Volume 26 No. 08

August 2015

Pres. Aquino signs Competition Law, Cabotage Law President Benigno S. Aquino III signed into law two landmark bills, namely Republic Act (RA) No. 10667 or the Philippine Competition Act and RA No. 10668 or the Foreign Ships Co-Loading Act which amends the 50-year-old Cabotage law. Both laws, signed on 21 July 2015, are expected to advance the country’s economic progress through improved market competition and a more efficient shipping system. The laws are seen to further enhance the country's business climate and help meet the challenges of the Association of Southeast Asian Nations (ASEAN) Economic Community (AEC). Department of Trade and Industry (DTI) Secretary Gregory L. Domingo said the newly signed laws indicated government’s sustained efforts to liberalize the economy and institutionalize reforms. “The Philippine Competition Act effectively levels the playing field as it criminalizes and imposes heavy fines on business activities that promote monopolies and obstruct equal access to market opportunities,” Secretary Domingo said. “The amended Cabotage Law will allow foreign vessels to transport and co-load foreign cargoes for domestic transshipment,” he added. On the Cabotage Law, he believes it will help lower shipping costs, liberalize trade, boost the country’s logistics performance, and align the August 2015

Aprroved Bills. President Benigno S. Aquino III (center) signed into law R.A. No. 10667 and RA No. 10668. Seated (L) Senate President Franklin M. Drilon and House Speaker Feliciano Belmonte Jr (R). Standing (L-R) DOF Secretary Cesar V. Purisima, DTI Secretary Gregory L Domingo, Congressman Mark L. Mendoza, Congressman Anthony G.Del Rosario, and Congressman Ibarra “Barry” M. Gutierrez III witnessed the ceremonial signing.

country with the plan for a single shipping market within ASEAN. European Chamber of Commerce of the Philippines (ECCP) Vice President for External Affairs Henry J. Schumacher said the laws will eventually benefit the Filipino consumer who potentially gets better goods and services at a better price. The Philippine Competition Act was passed after 25 years of legislative work. Salient features of the law include: • Leveling the business playing field for all companies operating in the country, from the large foreign multinationals down to the local micro, small, and medium enterprises (MSMEs) • Creation of the Philippine Competition Commission (PCC) that will look into anticompetitive behavior,

abuses in dominant positions, and anticompetitive mergers and acquisitions. The PCC, to be established within 60 days of the signing of the law, will be headed by a Chairperson, assisted by four commissioners, and an executive director. • Imposition of administrative penalties of a maximum fine of P100M on the first offense and P250M for the second offense for anticompetitive agreements and abuses of dominant position. Activities under abuse of dominant position include selling goods or services below the market prices to suppress competition; imposing barriers to entry; enforcing restriction on the lease or contract of sale or trade of goods; and making the supply of such goods dependent on the purchase of other goods or services. Anticompetitive agreements include price fixing; limiting or 1

controlling production; and dividing or sharing the market, geographically, in terms of volume of sales, type of goods or services, or buyers and sellers. The 50-year Cabotage Law was amended through the Foreign Ships Co-Loading Act. Revisions include: • • •

Allowing foreign ships to call in multiple ports provided that their cargoes are intended for import or export and duly cleared by the Customs Commissioner. Reducing logistic costs for producers. Before the amendments to the Cabotage Law, it was cheaper to send products from other countries to the Philippines than to ship goods within the country. Decongesting major ports in the country.

INDUSTRY Trends Electronics continue exports dominance Electronic products remained as the country’s top export merchandise despite a slowdown of total exports in May this year. Electronic exports accounted for 48.1% or nearly half of May total exports revenue amounting to USD2.36B. The amount is 6.33% better than the April record of USD2.2B fueled by growth of six electronic product sectors. However, the performance was weaker by 7.51% year-on-year. Semiconductors, accounting for 38.1% of all electronic products, declined by 6.9% to USD1.79B. Included in this sector are telecommunications, office equipment, control and instrumentation, communication/ radar, medical/industrial instrumentation, and components/ devices (semiconductors). Cumulative exports from January to May reached USD10.9B or 2.9% more than the USD10.6B reported for the same period a year earlier. 2

Top 5 Export Markets for PHL Electronic Products May 2015 q Hong

Kong

q Japan

q United q China

States

q Singapore

Renewed GSP to boost PHL exports United States (U.S.) President Barack Obama signed the Trade Preferences Extension Act of 2015 (H.R. 1295) renewing the Generalized System of Preferences (GSP) last 29 June 2015 to boost the access of Filipino exporters to the U.S. market. Salient features of the new GSP: • Renews the program until December 2017 • Restores GSP effective 29 July 2015 • Expands coverage to include 20 to 30 specific types of travel goods • Provides for retroactive refund of all duties paid by U.S. importers from the time the program lapsed on 31 July 2013 Facts on U.S. GSP: • U.S.’ largest and oldest trade preference facility • Established 41 years ago • Eliminated duties on about 5,000 types of products when imported from 122 designated beneficiary developing and least developed countries and territories • Includes the Philippines among four beneficiaries in Southeast Asia, together with Cambodia, Indonesia, and Thailand • Helps eligible country to expand its exports to the U.S. • Excludes textile, apparel, and footwear Philippine Ambassador to the U.S. Jose L. Cuisia Jr. said the program gives more Filipino exporters access to the U.S. market, creates jobs at home, increases Philippine firms’ competitiveness, and improves the country’s overall trade position.

