFACTURING CORP.

Manufacture of wearing apparel, such as bunny suit, cotton tops and blouses 100% - Korean People's Technology

Complex - SEZ

MARUKAME FASHION CEBU INC.Manufacture/Production of apparel or clothing, fashion accessories, footwear, bags, tents, seat covers and other related products

99.99% - Japanese Mactan Economic Zone

VERTEX ONE APPAREL PHILS., INC. Manufacture of garments and wearing apparel 99.98% - Samoan Cebu Light Industrial Park - SEZ

AUTOMOTIVE TRADE

DAIWA SEIKO PHILIPPINES, CORPORATION Manufacture motor vehicle transmission parts Laguna International Industrial Park - SEZ

METALCREST TECHNOLOGIES, INC. Manufacture of Automotive Parts Laguna Technopark - SEZ

MITSUBISHI MOTORS PHILIPPINES CORPORATION

Manufacture/assembly and distribution of motor vehicles and spare parts 100% - Japanese Greenfi eld Automotive

Park - SEZ

PANGEA PHILIPPINES, INC. Manufacture and assembly of electric vehicles, rechargeable batteries and their components

99.99% - American

Golden Mile Business Park - SEZ

TOYO SEAT PHILIPPINES CORPORATION Additional sewing line for production of new model (J36A) of automotive seats

Greenfi eld Automotive Park - SEZ

ELECTRICITY, WATER, AND GAS

MAJESTICS ENERGY CORPORATION 40 -MW Solar Energy Facility projects 100% - Filipino Cavite Economic Zone

ELECTRONICS

ALLIANCE MANSOLS INC. Surface Mount Technology (SMT) for the Production of Printed Circuit Board (PCB)

Laguna Technopark - SEZ

COOPER INDUSTRIES PHILIPPINES, LLC, PHILIPPINE BRANCH

Manufacture of Power Quality Equipment including Uninterruptible Power Supplies, Inverters, and Power Distribution Units

First Philippine Industrial Park - SEZ

FORTIFY TECHNOLOGIES ASIA, INC. (Formerly: Streamlines Asia, Inc.)

Manufacture of health and fi tness tracking devices, appliances, gadgets and kits and all related operations

99.98% - American Mactan Economic Zone

HYSONIC PHILIPPINES, INC. Manufacture of actuator (Smart-Toy) Light Industry & Science Park III - SEZ

KINPO ELECTRONICS (PHILIPPINES), INC. Manufacture of Graphing Calculators 99.99% - Taiwanese

Lima Technology Center - SEZ

LAGUNA AUTO-PARTS MANUFACTURING CORPORATION Frame Stator Assy (F/S Assy) Laguna Technopark

- SEZ

LAGUNA AUTO-PARTS MANUFACTURING CORPORATION Connector Assy Laguna Technopark

- SEZ

METALCREST TECHNOLOGIES, INC. Manufacture of round meter socket Laguna Technopark - SEZ

MIKUNI ELECTRONICS CORP. Assembly of electronic parts such as those for car remote engine starter, car black box recorder, and car security system

Light Industry & Science Park III - SEZ

MOLEX INTEGRATED PRODUCTS PHILIPPINES, INC. Manufacture of Temp-Flex and industrial products TECO Industrial Park

NIKKOSHI ELECTRONICS PHILIPPINES, INC. Manufacture of Remote Reset Switch Assembly (RRSA) Laguna Technopark - SEZ

ON SEMICONDUCTOR PHILIPPINES, INC. Plant 2 Probe Expansion - Custom Automotive Die Sales Golden Mile Business Park - SEZ

PANASONIC PRECISION DEVICES PHILIPPINES CORPORATION Manufacture of 3D Sensor Unit Laguna Technopark

- SEZ

SMART ELECTRONICS MANUFACTURING SERVICE PHILIPPINES, INC. Production of HME Deck for Health and Medical Equipment (HME) Calamba Premiere

International Park - SEZ

SMART ELECTRONICS MANUFACTURING SERVICE PHILIPPINES, INC.

