1September 2015

Volume 26 No. 09 September 2015

The Asia-Pacific Economic Cooperation (APEC) is seeking to place micro, small, and medium enterprises (MSMEs) at the “front and center” of international trade, citing their crucial role in enabling a competitive and innovative business environment across various economic sectors.

As a policy recommendation under the APEC Implementation Plan for the Boracay Action Agenda to Globalize MSMEs (Boracay Agenda) presented during the APEC 3rd Senior Officials’ Meeting (SOM3), the plan to integrate MSMEs in regional and global trade, which is part of the agenda of APEC 2015, will ascertain related policies and reforms.

The APEC Implementation Plan emphasized the possibility of integrating MSMEs in international trade’s global value chain by entailing their involvement in goods and services production from conception to usage.

Department of Trade and Industry-Industry Development Group (DTI-IDG) Assistant Secretary Ceferino S. Rodolfo said the plan to include MSMEs in end-to-end production is considered a “living document” that provides guidance to officials tasked to implement the Boracay Agenda.

The plan stressed the importance of affording MSMEs with greater access to information to enable their access to global opportunities in market and finance.

MSMEs, classified as businesses with employees ranging between 100 and 500, outnumber large companies by wide margins and show impressive growth through the years.

University of the Philippines (UP) School of Economics Dean Ramon L. Clarete highlighted that integrating MSMEs in international trade would result in “more exports, diversified products, and increased productivity, and increased firm competitiveness.”

“Like many developing countries, the Philippines will need to work to achieve the integration of MSMEs in global trade,” noted Clarete, adding that the APEC meetings this

year have produced specific, concrete, and practical initiatives which MSMEs can use to open themselves to international trade integration.

On the same note, a study by the Asian Development Bank (ADB) showed that greater MSME participation produces more economic growth opportunities.

In addition, Ateneo de Manila University (ADMU) Economics Professor Alvin P. Ang, who is also a Board Member of the Philippine Economics Society, said policy change after six months of implementation produces long-term results in the form of greater market competitiveness and lower prices.

APEC to integrate MSMEs in international trade

Philippine Business Report2

a special regime for taxation and labor for all start-ups involved in technology and research and development (R & D) to create a Philippine version of Silicon Valley.

Department of Trade and Industry (DTI) Secretary Gregory L. Domingo, and concurrent BOI Chairman, said that by providing “the income tax incentives, very minimal labor regulations with good infrastructure support, and a location near the academe,” information technology (IT) start-ups can thrive further in the Philippines.

Secretary Domingo even mulled the provision of income tax exemptions and lower income tax rates for firms and employees alike, noting, however, that it is only possible with the help of Congress through a new law.

He said it may also help to designate a local government unit (LGU) where all IT start-ups may flourish, similar to that of California’s Silicon Valley in the United States (U.S.).

Citing that software development, particularly for mobile phone applications, is fast becoming the new trend in the Philippines following the success of the business processing and management (BPM) industry, Domingo said vertical economic zones may also prove as useful for IT start-ups.

He said vertical economic zones have been the catalysts that made the country highly attractive to foreign investors that brought in BPM firms.

To further encourage IT start-ups to invest in the Philippines, Domingo vowed to conduct “Slingshot” – an IT start-up conference – twice yearly to enable the Philippines to gain exposure from foreign tech companies and R & D investors. Slingshot was first conducted as the startup event of APEC 2015 on 6 to 7 July 2015.

Domingo envisions that the Philippines will produce a sizable

INDUSTRYTReNDS

More European firms eye PHLThe Philippines is fast becoming a choice investment location for European firms, according to British Chamber of Commerce Philippines (BCCP) Chairman Chris Nelson.

European firms’ heightened interest and confidence is due to the significant improvements in the country’s economy, Nelson said.

United Kingdom (UK)-based firms, in particular, are keen on investing in the fields of software development, cider distribution, and pharmaceutics.

Pledging to continue supporting the interest of member-firms, the BCCP is eager to position the Philippine market as among the most ideal for investment in Southeast Asia.

The BCCP is the largest European chamber in the Philippines with a membership base of 250 firms. Founded in 1997 as the British Business Association, the BCCP formally became a chamber of commerce in 2001. Counting the UK Trade & Investment, British Embassy Manila, and Britain in South East Asia as key partners, the BCCP has a membership base formed by British and Filipino firms, all of which support the interests of the British business community in the Philippines.

“We have more socials and business events on our calendar and we will collaborate with key business players, government, local and

international partners, particularly UK Trade and Investment, to ensure we deliver the best service that our members deserve,” Nelson said.

PCCI finalizes nominations for top business-friendly LGUs The Philippine Chamber of Commerce and Industry (PCCI), the largest business organization in the country, has finalized the nominees for its 14th Local Government Unit (LGU) Awards. Held annually by the PCCI, the LGU Awards recognizes provinces, cities, and municipalities that contributed to making their respective jurisdictions business-friendly.

LGU Awards Committee Chairman Jose S. Alejandro said nominations were submitted by business and civic organizations, academic institutions, local chambers, trade associations, and cooperatives that have the necessary endorsement from a regional governor and area vice-president of the PCCI.

Alejandro added that some LGUs have also nominated themselves.

For the past 13 years, the PCCI is receiving 100 nominees yearly for the LGU Awards. The PCCI provides that nominees must meet the minimum business-friendliness indicators in the following fields to qualify: investment promotions, Anti-Red Tape Act (ARTA) compliance, and fiscal transparency. Last year’s award recipients included the cities of San Fernando, Pampanga, and Calapan, Oriental Mindoro; municipalities of San Nicolas, Ilocos Norte, and San Felipe, Zambales; and the province of Tarlac.

