1September 2014

Volume 25 No. 09 September 2014

Investments registered with the Philippine Economic Zone Authority (PEZA) rose to P127.5B in the first seven months of the year, or a growth of 30.8% over the P97.48B recorded in the same period last year.

PEZA Director General (DG) Lilia de Lima attributed the growth to foreign companies that continue to invest and establish their operations in the country.

For July alone, PEZA approved 12 new export enterprises that were eligible to enjoy fiscal and non-fiscal incentives offered by the investment promotion agency (IPA) to its locators.

Four of these newly registered enterprises are owned by Filipinos while the remaining eight are set up by foreigners (Swedish, Dutch, Chinese, Japanese, Korean, and Taiwanese).

Twelve new IT companies were also approved in July, of which only one is a Filipino firm, while the rest are managed by foreign companies from the Netherlands, Australia, United States (U.S.), Singapore, and the United Kingdom (UK).

For 2014, PEZA is targeting at least a 10-% growth in the value of investments to be approved, which will be driven largely by the following sectors:

q Agro-industrialq Electronics (automotive

electronics, consumer electronics, and printing

equipment)q Garments, bags, and shoesq IT servicesq Transport (aerospace, car parts,

and shipbuilding)

PEZA is among the government’s IPAs mandated to promote investments in export-oriented manufacturing and service facilities inside selected areas classified as special economic zones.

It grants both fiscal and non-fiscal incentives to registered enterprises, including income tax holidays (ITH) and liberalized visa application procedures for foreign nationals, to encourage investments within the ecozones.

To date, the country has 17 agro-industrial ecozones, 197 IT parks and centers, 66 manufacturing ecozones, two medical tourism zones and 18 tourism ecozones available for foreign and local investors.

PEZA investments hit P127.5B in 7 months

Philippine Business Report2

INDUSTRYTReNDS

PHL an emerging manufacturing economyThe Philippines has been identified as one of the “emerging manufacturing nations” in the region, the July 2014 edition of the Asia Briefing Magazine showed.

In the report titled “Manufacturing Hubs Across Emerging Asia,” Hong Kong-based Dezan Shira and Associates regarded the Philippines, together with Viet Nam and Indonesia, as an “emerging manufacturing nation” based on a number of factors such as key industries, investment regulations, and labor, shipping, and operational costs.

The Philippine government, for its part, has been aggressively pushing for a resurgence of the local manufacturing sector, which was deemed as key to inclusive economic growth. The development of this sector is expected to generate the much-needed employment and could help the country tap regional production networks.

At present, the goal is to make the Philippine manufacturing sector account for 30% of the country’s gross domestic product (GDP) by 2030 from the current 23%.

“The country’s manufacturing sector is growing by leaps and bounds,” Economist Cielito F. Habito said in his column in the Philippine Daily Inquirer “Manufacturing on a roll.”

Habito said data from the Philippine Statistics Authority (PSA) showed that the number of manufacturing firms with 20 workers or more jumped to 7,313 from 4,663 in 2010, or a 57-% growth in 2012.

“This is the latest hard evidence that manufacturing in the country has been in resurgence since 2010, when the sector swung around to a 12.3-% jump from 5.1-% contraction in 2009,” he said.

30% of USD 1.4-B ASeAN halal market eyedThe Philippines is eyeing to capture 30% of the USD 1.38-T halal market in the Association of Southeast Asian Nations (ASEAN) region by 2016.

"USD 15.9B is our potential business if we get 30-% share by 2016," Muslim Economic Affairs Director of the National Commission on Muslim Filipinos (NCMF) Director Aleem Siddique Giapal said.

To date, 18 certifying halal agencies operate in the country, nine of which are members of the Federation of Halal in the Philippines.

Alliance for Halal Integrity in the Philippines Chief Executive Officer (CEO) Potre Diampuan said demand for halal foods and non-food services is expected to increase rapidly as the Muslim population in the Philippines is increasing 1.8% annually.

Diampuan said most of the Filipino Muslims' halal foods and non-food stuff are still imported from Malaysia due to the credibility of local halal producers.

"Halal is not just about food but an Islamic way of life, it has evolved to become a big business," said Diampuan.

PHL positioned as tech hubThe Philippines’ potential as an emerging technology hub in the region was highlighted during the “Geeks on a Plane” (GOAP) tour led by venture capital firm 500 Startups.

Included in the tour were primarily United States (U.S.)-based venture

capitalists, startup founders, and technopreneurs.

500 Startups is aiming to raise USD 100M in venture capital funding for startups around the world, including the Philippines.

GOAP is supported by the United States Agency for International Development (USAID) through its Science, Technology, Research, and Innovation for Development (STRIDE) Program.

“We look at the country as a whole, and when you look at the developmental sense as a nation, the Philippines is in particular position in the world, and I think we take that into account as well,” USAID’s STRIDE Program Head David Hall said.

Investors see potential growth in the Philippines in terms of economy because of small and medium enterprises (SMEs), Hall said.

“We’re very proud to host the very first ‘Geeks on a Plane’ contingent to land in the Philippines,” IdeaSpace Foundation Inc. President and Co-founder Earl Martin Valencia said.

