1July 2012

Volume 23 No. 07 July 2012

Thirteen preferred economic activities have been included in the newly approved 2012 Investment Priorities Plan (IPP).

Investments in any of the IPP preferred activities are entitled to a maximum of eight-year income tax holiday (ITH) and zero duty on capital equipment importation, among other perks.

Expected to generate strong investor interest, the inclusion of hospital and medical services and iron and steel are the two new additions to the 2012 IPP.

Department of Trade and Industry (DTI) Undersecretary for Industry Development and Trade Policy Group (IDTPG) Adrian S. Cristobal Jr. said iron and steel was restored in this year’s IPP because there have been good prospects for this sector.

Tourism was transferred from preferred sectoral list to mandatory list, since the Tourism Infrastructure and Enterprise Zone Authority law allows for the granting of tax and fi scal incentives to ecozone tourism projects.

The public-private partnership (PPP) projects, which used to be a separate listing in the 2011 IPP, has been combined with the infrastructure listing.

The listing in the agriculture and fi shery covers the commercial production and commercial processing of agricultural and fi shery products, including their byproducts and wastes.

This also covers agriculture and fi shery related activities such as irrigation, post-harvest, cold storage, and blastfreezing facilities.

13 areas comprise 2012 IPP

Preferred economic activities in IPP 2012

• Agriculture/agribusiness and fi shery• Creative industries/ knowledge-based services• Disaster prevention, mitigation and recovery projects• Energy• Green projects• Hospital and medical services projects• Infrastructure and public-private

partnership (PPP) projects• Iron and steel• Mass housing• Motor vehicles• Research & development (R&D)• Shipbuilding• Strategic projects

Growth tops expectationsThe Philippine economy grew by 6.4% in the fi rst quarter, beating market expectations and offi cial forecast, on the back of strengthened services sector, higher exports, and robust state spending.

Real gross domestic product (GDP), or the value of all fi nished goods

and services, rose to P1.49T in the January-March period from P1.4T in the same period last year.

The domestic economy benefi ted from a benign infl ation and an uptick in the services sector particularly from trade and other services, the National Statistical Coordination Board (NSCB) reported.

Infl ation averaged 3.1% in the fi rst quarter, within the Bangko Sentral ng Pilipinas’ (BSP) target of 3-5% for the year.

“Growth also got a big boost from manufacturing which has recovered some grounds. On the demand side, growth mainly came from net exports and robust spending,”

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INDUSTRYTRENDS

services in Asia, followed by China and India, a survey by the Economist Corporate Network (Economist) showed.

Some 45% of respondents said the Philippines was an attractive services provider, while 35% and 25% said the same for China and India, respectively.

IT outsourcing (ITO), which includes software and other related services, grew 37% to about USD 1B in 2011, the Business Processing Association of the Philippines (BPA/P) reported.

Philippine Software Industry Association (PSIA) President Nora Terrado said the sector employs approximately 50,000 professionals.

In the Philippines, the IT-BPO industry grew to USD 11B in revenues, about one-tenth the size of India’s, and 640,000 direct employees in a little more than a decade, the BPA/P said.

Non-voice complex services in the country account for only about 35% of revenues, but these services are the fastest-growing segment of the industry, hinting that the Philippine IT-BPO industry is shifting to higher-value services.

PHL economy a ‘rare bright spot’The economies of Philippines and Indonesia stand out as rare examples of emerging Asian economies with positive rating outlooks amid economic forecast for many countries that ranged from shaky to dismal.

According to a report titled “Two Emerging Asian Economies Stand Out With Positive Outlooks Amid Sobering Economic News Elsewhere,” Standard & Poor's Ratings Services said that these two countries were among only ten in the world that have positive rating outlooks, and none were industrialized economies.

Generally, the bond markets are treating the Philippines and Indonesia pretty well. And the cost to insure the two countries' debt

using credit default swaps also illustrates the favorable treatment the credit markets are giving the two countries.

Meanwhile, Southeast Asian countries have reaffi rmed plans to integrate their economies by 2015, carrying hopes the move will make the region a key growth leader for the global economy.

Under the economic integration plan, their fi nancial systems and capital markets will be interconnected, trade will be easier through the elimination of many tariffs, and freer labor across movement borders will be allowed.

The Philippines is supportive of the region's integration, saying doing so would help accelerate growth of member-economies. The country's economic offi cials believed the integration will help member-countries pursue the goal of “inclusive” growth.

Local offi ce space shortage seenThe sustained strong demand for offi ce spaces by the business process outsourcing (BPO) sector and traditional corporate offi ces will result in a shortage in supply by 2015 as demand exceeds supply, property management fi rm Jones Lang LaSalle Leechiu (JLL) reported.

JLL Associate Director Phillip Anonuevo said total of offi ce spaces across business districts in Metro Manila is placed at 7.8M sqm from 2012 to 2015, but this would be eclipsed by the strong take up for offi ce spaces.

Anonuevo said total take-up rate of offi ce space could reach 450,000 sqm annually in the next two years while total supply coming up in 2012 is 465,172 sqm.

NSCB Secretary-General Romulo A. Virola said.

The services sector registered the highest growth since 2004 at 8.5% during the period, with trade and other services gaining 8.9% and 10.5%, respectively.

Industry gained by a modest 4.9%, compared with last year’s 7.3%, as manufacturing recorded a 5.7-% increase.

On the expenditure side, government spending jumped by 24% during the period, reversing last year’s 15.8% slump, while service and merchandise exports grew by 11.1% and 7.1%, respectively.

