President's Report

I trust you all had a great Christmas and New Year’s celebrations!

On behalf of the Council, I welcome our new members, Australia New Zealand Banking Corporation, Philippine Airlines and John Zisis. 
 
As you would be aware ANZ Bank is the only Australian bank licensed to operate in the Philippines.  It has been in the Philippines for many years now.  The bank’s representative to the Council is Amy Auster, the bank’s Chief of Staff for Asia Pacific, Europe and the Americas.  Amy is based in Melbourne where the bank’s head office is located. Philippine Airlines is the only Philippine airline flying between Australia and the Philippines and has been doing so for many years now. Its representative to the Council is Maarten Mulder.   Maarten is based in Sydney.  John Zisis was previously with Stellar BPO, and is now with FuturePeople Recruitment.  John is also based in Sydney.
 
In the next newsletter, you will receive more information about our new members, and the contact details of their representatives to the Council.
 
Our next Annual General Meeting will be held in March 2011.  Please send us any subject matter which you want to be included in the agenda for that meeting. 
 
As mentioned in our December newsletter, one of our major events this year will take place in mid July this year.  This is the joint business forum which we expect to be attended by representatives of large businesses, chambers of commerce, business councils, and governments from Australia, the Philippines and New Zealand.  We will in due course send you more details about this event.

Millie Telan, President

BPO Update

by Richard Mann, Vice President NSW

Philippines has taken over the lead in the global ranking from India
 
The changes in corporate location strategies manifest themselves in more nuanced ways for different types of business functions. Hence, investment in services activities (regional headquarters, shared services centers, business support functions) recovered in 2009, with more than 115,000 jobs created globally in these functions compared to just over 100,000 in 2008.
 
Accordingly, a central feature of the corporate restructuring currently taking place is the move toward greater use of the Shared Services Center model (where a particular function is concentrated in one place for use throughout the organization) for a wider range of activities, including higher value added activities such as Human Resources and decision support functions.
 
Meanwhile, as activities are separated into individual shared services centers, we see fewer new large headquarters with all key service activities centralized within one location.
 
Rather, companies are increasingly ready to embrace the opportunities offered by different locations within a region or globally for their service functions, such as to take advantage of the differences in costs and skills in different countries, regions, and cities.
 
For business support functions (such as shared services and business process outsourcing) the Philippines has taken over the lead in the global ranking from India, after having challenged the top position for several years.
 
This is the first time that India is not in the leading position for these activities.
 
The Philippines offers a similarly attractive business environment for international business support functions as India, but has not had the same labor cost increases as have occurred in various Indian ‘hot spots’ in recent years.
 
China is continuing its IBM Global Business Services 7 ascent as a services destination, and confirms it should not be considered anymore “merely” the world’s factory. Sri Lanka is another Asian country that has succeeded in positioning itself as an alternative to India.
 
While South Africa and Egypt confirm their increased attractiveness for services investment, various other countries have emerged as new preferred destinations, notably in Latin America where Costa Rica and Colombia are now both among the world’s top ten recipient countries. Finally, Fiji is remarkably highly ranked. This is due to one single large services centre.

Mining Update

by Gavan Collery, Vice President, Vic.

New Philippine Guidelines For Reporting On Exploration
 
The new Implementing Rules and Regulations (IRRs) that govern the Philippine Mineral Reporting Code have been issued by the Philippine Stock Exchange (PSE) in concert with the Philippine Securities and Exchange Commission.
 
The new Philippine guidelines are, for the most part, modeled on the Australian standards, known as the JORC Code.
 
The IRRs provide listed mining and exploration companies, and those applying to list on the PSE with implementing guidelines and pro-forma outlines for complying with the reporting standards in the Philippine code.
 
The IRRs aim to protect investors by requiring full disclosure of what is known as ‘material’ or price sensitive information. Such information includes the economic viability of the properties within a company’s exploration or minerals development portfolio and it prohibits disclosure of misleading information.
 
On the corporate front, Mindoro Resources, which recently listed on the Australian Securities Exchange off the back of its Toronto and Frankfurt listings, reports that drilling atb the Lobo gold-copper project in Batangas has begun.
 
Lobo is one of three projects that Mindoro shares with major mining house, Gold Fields of South Africa. Gold Fields is managing the drilling program at Lobo.
 
Mindoro also reports favourable metallurgical test results from its Agata nickel laterite project in northern Mindanao.
 

