Philippine WeeklyPhilippine Update

WEEKLY UPDATE WE TELL IT LIKE IT IS

VOLUME IV, NO. 19 May 13 – 19, 2013 ______PHIL. Copyright 2002

_ THE WALLACE BUSINESS FORUM, INC. accepts no liability for the accuracy of the data or for the editorial views contained in this report.__ Political "Quotes Poll body proclaims all 12 winning senators On May 18 the Commission on Elections (Comelec) proclaimed the final 3 winning senators, of the Week" completing the Top 12 in this year’s senatorial race. The 3 newly proclaimed senators are former Las Pinas Representative Cyntia Villar( 10th place with 13,696,120 votes); former San th Juan Representative Joseph Victor Ejercito (11 with 13,552,991 votes); and re-electionist th senator Gringo Honasan (12 with 13,070,031 votes). The first 9 senators proclaimed (based on rankings) were former censors chief Grace Poe; re-electionist senators Loren Legarda, Alan Peter Cayetano, and Francis Escudero; vice president’s daughter Nancy Binay, former “We in the legislature will do our part and work Aurora representative Sonny Angara; former National Youth Commission chairman Paolo doubly hard to achieve the goals of good Benigno Aquino; and re-electionist senators Koko Pimentel, and Antonio Trillanes. The governance, peace and security, and inclusive administration (Team PNOY) line-up got 9 of the 12 slots at stake. Only Binay, Ejercito, and Honasan belong to the opposition United Nationalist Alliance. growth, with the President's ‘daang matuwid’ as our clear guide to change and transformation in the next three years” Senate President Enrile likely to be replaced as pro-Aquino senators dominate 16th Congress A change in senate leadership looms as administration senators dominate the Upper Senator Franklin Drilon saying that by Chamber this 16th Congress. Of the Top 12 senatorial candidates, 9 are from the electing a majority of Team PNoy bets, the administration line-up (Team PNOY), while 3 are from the opposition-led United Nationalist voters have given President Aquino a fresh Alliance (UNA). The 9 slots are enough for the administration bloc to secure the majority in the mandate to govern. next Congress and possibly replace Senate President Juan Ponce Enrile. At this point, Senator Franklin Drilon seems to be the prime choice to replace Senate President Enrile. Sen. Drilon is a former senate president (2000 and 2001-2006), one of President Aquino’s “They just can’t come over here.” strongest allies in the Senate, served as Team PNOY’s campaign manager, and has always been supportive of Malacañang’s priority bills. He currently holds 2 powerful committees, Justice Secretary Leila de Lima saying Finance and Ways and Means. Having a cooperative senate leader would help ensure that Taiwan has to go through steps and make an President Aquino’s reform agenda is sustained and his priority bills are enacted on time. official request to the Manila Economic and

Cultural Office (MECO) before conducting any Buhay leads 14 party-list frontrunners investigation in the Philippines for the killing of Fourteen party-list groups are likely to get at least 1 seat in the House of Representatives, a Taiwanese fisherman in the country’s with Buhay (Life) leading the race, based on the Commission on Elections (Comelec)’s latest exclusive economic zone. partial and unofficial results. Buhay is led by former Manila mayor Lito Atienza. The top 14 party-list groups were Buhay with 897,575 votes (4.84%) followed by A Teacher with 679,799 (3.66%); Bayan Muna, 646,878 (3.49%); 1-Care, 582,968 (3.14%); Akbayan, 565,218 (3.05%); Ako Bicol Political Party, 511,258 (2.76%); Abono, 502,664 (2.71%); Gabriela, 502,588 (2.71%); OFW Family Club, Inc., 495, 122 (2.67%); Senior Citizens, 462,283 (2.49%); AGAP, 411,650 (2.22%); Cibac, 408,485 (2.20%); COOP-NATCCO, 406,045 (2.19%); and Magdalo, 371,573 (2.00%). Based on the Party-list System Act, only party-list groups that are able to garner 2% of the total number of votes cast in the party-list race are assured of earning House seats.