The renewed GSP directly benefits micro, small, and medium enterprises (MSMEs) and is a major employment generator for many export-oriented agribusinesses and community-based industries in the various regions of the Philippines. “The reinstatement of the program means that the Philippines could recoup its lost export share directly caused by the program’s expiry in 2013. More importantly, it is also an essential incentive for investors, both foreign and local, as it boosts the competitiveness of products produced in the Philippines in the U.S. market,” DTI Senior Trade Representative and Philippine Embassy Commercial Counselor Maria Roseni M. Alvero said. BOI sets release of inclusive biz rules The Board of Investments (BOI) will release the guidelines for inclusive business (IB) accreditation scheme in the third quarter of this year to enable firms to file their applications within the year and be assessed at the end of 2015. The guidelines will be subjected to public hearing and private sector review this month. The 2014-2016 Investment Priorities Plan (IPP) provides for the BOI to accredit the IB strategy of firms registered under its program. IB Strategy salient features: • •

Provides goods and services as well as income and decent work opportunities for the low- income segment of the society within the enterprise’s supply or value chain Focuses on enterprises engaged in agribusiness, tourism, and housing

Policy changes improve PHL’s ICT climate Policy changes in the country’s information technology and business process management (IT-BPM) have made the country ripe for investments and ready for the new wave of revolution in information and communications technology Philippine Business Report

(ICT), Department of Trade and Industry (DTI) Secretary Gregory L. Domingo said during the investment roadshow in San Francisco, United States (U.S.) entitled “Invest in the Philippines: Asia’s Bright Spot.”

PEZA firms are automatically registered in the BOC’s electronicto-mobile system (e2m) after paying P1,000 in “activation fees.” The memorandum revokes a previous order that sets rules and guidelines for accreditation as importers.

The young Philippine workforce is only getting better due to the reforms in the educational sector such as the introduction of K-12 and doubling the country’s budget for education, Secretary Domingo said.

The order requires importers and brokers to secure both an importers clearance certificate (ICC) and a customs broker clearance certificate (BCC) from the Bureau of Internal Revenue (BIR).

The Conference, held on 24 to 29 June 2015, was the third stop of a high-level trade and investment mission to the U.S. The two other briefings were held in Washington, D.C. on 24 June and in New York City on 26 June. Conference speaker and Tallwood Venture Capital Managing Partner Diosdado Banatao said the country’s challenge is in ICT infrastructure building, particularly in Internet bandwidth, which is as an area of opportunity for investments. An entrepreneur and an engineer working in the high-tech industry, Banatao co-founded Mostron, Chips and Technologies, and S3 Graphics. Customs clarifies registration process for economic zone locators The Bureau of Customs (BOC) issued Customs Memorandum Order no. 142015 dated 30 June 2015 mandating Philippine Economic Zone Authority (PEZA) firms to register separately as an importer and exporter. “Since the BOC maintains separate client profile registrations for each function of an entity/company, the activation fees to be collected from PEZA locators should be on a per profile basis, that is, one activation fee for their profile as an importer and an another activation fee for their profile as an exporter,” the memorandum said. PEZA locators do not have to submit additional requirements to secure accreditation since they have already undergone prior evaluation. August 2015

More e-jeepneys take public transport route More communities are adopting electric jeepneys (e-jeepneys) as alternative for mass public transport, the Electric Vehicle Expansion Enterprise Inc. (EVEEi) announced. Some cities that have adopted e-jeepneys include the cities of Muntinlupa, Makati, and Quezon, the group said. EVEEi Chief Executive Officer (CEO) Atty. Bodie Pulido said the e-jeepney program aims to modernize the fleet of dieselpowered jeepneys plying the country’s thoroughfares. EVEEi is also seeking more funding to finance its growing electric vehicle (EV) operations in the country. Presently, EVEEi operates 20 e-jeepneys in Filinvest City in Alabang, Muntinlupa under a project called the 360 Eco Loop. EVEEi and e-vehicle manufacturer and supplier PhUV teamed up to spur more interest for e-jeepneys through the “Adopt an EJeepney” program at the League of Corporate Foundation’s Corporate Social Responsibility (CSR) Expo held in July. The program aims to get support from the private sector to get seed money to replace traditional jeepneys with e-jeepneys. “We are now aggressively pushing for our clean and green advocacy.

The country needs this and the Filipino people deserve a cleaner and better alternative,” Pulido said. EVEEi’s e-jeepneys were supplied by PhUV, Inc., a pioneer in the local assembly of e-vehicles in the country. “The e-vehicle industry is now ready to cater to the local public transport market. Its members now have the technology and facilities to supply the local public transport sector with cleaner and more modern versions of the jeepneys and tricycles known as the e-jeepneys and the e-trikes,” Electric Vehicle Association of the Philippines (EVAP) President Rommel Juan said. Organized in 2009, EVAP is a group of some 50 major electric vehicle industry players in the country. Among its members are EV manufacturers, assemblers, importers, suppliers, distributors, non-government organizations (NGOs), the academe, and individual enthusiasts. International food exhibit generates over P7B IFEX Philippines 2015 generated export sales amounting to USD159.48M (P7.2B) and local sales of P52.59M. IFEX Philippines 2105 Stats q

131 international exhibitors with 127 from APEC member-economies excluding Hong Kong, China; Papua New Guinea; and Peru q Four exhibitors from Italy and Portugal q 13,701 visitors

IFEX Philippines 2105 Featured Local Products q

Seafood Sugar q Coconut q Grains q

q Cereals q Fruits

q Vegetables

IFEX Philippines 2015 is a biennial event organized by the Department of Trade and Industry’s (DTI) Center for International Trade Expositions and Missions (CITEM) and the Department of Agriculture (DA). 3

The exhibit provided an ideal trading platform for Asia’s food, ingredients, and raw materials. Since the Philippines is the host of the APEC 2015 meetings, this year’s IFEX was made an official Asia-Pacific Economic Cooperation (APEC) event.

hub are aircraft manufacturer Airbus for the aerospace industry and other firms in sectors such as transportation and construction.

