1August 2014

Volume 25 No. 08 August 2014

Department of Trade and Industry (DTI) Secretary Gregory L. Domingo has already endorsed the 2014 Investment Priorities Plan (IPP) for approval by President Benigno S. Aquino III.

DTI Undersecretary for Industry Development Group (IDG) Adrian S. Cristobal Jr. said the new IPP 2014, which is valid for three years, is aligned with the government’s Philippine Development Plan (PDP).

The Board of Investments (BOI) said the 2014 IPP differs from the previous IPPs as it now identifies specific activities that will be entitled to government incentives.

Results of the industry roadmaps being undertaken by the BOI and the private sector also served as basis in the formulation of the list of preferred economic activities listed in the IPP, which are entitled to a package of government tax and fiscal incentives, particularly the income tax holiday (ITH) which could last for a maximum of eight years.

Activities identified under manufacturing are motor vehicle assembly excluding motorcycle assembly; engineered products such as body panel stamping, engines; and chemicals such as fertilizers, pesticides, oleochemicals, and petrochemicals and derivatives, copper wire rod, pulp and paper, and tool and die.

Under the agro-business and fishery sector, activities identified include extraction of natural ingredients,

mechanized agri support services, and agri support infrastructure.

The services list includes integrated circuit (IC) design, ship repair, testing facilities, and charging stations for e-vehicles.

Public infrastructure and logistics listing refers to airports and seaports to include RO-RO ports for cargo and passengers.

There have been no changes on the Exports List.

Cristobal said the 2014 IPP seeks to grant incentives to first movers or first investors in the preferred economic activities.

The first mover principle refers to those willing to take risks to invest in economic activities listed under the 2014 IPP where others hesitate to go into.

Risk takers are given a three-year window under the upcoming IPP starting 2014 to enter and invest in the preferred areas.

To be part of the 2014 IPP, an economic activity

has to meet four criteria, namely, the potentials to:• create employment• move up the value chain• create spillover effects• create a competitive market.

DTI okays 2014 IPP

2014 IPP

Priority areasq Agrobusinessandfisheryq Economicandlowcosthousingq Energy q Manufacturingq Servicesq Public infrastructure and logisticsq PublicPrivatePartnership(PPP)

projects

Mandatory Listq Industrialtreeplantationq Mining(limitedtocapital

equipmentincentives)q Rehabilitationselfdevelopment

andselfrelianceofpersonswithdisability

q Oilrefiningq Publicationandprinting of booksq Storage and distribution of

petroleumproductsq Tourism

Source:BoardofInvestments(BOI)

Philippine Business Report2

INDUSTRYTReNDS

PPPs to make presence felt in ’14 The Philippine economy is seen to get a big boost this year as more big-ticket infrastructure projects under the government’s public-private partnership (PPP) program.

Three of the seven PPPs in the government’s pipeline were awarded in 2014.

Bids for two more projects—the Cavite-Laguna Expressway (CALAX) and the Light Rail Transit (LRT) line 1 Extension to Cavite—have already been opened and contract awards are expected within the year.

“That’s enough to push gross domestic product (GDP) to a higher level,” Department of Finance (DOF) Chief Economist Gil S. Beltran said.

For 2014, the government is aiming a growth range of 6.5%-7.5%. Last year, the economy expanded by 7.2%. By 2016, the government hopes to drive growth to as high as 8.5%.

Beltran said if construction of PPPs were to be carried out as scheduled, the additional business activity that would emerge could be enough to bring growth back within the official target range.

PHL eyed as aircraft repair hubThe Philippines is attracting more European companies to consider the Philippines as an aircraft repair hub.

Department of Trade and Industry Undersecretary for Industry Promotion Group (IPG) Ponciano

C. Manalo Jr. said the roadshows in five European cities focused on selling the country as a repair center.

Manalo said the Philippines can also run a training facility for technicians, mechanics, and pilots.

He said the Philippines alone has bought 75 Airbuses and has an existing fleet of aircraft that need regular maintenance.

“There is a lot of interest in the Philippines. We only met top level officials. In each of those countries, we met about 8-9 companies,” Manalo said.

Manalo said the roadshows also met with existing European investors such as French oil firm Total and upcoming investors such as Sweden’s fashion retailer H&M which would open its first store this month.

Manalo said the Philippines has so far established a track record on repair and maintenance operations (RMO) and aircraft parts manufacturing.

It also has the area, the expertise and the skilled workers required for these high-value, high-technology services and manufacturing, which are crucial in supporting a growing aerospace industry.

At present, four groups are offering maintenance, repair, and overhaul aircraft services in the country, namely Lufthansa Technik, Singapore Airlines, Philippine Airlines, and Metro Jet Engineering.

A most recent investment is the P2-B project of British firm B/E Aerospace for the manufacturing of aircraft galleys at the First Philippine Industrial Park in Batangas.

Last year, Manalo initiated discussions with the “big boys “ in aerospace, the five major players including Airbus of France, Boeing of the U.S., Bombardier of Canada, Embraer of Brazil, and Saab of Sweden, to consider the Philippines for their RMO as well as for the manufacturing of first and second tier parts of aircraft.

PHL becoming Asia’s shipbuilding, repair hubThe country is preparing to become a hub for shipbuilding and ship repair in the Asian region, Maritime Industry Authority (MARINA) Deputy Administrator for Operations Gloria Victoria-Bañas said.

Bañas noted that there has been an increase in foreign investments on shipbuilding and ship repair in the country.

