1July 2016

Volume 27 No. 07 July 2016

Ramon Lopez is new DTI SecretaryPresident Rodrigo Roa Duterte appointed Ramon M. Lopez as the new Department of Trade and Industry (DTI) Secretary.

Secretary Lopez is a returning DTI official who had headed the Department’s Office of Operational Planning (now called Corporate Planning Service) from 1982 to 1989 before he moved to RFM in 1990.

Prior to his appointment as DTI Secretary, Lopez was Executive Director of the Philippine Center for Entrepreneurship’s (PCE) advocacy group Go Negosyo. He directed it for the past 11 years, strongly advocating entrepreneurship and promoting the enterprising culture among Filipinos.

For 22 years, he served the business sector as top executive of RFM Corp.’s Corporate Planning Department and handled strategic planning and business development, mergers and acquisitions, and

H i s a c t i v e a n d p a s s i o n a t e involvement in Go Negosyo, not only as its executive director but also as one of the ‘Angelpreneurs,’ has earned the admiration and respect of millions of micro, small, and medium entrepreneurs (MSMEs) nationwide who were able to listen and learn from his words of wisdom and advice.

Assuming his role as the 27th DTI Secretary, he committed to continue to empower and inspire MSMEs, champion business, and at the same time, advocate the rights of consumers.

equity investors group. He has earned the respect of the business, financial, and investment communities here and abroad.

Lopez finished his Master’s in Development Economics class at Williams College in Massachusetts, U.S., and gained his AB Economics degree at the University of the Philippines, Diliman.

His previous stints with the National Economic and Development Authority (NEDA) and with the DTI have acquired him vast experience in trade and industry development planning.

Foreign investment pledges up 19.2% in Q1Foreign investments approved for registration by the country’s investment promotion agencies (IPAs) during the first three months of 2016 grew by 19.2% to P26B compared to P21.8B in the same period a year ago.

The first quarter foreign investments are expected to create 59,324 jobs.Top country investors for the period were the Netherlands (P8.1B), Japan (P4.4B), and the United States (P3.7B).

The foreign investment commitments with the Board of Investments (BOI) amounting to P8.44B and Philippine Economic Zone Authority (PEZA) worth P15.81B rose by 255.2% and 9.6%, respectively.

IPAs extend fiscal and non-fiscal incentives to investors.

BOI-approved investment pledges surged by 64% to P117.3B from P71.6B in the first four months of the year, reflecting the continued confidence of investors in the Philippines specifically in infrastructure and energy projects.

Among the big-ticket projects in the first four months of the year were:q P16.7-B project registered by Megawide Cebu Airport Corp.q P15.2-B project of Light Rail Manila Corp.q P14.7-B,150-megawatt (MW) Bayog Wind Power in Ilocosq P4.9-B, 25-MW biomass project in Negros Occidental

The Department of Trade and Industry (DTI) targets 5% growth in investments for this year.

The BOI approved P366.74B in investments in 2015, up 3% from P354.76B in 2014.

Philippine Business Report2

INDUSTRYTReNDS ‘

Bataan ecozone gets P107-B investments The Freeport Area of Bataan (FAB) received P107-B worth of investments from foreign and local companies over the last six years.

This year, the Authority of the Freeport Area of Bataan (AFAB) aims to attract P7-B investments, an improvement from the P6.23B registered in 2015.

Big-ticket investments in 2015 included San Miguel’s P2.2-B expansion of the B-Meg plant and the P2.6-B site expansion of the E-Fare Investment Holdings Inc.’s industrial park.

In terms of foreign direct investments and number of locators to the industrial zone in 2012 to 2015, AFAB is the fastest growing freeport in the country, AFAB Chairman and Administrator Deogracias G.P. Custodio said.

AFAB Performance Indicators

2014 2015

Locators 98 114Employment 20,017 25,803Exports USD 389.7M USD 526.6M

FAB’s Top Exporters in 2015

q Mitsumi Phils. Inc.q FCF Manufacturing Corp.q Essilor Manufacturing q Desk Top Bags Phils. Inc.q Dong-In Sunbirds Inc.q East Cam-Tech Corp.q Dunlop Slazenger Inc.q Mountaineering Instruments Corp. q DI Dawn Manufacturing Corp. q Dong-In Entech K1 Inc.

For the first quarter of 2016, AFAB approved P1.98-B investment pledges.

is similar to the current size of the economy of the Netherlands.

On a per capita basis, Philippine GDP has the potential to more than double from about USD 3,000 in 2016 to USD 6,347 over the next decade, which is similar to the current level in Bulgaria.

Fitch noted that the Philippines is forming a large domestic foundation with its 101M population and strong remittance flows from expatriate workers.

“Given these dynamics, we believe that the Philippines will become an increasingly important market for investors,” BMI stressed.

“Just as China, India, Brazil, and Russia have become important markets for investors over the past two decades, many less developed emerging markets will emerge as the next set of key investment hotspots over the next decade,” the Fitch report said.

Fitch listed 10 countries that have the potential to transition into key emerging markets and will cumulatively add USD 4.3T to the global gross domestic product (GDP):

10 Emerging Markets

q Bangladesh q Myanmarq Egypt q Nigeriaq Ethiopia q Pakistanq Indonesia q Philippinesq Kenya q Viet NamSource: BMI

BMI shortlist criteria

q Per capita income of about USD 3,500 and below

q Enjoy strong enough economic and political institutions to enact reforms

q Set to enjoy rapid economic growth, boast a potentially large domestic market

q Haveaninfrastructuredeficitthatwillleadto productivity-enhancing investment

PHL food processing to reboundThe country’s food processing sector expects to rebound as a result of the

FAB is emerging as the fashion manufacturing hub of the Philippines with a cluster of companies producing high-end branded garments, bags, shoes, and accessories.

exports seen to hit USD 100-B target The Department of Trade and Industry (DTI) targets to reach the USD 100-B mark for exports by 2017. Its optimism was based on the continuing recovery in the economies of the United States (U.S.) and European Union (EU), as well as on the country’s preferential trade agreements.