The award’s technical evaluation group consists of senior officers coming from different universities and national government agencies. The final panel of judges will be composed of industry leaders and university heads from both the public and private sectors.

Special tax and labor regime set for PHL “Silicon Valley”The Board of Investments (BOI) is crafting a policy to provide

3September 2015

number of “technopreneurs” in three to five years as support measures for IT start-ups continue to take off. Safeguards for steel bar imports extendedThe Department of Trade and Industry (DTI) extended the safeguard measure on imported steel angle bars for four more years upon the recommendation of the Tariff Commission to protect the local steel industry.

DTI Secretary Gregory L. Domingo issued the order assigning definitive safeguard duty for steel angle bar imports to be reduced by 5% every year over the four-year extension, while the punitive import duty amounts to P3,345 per metric ton (MT).

The DTI will review the safeguard measure regularly to determine and modify the duty amount as necessary.

Steel angle bars are basic construction materials of buildings, particularly high-rise skyscrapers.

Steel Angles, Shapes, and Sectors Manufacturers Association of the Philippines (SASSMAPI) Executive Director Ramon Khu said the safeguard measure has greatly benefited the local steel industry, which posed a 20% production increase in 2014.

Khu said smuggling and illicit trade activities involving steel angle bars necessitate the extension of the safeguard measure.

“There has been misdeclaration of steel angle bars, that is why we are hoping for the extension of the safeguard measure and stricter implementation of rules by the Bureau of Customs [BOC] and the DTI,” Khu said.

Khu added that without the safeguard measure extension, more than 50,000 workers under the local steel industry will be adversely affected. Smuggling steel angle bars affect competitive pricing of local steel producers.

Furthermore, Khu noted that the continued preference for the Philippines as a choice export destination by foreign steel manufacturers places the local steel industry in a dangerous position of losing its gains from its adjustment plan.

Healthcare services to enhance PHL BPM industry The Philippines is seen to maintain its position as a global hub for the information technology and business process management (IT-BPM) industry if it focuses on medical coding and billing, specifically International Code for Diseases (ICD) 10 Code.

Information Technology & Business Process Association of the Philippines (IBPAP) President Jose Mari P. Mercado said, speaking at the annual International IT-BPM Summit held at the Marriott Hotel Manila on 6 October 2015, that the migration of the United States (U.S.) to the ICD 10 Code in October this year is expected to enhance business activities involving medical coding and billing.

Mercado said the impact of the ICD 10 Code is like the Y2K bug, which has forced the rewriting of computer codes before it was expected to attack in 2000.

“The Y2K is what made India a global IT BPO hub, the ICD 10 Code could be the next Y2K for the Philippines,” Mercado said.

The migration of countries to the ICD 10 Code, which includes the U.S., is expected to require more certified encoders, which many of those countries do not have.

Mercado touted the Philippines’ IT-BPM industry strength in its ability to meet the expected high demand for certified encoders come October.

He said the country has a large number of nurses highly capable of performing medical coding and billing jobs, given their knowledge in medical jargons.

The IBPAP estimates that the local industry will produce 150,000 new jobs, with 20% coming from the healthcare information management (HIM) sector, which includes medical coding and billing jobs.

Revenues, meantime, will rise from USD 18.9B in 2014 to USD 21.9B in 2015 and USD 25B in 2016.

Currently, contact centers are still the largest contributors to the local BPM industry, having generated USD 11B in revenues in 2014, compared to the USD 3B produced by the HIM sector last year. To further sustain the growth of the HIM sector in the Philippines, the HIM Services (HIMS) Conference is held annually, with the latest held on 27 August 2015 under the theme “Meet Great Minds. Seize the Opportunities.”

Bread and pastry business in PHL improvesLocally-based bread and pastry producers now have more than 3,000 establishments, accounting for at least 20.3% of the total 16,000 of such enterprises in the country, according to the latest study of the Annual Survey of Philippine Business and Industry (ASPBI) last 2013.

The ASPBI study noted that bread and pastry producers are usually micro enterprises operating mostly on neighborhoods with local residents as their main customers. Now, branches of key players as well as foreign brands have greatly pushed for the growth of bread and pastry manufacturing establishments.

This expansion has since generated greater employment opportunities, as emphasized by the ASPBI study. This also results in influencing the changing taste of Filipinos, many of which are now accustomed

Philippine Business Report4

for the bullish prospects held by both the FMIC and the UA&P.

Greater government spending on infrastructure, which is set to increase following the 35% rise in infrastructure allocation under the proposed P3T national budget for 2016, is also seen as a potential economic growth factor, with the forthcoming 2016 elections and lower inflation both seen as crucial accelerators.

The Philippine Chamber of Commerce and Industry (PCCI) also stressed its bullish outlook towards the Philippine economy, saying that it expects the growth rate to stay within 6% to 6.5% for the rest of 2015.

PCCI President Alfredo M. Yao said the infrastructure developments due to the Philippines’ hosting of Asia-Pacific Economic Cooperation (APEC) meetings and the 2016 elections will help boost economic growth.

The Social Weather Stations (SWS) also noted that more Filipinos are expecting improvements in the Philippine economy, with 31% of the respondents saying they are optimistic as against the 15% who are pessimistic.