Acting Socioeconomic Planning Secretary Arsenio M. Balisacan said the fi rst quarter economic growth was “broad-based.”

“Growth for the quarter was supported by accelerated government spending, low prices which supported household consumption, better-than-anticipated exports performance, continued credit expansion, continued robustness of remittances, expansion in the tourism sector, increased business and consumer confi dence, and an overall buoyant domestic economic outlook," Balisacan said.

“Also, the Philippines posted the highest growth among ASEAN [Association of Southeast Asian Nations] and other neighboring countries except China, growing faster than Indonesia (6.3%), Viet Nam (4.0%), Singapore (1.6%), and Thailand (0.3%),” he said.

PHL world’s top IT-BPO hubThe Philippines is the most attractive global provider of information technology-business process outsourcing (IT-BPO)

3July 2012

Of the total 2012 pipeline, he said 48% or 254,246 sqm of offi ce space is pre-committed.

Assuming that the Philippines posts a stable fi scal position and good credit standing by 2013-2014, he said the other demand driver – the traditional corporate offi ces like fi nancial services, insurance companies, among others – is expected to create an additional demand of roughly 100,000 to 200,000 sqm of offi ce spaces annually.

The BPO sector, with a total of 939 existing sites, would account for 360,000 sqm of offi ce space annually. The BPO sector is the number one growth driver because of its phenomenal growth and continued strong growth potentials.

In 2011, the sector generated USD 11B and is expected to grow to USD 25B in 2016. Its current employment of 600,000 is expected to grow to 1.3M by 2015.

The resurgence of demand from the traditional corporate offi ces is pressuring supply as more multinational companies are putting up headquarters and opening branches here, Anonuevo said.

Of the new offi ce space supply, Makati accounts for 53% of prime and grade A offi ce stock with Ortigas coming in second at 25% and Bonifacio Global City at 6%. A number of other emerging districts like Bay City and Quezon City account for less than 3%.

Future pipeline supply from 2012 to 2015 will fuel the growth of business districts besides Makati Central Business District. Bonifacio Global City will capture as much as 41% of the new offi ce stock in addition to its many attractions, while Quezon City will account for 15%; Makati, 22%; and Ortigas 10%.

Coconut water sales jump 260%The value of coconut water exports rose by 260.6% to USD 1.3M in the fi rst quarter of 2012, the Philippine Coconut Authority (PCA) reported.

PCA Administrator Euclides Forbes said the Philippines sold 4.5M liters of coco water in the fi rst quarter, a 300-% increase from the 1.1M liters sold in the same period last year.

Forbes said this year’s volume of coco water export will exceed the 2011 total of 16.7M liters. This was equivalent to USD 15.1M in receipts.

Just like last year, the United States was the main buyer of Philippine coco water. Export earnings from the U.S. increased by 426.8% to USD 3.9M in the fi rst three months of the year. Americans bought 3.7M liters of Philippine coco water in the fi rst quarter of 2012, against 796,887 liters in 2011.

When President Benigno S. Aquino III visited the U.S. last year, he promoted coco water with U.S. businessmen who had put up a coconut water processing fi rm in Camarines Sur.

Coco water also made a strong showing in the Netherlands, which bought 189,800 liters, from 32,000 last year, and Australia, which registered a 362.6-% volume increase to 65,219 liters.

Forbes said coconut water had become a popular energy drink abroad because of its natural qualities and lack of chemical preservatives.

He said the country needs to plant more coconut trees to be able to meet the growing demand for coconut products.

Exporters urged to tap India's USD 17-B furniture martA top offi cial of the Indian International Furniture Fair (IIFF)

has urged Filipino furniture makers to explore business opportunities in India with a projected furniture market to reach USD 17B in the next fi ve years.

IIFF Project Manager Lindsay Teopaco said the growth drivers for the furniture industry are tourism, hospitality, real estate and housing, information technology (IT) and IT-enabled services, and consumer demographics.

“There is a big demand in hospitality sector; hotels are coming up over India. And we all know that India is an IT hub. Business process outsourcing (BPO) fi rms are growing so there is a big demand for offi ce furniture as well,” Teopaco said.

She said the residential segment comprises 65% of Indian furniture industry; offi ce, 20%; and contract, 15%.

The high-spending of India's middle class population, now reaching 300M, is boosting the residential segment’s growth.

The contract offi ce segment is driven by the expanding growth in real estate and offi ce construction while contract is supported by growing hotel developments and tourism demand.

The increasing income levels and consumption are also big factors in consumer spending in India. To effectively penetrate the huge market, Teopaco advised local furniture exporters to create a strong and aspirational brand and differentiation through service.

Local market adaptation is also crucial, considering that each country has different buying behavior. Filipino businessmen have to look for the right business partner and develop the local supply chain.

“Offering a dynamic and strategic product range is very important. You have to understand what type of product design. It may be wood, since they are strong in wood. But you have to see for yourself and test the market,” she said.

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TRADE ANDINVESTMENTS

Teopaco also underscored the importance of competitive pricing structure. “We all know that the people would like to bargain a lot so you have to make sure you bring your right product, right structure to the right market,” she said.

DTI, DOE pushing e-vehicle dev’t The Departments of Trade and Industry (DTI) and Energy (DOE) are working together to accelerate the development of the electric vehicle (EV) industry in the Philippines, Electric Vehicle Association of the Philippines (EVAP) President Rommel Juan said.

DOE Secretary Jose Rene D. Almendras is aiming for the development of the Alternative Fuels Vehicle Program, pushing for the National Economic and Development Authority (NEDA) and presidential approvals of the USD500-M eTrike program.

