1September 2016

Volume 27 No. 09 September 2016

BOI approvals double to P187B in H1The Board of Investments (BOI) has doubled its investment approvals for the first half of the year to P186.51B from P92.02B in the same period last year mainly due to energy projects.

Some 162 projects were approved by the investment promotion agency in the first semester. When fully established, these will create 30,207 jobs.

Approvals in the power sector increased four-fold to P95.95B in the first six months from P19.10B in 2015, accounting for 51% of the total investment approvals for the period. The 34 approved power projects, once operational, will supply an additional capacity of 1,034 megawatts (MW) to the grid.

Among the approved big-ticket food processing projects were

San Miguel Corporation’s P3.98-B animal feed production in Davao del Sur; Biotech Farms Incorporated’s P1.1-B milled rice and by-products project in Bulacan; and Roxas Sigma Agriventures, Inc.’s P830.5-M coconut products project in South Cotabato.

Domestic sources comprised 84% of the investment commitments from January to June, amounting to P156.61B while foreign investments accounted for the remaining 16% valued at P29.9B.

“The challenge is ensuring that these investments benefit the poorest of the poor,” Department of Trade and Industry (DTI) Secretary Ramon M. Lopez said.

“The administration will be embarking on measures to make investments more inclusive through, among others, providing linkages with micro, small, and medium enterprises [MSMEs], to the agricultural sector, and to the marginalized geographic regions,” Lopez added.

Filipino consumers most optimistic in the world Filipinos are the most optimistic consumers in the world, the latest quarterly study titled “Survey of Consumer Confidence and Spending” conducted by Nielsen Global showed.

Filipino consumers’ optimism score soared by 13 points to 132, which is the highest quarter-on-quarter increase among 63 countries covered by the study, beating the global average of 98 points.

“The Philippine economy relies heavily upon consumption, and with sales of consumer goods growing rapidly at a 7.1-% rate in the year ending May 2016, consumer spending remains robust. The promise of

greater reforms during the recent presidential elections, which took place during the survey period, likely helped buoy positive consumer sentiment,” Nielsen Philippines Managing Director Stuart Jamieson said.

The survey was conducted via the Internet with 30,000 respondents on 9-27 May. These respondents were from 61 different countries, representing a global online population of almost 2B consumers.

Consumer Confidence Ranking and Scores of

Selected Countries Q1 2016

PHILIPPINES

132INDIA

128INDONESIA

119UNITED STATES

128DENMARK

112

GLOBAL AVERAGE:98

1

2

3

4

5

Source: Survey of Consumer Confidence and Spending, Nielsen Global

BOI investment approvals 2014-2016

H1 2014 H1 2015 H1 2016

P186.51B

P92.02BP149.45B

Nielsen PHL Managing Director Stuart Jamieson

Confidence in the Philippines is at an all-time high, and with a 6.9-% GDP [gross domestic product] growth rate in the first quarter, it’s one of the fastest-growing economies in Asia,

“

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Top Performing Sectors H1 2016

Transportation infrastructure

Low-cost and economic mass

housing

Manufacturing

P31.9B P24.39B P18.61B

Philippine Business Report2

INDUSTRYTRENDS

PHL entering Golden Age The Philippines is entering a golden age that will last for 40 years, thanks to its demographic window, author and business leader Tsunenori “Lee” Sawaki said.

“The Philippines is just starting now and it will last 40 years. Among the ASEAN [Association of Southeast Asian Nations] countries, the Philippines has the longest population bonus [Pbonus],” said Sawaki, referring to the country’s demographics that is expected to lead to a period of rapid economic growth.

Sawaki defines Pbonus as the period when the productive segment, or those in ages 20 to 65 years, is growing faster than the whole population.

“The Philippines is now in that stage. In such situation, the economy is growing,” he says.

The Central Intelligence Agency (CIA) World Factbook of 2016 shows that the Philippines has one of the youngest populations in the world, relative to its Asian neighbors. Also, in 2014, the median age for selected Asian countries increased, while the Philippines’ decreased by 0.1.

Pbonus happens only once in each country, said Sawaki who is the Co-founder, Chairman and Chief Executive of Japan and the Association of Southeast Asian Nations Co. Ltd. (JASEAN).

JASEAN is a private consulting organization that helps Japanese businessmen explore opportunities in the Association of Southeast Asian Nations (ASEAN).

It was set up to help its more than 700 Japanese members, comprised of small and medium enterprises, expand their market overseas. Since the establishment of their office in the Philippines, JASEAN has already assisted more than 40 Japanese companies in putting their business in the country.

“If the economy is growing, income is also rising. People spend more money in beauty, health, and education. Naturally, people’s lives become longer. Before, Filipinos were spending only on food and they did not care about health or beauty,” he said.

Electronics, services to pull up PHL exports The country’s export growth target of 6.6% to 8.8% in 2016 and from 7.7% to 10.6% in 2017 is achievable, Export Marketing Bureau (EMB) Director Senen M. Perlada said, provided the revenues from the electronics and services support the sector.

Data from the Philippine Statistics Authority (PSA) showed that exports of goods have declined by 6.6% in the first five months of the year to USD 22.07B from USD 23.64B in the same period in 2015 as a result of weak global demand.

But DTI is optimistic that electronics and services will perform better this

year to help the country meet its target.

The electronics sector accounts for about half of merchandise exports revenue while services account for 30% of the export revenue.

Last year, the services export reached almost USD 29B. It remains robust this year and is projected to register a double-digit growth by the end of the year.

“It can pull up the numbers. So if you’ll have double-digit [growth] for services and if [the] electronics [sector] maintains its target, we will be hopefully flat in merchandise, and services will pull it up to positive growth,” Perlada said.