In a forum hosted by the British Chamber of Commerce Philippines (BCCP), DTI-Export Marketing Bureau (EMB) Director Senen M. Perlada said he is hopeful that the country could meet the revised projection of hitting USD 100B, which will be boosted by agriculture and the electronics sector.

The country’s inclusion in the EU-Generalized Scheme of Preferences Plus (EU-GSP+) and the U.S. Generalized System of Preferences (US-GSP) as well as the strong and continued interest of foreign companies in Philippine products and services were seen to boost exports, Perlada reported.

PHL 1 of 10 ‘emerging markets of the future’The Philippines is one of the 10 emerging markets of the future with potential to double its economy and gross domestic product (GDP), and gain the economic status of the Netherlands or Bulgaria by 2025, a BMI Research report titled “Ten Emerging Markets Of The Future” released by credit ratings agency Fitch showed.

Fitch believes that the Philippine economy has benefited from improvement in its macroeconomic fundamentals in the past six years, and as a result, should see annual average growth of 5.8% over the next decade.

This means the country’s economy can double its size from USD 312B in 2016 to USD 756B by 2025, which

3July 2016

The study was commissioned by the Science, Technology, Research, and Innovation for Development (STRIDE) Program and the Advancing Philippine Competitiveness (COMPETE) Project of the United States Agency for International Development (USAID) to assist the Board of Investments (BOI) in its efforts to further develop framework and strategies in developing domestic industries.

To sustain the upswing of the Philippine manufacturing sector, scaling up in higher value-adding sectors is needed.

Of the five sectors, electronics and electricals, automotive, and aerospace have overlapping relations in the value chain and employ almost half a million direct workers, the report said.

According to the study, GVCs consist of the process of producing goods from raw materials to finished products, wherever in the world the necessary skills and materials are available at competitive cost and quality.

PHL GVCs

q Automotive — can compete on its knowledge and expertise in these sectors as there have been new markets for e-vehicle and self-driving vehicle manufacturing. Philippines is the fourth largest exporter of wiring harness. The country exported a total of USD 4B of the USD 1.4T global exports in 2014. Exports have been increasing by 33% over the past decade.

q Aerospace — exports account for a mere 1% but the sector is coming out with a niche position in global markets.

q Electronics—stillholdsasignificant2.8% market share of GVCs in the global integrated circuits market. About 60% of the country’s exports are still dominated by electronics and electricals.

q Chemicals — exports are rapidly growing since 2007.

q Paper— emerging in a changing landscape.

New ICT Department to spur growth of IT-BPM, real estate The creation of the Department of Information and Communications Technology (DICT), as provided

end of the El Niño phenomenon this year and the resulting increase in productivity.

According to the Philippine Statistics Authority (PSA), the volume of production index in the food manufacturing segment rose by 15.3% year-on-year in March.

During the first quarter of 2016, average capacity utilization in the food manufacturing segment was at 84.8%, which is slightly higher than the industry average of 83.4%, giving strong first-quarter earnings for some food processing companies.

As effects of El Niño wane, the recovery in food manufacturing will underpin a solid performance in the broader manufacturing sector, Moody’s Analytics projected.

“The main driver of the strong growth in 2016 has been the revival in food manufacturing,” Moody’s said. “This will continue in the coming months with crop yields recovering as the effects from a severe El Niño climate pattern dissipate.”

Study finds strong global potential in five PHL industries The Philippines’ five key industrial sectors—automotive, electronics and electricals, aerospace, chemicals, and paper—need to upgrade technologies to deepen participation in multinational companies’ (MNC) global value chains (GVCs), the Duke University Center on Globalization, Governance and Competitiveness (CGGC) reported.

CGGC conducts client-sponsored research to address economic and social development issues for governments, foundations, and international organizations.

The manufacturing trends for the selected five global value chains (GVCs) are shifting toward the Asia-Pacific region in both supply and demand, as innovations are opening doors to new entrants and creating opportunities for the Philippines, Duke CGGC Senior Research Analyst Penny Bamber said.

for by Republic Act No. 10844 signed by President Benigno S. Aquino III on 23 May 2016, is expected to further spur the development of the information technology and business process management (IT-BPM), commercial real estate, residential, and retail sectors.

According to real estate expert Colliers International, the new department “addresses the need for the Philippines to be at par with other Southeast Asian countries which have Cabinet-level departments for their ICT sector, especially with the country’s robust IT-BPM industry and digitally savvy, predominantly young population.

“Exciting times are ahead for the property sector. The ICT law will definitely spur growth in the BPO and commercial real estate sector as foreign players will train their radar on the Philippines as a solid investment destination,” Ateneo Program Director for Real Estate Enrique M. Soriano III said.

DICT is mandated to formulate policies, in coordination with the Department of Education (DepEd), Commission on Higher Education (CHED), and Technical Education and Skills Development Authority (TESDA), to develop and promote ICT in education that is responsive to the human resource needs of the sector.

Jones Lang LaSalle (JLL) Philippines’ Associate Director and Head for Research, Consulting and Valuation Claro dG. Cordero Jr. said the creation of the DICT responds to the growth vision of the country’s IT-BPM sector to develop an IT-enabled workforce, enhance security and IT service management, and create an enabling legal and regulatory framework that will foster the growth of the IT-BPM industry.

DICT is expected to improve IT services and to promote digital literacy to develop more talents to service the industry.

“I think the most important effect of this law is the push to improve education in relation to

Philippine Business Report4

TRaDe aNDINVeSTMeNTS

the ICT industry, which will increase the manpower that is required for this industry to grow,” Colliers International Philippines Director for Research and Advisory Julius Guevara said.

The IT-BPM industry has been growing by 10% to 15% annually and is the main driver of office space demand in the country.

“This will make the BPO sector more attractive to existing and new players, which will require more office developments and will enable more demand for other allied property segments” Cordero Jr. said.

