PHILIPPINE

FACTSHEETVol. 22, No. 11

November 2010

PoliticalThe Supreme Court, in an unprecedented move, ordered First Philippines Industrial Corp. to stop operating a 117-km pipeline after an oil leakage disrupted fuel supply to Manila, polluted deep wells, caused traffic jams and dislodged more than a hundred families from their homes. The court issued a temporary environment protection order against the firm after granting the petition for a writ of kalikasan sought by residents in Makati.

The Philippines and the EU signed a three-year development cooperation agreement worth 69 million Euros (P4.12 billion), the bulk of which will go to health programs.

EconomicThe Philippine economy expanded at a slower pace in the third quarter mainly because of the weak agriculture sector and lower government spending. GDP grew by 6.5% in the third quarter. Services expanded by 7.7%; industry by 9.2% and agriculture shrank by 2.5%. The third quarter performance brought the average GDP growth for the first nine months of the year to 7.5%, well above the governments full-year target of 5-6%.

Imports climbed 24.6% to US$ 4.57 billion in September from a year earlier. Strong demand for semiconductor and electronics drove Philippine exports to a 46.1% increase to US$5.31 billion in September. Exports for the nine-month period reached US$ 38.3 billion, up 38.5% from last year.

The Finance and Trade departments will come up with a common position aimed at giving out the least possible tax incentives and other perks to investors. Incentives are necessary, but only insofar as big ticket investments are concerned and would not otherwise come without the incentives, DOF Sec. Purisima said.

The DTI will block requests to lower tariffs on cars imported from Japan when officials meet for a scheduled review of the bilateral trade pact (JEPEPA) next year.

Factory output in volume rose 15.9% in September, the weakest growth since December 2009.

Continued belt-tightening kept the budget deficit

under control in October. The country recorded a P10.5 billion deficit last month, bringing the 10-month tally to P270.3 billion, well under the P325 billion ceiling set for 2010 and comfortably below the P292.8 billion deficit programmed for the period.

Placements in the special deposit account (SDA) facility of the central bank have reached the P1 trillion mark as of end-October, manifesting the sharply growing liquidity in the countrys banking sector.

The Philippines, one of the few countries identified as facing the highest risk of natural disasters, will get US$ 1 billion worth of loans over the medium term to fund programs aimed at improving the countrys ability to cope with climate change.

The BSP has issued a regulatory prohibiting spouses and relatives of key banking officers from occupying sensitive positions in a bank.

Guarantees, easier access to bank loans and speedier processing were dangled by the government at the rollout of key infrastructure projects that include US$ 3.3 billion worth of rail, road and airport ventures up for bidding next year. The President said that his administration would compensate investors prevented by the courts or Congress from collecting contractually agreed toll or user fees. Meanwhile, the Dept. of Interior and Local Government will come out with policies to reconcile local and national government laws and regulations to make it easier for participants in the governments PPP program to do business in the Philippines.

Multilateral institutions are planning to pool funds to support the governments infrastructure drive, with Manila-based officials expressing willingness to finance PPP projects directly or back government guarantees.

The government will further liberalize the civil aviation industry to increase tourist arrivals, the President said. The full implementation of E.O. 219 (the liberalization of the air travel industry) will be done gradually.

Amid ongoing changes to the governments joint venture guidelines and issues surrounding the build-operate-transfer implementing rules and regulations, the NEDA gave assurances that

the agency can already approve PPP projects in only six months.

The BSP has approved a separate 25% single borrowers limit on loans, credit accommodations and guarantees by banks to infrastructure projects certified by the NEDA under the PPP initiative.

For the first nine months, the combined approved investment pledges of foreign and local investors amounted to P320.2 billion, almost three times the P117.5 billion committed a year ago.

The BSP kept interest rates unchanged but cut its inflation forecast up to 2012: full-year inflation 3.6% in 2010, 2.4% in 2011 and 2.8% in 2012.