The event, held on May 21 to 24 at the SMX Convention Center in Pasay City, had a total of 700 exhibitors, 569 of which were local enterprises and 131 came from abroad.

Uniqlo is bringing in Japanese students in their Philippine outlets to learn English as a second language.

The event enabled local enterprises to meet with buyers and expand the market for their products. Businesses urged to strengthen cooperation with government The key to competitiveness is greater cooperation between the private sector and the government, Philippine Business Conference (PBC) Chairman Benedicto V. Yujuico said. He said businesses are interested in opportunities offered by the free flow of goods, services, skilled labor, and capital investment in the Southeast Asian region. On the same note, Philippine Chamber of Commerce and Industry (PCCI) President Alfredo M. Yao said every Filipino businessman must maximize the benefits offered by a market of 650M consumers in the region whose purchasing power is among the fastest growing in the world. To succeed, Yao said a company needs to be a value-producing link in a global supply chain and at the same time work with strategic allies. More global firms eye PHL as training hub The Philippines has the potential to become a preferred training hub by multinational companies due to its English-speaking and skilled workforce, Department of Trade and Industry (DTI)-Industry Promotion Group (IPG) Undersecretary Ponciano C. Manalo Jr. said. Among the companies interested in making the Philippines its training 4

Foreign firms with training programs in the Philippines include Japan’s Uniqlo and Sweden’s H&M.

H&M is likewise undertaking training activities in their retail outlets in the country. Foreign investors interested in PHL defense ecozone President Benigno S. Aquino III is set to sign a proclamation designating the 340-ha. government arsenal (GA) lot in Limay, Bataan as an economic zone for local and foreign manufacturers of weaponry and ammunition. Manufacturers from Canada, United States (U.S.), South Korea, and South Africa have expressed interest in setting up operations within the property. The ecozone will be named GA Defense Industrial Estate (GADIE). Companies interested to operate in GADIE q

Rheinmetall Denel Munition (South Africa) q S&T Holdings Co (South Korea) q Colt’s Manufacturing Co (U.S.) q Waterbury Farrel (Canada)



Ecozones in Bataan q

Freeport Area of Bataan (FAB) q Portions of the Subic Bay Freeport Zone q Hermosa Ecozone Industrial Park q Bataan Technology Park Inc.

The GA will continue to operate as a unit under the Department of National Defense (DND) and serve as administrator of the economic zone. It will tap private-sector partners to develop the property. Presently, the Philippines produces munitions only for small caliber firearms, and imports all its medium and large caliber ammunitions.

Trade and INVESTMENTS MANUFACTURING USD 800M allotted for 2 new cement plants San Miguel Corp. (SMC) will spend USD800M to build new cement plants in the provinces of Pangasinan and Quezon. Construction of the plant in Pangasinan is ongoing and is expected to be completed by June 2017. The second cement plant is eyed for completion by September 2017. The cement plants will have an annual capacity of 2M tons each. Phoenix spends P200M in H1 Phoenix Semiconductor Philippines Corp. (PSPC) spent P200M for its capital expenditure program during the January-June period this year. The amount represented almost half of the total P423M capital expenditure for the year allotted for its Phase 1 program which is dedicated for Samsung. Phase 2 is scheduled to commence in the latter part of the year. Some P153.45M was used to purchase production machinery for branded memory cards and dual inline memory modules. PSPC produces memory modules for desktop and server computers aside from flash memory cards used for mobile phones, gadgets, and digital cameras. Meralco plans own e-vehicle manufacturing plant The Manila Electric Co. (Meralco) plans to put up a manufacturing facility for electric vehicles (e-vehicles) as it sees an increasing demand for these types of vehicles in the coming years. “We are hopeful that eventually there will be a manufacturing Philippine Business Report

plant here in the country and we’re prepared in doing our share in supporting that,” Meralco President and Chief Executive Officer Oscar S. Reyes said. Meralco Chairman Manuel V. Pangilinan earlier said the firm is willing to invest in local manufacturing facilities for e-vehicles, stressing it is better for the country to make and assemble its own rather than import. “We believe e-vehicles will be an increasing component of the overall transportation industry, initially in the smaller forms of public transport like tricycle and e-jeeps,” Reyes said. Taiwanese fitness maker sets up shop in PHL Taiwan’s fitness equipment manufacturer Johnson Health Tech. Co. is establishing its office in the country. Johnson Health Tech. Regional Sales Manager Katsuya Ito said the company plans to start the operations of its local subsidiary Johnson Health Tech. Phils., Inc. in Bonifacio Global City in Taguig City this month. Ito said they are looking to pour in investments up to USD2.5M for their venture in the country. “There is great potential here in the Philippines. It is a very large market and there is a growing middle class. There is also a very rich, strong fitness culture here,” he said. The firm eyes to open at least five stores in the country by the end of 2016. Johnson Health Tech. specializes in design, production, and marketing of fitness equipment. Honda invests P125M in showroom Honda Cars Angeles-Clark (HCAC) is investing P125M in building a specialty showroom at Clark Freeport Zone to showcase its brand new models. August 2015