But after the new factory expansion in Batangas, maybe the Philippines is the biggest,” he said.

The Batangas plant currently employs 12,500 workers and the planned expansion could grow the labor force by more than 20,000.

Expected to start operations in 2017, the new plant will have 100,000 sqm. of floor space. With its 10-ha. floor area, Epson will be the biggest manufacturing plant in the country.

Epson plans to increase production of projectors and large-capacity inkjet printers, sales of which are growing primarily in developing countries, including the Philippines, other Association of Southeast Asian Nations (ASEAN) countries, China, Russia, as well as other countries in Latin America and Eastern Europe.

“At this moment, the Philippines is the highest growth country in ASEAN. So we want to focus on the Philippines,” Tanaka said.

British interest in PHL at all-time highThe interest of British investors in increasing their investments in the Philippines is at an all-time high, with British Ambassador to the Philippines Asif Ahmad saying that sports-car brand McLaren and an electrical equipment manufacturer would enter the country soon.

“We talked to McLaren. They’ve been talking to the market. They’ve talked to three of the biggest car distributors here,” Ahmad said.

On the possible investment of a British equipment manufacturer, Ahmad said the firm has employed as many as 30,000 workers in a similar venture in another Asian country.

The manufacturer plans to establish an office of its own, to set up a manufacturing unit, and to engage a local firm for contract manufacturing.

Moreover, the British government will be making a push to forge

we believe the Philippines can lead that trend. Filipinos are among the best workers in the world, and the large local solar market can add to the demand for otherwise export-only factories,” Solar Philippines President Leandro L. Leviste said.

The company has started the procurement process for manufacturing equipment and will start setting up the facility in the third quarter of this year.

Leviste said among the objectives of the facility were to lower panel costs, take control of the supply chain, and support the new administration’s agenda to bring manufacturing to the Philippines.

“This is a key step toward lowering solar costs, enabling us to produce electricity cheaper than coal. Instead of importing expensive fuel from other countries, we will manufacture here in the Philippines. Soon enough, our country can become a leading energy exporter, and ‘made in the Philippines’ panels will be used around the world,” Leviste said.

The company forecasts a minimum demand of 500 megawatts (MW) by mid-2017.

epson taps growing PHL market with P4.7-B expansionGlobal printer manufacturing firm Epson is bullish for the Philippines as a market, putting in an additional P4.7-B investment in the country for its plant expansion scheduled to open in late 2017.

“I think the factory in the Philippines is one of the biggest among Asian factories,” Epson Philippines Corporation President and Country Manager Toshimitsu Tanaka said, referring to the Epson manufacturing plant in the Lima Technology Park in Lipa, Batangas.

Tanaka said the Batangas plant is currently the biggest Epson factory outside Japan, and its P4.7-B expansion will make it the biggest manufacturing plant in Asia.

“Many factories are located in the Philippines, Indonesia, and China.

MANUFACTURING

Solar Philipines to build solar panel plant in Batangas Local energy firm Solar Philippines plans to build one

of the world’s largest solar panel factories in Tanauan, Batangas, a move that is expected to position the country to become a global solar powerhouse.

Intended as a three-year project, the facility will be designed for an eventual capacity of two gigawatts (GW), with the first section scheduled to start operations by end-2016.

The Batangas facility will be built using German technology and will be generating 6,000 direct and 20,000 indirect jobs.

Counting on the skills and productivity of Filipino workers, Solar Philippines believes the country could become a solar panel manufacturing hub that will be competitive in terms of quality and cost.

“Solar manufacturing is moving from China to Southeast Asia, and

5July 2016

partnerships in the area of infrastructure.

“The strongest signal we have is that expenditure in infrastructure is going to speed up. I think this is really where we can focus our attention,” the diplomat said.

e-trike industry players expanding base in PHLThe country’s electric vehicles (EV) industry has been expanding its base, particularly in the deployment of electric tricycles (e-trikes) as a mass transport system, the Electric Vehicle Association of the Philippines (EVAP) announced.

EVAP said four new players with foreign origins have recently joined the industry. These are the Hong Kong-based Kyto Green Technologies; Kuwaiti PrimeGreen Power and Technology, Inc.; Canada’s SunEtrike; and Singapore-based Clean Air Transport Solutions.

These companies, the group noted, have been gearing up to corner a pie of the estimated 1.2M e-trikes rollout for the country.

“These new foreign EV players must have realized that a target of just 10% of the market or 120,000 regular tricycles for replacement by e-trikes would still be a substantial market over the next few years.” EVAP President Rommel T. Juan said.

Private EV ventures have been thriving in various parts of the country, prompting the industry to build on that momentum to achieve a higher goal of becoming the EV hub in Asia, Juan added.

In particular, PrimeGreen has rolled out e-trikes at the Clark industrial zone in Pampanga. PrimeGreen President and Chief Executive Officer (CEO) Wilson Varghese said they have different EV models to suit the different needs of the end-users.

“More and more foreign EV players are now entering the market, catalyzing our plan of becoming the EV hub of Asia,” Juan said.

AGRIBUSINESS AND FISHERY

Jollibee, Cargill forge ventureLocal fast-food chain Jollibee Foods Corp. (JFC) has entered

into a joint venture with American agribusiness firm Cargill to build and operate a poultry processing plant in the province of Batangas to boost its supply chain of dressed and marinated chicken.

Aside from its flagship brand Jollibee, JFC’s other brands Mang Inasal, Chowking, Greenwich, and Burger King franchises also sell chicken products.

The group said it had entered into an agreement with Cargill Philippines Inc. to create Cargill Joy Poultry Meats Production Inc. (CJPMPI) in Sto. Tomas, Batangas.

This joint venture is estimated to create some 1,000 new full-time jobs and develop new opportunities in the farming community in Batangas and nearby provinces as local poultry farmers are contracted to grow chicken to supply the requirements of the processing plant.