Assembly of semi-fi nished products, particularly, PCB main, Assy PCB, and AssyDeck for export

Calamba Premiere International Park - SEZ

SMT PHILIPPINES, INC. Manufacture of USB Flash Drive Light Industry & Science Park II - SEZ

59BUSINESS


TDK PHILIPPINES CORPORATION Manufacture of MR Heads with Dynamic Flying Height (DFH) Laguna Technopark - SEZ

TSUKIDEN ELECTRONICS PHILIPPINES, INC. Authority to lease a 1,634 sq.m. area and a 1,142.77 sq.m. open space from EZP Development, Inc.


ZAMA PRECISION INDUSTRY MANUFACTURING PHILIPPINES, INC. Manufacture of Diaphragm Carburetors 100% - German First Philippine

Industrial Park II - SEZ

SUMI PHILIPPINES WIRING SYSTEMS CORPORATION Production of wire or wire cable Hermosa Ecozone

Industrial Park

YOUNG SHIN STARLINK PHILS., INC. Manufacture of various sizes and types of Low Voltage Differential Signal (LVDS) Cable Wire

Light Industry & Science Park III - SEZ

HOTEL, RESTAURANT, AND LEISURE SERVICES

SOUTH BY SOUTHWEST CORPORATIONEstablishment of an Amanpulo Villa consisting of four (4) hotel rooms - villas or casitas, living room pavilion, service building, and swimming pool

100% - Filipino Pamalican Island Tourism Ecozone

IT AND IT-ENABLED SERVICES

FURUKAWA AUTOMOTIVE SYSTEMS LIMA PHILIPPINES INC..

Engage in the business of design and development of criteria for wire harness and parts using computer aided design (CAD)

99.99% - Japanese


GEOS ONLINE ENGLISH PHILIPPINES INC. Provide online English tutorial 99.6% - Japanese CBP-IT Park

TECHNICAL PRECAST DETAILING SERVICES, INC.

Engage in the business of providing and particulars into such outlines, sketches, plans, designs, and drawings for the production and erection of precast pre-stressed concrete building components and structures for manufacturing and erection of structure abroad

66% - Filipino 34% - American BTTC Center

ERBAS ASIA, INC. (Branch Offi ce in the Philippines of Erbas & Associates Pty. Ltd.) information technology enabled technical design services 100% - Australian UnionBank Plaza

MACHINERY AND EQUIPMENT

RAMCAR TECHNOLOGY, INC. Manufacture of plastic injection moulds, customized tooling, jigs and fi xtures, and fabrication of industrial equipments 100% - Filipino Sta. Maria Industrial

Park

METAL INDUSTRIES

FCXTRA CORPORATION Industrial powder coating services for metal and other related parts

75% - Filipino 25% - Japanese

Calamba Premiere International Park - SEZ

JAPAN SP SOLUTION, INC. Screen stencil and laser plate making, cleaning and ink matching and mixing, silicon and silk screen pad printing Cavite Economic Zone

KASAI ADVANCED MFG. PHILIPPINES INC.Manufacture of metal pressed parts and resin mold parts, processing parts coating, harness processing, assembly and manufacturing of metal mold

99.99% - Japanese


KATAYAMA MACHINERY PHILIPPINES INC. Manufacture of precision parts and machinery products 99.99% - Japanese


KONGNGAI METAL TOOLING & STAMPING PHILIPPINES CORP. Manufacture of stamping die, metal part and prototype product 100% - Chinese Lima Technology Center

- SEZ

O.M. MANUFACTURING PHILIPPINES, INC. Electrolyzed refi ning of metal Cavite Economic Zone

RONG BO YU (MANILA) CO. LTD. Production of precision injection mold, injection molding, painting, printing and other assembly works 100% - Chinese Laguna Technopark

- SEZ

S & G PRECISION, INC. Fabrication of jigs and fi xtures, hot runner parts and accessories Light Industry & Science Park III - SEZ

URE-SHII TECHNOLOGIES INC.. Fabrication, installation and maintenance of industrial and offi ce equipment including its parts and components 100% - Filipino Golden Mile Business