Vote buying rampant – Comelec The Commission on Elections (Comelec) said vote buying remained rampant in the country’s DISCLAIMER 2nd automated elections last Monday (May 13). Comelec spokesman James Jimenez said The articles in this Philippine Weekly Update they received reports of vote buying from all over the country. The amount used in vote buying (PWU) have been culled from various media sources. We cannot, therefore, vouch for ranges from P200 to P5,000.He said the automation of the elections might have worsened the the accuracy of what is reported. incidence of vote buying. Mr. Jimenez said, “It gives a sense that it has become rampant since the (election) operators cannot manipulate the results of the precinct count optical scan (PCOS) machines, that’s why they resort to vote buying.” Under the Omnibus Election Code, vote-buying is an election offense involving the giving, offering or promising money or anything of value directly or indirectly to induce anyone or the public in general to vote for or against any candidate. The offense carries a penalty of 1 to 6 years imprisonment, removal of the right to vote, and disqualification from running for public office.

1 The Wallace Business Forum, Inc. May 13 – 19, 2013 Philippine Weekly Update

BIR reminds candidates to report campaign expenses Candidates in the last elections were reminded to report all their campaign disbursements to the Bureau of Internal Revenue (BIR) and pay income taxes for excess funding they received during the election period. Under Revenue Regulation 7-2011, the tax bureau clarified that all unspent election contributions and donations will be recorded under a candidate’s personal income and will thus be subject to 5% creditable withholding tax. The report should be submitted 30 days after the polls (June 13), similar to the requirement of the Commission on Elections (Comelec).

Pres. Aquino calls for calm in dealing with Taiwan issue To avoid unwanted repercussions, President Aquino appealed for calm in settling the issue with Taiwan over the Philippine Coast Guard (PCG)’s alleged shooting at Taiwanese fishermen. The President said he was discussing the issue with officials as the PCG personnel involved in the incident had been relieved and placed under investigation. He said the Department of Foreign Affairs (DFA) was in touch with concerned authorities to ensure that the incident will not have unwanted repercussions. Taiwanese President Ma Ying-jeou warned they would consider sanctions against the Philippines, including a freeze on the hiring of Filipino workers and recall of their representative in the Taipei Economic and Cultural Office, over the shooting of a Taiwanese fisherman in a high seas scrum.

K to 12 program signed into law President Aquino signed into law the K to 12 Basic Education Program, which adds 2 years to basic education and makes enrollment of children in kindergarten compulsory. Republic Act 10533 or the “Enhanced Basic Education Act of 2013” was signed barely 3 weeks before the opening of classes in public and private schools nationwide on June 3. Under the K to 12 program, children are required to enroll in kindergarten before they can begin 6 years of primary education. Two years will be added to the 4-year high school curriculum. The law also mandates the use of the mother tongue as the medium of instruction from kindergarten to third grade before English is introduced. The additional years will serve as a specialization period for senior high school students, whether in vocational skills, music, arts or sports. They will be prepared in middle-level skills development, entrepreneurship, employment and tertiary education. Senior high school graduates will then have an option to take either short-term technical vocational courses, wherein employment is immediate, or pursue college education.

Economy S&P retains forecasts Standard & Poor’s (S&P) has maintained growth forecasts for the Philippines highlighting the country’s strength, while it cut projections for several neighboring economies. Although the region continues to outperform the rest of the world, indicators show that the rebound seen in 2012 has lost some traction, the credit rater said in a report. Export growth has stalled given weaker consumption in China, pulling down trade-dependent countries. As a result, S&P lowered growth projections for China, Hong Kong, India, Japan, South Korea, Singapore, Thailand and Vietnam. Only Malaysia, the Philippines, and Taiwan were upgraded, "reflecting the ongoing strength of those economies." Under the base case, the Philippines is estimated to grow by 6.5% this year, 6.3% in 2014 and 6% in 2015. Back in March, S&P expected the country to grow by only 5.9%, 5.7% and 5.4%, respectively. The forecasts were raised in April and kept in the latest report. The Philippines grew by a healthy 6.6% last year, beating market expectations and the government’s 5-6% goal. A higher trajectory is targeted for succeeding years: 6-7% in 2013 and 6.5-7.5% in 2014. S&P said, "Southeast Asia’s relatively domestically driven economies, led by Indonesia, will perform well again, with growth of 5.6% in both 2013 and 2014... In contrast, the newly industrialized economies, which are more trade-dependent, will continue to see below-potential growth averaging around 3% in 2013, picking up to 4.1% in 2014 as the global recovery and trade growth broaden."

