1March 2013

Volume 24 No. 03 March 2013

PHL gets “universal praise”From his participation in the World Economic Forum (WEF) in Davos, Switzerland, President Benigno S. Aquino III has brought home a stream of potential investments, new projects with existing investors, and a deal for the Philippines to host the WEF’s East Asia Summit next year.

Aquino attended a series of top-level meetings, especially the business executive forum hosted by Ayala Corp. that was attended by the top offi cials of more than 30 companies.

“I think there’s a universal consensus, both by the participants and by the Cabinet members present and our business sector, that it was a very successful meeting,” Aquino said.

“We were not on the radar’s range of so many entities for the last fi ve years or so, but now we are. So they want to know better.

We’ve received universal praise from so many quarters,” he said.

He presented prospective projects in the country’s three major sectors, namely infrastructure, tourism, and agriculture to global investors.

He said one of the prospective investors had indicated plans to send a mission to the Philippines to explore fresh investment possibilities. Even some companies with existing operations in the country, he added, are now keen on expanding.

Department of Trade and Industry (DTI) Secretary Gregory L. Domingo said the feedback after the roundtable was “very, very positive.”

“Some fi rms, including very big hedge funds based in the United States (U.S.), already indicated that they will be sending a team,” Domingo said.

Philippine National Competitiveness Council (PNCC) Co-Chair Guillermo M. Luz said Aquino’s WEF participation showed the progress the country has given to existing investors, which has opened the eyes of other investors who have not taken a close look at the country. The WEF is an independent international organization committed to improving the world’s state by engaging business, political, academic, and other society leaders to shape global, regional, and industrial agendas.

“We were not on the radar’s range of so many entities for the last fi ve years or so, but now we are. So they want to know better. We’ve received universal praise from so many quarters.”

Philippine Business Report2

INDUSTRYTRENDS

BOI readies investment conference, road showsThe Board of Investments (BOI) is preparing for its investment conference dubbed as “InvestMart” as well as for its road shows on business opportunities in the country’s different regions this year.

The BOI said the moves are part of the government’s efforts to increase domestic investments, even as it works to attract foreign fi rms to do business here.

“To complement our strengthened effort to attract foreign investors in the Philippines, we will continue to make parallel efforts to boost domestic investments in the country in 2013,” the agency said.

“We have also worked with industry players and associations in identifying potential investment areas and sectors for promotion such as the public-private partnership (PPP), pharmaceuticals, electronics, copper, and auto parts and components,” it added.

For this year, the BOI is targeting 11 investment road shows, which are primarily intended to provide a venue for the approved Investment Priorities Plan (IPP) presentation. Last year, the BOI conducted nine investment road shows in Dipolog, Butuan, Baguio City, Davao City, Cagayan de Oro City, Naga City, Tacloban, Cebu, and Bacolod.

PHL posts 6.6-% GDP The country’s gross domestic product (GDP) grew by 6.6% in 2012, beating the government and private economic analysts’ expectations.

Government offi cials cheered the “exceptional” growth rate, pointing to the robust economic growth as proof of the country’s

ability to move toward “equitable progress” on a policy of good governance.

“It is a resounding affi rmation of the Aquino administration’s fi scal strategy, backed by our robust macroeconomic fundamentals and more importantly, the principles of good governance,” Department of Budget and Management (DBM) Secretary Florencio B. Abad said.

Presidential Spokesperson Edwin Lacierda attributed the economic growth to private sector activity driven by the administration’s policy reforms.

While it was initially driven by government stimulus, the economic growth was now increasingly being driven by private sector activity, including investments, which grew by 8.7% in 2012.

“This means growth is becoming more sustainable from a fi scal and macroeconomic perspective. Private sector activity has been enabled by the Aquino administration’s dedication to positive reform. Without doubt, good governance means good economics,” Lacierda said.

National Statistical Coordination Board (NSCB) Secretary General Jose Ramon G. Albert said industry and services led economic growth on the supply side. On the demand side, growth was still largely driven by household consumption and external trade.

Industry grew 6.5%, more than twice the 2.3-% growth in 2011.

The National Economic and Development Authority (NEDA) said the expansion in public and private construction and the electricity, gas, and water sector led the growth.

The service sector also beat expectations with a 7.4-% growth from trade, transport and communications, real estate, renting and business activities, and other services.

Trade grew by 7.5% in 2012, more than twice the fi gure in 2011. Growth in transport and communications accelerated at 9.1% compared with 4.3% the previous year.

There were also notable gains in other services, particularly, tourism-related subsectors, such as hotels and restaurants and recreational, cultural, and sporting activities. These subsectors grew 13.3%, compared with only 7.1% in 2011.

Economy expected to accelerate in H2The domestic economy is expected to accelerate in the second half of the year, while infl ation rate would continue at 3% for most of 2013, First Metro Investment Corp. (FMIC) and University of Asia & the Pacifi c (UA&P) announced.

FMIC and UA&P expect continued infl ux of overseas Filipinos’ (OFs) remittances and foreign portfolio capital, lower infl ation rates, and less supply of government papers due to the national government’s lower defi cit and borrowing requirements.

It said foreign fl ows would continue to drive the equities market in 2013.

PHL posts growth in commercial service exportsThe country’s commercial services exports rose by 12% in the third quarter last year from the same period in 2011, the United Nations Conference on Trade and Development (UNCTAD) and the World Trade Organization (WTO) reported.