The eTrike project aims to replace the smoke-belching, gasoline-powered tricycles in the country.

Under the program, e-trikes will have to be manufactured and assembled in the Philippines.

DTI Secretary Gregory L. Domingo has tasked DTI offi ces in the East Asian region to organize missions composed of leading players in the EV industries of Japan, Korea, and Taiwan as prospective investors or joint-venture partners in research and development (R&D), manufacturing, assembly and as suppliers of critical EV components.

DTI will also help local EV players meet international business partners who can offer technology, capital assistance, and later the development of EV-related products for domestic and export markets.

AGRICULTURE/AGRIBUSINESS AND FISHERY

BOI approves FNC’s sugar processing projectThe Board of Investments (BOI) has approved tax incentives for a P21.5-M sugar processing plant to be put up by Forever Nutriliving Corporation (FNC) in Sagay, Negros Occidental.

The sugar plant, which will produce antioxidants and soft sugar, will be located inside Sagay Central, Inc., a sugar mill in Sagay, Negros Occidental. It will source raw materials from the sugar mill and export 70% of its output.

Antioxidants, which are extracted from cane syrup, are used as food additives to delay food deterioration; as medication for various forms of brain injury; and as stabilizers in fuel, lubricants, and gasoline to prevent oxidation and occurrence of foul-smelling residues.

Soft sugar, which is used for cooking, is partially refi ned sugar product with a distinctive brown color.

The company will produce 32,400 kilos of antioxidants and 7,020 tons (T) of soft sugar every year.

FGen buys out British partner in First Gas for USD360MFirst Gen Corporation has bought out its British joint venture partner in two natural gas-fi red power plants located in Batangas for USD 360M.

FirstGen acquired the 40-% equity held by British Gas Asia Pacifi c Holdings Pte. Ltd. (BGAPH) to take full control of the two First Gas power projects.

In a separate disclosure in London, BG said it will use the proceeds for oil and gas production.

First Gen earlier this month raised P10B by issuing preferred shares to partly fi nance the long-planned acquisition of BG’s 40% stake in the 1,000- megawatt (MW) Santa Rita plant and the 500-MW San Lorenzo plant, both located in Batangas.

First Gen’s purchase of BG’s stake allows it to proceed building the 300-MW San Gabriel power plant, a project delayed by BG’s decision to focus on more lucrative oil and gas production.

ENERGY

PTT to invest P1.5B in more gas stationsOil player PTT Philippines Corp. is looking into a local expansion worth P1.25B-P1.5B that will more than double its service stations in fi ve years.

Two new receiving terminals are also in the pipeline to improve the distribution system of the local arm of Thai oil giant PTT Public Co. Ltd. (PTTPCL).

“We plan for 15 gas stations a year for the next fi ve years. We would like to have the best volume for the gas station, so it is around 120 at the end of next fi ve years,” said PTT Philippines Corp. President and Chief Executive Offi cer (CEO) Wisarn Chawalitanon.

But the oil fi rm expects to jumpstart its fi ve-year expansion by building 20 new stations this year.

PTT Philippines will invest P250M-P300M annually for the new gas stations, Chawalitanon said.

At the end of fi ve years, PTT Philippines will have 130 gas stations, mostly in Luzon, from just 50 so far. To date, the company has four stations in Cebu that is serviced by the PTT Cebu Mactan Oil Depot and Terminal.

5July 2012

Total allots P300M for expansionThe local unit of multinational oil player Total SA of France plans to expand its network to around 200 branches this year, banking on the country’s continuous economic growth.

“We set a nice target, we want to get to at least 200 stations this year and we are quite confi dent about our plans and we will hit this target. We will be spending more than P300M for the retail network expansion program,” said Total Philippines Corp. President and Managing Director Ernst Wanten.

To date, the company, which will be celebrating its 15th year in the Philippines, has 176 service stations.

INFRASTRUCTURE

Marubeni to build USD1-B Philippine rail projectJoint venture partners DM Consunji Inc. (DMCI) and Japanese fi rm Marubeni Corp. fi nally obtained the green light from the government to build a USD 1-B rail system that will connect Quezon City to the neighboring province of Bulacan.

DMCI said the consortium has recently signed an Engineering, Procurement, and Construction (EPC) Contract for the Metro Rail Transit (MRT)-7 train system, a project of a unit of San Miguel Corp.

The MRT-7 project is a 22-km train line with 14 train stations from San Jose del Monte in Bulacan to the corner of North Avenue and EDSA Avenue in Quezon City. It also comprises a 22-km six-lane road from the Metro Rail Transit System (MRTS) depot in Bulacan.

The MRT-7 will be connected to the MRT-3 train line and the Light Rail Transit (LRT) line 1 through a common station in North Avenue.

Angat Dam gets P5B for rehabThe government has approved the P5-B funding requirement to rehabilitate the 44-year-old Angat Dam in Norzagaray, Bulacan, Department of Budget and Management (DBM) Secretary Florencio B. Abad said.

Abad said the funding requirement has already been given the go-signal by the DBM although the project would need to go through the National Economic and Development Authority-Investment Coordination Committee (NEDA-ICC).

Metropolitan Waterworks and Sewerage System (MWSS) offi cials said the project may take 18 months and would entail the construction of support structures to strengthen the dam and increase its water holding capacity.

MANUFACTURING P&G starts new production facilityProcter and Gamble (P&G) Philippines, Inc. has started operating its new P3-B state-of-the-art baby-care production facility in Cabuyao, Laguna.

