1April 2016

Volume 27 No. 04 April 2016

Foreign investment commitments approved by the country’s seven investment promotion agencies (IPAs) went up by 31.2% in 2015 to P245.2B compared to the P187B in 2014, the Philippine Statistics Authority (PSA) said.

The investments were approved by the Board of Investments (BOI), Clark Development Corp.(CDC), Philippine Economic Zone Authority (PEZA), Subic Bay Metropolitan Authority (SBMA), BOI-Autonomous Region of Muslim Mindanao (BOI-ARMM), Authority of the Freeport

Area of Bataan (AFAB), and Cagayan Economic Zone Authority (CEZA).

By sector, the bulk of foreign investment commitments last year went to manufacturing (P134.6B); electricity, gas, steam and air conditioning supply (P46.5B), and administrative and support service activities (P22.9B).

By country, Netherlands ranked first among the sources of investments, committing P82.7B, or 33.7% of the total. Japan and South Korea ranked second and third, with investments of P54.7B and P23.2B, respectively.

By region, Region IV-A (Cavite, Laguna, Batangas, Rizal, and Quezon or CALABARZON) received the largest amount of foreign investments valued at P115.7B, or 47.2% share, followed by the National Capital Region with P34.1B, or 13.9%, and Cordillera Administrative Region (Abra, Apayao, Benguet, Ifugao, Kalinga, and Mountain Province) accounting for P26.3B, or 10.7%.

In the fourth quarter of 2015, approved foreign investments climbed by 45.6% to P138.6B from P95.2B the previous year.

Foreign investors pledge P245B in 2015

DTI pursues region-specific roadmapsThe Department of Trade and Industry (DTI) is drafting region-specific roadmaps to meet the different needs of micro, small, and medium enterprises (MSMEs) in the country.

The crafting of localized industry roadmaps has been init iated since last year in the cities of Baguio, Cebu, Davao, I lo i lo, Naga, Tagaytay, Zamboanga, and in the provinces of Palawan and Pampanga.

This will enable industries in the different regions to align their respective targets and strategies with that of the national government while at the same time significantly boost MSME competitiveness.

The DTI has already met with businessmen, local governments, and other agencies to build the capacities of local industries and MSMEs to take advantage of opportunities in the ASEAN (Association of Southeast Asian Nations) Economic Community (AEC) and the European Union’s Generalized Scheme of Preferences Plus (EU-GSP+), DTI-Industry Development Group (IDG)

Assistant Secretary Rafaelita M. Aldaba said.

“These industry cluster roadmaps will allow MSMEs to move up the value chain and facilitate the link between agriculture, manufacturing, and services,” Aldaba added.

The AEC converges in single market all goods, services, and investments from 10 ASEAN member countries. Meanwhile, the EU-GSP+ grants zero tariff to more than 6,000 products exported by the Philippines to any of the European Union’s member states.

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INDUSTRYTRENDS

Retirement industry roadmap nears completion The re t i rement industry roadmap, envisioned to put the Ph i l i pp ine s

firmly on the global list of top retirement destinations, is expected to be finalized within the first half of the year, DTI-Industry Development Group (IDG) Undersecretary and Board of Investments (BOI) Managing Head Ceferino S. Rodolfo said.

The proposed roadmap outlines the course of actions to make the industry more competitive and take advantage of the country’s attractiveness to foreign and Filipino retirees due to its compassionate and competent pool of healthcare profess ionals and world-class wellness facilities.

As of 31 December 2014, this industry made considerable contributions to the economy as reflected in the USD 452M or about P19B from visa deposits of Special Resident Retiree’s Visa (SRRV) holders.

The SRRV was introduced in 1987 to entice foreign nationals and former Filipino citizens to retire in the country. It allows retirees to apply either for multiple entry privileges or for rights to stay permanently in the country by way of visa deposits ranging from USD 10,000 to USD 50,000 and USD 1,500 for former diplomatic corps workers.

According to the Global Retirement Index 2016 of International Living Magazine, the Philippines ranked 17th

out of the 23 best countries to retire in. Panama topped the list.

The annual index is based on factors such as real estate costs, special benefits for retirees, cost of living, leisure amenities, healthcare services, infrastructure, and climate.

BOI sets review of MVDP In compliance to the Comprehensive Automotive Resurgence Strategy (CARS) Program, or Executive Order (EO) 182 (s. 2015), the Board of Investments (BOI) has set the review of EOs 156 (s. 2002) and 887A (s. 2010) or the Motor Vehicle Development Program (MVDP) that may include an audit of its participants and the possibility of extending incentives to entice more investments.

The CARS Program is chaired by the Department of Trade and Industry (DTI) with members from the Departments of F inance, Transportation and Communications, Sc ience and Techno logy, the National Economic and Development Author i ty, and the Techn ica l Education and Skills Development Authority. The co-chairs include the Industry Development Council and the National Competitiveness Council.

The review may explore the possibility of providing for new entrants intending to eventually participate in the CARS program with a set of incentives on a limited transition period.

The MVDP was amended under EO 877A in 3 June 2010. Under the MVDP, there are no income tax holiday privileges for program participants. However, they will be entitled to avail of tariff rates for knocked down parts and components for assembly under the MVDP tariff lines of the Tariff and Customs Code.

Investments for motor vehicle assembly and manufacture of parts and components are listed in the Investments Priorities Plan 2014-2016, making such investments eligible to tax perks.

In a related development, the BOI is studying a special program for the motorcycle industry with the creation of the Motorcycle Technical Working Group (TWG) composed of representatives from the Japanese and Chinese manufacturers, parts makers, and exporters.

The TWG will review the industry roadmaps submitted by the Motorcycle

Development Program Participants Association (MDPPA-Japanese brands) and the Chamber of Assemblers and Manufacturers of Motorcycles in the Philippines (CHAMMP-Chinese brands).