Park - SEZ

VALOR MANUFACTURING CORPORATION Manufacture of fabricated metal 100% - Filipino Victoria Wave - SEZ

MISCELLANEOUS MANUFACTURES

AGC INDUSTRIAL FLAT GLASS PHILIPPINES, INC. Manufacture of industrial solar glass 99.99% -

Japanese Asahi - SEZ

BRIDGESTONE PRECISION MOLDINGS PHILIPPINES, INC. LFD (Lexmark Foam Development) for Laser Printer Cavite Economic Zone

BROTHER INDUSTRIES (PHILIPPINES), INC. Manufacture of BH11 Inkjet Cartridge First Philippine Industrial Park - SEZ

JL IMEX PHIL. CORP. Manufacture of ladies’ bags, wallets and leather handbags 100% - Korean First Cavite Industrial Estate - SEZ

PANASONIC PRECISION DEVICES PHILIPPINES CORPORATION Manufacture of Dichroic Prism Unit Laguna Technopark

- SEZ

60 BUSINESS


ZIR-CON LABS INC.Manufacture of Zirconium Blocks, Crowns, Bridges, Partials, Orthodontics and other Appliances for Restorative Dentistry; Dental Alloys, Materials and Supplies; Dental Technology Research Training

87% - American 13% - Filipino

Light Industry & Science Park I - SEZ

OFFSHORING AND OUTSOURCING

ACCENTURE, INC. Software development Gateway Tower

ACS OF THE PHILIPPINES, INC. Information Technology outsourcing and business process outsourcing (BPO) services Aseana One

ACS OF THE PHILIPPINES, INC. Information Technology outsourcing and business process outsourcing (BPO) services (data encoding and indexing) Cebu I.T. Park

ADVANCED WORLD SOLUTIONS, INC. Verifi cation of functionality for automobile software One Corporate Centre

AELOGICA (PHILIPPINES) INC. Software development and application, including programming and adaptation of system software and middleware

90% - American 10% - Filipino Ecotower

ANDERSON BUSINESS PARTNERS - PHILIPPINE BRANCH

Call center operations and business process outsourcing (BPO) activities and services 100% - English Ecotower

CASH FLOW OUTSOURCING SERVICES INC. Business Process Outsourcing offering Voice and Non-Voice services 99.5% - American Orient Square I.T. Bldg.

CONVERGYS PHILIPPINES SERVICES CORPORATION Call Center Operations Two Sanparq

E-WAY BUSINESS INC. Business Processing Outsourcing (BPO) using E-commerce technology and telemarketing services 100% - Filipino DPC Place Building

EXLSERVICE PHILIPPINES, INC. Business process outsourcing (BPO) services Northgate Cyberzone

EXLSERVICE PHILIPPINES, INC. Business process outsourcing (BPO) services Cebu I.T. Park

IBEX GLOBAL SOLUTIONS (PHILIPPINES) INC. Call center and business process outsourcing services SM Lanang Premier IT Center

IBM BUSINESS SERVICES, INC. Business Transformation Outsourcing services Eastwood City Cyberpark

IBM BUSINESS SERVICES, INC. Business Transformation Outsourcing services Lakeside Evozone

IBM DAKSH BUSINESS PROCESS SERVICES PHILIPPINES INCORPORATED Business Process Outsourcing and call center operations UP Science and

Technology Park (North)

IBM DAKSH BUSINESS PROCESS SERVICES PHILIPPINES INCORPORATED Business Process Outsourcing and call center operations Naga City Technology

Park

ING GLOBAL SERVICES AND OPERATIONS, INC.

