President's Report

The Annual General Meeting

The Council’s Annual General Meeting will be held on Thursday 31 March 2011 from 9:30am at Level 25, Australia Square Tower, 264 George Street, Sydney.  If you are unable to attend the meeting, please send your completed proxy form to our Secretariat by noon on Monday 28 March 2011.  If you want to be involved in the running of the Council, please nominate for a position, or a role in the Executive Committee. Only financial members are allowed to vote.

The Philippine Australia Ministerial Meeting in June 2011

The next Philippine Australia Ministerial Meeting will be held in Canberra (tentatively) on 16 and 17 June 2011.  It is a meeting of the Ministers of Trade and Foreign Affairs of Australia, and the Secretaries of Trade and Foreign Affairs of the Philippines.  We will send you more details about the Meeting as they become available.  This Meeting is significant for the Council as it provides members of the Council and others who are doing business, or have business interests,  in the Philippines and Australia a valuable opportunity to be heard by those who can make things happen.  It is an opportunity not to be missed.

Please save these dates in your calendar.

Joint Business Forum in July 2011

The Philippine Australia New Zealand Business Forum is only three and a half months away.  Please click here for the flyer for further details. The agenda for the forum will shortly be made available to you.

APEC Business Travel Card

You would have read in the press about the Government’s new rules on the issue of the APEC Business Travel Card.  On 21 March 2011, representatives of certain Government departments including the Department of Foreign Affairs and Trade and Department of Immigration and Citizenship, met with representatives of various Business Councils and Chambers of Commerce whose members do business in the APEC region.  The Australian Industry Group was also represented at the meeting.  The meeting dealt with the discussion paper recently released concerning the draft guiding principles which are proposed to be the basis on which Australia’s approach and eligibility criteria may be determined.

It was proposed at the meeting that the relevant Business Councils and Chambers of Commerce be involved in the assessment of the eligibility of applicants for the APEC Business Card. We will update you on this as more information becomes available.


Millie Telan, President

BPO Update

by Richard Mann, Vice President NSW

World Bank still upbeat on Philippines' BPO trade

Manila (Philippine Daily Inquirer/ANN) - The Philippines will continue to reap bounties from its burgeoning business process outsourcing industry, which has grown by leaps and bounds over the past few years, according to the World Bank.

In its latest quarterly report on the Philippines, the World Bank pointed out that growing income of the BPO sector had more than made up for the decline in tourism revenue.

The rapidly rising BPO sector is building on the natural comparative advantage of the Philippines," the World Bank said in a chapter of the report, titled Exports of Services: Lessons from the BPO and Tourism Sectors."

Exports of services have been growing rapidly in the Philippines as fast as the growth of the BPO sector more than offset declining tourism receipts," the report stated.

The World Bank also said factors like low cost, availability of human capital, tax incentives, and active promotion of the country's capability to provide BPO services would allow the industry to post sharper growth in the years ahead.

Also, US-based companies that chose to outsource their services to the Philippines spent 80 percent less on operations compared to firms that had not, the World Bank added.

On human resources, hundreds of thousands of Filipino graduates join the country's labor force every year. Most have skills that fit the requirements of the BPO sector. In 2008 alone, the report said, 444,810 graduates joined the labor pool and could be tapped by the BPO industry.

On tax incentives, a BPO firm in the country may enjoy an income tax holiday for up to eight years. Thereafter, it may be levied a minimal 5-percent gross income tax in lieu of all other taxes.

Last year, the Philippines outstripped India as the world's “call centre capital" in terms of manpower and growth in BPO receipts.

Industry data showed that at the start of 2010, revenue generated by the BPO sector in the Philippines stood at $5.5 billion compared with India's $5.3 billion.

Also, there were over 500,000 Filipinos working in the BPO sector compared with around 330,000 Indians.

Mining Update

by Gavan Collery, Vice President, Vic.

Government Gets Tough On Idle Mining Permits

In a bid to better manage minerals industry permitting in the Philippines, the national government has introduced a range of measures including placing an immediate freeze on the processing of new applications.

DENR Secretary, Ramon Paje, said: “As we take on the task of cleansing our regional offices of ageing mining applications and inactive mining projects, I have directed our MGB officials to refrain from accepting and processing new applications for mining permits such as exploration permits, mineral production sharing agreements and financial or technical assistance agreements.”

The Secretary went on to say: “We are now in the process of implementing our ‘use it or lose it’ policy where we will be cancelling mining applications that were unable to comply with all the requirements set by government, including mining tenements that have remained inactive and unproductive through the years.”