According to CHAMMP President Juan Enrico C. Quisumbing, the current ratio between Japanese and Chinese is 70:40 in favor of the Japanese brands. CHAMMP has nine members with sales of 386,000 units or 15% percent higher than 2014.

Overall, motorcycle sales last year in the country reached about 1M units and the industry expects steady growth to cont inue as more Filipinos buy motorcycles for affordability.

PHL reforms to continue after elections The growth of the local economy and the government’s long-term policy reforms are not likely to be derailed after the national elections in May, Standard & Poor’s (S&P) and the U.S.-Philippines Society said.

The U.S.-Philippines Society is a private sector initiative organized to broaden and expand interaction and understanding through basic research and/or applied research in the areas of security, trade, i n v e s t m e n t s , t o u r i s m , t h e environment, history, education, and culture between the U.S. and the Philippines that would benefit the citizens of both countries.

Change in leadership is unlikely to reverse the economic reforms in the Philippines, S&P Sovereign Debt Committee Chair John Chambers said.

S&P currently assigns the Philippines a ‘stable’ outlook rating of “BBB” which is a notch above the minimum investment grade.

U.S.-Philippines Society President John F. Maisto said any incoming administration is expected to keep the good economic policies, noting that the attractiveness of the Philippines as an investment destination is not affected by the pending leadership transition.

3April 2016

Legislative and administrative reforms over the past six years helped the Philippines achieve economic milestones, including investment grade sovereign credit ratings and improvement in the country’s rankings in various global competitiveness surveys.

DTI backs reforms to facilitate free trade The Department of Trade and Industry (DTI) is supporting the implementation of Republic Act 10668, or the Foreign Co-Loading Law, and the passage of the Customs Modernization and Tariff Act (CMTA) which reduces obstacles to free movement of goods and services to greatly contribute to the targeted 8%-9% export growth this year.

“Removing domestic regulations and other unnecessary costs of production and market delivery enhances the capacity of our local producers to focus on the improvement of their product and participate and explore opportunities given to them by the government,” DTI-Export Marketing Bureau (EMB) Director Senen M. Perlada said.

“Many of these factors are related to moving and clearing of cargoes at the ports, and cumbersome and costly requirements of regulatory agencies on traded goods,” Perlada added.

Expected Benefits of the Measures

q Foreign Co-Loading Law - Allows foreign vessels to dock at any

Philippine port for loading and unloading of foreign cargoes or import and export cargoes carried by a foreign vessel

- Paves way for the reduction of logistics costs

- Provides transshipment services needed by exporters and importers

- Increases port revenues - Provides price-competitive shipping

service that will help exporters to compete effectively in the international market

- Decongests Manila ports as most shipments normally have to unload first in Manila before shipping directly to other domestic ports around the country

q Customs Modernization and Tariff Act (CMTA) - Reduces human intervention in Bureau

of Custom’s process- Promotes transparency and accountability

of the agency

PHL business mission to Middle East books USD 50-M sales A Philippine delegation of food, pharmaceutical, and personal care companies garnered approximately USD 50M in sales from a business mission in Kuwait, Kingdom of Saudi Arabia (KSA), Bahrain, and United Arab Emirates (UAE).

“The round of business matching activities conducted with the assistance of our Philippine embassies in Kuwait, KSA, Bahrain and UAE together with the Philippine Trade and Investment Center in Dubai working closely with the full support of the major chambers of commerce in the Middle East has allowed us to conduct this business mission successfully,” DTI-Export Marketing Bureau (EMB) Director Senen M. Perlada said.

The companies that took part in the business mission include Fresh Consumer Trade and Logistics, Magic Melt Foods Inc., Market Reach International, Monde Nu Agri Corp., Philippine Grocers Food Inc., Pixcel Transglobal Inc., Profood International, Psalmstre Enterprises Inc., Willion International Trading, and United Laboratories Inc.

Philippine food and healthcare products have already penetrated the mainstream market in the Middle East and are now experiencing strong demand among the Arabs, Perlada said.

Aside from the abovementioned products, the Philippines also intends to market automotive parts as well as aviation, information technology and business process management (IT-BPM), and medical-related services in the region.

The mission was in accordance with the Philippine Export Development Plan (PEDP) 2015-2017 which aims to identify and develop the country’s products where global market demand is fast growing.

The PEDP strategy transcends into reality by allowing the DTI to work together with relevant stakeholders in making the country become a major player in the Middle East.

“With the new rules being observed in the Middle East market, this calls for a deliberate approach and we will work closely together with the private sector, major associations and other government agencies to further our objectives” Perlada said.

Japanese firms in PHL more upbeat this year Japanese companies are bullish on expanding and being profitable in the Philippines this year than those operating in other Asian countries, according to the Japan External Trade Organization (JETRO) 2015 survey.

The survey said the Philippines has the eighth highest percentage (55.1%) of Japanese firms looking to expand this year up to 2017 across Asia and Oceania.

In the Philippines, majority of the Japanese companies cited sales increase, growth potential, and relationship with clients as reasons for their optimism.

Moreover, 54.2% of Japanese firms in the country see an operating profit increase this year.

Notably, no Japanese firm indicated i n te re s t i n t r an s fe r r i ng , o r withdrawing their investments from the Philippines, the survey showed.

Across Asia, a total 239 Japanese-affiliated companies with direct and indirect Japanese investment stocks of 10% or greater were surveyed as part of the JETRO report.

Last year, Japanese investments accounted for bulk of foreign pledges in the country amounting to P39.4B or 28.5% of the total amount, data from the Philippine Statistics Authority (PSA) showed.

IT-BPM sector to create 2.5M jobs The information technology and business process management (IT-BPM) industry is projected to generate over 2.5M jobs in the next six years, Department of Labor and Employment (DOLE) Secretary Rosalinda D. Baldoz said.

DOLE has already drafted the National Human Resources Development

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Industry Roadmap to enable the IT-BPM industry to plan for workforce development and help the academe guide their students in choosing the right courses.

