Philippine Weekly Update - for the week ending 24-28 September 2012
In-Focus - October 01, 2012

Political

Trade Undersecretary Cristobal signified the interest of the government to prioritize multilateral agreements more than bilateral agreements like the potential European Union (EU)-Philippines free trade agreement. The country already has begun the scoping exercises for EU-Philippines FTA and impact studies were already presented. Tuna fishing sector will gain the most from a trade agreement between the two parties.

The Department of Budget and Management (DBM) through National Budget Circular No. 542 will undertake random audits from October to December of all government offices to ensure that they have pertinent information displayed on their Web sites for the public to access.

Rules implementing the Executive Order 79 on Mining have been revised in the wake of concerns raised by the industry. The amended implementing rules and regulations (IRR) addressing the issue of renewal of existing 25-year mining contracts is now with President Aquino for his approval. Meanwhile, the DENR suspended the implementation of the IRR.

The Philippines and the Kingdom of Saudi Arabia have doubled their bilateral flight frequencies from the current 10 flights per week to 21 on the route Philippines to Jeddah/Riyadh. The parties also agreed on unlimited traffic rights between Saudi Arabia and Clark and also between Philippines and Damman.


Economic

The Bangko Sentral ng Pilipinas has a dire outlook for exports especially for semiconductors as the book-to-bill ratio for electronics exporters stood at 0.87% in July, slipping from the previously reported 1.2% in March and hitting the lowest level since the mid-1980s. Further, in July, electronics exports fell 25.6% year-on-year to just $1.7 billion. However, BSP expressed optimism that total export revenues might still grow because the country is gradually diversifying its export products to lessen its dependency on electronics.

The BSP said that inflation could rise to a 10-month high in September due to higher fuel prices. Forecast range for September is 3.4-4.3%.

Standard & Poor’s (S&P) scaled up its GDP growth forecast for the Philippines to 4.9% this year from 4.3% originally on the basis of the economy’s continued and sustained expansion. The announcement was made against a background of decelerating growth forecasts for many of the country’s neighbors, including China, whose growth recalibrated to 7.5% from 8.0%.

The government recorded a fiscal surplus standing at P2.523 billion in August, trimming the eight-month deficit to P71.208 billion, more than double the P34.493 billion a year earlier.  The fiscal shortfall is a third of the P183.343-billion cap for the first three quarters and well under the P279.1-billion full-year ceiling.


Business

Philex Mining Corp. would dispute the penalties being imposed on it by Mines and Geosciences for violations of the Clean Water Act and the company’s own Environmental Compliance Certificate (ECC) for the breach of its Pacdal tailings dam.

SPC Power Corp. won the auction for the operation and maintenance service contract of the 650MW Malaya Thermal Power plant in Pililla, Rizal. However, the company is still subject to post-auction qualification.

The BSP has formalized stricter rules for banks’ reporting on their real estate exposure through Memorandum No. 2012-046. For a copy of the Memorandum, please click on this link: http://www.bsp.gov.ph/regulations/regulations.asp?type=3&id=3002

As of June, total bank deposits rose 7.9% to P4.1 trillion from P3.8 trillion a year ago. The bulk of deposits were savings, which increased 8.5% to P2.038 trillion during the same period. Time deposits also went up 1.8% to P1.146 trillion. Demand deposits expanded the fastest pace at 9.7% to P916 billion.

The BSP issued Circular 768 which sets additional minimum conditions for Hybrid Tier 1 capital and Lower Tier 2 capital.


Investments

Terra Motors Corp. is looking to invest roughly $3 million to build a factory in the Philippines in the next three years to produce electric motorcycles and tricycles for both domestic and foreign markets.

Development Bank of the Philippines (DBP) is readying P10.9 billion in “green” loans as more private corporations, local government units and state corporations implement environment-friendly projects. Most of the projects are for the acquisition of e-vehicles in different regions, construction of bio-ethanol distillery, power and wastewater treatment plants, construction of a green charcoal plant, a ferro-nickel smelting plant, and construction of a sanitary landfill.

Electricity Generating Public Co. Ltd. is open to build plants with capacities ranging from 80MW to 500MW that will run on various resources like hydro, coal and natural gas as well as to acquire interest in existing facilities.


Infrastructure

Macquarie Group of Companies has as much as $600 million in equity fund that could be spent for Philippine infrastructure projects. The fund may be spent in two years in five to 10 varying infrastructure projects. Aside from the Cavite Extension Project of the Light Rail Transit Authority, Macquarie also procured documents for the Ninoy Aquino International Airport Expressway project.

Manila North Tollways Corp. (MNTC) will raise $400 million over the next four years to fund several road extension projects of the NLEX project.

The Department of Health will begin the bidding for the P5.6-billion modernization of the Philippine Orthopedic Center in Quezon City under the government's Public-Private Partnership initiative. Besides the Philippine Orthopedic Center, the DOH plans to modernize 25 other hospitals, including eight cancer centers.

The Department of Finance and San Miguel Holdings Corp. are discussing ways to enhance the existing Metro Rail Transit Line 7 (MRT-7) concession agreement for the much delayed $1.2-billion rail project.

China and Philippines have decided to disengage from the North Rail contract and the latter would pay the loan for the project to Beijing over the next two years.


Energy News

The Department of Energy (DoE) is aggressively pursuing policy reforms that will enhance the fiscal incentives offered to companies engaging in oil and gas exploration and development in the country which may include the ring-fence concept.

The Energy Regulatory Commission (ERC) has resolved to set the initial implementation of Retail Competition and Open Access (RCOA) on Dec. 26. This commencement, however, is on a phase-in and partial implementation program and full implementation will come June 26 next year to include a 6-month transition period.

Energy World Corp. Ltd. has temporarily put on hold the construction of its proposed P9-billion liquefied natural gas (LNG) hub terminal and regasification facility in Quezon due to concerns raised by the provincial government for the firm’s application for an environmental compliance certificate (ECC).


Congresswatch

The House of Representatives is set to pass on third and final reading by Oct. 15 the proposed P2-trillion national budget for 2013. The social services sector will get the largest share with P698.8 billion or 34.8% of the proposed budget, followed by the economic services sector with P511.1 billion or 25.5% followed by general public services sector with P346 billion or 17.2%. The defense sector will get of P89.7 billion or 4.5 percent of the total budget.


ASEAN Integration

The Philippines is seeking to participate in an initial implementation of a unified visa for foreigners outside the Association of Southeast Asian Nations (ASEAN). Included countries in the initiative are Brunei, Malaysia, Singapore, Thailand and Vietnam.