The countrys balance of payments surplus surged 75% in the first 10 months this year to hit a new record level of US$ 9.276 billion.

PNOCs intends to sell part of P14 billion banked gas that it purchased from the DOE while waiting for the Batangas-Manila (BatMan1) natural gas pipeline project to be completed.

Foreign tourist arrivals in 2010 up to October reached 2.56 million, up 17% compared to the same period of last year.

Remittances of Filipinos abroad reached US$ 1.6 billion (+10.6) in September, bringing total remittances for the 9-month period to US$ 13.8 billion, up 7.8% from the same period of last year.

The Board of Investments is targeting US$ 5 billion in investments next year, with the bulk to come from the governments PPP program.

Top government officials, lawmakers and domestic industry leaders are forging alliances to identify immediate and long-term solutions to curb smuggling, which has been robbing the national government some P127 billion in revenues a year.

Foreign direct investments net inflows totaled US$ 80 million in August, bringing total FDI in the first eight months to US$ 1.027 billion, 38% less than in the same period of last year.

The Months Highlights

Foreign investments in stocks, government securities and peso-denominated assets yielded a net inflow of US$ 1 billion in October or more than double the US$ 494 million recorded in the previous month. This brought the foreign portfolio investments in the first 10 months to a net inflow of US$ 2.5 billion, compared to US$ 358 million in the same period of last year.

Heavy dollar-buying by the BSP lifted the countrys gross international reserves to US$ 56.89 billion as of the end of October, from US$ 54 billion in September and US$ 43 billion a year ago.

October inflation eased to an 11-month low of 2.8%. Average inflation for the 10-month period stands at

BusinessProfits of Ayala Corp. rose by 17% to P6.8 billion in the nine months that ended September. Alliance Global Group Inc. reported a 63% increase in net profits for the nine-month period to P5.39 billion. Petron Corp. posted a 59% increase in net profits to P5.35 billion in the first three quarters. Lopez Holdings Corp. said its net earnings rose 19% in the nine months to September reaching P13.03 billion on the back of higher revenues of its core businesses and gain on the sale of some investments. Cebu Pacific posted a 153% increase in net profits to P4.83 billion in the first nine months of the year.

Norways Intex Resources ASA has received a US$ 2 billion offer from a global private pension fund to finance its nickel project in Mindoro.

San Miguel Corp. is investing more money in Liberty Telecom Holdings, Inc., paying P220 million to raise its shareholding to 41.48%.

In a bid to aggressively expand its energy business, the Alcantara-led Alcan-Resources Inc. has earmarked US$ 500 million for its capital expenditure program over the next three years.

Pangilinan-led Metro Pacific Investments Corp., already the single largest shareholder in Meralco, wants to increase its shareholding in the countrys largest power distributor, to 46%.

San Miguel Corp. is in talks to acquire up to 100% of Australian mining firm Indophil Resources NL which controls a third of the US$ 5.2 billion Tampakan copper-gold project in Mindanao.

UK-based Forum Energy Plc has sealed a US$ 10 million facility to fund its exploration in West Palawan.

Twelve banks have completed their migration to the central banks electronic remittance system for interbank transfers allowing bank-to-bank remittance settlements.

Ayala Land Inc. has raised its stake in Philippine tourism by taking over dormant upscale resort Club Noah Isabelle in Palawan and breaking ground in Fort Bonifacio for the first of its chain of boutique businessmans hotels.

Universal LRT Corp. Ltd., the company that holds the right to develop the US$ 1.2 billion MRT Line 7, is buying out 7.8% partner Hollington Management Ltd.

Manila Water Corp. reported a 31% growth in net income for the nine-month period of this year to P2.975 billion. The company also announced that it will put up a P2 billion water treatment plant in Laguna Lake to provide up to 200 million liters per day in additional supply for its East Zone concession area in Metro Manila.