“The Roadmap identified the strengths of the industry which include scalable educated talent pool, cost competitiveness, excellent infrastructure as well as government support,” Baldoz said.

The IT-BPM Industry Roadmap studied a number of components which include the global marketplace and management issues such as, skills shortage, change of leadership, change of policies, and regulations.

Industrial production grows 5.3% in January Philippine industrial production likely grew 5.3% in January, an improvement f rom the 4 .9% expansion in the previous month, Moody’s Analytics, a division of Moody’s Corp., reported.

“Philippine industrial production is expected to have expanded 5.3% year-on-year in January. Since the Philippines is less reliant on China as an export destination than most other countries in the region, its producers have been less affected by slowing Chinese demand,” Moody’s said.

Moody’s expects industrial production to have sustained the recovery seen in recent months. Food production will also improve as a result of the dissipation of El Niño in the next few months.

National Economic and Development Authority (NEDA) Director-General Emmanuel F. Esguerra said a sustained support for the manufacturing sector could be done through creating and strengthening linkages across all production sectors.

The government must continue to improve infrastructure to support business activity and encourage businesses to reap the benefits of free trade agreements through aggressive information-sharing schemes and simplified bureaucratic processes, Esguerra said.

PHL in franchising sweet spotThe Philippines is currently in the “sweet spot of franchising” amid its economic boom, Binalot Fiesta Foods President and Chief Executive Officer (CEO) Rommel T. Juan said.

There are unique highlights in the Philippine economy that make it attractive to someone interested in franchising, Juan said.

Juan enumerated these highlights:q The Philippines has been hailed as

one of the fastest growing economies in the region with 6% - 7% growth in the past five years;

q The country’s population, around 100M and growing at a rate of 1% a year, are known to be enthusiasts for new or foreign brands, with evolving tastes and preferences that are more cosmopolitan;

q The younger population is also more English language proficient than its Southeast Asian countries counterpart. This group tends to patronize new brands;

q About 65% of the population is in the working-age bracket;

q Several sub-groups, such as call center agents and overseas Filipinos (OFs), need a different marketing strategy for each; and

q More opportunities for growth outside Metro Manila.

Meanwhile, a survey conducted by Actrium Solutions in 2104 showed that the global market value of franchising was estimated at USD 3.79T in the United States (U.S.) or 63% of market share with Asia getting only 16% percent.

The survey also reported that franchising in the U.S. and parts of Western Europe are nearly reaching domestic market saturation, giving way for opportunities in franchising in other markets such as the fast-growing Asian countries.

International Franchisors Challenges in Asia

Challenges % of RespondentsHard to find franchisees 74Franchisee management 72 License application procedure 54Foreign exchange controls 46Localization of brand and products 43 IP/patent registration and protection 43

Source: Actrium Solutions Survey for 2014

Koreans eye PHL for infra, energy investments The Philippines is being eyed by Korean investors for infrastructure and energy projects, according to the Association of Southeast Asian Nations (ASEAN)-Korea Centre (AKC).

AKC Secre ta ry -Genera l and Ambassador Kim Young-Sun led a 14-man business delegation last February from Korea who showed keen interest in the country’s infrastructure and energy sectors.

The ASEAN-Korea Centre is an intergovernmental organization which aims to promote exchanges among Korea and the ASEAN member states, including the Philippines.

AKC works to strengthen mutual coopera t i on be tween ASEAN member-countries and Korea through increasing trade volume, accelerating investment flow, invigorating tourism, and enriching cultural and people-to-people exchange.

Sun said the volume of investments in these sectors more than doubled from USD 18M in 2013 to USD 40M in 2014. Investments in infrastructure and energy account for 40% of Korea’s total investments in the Philippines.

Korea is the fifth largest investor in the Philippines, with their capital mostly poured into manufacturing, shipbuilding, retail, game and software development, tourism, infrastructure, agriculture, agribusiness, energy, and banking and finance.

During their visit to the country, members of the Korean delegation conducted site visits to RASLAG Photovoltaic (PV) Power Plant, NAIA Expressway, and the Daang Hari Expressway, which is also known as the Las Piñas-Muntinlupa-Cavite Road that links Metro Manila with the province of Cavite.

DTI-Industry Development Group (IDG) Undersecretary Ceferino S. Rodolfo said the Philippines’ infrastructure and energy sectors are ready to accept foreign investors.

5April 2016

“The Philippine economy is ripe for foreign investments,” said Rodolfo, who is also the Board of Investments (BOI) Managing Head.

Rodolfo said now is the best time for foreign investors to invest in the Philippines as the country continues to experience growth and stability.

He said the government’s expenditure on infrastructure contr ibutes significantly to economic growth. The government’s gross domestic product (GDP) spending on infrastructure rose from 1.8% in 2010 to 4.1% in 2015.

“The upward trend of GDP growth presents tremendous opportunities f o r f u r t he r i n ve s tmen t s i n infrastructure,” he said.

Notably, Philippine GDP has been experiencing a 6.2-% growth rate in the past five years, the fastest since 1970s. The government is targeting a GDP growth between 6% to 7% this year.

“This is one of the means to maximize the gains from the AEC [ASEAN Economic Community]. With stable macroeconomic fundamentals, expanded market access, and advances in infrastructure and human capital development, we gain leverage to position the Philippines as a manufacturing hub to service the ASEAN market,” Rodolfo said.

Korean Embassy to the Philippines Mission Deputy Chief Won-Jik Kwon acknowledged the Korean delegates’ decision to choose the Philippines for its investment mission, noting that the country is a strategic gateway to an integrated ASEAN market.

JFC eyeing more ‘winning sectors’The Joint Foreign Chambers of the Philippines (JFC) is keen on expanding the list of the so-called “winning sectors” from seven to 10 this year.

The “winning sectors” are those that contribute to inclusive growth, or those that are expected to drive the Philippine economic growth within or beyond targets in the next 10 years.