In other government news, the Philippine Government expects investments in mining this year to reach US$1 billion – about 5% higher than the 2010 figure.

However, industry sources say this growth will be very difficult to achieve while the doubt over open pit mining remains in the province of South Cotabato, home to the Tampakan project which is one of the world’s largest undeveloped copper and gold deposits.

The proposed provincial ban, in apparent defiance of national law and the Philippine Constitution, puts at risk development of the US$5.9 billion project which now ranks as the largest single foreign investment in Philippine history. Industry is urging the national government to promote responsible mining, and take an active role in resolving this issue which is in turn adversely affecting foreign investment right across the Philippine mining sector.

In company news, Australian and Canadian listed miner Mindoro Resources has announced encouraging nickel as well as copper and gold intersections from its various drilling programs.

The nickel results come from the Bolobolo prospect and the Karihatag prospect, both in the Surigao district. The copper-gold results come from Mindoro’s Pan de Azucar project in Iloilo province.

Political

Pres. Aquino screens 6 bets for top military position

President Aquino has begun screening candidates for the top post of the Armed Forces that Gen. Ricardo David will vacate on March 8. Mr. Aquino said he met with Defense chief Voltaire Gazmin to interview three other candidates for the top military post. Sec Gazmin, however, declined to identify the generals but a source said there are about seven officials who have already been interviewed by the President. Among those who are being considered as Gen. David’s replacement are Army chief Lt. Gen. Arturo Ortiz, AFP vice chief Lt. Gen. Reynaldo Mapagu, AFP deputy chief of staff Lt. Gen. Eduardo Oban, Northern Luzon Command Lt. Gen. Gaudencio Pangilinan, Air Force chief Lt. Gen. Oscar Rabena, and Navy chief Rear Admiral Alexander Pama. Generals Rabena and Mapagu are members of the Philippine Military Academy Class of 1978 while the rest belong to PMA Class of 1979.

House plans to exempt Luisita from distribution

The House of Representatives is laying the groundwork for President Aquino’s family to retain Hacienda Luisita and justify the non-distribution of the disputed 4,102-hectare plantation, following a call by House Speaker Feliciano Belmonte Jr. for big investors to enter into corporate farming contracts. In a speech during a meeting between House leaders and representatives from the Joint Foreign Chambers of Commerce and Philippine business goups, Speaker Belmonte encouraged foreign investors and corporations “to purchase or lease state-owned lands and private farm lands and enter into contractual arrangements with landowners, farmer organizations and agrarian reform communities that manage these lands.” He said allowing agrarian reform-awarded land to be used as collateral for loans would benefit farmers as the credit restrictions in the agrarian reform law had impaired farmers’ rights to avail themselves of credit. Akbayan Rep. Arlene Kaka Bag-ao, vice chairman of the House committee on agrarian reform and Mr Aquino’s ally, immediately protested Speaker Belmonte’s statement, saying they ran counter to the main objectives of the Comprehensive Agrarian Reform Program.

Palace rebuffs communists’ demand on hostilities

The Aquino administration has rejected the communists’ demand that the military suspend its operations against the insurgents for the duration of the peace talks in Oslo on Feb. 15 to 21, presidential spokesman Edwin Lacierda said. The Armed Forces’ civil-military operations would continue, he stressed, adding the communists were not in any position to demand their suspension. Mr. Luis Jalandoni, the chief negotiator of the National Democratic Front, had told his government counterpart Alexander Padilla that the military’s civil-military operation was a “deceptive signboard” to round up the sympathizers of the New People’s Army, the communists’ armed wing. Mr. Padilla said he would consult with the military on whether the communists’ demand could be accommodated. This month’s meeting in Oslo will be the first formal talks between the government and the communists since negotiations bogged down in 2004. The rebels have been fighting to establish a communist state for 40 years.

Economy

Business Sentiment Remains Strong in Q1 2011; Hits Record High for the Next Quarter - Business outlook continues to be bullish

Business optimism continued to be strong in Q1 2011, with the overall confidence index (CI) at  47.5 percent. The confidence index is computed as the percentage of firms that answered in the affirmative less the percentage of firms that answered in the negative with respect to their views on a given indicator.