The results shown in the Second Quarter 2015 report of the SWS on the Expected Change in the Philippine Economy brought the net optimism to “very high” at +15. About 42% of the respondents also expect their quality of life to improve in the next 12 months.

Financial experts also expect investments to increase in the Philippines toward 2016. Nomura Securities Senior Adviser Julius Caesar Parreñas said the pro-business policies are increasingly attracting the interest of foreign investors.

“A big part of that is also because of the ability of the Aquino Administration to really introduce the right policies that investors want to see,” Parreñas said.

to having bread and pastries as part of their usual food fare. Red Ribbon General Manager Zinnia S. Rivera attests to the growing popularity of bread and pastries among Filipinos.

“Decades ago, the usual merienda would be the regular Filipino fare, the kakanins. Today, cakes, pastries, and breads have now become common food items in Filipino homes and enjoyed everyday.” Rivera said.

PHL motor vehicle production accelerates in H1 2015The Philippines posted the second-highest growth rate of 8.7% in motor vehicle production in Southeast Asia in the first half of 2015, second to Viet Nam’s 45.3%, the ASEAN Automotive Federation (AAF) reported.

The Philippines was able to produce 45,662 units in H1 2015 compared to 42,020 units in H1 2014.

Overall, the Association of Southeast Asian Nations (ASEAN) region posted a 3.8% decline in total motor vehicle production, at 1.96M units compared to 2.04M units last year.

New measures for a world-class PHL jewelry sector put in placeThe Mines and Geosciences Bureau (MGB) has urged the local jewelry industry to comply with International Organization for Standardization (ISO) guidelines.

The technical committee on jewelry, formed by the Department

of Trade and Industry (DTI) through the Bureau of Philippine Standards (BPS), is in charge of providing evaluative reports on Philippine National Standards (PNS) guidelines on safety, cleanliness, and efficiency in manufacturing of jewelry.

Technical committee members on jewelry include representatives from the government, including MGB, Board of Investments (BOI), Technical Education and Skills Development Authority (TESDA), Bangko Sentral ng Pilipinas (BSP), Industrial Technology Development Institute (ITDI), and from the private sector, among them consumer organizations, technical and vocational institutions, and testing laboratories.

Currently, 16 out of 22 provisions in the current guidelines are found compliant to ISO guidelines which include numbering system, jewelry sizes, colors of precious metals, and types of alloying elements and coatings.

The technical committee is also reviewing a draft PNS for diamond jewelry set to be approved by end of 2015.

Optimism up for PHL economy in 2016The Philippines is expected to post stronger economic expansion in 2016, with the positive growth forecasts for the rest of 2015 and stronger optimism shown by the business sector and the general public.

The latest Market Call of First Metro Investment Corporation (FMIC) and the University of Asia and the Pacific (UA&P) speculated that the Philippines has grown faster during the second quarter of 2015, higher than the 5.2% growth rate the country has posted during the first quarter.

Higher public spending, continued strength in the business process management (BPM) industry, and stability in remittances from overseas Filipinos (OFs) all account

Indonesia Malaysia Philippines Thailand Viet Nam

Growth Rate (%) of Motor VehicleProduction in H1 2015

5September 2015

TRaDe aNDINVESTMENTS

AGRIBUSINESS AND FISHERY

Del Monte Arabia eyes USD 250-M fruit plantation in PalawanFood processing firm Del Monte Arabia will invest USD 250M (P11.2B) to develop 6,000 ha. of banana and pineapple plantation in Palawan.

The envisioned plantation will be leased for around 25 years and will employ 8,000 workers.

Del Monte Arabia, a separate entity from the Singapore and Philippine-listed Del Monte Pacific Ltd., will export its produce to the Middle East and other Asian markets.

Prasad puts up USD 10-M corn seed facility in PangasinanIndia-based Prasad Seeds established a USD 10M state-of-the-art corn seed processing plant in Rosales, Pangasinan.

The project, to be undertaken by Prasad Seeds Philippines Inc., aims to transform Pangasinan into becoming the corn seed capital of the Philippines and eventually the country as the corn seed hub of Southeast Asia.

The facility will initially provide corn drying, shelling, treating, conditioning and packaging, fumigation, warehousing and cold storage services. It also includes seed production trials and commercial seed production.Prasad Philippines has partnered with global seed firm Syngenta to process its locally-produced hybrid corn seeds.

Prasad Seeds uses a drying technology that consumes 20% less power compared to existing dryers.

MANUFACTURING

MVP to pursue e-vehicle ventureBusinessman Manuel V. Pangilinan (MVP) intends to establish an e-vehicle production plant in the country before 2020 and cater to the transport sector’s shift to green technology.

The manufacturing plant is estimated to cost at least USD10M.“Hopefully in the next five years it will take off. Meralco (Manila Electric Co.) should help promote indigenous manufacturing for e-vehicles,” MVP said.

MVP’s group will fund the facility’s construction but will seek a venture partner for technical expertise.

“First, we are not a vehicle manufacturer to begin with. Second, batteries are important component. Car will not run without a battery so we have to partner with someone with battery technology even with a technical assistance point of view,” he said.

Holcim to expand marketCement maker Holcim Philippines Inc. plans to expand its local market following its P3.09B acquisition of Lafarge Republic Inc.’s Star Terminal in Manila and Lafarge Republic Aggregates Inc. business in Angono, Rizal province.

The acquisition was a result of the global merger of Holcim Ltd. and Lafarge S.A. on 15 July 2015 to form LafargeHolcim.