During the 5th Arangkada Philippines Forum, American Chamber of

Commerce of the Philippines (AmCham) President Rick M. Santos said the three sectors to be added are still under evaluation and will be announced within the year.

“Winning Sectors”As identified by the JFC

q Agribusinessq Information technology and business

process management (IT-BPM)q Creative industriesq Infrastructureq Manufacturing and logisticsq Miningq Tourism, medical travel, and retirement

JFC officials cited the importance of foreign direct investments (FDIs) in driving revenues and employment generation to contribute to the government’s inclusive growth goal.

Canadian Chamber of Commerce of the Philippines (CanCham) President Julian Payne said to raise investments, the government should be open to reforms on the 60-40 ownership structure that favors local companies.

The JFC wants to see the country’s annual FDIs to reach over USD 7B in the next three to four years from the current USD 5B.

Improve products to beat global standardsThe Department of Trade and Industry (DTI) has urged Philippine manufacturers to improve the quality of their products to compete in the global market in light of lower duties arising from various free trade agreements (FTAs) and preferential schemes.

“With the decrease in tariffs of most traded products, competition is no longer limited to who can offer the lowest price but who can conform or surpass the standards of international markets as well,” DTI-Export Marketing Bureau (EMB) Assistant Director Agnes R. Legaspi said.

Legaspi emphasized the need for local firms to improve their products and at

least be at par globally, particularly in markets covered by existing FTAs.

Addressing a Doing Business in Free Trade Areas (DBFTA) session, she introduced the participants to different export windows like the European Union’s Generalized Scheme of Preferences Plus (EU-GSP+) that offers up to zero tariffs on products f rom developing countries.

The Philippines has been a beneficiary of the EU-GSP+ since December 2014, allowing the country to ship 6,274 eligible products duty-free access to the EU market.

Other GSP arrangements also allow Philippine products to tap big markets such as the United States (U.S.) and Canada at preferential duties.

To date, the Philippines enjoys memberships to FTAs involving the Association of Southeast Asian Nations (ASEAN), as well as bilateral FTAs between ASEAN and China, Japan, South Korea, India, Australia, and New Zealand.

The Philippines is also engaged in a bilateral trade deal with Japan, called the Philippines-Japan Economic Partnership Agreement (PJEPA).

Legaspi said trade agreements enable local goods enter various foreign markets, while also allowing foreign goods to compete in the domestic market, eating up significant market share given the Filipinos’ liking for imported products.

“As tariffs go down, we need to work more closely with Philippine businesses to help them navigate the rules of origin requirements and to hurdle other barriers, for instance product standards,” DTI-Industry Development Group (IDG) Undersecretary Ceferino S. Rodolfo said.

The DTI is targeting 8% to 9% export growth this year following a 5.6-% decline in 2015.

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TRADE ANDINVESTMENTS

MANUFACTURING

Foton PHL positions Clark plant for ASEAN marketAuto a s semb le r Foton Philippines has inaugurated a

P1.2-B Clark Freeport Zone facility to augment its production to penetrate the Association of Southeast Asian Nations (ASEAN) market.

The Clark Development Corp. (CDC) announced the start of operations of the assembly plant that will cater not only to the domestic market but also to the ASEAN region.

“This assembly plant is truly the ultimate goal that my brothers and I had,” Foton Philippines President Rommel Sytin said.

Foton is also eyeing Taiwan aside from the ASEAN market.

The Beijing-based Chinese auto brand has invested P1.2B for the establishment of its 11-ha. assembly plant in Clark, the first automotive-assembly facility in the Clark Freeport Zone, with a maximum capacity of 12,000 units a year.

Foton vehicles are distributed locally by the United Asia Automotive Group Inc.

Colgate-Palmolive may bring back manufacturing in PHLColgate-Palmolive Philippines, Inc. is eyeing a double-digit increase in its revenue this year and considering to bring back its manufacturing operations in the country.

The company, a Philippine subsidiary of global manufacturing firm Colgate-Palmolive Company (CL), is based in the United States (U.S.).

Colgate-Palmolive Vice President and General Manager Stephen

Lau based their optimism on the growing Philippine economy, which will be supported by the growth in consumption during elections.

“We have been in the country for 90 years and our aim is to get double digit growth. Thank you to the Filipino consumer. We have been in this market for so long,” Lau said.

“Right now, the Philippines is growing so fast. I hope we can have a factory here,” he said.

HOSPITALSCenturia Medical Makati opens T h e C e n t u r y Properties Group has launched Centuria Medical Makati, a n o u t p a t i e n t

information technology (IT)-medical building located in Kalayaan Avenue, Makati City.

The facility, a 28-story, 74,000-sqm building, is expected to host more than 500 doctors’ clinics specializing in primary care, multispecialty surgery, dermatology and cosmetic laser treatment, multispecialty dentistry, cosmetic and facial surgery, obstetrics and gynecology and other related services.

“Centuria Medical Makati addresses the country’s need for a point of reference when it comes to a medical tourism facility as well as an elevated form of outpatient experience,” Century Properties Chair and Chief Executive Officer Jose E.B. Antonio said.

The integrated facility opens greater opportunities for medical tourism providing care to patients coming from outside the country.

Century is also considering expansion to other cities and positioning to draw practitioners from the medicine and wellness industry.

MPIC to spend up to P3B to acquire 2 hospitals The hospitals group of Metro Pacific Investments Corp. (MPIC) is allotting

P3B for the acquisition of two hospitals this year. MPIC Hospital Group President Augusto P. Palisoc Jr. said MPIC is in talks with several hospitals in Metro Manila and in the provinces.

The group, which has a chain of private hospitals with a combined capacity of 2,224 beds, expects to acquire two hospitals this year as part of an annual target until an additional 2,000-bed capacity is achieved.

Palisoc said his group is bent on acquiring 200-bed hospitals this year. The group is eyeing to close one deal by the first half, and another toward the end of the year.