“In 2013, the Philippines was ranked as the fifth world’s largest shipbuilding country after China, Japan, Korea, and Brazil, as more local shipyards are building more ships of larger tonnage capabilities like bulk carriers, container ships and passenger ferries, particularly Tsuneishi Heavy Industries, Inc. (THICI), Hanjin Heavy Industries Corporation Philippines, and Keppel Philippines Marine, Inc., which cater to the export market,” Bañas said.

There are 121 licensed shipyards, eight facilities for the construction and repair of big ships,14 other shipyards for medium-sized ships, and 99 yards to service smaller ships.

To encourage more local and foreign investors, MARINA offers incentives for shipbuilding and ship repair projects under Republic Act 9295, which provides exemption from value-added tax on the importation of capital equipment, machinery, spare parts, life-saving and navigational equipment and steel plates; net operating loss carry-over and accelerated depreciation.

Under the government’s Investment Priorities Plan (IPP), investors in shipbuilding and ship repair are exempted from the payment of imported duties and taxes for the importation of equipment and parts needed for their operations and modernization.

3August 2014

Shipyard operators are also entitles to income tax holidays.

Bañas said there are other incentive schemes that investors can avail from the economic zones and freeport zones such as the Subic Bay Metropolitan Authority (SBMA), Cagayan Export Processing Zone Authority, Aurora Pacific Ecozone, Zamboanga City Special Economic Authority, and the Maritime Industrial Park at the Phividec Industrial Estate in Misamis Oriental.

“I am confident that the needed speed and momentum can be created to further propel the shipbuilding and ship repair industry way beyond global competitiveness,” Bañas added.

PHL retail seen growingPhilippine retail trade is expected to grow over the next three to four years as expansion plans are carried out and more brands consider to tap the Internet to sell products, a global market research and insights consultancy firm said.

Kantar Retail Director Simon Elsby said while the retail sector is expected to grow in the country amid favorable economic conditions and rising incomes, the convenience as well as online store sector are seen to rise at a much faster pace.

“The convenience store sector will grow four to five times compared to traditional formats like sari-sari stores,” Elsby said.

He said the convenience store sector is seen to rise at a faster pace as players in this segment undertake their expansion plans, with a total of about 4,000 to 5,000 outlets expected to open on the next five years.

Japanese convenience store Lawson, Inc. has said earlier it plans to partner with a local firm to set up as much as 2,000 convenience stores in the long-term, given the Philippines’ growing middle class population.

Japan’s FamilyMart Co. Ltd., which entered the Philippine market last year, plans to open around 700 branches in the next five years.

7-Eleven aims to hit 2,000 stores in the next three to four years from the current 1,049 branches, while Robinsons Retail Holdings Inc. targets to end 2014 with 1,400 Ministop branches nationwide, from a little over a thousand last year.

Elsby said the online sector is likewise seen to grow at a faster rate as more retailers tap the online space to sell their products.

As the convenience and online sectors are expected to rise at a much faster pace, traditional formats such as sari-sari stores may have to think more about their offering.

To his end, Elsby added that “traditional trade has been resilient but its biggest challenge is organized retailers not just offering products but cooler places for young people to hang out.”

TNS Asia Pacific Managing Director for Retail Tara Prabhakar said that as more people live in the cities, it is expected that convenience stores would increase in the country.

“Brands and retailers have the key to unlocking new channel and customer growth opportunities by developing activations that link shopper missions to different usage occasions,” Prabhakar said.

PHL beauty sector optimisticThe country’s beauty industry remains optimistic of the prospects for Philippine cosmetics, skin enhancement, and personal beauty products and services business.

Local players are optimistic on the integration initiative launched by the Association of Southeast Asian Nations (ASEAN).

“Because we’re now working closely with the Department of Trade and Industry (DTI) and in light of the ASEAN integration, we will be able to get government funding and we can really work together with concerted efforts,” Chamber of Cosmetics Industry of the Philippines President Anna Marie T. Anastacio said.

Anastacio said some 1,400 firms are in the country’s cosmetics business, citing data from the Food and Drugs Administration (FDA).

Executives of the United Business Media (UBM) shared Anastacio’s optimism.

“The Philippines is becoming more economically strong and with better domestic market, higher gross domestic product. The country can break through the export market,” UBM Executive Vice President Michael Duck said.

“By 2020, we would like the rest of the world to think of the Philippines every time they think of beauty,” Anastacio said.

Services exporters urged to upgrade and innovatePhilippine services exporters eyeing to penetrate new markets are encouraged to upgrade and innovate to boost their competitiveness.

International Trade Centre (ITC) Senior Services Adviser Jane Drake-Brockman said economic upgrading involves improving the efficiency of the production processes, adding new product lines and moving up the value chain.

She said the process also entails switching to a different sector which final products are more technologically sophisticated and of higher-value added.

Philippine Business Report4

“Upgrading is not easy, yet it is happening everywhere and is driven fundamentally by national level competitiveness policy changes and investments in physical and human capital,” she said.

Brockman said the Philippine services sector must also increasingly improve productivity through innovation.

“Services exporters tend to be project-based,” she added.

“Each export project tends to require a slightly different services offering; this means services firms can rarely find new export markets without innovating; they need to promote their capacity to create new services offerings for new international clients.”

Further, Brockman underscored the need to promote and facilitate Philippine services capability globally and regionally by improving its “branding.”

She said it is also imperative to increase the availability and expertise of services or service-oriented skills to ensure that the country is positioned to take advantage of regional and global business opportunities.