PHL seeks to become global hub for smarter analyticsThe Philippines has set its eye on becoming the global center for smarter analytics, a multi-billion dollar business of analyzing data for business opportunities, which experts say offers a bright spot for Filipino professionals.

Baker & McKenzie Global Services Manila Human Resources Director Eric Riego de Dios said the country is already taking steps toward this goal.

“The country takes a stab at becoming the global center for smarter analytics,” de Dios said during the Asia HR Summit 2014 held in Makati City in July.

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International Data Corp. (IDC) has predicted that the market for Big Data will reach USD 16.1B in 2014.

The IDC is a global provider of market intelligence and advisory services, on information technology (IT), telecommunications, and consumer technology markets.

According to Wikipedia, analytics is “defined as the discovery and communication of meaningful patterns in data.” Companies commonly apply analytics to business data to describe, predict, and improve business performance.

Big data is a catchphrase that refers to a massive volume of both structured and unstructured data that is so large it is difficult to process using traditional database and software techniques.

Success Factors HR Value Engineer Mark Souter encouraged HR practitioners to consider adopting analytics.

“We should also learn the language and practices of analytics,” Souter said.

He added that there is a huge opportunity for the Philippines and HR practitioners in the field of analytics.

Local franchise industry going strongMembers of the Association of Filipino Franchisers Inc. (AFFI) have remained optimistic of franchising prospects for 2014 as they expect their total sales to grow by 15% from the P54B posted last year.

They attributed their confidence on the Filipino market's growing affluence and the rising demand for services, particularly for health and wellness, and education.

AFFI President Victor M. Fernando said the retail and service sectors have come out strong over

the last eight years, as firms under this category now account for some 45% of the total franchises, while the remaining 55% fall under the food category.

With the expected strong growth for homegrown franchises, AFFI is now preparing their members for the forthcoming establishment of the ASEAN Economic Community (AEC) by end-2015.

Under an integrated regional economy, the 10 ASEAN member-states are expected to be transformed into a single market and production base, to be characterized by the free flow of goods, services, skilled labor, investments, and capital.

Fernando said the biggest challenge for AFFI members would be the increased and tougher competition given the entry of foreign brands.

As of end-2013, AFFI had a total of 120 members and about 16,000 franchises that employed some 96,000 across the country.

"Competitiveness is the key to an SME's potential success in ASEAN. In order to become more competitive, an SME needs to level-up on all facets of its business — competence and skill of key people, depth of technological and market expertise, mastery of all particular operations details, constancy of facilities upgrading, enhancement of brand image projection, refinement of visual design, etc.,” Fernando said.

1M kilos of meat exported in Jan-MayThe Philippines exported a total of 927,592 kilograms (kg) of canned and processed meat for the period of January to May this year, the Department of Agriculture (DA) reported.

Hotdog and corned beef accounted for 58.42% and 17.18%, respectively, of the total meat shipments while other assorted processed products shared 24.40%.

DA Secretary Proceso J. Alcala said the meat-processing sector has also produced P200B in sales turnover and has generated direct and derivative employment of about 100,000 jobs.

Data from the Bureau of Agricultural Statistics (BAS) showed that for the first quarter of 2014, livestock production went up by 1.20%, accounting for 15.44% of the country’s total agricultural output for the said period last year.

Alcala urged local hog producers to prepare for the upcoming Association of Southeast Asian Nations (ASEAN) free trade in end-2015, stressing that an open market would offer advantageous opportunities for the local hog industry.

“Remember, ours is the only foot-and-mouth disease-free country without vaccination in the Southeast Asia, and we must take advantage of that,” he said.

Demand up for retirement facility in CebuThe Board of Investments (BOI) reported a growing interest from investors seeking to set up integrated retirement facilities in the Philippines, including Cebu.

Retirees from all over the world such as Japanese and Taiwanese, among others, are already looking at facilities in the Philippines where they could retire.

Megaworld Corporation announced that a group of Japanese retirees acquired majority of the condominium units in one of their towers at the Mactan Newtown project.

Philippine Business Report4

On the same note, RHC Executive Director Marc Daubenbuechel said the number of retirees looking for homes outside their own countries is increasing each year so the Philippines must be able to cater to their need for retirement communities that fit their lifestyle.

Daubenbuechel warned that the country could miss out on this booming market if the developers continue to offer mere sleeping quarters, rather than a retirement village.

Department of Trade and Industry (DTI)-Cebu Provincial Director Nelia Navarro said Cebu will maximize its potential to attract thousands of retirees looking for alternative vacation homes outside of their countries.

Filipinos third most confident globally Consumer confidence in the Philippines rose in the second quarter of the year, bucking a decline seen in many Southeast Asian countries, research firm Nielsen said in its latest Global Survey of Consumer Confidence and Spending Intentions report.

The Philippines’ Consumer Confidence score increased 4 points, from 116 in Q1 to 120 in Q2.

The survey, which polled over 30,000 online respondents (500 in the Philippines) in 60 economies from May 12-30, measured consumer confidence, major concerns, and spending intentions.

Nielsen said that “escalating political instability and rising food prices” in the region dampened

consumer confidence in a number of Southeast Asian countries.

In the Southeast Asia, only the Philippines and Malaysia, whose scores increased one point from 92 in Q1 to 93 in Q2, saw their confidence scores improve.