Clark Development Corp. (CDC) President Arthur P. Tugade and HCAC Chairman and Chief Executive Officer (CEO) Eriberto H. Gomez signed a 25-year lease agreement on a 2,500-sqm. area within Clark Freeport. HCAC has a commitment to employ about 50 workers. Notably, there are intentions to hire persons with disabilities (PWDs) or Aetas as part of the agreement. HCAC’s operation is expected to start by July 2016. Toyota pledges more investments Toyota Motor Philippines Corp. (TMP) has committed to put more investments in the country as it prepares to apply its Vios model under the government’s Comprehensive Automotive Resurgence Strategy (CARS) Program. Six-year Comprehensive Automotive Resurgence Strategy (CARS) Program goals q q



q q



q

Attract more than P27B in new parts manufacturing investments Produce at least 600,000 vehicles for the three models that will qualify for the program Create 200,000 new jobs Generate total economic activity estimated to be worth P300B within the six-year life of the program Contribute 1.7% share to the country’s gross domestic product (GDP)

The additional investments are seen to boost the production of Vios at the company’s assembly plant in Sta. Rosa, Laguna to at least 33,333 units a year from the current 26,000 units, raise the local content to 50% from the existing 40%, and implement a full model change. The planned investments entail a P2-B investment for the company, TMP President Michinobu Sugata said. The CARS Program provides that incentives, including a USD 1,000 tax incentive per unit, would be given if a local vehicle

assembler could produce 200,000 units over the next six years, translating to a yearly production of at least 33,333 units. To date, TMP’s parent company Toyota Group has invested a total of P36B in the country since 1989 and has remitted a total of P174B in taxes and duties to the government. Haier Group eyes “triple growth” in PHL Expressing its confidence on the Philippine economy, the Haier Group relaunched its own brand in the country and kicked off a new one to help realize its “triple-growth” target by 2018. “I see the Philippines as the growth potential market for us. This is why I came here for the first ASEAN [Association of Southeast Asian Nations] tour,” Haier Asia Co. Ltd. President and Chief Executive Officer (CEO) Yoshiaki Ito said. “The biggest growth-driving factor I see in the Philippines is its young population,” Ito said. He also cited the country’s “flourishing economy, political stability, and flexible language capability.” Haier Electrical Appliances Philippines Inc. (HPI) President Nobuhito Hayashi said while Haier remains a minor player in the local appliance industry from being a new entrant three years ago, the company has already achieved robust business in the country. At present, the firm’s main core lineup of products includes washing machine, refrigerator, television (TV), and air-conditioning.

ENERGY Vivant invests P67B in new projects Cebu-based Vivant Corp. is pouring in P67B for new power generation projects in the next three years. Vivant Chief Operating Officer (COO) Arlo S. Sarmiento said 5

the group plans to invest in new facilities with over 450 megawatts (MW) in capacity. Sarmiento said the projects are expected to help augment electricity supply in Visayas and Mindanao. “These projects are deemed part of the solution for the power problems in Visayas and Mindanao . . . which should result in a 51% increase in its attributable generation capacity by 2018 as projects are completed,” Sarmiento said. Last year, Vivant infused more than P1.6B in equity for its power generation business including its acquisition of a 40-% stake in Minergy Power Corp. (MPC) and a 20-% stake in Therma Visayas Inc. (TVI). The companies are behind two coal-fired power facilities in the municipality of Balingasag, Misamis Oriental and in Toledo City, Cebu. “MPC is currently constructing a 3x55-MW coal-fired power generation facility in Misamis Oriental. Its completion by yearend 2017 should provide a new and stable source of power for the island of Mindanao,” he said. Also, TVI has broken ground on a 300-MW coal-fired power generation facility in Toledo City, Cebu. USD 220M allocated for solar farms Gregorio Araneta, Inc. has partnered with Thailand-based Soleq to pour in USD220M to build solar energy farms in Ormoc, Leyte and in Cadiz City, Negros Occidental.

They are building a 100-megawatt (MW) solar farm project in Cadiz worth USD 170M which is expected to be finished by December 2015. They also spent USD 50M to develop a 30-megawatt (MW) solar farm in Ormoc City after the devastation brought by Typhoon Yolanda. The project was completed and started supplying power in March 2015 to the National Grid Corporation of the Philippines (NGCP), a private corporation that maintains and operates the power transmission network in the country. “Clearing the land, putting up and maintaining the solar panels created much-needed jobs for the locals whilst beefing up the power supply of Leyte and the country,” Gregorio Araneta, Inc. Chief Executive Officer (CEO) Gregorio Araneta III said. Araneta said of all renewable energy projects, solar farms are the fastest to construct. Araneta’s company focuses on real estate investment and development as well as power generation. On the other hand, Soleq is an Asian solar utility firm focused on becoming Southeast Asia’s largest independent solar power producer. Soleq currently owns and operates 70% of 10 solar facilities in Thailand. It is supported by Equis Funds Group, a Singapore-based private equity group focusing on energy and infrastructure investments in Asia. P1.5-B Bataan fuel terminal inaugurated Oil firm Jetti Petroleum Inc. (Jetti) raised its investment in the Bataan bulk terminal from P1B to P1.5B for its second phase development. The Phase 2 of Jetti’s Mariveles, Bataan depot will add 1.5 ha. to its existing 2-ha. development.

The two groups have started work on what is considered to be the largest solar farm not only in the Philippines but in South East Asia. 6

“By expanding our holdings, we now have the capability of adding more storage tanks to meet the growing market need for quality fuels in

Luzon,” Jetti Corporate Affairs Manager Leo P. Bellas said. Bellas said Phase 2 can accommodate additional storage tanks totaling about 60M liters in combined fuel capacity.