The two agencies said Philippine commercial services exports were valued at USD 4.62B in the July to September period last year, up from USD 4.14B in the comparable period in 2011.

3March 2013

Commercial service exports cover business process outsourcing (BPO), fi nancial services, tourism, and transportation.

Insurance industry earns P118BThe gross premium income of life insurance companies in the Philippines reached P118B in 2012, greatly surpassing its P100-B target.

“We have surpassed our target many times over. With your help and support, we have done something for the industry,” Insurance Commission (IC) Commissioner Emmanuel F. Dooc said.

The P118-B performance was 37.5% better than the P85-B premium income in 2011, and surpassed the 16-% growth target for the industry.

Dooc said several factors such as the improving economy and the premium tax reduction contributed to the industry growth.

Robust growth for retail sector seenThe Philippine Retailers Association (PRA) expects robust growth for the retail sector this year on the back of consumers’ strong purchasing power buoyed by the country’s positive economic performance.

“We’re expecting double-digit growth for the retail sector this year,” PRA President Frederick D. Go said.

Go said the Business Monitor International (BMI), which provides consultancy and industry analysis, estimated the country’s total retail sector last year at P1.42T.

He said the PRA sees growth for the retail sector this year given the country’s positive economic condition and the added confi dence in consumer spending.

The PRA groups over 300 companies such as retailers, mall and shopping center operators, traders or suppliers, manufacturers, distributors, and wholesalers, among others.

Handicraft exporters eye new marketsPhilippine handicraft exporters are looking at new markets for their products as they aim for a 10-% growth in shipments this year.

Philippine Chamber of Handicraft Industries, Inc. (PCHI) President Dennis A. Orlina said they are looking at emerging markets for higher exports this year.

The country’s handicraft exports were estimated to have reached USD 130M last year.

“Top countries we are looking at are Brazil, Uruguay, and Peru,” Orlina said, adding other countries such as Russia and Viet Nam and those in Africa are likewise being eyed.

Industry players are also working with countries not seriously hit by the European economic crisis, including Germany and Italy.Orlina said the country could cater to these markets because of good product designs produced by local makers.

“Our designs have always been appreciated. Philippine products are much sought after by consumers,” he said further.

The country’s biggest markets for handicrafts are the United States (U.S.) and Japan.

To capture more buyers, Orlina said handicraft makers are expanding the use of indigenous materials such as abaca and bamboo in their products.

CAMPI eyes 10-% sales hike Auto sales are expected to grow by 10% this year from last year on the back of the country’s strong economic performance.

Chamber of Automotive Manufacturers of the Philippines,

Inc. (CAMPI) President Rommel T. Gutierrez said they expect sales to reach 172,000 units this year.

Last year, CAMPI sold 156,649 units, up 11% from 2011 due to an increase in purchases of both commercial vehicles and passenger cars along with the infl ux of new models and availability of competitive fi nancing schemes.

For this year, Gutierrez said the higher sales will be driven by the sustained economic growth and by the gross domestic product (GDP) per capita which is seen to reach USD 2,500.

He said growth in remittances from overseas Filipinos (OFs), election spending, and overall positive economic outlook are likewise seen to allow the group to achieve higher sales this year.

On expectations of continued positive economic conditions, car fi rms are also looking to introduce new models in the market.

Gutierrez said total industry sales are likewise expected to hit 200,000 units this year. Total industry sales in 2012 stood at 184,248 units.

Total vehicle sales last year posted an 11.6-% increase from 2011 due to the strong demand for both passenger cars and commercial vehicles.

Robust real estate market continuesThe expansion of Philippine real estate market would sustain as the country is now the region’s best bet for investments in the property market in terms of price and quality, property management fi rm CB Richard Ellis (CBRE) Philippines reported.

CBRE Chairman Rick M. Santos said quality and cost perspective would bring in more investors into the country.

Santos said aside from the strong growth in the outsourcing sector, the lifestyle (hotels, resorts, spas) or the leisure destinations will be

Philippine Business Report4

TRADE ANDINVESTMENTS

an alternative for business process outsourcing (BPO) site selection and offi ce developments outside of Metro Manila.

CBRE Vice Chairman for Global Corporate Services Joey M. Radovan said developers will continue to build in the next fi ve years for BPO offi ces, which are expected to stay in the Philippines for long.

“BPO will continue to be the driver of offi ce space in the next fi ve years because we have attained 700,000 workers last year and is expected to double in 2016 with revenues seen growing to USD 26B in 2016,” Radovan said.

He said the Philippines has become a corporate cost solution with cheaper price range compared to its competitor in the region.

In terms of offi ce lease rates, the Philippines offers an annual average price of USD 22 per square foot versus USD 100 to USD 200 in other countries.

Filipinos prefer branded productsSome 80% of Filipino consumers with Internet access prefer to buy new products from a familiar brand rather than switch to a new brand, research fi rm Nielsen reported.

The Nielsen global survey of new product purchase sentiment showed that brand familiarity is one of several key characteristics that resonate strongly with consumers globally.

“Introducing innovations on established brands that are already trusted by consumers can be a powerful strategy,” Nielsen Philippines Managing Director Stuart Jamieson said.

While 77% of Filipino respondents welcome new product options, Nielsen’s survey showed that proof-of-concept makes a difference with 74% saying they will wait until a new innovation has proven itself before making a purchase; 70% of respondents would consider value or store-brand options; and

more than 64% of respondents are enthusiastic in making a switch.