“The Philippines is showing quarter-on-quarter increase in consumer confidence which is largely driven by a strong economy and its growing middle class population,” Nielsen Philippines Managing Director Stuart Jamieson said.

Some 80% of the Filipino respondents said they were positive about the state of their personal finances over the next 12 months, well above the global average of 56% and second in the region to Indonesia’s 85%.

Domestic ecozones to get limited perksThe Department of Trade and Industry (DTI) plans to grant a 5-% corporate tax rate to locators in the proposed domestic economic zones.

Domestic ecozones are proposed locations for companies catering mainly to the domestic market. The Philippine Economic Zone Authority (PEZA) grants full incentives to special ecozones that export most of their products.

DTI Secretary Gregory L. Domingo said the government was pushing for limited incentives that would not put other companies outside the domestic ecozones at a disadvantage.

“The incentives should be limited to create a level playing field with companies existing outside the ecozones. The domestic ecozones will be under the Philippine Economic Zone Authority (PEZA),” Domingo said.

Domingo said the government preferred the creation of domestic ecozones outside major cities and in the poorest provinces.

PEZA Promotions and Press Relations Group Manager Elmer San Pascual said the agency had already forwarded a memorandum to Domingo, noting that many Japanese companies were just waiting for the perfect timing to put up manufacturing facilities, especially for consumer durables.

Foreign automotive suppliers are also interested in setting up operations but are restricted by the lack of incentives on companies producing for local markets, San Pascual said.

“It is within the law that we can give 5-% tax break to companies locating inside any of the government ecozones, but we’re not doing that. We can do that for the domestic ecozones but companies will still be subject to tax and duties as stipulated under customs valuation, once they start selling locally,” Domingo said.

San Pascual said PEZA was confident the 5-% special tax rate would be enough to attract investors to set up operations inside domestic ecozones. Companies outside ecozones meanwhile, are subject to a 30-% corporate tax.

PHL still leads India in outsourcingThe Philippines continues to edge out India in the business process outsourcing (BPO) voice segment, BPO firm Shore Solutions Inc. reported.

“The voice experience in the Philippines is a far more positive experience,” Shore Solutions Chief Operating Officer Jonathan Smith said.

“Talking to a Filipino agent is a far more pleasant experience and although the Philippine peso appreciation was fairly substantial, the voice work is still coming here,” Smith said.

He added that the Philippines also boasts of low labor costs, highly skilled and diligent workforce, cultural compatibility with both East and West, affordable

5September 2014

and stable telecom infrastructure and strong government support to the BPO industry.

Smith said more firms were tapping the Philippine BPO sector for higher value-added business particularly in the software development space, which included programming and iOS development, among others.

Shore Solutions is investing roughly P90M to add 500 more seats this year within its existing four facilities in Bonifacio Global City in Taguig City and in Mandaluyong City, thus increasing total employment to 2,500 by yearend.

The company is likewise considering to put up by next year a fifth facility south of Metro Manila, either in Alabang or Laguna, which would hire an initial 500 employees.

14 U.S. franchises show interest in PHL The United States (U.S.) Franchise Trade Mission, with representatives from 14 American franchises headed by US Department of Commerce Senior International Trade Specialist Kristin Houston, recently pitched business concepts to local businessmen as it declared its strong interest in expanding in the Philippines.

U.S. Franchise Trade Mission Representatives

q Edible Arrangementsq Jan-Pro Cleaning Systemsq Panda Expressq Pretzelmakerq Russo’s New York Pizzeriaq Title Boxing Clubq World of Beerq Great American Cookiesq Marble Slab Creameryq PJ’s Coffeeq RadioShackq Tilted Kilt Pub & Eateryq Tutor Doctorq Wow CaféSource: International Franchise Association (IFA)

“We started inquiring from these companies last February 2013 on what countries they felt are most important and the best strategically, the best dynamic

in the country for success in franchising, and the Philippines was the one they mentioned as an important market,” Houston said.

A total of 23 franchise companies applied for the delegation, but only 14 brands were chosen after an evaluation by the U.S. commercial services as to which franchises have the biggest chance of success in the Philippine market.

International Franchise Association (IFA) Director Josh Merin said there is a dramatically growing interest in the Philippines as a franchise market.

“Companies are saying that the Philippines is a much more appropriate and sophisticated market than ten years ago. Some of the reasons for this evolution are the growing Philippine economy, the perceptivity to U.S. brands, the strong cultural ties between the U.S. and the Philippines, and the growing sophistication of the Philippine business sector,” Merin said.

Trade lists investment possibilities in Israel The Department of Trade and Industry (DTI) has identified seven investment priority sectors for promotion to Israel as well as products for export to that country.

The seven priority sectors include public-private partnership (PPP) projects in infrastructure, manufacturing, energy (renewable energy, power), tourism, agribusiness, mining, and oil and gas.