Indian businesses explore trade, investment opportunities in PHL The Philippine Trade and Investment Center (PTIC)-New Delhi held a business round-table discussion with top Indian companies in July to explore trade and investment opportunities in the Philippines at the PHD House, New Delhi, India.

Participated in by 70 Indian businessmen and key industry players, the event aimed to explore more business opportunities between India and the Philippines in priority key sectors such as information and communications technology (ICT), automotive, agriculture, energy, chemicals, pharmaceuticals, electronics, and high-end furniture. “India can look to Philippines as a secondary location to reach out to U.S. Markets for Goods and Services to avail of U.S. GSP privileges and reap benefits of ASEAN Markets,” said PTIC-New Delhi Commercial Counsellor Michael Alfred V. Ignacio.

During the meeting, case studies and testimonials about successful Philippine-India joint ventures were discussed by Field Fresh Pvt. Ltd. Vice President Sandeep Tewari, representing a leading food and fruit juice processing company in India with joint venture with Del Monte Philippines.

Median Age for Selected Countries in Asia

JAPAN46.9

HONG KONG44

SOUTH KOREA41.2

TAIWAN40.2

THAILAND37.2

SINGAPORE34.3

PHILIPPINES23.4

3September 2016

On the same note, Tata Consultancy Services (TCS) Strategic Sales General Manager Manoj Saha emphasized the Philippines as a top destination and an alternative delivery center for Indian IT companies. Indian firms have expressed interest in the country’s information technology and business process management (IT-BPM) and automotive sectors.

Established in 1905, PHD Chamber of Commerce and Industry is one of the most important Indian Chambers of Commerce covering 12 Indian States.

The chamber has a direct membership base of over 1,600 corporate entities and more than 45,000 indirect members. BOI reveals roadmap for lifestyle industryThe Board of Investments (BOI) has unveiled the roadmap for the gifts, housewares, and holiday décor sector to provide strategic directions leading to improved competitiveness and productivity especially among micro, small, and medium enterprises (MSMEs).

Gifts and housewares, as well as holiday decor, are under the umbrella of the lifestyle industry which depends heavily on processed agricultural crops and other industrial raw materials.

DTI-Industry Development Group (IDG) Assistant Secretary Rafaelita M. Aldaba said many of these industries are MSMEs which require only minimal capitalization for startup venture. The revitalization of the lifestyle industries would pave the way for the much needed employment in the country.

“These industry roadmaps will allow our MSMEs to participate in the value chain and in the vast ASEAN [Association of Southeast Asian Nations] Economic Community market,” Aldaba said.

Export sales of holiday decor in 2013 reached USD 50.86M. For giftware, the country exported USD 23M worth of goods in 2014. In 2015,USD 19M worth of housewares was also shipped out from the country.

According to BOI, these industries were able to give 690,000 to a million jobs to Filipinos.

“All the more the support should be there to ensure [that] the industry grows faster. I think we’ll double [the growth forecast] to 20%; that’s doable,” Aldaba added.

Logistics must match e-commerce growthThe Philippine logistics sector must constantly improve and innovate to keep up with the rapid growth of e-commerce in Asia and meet the needs of retailers and consumers, Global Integrated Supply Chain Solutions at Agility Vice President Colin Mewburn Mercer said.

In an article published in Logistics Insight Asia Weekly Digest, Mercer predicts that 20.4% of the Asia-Pacific region retail sales will be done through e-commerce by 2019, double the 10.4% e-commerce penetration at present.

“While it is essential to the survival of retailers, the fulfillment of those orders is simply seen as an added cost to them, thus putting pressure on logistics providers to provide their services both faster and at an ever-lower cost,” Mercer said.

Taylor Nelson Sofres Inc. (TNS) Global Head of Communications Anne Rayner observed that Philippine e-commerce grew by 9% last year, 3% higher than the average e-commerce growth in the same period last year.

Some 20% of Filipinos have purchased products through online channels and there is lot of room for growth, Rayner said.To meet the logistics challenge, the Department of Trade and Industry (DTI) has included logistics as one of the focus sectors of the Comprehensive National Industrial

Strategy (CNIS) and has crafted a roadmap that will serve as a guidebook.

According to the National Logistics Masterplan, which was drafted by DTI and the United States Agency for International Development (USAID), the country should invest P5.7T in infrastructure development to improve the country’s logistics sector. The Department is currently in the process of finalizing it, incorporating the latest development plans of involved agencies. It is planned to be released before the end of 2016.

PHL eyes share of USD 18.4-B European IT game industry The Philippines is targeting to get a sizeable portion of the USD 18.4-B European computer games market by joining international conventions such as the Gamescom 2016 event in Cologne, Germany held in August.

At the Cologne event, the Game Developers Association of the Philippines (GDAP), represented by Altitude Games, GameOps Inc., Job and Esther Technologies Inc., Synergy88 Digital Inc., Transcom, and Zeenoh, showcased game-related products and services to international companies.

The Philippine delegation aimed to entice international video game development studios to explore investment and business opportunities in the country by presenting its specializations including developing end-to-end games and game-related services such as art, programming, and support outsourcing.

“The participation of our industry players in Gamescom further enhances the country’s image not only in the German market, but also in the international gaming industry as the event is expected to host the presence of other international global players, particularly in the European region,” DTI-Industry Promotion Group (IPG) Undersecretary Nora K. Terrado said.

Philippine Business Report4

Gamescom is Europe’s largest platform for computer and video games gathering developers, publishers, and other stakeholders from all over world showcasing upcoming games and game-related hardware.

Last year’s Gamescom gathered more than 345,000 visitors and 700 exhibitors from 88 countries.

The European video gaming industry accounts for 20% of the global market with USD 18.4B in revenue last year.

Germany, on the other hand, is Europe’s biggest video game market and the fifth largest in the world with earnings of USD 3.7B in 2015.