Reconciliation Processing (Custody Fee Reconciliation, Brokerage Fee Reconciliation, Payment Reconciliation, Cash Receivables Reconciliation, Finance Reconciliation, Market Risk Reconciliation, Credit Risk Reconciliation); and inclusion of Market data services processing

W Fifth Avenue

KIZUNA FEELS KNOT INC. Business process outsourcing for web graphic design 100% - Japanese KRC IT Zone

MICROSOURCING PHILIPPINES INC. General Business Process Outsourcing (BPO) Services Eastwood City Cyberpark

MULTIRATIONAL CORPORATION

Contract IT development services, business process outsourcing and outsourced call center services PBCom Tower

ORCHID CYBERTECH SERVICES, INCORPORATED Call center operations Cyberscape Beta

QBE GROUP SHARED SERVICES LIMITED - PHILIPPINES BRANCH IT-enabled Business Process Outsourcing (BPO) operations CBP-IT Park

REVISION ZERO CONSULTING CO. Preparation of drawings, detailing components of engineering structures thru computer aided design software

48% - New Zealander

48% - Australian 5% - Filipino

One San Miguel Avenue Condominium

SALVO TRAININGS & CONFERENCES (Branch offi ce in the Philippines of Salvo Global Pte. Ltd.)

Telemarketing by calling existing and potential clients 100% - Singaporean E-Square I.T. Park

SPi HEALTHCARE, INC. Business Process Outsourcing services 99.99% - American

Pacifi c Information Technology Center

TELETECH CUSTOMER CARE MANAGEMENT - PHILIPPINE BRANCH Business Process Outsourcing/Call Center Operations Cebu I.T. Park

TELETECH CUSTOMER CARE MANAGEMENT - PHILIPPINE BRANCH Business Process Outsourcing/Call Center Operations Cebu I.T. Park

TERADATA GCC (PHILIPPINES), INC. Software development and consulting center Ecotower

61BUSINESS


TRANSCOSMOS ASIA PHILIPPINES, INC. BPO and IT-enabled services 99.8% - Japanese One Corporate Centre

V MONEY INC. Business of providing electronic payment processing solutions and electronic commerce 100% - Filipino Ecotower

VALTES ADVANCED TECHNOLOGY INC. Software development and care support 99.8% - Japanese Trafalgar Plaza

VXI GLOBAL HOLDINGS B.V. (PHILIPPINES) Business Process Outsourcing/Call Center Services The Annex-SM City Davao IT Center

VXI GLOBAL HOLDINGS B.V. (PHILIPPINES) Call Center Operations Waltermart-North EDSA

WAKUTO PHILIPPINES INC. Software development 99.8% - Japanese Burgundy Corporate Tower

OTHER BUSINESS SERVICES

DELTA DESIGN PHILIPPINES LLC Assembly and test of component parts for semiconductor test handling equipment

Carmelray Industrial Park II - SEZ

HIBU (PHILIPPINES) PRIVATE LIMITED, INC. Provision for production advertisement services Ecotower

PUBLISHING AND PRINTING

TMA GROUP PHILIPPINES INC. Printing activity Calamba Premiere International Park - SEZ

REAL ESTATE AND PROPERTY DEVELOPMENT

AYALA LIFE-FGU CENTER - CEBU CONDOMINIUM CORPORATION

Operate, maintain and manage a 14-storey offi ce building to be known as Ayala Life-FGU Center Cebu 100% - Filipino CBP-IT Park

GLOBE TELECOM, INC. Operate and manage its existing 7-storey building (with 2-level basement) IT enterprises to be known as Globe Telecom I.T. Plaza

70% - Filipino 22% -

Singaporean 8% - Mixed

Cebu I.T. Park

KYOCERA CIRCUIT SOLUTIONS PHILIPPINES, INC.

Authority to lease out a 4,630 sq.m. of its existing 13,000 sq.m. factory to NEC Tokin Electronics (Philippines) Inc.

Light Industry & Science Park II - SEZ

NIKKOSHI ELECTRONICS PHILIPPINES, INC. Authority to lease out a 755.86-sq.m. fl oor area of its existing building to Nikkoshi Philippines Corporation

Laguna Technopark - SEZ

PROPHILE SOUND INDUSTRIES, INC.