Inflation seen staying within targets The private sector expects inflation to pick up speed but stay within central bank targets over the next few years. A Bangko Sentral ng Pilipinas or BSP (central bank) survey showed that the median inflation forecast of 26 banks and think tanks is 3.5% for this year up from the 2012 result of 3.2%. Consumer prices are then expected to increase by 3.8% and 3.7% in 2014 and 2015. The estimates fall within the central bank’s 3-5% target for 2013 and 2014, and the 2-4% goal for 2015. The BSP said, "Analysts noted the following upside risk factors, namely: election spending, the expected roll-out of government infrastructure spending with the implementation of various projects under the public-private partnership program and the increase in utility rates." On the downside, a continued peso appreciation could temper prices of imports and strengthen purchasing power, it added. Of the institutions polled, state-run Al Amanah Islamic Bank had the lowest forecast of 2.9% for 2013 to 2015. Deutsche Bank had the highest outlook at 4.3% for this year, while Maybank ATR Kim Eng saw inflation at 5% for 2014 and 2015. Inflation has remained benign so far, falling to 3% as of April due to stable food and oil prices.

2 The Wallace Business Forum, Inc. May 13 – 19, 2013 Philippine Weekly Update

DBM continues aggressive spending The Department of Budget and Management (DBM) will FINANCIAL INDICATORS Latest Week Week-ago Year-ago continue its aggressive spending this year even as it encourages private sector investment to further perk up the local T-Bill Rates (May 13, 2013 average ) economy. According to the DBM, the agencies’ spending 91-day N.T. 0.217 N.I. performance against their monthly cash programs (MCPs) show 182-day N.T. 0.398 N.I. encouraging signs. “They are being monitored, especially for 364-day N.T. 0.602 2.518 the AMT-guided departments so that necessary revisions/updates may be considered in the operating fiscal program,” the DBM said in a report assessing the government’s PESO DEPOSIT RATES (% p.a., Apr. 29 – May 03, 2013) performance as of end-March this year. Government Savings Deposit 0.01 0.05 0.10 disbursement requirements will be facilitated for the rest of the Time Deposit year even with the impact of the election ban in the 2nd quarter, Below 1 year 1.61 1.79 3.04 the DBM pointed out. Of the P2.006 trillion obligation program 1 - 2 years 3.46 2.57 2.91 3.85 Over 2 years 0.90 1.41 1.30 for 2013 (inclusive of Automatic Appropriations), P1.417 trillion has already been released in the 1st quarter, of which P915.1 DOLLAR DEPOSIT RATES (% p.a., Apr. 29 – May 03, 2013) billion was for regular operating requirements and Savings Deposit 0.28 0.28 0.31 implementation of programs and projects of Time Deposit departments/agencies. 