The current quarter’s CI was slightly lower, however, compared to the 50.6 percent CI recorded in the Q4 2010 survey, as the number of optimists relative to pessimists declined. Respondents attributed the less upbeat quarter-on-quarter outlook to the following: (a) usual slowdown in business activity after the Christmas and harvest seasons, (b) rising prices of oil and other commodities, and (c) abnormal weather conditions in some parts of the country.
Respondents’ outlook for Q2 2011 turned more buoyant as the next quarter index rose to an all-time high of 59.4 percent, the highest reading since the business expectations survey started in Q2 2001. Sustained business optimism indicates that the growth momentum could continue in 2011. Respondents cited the following factors for their upbeat outlook: (a) the government’s plans to undertake big-ticket infrastructure projects under the public-private partnerships (PPP) program and to front-load infrastructure and social spending, (b) faster recovery in emerging and developing economies, (c) steady stream of overseas Filipinos’ (OFs) remittances and foreign capital, (d) continued recovery of merchandise exports, and (e) continued strong confidence in the new government.

Tracking the national trend, the sentiment of businesses from both the National Capital Region (NCR) and Areas Outside the NCR (AONCR) remained buoyant for the current quarter albeit less favorably so when compared to the previous quarter’s survey results. However, sentiment turned considerably more upbeat for the next quarter.

Except for importing firms which registered a decline in optimism quarter-on-quarter, the outlook of businesses involved in international commodity trading (i.e., exporters and those engaged in dual activities) continued to improve in Q1 2011 as the recovery of global trade and a stable peso pumped up demand for Philippine exports. Importers cited the rising costs of commodities as the reason for their lower optimism. Looking ahead to the next quarter, all types of businesses involved in international trade became more bullish due to the expected rise in volume of orders and number of clients.

By employment size, all firms (small-, medium- and large-sized firms) posted positive but less favorable outlook quarter-on-quarter in Q1 2011 but turned more bullish for Q2 2011. Large-sized firms remained as the most optimistic for Q1 and Q2 2011.

The construction and industry sectors are more upbeat

Consistent with the sustained overall optimism over macroeconomic prospects, business sentiment across sectors continued to be favorable in Q1 2011. The construction and industry sectors registered a more buoyant outlook, while that of the wholesale and retail trade sector was broadly stable. On the other hand, optimism in the services sector declined compared to that in the previous quarter.

Respondents from the construction sector attributed their bullish outlook to the planned implementation of big-ticket infrastructure projects under the PPP scheme, as well as the increase in demand for residential and commercial buildings.

Firms in the industry and wholesale and retail trade sectors acknowledged the benefits that could be realized from the government’s initiatives to promote broad-based growth. This, together with the revitalized demand for exports and rising commodity prices in the world market, strong domestic demand, improvement in operations, a stable peso and the general perception of a better business environment, were reasons cited by the respondents for their sustained sanguine outlook.

The services sector was less optimistic on account of the seasonal slack in demand for hotels and restaurants, renting and business activities after the holidays, as well as the rising costs of operations and higher fuel prices (for the transportation sub-sector).
 
For the next quarter (Q2 2011), the outlook across all sectors turned more upbeat largely due to the anticipated implementation of government projects, particularly the PPP program and prospects of more favorable business conditions (i.e., steady stream of OF remittances, foreign capital, and merchandise exports). Business confidence remained highest in the construction sector.

Businesses’ outlook about their own operations improves

Led by the construction sector, businesses’ outlook about their own operations improved  quarter-on-quarter across all sectors, except for the services sector.
 

Firms’ access to credit improves while financial conditions remain tight

Although financial conditions remained tight, more firms reported easier access to credit relative to those that said otherwise. This suggested that firms’ anticipated needs for liquidity could be supported by available credit.

Employment outlook improves

Another indicator supporting expectations of sustained growth in 2011 was the employment outlook index for the next quarter, which improved further from the levels in the previous quarter and a year ago.  Employment indices of the construction, services and industry sectors went up quarter-on-quarter and year-on-year.

More firms indicate expansion plans and higher capacity utilization

Consistent with the more positive outlook of the industry sector about their own operations, more firms (33.9 percent of respondents) indicated expansion plans for Q2 2011.  Mining and quarrying continued to record the highest expansion plans, followed by agriculture; electricity gas and water; and manufacturing sub-sectors.   Meanwhile, average capacity utilization in Q1 2011 rose to 75.3 percent, the highest reading since Q3 2008.

Competition, weak demand, and financial problems remain major risks to business

Competition, weak demand (leading to low sales volume), and financial problems were the factors that limited business activity in Q1 2011. The top three business constraints were the same risks identified by respondents since Q3 2009.

