President's Report

May, June and July 2011 are busy months for the Council.  On 16, 17 and 18 May 2011, Austrade, the Council and the Chamber of Commerce & Industry Australia Philippines Inc conducted a seminar in each of Melbourne, Sydney and Brisbane.  The seminar was about the exciting and new business opportunities in the Philippines and realising those opportunities. The seminars were very well attended and could only be described as successful.  They were preceded by a webinar on 19 April 2011.

On 14 June 2011, the Council will host a dinner in Sydney in which the Philippines’ Secretary of the Department of Trade and Industry, Secretary Gregory Domingo, will be the keynote speaker.  It is expected that other high ranking Philippine government officials will be present including the Secretary of Foreign Affairs, the Secretary of the Department of Environment and Natural Resources, the Department of Energy, and the Department of Finance.  

Sponsorships are available.  Please call Millie Telan on 02 9020 5724 or 0421 055 168 if you wish to become one of the event sponsors.

Members will receive their invitations shortly.  Numbers are limited and so book your place as soon as you receive your invitation.  But save the date now.

On 15 and 16 June 2011, the Council is participating in the Philippines Australia Ministerial meeting which will be held in Canberra.  The meeting will be between the Australian Minister for Trade, Craig Emerson, Minister for Foreign Affairs, Kevin Rudd, and their counterparts, Philippines’ Secretary of the Department of Trade and Industry, Gregory Domingo, and Secretary of Foreign Affairs, Albert del Rosario.  In this forum, the Council will hold a dialogue with these Ministers and Secretaries on issues of importance to their members.

From 12 to 14 July 2011, there will be a joint business forum where about 200 to 250 delegates are expected to attend.  It will be held in Manila.  If you have not received your invitation and you are interested to attend, please click here for an invitation and other material.


Millie Telan, President

BPO Update

by Richard Mann, Vice President NSW

Philippine BPO success

2010 has been a great year for the Business Process Outsourcing industry in the Philippines. Metro Cebu has finally landed a spot in Tholons’ Top 100 outsourcing cities for 2010, together with Metro Manila, which ranked fourth. Cebu has been one of emerging cities in the past two years and this is the first year that it has been recognized as an emerged destination. Four of our Next Wave Cities namely, Davao; Sta. Rosa, Laguna or Metro Laguna; Iloilo; and Bacolod were also part of the Top 100 cities tagged as emerging locations.

In December of 2010, the Philippines overtook India as the call center capital of the world, and now employs over 350,000 employees in the local call center industry, compared to India’s 330,000, this according to data from the Call Center Association of the Philippines. Philippine Contact Centres generated roughly $6.3 billion in revenues in the year 2010, with the association estimating a 15-20% increase by 2011, as more and more multinational companies continue to set-up outsourcing operations inside the country.

Investments were poured into the construction of high-rise buildings and premium facilities to accommodate booming BPO businesses, not just in Metro Manila but in the Next Wave Cities as well. The recent growth spurt in the outsourcing industry in the Philippines has been fueled by the higher-end outsourcing or knowledge process outsourcing or KPO. Though contact centres in the Philippines still comprise the largest part of the BPO sector, it has begun leveraging its creative design talent pool, vast number of lawyers, and its CPAs or general accountants. No wonder, the Sunshine industry will definitely shine even brighter this year.

Mining Update

by Gavan Collery, Vice President, Vic.

Australia and the Philippines List Mining in Agenda Talks

In mid-June, the Trade and Foreign Affairs Ministers and Secretaries of Australia and the Philippines meet in Canberra to discuss a wide range of bilateral issues. One of the key matters on the agenda is not only the role of mining but also the role that Australia plays in minerals development in the Philippines.

This meeting of minds, known as the Philippine-Australia Ministerial Meeting (PAMM), is timely given the frustration being expressed by local and foreign miners at the slowness of processing applications in the Philippines, the call for the Philippine Government to act in the national interest in respect of provinces defying national law on mining matters, and talk of an impost of a new additional royalty on mining revenue as well as a Senate push to lift excise taxes on mining.

In Australia, the minerals industry is mature and robust. It delivers close to 50% of Australia’s GDP. In the Philippines where only 2% of GDP comes from mining revenues, the minerals industry is a relative fledgling where talk of new and extra taxes sees foreign investors shake their heads, turn their backs and look elsewhere to more inviting climes. There is global competition for capital, the economic benefit it brings to a nation and the jobs generated.