The Philippine video gaming industry produced its first-ever PC game called ‘Anito: Defend a Land Enraged’ in 2003. Currently, the industry earns an average of USD 100M annually.

According to GDAP, there are 60 game development companies in the country, comprising five percent of the global video gaming industry. Most of its clients are in the global market.

Factory space to boom in next 5 years The Philippines could experience a boom in the real estate sector for the next five years as foreign industrial and manufacturing firms set up their factories in the country, real estate services firm Prime Philippines Founder Jettson Yu said.

“For the next five years, we’re seeing a lot of interest in the industrial or manufacturing sector [for real estate], specifically from China, Taiwan, and Japan who are very, very eager to open up facilities in the Philippines,” Yu said. “Industrial is set to be the next boom because as people see their purchasing power increase, retail companies that serve them are definitely going to need more storage facilities in the country, which is where logistics and manufacturing facilities come in,” Yu added.

He said one major Taiwanese investor was looking at over 1,000 ha. of

Toyota bags slot in CARSThe Board of Investments (BOI) awarded a certificate of registration to Toyota Motors Philippines Corp. (TMP) as a participant in the Comprehensive Automotive Resurgence Strategy (CARS) program.

Toyota is investing USD 91M to manufacture at least 200,000 units of Toyota Vios over the next six years.

Department of Trade and Industry (DTI) Secretary Ramon M. Lopez awarded the registration certificate to TMP President Satoru Suzuki and Vice Chairman Alfred V. Ty last July.

The BOI had awarded a certificate of registration to Mitsubishi Motors Corp. (MMC) in June for the enrollment of its Mirage model in the program.

CARS is the government’s incentive program that provides a fiscal-capped, time-bound, and performance-based support to automotive industry players.

It serves as a stimulus to develop the Philippine automotive industry and make the country an auto manufacturing hub in the Association of Southeast Asian Nations (ASEAN).

The program provides a USD 1,000-per-unit support for the production of three models with a combined 600,000-unit production requirement over six years and mandatory local

production of body shell and large plastic parts, intending to raise the production level to a competitive scale.CARS is eyed to boost Philippine workforce, strengthen industrial linkages, and attract additional investments.

French helmet maker eyes PHL hub Delta Plus, a France-based manufacturer of personal protective equipment, is planning to establish a production facility in the Philippines amid the country’s booming infrastructure industry.

Delta Plus is determined to take advantage of building a manufacturing plant in the country, which it said would also generate jobs for Filipino workers.

Delta Plus Philippines Chairman Thibauld de Chantemele said the planned hub would also be used as a springboard for future expansion across the region.

The company has already set up a subsidiary in the Philippines to tap the country’s booming construction, manufacturing, and shipping industries, among other sectors that require protective gear.

The company will make available in the country its line of products that include eyewear, safety helmets, hearing protection, shoes, and gloves.

PHL serves as subregional hub for AlcatelMobile brand Alcatel is reviving its strong presence in the Philippines by making the country its subregional hub.

Alcatel Regional Director for Asia-Pacific and Country Manager for

TRADE ANDINVESTMENTS

MANUFACTURING

Delta Plus Chairman Thibauld de Chantemele

The Philippines is becoming an emerging tiger in Southeast Asia and as one of the fastest growing economies worldwide.

“

”

space for one industrial facility alone while some firms would need about 900 ha. of factory land.

Among the Asian investments that recently set shop in the country are motorcycle maker KTM, Japanese bicycle maker Shimano, and auto parts manufacturer ZAMA Group which recently opened a facility worth USD 44.69M in Batangas.

5September 2016

the Philippines Liza Woods said the brand is focused on creating a more permanent presence in Southeast Asia.“When I look at Asia-Pacific, even our president when he came here at the end of March, [we] recognize the importance of the Philippine market because it is stable,” Woods said.

With its local office, Alcatel has been providing customer care, customer-technical support, marketing, finance, and administrative operations not only for its clients in the Philippines, but also in Viet Nam and Lao PDR markets.

“The Philippines is far too important; we have to take care of it,” she said.

Alcatel is the mobile brand of Chinese electronics company TCL Corp. that is capable of creating around 120M units annually.

‘Unagi’ factories in PHL eyedA consortium of major Japanese food and storage firms is planning to invest USD 500M to put up in the Philippines processing facilities for food and fish products, including the delicacy unagi (freshwater eel).

“The objective is to establish Mindanao and Luzon as part of their food material sourcing, processing, storage and export to Japan,”Philippine Aquamarine Resources Inc. (Pari) Chairman and President Renato V. Diaz said.

Apart from growing and processing eels, a preferred Japanese summertime delicacy, the facilities would also cater to handling fruits such as mangoes, coconuts, pineapples, and bananas, and other agricultural products.

To be installed together with local partners, these factories will involve the latest technology in processing, cold storage, cooking, packaging, and shipping, Pari said.

The consortium particularly eyes General Santos City, Davao City, Clark Freeport, and Cagayan Economic Zone as possible locations for its facilities.

“Given the relatively high prices prevailing in the Japanese market, higher and more stable prices will benefit the rural fishermen and the farmers. This is the centerpiece of President Duterte’s program to uplift the people in the rural areas,” Diaz said.

Export revenues to be generated from the facilities are expected to hit USD 100M in two to three years, which will come from both finished products and raw materials of agricultural products.

Diaz said the joint venture is expected to employ 8,000 workers both in farming and production, noting that this will greatly contribute to uplifting people in the rural areas.

The Japanese firms are also currently conducting research and development initiatives to further strengthen the Philippine-Japanese agricultural value chain, and are poised to transfer technologies in the facilities in the Philippines.

AEV unit finishes P295-M expansionAboitiz Construction Group Inc., a unit of Aboitiz Equity Ventures (AEV), has completed the P295-M set of expansion projects for its sister firm Pilmico Foods Corp.

which is intended to boost the latter’s feed mill capacity.