The survey also showed that 74% of Filipino respondents like to tell others about their newly purchased products. The survey showed that 53% of Filipino respondents are partial toward local options over global brands, compared to 26% of Asia Pacifi c respondents who do not favor local brands.

Economic factors also play a role in purchase decisions with 60% of Filipino respondents saying challenging economic conditions make them less likely to try a new product. However, when given a choice, more than half of the respondents expressed willingness to pay a premium price for a new product.

More Filipinos doing online shoppingMore Filipino consumers have engaged in online shopping, a recent study by a global payments technology company showed.

The Visa e-Commerce Consumer Monitor Research 2012 found that 97% of Filipinos surveyed had browsed online for products and services last year and 71% successfully made an online transaction.

“While e-commerce is still in its early stages in the Philippines, we expect to see rapid growth across all purchase categories next year,” Visa Country Manager for the Philippines and Guam Iain Jamieson said.

Product categories with the highest conversion from browsing to payment include movie tickets (52%), holiday and travel tickets (50%), and bill payments (48%).

Last year, among the standout categories of online purchases were groceries (172%), movie tickets (147%), and fashion (131%).

The availability of new and varied Internet access devices is a key factor enabling the shift toward online shopping. Some 32% of those surveyed said they had browsed online for products or services via mobile phone or tablet device last year.

Notably, the survey showed that 77% of Filipinos said shopping online feels more secure than offl ine.

BANKING

Robinsons Bank to expand branch networkRobinsons Bank is seeking to grow its branch network to over 100 in three years.

JG Summit Holdings Inc. President Lance Y. Gokongwei said Robinsons Bank will put up 30 new branches in Metro Manila until 2016.

The bank currently has 65 branches, mostly located in Metro Manila.

It recently acquired a controlling interest in Legazpi Savings Bank, allowing the Gokongwei group to serve the countryside and improve the delivery of fi nancial services to rural communities. As part of the deal, it obtained branch licenses in restricted areas.

UnionBank sets aggressive expansion for City SavingsUnionBank of the Philippines plans to expand the network of City Savings Bank in Luzon from the existing 30 branches to 40, UnionBank Chairman and Chief Executive Offi cer (CEO) Justo A. Ortiz said.

Once approved by regulators, the plan to grow the branches

5March 2013

of City Savings to about the same level as UnionBank, which currently has 200 branches nationwide, will push through.

Ortiz said they would probably keep City Savings as a separate subsidiary rather than merging its branches with UnionBank.

PBB eyes 100 branches by yearendThrift lender Philippine Business Bank (PBB) plans to grow its network to 100 branches by end-2013, bank offi cials said.

Proceeds from PBB’s P4.25-B initial public offering (IPO), the fi rst in the country this year, will allow the bank to strengthen its foothold in the micro, small, and medium enterprise (MSME) sector.

Maybank to expand PHL operationsMaybank Philippines is expanding its network of branches from 55 to 200 branches in fi ve years with an initial capital and investments of P4B.

The bank, which started its local operations in 1997, currently operates 55 branches and plans to double the number by 2014, to 200 by 2018.

Security Bank ups branches to 208Security Bank Corp. (SBC) opened 72 more branches in 2012, bringing its current total to 208 nationwide – 170 for its main bank and 38 for subsidiary Security Bank Savings (SBS).

SBC’s total distribution network expanded by 53% with the new branches opened in 2012.

ENERGY

URC builds Negros ethanol plantUniversal Robina Corp. (URC) is expecting to complete by 2014 a 100,000-liter-per-year ethanol plant in Negros Occidental.

URC’s P1-B ethanol plant will have the advantage of proximity to feedstock supply in the province where URC also runs the Universal Robina Sugar Milling Co. (URSUMCO)

and the Southern Negros Devt. Corp. (SONEDCO).

The ethanol plant is part of URC’s investment in renewable energy (RE) as it has also programmed a P2-B biomass-fi red cogeneration plant with a 40-megawatt (MW) capacity. The plant within the SONEDCO area is expected to be completed in 2015.

Australian fi rms eyeing energy projectsMany Australian companies are exploring opportunities for energy investments in the Philippines, ranging from renewable energy (RE) ventures to petroleum exploration, coal power development, and even export of liquefi ed natural gas, Australian Ambassador Bill Tweddell said.

Tweddell said Australian fi rms are also interested in coal-fi red power plant developments and in upstream oil and gas sector.

For RE investments, the major prospects being eyed are the deployment of solar technologies for rooftops as well as for the energization of off-grid areas.

FOOD

Jollibee allots P5.5B for 300 new storesJollibee Foods Corp. (JFC) will spend P5.5B this year to put up 300 new stores across all its brand here and abroad, JFC Chairman and Chief Executive Offi cer (CEO) Tony Tan Caktiong said.

Half of the new stores will be put up through franchising.

Frabelle Foods eyes nationwide expansion Local brand Frabelle Foods is planning to penetrate more markets this year.

“Right now our products are mostly in Metro Manila but this year we want to go national and double the numbers of our distributors.We are currently in 433 supermarkets and 2,000 market stalls,” Frabelle

Foods Managing Director Fay T. Bernardo said.

GREEN PROJECTS Eastern Petroleum allocates P2B for 2013 expansion programEastern Petroleum plans to double its retail stations to 100 this year from the existing 40. The additional 60 will be evenly divided in Luzon, Visayas, and Mindanao, with 21 of them either acquired already or in the fi nal negotiation stage.