Manila Doctors finishes new medical buildingThe Manila Doctors Hospital (MDH) held a topping-off ceremony for a new medical building on T.M. Kalaw Street in Manila City, with the project completion expected to be in the fourth quarter of 2016.

The 18-story facility will offer services that include linear accelerator, brachytherapy, cancer center, and vascular clinic.

Metrobank Group Chairman Dr. George S.K. Ty led the ceremony, together with members of the board of directors, senior management team, employees and staff, and partners from the construction team.

Also with them was Metro Pacific Investments Corp. (MPIC) President and Chief Executive Officer (CEO) Jose Maria Lim, whose group acquired a 20-% stake in Manila Doctors.

MDH is the healthcare affiliate of Metrobank Foundation Inc., the corporate social responsibility arm of the Metrobank Group, and is operated by Manila Medical Services Inc.

ENERGY

Alsons Group sets aside USD 650M for REThe Alsons Power Group has allotted U S D 6 5 0 M f o r

7April 2016

hydropower and solar projects in the next five years as it gears up toward renewable energy (RE) developments.

“Alsons will be concentrating on hydroelectric and solar as we shift focus towards RE,” Alsons Vice President for Business Development Joseph Nocos said.

Nocos noted that Mindanao would have a secure power supply in the next 10 years with the recent developments by several power players.

A major power player in Mindanao, Alsons will start commercial operations of the first 105-megawatt (MW) coal-fired power plant of Sarangani Energy Corp. (SEC) within the first quarter of the year.

The second 105-MW unit of the SEC plant is scheduled to start operating in November 2018.

SEA s largest solar project launched in Negros OccidentalH e l i o s S o l a r Energy Corp. has inaugurated i t s 132.5-megawatt

(MW) solar generation facility in Cadiz City, Negros Occidental which is considered as Southeast Asia’s largest solar project.

Developed through a venture between Gregorio Araneta, Inc. (GAI) and Soleq, this project follows the partnership’s first solar project, a 30-MW solar generation facility in Ormoc, Leyte that was commissioned in April 2015.

Soleq is a player in the solar power industry in the Philippines and one of Southeast Asia’s largest solar independent power producers.

The first of its size in the region, the project has generated significant v a l u e a n d o p p o r t u n i t i e s t o communities in Negros Occidental employing over 2,000 local residents during the construction phase.

The project will produce 188,500 MW of solar power per year, or enough

to power to service an estimated 167,526 households. Its operation is seen to save 177.7M liters of water and lower carbon emissions by 94,627 tons per year, or equivalent to planting 2.4M trees.

“This project also demonstrates our country’s ability to develop world-class renewable energy projects and establishes the Philippines’ foothold as a frontrunner in renewable energy,” Helios Chairman Gregorio Araneta III said.

GAI is a Philippine holding company engaged in real estate, transportation, telecommunications, security and protection services, environmental protection services, oil/petroleum storage facilities, and project management.

PUBLIC INFRASTRUCTURE AND LOGISTICS

San Miguel to start MRT-7 constructionSan Miguel Corp. a n n o u n c e d i t s readiness to start building the P69.3-B

Metro Rail Transit (MRT) Line 7 that will connect Quezon City to San Jose, Bulacan.

Under the project’s timetable, construction should start from 18 February 2016 and be completed on 17 August 2019.

The project involves the financing, design, construction, operation and maintenance of the 23-km. elevated railway line with 14 stations from San Jose Del Monte, Bulacan to the MRT 3 North Avenue Station in Quezon City.

The infrastructure project also includes the 22-km. road asphalting from Bocaue Interchange of the North Luzon Expressway (NLEx) to the intermodal terminal in Tala, Caloocan City. The company hired the Hyundai Rotem-EEI consortium as engineering, procurement, and construction contractor.

EEI Corp., in consortium with Hyundai Rotem Co., has signed with Universal LRT Corporation (BVI) Ltd., the contract for the engineering, procurement, construction, and commissioning of the MRT System and Intermodal Transportation Terminal of the MRT-7 Project-Metro Manila.

The project is designed to divert northern provincial buses operations to San Jose Del Monte, in the hope of decongesting Epifanio de los Santos Avenue (EDSA), particularly the stretch from Balintawak to North Avenue.

Manila-Calamba cargo train revivedThe Philippine National Railways (PNR) is in talks with MRail, a subsidiary of Manila Electric Co. (Meralco), and International Container Terminal Services Inc. (ICTSI) to forge an agreement to revive the Manila-Calamba cargo train.

MRail, an entity engaged in rail investments , operat ions and maintenance and technical services, has formed a strategic alliance with ICTSI to revive and run the cargo freight service in the country.

ICTSI operates the Manila International Container Terminal (MICT).

Under the agreement, MRail will operate a freight train service in the existing PNR tracks for a minimum of eight round trips per day with an average daily container transfer of 600 TEUs to ICTSI-owned Laguna Gateway Inland Container Terminal and vice versa.

A TEU (twenty-foot equivalent unit) is equal to that of a standard shipping container measuring 20 feet long and eight feet tall.

MRail President and Chief Executive Officer (CEO) Ferdinand Inacay said the project would help the economy and resolve the congestion at the Manila ports.

The company would build tracks inside the MICT to connect to Tutuban Station in the existing PNR line.

Inacay said MRail planned to spend about P900M to acquire three cargo

‘

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trains and P300M to construct tracks to connect MICT to the Tutuban station of PNR.

He said the existing PNR system provides an alternative mode to transport containerized cargoes, noting that the system can alleviate traffic in major Manila arteries while at the same time give truckers a shorter turnaround time, thus, creating more trips per truck per day.

PUBLIC-PRIVATE PARTNERSHIP PROJECTS

IFC ready to invest USD 700M International Finance Corp. (IFC) announced its intention to invest

up to USD 700M in the Philippines to participate in the country’s biggest Public-Private Partnership (PPP) projects.

IFC East Asia and Pacific Director Vivek Pathak said the agency is very optimistic about the Philippine market and they will continue to invest in the country.