Authority to lease out a 551.50-sq.m. building space to Nakayama Seimitsu Mfg. Inc. Cavite Economic Zone

TOA KIKO CEBU CORPORATION Authority to lease out 455-sq.m. portion of its building to Showa Create Cebu Inc. Mactan Economic Zone

STORAGE AND WAREHOUSING

ALIGN AEROSPACE LLC - PHILIPPINE BRANCH Warehousing and supply chain/logistics facilities and services for the storage, deposit, & safekeeping of goods 100% - American Baguio City Economic

Zone

CBT REALTY & DEVELOPMENT CORPORATION Registration of its additional warehouse facilities Allegis I.T. Park

CQM MANAGEMENT, INC. Existing fi ve (5) units warehouse/factory buildings 100% - Filipino Cavite Economic Zone

HANKYU HANSHIN LOGISTICS PHILIPPINES INC. Additional warehouse site Mactan Economic Zone

HONDA LOGISTICS PHILIPPINES INC.. Manage and store PVC rolls and accessories 100% - Japanese First Philippine Industrial Park - SEZ

HTH SUNBO LOGISTICS (PHILIPPINES), INC. Warehousing and logistics services 99.99% - Singaporean


ITHACA INC. Construction of 3-units warehouse facilities Laguna Technopark - SEZ

ITHACA INC. Construction of 3-units warehouse facilities Light Industry & Science Park III - SEZ

ITHACA INC. Additional two (2) warehouse-type buildings Laguna Technopark - SEZ

IWS REALTY CORPORATION Additional 2-unit warehouse facilities Hermosa Ecozone Industrial Park

JIO MHW GLOBAL CHANNEL MANUFACTURING CORP.

Engage in resale of goods, packing, repacking, cutting or altering according to customer’s specifi cations, and assembling 100% - Korean People's Technology

Complex - SEZ

ROBELCHU CORPORATION Construct a warehouse building 100% - Filipino Light Industry & Science Park II - SEZ

SAKAMOTO PHILIPPINES CORPORATION

Warehousing/logistics support services particularly the importation/procurement, storage, deposit, inventory management of various machine tools, hand tools, manufacturing consumables, and industrial equipment

99.97% - Japanese Mactan Economic Zone

SLTI LOGISTICS SERVICE, INC.Additional area of operations to be undertaken in the 1,225 sq.m. area of storage/warehouse facility located in Toyota Autoparts Philippines, Inc. (TAPI)

Toyota Sta. Rosa - SEZ

62 BUSINESS


LIST OF BOI REGISTERED PROJECTS

JUNE 2014

INDUSTRY ACTIVITY PROJECT COST (IN PHP MILLION)

EQUITY LOCAL/FOREIGN

AGRICULTURE, FISHERY, AND FORESTRY

Sin Likas Import-Export Packaging, Inc. Producer of Vegetable & Fruit Juices 13 97% Filipino 3% American

Treelife Coco Sugar Producer of Coco Sugar 18 100% Filipino

Ada Manufacturing Corporation Operator/Provider of Rice Harvesting Services 1,840 100% Filipino

Sea Cage Industries, Inc. Producer of Milkfi sh (Aquaculture) 34 100% Filipino

ELECTRICITY, WATER, AND GAS

NV Vogt Philippines Solar Energy One, Inc. Renewable Energy Developer of Solar Energy Resources 555 60% Filipino 40% Foreign

Pagbilao Energy Corporation Operator of a 400 MW Coal-Fired Power Plant 39,903 100%Filipino

HOTEL, RESTAURANT, AND LEISURE SERVICE

Fort Bonifacio Shangri-La Hotel, Inc. Operator of Hotel and Serviced Apartments (Shangri-La at the Fort, Manila) 13,648 60% Filipino

40% Foreign

Ecosouth Hotel Ventures, Inc. Operator of Tourist Accommodation Facility (Seda Nuvali) 728 100% Filipino

MISCELLANEOUS MANUFACTURE

Primex Isle De Coco, Inc. Producer of Virgin Coconut Oil and Coco Flour 64 100% Filipino

REAL ESTATE AND PROPERTY DEVELOPMENT

Goshen Land Capital Inc. Developer of Low-Cost Mass Housing Project (North Cambridge Condominium Building 3 (Wharton) 159 100% Filipino

Communities Zamboanga, Inc. Developer of Low-Cost Mass Housing Project (Camella Pagadian) 356 100% Filipino