Products for export promotion to Israel

q Fresh processed foodsq Organic and natural productsq Beauty or makeup preparationsq Automotive parts and accessoriesq Leather footwearq Furniture and furnishingsq Construction and refrigeration services

Source: DTI-Sector Planning Bureau (SPB)

TRADe ANDINVeSTMeNTS

AGRICULTURE/AGRIBUSINESS AND FISHERY

Florida firm seeks PHL lab partnerBioTork, a Gainesville-based company, wants to work with a Philippine laboratory that will validate its technology of producing high-value fish feed from molasses with the use of its patented micro-organisms, Philippine Ambassador to the U.S. Jose L. Cuisia Jr. said after recently leading an economic mission to Florida.

BioTork is also interested in having a joint venture with a Philippine company that can adapt its technology into existing fermentation infrastructure and capacity.

Agriculture Attaché Dr. Josyline Javelosa, who accompanied Cuisia in the mission, stated that the Department of Agriculture (DA) will link BioTork with the University of the Philippines in Los Baños and the sugar industry for the simultaneous validation of this technology as applied to molasses produced in Philippine sugar mills.

“The University of Florida’s Center for Renewable Chemicals and Fuels has also welcomed potential collaboration with Philippine research institutions such as on biofuel production from sugar bagasse,” said Javelosa.

BANKING

Metrobank opens 3 branches in MindanaoMetropolitan Bank & Trust Company (Metrobank) has opened three branches in Mindanao as part of its 30-branch nationwide expansion goal this 2014.

Philippine Business Report6

New Metrobank branches in Mindanao

q Bongao, Tawi-Tawiq Isulan, Sultan Kudaratq Polomolok, South Cotabato

Source: Metrobank

Metrobank said these branches will further expand coverage to all regions of the Philippines.

The expansion program will bring a total of 860 to the bank’s total branch network. There are 14 branches already installed for the first half of the year.

ENERGY

Philex Pet, China oil firm restart talksPhilex Petroleum Corp. has restarted talks with the state-run China National Offshore Oil Corp. (CNOOC) for a potential partnership with the Recto Bank in Northwest Palawan.

The locally listed petroleum firm plans to invest as much as USD 70M to drill two exploration wells in 2016.

“We’re still considering how to mobilize in respect to the extension, how to mobilize the resources needed for the appraisal wells by 2016,” Philex Petroleum Corp. Chairman Manuel V. Pangilinan said.

EXPORT

Alaska seeks perks for non-dairy creamerAlaska Milk Corp. is applying for registration with the Board of Investments (BOI) as an export producer of non-dairy creamer on a non-pioneer status.

According to the notice posted by BOI, the application indicated an annual capacity of 67,731 metric tons (MT) and with project site located in Magsaysay Road, Barangay San Antonio, San Pedro, Laguna.

Incentives that Alaska will receive should its application be approved include:

• Four-year income tax holiday• Duty-free importation of capital equipment• Employment of foreign nationals

in supervisory, technical or advisory positions for five

years from date of registration• Simplified customs procedures

for importation of equipment and raw materials.

INFRASTRUCTURE/PUBLIC PRIVATE PARTNERSHIP

Russian investors eye mega PPP projectsRussian investors have expressed interest to invest in mega-projects in the Philippines, specifically in infrastructure and waste-to-energy ventures, Honorary Consul of the Russian Federation Armie L. Garcia said.

Better if they are open for Public-Private Partnerships (PPP), he added.

Garcia said more Russians are now eyeing the Philippines as their preferred investment site in the Association of Southeast Asian Nations (ASEAN) because of its strategic location in the region.

Aside from mega projects that are inked via PPP agreements, Russian investors are also interested in industries such as banking, medical technologies, wellness, food, real estate and construction, mining equipment supplies, waste recycling, information technology, and manufacturing, among others.

Retirees have also expressed strong interest to invest in properties where they can live out their retirement years in the Philippines.

Maynilad allots P10.4B for wastewater, NRW managementOf its P18B capital expenditure (CAPEX), Maynilad Water Services, Inc. (Maynilad) has allocated P8.2B for wastewater management projects while P2.2B has been earmarked for their Non-Revenue Water (NRW) Management.

Among its wastewater management projects is the P1-B Pasay Sewage Treatment Plant (STP) in Malibay, Pasay City capable of processing 46,600 cubic meters of wastewater daily, almost as much as 2.5-M five-gallon water containers.

The project is partly financed through a loan from the World Bank (WB) and will utilize a compact version of the Activated Sludge Process (ASP) technology that is used globally.

Construction of the Pasay STP began last June, seen to service 254,000 clients in Pasay and Makati City, and aid in the clearing of the Maricaban Creek.

Other Maynilad wastewater management projects

Project Location

Sewage and septage Muntinlupatreatment plant and Parañaqueconveyance systems Pasay ValenzuelaSource: Maynilad

Maynilad concession areas

Greater Manila Area (GMA) West Zoneq Caloocanq Las Piñasq Makati (West of South Super Highway)q Malabonq Muntinlupaq Navotasq Parañaqueq Pasayq Portions of Manilaq Portions of Quezon Cityq Valenzuela

Parts of Caviteq Bacoor Cityq Cavite Cityq Imus Cityq Kawitq Noveletaq RosarioSource: Maynilad

Under the budget for its NRW Management Program for 2014, P941M was set aside for the

7September 2014

renovation of pipes in some of its concession areas.

“We inherited a lot of old and deteriorated pipes in our concession area. By modernizing our distribution network, we can avoid unplanned water interruptions and protect the water supply of our customers,” said Maynilad President and Chief Executive Officer (CEO) Ricky P. Vargas.