Lafarge’s Star Terminal would strengthen Holcim Philippines’ ability to service its customers’ needs in Metro Manila and South Luzon while the acquisition of Angono plant business would provide the company basalt aggregates, an important ingredient of concrete and asphalt.

The company is a member of the LafargeHolcim Group, which has 115,000 employees in 90 countries. Holcim Philippines operates four cement plants in the provinces of La Union, Bulacan, and Misamis Oriental, and Davao City.

TMP to continue auto investmentsToyota Motor Philippines (TMP) plans to invest and implement a

full model change for its flagship model Vios to participate under the CARS (Comprehensive Automotive Resurgence Strategy) Program of Executive Order 182, issued earlier this year.

In 2012, TMP invested P1.4B in the country for its Vios model.

TMP is awaiting for the implementing rules and regulations (IRR) of EO 182 from the Board of Investments (BOI) to firm up its decision to participate in the auto program.

HOSPITALS ALI to roll out 10 hospitals until 2019Ayala Land Inc. (ALI) will invest P5B to rollout 10 hospitals across the country until 2019 as part of the first wave of its hospital venture that started more than a year ago.

Presently, ALI is building a hospital in its mixed-use development in Nuvali, Laguna as well as another in Arca South, which is an industrial estate owned by the company located in East Service Road, South Luzon Expressway, Taguig City.

ALI plans to build another one in Cloverleaf, Balintawak, Quezon City.ALI has partnered with Whiteknight Holdings Inc. for this healthcare venture which involves the development of medical facilities under two formats, the clinic type i.e. inside the malls and stand-alone hospitals.

Each new hospital requires an investment of around P500M with a capacity of 100 to 150 beds, while the satellite clinic format costs around P20M to P30M to build.

The 10 new hospitals will have 1,000 bed capacity. ALI opened its first hospital in Iloilo City in January 2015.

ALI will also put up hospitals in the provinces of Bulacan and Pampanga and in the cities of Bacolod, Cavite, Cebu, Davao, and other parts of Metro Manila with Qualimed as the flagship brand for the group’s healthcare portfolio.

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Villar Group to open 2 new hospitals next yearThe Villar Group of Companies will open two hospitals along Daang Hari in Parañaque City next year as part of its planned 12 nationwide hospital chain.

The group’s healthcare venture would be in partnership with doctors of the respective areas where the hospitals would be located.

The group’s initial plan is to build a 300-bed hospital which will have a provision for expansion.

“We have identified the first 12 sites of our hospital. But we can easily double that because the communities of Camella is close to 100 already,” Villar Group Chairman Manny Villar said.

The Villar Group, through listed Vista Land and Lifescapes Inc., has residential housing developments in 34 provinces and 74 cities and municipalities around the country.

ENERGY Meralco to invest USD 1.2B for 3 coal plantsManila Electric Co. (Meralco) is pouring in USD 1.2B in equity to develop three coal-fired power plants in Luzon, two of which are being built with a partner.

“For the two projects (SBPL and RP Energy), we clearly have partners. For Atimonan, in the meantime, we’re developing it as 100% [without a partner],” Meralco Chief Financial Officer Betty Siy-Yap said.

SBPL is a joint venture of Meralco with New Growth B.V., a wholly-

owned subsidiary of Thailand’s Energy Generating Co.

On the other hand, RP Energy is a consortium composed of Meralco PowerGen Corp. (MGen), Aboitiz Power Corp. and Taiwan Cogeneration International Corp.

The two projects were financed at 30% debt and 70% equity with Meralco taking the majority with equity at USD 1.2B.

MGen and its partners will borrow P100B this year to move the Subic and Quezon power projects.Site preparation works are ongoing with Korean and Japanese contractors undertaking the project’s engineering, procurement, and construction phase.

Eastern Petroleum allots P13B for 3 biomass projectsEastern Petroleum Corp, through its subsidiary Caraga Renewable Power Corp., is spending P13B in three biomass projects over the next five years.

The Agusan del Norte project is purely biomass while the Butuan and Visayas projects are biomass and ethanol plants.

German firm tapped for 50-MW Tarlac solar plantPetroSolar Corp., a joint venture between PetroGreen Energy Corp. (PGEC) and EEI Power Corp., awarded to German solar firm Conergy Group to build the 50-megawatt (MW) Tarlac Solar Power Project (TSPP) in a 55-ha. property in Tarlac province.

The new free-field installation plant measures 550,003 sqm.

and can produce 78,070 MW hours per year of clean energy to 31,700 households in the area. The solar power plant is also expected to save approximately 47,800 tons of carbon emissions yearly.

Site construction will be done in partnership with local construction firm Phesco Inc. and is expected to be completed in the first quarter of 2016.

Conergy selected the province of Tarlac as its site due to its location in the central plains of Luzon with around 75% of flat land terrain. The solar power plant in Tarlac will be the second solar farm Conergy will construct in Luzon. It constructed a 10-MW plant in Pampanga, and 63-MW plants in the cities of San Carlos and La Carlota in Negros Occidental.

PetroSolar plans to apply for incentives under the feed-in-tariff (FIT) scheme for its solar projects.

PTT shelling out P1B for add’l service stationsPTT Philippines Corp., the local unit of Thailand’s largest petroleum company, will invest P1B in the next five years in the Philippines to expand its service station network to 300.

Although PTT Philippines’ revenue grew by 10% during the first semester of the year compared to last year, it targets to grow its retail service station by 15% to 20%. PTT Philippines has 84 stations, 74 of which are in Luzon, and 10 in Visayas.