It is in this environment that the Philippine Government is forecasting investments in mining in the Philippines by 2016 in the order of $18 billion. While government may be ‘optimistic’ about this forecast, the mining industry – and especially the foreign investment arm – will need to see strong signs of decisive and conducive leadership. Mining investment in the Philippines over the last six years has totaled $3.84 billion.

Research by respected bodies like the Fraser Institute and even global accounting firm KPMG in recent months has pointed to the damage done to growth of minerals development in countries that seek to impose an additional tax grab on mining projects that already receive modest payback on funds spent over many decades and on subsequent returns on investment through minerals production.

The comforting news in the debate has been strong statements from the Philippine Government to protect foreign investment and cut red tape. The government has also stepped in behind large-scale mining in preference to small-scale mining because the government can not only secure a return or dividend from the large-scale miners, but also ensure that large-scale miners adhere to responsible mining and be held to account for their actions.

In related news, a local Catholic newsletter has said that the Philippine Government needs to make a ‘no nonsense and thorough’ review of small-scale mining following recent disasters and fatalities in the Compostela Valley. In commenting on the ongoing debate about the role of mining in the Philippines, local Jesuit priest Father Emeterio Barcelon has come out in support for open pit mining, an activity that has been opposed by an isolated number of provinces, despite it being lawful under the Philippine Constitution and Mining Act.

Fr Barcelon said there is no Church doctrine that is against mining.

‘The idea is that we should take care of what God has provided us, but being against mining is illogical,’ he said.

He said countries like the Philippines needed to create wealth through natural occurrences such as abundant minerals so that a country’s people do not have to leave their families behind in order to find jobs abroad.

In corporate news, Australian miner OceanaGold expects to begin construction on its Didipio gold and copper mine in Nueva Vizcaya by mid-year.

At the world-class Tampakan copper and gold project in southern Mindanao, exploration work has recommenced after almost one full month of non-activity due to civil unrest in the area. Importantly, the local communities have taken a leadership role to address the issues so that work – and local employment – could resume. The Tampakan project is due to go into production in 2016. At a development price tag of just under $6 billion, it is the largest single foreign investment in Philippine history.

Political

Philippines House panel starts hearings on fiscal incentives for Foreign Investors

A House of Representatives panel began hearing measures seeking to consolidate investor incentives, with the Trade and Finance departments still in disagreement over changes to the perks offered by the government. The measure, one of President Aquino’s priority measures and pending in Congress since 1995, is expected to lure investors with its streamlined policies and at the same time plug revenue leaks. Actual deliberations did not commence during the hearing of the House ways and means committee as the authors of 3 pending bills -- Pampanga Rep. Gloria Macapagal-Arroyo, Tarlac Rep. Susan A. Yap and House Speaker Feliciano R. Belmonte -- were not present. The Department of Trade and Industry represented by Board of Investments (BoI) and the Department of Finance (DoF) were given the opportunity to present their positions.

Foreign chambers of commerce urge abolition of aviation taxes

The Joint Foreign Chambers (JFC) has called on government to remove excessive taxes on the aviation industry. A joint statement by the 7 foreign chambers tagged the common carriers tax and the gross Philippine billings tax as barriers to full development of the country’s tourism industry as they also deter new investments in the airline sector. The groups also said these taxes go against international practices. The JFC, however, lauded the Aquino administration for issuing last October Executive Order 29, or the pocket open skies policy, which they said would represent giant reforms in the aviation industry if coupled with the removal of these taxes. The Philippines charges a 2.5% gross Philippine billings tax and a 3% common carrier’s tax on all revenues, passengers, excess baggage and cargoes of all international carriers regardless of the point of sale or payment of the ticket, passage or freight documents.

Economy

Inflation is expected to exceed 5%

Inflation is expected to top 5% in the coming months -- likely prompting further changes to monetary policy -- but the average rate for the year will still be within the 3-5% target, Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco, Jr. said. "Inflation will peak in the second and third quarter and in some months will exceed the target," Tetangco said. Still, the outlook is that the rise in consumer prices will eventually taper off, resulting in an "average that is well within target". The BSP needs to "make sure that inflation expectations remain anchored and that any possible second effects would be dealt with at an early stage".