Eastern Petroleum Corp. Chairman and Chief Executive Offi cer (CEO) Fernando L. Martinez said they are embarking on a nationwide expansion and introduction of a new product line this year.

The oil fi rm is now combining other retail franchises such as drugstores and fast food stores to attract and offer more services to its clients.

Aside from putting up more stations, Eastern Petroleum will also put up an oil depot in Mindanao. The depot is scheduled for commercial operations by the fi rst quarter of next year.

Eastern Petroleum’s expansion this year will require a capital expenditure of P2B.

Thai fi rm eyes JV for wind projectThailand’s Electricity Generating Public Co. Ltd. (EGCO) is considering a joint venture with Philippine Hybrid Energy Systems Inc. (PHESI) for a 48-megawatt (MW) wind power project in Mindoro.

If the project pushes through, it would provide for additional power supply that the province would need as it prepares for a strong economic growth.

Philippine Business Report6

CADPI investing in cogeneration plantsSugar group Central Azucarera Don Pedro, Inc. (CADPI) plans to invest in nature-friendly cogeneration power plants as soon as it is able to raise sugar production.

The company plans to run four of six potential cogeneration (combined heat and electricity) power plants.

CADPI’s subsidiary plants and prospective capacity are the 25.52-megawatt (MW) CADPI in Nasugbu, Batangas; 10-MW Central Azucarera dela Carlota; 6.5-MW Bagasse of Hawaiian Phils. Co.; and 4-MW Bagasse of Roxol Bionergy Corp.

Cogeneration plants effi ciently produce heat for various purposes like steaming or for cooling in factories, while generating electricity for plant use or for sale to the national grid.

Sugar milling and refi ning companies have abundant bagasse for cogeneration as excess material from sugar production.

German fi rms keen on PHL bioenergy sectorEight German fi rms are interested to provide technology solutions on bioenergy for the Philippines.

Company representatives visited the country to share knowledge, introduce innovative solutions on bioenergy for the Philippine market, and to network to identify local partners and projects.

They also visited biomass and biogas projects in Southern Luzon to explore the challenges and opportunities of producing energy from biomass and biogas.

German fi rms keen on PHL bioenergy sector

• Vastani GmbH• Eckrohrkessel GmbH• Envitec Biogas Ag• GTP Solutions GmBH• Binder GmbH• Ascentec GmbH• Novis GmbH• Pregobello GmbH

PUBLIC-PRIVATE PARTNERSHIP PROJECTS

NEDA clears P147-B infra dev’t projectsThe National Economic and Development Authority (NEDA) Board has approved fi ve infrastructure and social development projects worth P147B.

NEDA-approved projects Budget (In P billion)

• Kapit-bisig Laban sa Kahirapan- Comprehensive Integrated Delivery of Social Service (KALAHI-CIDSS) 81.90• Cavite-Laguna Expressway (CALEX) project 35.58• NLEX-SLEX Connector

Road project 25.56 • Change in Scope of the Second Cordillera Highland Agricultural Resources Management Project (CHARMP II) 2.94 • Adapting to Climate Change Through the Construction of Water Impounding Facilities in the Philippines: Pasa Small Reservoir Irrigation Project (Pasa SRIP) 1.03

Maynilad allots P17.2B for projectsMaynilad Water Services, Inc. is set to improve its infrastructures and water services in parts of Metro Manila and Cavite this year.

The west zone concessionaire has allotted P17.2B for its water and waste water projects, more than double its capital expenditure in 2012.

“The previous years have been about water service transformation. Now that we have improved and expanded our water services in the west zone, our next challenge is to accelerate our sewerage and septage coverage,” Maynilad President and Chief Executive Offi cer (CEO) Ricky P. Vargas said.

Maynilad said P9.30B of the P17.2B capital investment will go to the construction of waste water facilities in several areas such as

sewage treatment plants (STPs) and conveyance systems for Valenzuela, Pasay, and Muntinlupa.

Some P3.76B will also be spent to lay new infrastructure (pipelines, pumping stations, and reservoirs) that will provide potable water supply in unserved portions of North Caloocan, Valenzuela, and Novaliches in Quezon City, Parañaque, Las Piñas, Muntinlupa, Imus, Kawit, Bacoor, and Cavite City.

Meanwhile, the P2.13B will be for Maynilad’s Non-Revenue Water (NRW) reduction program, which covers meter and pressure management, active leakage control, primary line assessment, selective pipe replacement, and district metered area management.

Key company facilities such as pumping stations and reservoirs will be upgraded using a budget of P384M, while P960M will go to water source development.

MWC starts C-5 pipe-layingManila Water Company is undertaking a large-scale pipe rehabilitation project at the Libis area along C-5 Road in Quezon City to replace the current pipe network which is estimated to be more than 15 years old.

The project, which will cost P48.6M, entails the laying of 1,350 meters of 400-millimeter Ductile Iron Pipe (DIP) along the stretch of C-5 Road in Libis area as well as the replacement of the existing 150-millimeter Polyvinyl Chloride (PVC) line along Calle Industria, Manggahan, and Mercury streets.

A total of 3,481m of new lines will be installed to further improve the effi ciency and reliability of the water network and address the increasing water demand in the area.

Gov’t identifi es 2013 PPP projectsThe government has lined up four projects this year that aim to address the country’s economic, energy, and environmental challenges.