Some P139M of the amount went to the design and construction of its site in Kiwalan Cove in Iligan City.Pilmico’s second feedmill expansion in Capas, Tarlac has also been completed, costing about P156M.

The two new feedmill expansions are expected to support Pilmico’s growing sales amidst the increase in demand from other market segments like poultry.

Pilmico is the food subsidiary of the Aboitiz Group that has been producing wheat flour and related products since 1962. It is also engaged in swine production and animal feeds.

DMCI ventures into low-cost housingEngineering conglomerate DMCI Holdings Inc. plans to venture into the low-cost housing sector as part of its new growth strategy.

DMCI Chairman Isidro A. Consunji said the company has the capability to deliver quality homes for low-income and lower middle class families, with their housing units to be offered at a price lower than their current product offerings which average about P3.5M.

“As a new decade begins for our company, we see a reshaping of our growth strategy,” Consunji said.

Consunji said the company is also looking at developing new businesses that would complement their existing investments.

“To generate high value projects for our core business, we will strengthen our collaboration with industry leaders through fair pricing and exceptional service,” he said.

DMCI is currently one of the country’s diversified business groups with interests in power, water, mining, infrastructure, and property development.

AGRIBUSINESS AND FISHERIES

ECONOMIC AND LOW-COST

HOUSING

Japanese consortium partners eyeing ‘unagi’ factories in PHL

• NisshinFoodMaterialCo.Ltd.• YamatoGlobalExpressCo.Ltd.• YamatoWebSolutionsCo.Ltd.• YamatoTransportCo.Ltd.• ShowaDenkoKK• ShowaDenkoGasProductsCo.Ltd.• NorthJapanTradeCo.Ltd.• YuasaTradingCo.Ltd.• DaiNipponPrintingCo.Ltd.• MajendMAKCSCo.Ltd.• HokkaidoAjinomotoCo.Inc.• MCFoodSpecialtiesInc.• ShowaSangyoCo.Ltd.• YokoyamaFoodsCo.Ltd.• TomoechanCo.

Philippine Business Report6

Century moves into low-cost housingFrom its current portfolio of high-end, high-rise condominium projects, real estate developer Century Properties Group Inc. will be going into affordable housing.

Century Properties Group Inc. Chairman Jose E. B. Antonio said the low-cost segment of the real estate market, or the “horizontal economic housing,” yields as much as 40% in gross margins as compared to 15%-20% for vertical (or high-rise) developments.

“This is really where the sweet spot is,” Antonio said, noting that the backlog for low-cost housing in the country remained significant.

Antonio said the cycle in the low-cost housing segment, from product launch to turnover, is also faster than in the high-rise condo projects.

Century is now scouting for land in the provinces of Bulacan, Cavite, and Laguna, and is expected to deliver by 2020 a total of 31 residential buildings composed of 18,000 units and 1.34M sqm. of gross floor area.

In 2015, the firm completed five condominium projects with 2,500 units.

50-MW solar projects mulledManila Electric Co. (MERALCO) is planning to go into utility-scale or ground-mounted solar projects with an initial capacity of 50 megawatts (MW), apart from solar rooftops.

“We are hopeful that we will break into the utility scale solar within a fairly short period of time. We’re also working on solar rooftop,” MERALCO President Oscar S. Reyes said.

Reyes said the company is open to new and existing solar projects. For new projects, the company will be partnering with strategic firms to get started.

In 2015, the energy firm diversified its power generating portfolio to

include renewable energy (RE) projects such as solar, wind, run-of-river, and hydropower.

MERALCO Chairman Manuel V. Pangilinan said the group’s power generating unit Meralco PowerGen Corp. (MGen) will spin off a new and separate unit for RE investments to be called MSpectrum. This will be the company’s main vehicle for solar rooftop and utility-scale investments.

MERALCO is eyeing to build a portfolio of up to 100MW from solar rooftops in the next three years, of which 20MW is MSpectrum’s target in its first year of operations.

USD 280-M deal inked to build Sarangani plantAlsons Consolidated Resources, Inc. has signed an USD 280-M agreement with Japan’s JGC Corp. that will cover the engineering, procurement, and construction (EPC) work for the second section of its 210-megawatt (MW) coal-fired power plant in Sarangani province.

The amount is almost half of the plant’s disclosed total cost of USD 570M, which Alsons described as the “single largest investment” in Sarangani and the whole of Region 12.

The contract was signed by JGC Corp. Director Hiroyuki Miyoshi, Alsons Chairman and President Tomas I. Alcantara, and JGC Philippines, Inc. President Antonio Cabrera.

The two-unit plant provides baseload power to more than 3M residents of the province, of General Santos City, and other key areas of Mindanao.

The JGC Corp. said that the project will be completed in April 2019.

Metro Pacific acquires Marikina hospitalMetro Pacific Hospital Holdings Inc. (MPHHI), the healthcare unit of Metro Pacific Investments Corp. (MPIC), fully acquired Marikina Valley Medical Center (MVMC) by purchasing the remaining 469,077 shares of the hospital for P933M or P2,117.80 per share.

MPHHI President and Chief Executive Officer Augie P. Palisoc Jr., said the company has always wanted to establish their presence

Shell opens P6-B facility in MindanaoPilipinas Shell Petroleum Corp. (PSPC) inaugurated its P6-B North Mindanao Import Facility (NMIF) in July, a move seen to help address the growing power and energy needs of the Visayas and Mindanao regions.

Located in Cagayan de Oro City, the facility is expected to accommodate petroleum imports of gasoline, diesel, and jet fuel with a total capacity of 170,000-cu.m. storage at any given time. Construction started as early as 2013.