Higher interest rates and inflation, and a strong peso are expected in Q1 2011

Respondent firms expected inflation and interest rates to go up in Q1 and Q2 2011.

Inflationary expectations are likely to be stronger this year compared to the previous quarter’s level as respondents having views of higher inflation and interest rates increased in both Q1 and Q2 of the year. These expectations were due in part to price pressures arising from the increasing costs of fuel and other commodities in the global market and the strong performance of the domestic economy.  Meanwhile, respondents were of the view that the peso appreciation would continue in Q1 and Q2 2011, but the number that said so declined from the previous quarter’s survey.

Survey response rate is 78.2 percent

The Q1 2011 BES was conducted during the period 6 January–14 February 2011. There were 1,630 firms surveyed nationwide. Respondents were drawn from the Securities and Exchange Commission’s  Top 7,000 Corporations, as follows: 603 companies in NCR (37.0 percent) and  1,027 firms in AONCR (63.0 percent), covering all 17 regions nationwide. The survey response rate for this quarter was higher at 78.2 percent (from 75.4 percent in the previous quarter). The response rates were also higher for both the NCR and AONCR. For NCR, the response rate was 76.8 percent (from 73.3 percent in the previous quarter) and for AONCR, the response rate was 79.1 percent (from 76.7 percent in the previous quarter).
A breakdown of responses by type of business showed that 14.2 percent were importers, 6.7 percent were exporters, and 14.0 percent were both importers and exporters. About 65.1 percent of the respondents were neither importers nor exporters or did not specify their firm type.

Business

Oil firms are given more time for ethanol blend increase

Regulators have decided to increase ethanol content in gasoline to 10% from 5%, but will give oil firms and ethanol producers 6 months to prepare. The reprieve was granted by the National Biofuels Board amid concerns that the lack of local supply would lead to larger ethanol imports and push pump prices up. The recommendation has been forwarded to the Department of Energy (DoE), said Rosemarie S. Gomera, Sugar Regulatory Administration (SRA) planning department manager who represented the agency in a biofuel board meeting. A longer 1-year exemption, meanwhile, will be given for low and high octane gasoline products to allow vehicle owners time to upgrade their engines. He said the Energy department would issue new guidelines next week, noting that the biofuels board was supposed to come up with a decision on February 6, a Sunday. The board would review its recommendation 30 days before full implementation in February next year.

Pres. Aquino orders logging ban

An indefinite nationwide logging ban has been ordered by President Aquino, following through on a plan to address forest denudation blamed as having contributed to recent floods and landslides. Executive Order (EO) 23, signed last February 1 will take effect immediately after its publication in a newspaper. "A moratorium on the cutting and harvesting of timber in the natural and residual forests of the entire country is hereby declared unless lifted after the effectivity of this EO," the directive states. Natural and residual forests were defined in the order as those "composed of indigenous trees or not planted by man." EnvironmentSecretary Ramon J. Paje said the country had some 7.2 million hectares of natural forest cover remaining.

Deposits raise bank assets to P6.8Tn

Total assets of the local banking sector expanded 8.6% in the first 10 months of last year as Filipinos continued to save more on the back of the public’s increasing confidence in the country’s financial system. Data released by the Bangko Sentral ng Pilipinas (BSP) showed that the country’s bank resources reached P6.8 trillion as of end-October last year from P6.2 trillion as of end-October in 2009. The BSP said universal and commercial banks cornered 90% of the industry’s total resources while
thrift, rural, and cooperative banks shared the remaining 10%. The central bank traced the steady increase in the total resources of the banking system to the growth in currency and deposits.

Tampakan project proceeds despite risk

Foreign-backed Sagittarius Mines, Inc. has completed the Environmental and Social Impact Assessment (ESIA) for the Tampakan copper-gold mining project, an Australian mining executive. Sagittarius Mines also continues to undertake other various activities, despite the risk to its commercial operations posed by the open-pit mining ban imposed by South Cotabato province. The firm plans to use the open-pit mining method to extract the massive deposits, the bulk of which lies in the province’s Tampakan town. Richard Laufmann, chief executive officer and managing director of Indophil Resources NL, the minority shareholder of Sagittarius Mines, said the ESIA for the Tampakan mine was completed in the fourth quarter of 2010. Commenced in 2009, the ESIA is one of the documents required to be submitted to the Department of Environment and Natural Resources to obtain the project’s Environmental Compliance Certificate (ECC). This permit, in turn, is needed for the project to go into commercial production.