7March 2013

Public-Private Partnership (PPP) Center Executive Director Cosette V. Canilao said the Project Development and Monitoring Facility (PDMF) has given its green light for these projects that will be soon up for bidding.

2013 PPP Projects

• Plaridel Bypass Toll Road Project• Manila-Makati-Pasay-Parañaque Mass

Transit System• Philippine National Railways (PNR) North and South Lines Development and Extension• Batangas-Manila Natural Gas Pipeline

Project I

Calamba City, Malaysian group ink JV to build Calabarzon RGCThe Calamba City government and Alloy MTD, a Malaysian multinational infrastructure development group, have signed a joint venture agreement for the development and construction of the P2.5-B regional government center (RGC) under a public-private partnership (PPP) program.

The P2.5-B investment is on top of the Malaysian conglomerate's commitment to pour in some P22B worth of additional investments in the Philippines for power generation and building and housing ventures.

Alloy MTD is set to start the construction of the fi rst of four buildings of the RGC that can accommodate more than 50 national government offi ces presently scattered in Metro Manila and in the CALABARZON (Cavite, Laguna, Batangas, Rizal, Quezon).

Bulacan water project gets supportThe proponent of the Bulacan Bulk Water Supply Project recently got a transaction advisor that would help the development of the pre-feasibility requirements of the project, the Public-Private Partnership (PPP) Center said.

A consortium led by the London-based IMC Worldwide Ltd. emerged as the Metropolitan

Waterworks and Sewerage System’s (MWSS) technical project advisor, which aims to improve and secure people’s access to potable water in the municipalities of Bulacan.

The project involves the construction of interconnection structure to the MWSS’ existing Bigte-Novaliches raw water conveyance system as a source, for Phase 1; development of new water source/s including raw water conveyance system to the Water Treatment Plant/s (WTPs); and the construction of WTPs and ancillary facilities.

INFORMATION TECHNOLOGY

Google to deepen investments in PHLGoogle Inc. has announced its plan to deepen investments in the Philippines by opening a new offi ce in Manila,which could help local and global businesses.

“The Philippines is a key country in Southeast Asia in terms of its digital economy and tech-savvy population,” Google Southeast Asia Managing Director Julian Persaud said.

Presidential Communications Development and Strategic Planning Offi ce (PCDSPO) Undersecretary Manuel L. Quezon III is hoping that Google’s entry would encourage more local businesses to go online and tap international markets.

POWER

Sunwest readies P15-B hydro projectsThe Sunwest Group of Companies’ power generation arm is planning to enlist at the local bourse in three years’ time in compliance with the Electric Power Industry Reform Act (EPIRA).

Suweco President Jose Silvestre Natividad said the group is still considering which between the Eco Utility Ventures or Sunwest Water and Electric Co. Inc. (SUWECO)

would be used in listing at the Philippine Stock Exchange (PSE).

Under the EPIRA, generation companies, distribution utilities, and their respective holding companies must offer and sell to the public at least 15% of their common shares of stocks, mandating all power fi rms to enhance the infl ow of private capital and broaden the ownership base of the power generation, transmission, and distribution sector.

2020 SUWECO P15-B hydropower projects

• 8-megawatt (MW) Villasiga 1• 9.4-MW Villasiga 2• 2-MW Guiamon San Ramon• 3-MW Dalanas• 2.1-MW Tibiao• 15-MW Main Aklan River• 2.4-MW Upper Aklan West Tributary• 3-MW Lower East Aklan Tributary• 2.4-MW Middle West Tributary

Aboitiz, TeaM Energy negotiate with MHIAboitiz Group and TeaM Energy Philippines have been negotiating with Mitsubishi Heavy Industries (MHI) for the engineering, procurement, and construction (EPC) contract of the 400-megawatt (MW) Pagbilao coal-fi red plant expansion power project worthUSD 700M.

The project aims to put on stream the additional capacity so it can be aligned as part of the supply shoring-up for the Luzon grid come 2015.

The developers are expected to push ahead with other key implementation milestones such as raising the project fi nancing and cornering off-take (power supply contracts) for the generated capacity of the plant.

Union Energy, Sta. Clara Power form partnershipThe Union Energy and Sta. Clara Power Corp. have formed a partnership for the eight mini hydro power projects in Oriental Mindoro amounting to P1.9B.

Philippine Business Report8

“The provinces of Mindoro have been relying on the National Power Corp. Strategic Power Utilities Group for its power requirement and have not been spared of its own power shortages,” Sta. Clara Chairman Nicandro G. Linao said.

The 8-megawatt (MW) facility run-of-river project intends to address the growing power needs of Oriental Mindoro and its nearby areas.

“We are supporting the government’s call to put up green energy sources under the Renewable Energy (RE) Law. We expect to start construction within the year,” Sta. Clara Power President Asisclo T. Gonzaga said.

Ayala, Phinma sign JV agreementAyala Corp.’s AC Energy Corp. and the Phinma Group’s Trans-Asia Oil and Energy Development Corp. have signed a joint venture to develop the P12-B 135megawatt (MW) coal power plant in Calaca.

The two fi rms have agreed to incorporate a joint venture company, dubbed as South Luzon Thermal Energy Corp. with an initial capital of P200M.

Trans-Asia President Francisco L. Viray is optimistic on the business prospects of the plant because of the open access regime that will give them enough market.

Under the open access scheme, large power users will be able to choose their own suppliers, in contrast with the current system which has limited supplier shaving jurisdiction over their areas.