PHL internet use doubled in last four yearsThe Nielsen Pinoy Netizen report stated that the country’s Internet penetration almost doubled in the past four years to 52% in 2014 from 27% in 2010.

“As mobile penetration rises and getting online becomes easier than ever, consumers are staying online for increasing lengths of time,” Nielsen Philippines Managing Director Stuart Jamieson said.

The report cited that Filipinos prefer using a mobile device than a desktop computer, where the use of mobile phones to access the Internet is now equal to desktops at around 35%. The use of laptop to access the Internet remained the most commonly used device to access the Internet at 41%.

Internet use at home has also increased, from 23% in the fourth quarter of 2013 to 58%, or almost six to 10%, in the first quarter of 2104.

“Filipinos are demanding fast, convenient and on-the-go access to the Internet. Mobile devices are effectively addressing this demand, and as a result, Web users are migrating away from traditional PCs to connected devices as a means of accessing information online,” Jamieson said.

Future bright for mobile computing in PHLFavorable prospects are ahead of the mobile-computing industry in the Philippines, especially in the health care segment, technology company Mite Asia reported.

Mite Asia President Dexter Andrada said mobile health care is considered as the “next wave of where technology would be growing in leaps and bounds.”

Other segments that are seen to benefit more from mobile computing are the education and rural sectors.

“This is because smartphones are almost everywhere and everyone is using them. And that’s where mobile-apps can be useful across many areas,” Andrada said.

Research company GfK Asia said the Philippines is the fourth largest market for smartphones in Southeast Asia, selling 5.1M units from January to September 2013, or 39-% higher than the same period in 2012.

On the academic side, mobile learning is creating simple course apps for students to further their skills while on the go.

Andrada suggested that mobile-app developers should create something that could help the rural people or industry’s growth in a manner that is presented to them in layman’s term.

While he conceded that the app development in the country is still

at its “young stage,” he said that it is expected to mature in the next three years considering that entry into mobile platform is easier than web sites and the fast penetration of smartphones in the country.

Banana, pineapple production grew in Q1Banana and pineapple production rose in the first quarter compared to a year earlier due to expanded planting and favorable growing conditions, government data showed.

Banana production in the first quarter of 2014 improved by 1.9%, or an estimated 2.052 million metric tons (MMT), more than the 2.014-MMT level of output in the same period last year, the Bureau of Agricultural Statistics (BAS) reported.

Production of the Cavendish variety of banana went up 7.82%. It accounted for 53% of the total national banana production, while saba and lacatan followed with 27-% and 10-% shares, respectively.

Top banana producers for Q1 2014 and %-share

q Davao 37.1q NorthernMindanao 22.1q ARMM – 6.6

Source: Bureau of Agricultural Statistics

Meanwhile, pineapple production rose to 573,043 metric tons (MT), or 5.75% more than the 541,871 MT output in the first quarter of 2013.

PHL bananas to flood U.S. markets soonExport prospects for locally grown bananas look bright with the ongoing negotiations for the export of Philippine banana to United States (U.S.) territories such as Guam, Northern Mariana Islands, and Hawaii, the Bureau of Plant Industry (BPI) said.

BPI Director Clarito Barron said export of bananas from Mindanao

5August 2014

to the U.S. will lead to an increase in the country's revenue and therefore boost our banana industry.

The initial commercial export of Philippine bananas to the U.S. was shipped to San Diego, California in August 2013. A total of 486 cartons (6.561 MT) of highland Cavendish Dole Sweet bananas sourced from Bukidnon was sent to the U.S.

Coffee industry sees bright prospects The Philippine coffee industry has expressed optimism as local consumption reaches 80,000— 100,000 metric tons (MT) this year, the Philippine Coffee Board Inc. (PCBI) reported.

PCBI President Chit Juan said there are many new coffee in Mindanao with about 4M seedlings.

“Slowly but surely, the PCBI is educating farmers through the Department of Trade and Industry (DTI) on how to pick only red to ripe fruits that would result in better and quality coffee beans,” Juan said.

PCBI officials visited coffee-producing provinces to lecture on the best practices in harvesting coffee particularly in picking red coffee beans. Such session were done in coordination with DTI, Land Bank of the Philippines (LandBank), Peace and Equity Foundation, and the Department of Agriculture (DA) local and regional officials.

Juan noted that at the recent Roaster’s Choice Coffee Awards organized by the ASEAN Coffee Federation (ACF) in Bangkok, Thailand, the Philippine entry, an Arabica from Davao, won in two categories — espresso and siphon coffee preparations.

The awards was held during the THAIFEX Food Exhibition held in Bangkok and attended by over 25 micro-lot owners from coffee farms in Indonesia, Myanmar, Thailand, Laos, Viet Nam,

the Philippines, and other ASEAN coffee-producing countries.

The award was expected to encourage Filipino coffee farmers that Philippine coffee can be at par or even better than those from the coffee giants like Indonesia, known for showcasing the best in the ASEAN, Java and Sumatra coffees.

Cement firms expanding The combined production capacity of local cement makers can sufficiently meet the rising demand of the domestic market for the period 2014-2017, a study conducted by the University of Santo Tomas (UST) showed.

A study by UST Professor Antoinette Rosete, using published sources showed a steady forecasted increase in cement plant capacity expansion that is expected to meet the increased domestic demand for cement over a four-year period covering 2014-2017.

Cement Manufactures’ Association of the Philippines (CeMAP) President Ernesto M. Ordoñez said the local cement industry operated at 69% of capacity last year, meaning there is still enough room for heightened production to match expected growth in cement demand in the coming years.