Communities Cagayan, Inc. Developer of Low Cost Mass Housing Project (Lessandra Heights – Cagayan De Oro) 392 100%Filipino

Communities Cagayan, Inc. Developer of Low Cost Mass Housing (La Mirande Crest) 279 100%Filipino

TOTAL 57,988

63BUSINESS


DATA INDEX

YEAR-ON-YEAR

GROWTH

YEAR-TO-DATE

GROWTH

Volume of Production Index (VoPI) (2000=100) 125.4 13.8 -1.6

a. Food 144.5 9.1 2.7

b. Beverage 138.5 31.5 22.2

c. Tobacco 7.3 30.4 -1.6

d. Textile 38.1 16.5 12.4

e. Footwear and Wearing Apparel 28.8 -17.7 -13.9

f. Wood and Wood Products 70.9 20.8 1.5

g. Furniture & Fixtures 727.4 -7.2 11.7

h. Basic Metals 146.6 12.8 -9.0

i. Iron and Steel 101.4 2.8 10.4

j. Non-ferrous Metals 254.4 23.3 -34.3

k. Fabricated Metal Products 323.1 58.3 42.6

l. Machinery Excluding Electrical 42.8 13.2 31.9

m. Electrical Machinery 93.1 13.1 0.3

n. Transport Equipment 126.6 12.7 3.8

o. Other Mfg Industries 105.5 4.7 -1.7

p. Paper & Paper Products 67.1 -2.9 -5.1

q. Publishing & Printing 147.2 227.8 103.4

r. Leather Products 3.9 0.0 5.1

s. Rubber Products 268.5 23.0 9.9

t. Chemical Products 215.8 -5.2 -35.3

u. Petroleum Products 58.2 19.0 0.3

v. Non-Metallic Mineral Products 127.3 -17.4 -10.1

w. Glass & Glass Products 152.2 6.5 7.8

x. Cement 165.0 2.6 -0.4

y. Misc. Non-Metalic Mineral Products 40.7 -71.7 -55.7

VALUE OF PRODUCTION INDEX (VAPI) (2000=100) 189.1 12.6 -1.8

AVERAGE CAPACITY UTILIZATION 83.5 -16.8 83.2

DATA YEAR-AGOLEVEL

GROWTH RATE (%)

MOTOR VEHICLE SALES 69,737 57,128 22

PASSENGER CAR SALES 24,824 18,702 327

COMMERCIAL VEHICLE SALES 44,913 38,426 16.8

BUSINESS CLIMATE INDEX

UNIVERSAL AND COMMERCIAL BANK’S LOANS OUTSTANDING TO THE REAL ESTATE SECTOR (P Bn)MARCH 2014w

MAR-14 % TO TOTALRE: LOAN DEC-2012 % TO TOTAL

RE: LOAN

RESIDENTIAL 192.28 28.5 173.46 30.5

COMMERCIAL 492.28 71.5 394.95 69.9

MOTOR VEHICLE SALESJUNE 2014

000

500

0

500

000

500

000

500

000

FDI:BOP CONCEPT US$ Million

INDUSTRIAL PERFORMANCE (2000=100) MAY 2014

FOREIGN DIRECT INVESTMENTBalance of Payments Concept*; JANUARY- APRIL 2014

LEVEL (US$ million)

SOURCE CURRENT YEAR AGO YEAR-ON-YEAR% CHANGE

TOTAL FDI 1,377 1,829 -24.74

Equity Capital 357.26 791.33 -54.85

Reivested Earnings 131.42 146.33 -10.19

Debt Instruments 887.99 891.64 -0.41

* The BSP adopted the Balance of Payment, 6th edition (BPM6) compilation framework effective 22 March 2013 with the release of the full-year 2012 and revised 2011 BOP statistics. In BPM6, net FDI fl ows refer to non-residents’ equity capital (i.e., placements less withdrawals) + reinvestment of earnings + debt instruments, net (i.e.,net intercompany borrowings).