P&G Philippines President and General Manager Sumeet Vohra said the facility aims to meet the growing demand for disposable diapers in the Philippines and provide even better value to mothers both in the domestic and in Asian regions.

The new production line is the fi rst phase of the planned three-year P3-B additional investment that aims to facilitate growth in the business by optimizing its supply chain.

“The Philippines remains a key market for P&G globally. Throughout the company’s 75-year history in the country, P&G has continually invested in innovations to improve and upgrade its plant

technology and facilities,” P&G Global Group President for Baby Care Martin Riant said.

Pepsi-Cola invests P1.5B in bottling linesPepsi-Cola Products Philippines, Inc. (PCPPI) is set to invest P1.5B for three bottling lines this year after recording a 606-% increase in fi rst quarter net profi ts.

“We had a terrifi c fi rst quarter and we hope to sustain that for the remainder of the year. We are investing more on infrastructure and increasing our capacity,” PCPPI President Partho Chakrabarti said.

The company is pouring some P600M into a new plant in La Union and is expected to begin its operations by yearend. Two more bottling lines will be put up in the Visayas and Mindanao, each to cost an average of P500M.

The PCPPI intends to increase its production and distribution capacity in Luzon by 10% this year.

“We expect the Philippine economy to perform better in 2012 with higher public and private spending, a net exports turnout, stronger capital infl ows, and an accommodative monetary policy,” PCPPI Chairman Oscar S. Reyes said.

Coca Cola bullish on growthThe Coca Cola Export Corp. (CCEC) is bullish to grow faster this year on the back of the improving business climate in the country and stronger spending capacity of the middle class.

“This is a country [Philippines] that offers us a lot of opportunities. The young population in the Philippines is growing and there’s no better place for our company than a place with a young population,” CCEC President and General Manager Guillermo Aponte said.

The growth of the business process outsourcing (BPO) industry contributes to the increased spending power of the emerging middle class.

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Aponte said the Philippine economic climate has a very promising range of growth and they are very positive with prospects for the country.

Last year, CCEC opened a manufacturing plant in Cagayan de Oro and expanded its capacity in Sta. Rosa, Laguna and Cebu. CCEC also wants to expand in Mindanao and Visayas.

The expansions of several supermarket chains provide the company opportunities to expand also its distribution network.

MASS HOUSING

DMCI Homes allots P8B for housing projects The property arm of DMCI Holdings, Inc. is looking to spend some P8B for housing projects mostly in Metro Manila this year.

“This year, in terms of capex, I think we’re looking to spend roughly around P8B. This amount will be funded by a combination of internally-generated funds and from fi nancial institutions,” DMCI President Alfredo R. Austria said.

DMCI Homes had earlier bared plans to build a high-rise condominium in Ermita, Manila and three in Quezon City this year as well as two mid-rise complexes in Taguig and Las Piñas worth P18B.

PHINMA unveils plans for two mid-rise housing projectsPHINMA Property Holdings Corp. (PHINMA Properties) is spending some P2.5B to build two mid-rise housing developments in Metro Manila, which should be ready by early 2013.

The company announced it will build Arezzo Place – a four-phase walk-up project in Pasig City – and the Solano Hills, a three-phase condominium development in Muntinlupa City.

Upon completion by the fi rst quarter of 2013, the P1.5-B Arrezo Place and the P1-B Solano Hills projects will feature fi ve-storey buildings with 30-sqm units designed to cater

to young professionals and families, overseas Filipino workers (OFWs), and retirees.

The Italian-themed Arezzo Place, expected to be the company's largest project yet in terms of area (5 hectares), will rise on Alfonso Sandoval Avenue in Pasig City.

On the other hand, the California-inspired Solano Hills located on Villongco Road, Muntinlupa City, will boast of modern country lodge structures on a 2.9-ha lot.

MINING IPVG to build USD 250-M refi nery The IPVG Corp. plans to sign a lease agreement for the location of a USD 250-M mineral refi nery and targets to start construction later this year.

The refi nery is expected to produce 3,000 metric tons (MT) of refi ned minerals per year which would be used in several industries including high technology and green technology sectors.

In May, IPVG, through its affi liate New Wave Resources, has signed an agreement for the construction and operation of a mineral refi nery with Canadian fi rm REC.

Under the deal, REC would build the refi nery and sell majority of the fi nished products through long-term off-take contracts.

IPVG President and Chief Executive Offi cer (CEO) Enrique Y. Gonzalez said that the fi rm intends to process seven to eight minerals which will be sourced overseas.

The fi nished products would be exported to Japan, Korea, United States, and some European countries.

MOTOR VEHICLES Hyundai eyes PHL for autopartsKorea’s Hyundai Motors is exploring the possibility of increasing its importation of auto parts and components from the Philippines, Department of Trade and Industry (DTI) Undersecretary for Trade and Investment Promotions Group (TIPG) Cristino L. Panlilio said.

“We are looking at how we can increase our exports of car components for Hyundai,” Panlilio said.

At present, most of the country’s auto parts exports for use by Hyundai are auto electrical components, particularly wiring harness.

Mitsubishi to assemble Montero hereMitsubishi Motors Philippines Corp. (MMPC) has sought permission from its Japan-based parent Mitsubishi Motors Corp. (MMC) for the right to assemble the Montero Sport model in the Philippines to maximize the utilization rate of its production facility in Cainta, Rizal.

“Up to now, it is not yet fully-formed but we are applying for a volume model that we can produce in the Philippines,” said Mitsubishi Philippines Vice President for Marketing Services Froilan Dytianquin.