Last year, cement manufacturers in the country enjoyed a 5.9-% growth in their sales performance.

The optimism shared by CeMAP members on the projected upticks in Philippine demand for cement and other construction materials was triggered by increased government spending for infrastructure projects, among which include the rehabilitation program in the aftermath of the Yolanda devastation in the Visayas.

Government allocation for infrastructure was set at P296.7B.

ARMM investments breach P2B in H1Investments in the Autonomous Region in Muslim Mindanao (ARMM)

have breached the P2-B mark in the first half of the year, generating 1,800 jobs more, the Regional Board of Investments-Autonomous Region in Muslim Mindanao (RBOI-ARMM) reported.

The RBOI-ARMM has registered seven firms in the period, bringing in businesses worth P2.5B compared with the P1.46B generated in 2013.

RBOI-ARMM Executive Secretary Laisa Alamia said economic climate has been boosted by breakthroughs in the peace process and reform efforts.

Major investments in ARMMJanuary-June 2014

In Million Php

Company Project CostLamsan 15-MWbiomass 921PowerCorp energyplant

SRLanguyan Mining 520MiningCorp

PhilippineTrade Biomass 486Center powerplant

GreenEarth 4.5-MWplant 366EnersourceCorp

Agumil Oilpalmkernel 170PhilippinesInc crushingplant

Power-Up Fuelterminals 50Ventures Inc

ABSCOR Trading 10Multi-Trading Co

Source: Autonomous Region in Muslim Mindanao

“This is the first time in the history of ARMM. We have developed mechanisms that will help the region get more investors. And the good thing is these investments are now generating jobs for the people of ARMM,” Alamia said.

eDC eyes new initiatives The Export Development Council (EDC) has identified fresh initiatives and policy support that will be incorporated in the new three-year Philippine Export Development Plan (PEDP).

These initiatives are meant to help exporters, whose contribution is estimated at about one-third of the Philippine economy,

Philippine Business Report6

keep pace with the robust growth being experienced by their peers in the region.

EDC members from the public and private sectors revisited the growth assumptions earlier set in the previous PEDP, as well as identified strategies and set new growth targets that can be incorporated into the 2014-2016 PEDP.

“Included in the recommendations that we identified during the meeting is the need to remove non-tariff barriers, which complicate the procedures that exporters go through instead of speeding them up,” Philippine Exporters Confederation (Philexport) President Sergio Ortiz-Luis Jr. said.

These non-tariff barriers, he said, are among the problems that need to be solved for Philippine exporters to catch up.

“We have a lot of red tape that other countries have already simplified,” said Ortiz-Luis, citing customs regulations as an example.

The EDC earlier set an ambitious export target of USD 120B in 2016.

TRADe ANDINVeSTMeNTS

Gazmin said the DA was surveying these requirements, which, aside from the volume, include buyers’ preferred duck cuts.

He added that the DA will also look at the interest of local firms and is currently eyeing Davao-based Maharlika Agro-Marine Ventures Corp., which began exporting Peking duck to Japan in March 2013.

Gazmin noted that duck is one of the Philippines’ livestock export prospects to Indonesia; others are beef and pork. Indonesian’s chicken industry is protected.

CS First Green to raise bamboo farms in PangasinanSome 30,000 hectares of land in different municipalities of Pangasinan are set to be planted with bamboos. This is part of the integrated bamboo farm and manufacturing industry project of the CS First Green Agri-Industrial Corp., a private entity that partnered with the Department of Trade and Industry (DTI) and Department of Environment and Natural Resources (DENR) for the agricultural venture.

Under a memorandum of agreement (MOA), the DTI will provide the needed technology in processing the bamboo into lumber, tile, and plywood, while the CS First Green will provide funds for the project.

“We are now looking for alternatives to the usual lumbers from trees. Aside from the fact that bamboo has many uses, it is also simply replaceable within three to five years unlike with trees where we wait for over five years before they grow. We will download that technology and provide the product in domestic market and even for export,” DTI-Pangasinan Provincial Director Peter O. Mangabat said.

AGRICULTURE/AGRIBUSINESS AND FISHERY

PHL eyes Indonesia as duck export marketThe country is exploring duck exportation to Indonesia, Department of Agricultural-Agribusiness and Marketing Assistance Service (DA-AMAS) Director Leandro H. Gazmin said.

“Our contacts will be giving us demands on their requirements... we just have to match them locally,” he said.

ENERGY

PTT to build more stationsPTT Philippines Corp., the local subsidiary of Thailand’s biggest oil firm, is increasing the number of its service stations to 150 in the next five years.

It will most likely increase the budget for the expansion to around P4B from P2.1B initially.

PTT Philippines President Wisarn Chawalitanon said they presently have 74 gasoline stations around Luzon and in the province of Cebu.

“These will be put up mostly in Luzon. Initially, we plan to put up 15 new service stations a year,” he said.

PTT will also renovate existing stations and set up coffee shops and convenience stores.

A highlight of its expansion program is to put up Platinum and Premier stations, which would include mini-parks.

EDC secures P2.7-B funding for wind farm projectEnergy Development Corp. (EDC) has applied for funding worth P2.7B for the construction of the second phase of the 150-megawatt (MW) Burgos Wind Farm.

EDC said it is expected to complete the first phase of the project, with 87 MW in the fourth quarter of the year and the second phase in the second quarter of 2015.