IFC is the private sector lending arm of the World Bank Group.

“We have a good track record in the Philippines. We were the earliest investors in the infrastructure and power sectors in the Philippines,” Pathak said.

Pathak cited the opportunities for the private sector when it comes to developing the infrastructure and power sectors in the country.

“We remain optimistic about the Philippines. Philippines has better opportunity than any other countries in Asia-Pacific. The private sector will be more than willing to invest,” he said.

Pathak emphasized that to unlock the potential of other sectors in the country such as tourism and agriculture, the country must invest heavily in infrastructure development.

He said the Philippines has been a leader in public-private partnerships

(PPPs) in Asia due to the country’s high level of private sector participation.

To date, IFC acted as transaction adviser on two PPP projects awarded under President Benigno S. Aquino III’s administration which are the NAIA Expressway (Phase II) Project and the LRT 1 Cavite Extension and Operations and Maintenance Project.

AVIATION

Budget airlines express interest in Clark Airport operationsClark International

Airport (CRK) is set to expand its operations further as seven airlines, many of which are low-cost carriers (LCCs), have inquired on the possibility of establishing their operations there.

C lark In ternat iona l A i rpor t Corporation (CIAC) President and Chief Executive Officer (CEO) Emigdio P. Tanjuatco III disclosed that the airlines interested in operating at CRK include: V-Air (Taiwan), Jet Star (Singapore), Thai Smile (Thailand), Rayani Air (Malaysia), Express Air (Indonesia), Air India (India), and Airline 4.0 (United States).

Currently, CRK serves numerous airlines such as Air Asia, Asiana Airlines, Dragonair, Jin Air, CEBGO, Cebu Pacific, Qatar Airways, and Tiger Air.

Last March 2016, CIAC presented CRK as an ideal aviation hub to 17 airlines including LCCs during the Routes Asia 2016 Conference, Southeast Asia’s largest aviation conference attended by numerous foreign airlines.

More importantly, the hosting of the conference in SMX Convention Center, Pasay City enabled the Philippines to showcase its potential to serve more international flights.

Speaking before the Strategy Summit of the conference, Department of Tourism (DOT) Undersecretary for Tourism Development Benito C. Bengzon, Jr. said the country is primarily targeting regional carriers

and is also looking into luring airlines to serve long-haul markets.

Among the airlines considered for formal partnerships during the business-to-business meetings of the conference include KLM, Air Asia, Shenzhen South China Holidays, British Airways, Air New Zealand, and Asia Landmarks.

Bengzon is confident that the country’s strategic position as a regional aviation hub can enable the country to grow and develop its tourism sector. He added that the “symbiotic relationship” between tourism and aviation calls for a civil aviation policy that is more liberalized.

The country is currently increasing air connectivity with the improvements in its air safety, prompting the resumption of flights to Europe by Philippine-based airlines, alongside the country’s return to the United States (U.S.) Federal Aviation Administration’s Category 1 status.

The status means air carriers from the assessed state may initiate or continue service to the U.S. in a normal manner and take part in reciprocal code-share arrangements with American carriers.

The conference also served as a venue for aviation industry players to address key issues and concerns in the region and discuss potential business partnerships. It helped raise the country’s need to continue its infrastructure improvements to supplement growth.

PAL places order for six A350-900 Airbus jetsPhilippine Airlines (PAL), the country’s flag carrier, and European civil aircraft manufacturer Airbus entered into a Memorandum of Understanding (MOU) in Singapore, formalizing the airline’s order of six A350-900 jets worth USD 1.8B.

PAL’s deal with Airbus includes an option for an additional order of six more A350-900 jets meant for the airline’s Manila-United States (U.S.) routes and other additional destinations, which can raise the deal’s price to USD 3.7B.

9April 2016

PAL President and Chief Operations Officer (COO) Jaime J. Bautista, who signed the deal with Airbus President and Chief Executive Officer (CEO) Fabrice Bregier during the 2016 Singapore Airshow, noted that the airline conducted extensive commercial and technical evaluation in deeming the A350-900 jet as its ideal choice.

In line with PAL’s goal to become a five-star airline, each of the six A350-900 jets ordered will come in a three-class layout configuration. The airline will operate the aircraft on nonstop routes going to U.S., particularly cities in the West Coast region, New York, and new destinations in Europe.

“The [A350-900’s] range capability has been an important factor in our decision, enabling us to offer non-stop service on all our premium long haul routes,” Bautista said.

Airbus’ A350-900 possesses a highly aerodynamic design and boasts of carbon fiber fuselage and wings, as well as brand-new Rolls-Royce Trent XWB engines, which reduces fuel burn and emissions by 25% at lower maintenance costs.

PhilJets enters helicopter deal with BellFilipino boutique aviation firm PhilJets Aero Services entered into a management contract with Bell Helicopter to run a four-passenger helicopter for corporate and VIP transport services.

PhilJets Chief Executive Officer (CEO) Th ierry Tea and Be l l Helicopter Vice President of Global Sales and Marketing Patrick Moulay signed the Letter of Intent (LOI) for managing the Bell 505 helicopter. The LOI is the first from the Philippines and one of 350 signed with the helicopter manufacturing firm.

“We are thrilled that our group’s clients will be the first in the country to have the new Bell 505. The value and performance capabilities will complement the range of our expanding fleet.

It is what a growing client segment is looking for. It will enable us to quickly and comfortably transfer our customers and partners at a competitive cost throughout the region,” Tea remarked.

According to Tea, growing customer demand for mid-sized helicopters led PhilJets to select the Bell 505 helicopter as the right choice. Moulay, for his part, said that the growing amount of LOIs for the helicopter unit is proof of its outstanding mix of features, performance, and value.

BANKING

BSP green-lights UOB non-banking operationsS i n g a p o r e a n b a n k U n i t e d Overseas Bank Ltd. (UOB ) f o rma l l y

established its non-banking unit in the Philippines after the Bangko Sentral ng Pilipinas (BSP) gave its approval as part of the country’s banking liberalization program.