60 days & below 0.81 0.83 0.78 61-90 days 0.95 1.02 0.92 91-180 days 1.05 1.04 1.02 PH ranks ‘fair’ in resource governance 181 days & above 1.26 1.25 1.18 The Philippines ranks 23rd out of 58 countries surveyed worldwide about resource governance, placing in the top half of LIBOR/SIBOR (% p.a., May 13-15, 2013) those surveyed. Revenue Watch Institute, a New York-based organization on resource management, based country ranking Libor 90 days 0.27 0.28 0.47 Sibor 90 days 0.28 0.28 0.47 according to transparency and accountability on the Libor 180 days 0.42 0.43 0.73 management of natural resources. The 4 criteria used include Sibor 180 days 0.43 0.43 0.73 laws made to protect environment, reporting practices, safeguards and quality controls, and enabling environment. FOREIGN EXCHANGE RATE (% p.a., May 17, 2013) Revenue Watch said findings of the survey suggest the PDS Weighted Ave. (P/US$) 41.18 41.10 43.18 government has made meaningful progress toward improved Blackmarket (P/US$) 41.35 41.30 43.00 resource governance. Of the 4 criteria used, the Philippines PDS Weighted Ave. (P/EURO) 53.07 53.16 54.47 ranked highest in terms of number of laws protecting the environment, but failed on enabling environment because of PRIME LENDING RATE (% p.a., May 17, 2013 ave.) prevalent corruption. The report said the Philippines has comprehensive mining legislation, but incomplete disclosure Bank of America 4.04 4.04 6.17 BPI 4.38 4.38 5.70 requirements. The Philippines also has not passed a freedom of Citibank 3.28 4.16 5.43 information law. In reporting practices, the Philippines ranked BDO 3.96 3.96 5.67 23rd with a partial score of 54 due to poor contract Hong Kong & Shanghai Bank 4.88 5.63 4.46 transparency and uneven disclosure of mining data. ING Bank 6.66 6.66 7.16 Metrobank 7.00 4.00 7.00 PNB 8.95 8.95 8.30 BIR sets new rules on compromise settlements RCBC 6.75 6.75 6.75 Taxpayers seeking compromise settlement of unsettled Security Bank 7.40 7.40 7.40 obligations must now pay upfront before their applications are Standard Chartered Bank 3.94 5.69 7.78 UCPB 6.25 6.25 7.13 processed, according to new Bureau of Internal Revenue (BIR) Union Bank 7.50 7.50 7.50 rules. Revenue Regulations (RR) 9-2013, dated May 10, sets a timeline for the payment of compromise penalties for various L/C SELLING RATE-IMPORT (P/US$, May 17, 2013) National Internal Revenue Code (NIRC) violations. The new rules amended RR 30-2002, dated Dec. 16, 2002, that had set Bank of America 41.20 41.10 43.21 implementing guidelines for Sections 7(c), 204(a) and 290 of the BPI 41.22 41.15 42.20 Citibank 41.13 40.95 43.95 NIRC on the compromise settlement of tax liabilities. The BIR Equitable PCI Bank 41.30 41.20 43.25 allows taxpayers to pay compromise penalties, in lieu of criminal Hong Kong & Shanghai Bank 41.76 41.55 43.45 prosecution, for various violations of the Tax Code. These ING Bank 41.35 41.30 43.50 include the failure to register with the bureau and the late filing Metrobank 41.40 41.20 43.20 and payment of taxes, among others. The penalties are PNB 41.30 41.15 43.20 RCBC 41.20 41.09 43.15 dependent on the offense. In the 2002 issuance, taxpayers Standard Chartered Bank 41.45 41.10 43.25 applying for compromise settlements could pay offered amounts Security Bank 41.21 41.12 43.14 before or after their applications’ approvals. In case the UCPB 41.40 41.20 43.25 compromise was disapproved and the applicant had already Union Bank 41.50 41.30 43.45 paid his or her offer, the payment would be deducted from the taxpayers’ outstanding liability. *T-Bills transaction is every two weeks