Pilipinas Shell’s Cagayan de Oro terminal began operations in 1968, or almost 50 years ago. With the newly inaugurated facility, NMIF has transformed into an import terminal for gasoline, diesel, and LPG products with a much bigger storage capacity.

The facility is now the largest terminal outside Luzon to serve Mindanao and Visayas.

Shell Companies in the Philippines Chairman Edgar O. Chua said the new facility will help reduce maritime risks since the source of petroleum products is now closer to the intended distribution points.

“It will lower the cost and there is less double handling,” Chua said.

The new NMIF will also boost activity at the Port of Cagayan

HOSPITAL

ENERGY

de Oro. It received its first tanker vessel in June carrying 25M liters of automotive diesel oil that filled two of its four diesel storage tanks.

Pilipinas Shell operates a refinery, 22 oil depots, and over 960 retail stations in different parts of the country.

7September 2016

in the east side of Metro Manila since this is home to newly-born communities.

MVMC President Juan A. Lagunzad said MPIC’s entry will help MVMC adapt to a changing world of integration and connectivity and to upgrade the quality of its infrastructure, equipment, and services.

Established by 21 enterprising founders, comprised mostly of doctors from different specializations 12 years ago, MVMC is a tertiary hospital located along Sumulong Highway in Marikina City.

Recently, the construction of a seven-storey Medical Arts Building was completed to accommodate 44 clinics for over 270 doctors.

This is the 12th hospital under MPHHI since 2007.

MPIC has already invested P12B in the healthcare industry. They were able to post a core net income of P1.3B in 2015, increasing by 30% from 2014.

Gov’t allocates P900B for infra projectsDepartment of Budget and Management (DBM) Secretary Benjamin E. Diokno said the Duterte administration plans to spend almost P900B on vital infrastructure projects next year.

This is in line with the plan to boost government expenditures to 7% of the GDP toward the end of the present administration by 2022.

“The next six years will be the golden age of Philippine construction, both public and private,” Diokno said.

Some of the projects where this budget will be placed are three to four additional railway lines in Metro Manila, a new air transport hub, and a proposed connecting highway between Makati City and Clark Pampanga.

More “hybrid” public-private partnership (PPP) projects are in the

pipeline to hasten infrastructure development. The administration also ordered non-stop, 24/7 construction work on urban-based projects.

MPIC, to take charge of NLEX-SLEX Connector Road constructionMetro Pacific Tollways Development Corporation (MPTDC), the tollways unit of Metro Pacific Investments Corporation (MPIC), is set to receive the P23.3-B contract for the construction, operation, and maintenance of the toll road connecting the North Luzon Expressway (NLEx) and the South Luzon Expressway (SLEx).

The connector road has an estimated construction cost of P15.74B and a right-of-way cost of P7.46B. It includes an elevated four-lane, eight-km.tolled expressway which begins at NLEX Segment 10 at C-3 or Fifth Avenue, Caloocan City and connects to SLEx through the third stage of the Metro Manila Skyway System Project. It will be composed of at least two interchanges and two tolling plazas.

When completed, it is expected to decongest the traffic in Metro Manila. It will also decrease the travel time between NLEx and SLEx from a maximum of two hours to just 15 to 20 minutes.

MPTDC President and CEO Rodrigo E. Franco said they are hoping to start the construction of the first section in 2018.

GMCAC eyes third party for MCIA developmentGMR-Megawide Cebu Airport Corporation (GMCAC), the consortium that secured the

contract for the expansion and operation of the Mactan-Cebu International Airport (MCIA), expects to select a partner for the development of a six-ha. property within the airport complex for mixed-use.

GMCAC President Loiue B. Ferrer said they are currently talking to at least eight interested groups. The property was able to attract both foreign and local firms.

The facility is planned to serve as area for hotels, malls, and gaming facilities. GMCAC plans it to be in place by the latter part of 2018.

The consortium started the construction of MCIA Terminal 2 in January 2016, expanding the capacity of the airport up to 13M passengers per year, from 4.5M at present.

Based on the 25-year agreement for MCIA deal, responsibilities of the GMCAC include managing MCIA, renovation of Terminal 1, and constructing and operating the second terminal.

Cebu Air buys two new A330-300 aircraftsIncreasing its capacity in the long-haul segment, low-cost airline Cebu Pacific ordered two new A330-300 planes worth USD 512.8M from French manufacturer Airbus SAS.

The company is expecting the delivery within December 2016 and May 2017, Cebu Pacific Vice President for Corporate Affairs Paterno S. Mantaring Jr. said.

It will be used for the airline’s long-haul routes to destinations like Riyadh in Saudi Arabia, Doha in Qatar, Dubai in United Arab Emirates, Kuwait City in Kuwait, and Sydney in Australia.

From 2016 to 2021, Cebu Pacific is also expecting the delivery of 48 more aircraft including 32 Airbus

PUBLIC-PRIVATE PARTNERSHIPS

PUBLIC INFRASTRUCTURE

AND LOGISTICS

Department of Budget and Management Secretary

Benjamin E. Diokno

The next six years will be the golden age of Philippine construction, both public and private,

“”

AVIATION

Philippine Business Report8

321(new engine option) neos and16 ATR 72-500s.

To date, the carrier has a total of 52 planes, composed of 36 Airbus A320 planes and eight ATR 72-500 aircraft.

PAL to transfer some flights to ClarkPhilippine Airlines (PAL) is planning to move some of its domestic flights to Clark International Airport in Pampanga.

This planned transfer, PAL President Jaime J. Bautista said, heeds the government’s call to decongest Metro Manila and lessen the load of Ninoy Aquino International Airport (NAIA).

He also said the airline still has to study which domestic flights will be transferred to Clark.