One project was the replacement of 39 km of pipes in Dalandanan, Malinta, and Marulas, Valenzuela City worth over P325M.

MWSS opens auctions for Bulacan water projectBidding for the P24.4-B Bulacan Bulk Water Supply Project under the Public-Private Partnership (PPP) scheme has been launched by the Metropolitan Waterworks and Sewerage System (MWSS).

Last 20 June, the Invitation to Prequalify to Bid (ITPB) was posted, while the deadline for the submission of prequalification documents was set last 5 August.

The project aims to supply more than 2M residents of Bulacan with 230M liters of potable water per day.

Alloy Mtd. Philippines Inc., the local arm of Malaysian firm Alloy Mtd. Group expressed interest in the project and has partnered with Datem Water, Inc., a fresh entrant into the water industry.

Another PPP project that Alloy Mtd. is considering is the P123-B Laguna Lakeshore Expressway Dike project which the Metro Pacific Investments Corporation is also eyeing.

The Malaysian infrastructure company is looking for a partner in the real estate sector that can give a valuation of the area’s profitability as it may become a major thoroughfare.

The expressway may supplement the Bicutan-Calamba stretch of the South Luzon Expressway, one of two

major roads leading to the southern residential areas with the other being the Coastal Road.

Project coverage

q Design, construction, and developmentq Financingq Operation and maintenance (O&M)

Source: Metropolitan Waterworks and Sewerage System (MWSS)

Facilities

q Booster pump stationq Reservoirq Transmission mains and connection to

concession trunk linesq Water treatment plant

Source: Metropolitan Waterworks and Sewerage System (MWSS)

NAIA Terminal 3 begins full operationAfter 17 years and four administrations, the 182,500-sqm Ninoy Aquino International Airport (NAIA) Terminal 3 is fully operational following the completion and integration of the terminal’s system works by Japan’s Takenaka Corporation.

Starting last August to the end of September, five airlines will transfer its operations from NAIA 1, decongesting outflow from the current 8M to its design capacity of 4.5M.

Terminal 3, with its 34 air bridges and 20 contact gates, will now be able to concurrently attend to 28 planes and accommodate up to 6,000 passengers per hour, around 33,000 peak passengers daily, and about 3.5M passengers annually.

Takenaka Corp. inked a USD 40-M construction work agreement with the Department of Transportation and Communications (DOTC) last August 2013 to complete the remaining works for the airport to be fully operational in one year.

The Japanese firm was the contractor first consigned in 1997 by the

Philippine International Air Terminals Co. (PIATCO) for the construction of NAIA 3 but was impeded in 2002 due to legal disputes, including a case between the government and PIATCO and Fraport AG, its German shareholder.

Relocating airlines

Airline Transfer scheduleqDelta Airlines 1 AugustqKLM Royal Dutch Within first week Airlines of AugustqCathay Pacific End of SeptemberqEmirates End of SeptemberqSingapore Airlines End of September Source: Manila International Airport Authority (MIAA)

System works inclusions

q Baggage handlingq Computer terminalsq Flight-information displaysq Gate coordination and fire-protection systemsSource: Department of Transportation and Communications (DOTC)

Panglao airport work to start soonThe construction phase of the New Bohol (Panglao) International Airport Development Project may begin this November following the opening and evaluation of technical proposals from five groups of bidders from Japan last 19 June.

Awarding of the civil works contract is slated for this month, following the conduct of the financial evaluation and after the assessment of the technical proposals.

The target completion for the project, which will have an environmentally sustainable 2,000-m runway and 8,270-sqm passenger terminal building in a 220-ha area in Panglao, is 30 months after the contract is awarded.

“The economic development impact of this new airport cannot be overemphasized. It will boost Bohol’s tourism to unprecedented levels, and will contribute much towards making our Heart of the Islands globally competitive in the tourism market,” said Bohol Governor Edgar M. Chatto.

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Financing for the civil works of the project is covered by a JPY 10.78B or around P4.6B official development assistance loan from the Japan International Cooperation Agency (JICA) while the P2.34-B 30-year operation and maintenance (O&M) contract will be bidded out under the Public-Private Partnership (PPP) scheme.

Once completed, the Panglao airport will replace the Tagbilaran airport which will be turned into a mixed-use development for use of light industries, such as clothing and electronic manufacturing, and the information technology and business process management (IT-BPM) industry.

Japanese contractorsq Chiyoda-Mitsubishi Joint Ventureq Maeda-Toyo Joint Ventureq Shimizu Corporationq Sumitomo-Mitsui Construction Co. Ltd.q Taisei-JATCO Joint Venture

Source: Public-Private Partnership (PPP) Center

Bidding opens for ITS-South TerminalThe Invitation to Prequalify and Bid for the P4-B Integrated Transport System (ITS) Project - South Terminal had been posted by the Department of Transportation and Communications (DOTC) last 31 July with a deadline of submission of prequalification documents set for 6 October.

Bidding for the 35-year contract will be under the Public-Private Partnership scheme and will have a Build-Transfer-Operate (BTO) structure.