It has started building on the supply and logistics requirements to expand to Mindanao by 2016.PTT Philippines considers the Philippines as one of the priority markets in Southeast Asia for expansion.

PTT is widening its retail network by introducing mini-stations with an area of 800 to 1,000 sqm., smaller compared to regular stations’ 1,200 to 1,800 sqm. land area.

3 Coal Plants

Project Wattage Cost Location (in USD)San 455 1.2B Quezon Buenaventura Power Ltd. Redondo 300-600 1.2B Subic, Peninsula EnergyAtimonan 2x600 1.2B QuezonOne Energy

Zambales

3 Biomass projectsProject Wattage Cost Location (in PHP) Butuan 12-14 P4.1B Butuan,biomass Agusan plant del NorteAgusan 23.5 P4B del Norte del NorteplantVisayan 18 P5B Visayas plant

Agusan

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PUBLIC INFRASTRUCTURE AND LOGISTICS

Mactan airport’s Phase 2 starts in DecemberThe Phase 2 construction of the new passenger terminal at the Mactan-Cebu International Airport is expected to begin this December, GMR Megawide Cebu Airport Corp. (GMCAC) President Louie B. Ferrer announced.

Phase 1 started last June 2015.

The new Mactan-Cebu International Airport terminal has an estimated project cost of P17.52B and is designed to address the congestion at the airport, which registered 6.9M passengers in 2013.

The new passenger terminal increases the airport’s capacity to 8M passengers per year from its existing annual capacity of 4.5M.

The target is to open the terminal by May 2018.

2 common stations for LRT-MRT agreedA plan to construct two common stations linking the Light and Metro Rail Transits (LRT-MRT) has been “agreed in principle” by various private stakeholders, the Department of Transportation and Communications (DOTC) reported.

Under the proposal, a facility will be constructed near Trinoma Mall to connect LRT 1 and MRT 3, and another station will be built adjacent to SM North EDSA mall to link MRT 3 and MRT 7 with LRT 1.

The nod of SM Prime Holdings Inc. (SMPH) on the two-common-station approach has reportedly been “agreed in principle,” the scheme that was agreed on by Universal Light Rail Transit Corp. (ULC) and the Light Rail Manila Consortium (LRMC), the concessionaires of the MRT 7 and LRT 1, respectively.

Once constructed, the two common stations are expected

to benefit hundreds of thousands of commuters daily.

DOTC’s Daily Passenger Stats

q LRT 1 - 500,000q MRT 3 - 540,000q MRT 7 - 2M (projected commuters in northern Metro Manila and Bulacan

province)

SBMA to boost capacity of 2 portsThe Subic Bay Metropolitan Authority (SBMA) is set to double the capacity of its two ports under a planned P10-B expansion program.

SBMA Administrator Roberto V. Garcia said the New Container Terminals 1 and 2 (NCT 1 and NCT 2) will have combined 1.2M TEUs (twenty-foot equivalent units) from the current 600,000 TEUs.

The expansion is deemed critical in view of the expected huge spill over from the Manila Port three years from now.

The SBMA said the volume of cargoes going to Manila is expected to reach 6M metric tons in two to three years.

“If we don’t expand the port now, it might be too late when cargoes in Manila reach 6 million TEUs in three years,” Garcia said.

In addition, he said the port expansion will be complemented with the building of a new road that will directly connect to the Subic–Clark–Tarlac Expressway (SCTEX).

SBMA is eyeing to build a 23-km. bypass road that will run through Bataan and into the SCTEX.

PUBLIC-PRIVATE PARTNERSHIP PROJECTS

Muntinlupa-Cavite Expressway openedPresident Benigno S. Aquino III led the inauguration of the P2.01-B Muntinlupa-Cavite Expressway (MCX) otherwise known as the 4-km. Daang

Hari-South Luzon Expressway (SLEX) Link Road connecting Bacoor, Cavite to the SLEX.

The MCX, the first public-private partnership (PPP) project awarded by the Aquino Administration, serves as an alternative route from Metro Manila to Cavite province and vice versa, cutting travel time by an average of 45 minutes and decongesting traffic in the areas comprising the western part of Cavite province, Las Piñas City, and Muntinlupa City.

The Department of Public Works and Highways (DPWH) said the new facility will also provide new access to the National Bilibid Prison (NBP) property in Muntinlupa City, which is being eyed to be redeveloped into a mixed commercial, residential, and institutional estate.

"We are optimistic that the completion of this toll road would improve Calabarzon's competitiveness as an investment destination," DPWH Secretary Rogelio L. Singson said.

The project, awarded to Ayala Corp. in December 2011, involved the construction of a four-lane toll road, from the junction of Daang Reyna and Daang Hari in Las Piñas City and Bacoor, Cavite to SLEX through the Susana Heights Interchange in Muntinlupa City.

MCX Toll Fee

q Class 1 (private cars) P17 q Class 2 (buses or truck vans) P34q Class 3 (heavy vehicles) P51

MPIC-Ayala partnership eyed for P171-B railway PPPThe Metro Pacific Investments Corp. (MPIC) is amenable to tie up with Ayala Corp. for the P171-B South Line of the North-South Railway Project (NSRP), the biggest project under the government’s public-private partnership (PPP) program to date.

The planned South Line of the NSRP covers the construction of the

Philippine Business Report8

has become its global hub for all its English content production.

Einhorn said the choice of the Philippines is an affirmation of the country’s capability as world’s global outsourcing hub.

As a company that is exclusively catering to publicly traded firms in the United States (U.S) and UK, Einhorn also cited the booming Philippine economy and the robust local stock market.