The manufacturing facility of MMPC in Cainta, Rizal is capable of producing 40,000-60,000 units annually but is only producing around 14,000 units per year. Assembled in the plant are the Adventure, L300, and Lancer EX.

For now, all Montero Sport models sold in the Philippines come from Thailand.

POWER

AEV allots P170B for new projectsAboitiz Equity Ventures (AEV) plans to invest P170B in new

7July 2012

generation projects over the next fi ve years, even as it expressed interest in joining the public-private partnership (PPP) program, specifi cally in airports and water.

AEV considers expanding into other areas outside of its core businesses of power and banking and said they see a lot of opportunities in the privatization efforts of the government, along with the aggressive move in promoting tourism.

The group is prepared to bid in those sectors either on their own, or through a joint venture and interested in any airport that is up for bidding, either new or for rehabilitation

In Mindanao alone, AEV is prepared to infuse P35B in various energy-related activities.

FPHC allots USD 1.5B for new power projectsThe First Philippine Holdings Corp. (FPHC), through its power generating units, is looking at boosting its capacity by 400 to 500 megawatts (MW) in the next two to three years at an estimated cost of up to USD 1.5B.

Higher electricity output will allow the holding fi rm to post triple-digit growth in profi ts this year.

The current capacity of the company is 2,800MW through geothermal fi rm Energy Development Corp. (EDC) and renewable energy (RE) fi rm First Gen Corp. Only 1,500MW is attributable to FPHC.

The target can easily be achieved if the 550-MW San Gabriel gas-fi red power plant in Batangas is pursued.The company is also looking at the 86-MW Burgos wind project in Ilocos Norte and the 100-MW run-of-river hydropower projects.

First Gen owns 60% of First Gas, which owns and operates the 1,000-MW Santa Rita combined-cycle natural gas-fi red power plant and the 500-MW San Lorenzo natural gas power plant, both in Batangas.

Filinvest pours P25B in green fi eld projectFilinvest Development Corp. (FDC) is eyeing to invest P25B this year to jumpstart the construction of new power plants with combined generation capacity of 200 megawatts (MW).

The “green fi eld project,” expected to operate in about two to three years, will use “clean coal” and renewable energy (RE) like biomass as fuel instead of liquefi ed natural gas (LNG).

FDC President Josephine Gotianum-Yap said the group has shelved the planned LNG strategy and was currently exploring power generation projects that are cost-effective and environment-friendly.

Meralco, Japan fi rm tie upThe Manila Electric Co. (Meralco) will team up with a Japanese utility fi rm to build the Philippines’ fi rst natural gas-fi red power plant.

The proposed 1,500-megawatt (MW) plant may be built in the southern part of Luzon with half of the project likely to be completed in late 2016.

Meralco is now building their own generation portfolio. Running power plants will reduce its dependence on generators for supply. Meralco currently buys electricity from First Gen Corp., Aboitiz Power Corp., AES Corp., and San Miguel Corp.

PUBLIC-PRIVATE PARTNERSHIP

GSIS readies P25-B fund for PPPThe Government Service Insurance System (GSIS) has created a P25-B infrastructure fund to be used for public-private partnership (PPP) projects.

The GSIS will be the lead investor in the Philippine Investment Alliance for Infrastructure (PInAI) which will be under the management of Maquarie Infrastructure and Real Assets (MIRA).

Included under the PInAI are transportation, energy, power, water, environment, communication sectors, and other PPP investment opportunities.

GSIS President and General Manager Robert G. Vergara said two other foreign institutions will participate as anchor investors in the fund.

The overall goal is to generate returns of 9%-15% a year to make the investments worthwhile for members.

Aside from PPP, GSIS is also eyeing to pour more funds in the local equities market, particularly in power and infrastructure stocks. GSIS would likely double its equity exposure in the next 12 months.

Sun Life eyes PPPThe Sun Life Financial is eyeing to participate in the government’s public-private partnership (PPP) program.

Sun Life Financial Philippines President and Chief Executive Offi cer (CEO) Rizalina G. Mantaring said they have been approached by a commercial bank for the possibility of joining a consortium that would be involved in an infrastructure projects under PPP.

Mantaring said Sun Life has been interested to invest in infrastructure projects under PPP after a meeting with President Benigno S. Aquino III and his economic team.

Itochu to venture in consumer-related businessJapanese fi rm Itochu Corp. is planning to engage in new consumer-related business ventures in the Philippines, banking on the country’s better economic prospects.

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Itochu Manila General Manager Kenichi Hisatomi said consumer-related businesses like convenience stores and business process outsourcing (BPO) are attractive for the fi rm.

“Population is growing with a very young people who can spend money on merchandise or the Internet. We can do same business models as in Japan,” Hisatomi said.

At present, the Japanese fi rm is into the liquefi ed petroleum gas (LPG) business, the exclusive distributor of Dole’s Philippine bananas to Japan, and has commissioned an ethanol plant in Isabela.

REAL ESTATE

P3-B Marco Polo hotel opens in 2013The group of businessman Samuel Po has ventured into property development for the fi rst time by investing P3B in a new fi ve-star hotel in Ortigas to be managed by Marco Polo Hotels.

The 313-room Marco Polo Ortigas Hotel will open by end-2013, the newest fi ve-star hotel in the Ortigas central business district.

Xin Tian Di and top offi cials of Marco Polo Hotels signed the management contract for Marco Polo Ortigas Hotel, which is the third Philippine hotel in Marco Polo’s portfolio. Next to China, the Philippines will have the most number of Marco Polo Hotels in Asia.