The 150-MW Burgos wind project will be the largest operating wind farm in the Philippines, generating approximately 365 gigawatt-hours annually to supply electricity to over a million households, EDC said.

The expansion raises the total project investment cost to USD 450M from USD 300M initially.

5 UK energy firms to explore opportunities in PHLFive energy companies from the United Kingdom (UK) visited

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the country to explore business opportunities. These are:• Lloyds Register (energy, retail,

marine and management systems)

• NiSoft (geothermal, gas, coal and oil)

• OST Energy (solar, wind, bio-energy, power plants, environmental services)

• Sgurr Energy (onshore and offshore wind, solar, wave

and tidal, hydro) • Wind Prospect (onshore and offshore wind, solar and hydro)

The visit intended to boost trade and investment relations between the UK and the Philippines.

The representatives of the UK energy companies met with government officials and key industry players who seek to forge commercial partnerships and explore opportunities in energy solutions.

Geothermal area up for auction this quarterThe Department of Energy (DOE) aims to auction off a geothermal resource area in Davao del Sur this quarter.

“There are three proposed geothermal areas for investors, but so far we have determined one that can be offered to the private sector,” DOE-Geothermal Energy Division Chief Ariel D. Fronda said.

He identified the area as Balut Island, which is adjacent to Sarangani Island.

He added that the area — which has surface temperature ranging between 66-700C — has a potential capacity of 20 megawatts (MW).

The department has yet to make recommendations on the two other areas that were part of the resource assessment.

These areas are situated in Banton Island, Romblon; and Maricaban Island, Batangas.

Energy firm applies for perksSan Carlos Solar Energy Inc. (SACASOL) submitted to the Board of Investments (BOI) an application for registration as a renewable energy developer of solar energy resources.

The registration is for the firm’s second solar power plant project worth P1.8B, which will have 18MW total capacity and 72,000 solar panels to be installed.

The project will be located in Barangay Cubay, La Carlota, Negros Occidental and is targeted to begin operations by the end of this year.

Upon approval of the registration, the company will receive government incentives for the project.

Along with SACASOL, three other companies engaged in real estate and tourism are also seeking incentives from BOI.

Some state perks for Investment Priorities Plan (IPP)

Projects compliment to IPP and approved by BOI

q Exemptionfrom: - Importdutiesofcapitalmaterialsand

spareparts - Warfagedues,exporttax,duty,

impost,andfeesq Incometaxholidayforatleastfouryearsq Reductioninlaborexpensesq Tax credits

Source: Board of Investments

GREEN PROJECTS

Biogas project gets P2BAseagas Corporation obtained a P2-B notes facility and security agreement with the Development Bank of the Philippines (DBP) which will partly fund the company’s biomass renewable energy plant project.

The project, seen to cost at USD 50M in capital expenditures (CAPEX), will be converting effluent waste provided by Tanduay Distillers Inc. subsidiary of Absolut Distillers, Inc. (ADI), to liquid biomethane that can be used as alternative to diesel.

To be located in Lian, Batangas, construction for the biogas plant was targeted to start last June and for commercial production to begin next year.

The plant is seen to produce 9,000MT yearly which can be used by up to 200 medium to heavy duty vehicles, the vehicle classification targeted for marketing the biogas.

Aside from the plant, the project implementation plan includes putting up refilling stations and if the project is successful, an offshore on-scale expansion in the long-term.

Alsons considers Re projectsThe Alcantara Group’s power and property firm, Alsons Consolidated Resources, Inc. (ACR) inked hydropower service contracts (SCs) with the Department of Energy (DOE) in a bid to switch its focus on renewable energy within five years.

ACR hydropower plant projects

Capacity Location Status17MW AlongSiguil FirstRE River,Maasim, project Sarangani 4MW SanCarlosCity, SCobtained NegrosOccidental through Alsons Energy Development Corporation10MW DonSalvador Benedicto, Negros Occidental12MW Kalaong1plant, SCobtained Maitum, Sarangani 4MW Kalaong3plant, SCapplication MaitumSarangani pending6MW Kalaong2plant, Maitum, Sarangani

8MW Bayugan,Agusan del Sur

8MW Siayan,Zamboanga del Norte

11MW Bago City, Negros Occidental

23MW Lupon,Davao Oriental

Source:DepartmentofEnergy

Philippine Business Report8

The signed SCs are for three project sites with 40 to 50-MW capacity, and the company is looking to sign more hydropower SCs for other sites with aims of reaching more than 100MW.

ACR is also looking at developing a solar power project in Mindanao and is in discussions with developers in the sector.

INFRASTRUCTURE/PUBLIC PRIVATE PARTNERSHIP

3 PPPs, irrigation project approved by NeDAThe National Economic and Development Authority (NEDA) Board and the Investment Coordination Cabinet Committee (ICC Cabcom) designated five Public-Private Partnership (PPP) projects worth a total of P162.4B for evaluation.

NEDA reviewed and approved three PPPs worth P141.06B last 19 June 2014, while the ICC Cabcom looked at two PPPs worth P21.08B on 20 June 2014.

Among the PPPs reviewed by NEDA is the New Bohol (Panglao) Airport Enhanced Operation & Maintenance (O&M) project which is expected to service domestic flights and potentially off-peak or night time international flights.

Revisions to the Irrigation Phase of the Casecnan Multipurpose Irrigation and Power Project and the Umayam River Irrigation Project, which were previously approved by the board before the changes, were also approved.

The projects will be located in Central Luzon and Caraga regions respectively.