Accenture is opening 3 new facilities in the Philippines, increasing its facilities to 15 and its headcount from 14,000 to 20,000.

Ayala Corp.s wholly owned subsidiary Michigan Power Inc. and Mitsubishi Corp. have formed a joint venture for the development of solar power projects in the Philippines.

Roxas Holdings Inc. plans to temporarily shift from making fuel ethanol to producing potable and industrial alcohol amid increasing competition from cheap imported bioethanol.

InvestmentsProcter & Gamble will be investing roughly P2.5 billion to expand its diaper factory in Cabuyao, Laguna.

The engineering unit of Singapore Airlines is set to expand its aircraft maintenance facility in Clark Civil Aviation Complex this month, earmarking P1 billion to put up a second hangar.

La Frutera, Inc. intends to add another 100 hectares to its 1,100-hectare banana plantation to hike volumes.

Pepsi-Cola Products Philippines, Inc. plans to build 11 renewable energy plants to provide power for its steam engines.

Clean energy firm Asia Renewables Pte. Ltd. plans to acquire landfill, biogas and biomass projects in the Philippines

InfrastructureMetro Pacific Investments Corp. is in discussion to take over the 29% stake of the Sobrepenas Fil-Estate Corp. in Metro Railway Transit 3.

Marubeni Corp. has committed to rehabilitate and increase the generating capacities of the 1,200-MW Sual and 735-MW Pagbilao coal-fired power plants. According to Federico Puno, CEO of Team Energy, a venture between Marubeni and Tokyo Electric and Power Co., the company targets to expand the Sual facility

by another 600-MW and the Pagbilao plant by 400-MW. Team Energy also plans to put up three mini-hydros in Benguet which will have a combined additional capacity of 15-MW for the Luzon grid.

Groups opposing the toll increase at the South Luzon Expressway asked the Supreme Court again to nullify the contract that the Toll Regulatory Board entered into with a Malaysian investor to operate the highway. Regulations have again postponed a decision on toll hikes at the South Luzon Expressway, saying they still lack Supreme Court clarification of a recent ruling that lifted a restraining order on adjustments.

The Toll Regulatory Board is looking to increase user charges for another key Luzon road, the Subic-Clark-Tarlac Expressway, by roughly 45% in January next year to help the BCDA to pay back its loans.

The Philippine government is negotiating with the ADB to secure a US$ 1 billion loan with which to fund key renewable energy and energy efficiency projects in the country. The loan is expected to be finalized by mid-2011.

Meralco is set to spend over P10 billion annually for its capital expenditure program starting this year; they are expecting to invest P10.8 billion reaching up to P12 billion by 2012.

The Public Works department will let other companies challenge (Swiss Challenge) Metro Pacific Investment Corp.s P21 billion offer to build a road connecting the North and South Luzon expressways by the second quarter of 2011.

Chevron Corp. and locally listed APC Group Inc. plan to invest US$ 300 million to put up a 100-MW geothermal power facility in Kalinga.

CongressWatchThe Finance department plans to take a more active role in the granting of incentives based on a new bill it wants Congress to consider. The Senate finance committee recommended second reading approval of the P1.645 trillion budget for 2011, while introducing realignments and new programs. The committee also proposed an interagency body on the P21.9 billion conditional cash transfer (CCT) program approved by the House. The House already approved the 2011 budget.

AgricultureThe government believes it may take at least US$ 1 billion to fund the various PPP projects for agriculture and irrigation.

A number of Japanese firms plan to invest in a plantation in the Philippines, with the produce to be exported to Japan, Agriculture Sec. Alcala said.