Cargill will hold a 70-% stake in the venture amounting to P571.5M while JFC will own the remaining 30% worth P244.9M.

The JFC group operates a total of 3,158 stores worldwide, 2,506 of which are in the Philippines.

Cargill, on the other hand, provides food, agriculture, financial, and industrial products and services globally. It has 149,000 employees in 70 countries. It started doing business in the Philippines in 1947.

ECONOMIC AND LOW-COST HOUSING

8990 Holdings plans P573-M projectMass housing

developer 8990 Holdings Inc. is set to invest P573M for its 17-building

Urban DECA Homes (UDH) Hernan Cortes housing project in Cebu City.

The project is the firm’s fourth to be launched this year and its third medium-rise project in the city.

The development comprises 17 residential buildings in a 3.2-ha. property in Kasambangan, Cebu City that will offer 1,596 housing units.

“We are pleased with the turnout of reservations in the launching of UDH H. Cortes. This is an indication of a huge unmet demand in affordable housing,” 8990 Holdings Chief Executive Officer Januario Jesus Atencio said.

Rockwell to venture more into mass housingRockwell Land Corp. (RLC) has allocated P10B to P12B in its capital expenditures (capex) this year to deepen its venture into hotel operations and mass housing.

The amount was higher than the firm’s actual expenditures of P7.4B last year, or an increase of 62%, RLC Senior Vice President for Finance and Chief Finance Officer Ellen Almodiel said.

Some 60% of the capex will be used for the development of projects mainly for residential condominiums and the rest for those to boost its recurring income which includes hotel, retail, and office operations.

RLC President and Chief Executive Officer (CEO) Nestor J. Padilla said the company will expand several hotel properties under the Aruga brand, which was first introduced by Rockwell in its Makati property. The 280-room boutique hotel is expected to be completed by the first half of 2019.

In addition, RLC has created a unit called Stonewell Land, which will handle its mass-housing project, the first time the company will venture into mass housing. It has a 32-ha. property in Lipa, Batangas to start off the project.

The Lipa project is expected to start by next year. The succeeding phases

Philippine Business Report6

will be completed during the next five years to seven years.

ENERGY

World’s biggest mall solar power plant installed in PampangaRobinsons Land Corp. (RLC) has switched on the

supposed world’s largest solar power plant installed in a shopping mall in San Fernando, Pampanga.

The 2.88-megawatt (MW) solar plant atop Robinsons Starmills reportedly broke existing records on such a renewable energy generator installed for a shopping mall’s own consumption.

The facility is expected to reduce carbon dioxide emission by 2.25M kilograms — comparable to the planting of 100,000 trees or removing 5.5M miles worth of vehicular carbon emissions.

“The sprawling design of Robinsons Starmills and the wide open surrounding space make it ideal for a large scale solar power facility,” RLC President Frederick D. Go said.

Robinsons Starmills has set a new global milestone for having the biggest solar plant on its rooftop, beating SM City North which earlier held the record with its 1.5-MW installation in 2014.

“Solar power facilities also require minimal maintenance, do not generate any noise, and produce no emission as they consistently produce energy for at least 25 years,” said Go. Solenergy Systems Inc. carried out the installation of a total of 10,880 solar panels on the roof deck of the mall.

Aside from the recently-completed installation, RLC is also expected to operate new solar power plants on its malls in the cities of Tacloban and Bacolod.

“All our future malls will also be designed to ensure that the shape and layout of the roofs will allow the most efficient installation of solar panels to make the most of the power provided by the sun so that we will be using even less electricity from the grid,” Go said.

aCR readies 3 power projects Alsons Consolidated Resources Inc. (ACR) plans to roll out three major power projects in Mindanao, with a total capacity of 225 megawatts (MW), before the end of this year.

The three projects are the 105-MW generating unit of the 210-MW baseload coal-fired power plant of Sarangani Energy Corp. (SEC) in Maasim; the 15-MW Siguil River run-of-river hydroelectric plant also in Maasim, and the 105-MW baseload coal-fired power plant of San Ramon Power Inc. (SRPI) in Talisayan, Zamboanga City.

The USD 570-M SEC power plant is the single largest investment in Sarangani province and the entire Region 12. It is expected to serve over 6M people in key areas in Mindanao when it fully operates in 2018.

The 15-MW Siguil run-of-river power plant, on the other hand, is also seen to be up and running in 2018.

MeRaLCO to venture into ReManila Electric Co. (MERALCO) is keen on developing renewable energy (RE) through its power-generation arm and its solar-power unit.

In its foray into RE, MERALCO created MSpectrum, the entity that will take care of the firm’s solar-power business.

Meralco Senior Vice President Alfredo S. Panlilio said MSpectrum will initially operate with 20 megawatts (MW) of power-generating capacity.

Aside from solar, Reyes cited wind, hydro, and biomass as other RE sources included in the power firm’s portfolio.

“We are actually going into that direction now because we have sort of laid out all our baseload requirements well into the next few years,” Panlilio said.

HOSPITAL

Qualimed invests P1.4B in hospitals, clinicsQualimed Health Network, a joint venture between Ayala Land Inc.

(ALI) and Mercado General Hospital Inc., poured in P1.4B, or 28% of its P5-B budget, to develop 10 hospitals and 10 clinics by 2020.

Qualimed President and Chief Executive Officer Edwin M. Mercado said the average cost of constructing a single hospital ranges from P400M to P430M.

The Qualimed group has two operating hospitals, namely the Qualimed Hospital-Iloilo and Qualimed Hospital San Jose del Monte. Qualimed Nuvali is set to open before the year ends. The total construction costs of the three hospitals amount to P1.3B.

The group currently operates three clinics in Quezon City, specifically in Trinoma Mall, Fairview Terraces Mall, and UP Town Center and one clinic along McKinley Road in Makati City.

Mercado said two more Qualimed clinics in Bonifacio Global City and in Cebu IT Park will be opened this year.