Based on a report of the Japan International Cooperation Agency (JICA), Clark Airport’s traffic is expected to reach about 2.6M passengers in four years and more than triple by 2040, compared to the passenger volume of 868,528 in 2015.

“The functions of the two gateway airports of NAIA and Clark should be urgently strengthened and integrated by clarifying their roles and improving access to and between these airports,” the report indicated.

Department of Transportation (DOTr) Secretary Arthur P. Tugade said access issues would be addressed by the government’s plan to construct a railway line connecting the Clark Freeport Zone to Metro Manila in the Trinoma Shopping Mall, Quezon City, or to NAIA in Pasay.

EastWest to open new subsidiaryAiming to evolve into a universal bank, EastWest is set to open its own financial leading unit called the EastWest Leasing and Financial Corporation (EWLFC).

EastWest President Antonio C. Moncupa Jr. said the company will be putting an initial equity of P100M to set up the new unit.

“EWLFC completes the lending product menu of EastWest and gives us the opportunity to serve comprehensively the financing requirements of our customers,” Moncupa said.

Presently, the company is waiting for the approval of the Securities and Exchange Commission (SEC) to officially register the financial leasing company.

Metrobank raises investment in PSBankMetropolitan Bank & Co. (Metrobank) increased its stake in its thrift bank arm Philippine Savings Bank (PSBank) by P1.61B, now owning over 80% of the total shares.

The parent firm bought 16.09M shares at P100 per share, equivalent to 6.69% of PSBank’s total outstanding capital stock, said PSBank Senior Vice President Perfecto Ramon Z. Dimayuga Jr. said. Metrobank is the second largest universal and commercial bank in the country according to assets, having P1.37T as of end-March 2016. PSBank, on the other hand, also ranks as the second biggest thrift bank with P173.86B worth of resources as of the same period.

Mexican BPO companies interested in PHLMexican Ambassador to the Philippines Julio Camarena Villaseñor said that Mexican companies are eying the Philippines’ information technology and business process management (IT-BPM) industry for more investments.

Camarena said they are willing to work with the Duterte administration in attracting investors to the country and that they are also looking at other sectors like construction, retail, and telecommunications.

“We’re excited to start a new process in which Mexican companies can indeed come over and invest additionally in the Philippines,” he said.

According to him, the similarity of the two countries’ culture should serve as an advantage to make doing business a lot easier.

“Mexico has signed the North America Free Trade Agreement, so any product you bring into Mexico has immediate access to United States [U.S.] and Canada, giving you a much larger public consumption and possibilities to attract,” Camarena said.

Ramco Systems establishes subsidiary in PHLSoftware provider Ramco Systems has established a wholly-owned subsidiary in the Philippines, their fourth office in the ASEAN (Association of Southeast Asian Nations) region.

The subsidiary will focus on cloud human resources, global payroll, and logistics software. It is also expected to provide jobs to local innovators, at a time when the country’s information technology (IT) sector expands to the implementation of cloud-based technology.

“A buoyant economy and the drive to embrace disruptive technologies is driving enterprises in Philippines to invest in latest technologies. We are opening an office in Manila to enable local enterprises to leapfrog to cloud technology and derive significant business benefits,” Ramco Systems Vice Chairman and Managing Director P.R Venketrama Raja said.

The company’s regional headquarters is located in Singapore. It also has offices in Hong Kong and Malaysia. As of end-March 2016, 29% of Ramco’s overall revenue came from Asia-Pacific.

“Given the excellent technical manpower in the Philippines, it will also serve as a base for addressing

BANKING

IT-BPM

9September 2016

our clients in the ASEAN region,” Raja said.

Steel company eyes USD 500-M expansionSteelAsia Manufacturing Corp. will invest USD 500M for the construction of three new production facilities in Candelaria, Quezon and Cagayan de Oro to produce 600,000 tons a year of wire rods for industrial applications.This will be the first time that the firm will manufacture wire rods locally, SteelAsia President Benjamin O. Yao said.

“The local production of these steel products will help accelerate the country’s industrialization because these can provide raw materials for the manufacturing sector. We are not creating jobs only in our own mills but in other industries as well,” said Steel Asia VP Rafael O. Hidalgo.

These facilities, when fully operational, are expected to supply to the domestic market about 1.5M tons of steel products that are currently being imported.

Cemex will construct a USD 300-M plantCemex Holdings Philippines Inc. will build a USD 300-M integrated cement-production plant at its Solid Cement Plant in San Jose, Antipolo City and which will be operational by the second half of 2019 with an annual capacity of 1.5M metric tons (MMT) to double the capacity by 25%.

The firm was upbeat on the domestic economy after the new administration vowed to sustain growth across the country, Cemex Philippines President and Chief Executive Pedro Jose Palomino noted.

Ayala Land Premier to build P20.5-B project on former site of Mandarin HotelAyala Land Premier (ALP), the luxury property brand of developer Ayala Land Inc. (ALI), will construct two Park Central Towers hotel, comprising 69 stories or about 276 meters with 281 private residences, at the former site of Mandarin Hotel in Makati City . The new hotel will also have an 8,000-sqm. mall at its lowest floors.

Leandro V. Locsin and Partners was the main architect and designer of the project in collaboration with Singaporean architectural firm Soo Chan Design Associates and Japanese design group Studio Taku Shimizu.

ALI eyes more Luzon townshipsAyala Land Inc. (ALI) is looking to develop mixed-use estates in the northern and southern parts of Luzon to take advantage of growth opportunities.

The company is on the lookout for properties to develop in Pangasinan, Baguio City, and Laoag City that have been identified as growth centers. It also has set its sights on the CALABARZON (Cavite, Laguna, Batangas, Rizal, Quezon) region.

ALI is looking for around 20 ha. of land to be developed into a mixed-use estate to host retail establishments, offices, and schools.