Meralco teams up with Global BusinessThe Meralco PowerGen Corp. will team up with Global Business Power Corp. for the operation

and construction of four coal-fi red power plants in Mindanao.

“Meralco PowerGen Corp. and Global Business Power Corp. will jointly pursue and evaluate potential power generation projects largely in Mindanao area under a memorandum of understanding (MOU) that will be entered into shortly by both parties,” Meralco President Oscar S. Reyes said.

Reyes said Meralco continues to explore opportunities with the goal of putting up power plants to address the need for reliable, sustainable, and competitively priced power supply.

Meralco Chairman Manuel V. Pangilinan said the company expects a better year on the back of better economy prospects, committing to pursue new projects to further boost its objective of providing more effi cient distribution system to customers while sustaining profi ts.

First Gen expands gas power generationFirst Gen Corp. is gearing up to expand its gas power generation portfolio to as much as 2,800 megawatts (MW) by 2018 with an estimated USD 1B worth of investment.

The fi rst phase includes construction of the planned up to 500-MW San Gabriel natural gas facility, while the second phase is the establishment of additional 800MW.

First Gen is in talks with Malampaya natural gas consortium, consisting of Royal Dutch Shell Plc. and Chevron Texaco, to secure adequate supply of natural gas at reasonable price.

Local consortium launches powerplantA local consortium has launched a 30-hectare (ha) powerplant in Iloilo with a capacity good for two 135-megawatt (MW) units.

The coal power plant triumvirate composed of AC Energy Holdings Corp., Palm Thermal Consolidated

Holdings Corp., and Jin Navitas Resources Inc. has tapped a Canadian-American company, SNC-Lavalin, as the project engineer and manager.

“The power plant will use the circulating fl uidized bed combustion (CFBC) technology being used in one of the most advanced and most fuel-effi cient plants in the Visayas. It will use the latest Alstom Technology (Europe) for its steam turbine and generator,” Palm Concepcion Power Corp. (PCPC) President and Chief Executive Offi cer (CEO) Roel Z. Castro said.

The project has received full support from local business leaders and local offi cials who recognize that the new power plant will provide security and reliability of power supply to sustain the province’s growth.

SMC signs EPC with FormosaSan Miguel Corporation (SMC) has signed an engineering, procurement, and construction (EPC) contract with Formosa Heavy Industries and True North Manufacturing Services Corporation for its power capacity expansion.

SMC Global Power Holdings Corporation said the two new power facilities, which will cost USD 900M to USD 1.2B, will be located in Bataan and Davao with a combined capacity of 600 megawatt (MW).

SMC’s future power plant plans include the 600-MW coal plant in Leyte; 150-MW plant in Panay; and 150-greenfi eld plant in South Cotabato.

REAL ESTATE

Megaworld to pour P25-B investmentMegaworld is planning to spend P25B for the development of Iloilo Business Park.

Megaworld said the fi rm is looking for a promising location, noting that Iloilo is located in a very strategic area in Western Visayas and has the potential as a tourist area.

9March 2013

Generics Pharmacy eyes 150 new branches yearlyThe Generics Pharmacy Franchising Corp. is planning to put up 150 stores annually starting this year after establishing 200 stores last year.

“Currently we have 1,500 outlets open. For the year, I think we can do additional 150. Expansion now would be from second to fi fth

class municipalities. Talking about inclusive growth, we are already doing it,” The Generics Pharmacy President Benjamin I. Liuson said, adding they target to hit 2,000 stores by 2015.

Liuson said even as The Generics Pharmacy wants to fuel growth this year, it intends to keep its expansion slower compared to the company’s introductory years because they want to protect the existing franchisees.

Watsons sets aggressive expansion plan Watsons Personal Care Stores (Philippines) Inc. has lined up an aggressive expansion program this year, banking on the strong economic growth and targeting to reach more than 350 stores this year across the country.

“We will continue to expand. This year, we are actually opening 40 stores and we will be expanding not only in the metropolis, but also outside,” Watsons Philippines General Manager Robert U. Sun said.

This will allow the company to grow its sales by 12% this year, double the estimated 6-% Philippine economic growth.

Watsons Philippines is a joint venture between SM Prime (40%) and Hong Kong’s A.S. Watson & Co. Ltd. of the Hutchison Whampoa Group (60%).

URC enters power gen businessUniversal Robina Corp. (URC) moves a step closer to entering the power generation business for the fi rst time by investing USD 60M for a power generation plant in its sugar mill in the Visayas as it secures shareholder approval for the power venture.

The plant, which will use bagasse or waste in sugarcane milling as

feedstock, will start commercial operations in 2014, said URC General Manager of the Sugar Division Rene P. Cabati.

It will be located at the sugar mill of Southern Negros Development Corp. in Kabankalan, Negros Occidental.

SM, Waltermart forge JV dealSM Investments Corp. (SMIC), through its subsidiaries SM Retail Inc. and SM Prime Holdings Inc., has entered into a joint venture with Luzon-based shopping mall and supermarket chain Waltermart Group of Companies.

The company will fi rst complete the due diligence prior to disclosing more details, SM Prime Executive Vice President and Chief Finance Offi cer Jeffrey C. Lim said.

Waltermart is into shopping malls and supermarkets business. To date, it has 17 community malls and shopping centers in Batangas, Bulacan, Cavite, Laguna, Makati, Nueva Ecija, Pampanga, Parañaque, and Quezon City.