To be built in Arca South, previously the Food Terminal Incorporated (FTI) Complex, the ITS South Terminal will have an intermodal hub to connect passengers from Laguna and Batangas to various modes of transport in Metro Manila.

Meanwhile, the P2.5-B ITS Southwest Terminal Project to be located along Coastal Road in Parañaque is already going through the bidding process with bids by 12 companies expressing interest to be opened this month.

opened the office to establish the Philippines as its Asian regional hub.

“It’s good to have local presence and it’s easy to fly out of Manila to visit our customers in the region...this is not outsourcing, these are our people serving our customers,” Svane said.

The Manila office will handle support for over 40,000 customer accounts in the region. The company provides a cloud-based customer service platform, also called Zendesk, that includes ticketing, self-service options, and customer support features.

MANUFACTURING

PASAR looking forward to copper manufacturingThe Philippine Associated Smelting and Refining Corp. (PASAR) has submitted feasibility study for copper rods to the Board of Investments (BOI) while that for enameled copper wire is being readied in preparation for the possible formation of a manufacturing plant for the copper materials.

Regarded by PASAR as a possible gateway to the establishment of more manufacturing plants in the Philippines, the enameled copper and copper wire production will be located in the domestic economic zone planned by the Philippine Economic Zone Authority (PEZA).

Enameled copper wires are used as a raw material for the production of magnetic wires needed for the assembly of electric motors, which in turn is utilized in various ways by the manufacturing sector.

“That’s what we want to develop, the low-level supply chain for copper rods or wire,” said PASAR Chairman Angel N. Veloso Jr.

Asian expansion through PHL planned by Coca-Cola FeMSAAfter acquiring Coca-Cola Bottlers Philippines Inc. in 2013, Coca-Cola

DOTC is looking at a feasible location for an ITS Terminal for passenger coming from North Luzon.

ITS South Terminal contract coverage

q Design and constructionq Financeq Operation and maintenance (O&M)

ITS South Terminal facilities

q Arrival and departure baysq Park-ride facilitiesq Passenger terminal buildingq Public information systemsq Ticketing and baggage handling facilities

Companies interested in ITS Southwest project

q Altus San Nicolas Corp.q Ayala Land, Inc. and Ayala Corp.q D.M. Wenceslao and Associates Inc.q Egis Projects Philippinesq Expedition Properties Corp.q Filinvest Land Inc.q Megawide Construction Corp.q Metro Pacific Tollways Corp.q Robinsons Land Inc.q San Miguel Corp.q State Properties Corp.q Vicente T. Lao Construction

ITS Southwest Terminal facilities

q Arrival and departure baysq Park-ride facilitiesq Passenger terminal buildingsq Ticketing and baggage handling

facilitiesq Transfer facilities

Areas considered for ITS North

q Area in the University of the Philippinesq Philippine National Railways (PNR)

Caloocan stationq Former Manila Seedling Bank, EDSA, Quezon AvenueSource: Department of Transportation and Communications (DOTC)

IT-BPM

Zendesk opens PHL officeSan Francisco-based information technology (IT) company Zendesk, Inc. has inaugurated its Philippine office in Taguig City last 24 July.

Zendesk Chief Executive Officer (CEO) Mikkel Svane said they

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Fomento Económico Mexicano, S.A.B. de C.V. (FEMSA) is looking to expand through Asia by using its Philippine operations as a platform.

The Mexico-based company already expressed its intent to Department of Trade and Industry (DTI) to expand its operations in the Philippines.The company previously set aside USD 150M, part of which include building of five new polyethylene terephthalate (PET) lines and improvement of the present lines for its returnable glass bottle production to meet the volume.

The building of 5 new PET lines and improvement of existing lines will allow for the manufacturing of an additional 150M bottles each for the PET and glass types.

The expansion of bottling capacity will also localize the research and development of products for distribution in the country.

New PET line locations

q Laguna 4 linesq Masamis Oriental 1 linesSource: Coca-Cola FEMSA Philippines

MASS HOUSING

Low-cost condo to rise in Tondo8990 Holdings Inc. plans to develop a low-cost, mid-rise residential condominium with an integrated mall in an 8.47-ha area in Vitas, Tondo, Manila.

Through its subsidiary 8990 Housing Development Corp., the land was bought at P1.61B.

The mid-rise project will be under the Urban Deca Homes brand and is estimated to have 15,000 units.This will be the company’s second planned development to have an integrated retail center, with the first in a 13-ha area in Ortigas Avenue Extension, Pasig City.

MINING

Semirara investing USD 400M for Calaca plantSemirara Mining Corp. is planning to spend USD 400M to boost the capacity of its Calaca coal-fired power plant.

According to Semirara Chief Executive Officer (CEO) Isidro A. Consunji, the company may sign a syndicated loan for 70% of the cost of the expansion as early as next quarter.

Fresh supply is being added as the Philippines saw power demand rise by 50% in the 10 years from 2012. This, according to the Department of Energy (DOE) data, is more than three times the 16-% increase in generation capacity over the same period.

The expansion will increase the plant’s capacity by 350 megawatts (MW) to 1,200MW.

POWER

NDC, PNOC RC partners for mini-hydropower projectsThe National Development Co. (NDC), in partnership with the Philippine National Oil Co. Renewables Corp. (PNOC RC), has put up a P90-M, 1-megawatt (MW) mini-hydropower plant in Rizal, Nueva Ecija.