Robinsons Retail buys stake in De Oro PacificRobinsons Retail Holdings Incorporated (RRHI) has acquired a majority stake in De Oro Pacific Home Plus Depot, a big box builders hardware depot with a three-store chain in Cagayan de Oro City and Iligan City.

The hardware depot started operating in 1993. It also operates

a 3,000-sqm. warehouse in CDO to support the three De Oro Pacific Home Plus stores.

The Robinsons Retail group is bullish in the do-it-yourself (DIY) business which is currently rising to the sustained growth of the construction sector driven by the huge backlog in residential building.

For 2016, the group plans to spend P5B in capital expenditures, up from P3.14B actual spending in 2015, as it plans to roll out more stores this year.

As of the first quarter of 2016, Robinsons Retail operates 1,506 stores with total gross floor area of 974,000 sqm.

Meralco, ITCSI draw P10-B cargo rail planManila Electric Co.’s (MERALCO) MRail has entered into a joint venture with International Container Terminal Services Inc. (ICTSI) for a P10-B cargo railway project.

Under the agreement, the consortium would shell out P2.7B of the projected total cost of P10B for the initial phase of the project that is forecasted to be completed in two years.

The project seeks to establish a freight railway delivery service for containerized cargoes using the existing Philippine National Railway (PNR) rail tracks.

This will also revive the connectivity between the port of Manila and an inland container terminal facility in Laguna.

The railway cargo project will entail rehabilitating the existing PNR tracks, restoring the Tutuban

RETAIL

MINING

Cemex PHL President and CEOPedro Jose Palomino

We think the Philippines is a growth case. We believe that what is happening now has no U-turn, and the growth pace could even be higher. Our goal is try to grow with the country and join the whole community in this growth,

“

”

REAL ESTATE

Total Number of RRHI-operated mall-based DIY hardware stores as of H1 2016

HandymanDoItBest 132TrueValue 19TrueHome 2

SHIPPING

Philippine Business Report10

Avenue to the Port of Manila tracks that traverse through the center of C.M. Recto Ave. in Manila, and the construction of the stabling yard in Calamba, Laguna for the container trains.

Once operational, the railway cargo project is expected to ease congestion of the ports of Manila. It will speed up flow of cargoes into a central trans-shipment hub connected to the port and closer to the inland destination.

Smart fires up 200 new cell sites to boost 2G networkSmart Communications has activated nearly 200 new cell sites nationwide to enhance its 2G capacity and improve its overall mobile services.

The rollout of the newest batch brings the total number of cell sites using the 1800-megaHertz (MHz) frequency covered by a co-use agreement with the telecoms business of San Miguel Corporation (SMC) to 2,221.

Located in 656 cities and 73 municipalities across the country, the cell sites will boost the ability of Smart's GSM or 2G network to handle more calls and text messages, mainly in dense urban areas in Metro Manila, North Luzon, South Luzon, Visayas, and Mindanao.

To improve their services, Smart has switched on additional facilities in 262 cell sites in Metro Manila, 883 in North Luzon, 679 in South Luzon, 116 in Visayas, and 281 in Mindanao, a move expected to provide a better mobile experience to roughly 700M Smart, Talk and Text (TNT), and Sun subscribers.

Smart is also deploying the 700 MHz frequency to reinforce its mobile data service throughout the country, particularly via LTE (Long-Term Evolution). LTE is a 4G mobile phone technology that presently provides the fastest wireless data service commercially available.

Smart is targeting to activate LTE service using the 700 MHz to nearly 40% of the country’s cities and municipalities by end-2016.

Jollibee earmarks P10.4B for expansionJollibee Foods Corporation (JFC) is investing P10.4B for to improve and expand its franchise network this year.

JFC Chief Executive Officer (CEO) Ernesto Tanmantiong said the substantial increase in this year’s capital expenditures (capex)—which is more than double the P4.7B incurred 2015—will support the opening of 200 stores across the country.

About 70% of these are located in Visayas and Mindanao. Meanwhile, another 80 to 100 outlets will be opened abroad.

JFC plans to open three new commissary facilities to support its restaurant chain and expand its existing commissary in Canlubang, Laguna.

Offshore, JFC is eyeing Milan, Italy before entering other European countries. It has already established locations in the United States (U.S.), Kuwait, Saudi Arabia, Qatar, United Arab Emirates (U.A.E), Bahrain, Singapore, Hong Kong, Brunei, and Viet Nam.

Last year, capex was poured into improving its core businesses which include information technology (IT) upgrade, the increase in network development organization, and the acquisition of American hamburger chain Smashburger.

This year, the capital spending will go to the logistics improvement by building new warehouses and distribution centers, aside from new store openings, store renovations, and commissaries.

TELECOM

COMPANY NOTES

Nestlé to build P2-B Milo plant in BatangasNestlé Philippines Inc. is building a P2-B beverage factory in Lipa, Batangas that will produce protomalt, a propriety key ingredient used for its various Milo products.

“Our P2-B investment in the new Milo plant is another concrete demonstration of our commitment to the Philippines,” Nestlé Philippines Chairman and Chief Executive Officer (CEO) Jacques Reber said.

Reber disclosed that the 5,400-sqm. protomalt plant would be the third facility within the company’s 29-ha. complex in Batangas. It will be Nestlé’s fourth protomalt manufacturing facility in the world, the other three are located in Singapore, Nigeria, and Australia.

Construction of the plant began in December 2015 and is expected to be operational in November 2017 with a capacity of 35,000 tons. It will initially serve the company’s domestic requirements.

The Philippines ranks eighth in Nestlé’s biggest markets of global network and is the second largest in Asia after China. The country is also the second-biggest market for Milo products in the world after Malaysia.

Jollibee, which now generates 22% of its business from the international market, is the largest food service network in the Philippines. It is the ninth most valuable quick-service restaurant chains globally, and the company targets to climb four notches up by market capitalization within the next five to seven years.