Political

High court deals another legal setback to Aquino
 
The Supreme Court on Dec 7 struck down as unconstitutional a Truth Commission created by President Aquino to investigate the reports of corruption committed by officials of the previous administration.
 
The 10-5 decision was a major blow to Mr. Aquino, who made it his priority to prosecute his predecessor, former President GloriaArroyo, and her officials on corruption charges.
 
Supreme Court spokeswoman Gleo Guerra said a majority of the justices voted against the Truth Commission because the Constitution did not allow the government to establish agencies to investigate just one group of people.
 
Associate Justice Jose Catral Mendoza wrote the decision to which Chief Justice Renato Corona agreed, as did Associate Justices Presbitero Velasco Jr., Teresita Leonardo-de Castro, Arturo Brion, Diosdado Peralta, Lucas Bersamin, Mariano del Castillo, Martin Villarama Jr., and Jose Perez. Executive Secretary Paquito Ochoa Jr. said Malacañang will file a motion for reconsideration and explore other options “to investigate, try and punish those who may have used and abused their positions to enrich themselves while in office.”
 
Gov’t seeks meeting with MILF
 
The Aquino administration has asked the separatist Moro Islamic Liberation Front for a two-day chairman-to-chairman meeting on Dec. 13 and 14. Government chief negotiator Marvic Leonen coursed the request through Malaysian Deputy Prime Minister for Foreign Affairs Richard Riot during their meeting in Kuala Lumpur on Dec. 2.
 
MILF spokesman Von Al-Haq said the secessionist group had yet to receive a copy of the request for an informal meeting to be facilitated by Malaysia. Ms Leonen said the very first informal chairman-to-chairman meeting would deal with administrative concerns, such as extending the tour of duty of the International Monitoring Team and the Ad Hoc Joint Action Group.
 
The monitoring team oversees the implementation of a ceasefire pact between government troops and the MILF, while the ad hoc group is a mechanism for both parties to isolate and interdict criminal syndicates and kidnap-for-ransom groups, including the so-called lost commands operating in or near MILF areas.
 

Economy

GDP growth expected to ease to 5.4% in 2011
 
UK-based Standard Chartered Bank sees the country’s economic growth slowing down next year on the back of overheating concerns after posting a strong growth this year. In a report, Standard Chartered Bank said the economy, as measured by gross domestic product (GDP) would grow by a slower 5.4% next year from the projected strong expansion of 7.2% this year. The bank’s GDP forecast next year would be slower than the 7% to 8% target set by the Cabinet-level Development Budget Coordination Committee (DBCC).
 
This year’s GDP growth projection of 7.2% is faster than the target of 5% to 6% set by the economic managers. The country’s GDP posted a surprising growth of 7.5% in the first 3 quarters of the year from 0.5% in the same period last year. The GDP expansion, however, eased to 6.5% in the third quarter after expanding by 8.2% in the second quarter and 7.8% in the first quarter.
 
Bank loans hit P2.18Tn in October
 
The lending growth of banks slowed down but remained healthy indicating that the country’s growth outlook remains generally positive, the BSP reported. Data showed that bank lending grew at a slower pace of 8.4% to P2.177 trillion as of end-October this year from a 9.8% growth as of end-September due primarily to a weaker lending growth to the manufacturing sector. The BSP reported that total outstanding loans of banks excluding reverse repurchase placements with the BSP reached to P2.177 trillion as of end-October this year or P169 billion more than the P2.008 trillion registered in end-October last year.

The slowdown in bank lending growth has been attributed to the slowdown in the expansion of loans extended to productive activities to 9.4% in October from 10.8% in September. Loans extended to production activities amounted to P1.96 trillion as of end-October from P1.79 trillion as of end-October last year and accounted for about 82% of the banks’ total loan portfolio.
 
EDC sets annual targets for 2011-2016
 
The Export Development Council (EDC) will propose annual growth targets of 13-14% starting next year with the aim of reaching nearly $100 billion in receipts by 2016.
 
The Philippines has to "level up and double up," said EDC deputy executive director Emmarita Z. Mijares, considering neighbors like Thailand and Indonesia have long topped $100 billion in merchandise exports alone. If adopted, this would be the first time for the EDC to set export targets beyond 3-year intervals.
 