PUBLIC INFRASTRUCTURE AND LOGISTICS New P3-B port rising in Bataan Filipino-owned Seasia Logistic Philippines Inc. and London-based Nectar Group Ltd. joined efforts to build the first phase of a P3-B development port project in Bataan. Seasia President Rafael Cosme said the Phase 1 of the port development project of the P1.2-B Seasia Nectar Port Services Inc. (SNPSI) covering 5.9 ha. would be completed within the year. The port facility can accommodate two vessels about 120 meters long and would be equipped with a 247-meter quay that could handle a capacity of at least 3M tons per year. SNPSI is 60% owned by Seasia Logistics and 40% by the Nectar Group. The proposed terminal is designed to handle shipment of coal, clinker, silica sand and other cement raw materials, steel, fertilizer and other dry bulk cargo. Cosme said SNPSI would be pouring another P600M for Phase 2 that would cover another 1.1 ha., allowing the facility to handle one more long vessel. Phase 3 is expected to cost around P1.2B, covering 4.4 ha. and another 200 meters of quay. With the completion of Phase 1, he said the company would start handling the clinker as well as coal shipments of its client Holcim Philippines. For the second phase, SNPSI would be looking at steel shipments and even containerized shipments Philippine Business Report

of locators inside the freeport area of Bataan.

PUBLIC-PRIVATE PARTNERSHIP PROJECTS P141.52-B PPP projects slated for approval Four Public-Private Partnership (PPP) projects worth P141.52B are up for approval by the National Economic and Development Authority’s (NEDA) Investment Coordination Council Technical Board and Cabinet Committee (ICC-TB and CC). PPP Projects for Approval In Billion Pesos Name of Projects Ninoy Aquino International Airport (NAIA) Development Ortigas-Taytay LRT Line 4 Batangas-Manila (BatMan) 1 Natural Gas Pipeline C-5 Modern Bus Transit System

Amount 74.56 50.15 10.53 6.28

Source: NEDA



These projects are currently undergoing evaluation by the appropriate government body. The projects will then be endorsed to the Cabinet-level NEDA Board chaired by President Benigno S. Aquino III for final approval. The C-5 Modern Bus Transit System Project is expected to improve the connectivity of the cities of Paranaque, Taguig, Makati, Quezon, and Valenzuela with a Bus Rapid Transit (BRT) system along the C-5 corridor. The Ortigas-Taytay LRT Line 4 Project, on the other hand, is a proposed 11-km. rail line from the SM City at Taytay to the intersection of Ortigas Avenue and EDSA in Pasig City. Also, the Ninoy Aquino International Airport (NAIA) Development project is seen to improve, upgrade, and enhance the operational efficiencies of all existing terminals of NAIA to meet the International Civil Aviation Organization (ICAO) standards. August 2015

Meanwhile, the BatMan 1 Natural Gas Pipeline Project of PNOC involves the construction of a 121-km. transmission pipelines from the province of Batangas to Metro Manila. The Aquino Administration aims to award 15 PPP contracts within its term. To date, nine PPP projects worth P136.37B have been awarded since 2010. PPP Projects Awarded In Billion Pesos* Name of Project

Amount

q LRT Line 1 Cavite Extension and O&M q Cavite - Laguna (CALA) Expressway q Mactan-Cebu International Airport Passenger Terminal Building q PPP for School Infrastructure Project (PSIP) Phase I q NAIA Expressway (Phase II) Project q Modernization of the Philippine Orthopedic Center q Daang Hari-SLEX Link Road (Muntinlupa-Cavite Expressway) q PPP for School Infrastructure Project (PSIP) Phase II q Southwest Integrated Transport System (ITS) Project q Automatic Fare Collection System (AFCS)

64.90 55.51 17.52 16.43 15.86 8.69 2.01 3.86 2.50 1.72

Source: Department of Transportation and Communications (DOTC) *As of August 2015



P17-B Davao Sasa Port for PPP modernization The Davao Sasa Port will soon undergo a P17-B modernization project under the public-private partnership (PPP) scheme, the Department of Transportation and Communications (DOTC) and the Philippine Ports Authority (PPA) announced with the closing of the submission of qualification documents last 29 July. The project involves the expansion and modernization of the existing port, which includes the

construction of a new quay and the installation of cranes to address port traffic congestion. The modernization project is seen to upgrade the port’s annual capacity from 550,000 twenty-foot equivalent units (TEUs), to 1.2M TEUs. A TEU is used to measure a ship's cargo carrying capacity. The dimensions of one TEU are equal to that of a standard 20-foot shipping container. The project will be implemented in three construction phases, for completion from 2017 to 2020. Cebu airport upgrade starts The Department of Transportation and Communications (DOTC) broke ground for the construction of the new international terminal for the Mactan-Cebu International Airport (MCIA) last 29 June. GMR-Megawide Cebu Airport Corporation (GMCAC) bagged the 25-year public-private partnership (PPP) contract in 2014 after offering a P14.4-B bid. The project covers the construction of a new international passenger terminal building, renovation of the existing terminal, and its conversion into an exclusive domestic facility. The new terminal is seen to be constructed by 2018 and the renovation of the existing terminal by 2019. Passenger capacity is expected to grow from 4.5M to 12.5M per year, according to DOTC.