ICC Cabcom-reviewed PPPs

Project Worth(inPesos)DavaoSasaPort 17.88BPuertoPrincesaAirportO&M 3.2BSource:Public-PrivatePartnership

Sole bidder gets LRT-1 PPP project Following approval by the National Economic and Development Authority (NEDA) and clearance by the Light Rail Transit Authority (LRTA), the Department of Transportation and Communications (DOTC) awarded the LRT Line 1 (LRT-1) Cavite Extension and Operation & Maintenance (O&M) project to its lone bidder last 16 July 2014.

Light Rail Manila, the consortium of Ayala Corporation (AC) and Metro Pacific Investments Corporation (MPIC), submitted a P9.35-B premium offer bid for the P64.9-B project under the Public-Private Partnership (PPP) scheme last 28 May and was opened by the DOTC Special Bids and Awards Committee last 5 June.

Before the concession agreement can be signed, the consortium will be paying 20% of the premium bid while the remainder will be paid during the 32-year concession period.

The railway extension is expected to be completed by 2020.

NEDA-reviewed PPPs

Project Worth InclusionsLagunaLakeshoreExpressway P122.8B q Constructionof500-mhigh,47-kmDikeProject—Calamba-LosBaños expressway-dikewithtwosectionsTollExpressway q Installationoffloodcontrolsystem q 700haLagunaLakereclamationLaguindinganAirportOperation P15.92B q Construction of infrastructure &Maintenance(O&M) andfacilities - newpassengerterminal/s - airsidefacilities(apron,runway, andtaxiway) q Installationofneededequipmenttopass international standards q O&Mofpassengerterminalsduring concessionperiodNewBohol(Panglao)Airport P2.34B q ImprovementordevelopmentEnhancedO&M ofadditionalfacilitiesfor - Access - Operationalefficiency - Passenger and cargo-movement efficiency - Passenger safety - SecuritySource:Public-PrivatePartnership/asof16June2014

LRT-1 Cavite Extension O&M project inclusions

q Construction of 11.7km railway extension from Baclaran Terminal

to Niog, Bacoor, Cavite - 10.5kmwillbeelevated - 1.2kmwillbeonthesamelevel/

ground levelq Handling of contingency cost from

interfaceriskfromrelatedprojectsq Installationofequipment fortheAutomaticFareCollection System(AFCS)q O&MofthewholeLRT-1during

concessionperiodq Rehabilitationoffacilities

Inclusion in the revised project terms

q Acceptanceofnegativebidsq Allowinga5%fareincreaseatproject

completionq Exemptionfromrealpropertytaxq Governmentsubsidyforsuddenpower

ratehikesaboveagreedrangeq Guarantee of structural integrity for two

yearsbythegovernment

Source:Public-PrivatePartnership,MetroPacificInvestmentsCorporation

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MANUFACTURING

Chinese firm invests P9B to export steelPanhua Group Co. Ltd. of China will be investing P9B to export 42,000MT of steel by the first quarter of 2016 at the Subic Bay Freeport, Zambales.

Last February, the Subic Bay Metropolitan Authority (SBMA) approved the project which will allow the Chinese steel manufacturer and supplier to export steel coils and metal sheets.

“More foreign direct investments (FDIs) are pouring into the Philippines because it has earned the trust of investors after it received investment upgrades from different rating firms,” said SBMA Chairman Roberto V. Garcia.

The Panhua Group is also involved in shipping, real estate, mining, and logistics.

Panhua Group steel products

q Cold-rolledsteelcoilsandsheetsq Galvanizedsteelcoilsandsheetsq Pre-paintedgalvanizedsteelcoils

andsheets

RESEARCH AND DEVELOPMENT

JICA endorses Sangley Point as new air hubThe Japan International Cooperation Agency (JICA) formally recommended Sangley Point in Cavite as the site of the new aviation hub that will replace the aging and congested Ninoy Aquino International Airport (NAIA).

JICA said the site would best suit the parameters set by the Department of Transportation and Communications (DOTC) for the country’s long-term air hub, which is worth USD 10-B.

JICA will now begin working on a feasibility study, with the aim of inaugurating a new main airport by 2025.

Meanwhile, DOTC will still have to present the long-term gateway options to President Benigno S. Aquino III for approval, including the final location of Manila’s new gateway as well as the fate of NAIA once a new airport is built.

Other options being considered

qSanMiguelCorp.’sproposed USD10-Bairport,whichinvolves thedoublingofthecapacityofNAIA (seentobebuiltbetweenthecities ofLasPiñasandParañaque)qTwinairportsystemwhereinNAIAandClarkInternationalAirport(CRK)inPampanga

willbesimultaneouslyrehabilitatedqUnsolicitedproposalandfeasibilitystudy

from All-Asia Resources andReclamationCorp.(ARRC)Source:DepartmentofTransportationandCommunications

PHL turns to 3 Japanese agencies for technical helpThe Philippines is seeking technical and funding assistance from three Japanese government agencies to help upgrade the capabilities of local supply chain industries.

These agencies are:• Japanese Ministry of Economy,

Trade, and Industry (METI)• Japan International Cooperation

Agency (JICA)• Japan External Trade

Organization (JETRO)

Department of Trade and Industry (DTI) Assistant Secretary Ceferino S. Rodolfo said the assistance would be spent on: • Manufacturing services• Human resource development• Improvement of the capabilities

of SMEs• Business-matching activities• Enhancement of education and training

Rodolfo stressed that the Philippines is becoming a more preferred investment destination for Japanese companies engaged in services and manufacturing, given the strong economic growth and rising per capita income of Filipinos. External factors such as political turmoil and rising wages in neighboring countries are also helping improve the country’s viability.