SMIC likely targets the D and E market segment while saving on costs by partnering with Waltermart’s existing malls.

D&L, Swiss fi rm forge distributorshipD&L Industries Inc. signed an agreement to be the authorized distributor in the Philippines of the wide range of calcium carbonate products produced by Omya Mineral Philippines Inc.

Omya is a leading global producer of industrial mineral founded in 1884 in Switzerland.

D&L Industries Inc. is the country’s leading manufacturer of customized food ingredients and specialty plastic colorants and additives.

AirAsia taps 7-11 stores for paymentsAirAsia Inc. and Philippine Seven Corp. recently launched the Payment Partners for AirAsia booking reservations and other online purchases that could be

COMPANY NOTES

“As we extend our live-work-play formula to Iloilo, we’re expecting a breakthrough in Western Visayas in terms of business and tourism, which will be brought by the world-class developments that Megaworld has always been known for,” Megaworld Vice President for Business Leasing and Development Group Jericho Go said.

ALI invests P20B for Circuit MakatiAyala Land Inc. (ALI) has invested P20B in developing a former race track into an entertainment facility dubbed as the Circuit Makati in partnership with Makati City government and the Makati Commercial Estate Association, Inc. (MACEA).

“Circuit is Ayala Land’s 21-hectare integrated, mixed-use development anchored on entertainment experiences that bring together Ayala Land’s various product lines -Alveo for residential, Ayala Malls and offi ces, and Ayala Hotels,” ALI President Antonino T. Aquino said.

ALI Strategic Landbank Management Group Head Mean Dy said Circuit is envisioned to highlight Makati City as the country’s unrivalled destination for lifestyle and entertainment.

The project will have a residential component consisting of Alveo and Ayala Land Premiere; 30,000 sqm offi ce spaces; 45,000-sqm mall; and 1,500-seater performing arts venue.

Philippine Business Report10

made through 7-Eleven stores nationwide.

AirAsia guests who prefer to pay in cash may now avail themselvesof online promo fares and other privileges from www.airasia.com and pay at any 7-Eleven’s more than 800 convenience stores.

“With this new cash payment system, AirAsia passengers will experience the ease and convenience of our 24/7 service,” Philippine Seven Chief Executive Offi cer (CEO) Jose Victor Paterno said.

Guests will be able to book their fl ights via AirAsia’s new and improved mobile apps as well.

i-Remit expands networkCash transfer fi rm i-Remit Inc. has expanded its local remittance network by signing a partnership with pawnshop operator Eight Under Par Inc., known as Palawan Pawnshop.

The agreement allows a tie-up of the two companies in distributing remittances originating from foreign sources such as Overseas Filipinos (OFs), immigrants, and other nationalities abroad, to designated benefi ciaries in the Philippines.

I-Remit, the largest Filipino-owned remittance company that is not affi liated with any bank, has been signing up partners here and overseas to boost its remittance business.

Palawan Pawnshop has been in the money remittance business since 2003. It is registered with and is subject to the regulatory and supervisory powers of the Bangko Sentral ng Pilipinas (BSP) as a pawnshop, foreign exchange dealer/money changer, and remittance agent.

Alliance Select fi rms up JV with tuna fi shing companyAlliance Select Foods International Inc., CHL Fishing Industry Inc., and CHL Construction and Development Enterprises Inc. (CHLC) have

PHL-Turkey trade projectedBilateral trade between the Philippines and Turkey is projected to hit USD 1B in fi ve years from the current USD 400M.

More Turkish businesspeople are putting up businesses in the country, Philippines-Turkey Business Council President Ernesto N. Chua reported.

They have been encouraged to put up factories in the Philippines that they can use as a staging point for exports to other Asian countries.

Chua said 12 Turkish businesspeople are already in various stages of putting up their businesses in the country in various fi elds from pharmaceuticals, food, construction, to government infrastructure projects.

One Turkish company has already established an ice cream business here.

At present, the country’s biggest import from Turkey is fl our, while Turkey, one of the fastest growing emerging markets of the world, imports electronics products from the Philippines.

Separate customs territory model eyed for planned PHL-Taiwan FTAThe proposed comprehensive Philippine-Taiwan free trade agreement (FTA) is seen to track along the separate customs territory model that Taiwan had adopted in its World Trade Organization (WTO) accession.

If ever a comprehensive FTA is entered between the two economies, it should be an agreement between the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu (Chinese Taipei) and the Philippines, Manila Economic and Cultural Offi ce (MECO) in Taipei Managing Director Antonio I. Basilio said. He added that this is the same formula used in the Taiwan-Singapore FTA.

Basilio said if the study says it is benefi cial, stakeholders would be consulted. An FTA would encourage more Taiwanese investors into the country because it guarantees protection to their investments.

This, he said, would lure more electronics fi rms to migrate into the Philippines.

Agriculture offers the biggest potential because the FTA means removal of the various qualitative restrictions imposed by Taiwan on Philippine agricultural products.

The Taiwanese are also expected to press for more leeway to enable them to sell to the local market.Taiwan is also conducting a parallel feasibility study.

MECO and its counterpart, the Taipei Economic Cultural Offi ce (TECO), would be the vehicles between the two economies to sign in case of an agreement.

BILATERALAGREEMENT

created a joint venture fi shing company, which will have an initial authorized capital stock of P16M.