The plant is expected to be commissioned in May 2015 and will benefit Barangay Poblacion West, Rizal through a power sales agreement with the Talavera town-based Nueva Ecija Electric Cooperative II (NEECO II).

The facility is the initial undertaking of the partnership. PNOC RC said in a statement that it has a total of 20-MW hydropower projects in its portfolio for similar undertakings with NDC.

The government is currently eyeing Nueva Ecija as the country’s mini-hydropower plant capital because of these planned projects.

Expected benefits of the hydropower plant

q Lower electricity rates for Rizal; NEECO II would buy electricity produced at P4 per kilowatt-hour (kWh)

q Source of energy for Rizalq Boost economy of RizalqP700,000 in annual revenue (via the

National Irrigation Administration or NIA) that would be used to improve irrigation and other agricultural services that would benefit the farmers of Rizal

Source: National Irrigation Administration (NIA)

PNOC RC President Carlos Jose Gatmaitan said they are looking for more possible locations suited for hydropower generation and has so far found six sites.

REAL ESTATE

Italpinas to invest P4.3B in mixed-use projectItalpinas Euro-asian Design and Eco-Development Corp. is spending USD 100M equivalent to P4.3B for a mixed-use development named Primavera City. It will be built within El Pueblo Township in Cagayan de Oro.

The project will have an integrated residential and commercial development that will be established in a seven-year period in phases of two buildings at a time.

Italpinas will also incorporate green and eco-friendly design in Primavera City. The company will use 10,000sqm of semi-transparent photovoltaic panels. It will cover the buildings’ entire roofs that would generate 1M kilowatt-hour per year.

The residences’ design are firmly related to their location wherein they cannot perform it they are built somewhere else.

The residents can save as much as 30% in electricity cost by just harnessing the ventilation, Italpinas Chairman and CEO Romolo Nati said.

Philippine Business Report10

SLI expands hotel, condotel portfolioSta. Lucia Land, Inc. (SLI) is expanding its hotel and condotel portfolio with more properties that will be built in key cities across the country.

The lined-up projects in various cities include Sotogrande Hotel Suites in Davao; Arterra Residences at Discovery Bay in Cebu; Splendido Tower 2 in Tagaytay; Stradella at East Bel-Air in Cainta; Sotogrande Hotel in Neopolitan and in Katipunan, Quezon City; Sotogrande; and Santorini in Pasig.

“Based on our studies, the mix of hotel and residential units translates to better returns versus a whole building that’s solely a condominium or hotel,” SLI Vice President (VP) for Sales Paul Michael Robles said.

Araneta ‘makeover’ for P30BThe Araneta Center has allotted P30B for the renovation of at least three hotels, four residential towers, five business process outsourcing (BPO) buildings and the Gateway Mall’s expansion in the coming years.

As part of the commercial district’s 20-year “extreme transformation”, they are planning to add two to three more hotel developments apart from their soon to open Novotel Manila Araneta Center.

Novotel Manila Araneta Center’s construction is expected to finish by end-2014 and aims to open on the first quarter of 2015, Araneta Center Inc. Senior Vice President for Operations Antonio T. Mardo said.

RETAIL

Robinsons retail sets P7B capexRobinsons Retail Holdings Inc. raised its capital expenditure (capex) this year to build more stores in step with the improving economy and growing middle class.

“We will be spending an estimated P7B capital expenditures to fund our aggressive nationwide

expansion,” Robinsons Retail Holdings Inc. President and Chief Operating Officer Robina Gokongwei-Pe said.

Robinsons will open 300 stores this 2014; 21 supermarkets, four department stores, 25 Do-It-Yourself (DIY) stores, 100-120 convenience stores, 80-100 drugstores, and 50-55 specialty stores. Most of these stores will be located in Visayas and Mindanao.

“We are banking on the attractive macroeconomic environment, which includes rising middle income, shift from traditional to modern retail and increasing disposable income,” Gokongwei-Pe said.

PSC allots P2B capexThis 2014, Philippine Seven Corp. (PSC) has allocated P2B capital expenditures (capex) for the opening of 300 new 7-Eleven stores and renovating its 100 existing stores.

PSC plans to grow its stores and invest more in Visayas in line with improving its nationwide market share.

“PSC is targeting a store expansion rate of 25%, doubling store count every three years, a best guess and will likely change in response to conditions and unknowns,” PSC President and CEO Jose Victor Paterno said.

PSC aims to establish its footprint in the Visayas region that will need a large capital spending for warehouse and store openings.

TELECOM

PLDT rolls out P700M project in BoholPhilippine Long Distance Company (PLDT) rolled out a P700-M domestic fiber optic network project in Bohol.

This project will enable Bohol to host big ticket business process management (BPM) operations, with the capability of 40-GB speed

which is estimated to accommodate 160,000 call center seats,41M point-of-sales and 5.1M ATM transactions.

The company plans to establish the fiber optic connection in the province within two to three years’ time.

TOURISM

Hotel of Asia aims 5,000-room hotel business by 2020Hotel of Asia Inc. is developing a home-grown and foreign hotel brands in line with their goal of becoming a major industry player.