Govt works on new tax measures

Work is already under way on new tax measures the government hopes to introduce next year after the end of a self-imposed limitation. President Aquino’s campaign promise not to raise taxes has been criticized as ill-advised given the perennial government deficit, but Cabinet officials have said this only applied up to the end of 2011. The issue was again raised earlier this week at a forum where a former Budget secretary questioned the policy of seeking to increase revenues via tax administration improvements.

Business

Consumer confidence down – BSP

Filipino consumers were more pessimistic in the first quarter of the year because of rising oil and food prices, and natural disasters that occurred overseas, according to the 1st Quarter 2011 Consumer Expectation Survey (CES) conducted by the BSP. The consumer confidence index for the first quarter of the year dropped to –23.1% from –8.5% in the fourth quarter of 2010. The survey conducted from March 14 to 21 covered 5,920 respondents in the National Capital Region and nearby areas. BSP Deputy Governor Diwa Guinigundo said the sharp decline in the level of consumer confidence in the first quarter in relation to the preceding quarter is an “abberation” because it was caused by external factors. The country’s gross domestic product (GDP) expanded 7.3% last year, its strongest growth in 34 years. The Philippines barely escaped recession in 2009 after growth slackened to 1.1% from 3.8% in 2008 because of the impact of the global financial crisis.

DENR to save $5.9Bn mining project

Environment and Natural Resources Secretary Ramon Paje said that the Aquino administration won’t just stand by and allow the $5.9-billion potential investment of the Swiss-based Xstrata Group in the Tampakan copper-gold project in South Cotabato to be cancelled. Since the Tampakan project is still slated to start operations in 2016, Sec. Paje said the National Government has ample time to “handle the issue.” Concern over the continuity of the project was raised after the South Cotabato provincial government approved the rules to implement the South Cotabato Environment Code, a provincial ordinance that includes a ban on the use of open pit mining methods in the province. Mr. Paje said: “The IRR has no immediate effect on Tampakan. Their operation is 2016 yet. We have (a) few more years to handle the issue.” Sagittarius Mines Inc. (SMI), the local entity that will operate the Tampakan project, has identified an open mining method for the project because of the nature of the ore body. SMI said it has made mitigating plans to ensure that it preserves all the natural flora and fauna in the area and create a suitable new habitat for what it will displace.

Company News

PHILIPPINES--The domestic business process outsourcing (BPO) industry is set for a windfall in foreign contracts as the global economy continues its turbulent path, according to a technology provider of call center services.

Australia-based Call Design, which formally opened its Philippine office Friday, said the change in economic climate was one of the reasons why the company chose to move and set up a branch office in the Philippines.

Miles Stanton, managing director at Call Design, said the current financial crisis will spark further growth for the local BPO industry.

"We expect more and more foreign firms tapping the Philippines for their contact center, and other outsourced services, as the need to save on costs becomes more important," Stanton noted.

"This boom is happening now," he added, noting that the local BPO industry is already growing at an impressive 92 percent annual rate, in terms of seats.

Stanton's optimism is echoed in a July report by XMG. The Canadian research firm said the prevailing economic slowdown will boost contract for offshore countries such as the Philippines, by an additional 7 percent to 12 percent. XMG said this growth will be driven by multinational companies' objective to cut costs and outsource business processes to more cost-effective sites.

DOE okays Gindara 1 drilling

Department of Energy (DOE) has given Nido Petroleum Ltd. a go signal to proceed with the drilling of its Gindara 1 project in Northwest Palawan in May this year. Nido exploration head Jon Pattillo said the approval of the drilling program “marks another important milestone in the lead up to the drilling of the Gindara-1 prospect”. The Gindara prospect is covered under service contract 54B whose consortium members are Nido, 33% (operator); Kairiki Energy Ltd. (formerly Yilgarn Petroleum), 22%; and Shell Philippines Exploration B.V. (Spex), 45%.

GII sets up HQ in Phl

Green Intervene Inc. (GII), a multi-national company specializing in commercial and residential water filtration, will soon set up its Philippine corporate headquarters in Muntinlupa City. GII, a partner of The Dow Chemical Co., will help provide residents of Muntinlupa and surrounding cities with clean and good tasting water throughout the year with the installation of the most technologically-advanced water pre-filtration system available in the market today.

Infrastructure