M6 Ltd., whose main business is financial public relations and events management, has been operating in the country for the past six years.

All of the firm’s English language content, including press for its publicly traded clients, are generated from its Manila office.

Born2Invest processes business news from the world’s trusted sources into summaries that are useful to enterprises around the world.

Already, Born2Invest has added 25 new staff and part time writers for a combined 45 personnel.

MINING

FNI acquires Palawan nickel mineGlobal Ferronickel Holdings Inc. (FNI) has acquired a nickel mine in Palawan for USD 50M to double the company’s annual production capacity.

FNI bought Southern Palawan Nickel Ventures Inc. (SPNVI), which owns at least 90% of Ipilan Nickel Corp., a firm engaged in nickel mining in Brookes Point, Palawan.

The Ipilan mine is projected to have an annual production rate of up to three million metric tons (MMT). The site covers 2,800 ha., 800 ha. of which have already been explored for 66.5 MT of resource.

FNI President Dante R. Bravo said they intend to set the mining site in operations next year.

56-km. commuter rail service from Tutuban, Manila to Calamba, Laguna and the 478-km. long-haul rail service from Tutuban to Legazpi, Albay.

The long-haul route will have the following possible extensions: 58 km. from Calamba, Laguna to Batangas City; and 117 km. from Legazpi to Matnog, Sorsogon.

The Philippine National Railways (PNR) currently operates the commuter line service from Tutuban to Calamba, which serves around 75,000 commuters daily.

BANKING

P30B allotted for Land Bank, DBPThe government is infusing P30B into two state-owned banks to boost capital, Department of Budget and Management (DBM) Secretary Florencio B. Abad said.

Abad said the government has earmarked P20B and P10B in 2016 for Land Bank of the Philippines (LBP) and Development Bank of the Philippines (DBP), respectively, to meet the capital ratios required by the Bangko Sentral ng Pilipinas (BSP).

Being state-owned, LBP and DBP are under the administrative supervision of the Department of Finance (DOF). Since 2014, BSP has required universal and commercial banks in the Philippines to comply with Basel III’s 10% capital adequacy ratio.

Basel III requirements, composed of measures to strengthen the regulation, supervision and risk management of banks, was put in place to avoid a repeat of the 2008 global financial crisis wherein governments, using taxpayers’ money, were required to bail out fallen lenders.

Banks in the Philippines have until 1 January 2017 to comply with the BPS’s Basel III requirements.

IT-BPM

Open Access BPO expands to Davao CityBusiness process management (BPM) firm Open Access BPO is expanding to Davao City.

This will be the American firm’s second office in the country, its first in Makati City was established in 2007.

Open Access BPO Chief Executive Officer (CEO) Benjamin Davidowitz attributed their expansion to Davao City to three factors, namely lower cost of doing business, redundancy purposes, and safety.

Redundancy purposes means having different locations for customer support, which creates an extra blanket of security.

The new office will be located in the Filandia information technology (IT) Center which is one of the eight information technology (IT) parks in the city accredited by the Philippine Economic Zone Authority (PEZA).

Open Access BPO will employ some 180 professionals who will be delivering English voice and non-voice customer support to company clients.

“We aim to open our offices in cities that are very safe, populated by a highly educated workforce, and offer a high level of accessibility,” Davidowitz said.

M6 Ltd. augments PHL operationsUnited Kingdom (UK)-based M6 Ltd. has expanded its Philippine operations as content production hub to include content production for its mobile application Born2Invest to serve English-speaking countries worldwide.

M6 Ltd. and Born2Invest Founder Dom Einhorn said the Philippines

9September 2015

REAL ESTATE

Megaworld earmarks P20B for new office buildings Property developer Megaworld Corp. is spending P20B to complete 12 new office towers in Fort Bonifacio, Taguig City by 2018.

In Fort Bonifacio, Megaworld currently has some 300,000 sqm. in office stock. With the new office towers, their office space inventory will total 650,000 sqm. This will account for the bulk of the firm’s projected 1M sqm. of office stock in the next three years.

Four office towers are currently being built in Uptown Bonifacio, the company’s 15.4-ha. integrated urban township in the northern part of Fort Bonifacio near Kalayaan Avenue.

RETAIL

Puregold teams with ALI, acquires Budgetlane chainPuregold Price Club Inc. and Ayala Land Inc. formed a 50-50 joint venture AyaGold Retailers, Inc. (AyaGold) with P2B capital to establish eight to 10 branches in Metro Manila over the next three to four years.

AyaGold will build and operate mid-market supermarkets under the Merkado Supermarket brand in key locations within the country. Some P200M is allotted for each of their Metro Manila branches which will have an average area of 2,250 sqm.

On a related note, Puregold Price Club Inc. recently acquired eight Budgetlane supermarkets in Metro Manila, Rizal, Laguna, and Batangas with investment per store ranging from P200M-P300M.

Ayala to open Bicol mallAyala Land Inc. and Bicol-based LCC Group’s venture mall in the Bicol Region is seen to be completed by December this year.

The P1.6-B Liberty City Center will rise on a 1.4-ha. property in Legazpi City, Albay.

telecom, retail, and tourism.

TELECOM

Globe buys add’l Bayantel shares Globe Telecom, Inc. is acquiring all of Bayan Telecommunications Holdings Corporation (BTHC)’s and Lopez Holdings Corporation (LHC)’s shares in Bayan Telecommunications, Inc. (Bayantel).