REAL ESTATE

Century signs USD 30-M loan for Makati towerCentury City Development Corp. signed a USD 30-M secured facility agreement with Phoenix Property investors’ Golden First Century Pte. Ltd. to partly finance its latest real estate project Century Spire in Makati.

“We are elated to have Phoenix consider Century as their first partner for Philippine real estate. It is not only a testament to their belief in Century’s capabilities to deliver world-renowned projects, but also to the continued strength of the Philippine economy,” Century Chief Financial Officer Carlo Antonio said.

RETAIL

Puregold to invest P2.5B for 500 Lawson storesPuregold Price Club Inc. recently signed with Lawson Asia Pacific, Inc. and Lawson, Inc. for a joint venture that will open 500 convenience stores worth P2.5B.

The company plans to open 500 Lawson convenience stores by 2020 with P4M-P5M capital expenditure (capex) per store, according to Puregold Director Vincent Co.

Puregold and Lawson’s agreement states that they will build and operate Lawson convenience stores within a period of seven years. Also, under the agreement 70% of the investment will come from Puregold and 30% from Lawson.

Moreover, Puregold is also planning to acquire the Puregold-Duty Free stores in the Clark and Subic Bay freeports.

2 new Iloilo malls start constructionDouble Dragon Properties Corp.’s first two of the five city community malls will start construction within the year.

Philippine Business Report10

COMPANY NOTeS

Iloilo Mayor Jed Patrick E. Mabilog said they aim to become a premier city by 2015 and regain its glory as a premier investment hub of Visayas.

The construction of five malls costs P275M each or P1.4B total investment, according to Double Dragon Properties Corp. President and Chief Executive Officer (CEO)Edgar Sia II.

Double Dragon said City Mall Commercial Centers Inc. (CMCCI) inked a 26-year lease agreement with Iloilo Commercial Development Corp (ICDC) owned by the city-based Que family covering two properties in Ungka, Pavia near the city boundary and in Tagbak, Jaro.

TELECOM

PLDT pushes Visayas’ int’l landing stationPhilippine Long Distance Telephone Co. (PLDT) is pursuing the establishment of a new international cable landing station in the Visayas this 2014 to boost the company’s network.

The planned cable landing facility in the Visayas would augment the company’s existing landing stations in Luzon, PLDT Chairman Manuel V. Pangilinan said.

Pangilinan mentioned that it will probably be in Visayas for redundancy purposes because all of the cable landing stations are in Luzon.

The proposed additional international cable landing station would be constructed together with foreign partners.

Globe to raise P10BGlobe Telecom Inc. has filed an application with the Securities and Exchange Commission (SEC) to raise up to P10B from the issuance of preferred shares.

The company added it would issue 14M non-voting perpetual preferred shares with an over-subscription

option for up to 6M preferred shares at P500 apiece.

Their net proceeds from the offering would be used to partially finance the USD 680-M capital expenditures (capex) allotted for 2014.

“To sustain the growing demand for data connectivity, both in terms of wireless services and date solutions to the home, Globe would continue to invest in its data network, including investments in long term evolution (LTE) and 3G,” the company said.

TOURISM

Microtel in P3-B expansion programThe local operator of Microtel Inns & Suites will step up their game through a P3-B expansion program that will make it the largest hotel chain in the Philippines in the next few years.

Phinma Group’s Microtel Inns & Suites (Pilipinas) Inc. is investing on the increase in foreign and domestic tourists as well as business travelers in key parts of the country.

“Until 2016, we are investing P743M to complete the 25 hotels we are targeting. Right now we have 13,” Microtel Pilipinas Chief Finance Officer (CFO)Demetrio P. Lucila said.

Lucila added that they will spend around P743M as equity in the hotel construction and looking in partnering with land owners and interested parties.

Travellers sets aside P9B for capexTravellers International Hotel Group has set a P9-B capital expenditure (capex) program this year. Mostly, to fund the expansion of Resorts World Manila which will double

Ayala to wrap up P104B PPP projectsAyala Corp. may soon wrap up its fourth project under

the size of the integrated resort’s gaming, hotel, and retail facilities once completed in 2017.

Travellers President Kingson Sian said the company sees no immediate need to raise funds as it has a net cash position of P8.1B and unused credit lines of P6B.

“We’re quite well-capitalized so no need to raise equity to fund the expansion of phase 2 and phase 3,” he added.

Phase 2 involves the expansion of the existing Marriott Hotel Manila with the construction of a grand ballroom that can sit about 2,000 people as well as the addition of 227 rooms, while Phase 3 comprises the construction of two new hotels – Hilton Manila and the Sheraton Hotel Manila as well as an extension of Maxims Hotels – which will add, an aggregate 877 key rooms to Resorts World Manila as well as a new gaming area.

Peter and Paul seeks BOI perksPeter and Paul Inc. applied for registration with the Board of Investments (BOI) as a new operator of a tourist accommodation facility called Domicillo Bed and Breakfast on a non-pioneer status.

The company, once approved by the BOI, will be entitled to fiscal and non-fiscal incentives that will allow their business to be more competitive.

Government data showed that BOI-registered enterprises received other incentives aside from the exemption of income taxes payment for four years from the scheduled start of commercial operations.

11August 2014

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ASeANWATCH

PHL, Malaysian investors keen on ASeANInvestors from the Philippines and Malaysia are the most optimistic in the Southeast Asian region, according to a Manulife Investor Sentiment Index (MISI) survey.