AVIATION Foreign construction, aerospace firms interested in PHL After conducting an investment roadshow in France, Department of Trade and Industry (DTI) Secretary Gregory L. Domingo announced French aerospace companies are beefing up their importation of aircraft parts and components from existing suppliers in the country. 7

These aircraft components include kitchen gulleys, toilets, and flight control systems. One aircraft company is sending a delegation next month. Aside from importing more aircraft parts and components in the country, Domingo said that more French aircraft companies are also expected to set up maintenance, repair, and overhaul/operations (MRO) in the country. Cebu Pacific invests in 16 new ATR planes Cebu Air Inc. (Cebu Pacific Air) has set aside USD673M for the purchase of 16 new aircraft from Toulouse-based turboprop aircraft maker ATR to meet the growing demand for inter-island services in the Philippines. According to Cebu Air Inc., the transaction would double the airline’s turboprop fleet size. It currently operates a fleet of eight ATR 72-500 aircraft that would be retired as the new aircraft enter service. The entry into service of the ATR 72-600 would see Cebu Air Inc. with new generation aircraft to meet growing demand for interisland service within the country, Cebu Air Inc. President and Chief Executive Officer Lance Y. Gokongwei said.

This would expand the size of the fleet of the PAL Group that includes PAL Express to 78.

BANKING AUB adding 12 branches this year Asia United Bank Corp. is adding 12 branches this year as part of its network expansion strategy in the next few years. Eight bank branches will be for parent AUB and four for thrift bank subsidiary Rural Bank of Angeles, Asia United Bank Corp. Vice President and Corporate Planning and Investor Relations Head Elizabeth T. Miranda said. AUB is raising some P5B in fresh funds for this expansion. As of March 2015, AUB registered a network of 206 branches. The Rural Bank of Angeles is one of the bank’s subsidiaries along with Asia United Leasing and Finance Corp. and Cavite United Rural Bank.

IT-BPM TaskUs goes ahead with USD15-M expansion Business process management (BPM) firm TaskUs is spending USD15M to expand its operations in the country.

Alorica spending USD10M for add’l seats Business process management (BPM) company Alorica is spending USD10M to expand its operations in its Lipa City, Batangas facility. The investment is intended to add 1,000 seats to the current 1,500 employees by end-2015. Alorica, with its three facilities in Makati City, and one each in Cebu and Lipa, currently employs a total of 10,000. Beepo boosts Clark operations Australia-based Beepo had increased its employment base in the Philippines to 160 as of May 2015 from only 15 when the company started operations in April 2014, the Clark Development Corp. (CDC) said. The company’s expansion was due to a number of advantages offered by Clark, which include the availability of talent, streamlined incorporation process, adequate facilities for both commercial and leisure activities, and ease of travel, Beepo Chief Executive Officer Aimee Engelmann said. The CDC also cited the Beepo website stating that there had been “an increasing number of Australian organizations outsourcing various core and non-core positions to offshore service providers in the Philippines.”

PAL places USD 660-M order for 2 Boeing planes Philippine Airlines Inc. (PAL) is spending USD660M to acquire two new Boeing 777-300ER to expand its long- and short-haul routes. The airline has entered into an agreement with Intrepid Aviation for the lease of two more Boeing 777-300ER, PAL President and Chief Operating Officer Jaime J. Bautista said.

“The expansion program includes opening of new locations outside Metro Manila and the improvement of infrastructure,” TaskUs CoFounder and Chief Executive Officer Bryce Maddock said.

The additional aircraft would bring to eight the total number of Boeing 777-300ER being operated by PAL. The first one is scheduled to arrive in the last quarter of 2016; the second in early 2017.

Maddock said TaskUs recently opened its flagship regional corporate headquarters in Bonifacio Global City in Taguig City, which is part of the first phase of the company’s expansion program.

8

The new building is the firm’s third site in the Philippines after the company opened offices in Imus, Cavite and in SM Aura in Taguig.

Beepo projected that over 250,000 jobs will be sent to the Philippines in the next 10 years. Convergys opens new Clark site Convergys’ business process management (BPM) centers in the country now reached 34 as it recently expanded its operations to Clark. The firm’s other offices are located in the cities of Baguio, Bacolod, Cebu, Davao, and around Metro Philippine Business Report

Manila with a headcount of around 60,000 spread across the archipelago. “Clark’s site has a total of 700 employees and aiming to hit the 1,000 target this year,” Convergys Senior Vice President and Country Manager Ivic Mueco said. Teleperformance opens 16th site; mulls Mindanao offfice Teleperformance Philippines Inc. said it plans to establish a new recruitment and operations facility in Mindanao. Teleperformance recently inaugurated its 16th site at SM Aura in Taguig City. The new facility, occupying six floors of the SM Aura Office Tower, will employ 2,000, bringing Teleperformance’s work force in the Philippines to more than 43,000. During the event, Teleperformance Philippines Managing Director Travis Coates said the company considered adding another facility in Mindanao, aside from its Davao City facility which has nearly 2,000 employees.

MINING Top Frontier investing USD 1.5B for nickel plant Top Frontier Investment Holdings is building a nickel processing plant in the province of Surigao del Norte valued at USD 1.5B.

Top Frontier President and Chief Executive Officer (CEO) Ramon S. Ang said they would put up a high-pressure acid leach (HPAL) technology which would have an annual capacity of 200,000 tons per year. An HPAL plant enables the recovery of nickel from nickel oxide ores that traditionally were difficult to process. August 2015

AMIC to develop 2 Abra projects Abra Mining & Industrial Corp. (AMIC) said it plans to use P700M in fresh capital to develop two of its projects in the province of Abra. The investment covers the development and commercial operations of its Bucay-Baticang Limestone Project and the relaunch of its Patok Gold-Silver-Copper Operations, both located in Bangued, Abra. The company has a total of four mining claims located in Abra province, the other two being the Capcapo Copper-Gold and SanVig Iron Sand projects.