Globe’s purchase of Bayantel shares amounting to P1.83B increased Globe’s equity interests in Bayantel from 56.87% to 98.57%.

The buyout of Bayantel shares comes after the conversion of Bayantel debt into equity. The National Telecommunications Commission (NTC) in July approved the debt-to-equity deal to pave the way for the Globe-Bayantel merger.

PLDT builds 8th data centerThe Philippine Long Distance Telephone Company (PLDT) is building a P1.3-B data backup center at the Clark Freeport Zone in Pampanga.

To maintain seamless connectivity in the event of a major disaster in the country, the data backup center will be built to withstand an intensity 9 earthquake, flooding, fire, and storm, among others.

The project will be completed in March next year.

PLDT Existing Data Center Locations

q Makati Cityq Parañaque Cityq Pasig Cityq Taguig Cityq Subic, Zambalesq Mandaue City, Cebu

COMPANY NOTeS

OceanaGold allots P100M for community projectsMining company OceanaGold is spending P100M for community

Ayala Land will operate the mall while retailer LCC is in charge of the supermarket and department stores.

The four-storey mall will have 200 stores and four cinemas.

PSC to have 2,000 stores by 2016Philippine Seven Corporation (PSC) is aiming to expand its 7-Eleven Convenience Store nationwide network to reach 2,000 stores in 2016.

The firm has allotted P3B for capital expenditures this year for the improvement of existing stores as well as for the putting up of a total of 150 stores nationwide.

As of end-2014, PSC has 1,282 stores. The company opened a total of 273 stores last year.

7-11 Existing StoresLuzon 1,250Visayas 136

7-11 additional new storesLuzon 50Visaysas 40Mindanao 60

RESEARCH AND DEVELOPMENT

Ayala invests P450M in UNCAyala Education, Inc. spent some P450M to procure a 60-% stake in the University of Nueva Caceres (UNC) in Naga City, Camarines Sur.

Ayala Education will hold the majority of the university’s board seats and Ayala Education Inc. Chief Executive Officer (CEO) Alfredo I. Ayala was appointed as UNC President.

Since 2012, Ayala Corporation has invested in the education sector through 100-% owned Ayala Education to meet workforce demand for the information technology and business process management (IT-BPM) and other services industries, such as banking,

Philippine Business Report10

COUNTRY-TO-COUNTRY

INTERNATIONAL/REGIONALWATCH

Gokongwei mulls 70 Costa Coffee storesBritish coffee brand Costa Coffee franchisee Robinsons Gourmet Food and Beverage Inc. is targeting to open 70 stores with an estimated value of P672M over the next five years.

Three new branches will be opened this year, bringing the total number of stores to five so far. The first two stores are located in Eastwood, Quezon City and Robinsons Place Manila. The three others will be located in Bonifacio Global City, E. Rodriguez Avenue in Quezon City, and Robinsons Antipolo.

Each 120-sqm. Costa Coffee store requires an average investment of P9.6M and will employ between 12 to 14 staff.

Philippines. Japanese counterparts are actively involved in the DTI’s participative policy making processes through various mechanisms such as formal and informal industry consultations and industrial cooperation dialogues.

PHL, Russia sign new aviation dealThe Philippines and Russia forged a new air services agreement to expand the number of flights between the two countries.

The Philippines’ Department of Transportation and Communications (DOTC) Undersecretary Jose Perpetuo M. Lotilla, and Russia’s Ministry of Transport Deputy Minister Sergey Seskutov signed an amendment to the 2009 Philippine-Russia Air Services Agreement.

This new deal allows Philippine carriers to conduct operations between any point in the country and in Russia, including Moscow.

Also, travelers from between the Philippines and Europe/North America will benefit from more competitively-priced and faster direct flights with the use of Russian airspace, according to the Department of Foreign Affairs (DFA).

“We are confident that the new arrangements will help us meet our targets for Russia and the CIS [Commonwealth of Independent States],” Department of Tourism (DOT) Undersecretary Benito C. Bengzon Jr. said.

projects to support its corporate social responsibility (CSR) commitment.

Projects include human resources development and institutional building; enterprise development and networking; and infrastructure development and support, among others.

The company is also helping to develop a cooperative per barangay surrounding the Didipio Mine in the provinces of Nueva Vizcaya and Quirino to equip local stakeholders involved in community improvement with sufficient technical skills.

OceanaGold has so far granted a total P1.17M to three community cooperatives in Barangay Wangal and Capisaan in Kasibu, Nueva Vizcaya and Barangay Tucod in Cabarroguis, Quirino. The cooperatives provided livelihood assistance in the areas of general merchandizing, micro-financing, food terminal, farm supply merchandizing, and credit lending.

Manila Water expands bottled water brandManila Water Total Solutions Corp., a unit of Manila Water Co. Inc., is investing P500M to expand its new bottled water business network by adding five more bottling plants for its Healthy Family brand.

The new bottling plants pipelined for establishment this year are in Taytay, Rizal; Pasig City; and Quezon City. The company is also scouting for locations within Metro Manila for the two other plants.

Total Solutions’ existing plant in Taguig City processes 5,000 five-gallon of water daily.

PHL, Japan strengthen industrial cooperationThe Philippines’ Department of Trade and Industry-Industry Development Group (DTI-IDG) Undersecretary Adrian S. Cristobal Jr. and Japan’s Trade Policy Deputy Director General Toshiyuki Sakamoto signed an Action Plan on Industrial Cooperation to strengthen economic ties between the two countries.