Company News

Stellar unveils plans to expand Philippines operations

Stellar, a leading call centre and business process outsourcing provider today announced plans to expand its contact centre facility in the Philippines as demand for voice based and back of house processing services continue to grow worldwide.

Following 3 years of exceptional growth, Stellar is planning expansion of its Philippines operations. The Philippines supports Stellar customers from Australia, UK, US and Canada with over 1500 employees. Recent growth has come from both new and existing clients.

“That we have experienced organic growth from our existing clients in such a short period of time is a testament to the quality of the service we provide” said Edmundo Macaso, CEO Philippines “With clients operating 24 hours a day (servicing North America and UK customers at night and Australian customers during the day) it will be necessary to increase our capacity to support future growth” he went onto say.

Stellar is looking at facilities in Eastwood City and surrounding areas and will have a new site operational in 3 months. “We will establish a new centre with the capacity to support 1,000 new seats and we already have a number of clients committed to the new site” says John Hollingsworth, global CEO.

As a global expert in Managing Customer Relationships, Stellar provides quality customer interactions for a number of leading global brands. Stellar is privately owned and manages over 300 million customer interactions on behalf of its clients each year. Its offerings span front office services, such as Customer Service Support and Directory Assistance, to automated back office support services and solutions. For more information, visit www.stellarBPO.com.

Frontier Gasfield to acquire stake in SC 69

Trans-Asia Oil and Energy Development Corp. (Trans-Asia) said Australia-based Frontier Gasfield Pty. Ltd. has opted to acquire 15% of the former’s participating interest in Service Contract (SC) 69. Trans-Asia, which holds a 30% participating interest in SC 69, earlier entered into a farm-in agreement with Frontier Gasfields on June 3 last year. It, however, said the assignment of interest to Frontier will still be subject to the consent of partners in SC 69, as well as approval of the DoE.

ACI opens its new facility

Aviation Concepts (ACI), a Guam-based firm engaged in private jet chartering, aircraft sales and management services, recently opened its newly refurbished facility that used to be the aircraft hangar of Federal Express (FedEx). ACI President and Chief Executive Officer (CEO) Terry Habeck said the 100,000-square-foot facility would serve as the company’s second functional base in Asia Pacific for its fixed-based operations, also known in the private aviation industry as FBO or a service
center for jets and airplanes.

Yokohama Rubber expands capacity

Yokohama Rubber Co., Ltd. has announced an expansion program to increase production capacity to 10 million tires a year from 7 million, with the infusion of an additional investment of ¥20 billion or about $244 million. The announcement coincided with the extension of its tenancy agreement with Clark Freeport authority for 300,000 square meters, giving the tire company a total plant area of 460,000 square meters or 2.8 times its current area…an initial expansion will be operational in 2013.

PLDT signs up with foreign firms

Philippine Long Distance Telephone Co. (PLDT) has signed a deal with telecommunication companies in Japan and Singapore to build a $430-million “next generation, high bandwidth” optical fiber underwater cable system called Asia Submarine-cable Express (ASE). The 7,200-kilometer ASE system will link Japan, the Philippines, Hong Kong and Singapore. The system will also connect to Malaysia and potentially to mainland China, as well as other Southeast Asian countries, PLDT said.
 

Infrastructure

Gov’t to bid out 2-3 PPP projects in 1H

The Aquino administration is eyeing to bid out two to three infrastructure projects in the first half of the year under its planned public-private partnership (PPP) for infrastructure. “Our hope is we bid out at least two to three projects in the first half of the year. At this stage, we are not yet at liberty to disclose which one but we can assure you that we are committed to bidding out at least 10 in 2011, and more in 2012 because the need for infrastructure in our country is quite substantial,” Finance Secretary Cesar Purisima said. He said what is important is to have the crucial infrastructure in place to be able to attract investments in the country and consequently, create job opportunities.

DPWH enforces truck load limit

Beginning Feb. 1, trucks which axle load exceeding the maximum allowable load limit of 13.5 metric tons per axle are no longer be allowed to use national roads and bridges. The Department of Public Works and Highways (DPWH) is now strictly enforcing the load limit because of frequent violations of the anti-overloading law by trucking companies. Public works personnel are deputized to confiscate the plates of overloaded trucks. DPWH Secretary Rogelio Singson said that by enforcing the loading standards, the national government would be able to cut its road repair expenses and realign the budget for other infrastructure projects.