The Philippine Export Development Plan (PEDP) for 2011-2013 is expected to be cleared by Malacañang before the end of the year while advanced targets up to 2016, which will likely be used as the basis for the 2014-2016 plan, will also be submitted for approval. The EDC set a 22% growth this year for total exports -- which include merchandise and service exports -- from 2009’s $48.5 billion. By 2016, the figure should double to $98.8 billion.
 
DOF to lobby for VAST bill
 
The Finance department will lobby against the House bill on Value Simplified Tax (VAST) when it reaches the Senate, following committee approval of the measure halving the value-added tax rate. According to Finance Undersecretary Gil S. Beltran, the measure will be "burdensome to consumers." House Bill (HB) 1970, or VAST, proposes to lower the tax rate on sale of goods or services and importations to 6% from 12% by scrapping input tax credit or the recovery of previously paid taxes.
 
Rep. Hermilando I. Mandanas, ways and means committee chairman and author of HB 1970, claimed his bill will raise revenues by P50 billion annually. Under VAT, businesses can underdeclare the sales and made to present as an excess input VAT. VAST will also reduce discretion of tax applicability that increases temptation for corruption
 

Business

Consumer confidence improves
 
Consumer sentiment continues to improve, the BSP claimed, with a quarterly confidence index (CI) at a 4-year high for the last 3 months of 2010. While still in negative territory at -8.5% -- meaning pessimists continue to outnumber optimists -- the October-December result was an improvement from the third quarter’s -14%.

It was also the highest since the quarterly survey was started in 2007, the central bank said. The rise "was supported by better-than-expected GDP (gross domestic product) growth for the first 3 quarters of the year at 7.5%, which exceeds the full-year government forecast of 5-6%," the BSP said in a statement.
 
"However, the confidence index for Q4 2010 stayed in the negative territory as the pessimists outnumbered the optimists, especially those in the low-income group who attributed their unfavourable sentiment to lack of employment and insufficient income," it added. Sentiment for the next 3 months and the year ahead, meanwhile, dipped slightly but stayed positive.
 
The next-quarter CI fell to 11.9% from 15.3% 3 months earlier, while that for the next 12 months dipped to 25.9% from 33.4%.
 
IFC, WB name business-friendly cities
 
It is easiest to launch a business in General Santos, get construction permits in Davao City and register property in Valenzuela, a new International Finance Corp. (IFC) and World Bank report showed.
 
The Doing Business in the Philippines 2011 report looked at the number of procedures, time and costs involved in starting and operating a business in 25 Philippine cities, expanding a 2008 edition that analyzed 21 localities based on 3 main indicators.
 
Reports of this kind, the IFC and World Bank said, function "as a kind of cholesterol test for the regulatory environment for domestic businesses." It is also timely for the Philippines, the 2 institutions said, as studies from other countries "suggest that 85% of business reforms occur in the first 15 months of a new administration."
 
Philippine cities, according to the report, "actively reformed" business regulations over the past two and a half years, but it also noted that several of 2008’s top rankers had been overtaken; it said that aside from regulatory improvements, new entrants may have also been a factor.
 
No single city did well with respect to the 3 indicators. Davao, for example, while first in construction permits and second in terms of the ease of starting a business, was near bottom (20th) with respect to registering property.
 
Only Taguig and Valenzuela consistently ranked in the top 7 among all 3 indicators. Taguig was third in terms of business start-up, second in construction permits and sixth in property registration, while Valenzuela, in the same indicator order, was fourth, sixth and first.
 
Tougher year ahead seen for the banking sector
 
Top executives of 2 of the country’s biggest banks said they expect 2011 to be a tougher year for the banking industry compared to 2010. Banco de Oro Unibank Inc. (BDO) president and chief executive officer Nestor V. Tan said the uncertainty of the global economic recovery will put pressure on the Philippine banking system and the domestic economy.
“There remains an air of uncertainty on the global economic environment,” Tan said. He added that global interest rates may become volatile although will remain at low levels.
 
The U.S. Federal Reserve hinted it may keep rates at relatively low levels depending, among others, on the unemployment figures. It is perceived that the Fed may keep a lid on interest rates if the U.S. economy continues to crawl upwards and the jobless figures stagnate in the first semester of 2011.
 
Meanwhile, BPI president and chief executive officer Aurelio Luis R. Montinola III said he expects the country’s gross domestic product growth rate to soften between 5-7%, from a robust 7% this year.
 