BANKING INDICATORST-Bills primary issues (%p.a.)WAIR Auction Auction Date -(November 15, 2010 )91 days 1.480

182 days 1.983

364 days 2.394

(NI - no issuance)

Reserve Money (November 2-5, 2010) (million PHP)----- 1,023,285

Dollar Deposit Rates (% per annum) (Nov. 8-12, 2010)

Savings Deposits 0.332

Time Deposits

60 days and below 0.877

61-90 days 0.979

91 - 180 days 1.109

181 days and above 1.277

LIBOR/SIBOR (% per annum) (November 24, 2010)

Libor 90 days 0.2875

Sibor 90 days 0.3000

Libor 180 days 0.4469

Sibor 180 days 0.4580

Banking Lending Rates (% per annum) (Nov. 8-12, 2010)

All maturities 7.057

(one year and below) 7.057

(more than 1 yr. - 5 yrs.) 7.057

(more than 5 yrs.) 7.057

GROSS INTERNATIONAL RESERVESIn Million U.S. Dollars

2010 2009

January 45,592 39,248

February 45,764 38,925

March 45,579 39,041

April 46,944 39,316

May 47,690 39,589

June 48,704 39,490

July 49,042 40,169

August 49,906 41,493

September 53,754 42,529

October 57,153 43,173

November 44,168

December 44,243

Economic Indicators

visit us at www.eccp.com

Source: National Statistics Office / BSP

MERCHANDISE EXPORTS In Million USDJAN-SEP

2010JAN-SEP

2009(%)

Change

Electronics and Components 23,503 15,982 47.06

Clothing Accessories 1,280 1,142 12.10

Coconut Oil 941 393 139.08

Woodcraft & Furniture 816 712 14.62

Elect. wiring harness 814 482 68.76

Gold 102 212 -51.89

Metal Components 563 333 68.85

Bananas 229 284 -19.23

Tuna 254 258 -1.24

Petroleum Products 208 213 -2.52

Footwear 6 18 -65.38

Pineapple 170 201 -15.56

Shrimp and Prawns 33 35 -7.06

Basketwork 33 29 14.57

Dessicated Coconut 106 113 -6.42

OTHERS 9,241 7,241 27.62

TOTAL EXPORTS 38,298 27,649 38.52

MERCHANDISE IMPORTS In Million USDJAN-SEP

2010JAN-SEP

2009(%)

Change

Electronics and Components 13,678 11,307 21.0

Telecommunication Eqpt.and Electrical Machinery 618 615 0.6

Industrial Machinery 1,754 1,190 47.4

Mineral fuels, lubricants 6,814 5,224 30.4

Transport Equipment 2,286 1,666 37.2

Textile Yarns, Fabric 419 431 -2.8

Cereals 2,023 1,671 21.1

Iron and Steel 896 658 36.1

Chemicals 508 422 20.6

Plastics 852 559 52.5

Metal Products 395 316 25.0

Power Generating Machinery 326 265 23.1

Misc. Manufactured Articles 401 387 3.7

Paper and Paper Products 432 359 20.3

Dairy Products 529 317 67.0

OTHERS 39,893 6,307 532.5

TOTAL IMPORTS 39,938 31,692 26.0

The Philippine Monthly Factsheet is prepared by:European Chamber of Commerce of the Philippines (ECCP)For more detailed information, please contact:ECCP19/F Philippine AXA Life CentreSen. Gil Puyat Ave. cor. Tindalo St.Makati City, PhilippinesTel.: (632) 845.1324 Fax: (632) 845.1395e-mail: schumacher@eccp.com website: www.eccp.com

BOI APPROVED INVESTMENT PROJECT

JANUARy - SEPTEMBER 2010

SOUTH LUZON TOLLWAy CORPORATION

Rehabilitation, construction, expansion and maintenance of South

Luzon Expressway - project cost P 8,354,000,000

PETRO ENERGy RESOURCES CORPORATION

Power generation - wind power generation (Nabas, Aklan)

- project cost P 2,546,290,000

PETRO ENERGy RESOURCES CORPORATION

Power generation - wind power generation (Sual, Pangasinan)

- project cost P 2,543,482,000

THERMA LUZON, INC

Power generation project - 700 MW Pagbilao Coal fired thermal

power plant - project cost P 1,959,000,000

PHOENIX PETROLEUM PHILIPPINES, INC.