REAL ESTATE

RETAIL Suy Sing develops distribution hubs nationwide Suy Sing Commercial Corporation, a one-stop grocery distribution company, plans to expand by establishing five more depots nationwide in the next five years. This is to strengthen the company’s current six warehouses for its emerging clientele based in a consumption-led domestic economy. The company serves as a grocery products’ consolidator with a total of 300 suppliers including Nestle, Procter and Gamble, Unilever and local suppliers like URC, Alaska, Century, and Monde.

Anchor Land spending P21B for Metro Manila projects Anchor Land Holdings Inc. has earmarked P21B for Metro Manila developments, a mix of upscale residential and office projects in the next five years.

“We are directly serving 7,000 independent stores, but our customers also serve smaller stores that if we count them all we are about 30,000 stores,” Suy Sing Commercial Corporation President Tina Tan said.

Anchor Land Chief Executive Officer (CEO) and Vice President Steve Li said the five-year capital expenditure (capex) would finance the company’s 13 projects, six of which will be launched within the year. For these six projects, P5B of the total capex will be utilized.

Five of the company’s distribution hubs are located in Luzon particularly in the provinces of Bulacan and Pangasinan and the cities of Taguig, Parañaque, and Manila. It also has a warehouse in Mindanao located in Cagayan de Oro City.

The six projects include three residential projects, two hotel developments, and a commercial center in Manila and Parañaque City. Avida launches P4-B Tagaytay condo Avida Land Corporation recently launched its residential condominium project in Tagaytay City called Serin East located along the Tagaytay-Nasugbu Highway. Avida will be investing P2B for this development which features 235 units. Serin West, located just beside the Serin East development, was earlier launched in 2012 with 480 units.

TOURISM DOT endorses 5 projects to BOI, PEZA The Department of Tourism (DOT) endorsed five tourism-related developments to the Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA) for available incentives. The five projects have a combined total investment cost of P1.8B. Three of the projects are located in the province of Palawan, namely the P189-M Amanpulo Villas Kamansi Holdings Inc.’s five star resort in Pamilacan Island, Cuyo; the P864-M four-star Best Western Ivy Wall Hotel and the 9

P35-M three-star Blue Palawan Beach Club both in Puerto Princesa City. The two other resort-oriented projects will rise in the province of Bohol – the P200-M four-star Eskaya Beach Resort and Spa in Panglao and the P20-M Belian Hotel in Tagbilaran City. These tourism projects are expected to add employment opportunities once completed. Tourism developers need DOT endorsement to qualify in availing of incentives under Executive Order 226, the 1987 Omnibus Investment Code and Republic Act 7916 or the Special Economic Zone Act of 1995.

COMPANY NOTES Century Pacific doubles capex to P820M Century Pacific Food Inc. doubles its capital expenditure (capex) this year as it pursues to grow its profits and revenues by double digits annually over the next two to three years. According to Century Pacific President and Chief Executive Officer (CEO) Christopher Po, the company has allocated P820M for capex this year, higher than last year’s spending of P450M. This year, P450M of the budget will be used in the construction of a cold storage facility in General Santos City. GrabTaxi expands into courier service GrabTaxi, a taxi service booking application, is venturing into a new service named GrabExpress which is an on-demand courier service.

“From GrabTaxi, we have moved to GrabCar to give people more options. Now, we’re also moving to GrabExpress to move things,” GrabCar Philippines Country Manager Natasha Bautista said. The courier service was launched last June 2015. Through this, customers can send parcels anywhere within Makati or Taguig City, for a flat fee of P80. Puregold ventures into remittance business Puregold Price Club Inc. is expanding into the remittance business with their new service PurePadala. Puregold President Ferdinand Vincent P. Co believes that this venture can further increase sales and foot traffic across their 239 Puregold stores nationwide. Puregold’s PurePadala will eventually venture into an industry-first as it will give senders the chance to decide where they want their money to be spent. “This innovation will allow senders to automatically choose where to allocate the funds such as for groceries, utilities, or education. For example, the money will have to be spent in Puregold if it is allocated for groceries, instead of getting it as cash,” Co said. He added that the sender has an option to exclude tobacco and alcohol products as grocery items. Co noted that the venture is seen to help Puregold attract more foot traffic to its stores as it moves towards fulfilling its vision of being a one-stop shop.

Country-toCountry Canada pushes for free trade talks with PHL Canada has insisted to start exploratory talks with the

10

Philippines for the planned bilateral free trade agreement (FTA) as soon as possible this 2015. “We want the exploratory talks as soon as we can within the year to see if we can go on for the formal trade negotiations. We know that the clock is ticking for the Aquino administration,” Canadian Ambassador to the Philippines Neil Reeder said. Both countries can benefit each other as a jump off point for their entry into new markets. Canada can use the Philippines as its entry point to the Association of Southeast Asian Nations (ASEAN) in the same way that the Philippines can use Canada to access the United States (U.S.) and Mexico. “With a growing middle class, we see more opportunities for the Philippines as a market for goods and services by Canadian firms,” Reeder said. California businessmen hope to boost PHL ties A delegation from San Diego County in the United States (U.S.) led by Honorary Philippine Consul of San Diego Audie J. De Castro visited the Philippines last July to explore potential trade and tourism ties. Local businesses would possibly have a good market of 200,000 Filipinos in San Diego if ever they decide to invest in the California county. The country’s robust economic growth has provided “confidence” for San Diego industries to consider Manila and other economic hubs as possible offshore investment destinations aside from the community of FilipinoAmerican residents, according to De Castro. “Our goal is to come here and build relationships with people and hope that the commitments are made later. The purpose of this mission is to promote both trade and diplomacy between the two countries,” he said. Philippine Business Report