64 BUSINESS


BUSINESS CLIMATE INDEX

SURVEY ON THE MONTHLY OCCUPANCY RATES & LENGTH OF STAY

67.2% HOTEL OCCUPANCY RATE IN 2013

The comparative average occupancy rates of hotels in Metro Manila hit 67.2% in 2013. The occupancy rate for accredited hotels hit 67.4% while non-accredited hotels posted a 54.85% occupancy rate. Deluxe hotels were the most popular with 70.82% occupancy. The guest’s length of stay averaged at 2.49 nights in 2013. On the average, guests preferred to stay longer on non-accredited hotels at 4.31 nights.

1 STRIKE IN JUNE

A strike was recorded in June 2013 which involved 400 workers equivalent to 1,200 man-days lost. Meanwhile, there is a total of 83 notices of strike/lockouts since January 2014. In 2012, 3 strikes were recorded involving 209 workers, which is equivalent to 797 man-days lost. Meanwhile, 184 notices of strike were fi led that year.

LABOR STRIKES

STRIKES DECLARED WORKERS INVOLVED MAN-DAYS LOST (000)

2014 2013 2014 2013 2014 2013

JAN 0 0 - - - -

FEB - - - - - -

MAR - - - - - -

APR - - - - - -

MAY - - - - - -

JUN - 1.00 - 400 - 1,200

JUL - - - - - -

AUG - - - - - -

SEP - - - - - -

OCT - - - - - -

NOV - - - - - -

DEC - - - - - -

TOTAL 0 1 0 400 0 1,200

0

500

1000

1500

2000

2500

3000

3500

4000

MAN-DAYS LOST

0

2

4

6

8

10

12

STRIKES DECLARED

VISITOR ARRIVALS SLIGHTLY UP IN MAY

Total visitor arrivals registered in May is 364,804 up by only 0.76% from 362,062 in the same month in 2013. Of this, 4.89% or 17,794 visitors were Filipinos residing abroad.

Korea remained the top source market followed by the U.S. and China. From January to May, visitors coming from Korea amounted to 453,227 (21.99% share of the 2.06 million total visitors for 2014). The U.S. market tallied 327,702 visitors (15.9%) while the Chinese market recorded 198,951 visitors (9.91%).

VISITOR ARRIVALSJANUARY-MAY 2014

0

100

200

300

400

500

TOURISM ARRIVALS

COUNTRY 2014 2013 % CHANGE RANK

KOREA 453,277 489,389 -7.38 KOREA

USA 327,702 306,056 7.07 USA

CHINA 198,951 163,879 21.40 CHINA

JAPAN 188,941 179,984 4.98 JAPAN

AUSTRALIA 96,655 88,190 9.60 AUSTRALIA

SINGAPORE 74,710 70,470 6.02 SINGAPORE

CANADA 67,929 61,086 11.20 CANADA

UNITED KINGDOM 60,305 52,379 15.13 UNITED KINGDOM

TAIWAN 55,543 79,297 -29.96 TAIWAN

MALAYSIA 54,420 45,447 19.74 MALAYSIA

HONGKONG 49,381 55,811 -11.52 HONGKONG

GERMANY 35,040 33,205 5.53 GERMANY

OVERSEAS FILIPINO 90,626 92,494 -2.02 OVERSEAS FILIPINO

OTHERS 307,655 293,833 4.70 OTHERS

TOTAL 2,063,149 2,013,533 2.46 TOTAL

2012 2011 2012/2011

JAN TO DEC JAN TO DEC GROWTH RATE

De Luxe Hotels

Occupancy Rates 70.82 71.49 -0.94

Length of Stay 2.87 2.92 -1.71

First Class Hotels

Occupancy Rates 60.14 58.05 3.59

Length of Stay 2.20 2.30 -4.17

Standard Hotels

Occupancy Rates 65.34 64.82 0.80

Length of Stay 2.46 2.38 3.47

Economy Hotels

Occupancy Rates 52.15 53.44 -2.41

Length of Stay 1.87 2.13 -12.44

Overall Average 67.20 67.25 -0.07

retail sector growth to remain steady - the wallace...

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