Storage, marketing, and distribution of petroleum products

- project cost P 615,000,000

WESTERN FEEDMILL CORPORATION

Producer of animal feeds

- project cost P 90,000,000

BASIC ECOMARKET FARMS, INC.

Producer of dried cassava granules

- project cost P 50,000,000

KF NUTRI-FOODS INTERNATIONAL, INC

Producer of banana chips

- project cost P 15,000,000

Source: BSP

Source: National Statistics Office (NSO)/BSP

Balance of Trade by Major Trading Partners: Jan July 2010(F.O.B. Value in Million U.S. Dollars)

Country Total Trade Imports Exports Bal. of Trade

Total 78,235.89 39,937.87 38,298.02 -1,639.85

1. Japan 10,686.67 4,961.83 5,724.84 763.01

2. United States 10,075.78 4,268.45 5,807.33 1,538.88

3. Singapore 9,480.09 3,922.34 5,557.75 1,635.41

4. China 7,108.49 3,221.16 3,887.33 666.17

5. Hong Kong 6,200.12 3,025.99 3,174.13 148.14

6. Korea, Republic of 4,476.86 2,737.12 1,739.74 -997.38

7. Taiwan 3,872.34 2,641.64 1,230.70 -1,410.94

8. Others 26,335.54 15,159.34 11,176.20 -3,983.14

Peso Exchange Rate (end month)

2010 2010 2009 2009

USD EURO USD EURO

Jan 46.74 65.30 47.34 60.60

Feb 46.16 62.95 48.24 61.40

Mar 44.42 59.39 48.17 64.04

Apr 44.69 59.08 48.40 64.20

May 46.49 57.49 47.54 66.35

Jun 46.44 57.50 48.28 67.93

Jul 45.56 59.41 48.07 68.55

Aug 45.18 57.22 48.79 69.97

Sept 43.92 59.92 47.59 69.40

Oct 43.31 60.50 47.73 70.80

Nov 44.09 58.90 46.75 70.17

Dec 46.35 66.66

Ave. 45.18 59.79 47.77 66.67

Annualized Inflation 2009-2010

Philippines Metro Manila Outside MM

2010 2009 2010 2009 2010 2009

Jan 4.3 7.1 3.6 4.3 4.6 8.3

Feb 4.2 7.3 4.1 4.7 4.3 8.4

Mar 4.4 6.4 5.0 3.2 4.1 7.8

Apr 4.4 4.8 5.3 2.2 4.1 5.8

May 4.3 3.3 4.6 0.8 4.2 4.2

Jun 3.9 1.5 4.1 -0.1 3.9 2.2

Jul 3.9 0.2 4.1 -1.0 3.8 0.7

Aug 4.0 0.1 4.5 -1.1 3.8 0.6

Sept 3.5 0.7 3.5 -0.3 3.5 1.1

Oct 2.8 1.6 2.2 1.1 2.9 1.9

Nov 2.8 2.0 3.1

Dec 4.4 4.0 4.5

Ave. 4.0 3.4 4.2 1.7 3.9 4.1

C E B U M O N T H L Y FACTSHEET Vol. 18, No. 11, November 2010

THE MONTHS HIGHLIGHTS

Scramble To Explain, Correct. Local government offices that were found by the Commission on Audit (COA) to have commit-ted violations in spending or using govern-ment resources were requested to explain or promise to correct deficiencies. Examples : Gov. Gwen Garcia met with COA officials to discuss processes, saying they were also part of the delay. The provincial accountant is responsible for an error in dollar exchange rate of USD $500,000 paid by Kepco for the Balili coal ash landfill and would adjust it. The provincial health office reminded town officials to submit the lists of medicines and supplies. Borbon officials braced for refund of undue allowances. Reacting to COA findings is a yearly ritual characterized by blame-throwing over sometimes confusing and impractical rules.