Nestlé PHL President and CEOJacques Rober

The Philippines is a key market for us at Nestlé. For over a century, we have continually affirmed our confidence in, and commitment to the Philippines through our investments and expansion.

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11September 2016

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PHL optimistic on bilateral deal with UK The Philippines is confident to forge a bilateral deal with the United Kingdom even with the latter’s historic exit from the European Union (EU).

In 2015, the Philippines secured EU’s permission to begin negotiations for the Philippines-EU free trade agreement (FTA).

British Ambassador to the Philippines Asif Ahmad said FTA prospects between the two countries look bright because the Philippines has been classified by UK as among the top 40 emerging powers in the world.

“Before the referendum in the UK, the EU which we are part, is negotiating the free trade agreement with the Philippines. Now that the first part has been completed, the second part has formally started but that process has only just began and there’s no time limit on how long it will take to do that,” Ahmad said.

He also noted that the Philippines is one of the countries on UK’s priority list to explore an FTA with in the future.

“The fundamental reason for offering the Philippines that exporting and engagement with the world will improve lives here in the Philippines and overall will make the Philippines a stronger economic and trading partner,” he said.

PHL seeks stronger ties with FranceThe Philippines is seeking ways to boost bilateral ties with France in support of strengthening the development of micro, small, and medium enterprises (MSMEs).

Department of Trade and Industry (DTI) Secretary Ramon M. Lopez met with France Ambassador Thierry Mathou to discuss programs in firming both countries’ economic ties.

“France, as the third largest economy in the European Union, is among the countries which support the Philippines’ advocacy on developing small and medium enterprises especially in the creative services and startup sector,” Lopez said.

Philippine exports to France last year increased by 25.41% from USD 331.64M to USD 415.89M in 2014.

Top exported products include parts of electronic integrated circuits and micro assemblies.

Bilateral trade between the two countries, however, was expected to finish lower in 2015 from the USD 2.3B recorded in 2014.

PHL ‘winner’ in attracting FDIs The Philippines along with Viet Nam are winners in terms of attracting foreign direct investments (FDIs) compared with their Southeast Asian peers amid the slowdown in China, global financial services company Credit Suisse reported.

The Philippines’ FDIs are now at a multi-decade high of USD 8B as of April 2016, up from USD 6B in 2015 and USD 1B five years ago.

“However, there is a significant divergence among countries, with Viet Nam and Philippines emerging as winners and Malaysia staying surprisingly resilient, while the previous FDI favorites including Indonesia, Singapore, and Thailand saw some weakening trends,” the report revealed.

The financial institution identified Japan and the United States (U.S.) as key drivers behind this FDI increase mostly in the manufacturing and finance industry sectors.

Bangko Sentral ng Pilipinas (BSP) data showed net FDI inflows in April surged by 476% to a record of USD 2.2B from USD 382M a year ago. FDIs in the first four months of this year amounted to USD3.5B, much higher compared to USD1.23B a year ago.

Investors remained optimistic on the Philippines “as the economy continued to post strong growth and show even better growth potentials.”

The BSP expects FDIs to hit USD 6.3B this year, an improvement from the USD 5.72B registered in 2015.

COUNTRY TO COUNTRY

France has consistently been one of the Philippines’ biggest markets for import and export merchandise and has risen to become the country’s second largest trading partner among European Union (EU) member states.

INTERNATIONALAND REGIONALWATCH

Gardenia to invest P1B for first Mindanao facilityGardenia Bakeries Philippines is planning to spend P1B to construct its first-ever plant in Mindanao to take advantage of the growing demand for bread.

Gardenia President and General Manager Simplicio Umali Jr. said he is eyeing Davao as a possible site of their seventh plant in the country.

Umali sees the bread market in the Philippines growing to P18B as people starts to accept bread as a food staple over rice. Gardenia is expecting a P5-B revenue this year, compared to last year’s P4B.

Philippine Business Report12

Pub l i s h e d mon t h l y b y t h e K n ow l e d g e Man a g emen t a n d I n f o rma t i o n S e r v i c e , D e p a r tmen t o f T r a d e a n d I n d u s t r y,5 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 ) 7 5 1 . 3 5 6 5 • 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

Editorial Team: Dir.Patricia May M. Abejo/Editor-in-Chief •Alfonso M. Valenzuela/Managing Editor •Cresenciano P. Par/Assistant Editor •Kristina S. Andaya, Renaldo C. Neneria, Zarrel M. Noza, Airiz A. Casta/Writers•Zarrel M. Noza/DesignLayout•Ric A. Kagahastian/CirculationOfficer•

Philippine Business ReportSeptember 2016

Entered as Third-Class Mail at theMakati Central Post Office

under Permit No. 504valid until 31 December 2016

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

ECONOMICINDICATORS

Consumer Price Index (%)(2000 base year)

144.5144

143.5143

142.5142

141.5Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16

Exports(In USD Billion)

480046004400420040003800

Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16

Imports(In USD Billion)

8000

6000

4000

2000

0Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16

GNI Growth rate (%)876543210

1Q(2015) 2Q(2015) 3Q(2015) 4Q(2015) 1Q(2016) 2Q(2016)

876543210

GDP Growth rate (%)

1Q(2015) 2Q(2015) 3Q(2015) 4Q(2015) 1Q(2016) 2Q(2016)

Peso per US Dollar Rate48

47.547

46.546

45.545

Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16

As of 31 September 2016Inflation Rate (%)

2

1.5

1

0.5

0Apr-16 May-16 Jun-16 Aug-16Jul-16 Sep-16

(1994 base year) As of 29 July 2016

Interest Rate (%)8

6

4

2

0Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16

(Overnight lending facility as of August 2016)

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