The construction cost for each clinic ranges from P10M to P12M, which brings the total investment costs for the six clinics to be operational this year at P72M.

Last May, Qualimed opened the 105-bed Qualimed Hospital-San Jose del Monte in ALI’s Altaraza Town Center estate in San Jose del Monte, Bulacan.

“Our operational strategy for this new hospital is to make the delivery

7July 2016

of our healthcare services more rooted locally. We have within our team some of the best local doctors and medical professionals from the province,” QualiMed Hospital-San Jose Del Monte President Dr. Jose Tecson III said.

PUBLIC INFRASTRUCTURE AND LOGISTICS

MRT-3 escalator rehab deal awardedThe P65.48-M MRT-3 rehabilitation project was granted to International

Elevator & Equipment Inc. (IEEI). It will refurbish the 34 Mitsubishi-brand escalators of the MRT-3.

“IEEI holds proprietary rights to rehabilitate this second batch of escalators, being the brand’s exclusive distributor,” the Department of Transportation (DOTr) said.

The project will start within 223 calendar days from the issuance of the Notice to Proceed.

Stations with escalators for replacement include the Araneta Center-Cubao and Shaw Boulevard with eight units, Boni stations both with two units, Buendia with four units, and Taft station with 10 units.

“These efforts to rehabilitate the line’s conveyance facilities are among the various projects of the DOTr to modernize and improve the MRT-3,” according to DOTr.

SMC plans bridge to BoracaySan Miguel Corp. (SMC) plans to improve Caticlan, which is the access to Boracay Island, by building a 1.9-km. toll bridge that will connect the beach community to the mainland.

SMC President Ramon S. Ang said the infrastructure project was estimated to cost USD 100M or about P4.6B.

The project will provide more convenience for tourists as they can live in Caticlan and still enjoy Boracay’s view.

“We think what’s best is if everybody will stay and eat in Caticlan, go to

Boracay to enjoy the beach,” Ang said.

Dry bulk terminal opens in MarivelesSeasia Nectar Port Services Inc. will start the commercial operations of its Mariveles Dry Bulk Terminal within the Authority of the Freeport Area of Bataan (AFAB).

Seasia Chairman Ramon R. Atayde said the new facility would improve the dry bulk handling’s operations with the use of mechanized material handlers for faster and more efficient shipments’ discharge.

“I am pleased to announce that we now have 180 meters of berth available and we are ready to accept barges and vessels,” Atayde said.

The opening of Mariveles port last April will benefit businesses which will allow them to ship their products to Manila and outside of the country directly.

With this new venture, the AFAB is confident that more investors will use the facilities to cut down shipping costs.

The terminal aims to handle shipments of coal, clinker, silica sand and other cement raw materials, steel, fertilizer, and other dry bulk cargoes.

BANkING

WealthBank, Woori form JV for SMes, OFsVicsal Development Corp.’s (VDC) financial arm,

Cebu-based Wealth Development Bank (WealthBank), and South Korea’s Woori Bank, formed a joint venture to provide the needs of Korean small and medium enterprises (SMEs) and overseas Filipinos (OFs).

The joint venture will work together with Korean businesses operating in the Philippines and Korean citizens visiting and working in the Philippines.

“We see this partnership taking us to the next level in banking, and elevating our game in a number of important niche areas. We know where the untapped markets are, and with our local market insight and Woori’s expertise and technology, we can serve those segments quite effectively,” WealthBank and VDC Chairman Edward Gaisano said.

VDC said the partnership will concentrate on certain growth areas and will also find both traditional and new channels to serve their clients.

BDO, aozora to tie up for investor servicesBanco de Oro Unibank Inc. (BDO) will be collaborating with Japanese commercial bank Aozora Bank Ltd. in providing merger-and-acquisition advisory, investment banking, and other services for Japanese investors.

BDO’s collaboration with the Japanese bank includes selected banking services to assist clients targeting the Philippines as a potential investment spot.

“Aozora handpicked BDO given the bank’s strong foothold in the Philippine market. This strength would be helpful to Aozora’s clients who plan to invest and find potential business partners in the country,” according to BDO.

The collaboration with Aozora can give BDO broad coverage in the major prefectures with the most number of Japanese investments in the Philippines, BDO Senior Vice President and Head of International Desks Edward Wenceslao said.

IT-BPM

PHL IT-BPM industry showcased at CeBIT 2016 The Philippine electronics sector was featured at the Hanover, Germany

edition of Centrum für Büroautomation, Informationstechnologie und

Philippine Business Report8

Telekommunikation (CEBIT). The fair is a global trade fair and event for promoting information technology (IT) services held last March 2016.

The Board of Investments (BOI) said electronic companies largely contribute to the Philippine economy with 49.3%, or USD 28.9B, of the total Philippine exports worth USD 58.65 in 2015.

“The Philippines had a country pavilion, showcasing our country branding and competencies in voice and non-voice BPM [business process management] and electronics industry,” BOI-International Investments Promotion Service (IIPS) Director Angelica M. Cayas said.

PHL-based IT-BPM firms in CEBIT 2016

q Acquire BPOq First Maritime Shared Servicesq Magellan Solutionsq Personivq Pointwest Technologies Corp.q Shore Solutionsq Sitel Philippines Corp.q Startekq SPI Globalq TaskUS Inc.q Teleperformance

The information technology and business process management (IT-BPM) industry is presently the country’s fastest growing industry. In 2015, it generated USD 22B in revenues, generating jobs for around 1.2M full-time employees.

For 2016, the industry is expected to exceed the revenue figures earned last year and aims USD 25B in revenues and 1.3M direct employment opportunities.

3M opens second largest GSC in Fort BonifacioGlobal science and manufacturing firm 3M Corp. opened its third global hub at the Bonifacio Stopover Corporate Center in Fort Bonifacio, Taguig City. This is the company’s second largest global service center (GSC) next to the one in Costa Rica. 3M’s another GSC is based in Poland.