Cebu City Ranks 9th In Top Outsourcing List. After constantly ranking high in the list of emerging cities for outsourcing, Cebu finally emerged. Cebu ranked no. 9 in the 2010 Tholons list of outsourcing cities. Tho-lons is a services globalization investment and advisory firm. It decided this year to make a list of top 100 cities instead of just top 50. For the past two years, Cebu ranked first in the emerging cities category and was in fourth place in 2007.

Cebu Has Medical Tourism Potential. For leaders of the Canadian Chamber of Commerce in the Philippines, Cebu has the potential to become a destination for medical tourism. To encourage foreigners to choose Cebu for their medical needs, they recommend that the right medical facilities have to be in place. While most hospitals get accreditation from American agencies, the Chamber suggested that medical facili-ties secure accreditation from Accreditation

Canada, a non-government organization that is also recognized internationally.

Wellness Industry Sees 15% Growth This Year. The Spa and Wellness Association of Cebu (Swac) is hoping for a 15% growth by yearend. The medical tourism in particular is picking up. A significant number of tourists are now coming to Cebu for the health check-ups, dental and aesthetic services. Swac and the Cebu Health and Wellness Council Inc. (CHWC)) are determined to strengthen Cebus wellness industry and make Cebu a favourite destination for wellness services.

Accenture To Open 2nd Facility in Cebu. After doing business in the country for 25 years, Accenture, a technology services and outsourcing company, added three more facilites in the country, one of which will begin operating in Cebu next month. The facility in Robinsons Cybergate is their second in Cebu after the first Accenture facility opened at the Pioneer Building at the Cebu Business Park in 2007. Cebu is part of Accentures strategic growth. Cebu is a prime location to source out talent for business process outsourcing (BPO) and technology.

Biggest Ship in RP Delivered. Aboitiz Group of Companies and Tsuneishi Heavy Industries Cebu Inc. named and delivered what is said as the largest vessel con-structed in the country. The MV Tenshu Maru is a 180,000 DWT type builk carrier that is 286.9 meters long and 45 meters wide, with a gross tonnage of about 92,400. The vessel, which will have a port of origin in Panama, was turned over to its owner, Japanese company Chijin Shipping, S.A.. Tenshu Maru is the 118th vessel constructed by Tsuneishi and is the biggest ship ever built in the Philippines.

Aboitizland To Invest Pesos 350M On Proj-ect. The real estate arm of the Aboitiz Group of Companies, Aboitizland, has earmarked Pesos 350 million for the development of Pristina North Residences. Pristina North is the high-end real estate project of the AboitizLand that sits on a 32.5 hectare lot in Talamban, Cebu City. The development has four components residential, retail and entertainment, office park and village center. Pristina North residences is a house and lot enclave with in Pristina North.

US $1.3M Master Plan for MCIAA. The Korean International Cooperation Agency (KOICA) will spend about US $1.3 million for a master plan that will serve as a guide for the Mactan-Cebu International Airport Authority (MCIAA) for the next 20 to 30 years. This is a grant from the Korean government. KOICA consultants will provide all the technical de-tails, the final approval of what they intend to do rests on the Philippine Government.

Cobonpue To Provide Trainings For Cebus Out-of-School Youth. Famous furniture exporter Kenneth Cobonpue will be providing training and employment opportuni-ties for out-of-school youths in Cebu, through his company Interior Crafts of the Island Inc. Cobonpue, in coordination with Filo DOro Upholstery Subcontractor Development, has commissioned at least 10 out-of-school youths to make upholstery requirements for the company, the latest is the order RugNets from well-known fashion designer Giorgio Armani.This special contractor system of Cobonpue is supported by the German Development Service (DED) in cooperation with the Phil-ippine Business for Social Progress (PBSP) through the specified Strategic Corporate Community Partnership.