PHL sees travel goods’ inclusion in EU GSP+ The Philippines perceives a new opportunity with the possible inclusion of travel goods in the European Union's Generalized System of Preferences Plus (EU-GSP+) following the expanded coverage under the United States (U.S.)-GSP. Department of Trade and Industry (DTI)-Industry Development Group (IDG) Undersecretary Adrian S. Cristobal Jr. cited the opportunity for the EU to also open this new category in its own GSP scheme. For instance, some travel goods for the Coach and Michael Kors brands are being produced in the country for the exports market. Once the EU-GSP+ includes these products, more EU producers of travel goods can possibly expand in the country to avail of this duty-free privilege for its exports to Europe. “The timing is also good because travel goods is one sector where exporters are looking at for possible inclusion in the EU-GSP+,” Cristobal said. APEC plans incentives for business disaster planning The Asia-Pacific Economic Cooperation (APEC) is supporting the suggested financial incentives for business disaster planning. In the APEC Emergency Preparedness Working Group (EPWG) meeting, the member-economies recognized that an incentives-based approach is essential to encourage emergency preparedness among businesses in the Asia-Pacific region. “Small businesses play a significant and growing role in the international production and trade of goods . . . but their August 2015

APEC economies are more prone to world’s natural disasters and incurred USD 68B annually in related costs from 2003 to 2013. “Leveraging science and technology will help governments, small businesses and communities to better prepare and recover from natural catastrophes, ultimately boosting resilience of global supply chains and livelihoods,” APEC EPWG Co-Chair Kiyoshi Natori mentioned. “Possible financial incentives to encourage small and medium enterprises (SMEs) to adopt business continuity plans include tax cuts, reduced insurance costs and lower interest rates,” Natori said. MACC, PCCI sign MOA for trade coop The Mercosur-ASEAN Chamber of Commerce (MACC) and the Philippine Chamber of Commerce and Industry (PCCI) signed a memorandum of agreement (MOA) at the PCCI head office in Taguig City. Under the agreement, the two chambers shall promote, strengthen, and expand trade, economic, scientific, and technological cooperation. “We are seeing in South America that the best door to go to the Association of Southeast Asian Nations (ASEAN) is the Philippines because you are similar to us in a lot of ways. You have stories that made us similar. And that makes the Philippines very interesting for companies,” MACC President Rodolfo Caffaro Kramer said. Kramer mentioned that there are also large companies in Argentina who are interested to invest in the Philippines. “At the end it’s one country with another country but we want to have this regional vision. And of course we want to learn a lot from you because ASEAN,

for us, is an extraordinary example,” he said. Mercosur is a subregional bloc whose members are Argentina, Brazil, Paraguay, Uruguay and Venezuela. Uber to APEC: Be ‘tech-forward’ like PHL United States (U.S.)-based international transportation network company Uber Technologies Inc. has urged Asia-Pacific Economic Cooperation (APEC) member economies to follow the Philippines’ lead in adjusting transport regulations to accommodate emerging modes of travel. Uber Southeast Asia General Manager Michael Brown said the Department of Transportation and Communications (DOTC) and the Land Transportation and Franchising Regulatory Board (LTFRB) are progressive in coordinating with Uber and other mobile app-based ride-booking service providers in enhancing the country’s transport regulations. “We laud the Philippines for being so technology-forward and sophisticated in recognizing that we’re here to stay,” Brown said.

Philippine Postal Permit No. 504

INTERNATIONAL/ REGIONALWATCH

disaster risk exposure remains disproportionately high,” APEC EPWG Co-Chair Li Wei-sen said.

11

5)

ECONOMIC INDICATORS

GNI Growth Rate (%) 8 7 6 5 4 3 2 1 0

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

141.4 141.3 141.2 141.1 141 140.9 140.8

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15

(In USD Billion)

6000 5000 4000 3000 2000 1000 0

As of 30 September 2015

8,000.00

4,000.00 2,000.00 0.00

Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15

(1994 base year)

2 1 0

(In USD Billion)

6,000.00

3

Feb-15 Mar-15 Apr-15 Jul-15 Aug-15 Sep-15

Imports

Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15

Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15

Interest Rate (%)

Inflation Rate (%)

Peso per US Dollar Rate 48 47 46 45 44 43 42

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

Exports

Consumer Price Index (2000 base year)

GDP Growth Rate (%)

8 7 6 5 4 3 2 1 0

7 6 5 4 3 2 1 0

Lending Regular As of 30 September 2015

Mar-15 Apr-15 May-15 Jun-15 Jul-15 Sep-15

Sources: Bangko Sentral ng Pilipinas (BSP) Philippine Statistics Authority (PSA)

Entered as Third-Class Mail at the Makati Central Post Office under Permit No. 504 valid until 31 December 2015

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 /Editor-in-Chief • A l f o n s o M . Va l e n z u e l a /Managing Editor • Cresenciano P. Par/Assistant Editor • Jamila Joy H. Raposon, Kristina S. Andaya/Writers • Renaldo C. Neneria/Design Layout •

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, 2F Trade and Industry Building, 361 Sen. Gil J. Puyat Avenue, Makati City 1200, Philippines • Phone ( + 6 3 2 ) 8 9 5 . 3 6 1 1 • 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

12

Philippine August Business Report 2015

Philippine Business Report