The investment was the group’s answer to the government’s call for fresh investments in tourism.

“Our rapid growth and development in the Philippines and China has further strengthened our brand and its awareness throughout

Asia-Pacifi c,” said Marco Polo Hotel President Steve Kleinschmidt.

RLC builds Butuan mall, hotelRobinsons Land Corporation (RLC) is building its fourth mall and fi rst Gohotels.ph value hotel in Mindanao for opening by the third quarter of 2013.

RLC said it has started construction of Robinsons Place Butuan as well as the Gohotels.ph branch beside it, with a combined total gross fl oor area (GFA) of 45,300 sqm.

Gohotels.ph Butuan will have 100 rooms that will be equipped with the trademark gohotels.ph amenities.

On the other hand, Robinsons Place Butuan will feature the most popular shops and restaurants, a wide array of service establishments, a foodcourt featuring local dishes of the region as well as four digital cinemas including the fi rst 3D cinema in the province.

SHIPPING

BOI approves P684-M shipping projectFurther boosting the country’s transportation infrastructure investments in the region, the Board of Investments (BOI) has approved the P683.9-M investment project of Philippine company Aviva Shipping Corporation in Surigao.

The project involves domestic shipping operations for landing craft transport (LCT) vessels. This includes the acquisition of six LCT vessels which could be used for shallow waters and roll-on roll-off (RORO) cargo operations.

The vessels will have combined cargo capacity of 14,645 deadweight tonnage (DWT), and 9,552 gross tonnage.

Department of Trade and Industry (DTI) Undersecretary for Industry Development and Trade Policy Group (IDTPG) Adrian S. Cristobal Jr. noted the need to improve

logistics facilities to make the country more competitive and the domestic supply chain activities more effi cient and seamless.

2GO to use small cargo ships for faster turnaround2GO Group, Inc. is set to replace two old cargo ships with smaller models that will enable the company to sail at full capacity more frequently.

“We will be replacing big cargo ships 2GO1 and 2GO2, which at 1,000 TEUs [twenty-foot equivalent unit] is hard to fi ll up and too big for this market,” said 2GO President and Chief Executive Offi cer (CEO) Sulfi cio O. Tagud Jr.

The smaller capacity cargo ships would not lower their volumes as they have enough number of ships, Tagud said.

The fi rm will spend USD 8M for two new 250-300 TEU ships. It is also planning to build up its supply chain business to equalize its revenue stream across its business segments.

Hanjin to expand Subic shipyardWorld’s leading ship manufacturer Hanjin is expanding its shipyard facility in Subic Freeport and is constructing a 200-megawatt (MW) power plant.

Department of Trade and Industry (DTI) Undersecretary for Trade and Investment Promotions Group (TIPG) Undersecretary Cristino L. Panlilio said the additional investment venture is due to the country’s favorable macroeconomic factors.

Panlilio said Hanjin’s local unit Hanjin Heavy Industries & Construction- Philippines, Inc. (HHIC-Phils., Inc.) will construct a USD 300-M slipway drydock and a USD 200M-USD 400-M 200-MW powerplant.

HHIC-Phil, Inc. is working on a lease contract with Subic Bay Metropolitan Authority (SBMA) for additional 100 ha for its new drydock to enable the facility to accept more ship repair jobs.

9July 2012

P1.22-B medical tourism project approvedThe Board of Investments (BOI) has approved the P1.22-B medical tourism project of Providence Hospital Inc. (PHI) to be located in Quezon City.

The 500-patient bed hospital project is accredited by the Department of Tourism (DOT), which is seen to boost the country’s medical tourism industry.

Set to start commercial operations this October, the project will generate 278 jobs.

“We aim to make the Philippines an attractive tourism destination. Our well-trained medical staff and competitive medical services put the Philippines in a strong position to develop its medical tourism market,” Department of Trade and Industry (DTI) Undersecretary for Industry Development and Trade Policy Group (IDTPG) Adrian S. Cristobal Jr. said.

The Asian Medical Tourism Analysis 2008-2012 stated that Asia’s medical tourism market is expected to grow by 18% between the years of 2007-2012.

TELECOM

San Miguel telco gears up for expansion San Miguel Corp.’s Liberty Telecoms Holdings, Inc. has programmed P1.1B this year to expand its fourth-generation (4G) network infrastructure beyond Metro Manila as its parent fi rm also prepares to join the fray for call and text services.

The company, which operates Wi-Tribe broadband Internet, said they are expanding to Northern and Southern Luzon and in Cebu.

Its 4G network rollout, which supports mobile Internet services, has so far covered Mega Manila, which includes the provinces of Bulacan, Cavite, and Rizal.

MAJOR PROJECTS

The Navotas fi sh port, considered the country’s biggest and oldest, handles about 380 metric tons (MT) of various fi sh species.

The project will entail three major components, including the upgrading of landing quay, market halls, piers, parking areas, drainage system, and breakwater.

It will also build new facilities such as cold storage system, conveyors, fi sh sorting areas, and waste water treatment plant.

The project will also involve the construction of wharf landing, dredging of harbor basin, and provision of an area for ship repair and other agri-fi shery enterprises.

NEDA approves P32-B projectThe National Economic and Development Authority (NEDA) recently approved fi ve projects worth P32.7B on transportation, infrastructure, and health, which aim to build and rehabilitate vital infrastructure such as roads, bridges, and hospitals.