The joint venture will be named Wild Catch Fisheries. Its authorized capital stock of P16M will consist of 16M common shares with a par value of one peso a share.

Alliance shall purchase all of the company’s tuna catch which will ensure a steady and consistent supply to the company’s canned tuna operations in General Santos City.

11March 2013

ASEANWATCH

PHL to outpace SEA growth The Philippines is expected to grow faster than its Southeast Asian neighbors this year following above-target growth in 2012, as strong consumption and investment persist amid an expected pick-up in global growth, the International Monetary Fund (IMF) said.

Growth could hit 6% this year, said the IMF, noting that this is slower than the 6.5% projected for last year, but faster than the October forecast of 4.8%. For 2014, growth could ease to 5.5%.

“This growth resilience and more favorable outlook are both a testament to the Philippines’ improved macroeconomic fundamentals, policy reforms, and a refl ection of the exceptional goal setting,” said IMF Mission Chief Rachel van Elkan.

The new growth fi gures are stronger than the aggregate growth estimate for ASEAN-5, which is only seen to expand 5.5% in 2013 and 5.7% in 2014. ASEAN-5 is composed of the Philippines, Malaysia, Indonesia, Thailand, and Viet Nam.

MAP prepares master plan for ASEAN biz integrationThe Management Association of the Philippines (MAP) is drafting a master plan that will contain strategies on how businesses can prepare and compete in a unifi ed Association of Southeast Asian Nations (ASEAN) by 2015.

MAP President Melito S. Salazar Jr. said the group is coming up with a master plan that will help businesses prepare for the ASEAN Economic Community (AEC).

“We are planning to have a master plan for Philippine competitiveness on ASEAN integration by September,” Salazar said.

The AEC will transform the ASEAN into a region with free movement of goods, services, investment, skilled labor, as well as fl ow of capital.

Japanese fi rms more optimisticMany Japanese-affi liated fi rms in Asia and Oceania including the Philippines expect improved operating profi ts this year on expectations of higher local sales, the Japan External Trade Organization (JETRO) reported.

JETRO’s 2012 Survey on Business Conditions of Japanese-affi liated fi rms in Asia and Oceania showed that 46.8% of the 3,819 respondent fi rms expect improved operating profi ts for 2013.The most common reason for the increase was sales increase in local markets.

It noted that Japanese fi rms are prioritizing local market development rather than developing exports.

The survey also showed that among the immediate issues fi rms want to address is product differentiation through quality or high added-value.

PHL seen as RE leader in Southeast AsiaThe Philippine economy stands to benefi t from massive renewable energy (RE) investments and does not need to rely on outdated and destructive fossil fuels, Greenpeace’s report titled “Green Is Gold: How renewable energy can save us money and generate jobs” showed.

Greenpeace launched the report to debunk notions that RE technology was expensive and not economically viable.

“It will make electricity cost more economical, generate growth for the country while posing fewer risks to the environment and people, and contribute to energy independence,” said Greenpeace Southeast Asia Executive Director Von Hernandez.

Greenpeace said the country’s RE potential was estimated at 261,000 megawatts, which “remains

untapped, with investors now moving to other markets in the region, having been locked out by coal projects in the pipeline.”

Greenpeace said the Department of Energy (DOE) should not miss out on the opportunity to realize the full potential of the fi ve-year-old RE Act of 2008.

ON THECALENDAR

Putting Your Business Online (e-Marketing)Use the power of the Internet to promote and sell your products or services. Discover the benefi ts of building your own company website where your customers can reach you online. The Philippine Trade Training Center (PTTC) will conduct this half-day training session on April 24, 2013.

BIR Matters for MSMEsLearn the basics and intricacies of taxation and money matters in relation with the Bureau of Internal Revenue (BIR). This training, which will be conducted by the Philippine Trade Training Center (PTTC) on April 25, 2013 is targeting micro, small, and medium enterprises (MSMEs) who are intent in starting and growing their businesses.

For more information, visit http://www.pttc.gov.ph.

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Philippine Business Report12

40.240.440.640.8

4141.241.4

Mar-12Feb-13Jan-13Dec-12Nov-12Oct-12

Peso per US Dollar Rate

5.35.45.55.65.75.8

Mar-13Feb-13Jan-13Dec-12Nov-12Oct-12

Interest Rate (%)

0102030405060

Overall Business Outlook on Macroeconomy

Economic Indicators

As of March 4, 2013 As of March 4, 2013

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

012345678

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

GNI Growth Rate (%)

012345678

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

GDP Growth Rate (%)

050

100150200250

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

BOI-PEZA Approved Investments (PhP Billion)

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 • Online: http://www.dti.gov.ph/dti/index.php?p=116

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

March 2013Philippine Business Report

*GNI - Gross National Income

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

under Permit No. 504valid until 31 December 2013

0100,000200,000300,000400,000

Nov-12Oct-12Sep-12Aug-12Jul-12Jun-12

Visitor Arrivals

0100020003000400050006000

Dec-12Nov-12Oct-12Sep-12Aug-12Jul-12

Exports(In USD Billion)

4,8004,9005,0005,1005,2005,300

Nov-12Oct-12Sep-12Aug-12Jul-12Jun-12

Imports (In USD Billion)

130.5131

131.5132

132.5

Feb-13Jan-13Dec-12Nov-12Oct-12Sep-12

Consumer Price Index(2000 base year)

0

1

2

3

4

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Inflation Rate (%)(1994 base year)