The Philippine GSC will be in charge of key processes on finance, human resources, and sourcing and procurement. It will also be a source of information (IT) support for reporting, quality, analytics, security, and database management. “The GSC is an internal function of the company. It aims to simplify and standardize processes into a single global system that we will deploy to all our offices around the world,” 3M Executive President for International Operations Hak Cheol Sin said.

It is also expected to hugely contribute to achieving 3M’s goal to position itself as a leading science and manufacturing company and a service provider at a global scale.

“We chose Manila as our third GSC facility because of the Philippines’ strategic advantages which include a well-qualified workforce with service center expertise,” 3M Vice President for Global Services Ippo Vrohidis said.

The hub is expected to employ some 880 Filipinos and is targeting an initial workforce of 130 by end-2016. The company is also planning to establish a consumer technical service facility in the country in the next three months.

3M produces over 55,000 products which include household, fire protection, dental and orthodontics, abrasives, adhesives, electronics, and car care materials.

REAL ESTATE

Megaworld invests P10B in CaviteMegaworld Corp. revealed its new P10-B, 140-ha. “Maple Grove”

township project in General Trias, Cavite.

The township will have a mix of residential, retail, office, and institutional components and is envisioned to be a place where “relaxation and nature perfectly blend with the urban lifestyle.”

“In the last 27 years, we have built townships that cater to the evolving lifestyles of Filipinos. As we continue to expand our township footprint in key growth areas across the country, innovation and design will be a significant factor in our masterplans,” Megaworld Senior Vice President Jericho P. Go said.

This is Megaworld’s fourth integrated urban township development in the Cavite-Batangas growth area.

Menarco builds P2-B office tower in BGCMenarco Development Corp. is constructing a 32-story “green” office building in Bonifacio Global City (BGC) in Taguig City.

Menarco Tower claims that it is different from its competitors as it focuses on the wellness of their tenants. It provides more natural lighting, special air filtration systems, and whole food dining options.

“We’re here to create a new standard,” Menarco Development Managing Director Carmen Jimenez-Ong said.

Menarco Tower would have 22 office floors and 10 parking floors, information from its broker Leechiu Property Consultants showed.

The company selected mainly Filipino companies in the construction process, the firm’s practice that would also be maintained for future projects.

Korean firm to invest USD 1M in Clark projectClark Development Corp. (CDC) signed an agreement with Korean firm Punta LWA Properties Corp. to establish a 4,443-sqm. area tourism facility in Clark.

The agreement will develop and operate the former site of Mimosa Mart along the C.M. Recto Highway, which include a hotel and villas, with amenities such as a restaurant, a coffee shop, and a wellness center.

9July 2016

The project will develop and operate the facilities for 25 years, with the potential to provide employment for 50 firms for operations and another 50 for the construction of the buildings.

TELECOM

PLDT, Globe enter into P69-B dealPhilippine telecom firms Philippine Long Distance

Telephone (PLDT) and Globe Telecom agreed for a P69.1B worth of deal in acquiring San Miguel Corp.’s (SMC) telecommunications asset Vega Telecom Inc.

The asset firm controls interests in Bell Telecommunication Philippines, Inc., Eastern Telecommunications Philippines, Inc., Cobaltpoint Telecommunication, Inc. (formerly Extelcom), Tori Spectrum Telecommunication Inc. (formerly Wi-Tribe), and Hi- Frequency Telecommunication Inc.

Under the agreement, both telecom firms would acquire 50% each in equity interest of the telecommunications business of SMC and pay P52.08B for all the shares and assume about P17.02B of liabilities of the asset firm.

The deal involves SMC subsidiaries that own 700-megahertz frequency, the “real estate” on which telecommunication operators develop their respective network to deliver faster wireless Internet services to customers.

COMPaNY NOTeS

Designed by Miami-based firm Arquitectonica, the mall addition will have an unobstructed view of the sea.

Opened in May 2006 as the flagship development of SM on its 60-ha. reclaimed land along the Manila Bay, MOA introduced the first Olympic-size skating rink and the first IMAX theater in the country.

It will add about 250,000 sqm. to its gross floor-area plate, spanning a total of over 650,000 sqm.

When the design team was going through the redesign process for SM MOA, SM Prime President Hans Sy wanted it to have the “wow” factor, Senior Vice President for SM Supermalls Steven Tan said.

With over 700 tenants, the mall is considered one of SM’s most successful malls, enjoying an occupancy of between 98% and 100%. This has prompted the company to do the redevelopment of the mall in phases. The Olympic-size skating rink, which will be on the third floor, is targeted to be ready by the end of the year.

The mall also recently unveiled a solar carpark, visited recently by environment advocate and former United States Vice President Al Gore. The 2.7-megawatt (MW) MOA solar carpark, done in partnership with Solar Philippines, is nearly twice the size of the 1.5-MW SM North Edsa Solar Carpark, making it one of the world’s largest on-site solar projects. Comprised of 10,426 solar panels and 40 inverters, it supplies about 20% of the mall’s power needs.

Maynilad to spend P42B for service expansion, sewerage projects until 2018Maynilad Water Services Inc. is planning to spend P42B until 2018 to accelerate the improvement and expansion of water and wastewater services for its customers.

The P21-B capital expenditure (capex) target for 2016 to 2018 will be spent for water projects, including service expansion,

management of water losses or nonrevenue water, operational support programs, such as the upgrade of pumping stations, and the development of new water sources, Maynilad said.

Maynilad concession areas

Metro Manilaq Manila (certain portions)q Quezon City (certain portions)q Makati City (west of South Super Highway)q Caloocan Cityq Pasay Cityq Parañaque City q Las Piñas Cityq Muntinlupa Cityq Valenzuela Cityq Navotas Cityq Malabon City

Cavite Provinceq Cities: Cavite, Bacoor, and Imusq Municipalities: Kawit, Noveleta, Rosario

Moreover, about P21B is earmarked for Maynilad’s sewerage and sanitation program. This covers the construction of sewage treatment plants, laying of conveyance systems, acquisition of lots for new wastewater facilities, and maintenance of the existing wastewater infrastructure.