First of these is the Light Railway Transit (LRT) Line 2 East Extension Project that involves the construction of a 4.19-km extension from the existing Santolan Station to Masinag Junction. The total approved cost of P9.7B is to be entirely fi nanced by the Department of Transportation and Communications (DOTC).

A public-private partnership (PPP) project, the Modernization of the Philippine Orthopedic Center (POC) was approved by the Investment Coordination Committee (ICC) Cabinet Commmitte (CabCom).

This involves the construction of a 700-bed capacity tertiary orthopedic hospital within the National Kidney and Transplant Institute (NKTI) Complex in Quezon City.

The Upgrading and Rehabilitation Project of the Navotas Fish Port Complex (NFPC) is also an ICC CabCom-approved project (see related story below).

DA allots P2.7B for Navotas portThe Department of Agriculture (DA) has approved the P2.7-B budget for the rehabilitation of the Navotas Fish Port Complex (NFPC) until 2015.

To be completed in four years by the Philippine Fish Development Authority (PFDA), the project would ensure the stable and affordable supply of fi sh in Metro Manila, as 80% of the region’s requirements come from Navotas.

COMPANY NOTES

Maynilad energizes P170-M pumping stationMaynilad Water Services, Inc. (Maynilad) has improved water services in Imus, Cavite with its P170-M Patindig Araw Pumping Station.

“This project is meant to improve water service levels and allow us to serve more people in Cavite.” Maynilad President and Chief Executive Offi cer (CEO) Ricky P. Vargas said.

Maynilad, the water concessionaire for the West Zone, is set to spend more than P2.6B this year to expand water services in the southern portion of Metro Manila.

Manila Water forges deals with Cebu for supply projectManila Water Co., Inc.; Cebu Manila Water Development, Inc.; and the municipal government of Carmen

Philippine Business Report10

BILATERALAGREEMENT

ASEANWATCH

ethanol fuel by the Securities and Exchange Commission (SEC).

SEC approved the amendment of the secondary purpose of URC last May 25, 2012. The company is now allowed to engage in the business of producing fuel ethanol and other similar products and to carry on all activities and services incidental and/or ancillary for such production.

Bioethanol, also called ethanol fuel, is a light alcohol produced by fermenting starch or sugar from corn, sugarcane, cassava, or nipa used as a substitute to gasoline.

It is a form of renewable energy (RE) intended to provide a more environmentally and economically-friendly alternative to fossil fuels such as diesel and gasoline.

Puregold acquires Parco SupermarketPuregold Price Club, Inc. (Puregold) has acquired Parco Supermarket to further expand its foothold in the C and D market segments.

Puregold’s executive committee issued a resolution last May 25, 2012 and acquired 519,111 shares or the whole outstanding capital stock of Gant Group of Companies, Inc. which owns and operates 19 branches of Parco Supermarket.

have begun works on the Cebu bulk water supply project.

For the project, Manila Water’s consortium and the Province of Cebu will have a 51%-49% share.

The project is targeted for operation by the third quarter of 2013.

SM opening second Cebu MallSM Prime Holdings, Inc. (SM Prime) has opened its second shopping mall in Cebu, its 43rd in the country.

SM City Consolacion has a gross fl oor area (GFA) of 106,857 sqm located in Cebu North Road, Barangay Lamac, Consolacion, Cebu.

The group’s third mall in the province will be built in the reclaimed South Road Properties (SRP) area, targeted to open in the third quarter of 2014.

Pharmacy readies expansionThreeSixty Pharmacy is planning to add 20 more to its existing network of 60 branches in the Visayas this year.

ThreeSixty Pharmacy Business Development Manager Carlo Yap said 10 of the 20 additional outlets will be in Cebu, nine in other areas in the Visayas, and one in Tagum City, Davao.

ThreeSixty Business Operations Manager Glordelyne Ramos said the company is opening outlets in remote towns to give people there access to quality and affordable medicines.

Universal Robina to produce ethanolUniversal Robina Corp. (URC) has been given authority to produce

PHL-EU bilateral trade reboundsBilateral trade between the Philippines and European Union (EU) hit €9.1B last year in favor of the Philippines with its exports to the EU growing at €5.1B as against €4B of the EU exports to the Philippines.

According to the EU-Philippines Trade Fact fi le of 2011, Philippine exports of information technology (IT) products to the EU declined by 10% while the country’s exports of agricultural products increased by 13% to €841M.

PHL to lead franchise boom in AsiaThe Philippines is seen as a catalyst in the franchising industry in Asia which is expected to attract more foreign business concepts in the country.

EU exports to the Philippines increased by 6% in 2011. EU trade with other Association of Southeast Asian Nations (ASEAN) members has grown signifi cantly, up to 26% increase with some partners.

In terms of foreign direct investments (FDIs), the EU remains the Philippines’ largest investment partner with its total stock of investments rising further by 16% to nearly €8B as of 2010 or about 30% of total FDI stock in the Philippines.

Trade with India expands 10%Bilateral trade between the Philippines and India increased by 10.8% to USD 1B in 2011 over 2010 and is seen to improve with the forthcoming integration of the ASEAN region by 2015.

Philippine Chamber of Commerce and Industry (PCCI) President Miguel B. Varela said a robust trend is seen to continue with the expanding cooperation in thriving industries like garments and textile.

Varela said activities like the recent Indian Textile Exhibition (Intexpo Philippines 2012), will be able to help revive the country’s ailing garments industry.

“The Intexpo showcases the best of the Indian industry. It shows us how much our country can learn and gain from trading with our Indian counterparts,” Varela said.