BSP Deputy Governor Nestor A. Espenilla Jr. issued Circular Letter 2016-017, which formalized UOB Philippines (UOBP) Collections Inc.’s commercial operations, following UOB’s request to convert i ts subsidiary, the UOBP thrift bank, into a non-banking unit.

Years prior to the signing of Republic Act (RA) No. 10641 in 2015, which amended the Foreign Banks Law to allow foreign banks to earn up to 100% of any local bank in the country, UOBP first operated through its 60% stake in Westmont Bank acquired in 1999.

UOBP’s conversion from a commercial bank to a thrift bank commenced in 2006 after the bank sold 66 branches to BDO Unibank. UOB’s acquisition of 100% of the thrift bank’s ownership stake in 2012 made way for its eventual transition into a wholly-owned non-banking unit under RA 10641.

With more than 500 offices in 19 countries throughout North America,

Western Europe, and the Asia-Pacific region, the UOB Group seeks to spearhead its further expansion through its non-banking unit in the country, having been the sixth bank allowed by the BSP to set up local operations.

Other foreign banks allowed by the BSP to operate in the country include Cathay United (Taiwan), Industrial Bank of Korea (South Korea), Shinhan Bank (South Korea), Sumitomo Mitsui (Japan), and Yuanta Bank (Taiwan).

COMPANY NOTES

P1.1B for its pipe replacement projects in 2015.

The company replaced 235 km. of old and leaky pipes in its service area which enables the company to recover almost 58M liters per day (MLD) of potable water that can supply over 400,000 households.

The completed projects were located in various portions of Quezon City, Caloocan, Manila, Parañaque, and Cavite City.

“When we took over Maynilad in 2007, the pipe network we inherited included the oldest water system in Asia. Maynilad has since replaced around 1,520 km. of damaged pipes in the West Zone,” Maynilad President and Chief Executive Officer (CEO) Ramoncito S. Fernandez said.

Last year, Maynilad generated approximately 3,300 jobs from its pipe replacement projects.

This year, Maynilad has allotted P13.6B for its capital expenditures (capex), P4B of which will be used for treatment plants’ construction

Maynilad spends P1.1B for pipe replacementsM a y n i l a d Wa t e r Services Inc. disbursed

Philippine Business Report10

COUNTRY-TO-COUNTRY

and rehabilitation, pumping stations and reservoirs, and for water service expansion.

Some P2B will be spent for their non-revenue water (NRW) reduction program. The program handles meter management, leak repairs, pipe replacements, and district metered area management.

Pepsi starts snack food line in Laguna plantPepsi-Cola Products Philippines Inc. (PCPPI) will produce branded snacks for the local market after the opening of the company’s new manufacturing facility in Cabuyao, Laguna last February.

“We are delighted with this opportunity to produce internationally-renowned snacks products for the Philippine market, as we move toward our vision of becoming a premier food and beverage company in the Philippines,” PCPPI President Furqan Ahmed Syed said.

PepsiCo has set a quality and safety standards internationally which the manufacturing plant has been fully complying with.

PCPPI Vice President for Corporate Affairs and Communications Jika M. Dalupan said the creation of the snacks-and-beverage franchise operations in the country reveals PepsiCo’s goal to ensure the integration of its food and beverage portfolio across multiple platforms, including manufacturing and go-to-market execution.

“By pairing our tasty snacks with our refreshing drinks, we are bringing together food and beverage brands that truly work better together,” she added.

Ayala Land takes over TutubanAyala Land, Inc. (ALI) formally took over the Tutuban Center in Divisoria with the initial P1.41B payment to the mall’s original owner Prime Orion.

“Ayala Land, Inc . and Pr ime Orion Phil ippines, Inc. (POPI) executed a Deed of Subscription and a Supplement to the Deed of

Subscription whereby ALI subscribed to 2,500,000,000 common shares of stock of POPI, which will represent 51.06% of the total outstanding shares of POPI,” Prime Orion told the Philippine Stock Exchange (PSE).

Tutuban Center sits on a 20-ha. land that has a 60,000-sqm. gross leasable area and generates P400M in annual revenue.

The center is the planned transfer station for the P287-B North South Railway Project which will connect to the Light Rail Transit (LRT) Line 2 West Station. The North South Railway Project will have a 56-km. commuter rail from Tutuban to Calamba, Laguna, and a 478-km. long-haul rail from Tutuban to Legazpi, Albay.

As the in terconnect ion s i te , the center’s daily foot traffic is expected to increase from 100,000 to 400,000.

SM Group to build m o r e s c h o o l buildingsSM Investments C o r p o r a t i o n t u r n e d o v e r a

newly built nine-story building to the University of the Philippines’ (UP) Professional Schools satellite campus in Bonifacio Global City.

SM Prime Holdings Inc. President Hans Sy said the building for UP costs more than the P400-M development budget earlier allocated for the project when it started construction in 2014.

Sy noted that the SM Group plans to do more similar projects in the near future.

“We are in the process of signing some agreements,” he said.

Also, the Henry Sy Foundation started constructing last August 2015 a new innovation center of art, science, and technology laboratory at Miriam College campus in Quezon City.

PHL-UK trade up by 30% in 2015 Total bilateral trade between

the Philippines and the United Kingdom grew 30% to USD 2.6B in 2015 from USD 1.2B in 2014.

The growth could have been higher if the country’s restrictions on foreign investments, particularly on ownership, had been further eased, British Ambassador to the Philippines Asif Ahmad said.

British exports to the Philippines alone grew by 38%, the total value of trade remained small compared to that between the UK and other countries in the Association of Southeast Asian Nations (ASEAN), Ahmad noted.

Britain is already the single largest European investor in the Philippines, with companies like Shell investing billions of dollars in their energy projects such as the Malampaya gas platform, he added.