The funding will come from local and international bank loans, and internally generated funds. The water company expects to generate over 126,000 jobs from its P42B capex for the next three years, Maynilad said in statement.

Max ‘s tapping domestic institutional marketMax’s Group Inc. (MGI) has tapped the institutional market to enlarge its presence in the country through resorts, hotels, and other establishments, while continuously adding stores both domestically and overseas, MGI President and Chief Executive Officer (CEO) Robert F. Trota said.

“Right now, we are eyeing to expand that strategy by offering our stores whether it be our Max’s Restaurant, our bakery, Pancake House, or any of our brands,” Trota said.

Some of MGI’s restaurants are now serving the food and pastry requirements of Canyon Cove Resort

SM Mall of asia as PHL biggest shopping mallThe country’s largest shopping mall, SM Mall of Asia (MOA) in Pasay City, is set to complete its expansion that includes a FIFA World Cup-size soccer field mounted on the mall’s roofdeck and a botanical garden.

Philippine Business Report10

COUNTRY-TO-COUNTRY

in Nasugbu, Batangas and Camaya Coast in Mariveles, Bataan.

MGI is positive that the prevailing macroeconomic backdrop will remain favorable, spurred by continuous consumer spending.

“We are primed to open another 60 to 70 stores in key strategic locations. Essentially, we have laid the groundwork to anchor our growth moving forward,” he said.

In January to March, MGI opened nine stores across its star brands Max’s Restaurant, Pancake House, Yellow Cab Pizza, and Krispy Kreme.

Three international outletsMGI operates a chain of 577 stores, including 37 overseas as of end March this year.

Gokongwei takes 51% of The Generics PharmacyThe Gokongwei group acquired a 51-% stake in the country’s largest generics drugstores, The Generics Pharmacy (TGP).

The acquisition was in line with the group’s strategy of expanding its presence in the drugstore business.

Established in 2001, TGP now has more than 1,800 stores across the country.

Together with pharmaceutical chain South Star Drug, the group would now have nearly 2,200 stores nationwide, the largest in terms of the total number of store outlets in the country. These two companies target all types of consumers and cover all segments of the drugstore business.

“We are very excited to partner with TGP. This is because TGP strongly believes in its vision to offer quality products at very affordable prices and in convenient locations. It is an honor to continue the company’s legacy and to further grow the business,” Robinsons Retail President and Chief Operating Officer Robina Y. Gokongwei-Pe said.

Communications Technology Office, and the Commission on Higher Education (CHED).

Philippine Ambassador for New Delhi Maria Teresita C. Daza and Commercial Counsellor Michael Alfred V. Ignacio, and other officials also joined the deliberations.

On the other hand, Joint Secretary of the Department of Commerce of India Mr. Ravi Capoor led a 20-member delegation of officials representing different officers of India’s Ministry of Commerce and Industry.

Focal points and point persons were also identified to fast track the signing and implementation of the proposed MOUs, and updating of existing ones.

The Philippines-India trade currently stands at USD 1.8B. Given the size of both the Indian and Philippine markets and their recent economic performance, both sides recognize the huge potentials and opportunities to increase bilateral trade substantially in the medium to long term and agreed to work closely together to consistently improve the bilateral trade between the two countries.

Indian investments in the Philippines amounted to P1.75B in 2015, in sectors such as information technology and business process management (IT-BPM), agriculture, forestry and fishing, manufacturing, construction, and financial and insurance activities.

Fourteen of India’s IT-BPM companies also established operations in the country, recognizing its strengths in the U.S. and other Western markets. The Philippine Trade and Investment Center in New Delhi (PTIC New Delhi) identified the following priority sectors for investment promotion in India: IT-BPM, automotive components manufacturing, infrastructure development, and energy projects. It also actively promotes education, electronics, and design driven niche products in India.

PHL, India renew trade and investments cooperation

The Philippines and India held the 12th Meeting of the Joint Working Group

on Trade and Investments (JWGTI) in New Delhi to discuss stronger economic, trade, and investment cooperation.

The meeting tackled bilateral cooperation initiatives and issues involving trade, investments, and improved market access for both countries, noting the significant economic gains of both economies.

Phil-India JWGTI Agreements

q Jointly develop a mechanism for sharing of statistical trade data

q Expeditethefinalizationofvariouspending Memoranda of Understanding

q Fast track and strengthen cooperation between Invest India and the Philippine Board of Investments (BOI), and matters involving customs, science and technology, information and communications technology (ICT), micro, small, and medium enterprise (MSME) development and Trade in Rice and Education cooperation

q Embark on strengthened technical cooperationinthefieldsofcoconuts(production, processing and commercialization)

q Increase participation in trade fairs q Enhance cooperation involving

pharmaceuticals through the Trade Working Group

Philippine Board of Investments (BOI) Governor Lucita P. Reyes led an 11-strong delegation from Manila with Philippine International Trading Corporation (PITC) President Ma. Lourdes T. Baua, and representatives from the Department of Trade and Industry’s (DTI) Bureau of International Trade Relations (BITR).

Other representatives were from the Department of Science and Technology (DOST)-Information and

11July 2016

Ph

ilip

pin

e P

ost

al P

erm

it N

o. 5

04

Both agreed to hold the 13th JWGTI in Manila on the third quarter of 2017.

PHL as Taiwan‘s priority for Go South policy’

The new Taiwanese government has selected the Philippines as one of the priority countries under its “Go South” policy to build stronger economic relations with south Asian countries, Taiwan Economic and Cultural Office (TECO) Representative to Manila Dr. Gary Song-Huann Lin said.

With the selection of the Philippines, the country has become Taiwan’s important gateway to the Association of Southeast Asian Nations (ASEAN).

Manila Economic Cultural Office (MECO) Chairman Amadeo R. Perez Jr. cited Taiwan’s excellent products, which he partly attributed to the 140,000 overseas Filipinos, who are mostly working in Taiwanese manufacturing companies.