11July 2012

ON THECALENDAR

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“The growth of the franchising industry will be coming from Asia and it will be spearheaded by the Philippines. When it comes to franchising, we are way ahead compared to other countries in Asia,” Philippine Franchise Association (PFA) Vice Chairman and Francorp Chief Executive Offi cer (CEO) Alegria Sibal-Limjoco said.

To make sure franchisers in the Philippines will get continued retooling, Limjoco said the PFA periodically brings in foreign experts. Some such foreign experts will be featured in this year’s Franchise Asia Philippines (FAP) 2012 Expo from July 25 to 29 at the SMX Convention Center.

PHL among top 10 hosts for PPP projects A study conducted by the Economic Intelligence Unit (EIU) showed that the Philippines’ public-private partnership (PPP) program has been ranked at the middle among 16 emerging and developed nations in Asia.

The study was commissioned by the Asian Development Bank (ADB) and conducted by the EIU. It uses a benchmark index system to rank the readiness and capacity of a country to carry out sustainable, long-term PPP projects.

It said the Philippines, Viet Nam, Mongolia, Papua New Guinea, Pakistan, Bangladesh, Kazakhstan, Thailand, and Indonesia are putting in place the necessary laws

and structures to attract more private investment.

ADB Deputy Director General for Regional and Sustainable Development Woochong Um said to leverage the reported USD8T required over the next decade for physical infrastructure in Asia, public fi nanciers like ADB must undergo a complete change of mindset and shift their focus from sovereign projects to PPPs.

PHL can be Asia’s creative hubThe Philippines can be Asia’s creative hub, Leo Burnett Malaysia Head of Creative Eric Cruz said.

“We can be better than Thailand and Hong Kong in fi lm processing if only the government can help provide the vibrant atmosphere modernize and infuse incentives to help our creative industries,” Cruz said.

To help advance the growth of the local creative industry, Cruz said that government should invest more on infrastructure and people.

Cruz added that the local creative industry was picking up, having won prizes in international advertising competitions.

PHL to benefi t from motorizationThe government is being encouraged to begin placing critical measures in preparation for the foreseen high motorization industry in the Association of Southeast Asian Nations (ASEAN) by 2015.

Toyota Motor Philippines (TMP) President Michinobu Sugata said the company’s bullish forecast was anchored on an outlook that pointed to 2012 as a “turning point for the Philippine automotive industry, with the full recovery from the Japan and Thailand crises expected to happen this year.”

Motorization refers to increased demand for mobility that is expected to pave the way for the rise in motor vehicle ownership.

Digital Electronics WorldDigital Electronics World, an exhibit presenting the newest and emerging technologies, will be held on August 16-18, 2012 at the SMX Convention Center in Pasay City.

To be showcased are audio and video systems, computer-based training system, digital audio system, digital home and entertainment, and electronic boards, among others.

CommworldCommworld, a trade show dedicated to the information and communications technology (ICT) industry, will feature industry growth areas’ products and services on August 16-18, 2012 at the SMX Convention Center in Pasay City.

Technologies including 3G/GPRS/HSDPA, antennas, towers and accessories, application software, base station, battery supplies, broadband technology, broadcasting technology, CAD/CAM/CAE/CIM, call center technology, camera equipment and accessories, cellular switching systems, and communications software and services will be featured.

Philippine Business Report12

Entered as Third-Class Mail at theMakati Central Post Offi ce

under Permit No. 504valid until 31 December 2012

Philippine Business ReportJuly 2012

Philippine Business Report is published monthly by the Trade and Industry Information Center (TIIC), Department of Trade and Industry, 2F Trade and Industry Building, 361 Sen. Gil J. Puyat Avenue, Makati City 1200, Philippines • Phone (+632) 895.3611 • Fax (+632) 895.6487 • To subscribe, e-Mail: publications@dti.gov.ph

Editorial Team: Anne L. Sevilla, Editor-in-Chief • Vic S. Soriano, Managing Editor • Cresenciano P. Par, Assistant Editor • Jam A. Hourani, Ariel B. Salcedo, Elaine M. Lazaro, and Emman R. Caleon, Writers • Ren C. Neneria, Design Layout • Myrna V. de los Reyes, Circulation.

Economic Indicators

*GNI - Gross National Income

01234567

4Q (2010) 1Q (2011) 2Q (2011) 3Q (2011) 4Q (2011) 1Q (2012)

GNI Growth Rate (%)

01234567

4Q (2010)1Q (2011) 2Q (2011) 3Q (2011) 4Q (2011) 1Q (2012)

GDP Growth Rate (%)

126.5127

127.5128

128.5129

129.5130

May-12Apr-12Mar-12Feb-12Jan-12Dec-11

Consumer Price Index(2000 base year)

012345

May-12Apr-12Mar-12Feb-12Jan-12Dec-11

Inflation Rate (%)(1994 base year)

40.541

41.542

42.543

43.544

Jul-12Jun-12May-12Apr-12Mar-12Feb-12

Peso per US Dollar Rate

As of July 5, 2012As of July 5, 2012

3.83.9

44.14.24.34.44.5

Jun-12May-12Apr-12Mar-12Feb-12Jan-12

Interest Rate (%)

010002000300040005000

Apr-12Mar-12Feb-12Jan-12Dec-11Nov-11

Exports (In USD Billion)

4,200 4,400 4,600 4,800 5,000 5,200 5,400 5,600

Apr-12Mar-12Feb-12Jan-12Dec-11Nov-11

Imports (In USD Billion)