However, he believes the country is primed to receive more investments in key sectors such as infrastructure and construction, energy, and education.

PHL, Slovenia to forge defense cooperation The Philippines

and Slovenia signed a memorandum of understanding (MOU) on research, innovation, and technological practices to increase the Philippine government’s bid to modernize its defense capabilities.

“There are opportunities in the Philippines to offer services and products in terms of modernizing the military and police forces,” Slovenian Ministry of Economic Development and Technology State Secretary Ales Cantarutti said.

11April 2016

INTERNATIONAL/REGIONALWATCH

“We are also aware of your excellence in growth, expansion, and the whole economy and we see potentials here. The Philippines is also the excellent gateway to the Association of Southeast Asian Nations (ASEAN) region,” he added.

Once the MOU is established, the next step would be to organize a joint commission for the area in the defense industry, Cantarutti noted.

“We are open and ready to cooperate on different levels. We know that in today’s world, trade is not enough if we want to be a reliable and sustainable partner in the long term,” he said.

With a population of 2M, Slovenia is partnering with the country at the best point in time as trading continues to rise and investments sustain the momentum, Philippine Ambassador to Slovenia Maria Zeneida Collinson said.

“We are also an outstanding performer in the Asian region with an average growth rate of 6% and we are hitting the demographic sweet spot which only means increase in purchasing power and productivity,” Collinson said.

DTI promotes local food exports to Japan, Middle EastThe Department of Trade and Industry (DTI), through the Center for International Trade Expositions and Missions (CITEM), has aggressively promoted the export of local food products to Japan and the Middle East at the 41st International Food and Beverage Exhibition (FOODEX) held last 8-11 March 2016 at Makuhari Messe, Tokyo, Japan.

Around 18 Philippine companies showcased their tropical fruits and beverages and other products.

“The Philippines has superior quality and export-ready fruits and fruit products, and rigorous promotions are being done to position the country as the sourcing destination of the best ingredients and food products in Asia,” CITEM Executive Director Rosvi C. Gaetos said.

“Data showed the Philippines dominating Japan’s tropical fruits imports, supplying 99.7% of its pineapples, 93.3% of its bananas, and 27.3% of its mangoes. That in itself is a feat, given the highly-discerning Japanese market,” Gaetos added.

PHL products being promoted to Japan

q Frozen tunaq Peking duckq Snacksq Beveragesq Pastry ingredients

These products have captured the palate of Japanese consumers.

In the Middle East, agri-business companies have gained significant access to the mainstream market among Gulf Cooperation Countries (GCC), particularly Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman.

“We have made substantial progress in key areas of complementation and are optimistic that we can sign the agreement before June this year,” Rodolfo added.

EFTA is an intergovernmental o rgan i za t i on se t up fo r the promot ion of f ree t rade and economic integration for its four member states, namely Iceland, L i e ch t en s t e i n , No rway, a nd Switzerland.

The Philippine government is now developing a work program that will encourage and promote utilization of the free trade agreement so that Philippine industries and sectors may benefit from the opportunities brought about by PHL-EFTA free trade agreement (FTA).

“Right now, most Ph i l ipp ine products have duty free access to the EU through the European Union’s Generalized Scheme of Preferences Plus (EU-GSP+). We are targeting a more permanent and long-term relationship through the ongoing negotiations with EFTA,” Rodolfo said.

PHL exports to EFTA in 2014

q Gold in semi-manufactured formsq Digital monolithic integrated circuitsq Aircraft partsq Printed circuitsq Artificial teethqSilver

PHL imports to EFTA

q Medicamentsq Diagnostic or laboratory reagentsq Parts of airplanes or helicoptersq Wrist-watches

“Improving market access with Europe through EFTA will encourage investments in the services and non-services sector, bring in high value added products, technological knowhow, and capital from their highly developed economies to our local economy,” he added.

PHL-EFTA concludes 5th round of negotiationsThe Philippines and the European Free Trade Association (EFTA) have concluded the 5th round of negotiations for free trade and economic partnership.

“DTI [Department of Trade and Industry] has intens i f ied i t s efforts to deepen and strengthen the country’s strategic trade and economic partnerships with the recent conclusion of the fifth round of negotiations on the Philippines-EFTA,” DTI-Industry Development Group (IDG) Undersecretary Ceferino S. Rodolfo said.

Philippine Business Report12

0

2

4

6

8

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

Interest Rate (%)Lending Regular

4545.5

4646.5

4747.5

48

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

Peso per US Dollar Rate

ECONOMIC INDICATORS

As of 29 April 2016

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

E d i t o r i a l Te a m : P a t r i c i a M a y M . A b e j o / E d i t o r - i n - C h i e f • A l f o n s o M . Va l e n z u e l a / M a n a g i n g E d i t o r • C r e s e n c i a n o P. P a r / A s s i s t a n t E d i t o r • K r i s t i n a S . A n d a y a , R e n a l d o C . N e n e r i a / Wr i t e r s • R e n a l d o C . N e n e r i a / D e s i g n L a y o u t •

Philippine Business ReportApril 2016

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

Entered as Third-Class Mail at theMakati Central Post Office

under Permit No. 504valid until 31 December 2016

As of 28 April 2016

012345678

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

GDP Growth Rate (%)

01234567

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

GNI Growth Rate (%)

0100020003000400050006000

Feb-16Jan-16Dec-15Nov-15Oct-15Sep-15

Exports(In USD Billion)

Ph

ilip

pin

e P

ost

al P

erm

it N

o. 5

04

0

0.5

1

1.5

2

Mar-16Feb-16Jan-16Dec-15Nov-15Oct-15

Inflation Rate (%)(1994 base year)

0

2000

4000

6000

8000

Feb-16Jan-16Dec-15Nov-15Oct-15Sep-15

Imports (In USD Billion)

140.5141

141.5142

142.5143

Mar-16Feb-16Jan-16Dec-15Nov-15Oct-15

Consumer Price Index(2000 base year)