There are over 600 Taiwanese firms doing business in the Philippines, making it the country’s seventh largest investor and 11th trading partner.

The Taiwan Excellence 2016, a series of promotions for Taiwanese products in the country, kicked off at the SM Megamall in June. It will also stage product exhibitions in Trinoma Mall in August and in Market! Market! in October. A total of 54 Taiwanese brands will bring in 200 top products, from home appliances to electronic gadgets.

Taiwan would like to rekindle the earlier proposal for the forging of a comprehensive export credit agency (ECA) that will target specific sectors. The earlier proposed ECA has called for the creation of an economic corridor comprising of special economic zones of Subic, Clark in the Philippines and Kaohshiung in Taiwan.

The new tie up between the two economies is expected to open a wide cooperation not just in trade but also in the areas of agriculture, fishery, aqua technology, information and communications technology, climate change, and education.

INTeRNaTIONaL/ReGIONaLWaTCH

Sea wins more Japanese investmentsJapanese investments in Southeast Asia (SEA) continue to grow, almost tripling to USD 180.9B from 2011 to 2015, Bank of Japan data showed.

For the third straight year until 2015, the amount of foreign direct investments from Japan to the 10-member countries Association of Southeast Asian Nations (ASEAN) exceeded such investments in China and Hong Kong, according to figures compiled by the Japan External Trade Organization (JETRO).

With Japan’s population aging and declining, companies have been searching for growth opportunities elsewhere in Asia.

“ASEAN markets are attractive from the Japanese perspective,” DBS Group Holdings in Singapore Economist Ma Tieying said. “Many economies have great potential to grow, thanks to relatively low per-capita incomes and a young population profile.”

In a 2015 survey among manufacturers conducted by the Japan Bank for International Cooperation, about 56% of respondents want to expand investment in the five key nations of Singapore, Thailand, Indonesia, Malaysia, and the Philippines.

The other five members of ASEAN are Brunei, Cambodia, Laos, Myanmar, and Viet Nam.

PHL maintains high motorcycle sales growth in aSeaNThe Philippines leads among the growth markets in Southeast Asia for motorcycle and scooter sales in the first four months of the year, data from the Association of Southeast Asian Nations (ASEAN) Automotive Federation (AutoFed) showed.

The country’s sales posted the highest year-on-year growth of 38.7% in the January to April period among five Southeast Asian markets.

A total 351,102 units were sold in the country during the four-month period as compared to 253,129 units recorded in the same period last year.

Singapore, a smaller motorcycle market in terms of volume compared to the Philippines, posted a 9.3-% jump in sales to 2,656 units as of end-April.

Malaysia was flat year-on-year, while those in Indonesia and Thailand, the region’s top two motorcycle markets, declined 4.8% and 8.5%, respectively.

Overall, sales in the five ASEAN-member countries dipped 1.8% in the first four months of the year to 3.11M units from 3.17M units in the same period in 2015.

At present, motorcycle sales in the country continue to be larger than that of cars, which reached 104,176 units as of end-April.

“The growth is due to its affordability and mobility that two-wheeled motorized vehicles offer,” Federation of Automotive Industries of the Philippines President Vicente Mills Jr. said.

Philippine Business Report12

0

2

4

6

8

Jul-16Jun-16May-16Apr-16Mar-16Feb-16

Interest Rate (%)Overnight Lending Facility

4545.5

4646.5

4747.5

48

Jul-16Jun-16May-16Apr-16Mar-16Feb-16

Peso per US Dollar Rate

eCONOMIC INDICaTORS

As of 29 July 2016

P u b l i s h e d m o n t h l y b y t h e K n o w l e d g e M a n a g e m e n t a n d I n f o r m a t i o n S e r v i c e , D e p a r t m e n t o f T r a d e a n d I n d u s t r y, 2 F T r a d e a n d I n d u s t r y B u i l d i n g , 3 6 1 S e n . G i l J . P u y a t A v e n u e , M a k a t i C i t y 1 2 0 0 , P h i l i p p i n e s • P h o n e( + 6 3 2 ) 8 9 5 . 3 6 11 • F a x ( + 6 3 2 ) 8 9 5 . 6 4 8 7 • To s u b s c r i b e , e -M a i l : p u b l i c a t i o n s@d t i . g o v . p h • w w w . d t i . g o v . p h

Editorial Team: Patricia May M. Abejo/Editor-in-Chief •Alfonso M. Valenzuela/Managing Editor •Cresenciano P. Par/Assistant Editor •Kristina S. Andaya, Renaldo C. Neneria/Writers •Renaldo C. Neneria /Design Layout •Ric A. Kagahastian /Circulation Officer •

Philippine Business ReportJuly 2016

Sources: Bangko Sentral ng Pilipinas (BSP) Philippine Statistics Authority (PSA)Photos/graphics: Coutesy of Google.com

Entered as Third-Class Mail at theMakati Central Post Office

under Permit No. 504valid until 31 December 2016

As of 29 July 2016

012345678

4Q (2014)1Q (2015) 2Q (2015 3Q (2015)4Q (2015)1Q (2016)

GDP Growth Rate (%)

012345678

4Q (2014) 1Q (2015) 2Q (2015) 3Q (2015) 4Q (2015) 1Q (2016)

GNI Growth Rate (%)

0

0.5

1

1.5

2

May-16Apr-16Mar-16Feb-16Jan-16Dec-15

Inflation Rate (%)(1994 base year)

380040004200440046004800

Jun-16May-16Apr-16Mar-16Feb-16Jan-16

exports(In USD Billion)

0

2000

4000

6000

8000

May-16Apr-16Mar-16Feb-16Jan-16Dec-15

Imports (In USD Billion)

141.5142

142.5143

143.5144

144.5

Jun-16May-16Apr-16Mar-16Feb-16Jan-16

Consumer Price Index(2000 base year)