More Australian miners eye PH despite open-pit row
 
More Australian miners are interested in investing in the Philippines despite conflicting industry policies between local and national government, officials of the Pacific rim country said.
 
“At least 4 major firms have expressed interest on top of some 10 Australian mining companies that are already doing exploration or exploitation in the country," Ross Bray, Australia’s senior trade commissioner for the Philippines and Micronesia, said. This sector, in fact, is expected to account for a bulk of the trade and investment flows between Australia and the Philippines, Tim Harcourt, the Australian Trade Commission’s chief economist, for his part said. Ten to 15 support firms are expected to set up shop here for every mining company that enters the country. The interest is driven by the rich mineral deposits of the Philippines and the skilled local workforce that could support mining activities, Mr. Harcourt said.
 

Company News

Conal Holdings to commission 5 power plants
 
Conal Holdings Corp. will commission 5 power plants, 4 in Mindanao, within the next 5 years to help boost power supply.
 
The company is expected to invest roughly $1 billion on these power plants, 3 of them in Maasim, Sarangani including a 200-megawatt (MW) coal-fired power plant where up to half of the total investments would be spent.
 
PNOC-EDC to start 4 priority projects
 
The Philippine National Oil Co.-Exploration Corp. (PNOC-EC) wants to start 4 priority projects next year.
 
Former Manila mayor Gemiliano C. Lopez, Jr. said the company was planning to develop a 50-megawatt (MW) coal plant at an Isabela mine, an 80-MW gas-fired power plant in Batangas, a 100-MW coal-fired power plant in Malangas, Zamboanga Sibugay, and a gas receiving terminal in Bataan.
 
CGA Mining acquires new property
 
CGA Mining Ltd. has acquired a new property north of its existing Masbate gold project in Southern Luzon.
The miner said that through a joint venture with Bloomsbury Holding Ltd. and Philippine partners, it has acquired an interest in the Pajo Property, which is covered by Mineral Production Sharing Agreement.
 
Pepsi Cola in JV for coconut water export
 
Pepsi Cola has entered into a joint venture with Peter Paul Philippines, a local desiccated coconut producer, for the export of coconut water to the U.S. Yvonne Agustin, executive director of the United Coconut Associations of the Philippines Inc. (UCAP), said that “if the schedule does not miscarry, the venture will have its first export in January next year.”
 

Infrastructure

Gov’t to amend JV rules for infra projects
 
The Aquino administration will amend existing joint venture guidelines for infrastructure projects so that all projects will pass through the National Economic and Development Authority- Investment Coordination Committee (NEDA-ICC).
The move is to ensure transparency, consistency in development policy decision and appropriateness of risk allocation among parties, NEDA Director-General Cayetano Paderanga Jr. said.
Furthermore, the move is also part of the Aquino administration’s efforts to attract investors to its Public-Private Partnership program for infrastructure.
A PPP is a contractual arrangement between government and the private sector to deliver public infrastructure and public services. It is being pushed by the Aquino administration so that it would have more funds for public health and education.
 
Disruption of operations at NAIA
 
Passengers’ waiting lines are unusually long and the situation could get worse during the holidays, spilling over into the start of the New Year at the Ninoy Aquino International Airport as foreign carriers feud with NAIA Customs personnel.
 
The latest installment in the yearlong dispute is the decision of the Airline Operators Council (AOC) to stop providing arrival cards to passengers on international flights.

AOC chairperson and KLM assistant station manager Maria Lourdes Reyes wrote a letter to NAIA Customs collector Carlos So, saying the carriers would no longer provide arrival cards effective Jan. 1, 2011.
 
The termination of the voluntary supply agreement for the cards, distributed to all incoming international passengers, was unanimously approved during a general membership meeting of the AOC at the NAIA last week.
 
The AOC letter came at the heels of the letter of Delta Air country manager Steven Crowdey, first vice chairman of the Board of Airline Representatives (BAR), to Customs Commissioner Angelito Alvarez requesting him to stop the strike or disruption of service at the airport by his men. The strike is reportedly due to the non-payment of the overtime rendered for the BAR by Customs personnel for the last 16 months.
 
Philippine Airlines (PAL) has agreed to shoulder a portion of unpaid overtime work of Customs officials detailed at the 3 terminals of the NAIA, in an attempt to avert possible chaos from a shortage of personnel with the expected volume of arrivals for the holidays.