The company plans to build various hotels with a total of 5,000 rooms nationwide by 2020; majority of which will be through flagship of their condotel brand, Hotel 101.

They are full blast in constructing the first Hotel 101-Manila near the Mall of Asia Complex. It is scheduled for turnover on December 2015 but the company plans to finish it in an earlier date in time for the Asia Pacific Economic Cooperation (APEC) Summit in November 2015.

The second Hotel 101 project in Taguig near SM Aura will be launched in the first quarter of 2015.

COMPANY NOTeS

Megawide allots USD 100M for Re projectsMegawide Construction Corporation allotted about USD 100-M initial investment to develop various renewable energy (RE) projects in the next two years.

The construction firm inked a partnership agreement with PhilCarbon Inc., to start pilot testing of the new business.

The joint venture would be responsible for the portfolio development of RE projects

11September 2014

ON THeCALeNDAR

Unique miniature shoe exhibition ongoing at HallOneA unique miniature shoe exhibition titled “Stepping out of the Shoebox: A Filipino Exporter’s Journey to Global Manufacturing Excellence and Design” takes the audience in a journey into the inventive evolution of shoes throughout the centuries.

The exhibition, launched over the summer, is currently ongoing at HallOne of the International Trade Center in Pasay City, and will run until October.

2nd Philippine Business expo set in NovemberThe Philippine Small & Medium Enterprise (PhilSME) Business Expo 2014’s second edition is set to take center stage on 21 to 23 November 2014 at the SMX Convention Center Manila, Pasay City.

PhilSME, with the tagline “Boost Your Business,” is the largest trade event dedicated to the ASEAN SME Community in the Philippines. This 3-day show provides a platform to meet and network with industry professionals from the SME sector in a dynamic and focused business environment.

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ranging from biomass, wind, hydro, solar, and geothermal.

SM to build largest solar-powered mallSM Prime Holdings Inc. is building the largest commercial solar mall in the world as part of its commitment to use clean, renewable, and sustainable energy in its operations.

A 1.5-megawatt (MW) solar rooftop is currently being built at the SM City North EDSA which will be used to power up a significant portion of the mall’s energy requirements, SM Prime President and Chief Executive Officer (CEO) Hans T. Sy said.

The project will be built by Solar Philippines and will be operational next month.

mining, tourism, food production, and infrastructure, Ahmad said.

Israel agriculture firms explore investment opportunities in the PHLIsrael’s major agricultural firms are coming in November 2014 to explore investment opportunities in dairy, irrigation, water management, and other manufacturing ventures even as Jewish defense and security companies currently promote homeland security business.

The Philippines’ economic prosperity has encouraged Israeli firms to look into the Philippines stressing that Israeli companies used to invest in other countries in Asia such as China and Japan, Israel Trade Attaché Doron Hemo said.

The Israel Embassy is still recruiting members for the November agriculture investment mission but this early, big companies have already expressed interest to join.

UK seeks deeper economic ties with PHLThe United Kingdom (U.K.) wants to deepen economic ties with the Philippines whose open market and more sustainable growth have made it a more attractive trade and investment hub in the region.

The UK has a “long shopping list” of industries they want to invest in, which are in areas that are compatible with what the Philippines itself needs, British Ambassador to Manila Asif Ahmad said.

British companies are particularly interested in energy, construction,

ASeAN to liberalize investment rules for 24 servicesAn additional 24 categories of services will be open this year to greater Association of Southeast Asian Nations (ASEAN) investment under the ASEAN Framework Agreement on Services (AFAS), which aims to reduce investment barriers.

The National Council for Peace and Order (NCPO) gave the green light in July for the country to sign an agreement on the services sector at next month’s ASEAN Economic Ministers (AEM) meeting in Myanmar.

The services include ship repair, international law consulting, accounting, ship and cruise rental, online information providers, and cross-ocean transportation.

Philippine Business Report12

42.543

43.544

44.545

Sep-14Aug-14Jul-14Jun-14May-14Apr-14

Peso per US Dollar Rate

economic Indicators

As of 10 September 2014

Published monthly by the Knowledge Management and Information Service, 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 • Online: http://www.dti.gov.ph/dti/index.php?p=116

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

Philippine Business Report

*GNI - Gross National Income

Entered as Third-Class Mail at theMakati Central Post Office

under Permit No. 504valid until 31 December 2014

September 2014

As of 10 September 2014

Sources: Bangko Sentral ng Pilipinas (BSP) National Statistics Office (NSO)

136137138139140141142

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

Consumer Price Index(2000 base year)

0100020003000400050006000

Jun-14May-14Apr-14Mar-14Feb-14Jan-14

exports(In USD Billion)

0

2,000

4,000

6,000

8,000

Jun-14May-14Apr-14Mar-14Feb-14Jan-14

Imports (In USD Billion)

0

2

4

6

8

10

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

GDP Growth Rate (%)

6

6.5

7

7.5

8

8.5

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

GNI Growth Rate (%)

0

2

4

6

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

Inflation Rate (%)(1994 base year)

5.35.45.55.65.75.8

Sep-14Aug-14Jul-14Jun-14May-14Apr-14

Interest Rate (%)Lending Regular