The Action Plan is crafted to further develop the collaboration between the Philippines and Japan in key areas such as automobile; manufacturing; micro, small, and medium enterprises (MSMEs), services; and human resource development.

These initiatives aim to identify and address the supply chain gaps between the two countries by providing technical and institutional capacity building to domestic industry players.

Japan is a consistent top source of foreign investments in the

New WTO deal benefits PHLThe Department of Trade and Industry (DTI) believes that the Philippines will largely benefit from the recent World Trade Organization’s (WTO) Information Technology Agreement (ITA) which eliminates tariffs on 201 products

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By the end of 2015, ASEAN will be integrated, allowing the free flow of products and goods across the 10 member-states.

“By growing the economic pie, all member states of ASEAN should benefit. The AEC could make ASEAN businesses more competitive on cost, helping to lift the region to the next level of growth. But to realize this potential, everyone has to pull together,” Cheng Teck noted.

APEC drives development of capital marketsAsia-Pacific economies aim to improve further their capital markets to finance the infrastructure demands, according to the Department of Finance (DOF).

“We have seen the rapid growth of the region’s capital markets over the past few years, as well as their promising potential to be a driver of infrastructure investments,” DOF Secretary Cesar V. Purisima said.

Economies capital markets need a more reliable source of funding for their connectivity and mobility needs, Purisima noted.

The Asia-Pacific Economic Cooperation (APEC) has recently concluded the Infrastructure Financing and Capital Market Development Workshop in Iloilo City which stabilized details of the group’s Cebu Action Plan’s fourth pillar dealing with infrastructure development and financing.

The Philippines suggested the Cebu Action Plan to increase financial integration, fiscal transparency and resiliency, and infrastructure development and financing among APEC members. This Cebu Action Plan was endorsed in the recently concluded APEC Finance Ministers Meeting.

Participants also discussed in the workshop the initiatives to address barriers in infrastructure development.

Moreover, they have figured out what financial instruments and policy frameworks should be used to support pension funds and insurance firms wanting to support infrastructure investments especially in emerging markets.

PHL proposes APEC standard for PPPThe Philippines wants to establish an Asia-Pacific Economic Cooperation (APEC) standard for pubic-private partnerships (PPP) to speed up the Cebu Action Plan’s implementation process.

“One of the things we’re hoping is that with the Cebu action plan, we can create an APEC standard of PPPs. For example the terms, we can create standard APEC terms for PPPs, just like loan contracts,” Department of Finance (DOF) Secretary Cesar V. Purisima said.

Investors across the region can participate easily in APEC member economies’ PPP projects if there’s a specific standard, Purisima noted.

“When you say it’s an APEC standard contract, the expectations of both parties—the private sector and the public—is the same. With best practices shared among countries, we can develop this,” he added.

manufactured in the information technology (IT) sector.

The tariff exclusion was a result of an 18 July agreement reached by 54 WTO members and confirmed in a 24 July meeting at the WTO headquarters in Geneva, Switzerland.

“Almost all imported raw materials and intermediate inputs and capital equipment requirements can be imported duty free. Once the ITA is entered into force, it will provide the Philippines access to over 90% of global IT trade. Furthermore, it will create jobs through increase in foreign direct investments and will help boost GDP growth for our country,” DTI-Industry Promotion Group (IPG) Undersecretary Ponciano C. Manalo Jr. said.

Under the agreement, starting 2016 tariffs will be abolished on these products within three years.

Among the products covered under the agreement are new generation semiconductors, static converters, video games, and automated electronic component machines’ parts wherein the Philippines is part of the regional and global production chain.

AEC poses bigger challenge for SMEsStandard Chartered Bank perceives a bigger challenge in bringing small and medium enterprises (SMEs) on board in the upcoming Association of Southeast Asian Nations (ASEAN) Economic Community (AEC).

According to a recent survey of the Asian Development Bank (ADB) and Institute of Southeast Asia, less than one-fifth of ASEAN businesses are equipped for AEC.

“While various programs exist for SMEs at the country level, we need a pan-ASEAN framework of governmental support, highlighting the benefits of the AEC to smaller businesses,” ASEAN StanChart Chief Executive Officer (CEO) Lim Cheng Teck said.

Philippine Business Report12

42434445464748

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

Peso per US Dollar Rate

ECONOMIC INDICATORS

As of 30 September 2015

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

Edi tor ia l Team: Pat r ic ia May M. Abe jo /Ed i to r - i n -Ch ie f • Al fonso M. Va lenzue la /Manag ing Ed i to r • Cresenc iano P. Par/Assistant Editor • Jamila Joy H. Raposon, Kristina S. Andaya, Martin T. Millete/Writers • Renaldo C. Neneria/Design Layout •

Philippine Business ReportSeptember 2015

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

Entered as Third-Class Mail at theMakati Central Post Office

under Permit No. 504valid until 31 December 2015

012345678

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

GNI Growth Rate (%)

012345678

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

GDP Growth Rate (%)

01234567

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

Interest Rate (%)Lending Regular

As of 30 September 2015

140.8141

141.2141.4141.6141.8

Sep-15Aug-15Jul-15Jun-15May-15Apr-15

Consumer Price Index(2000 base year)

0.00

2,000.00

4,000.00

6,000.00

8,000.00

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

Imports (In USD Billion)

0100020003000400050006000

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

Exports(In USD Billion)

00.5

11.5

22.5

Sep-15Aug-15Jul-15Jun-15May-15Apr-15

Inflation Rate (%)(1994 base year)