The study shows sentiment in the Philippines is joint highest with Malaysia, and at 58 is more than double the regional average of 24 (up two points from 22 in the previous quarter).

“A strong stock market performance during the quarter and strong economic growth expectations look to be underpinning the upbeat sentiment,” Manulife Philippines President and Chief Executive Officer (CEO) Ryan Charland said.

PHL, Indonesia to sign agreement on seaweedsThe Philippine government is currently negotiating with Indonesia for a comprehensive agreement on seaweeds farming, the Department of Agriculture (DA) said.

“The Indonesian government is willing to help us improve our

capacity for seaweeds production,” DA Secretary Proceso J. Alcala said.

Alcala said Indonesia has a long and successful history of mass-producing seaweeds and is willing to share its experiences with the Philippines.

Business sentiment in Asia rises to 2-year high in Q2Business sentiment among Asia’s top companies hit its highest level in more than two years in 2014’s second quarter, rising sharply on supportive political changes around the region and positive signs from China, the Thomson Reuters/INSEAD Asia Business Sentiment Index showed.

The index jumped to 74 from 64 in the first quarter, the highest reading since 2012.

Leadership change gave India and Thailand sorely-needed shots in the arm, with the two key markets powering a rise in the wider index.

Robust scores from China and Australia also helped lift the index with scores of 67 and 79 respectively, both up significantly from the previous quarter.

Philippines held flat, although the Philippines still maintained its 100 reading, the same as in the first quarter.

Malaysian firms expand operations in PHLMalaysian food and consumer product distributors Intisari Mulia International Inc. (IMI) and Ascona International are set to expand their businesses in the Philippines due to strong local demand for their goods.

The Trade Office of the Malaysian Embassy in Manila (Matrade Manila) said these companies were capitalizing on the growing demand for Malaysian palm oil, which is being distributed by IMI, and for halal products being supplied by Ascona.

Canada firms eyeing PHLCanadian firms are now considering the Philippines to be a viable site

the Public-Private Partnership (PPP) project.

Ayala and its partner AboitizLand, Inc. offered the highest bid for the Philippines’ biggest toll road tender.

The Ayala Group offered to pay the government P11.66B for the contract to build and operate the P35.4-B (USD 809M) project.

Megaworld to spend P230B for township projectsProperty developer Megaworld will be spending a total of P230B from 2014-2018 in line with its bid to expand its “township” projects.

Megaworld Senior Vice President Jericho P. Go said they plan to launch at least 10 residential projects and six office towers annually starting 2015.

Go said new commercial spaces are also scheduled to open in the next five years in Quezon City, Taguig City, Makati City, and in the provinces of Cebu, Iloilo, and Davao.

where they can set up their regional headquarters.

Canadian companies are looking at various industries here such as mining, banking and finance, insurance, transportation, infrastructure, construction, and aerospace, Canadian Chamber of Commerce of the Philippines President Julian H. Payne said.

“The interest of Canadian companies is increasing because of the improvement of the Philippine economy. The Philippines is increasingly becoming a huge consumer market in its own right, and it is part of the Southeast Asia market, which is opening up,” Payne said.

Philippine Business Report12

5.35.45.55.65.75.8

Aug-14Jul-14Jun-14May-14Apr-14Mar-14

Interest Rate (%)Lending Regular

42.543

43.544

44.545

Aug-14Jul-14Jun-14May-14Apr-14Mar-14

Peso per US Dollar Rate

economic Indicators

As of 08 August 2014

Publishedmonthlyby theKnowledgeManagementand InformationService,DepartmentofTradeand Industry,2FTradeand IndustryBuilding,361Sen.Gil J.PuyatAvenue,MakatiCity1200,Philippines •Phone(+632)895.3611•Fax (+632)895.6487•Tosubscribe,e-Mail:publications@dti.gov.ph•Online:http://www.dti.gov.ph/dti/index.php?p=116

Editorial Team: Patricia May M. Abejo/Editor-in-Chief •Anne L. Sevilla/Managing Editor •Jam H. Raposon/Assistant Editor •Resty P. Par, Hazel S. Dizon, Joanna D. Cruz, Airiz A. Casta, Kit S. Andaya/Writers •Ren C. Neneria/Design Layout •Al Aquino/Circulation.

Philippine Business Report

*GNI - Gross National Income

Entered as Third-Class Mail at theMakati Central Post Office

under Permit No. 504valid until 31 December 2014

August 2014

As of 07 August 2014

0

2

4

6

8

10

4Q (2012) 1Q (2013) 2Q (2013) 3Q (2013) 4Q (2013) 1Q (2014)

GDP Growth Rate (%)

0

2

4

6

8

10

4Q (2012) 1Q (2013) 2Q (2013) 3Q (2013) 4Q (2013) 1Q (2014)

GNI Growth Rate (%)

0

2,000

4,000

6,000

8,000

Apr-14Mar-14Feb-14Jan-14Dec-13Nov-13

Imports (In USD Billion)

Sources: BangkoSentralngPilipinas(BSP) NationalStatisticsOffice(NSO)

0100020003000400050006000

May-14Apr-14Mar-14Feb-14Jan-14Dec-13

exports(In USD Billion)

136137138139140141

Jul-14Jun-14May-14Apr-14Mar-14Feb-14

Consumer Price Index(2000 base year)

0

2

4

6

Jul-14Jun-14May-14Apr-14Mar-14Feb-14

Inflation Rate (%)(1994 base year)