3 The Wallace Business Forum, Inc. May 13 – 19, 2013 Philippine Weekly Update

BOC misses collection target in April Corporate Briefs

Collections of the Bureau of Customs (BOC) were up 7% year on Metro Pacific Investments Corp. (MPIC) has jacked up its medium-term income year in April, but the agency still missed its target for the month. and revenue target given better operations and more hospital acquisitions…in an Customs Commissioner Rufino Biazon said a total of P27.141 interview, Augusto Palisoc Jr., MPIC executive director and head of the billion in taxes and duties was collected last month, up from healthcare group, said the country’s largest hospital chain expects P1.2 billion in profits and as much as P17 billion in revenues by 2015…he also said the target P25.362 billion a year earlier. This amount, however, was 1.31% of “3,000 beds maybe achieved in three years given the pace of one to two or P362 million short of the agency’s P27.503-billion goal. The hospital (acquisitions) every year”. April haul brought Customs collections for the year so far to The Sunwest Group of Companies said it expects to bag the construction P95.957 billion, 1.12% higher than the P94.896 billion it took in contract to develop the Bicol International Airport following a favorable court during the comparable 2012 period. The bureau last week ruling…Robert Uy, Sunwest Construction Development Corp (SCDC) vice disclosed that the Port of Subic raked in P1.091 billion last month, president and chief operating officer, said the company may begin construction of nearly double its P561.98-million goal. This was also 74.56% the Bicol Region’s premier airport after a local court dismissed a legal challenge thrown by losing bidders, BSP & Co. Inc and 4B Construction Corp. higher than the P625 million it collected in April last year. Port collections are normally sourced from transshipment operations, Cebu Pacific is eyeing another Middle East destination to add to the United Arab ship calls and duties on imports, as well as other fees and charges Emirates, to which a maiden flight is scheduled in October, according to documents from the Civil Aeronautics Board (CAB)…the budget carrier is on transactions. The Customs bureau, which accounts for about targeting the 200,000 overseas Filipino workers in Qatar as no local carrier “is 1/5 of government revenues, needs to collect P340 billion this actually operating there,” Maria Vida Stoifl, Cebu Pacific’s External Affairs year. Last year it shored up only P289.9 billion against its P347- director, said in a May 6 letter to CAB Executive Director Carmelo Arcilla…the billion target. This was, however, 9.3% more than the P265.1 country bagged 8 flights per week for the Manila-Doha route under a memorandum of agreement in 2009. billion collected in 2011. AC Energy Holdings Inc., the investment vehicle of conglomerate Ayala Corp. for the power sector, has sold its entire stake in a 135-megawatt coal-fired power U.S., PH launch 13 health projects plant in Iloilo, the company said in a disclosure to the Philippine Stock Thirteen projects that will help enhance the health of Filipino Exchange…the firm said it sold its 40% stake in Palm Concepcion Corp., which families under the U.S.-Philippines bilateral health agreement were operates the coal-fired plant and holding company Panay Consolidated Land Holdings Corp. to Palm Thermal Consolidated Holdings Corp. (PTCHC), a wholly- launched on May 16. Health Secretary Enrique Ona and U.S. owned subsidiary of A. Brown Co. Ambassador Harry Thomas Jr. launched the P7.96-billion projects to be implemented over a 5-year period in 48 provinces Manila Water Company Inc. subsidiary Laguna Water Corporation has signed a P1.33 billion omnibus loan and security agreement with the Development Bank of nationwide. Mr. Thomas said the projects to be implemented by the Philippines (DBP) to finance the modernization of its facilities and expansion the U.S. embassy Manila’s United States Agency for International of its water network…the loan was secured under the DBP’s Philippine Water Development (USAID), in cooperation with the Department of Revolving Fund, a collaborative effort between the Philippine government, United Health (DOH), “will support an integrated approach to health States Agency for International Development (USAID), and the Japan International Cooperation Agency (JICA) to address the need for efficient and service delivery and greater partnership between the public and sustainable water supply in the Philippines in line with meeting the Millenium private sectors.” Sec. Ona said the projects are in line with the Development Goals (MDG)…in April, Laguna Water signed a P500 million term Philippine Development Plan and the DOH Universal Healthcare loan with DBP with the option to increase the term loan to P1.33 billion.

Strategy. The U.S. government, through USAID, helps to reduce Agrinurture Inc. is expanding its banana cultivation area and improving its cold maternal and newborn deaths, unmet need for family planning, storage facilities to increase its export sales…the company recently acquired a prevalence of tuberculosis, and the spread of the AIDS virus in the 1,000-hectare banana plantation in Mindanao which would add 40,000 metric tons of Cavendish banana to its annual production…ANI chairman Antonio Tiu country. said ANI has been expanding its banana cultivation area to improve supply of the fruit for export in anticipation of increased overseas demand.

Business SM Prime Holdings, Inc. opened SM Aura Premier in Taguig City, the company’s 47th mall in the Philippines…SM Aura, which has a gross floor area of 234,892 square meters, according to a statement attached to the company’s Peaceful polls send PSEi above 7,300 disclosure…SM Aura incorporates office towers, a chapel, a convention center, The Philippine Stock Exchange index (PSEi) breached the 7,300- and mini-coliseum, among other features. point level for the 1st time this week, boosted largely by the peaceful elections and strong 1st quarter corporate earnings, analysts said. The PSEi climbed 0.70% or 51.08 points to settle at its 30th all-time high this year at 7,313.46. The main index also recorded a new intraday high at 7,349.95, breaking the previous record of 7,284.34 on May 6. Most counters were in the green, led by financial firms that jumped 1.24% or 23.20 points to 1,895.06. But the mining sector, which sank 2.59%or 506.53 points to 19,020.77, weighed down the PSEi.

Local firms seen shifting to digitized financial systems Firms operating in the Philippines are seen to continually shift towards digitizing their financial management in the next 1 to 2 years as they seek to improve their cash flow forecasting, according to treasury management solutions firm SunGard Data Systems, Inc.- AvantGard. The results of the inaugural Asia-Pacific Treasury Barometer survey of SunGard-AvantGard and the Bank of America- Merrill Lynch conducted last quarter showed cash visibility remains one of the biggest challenges for cash flow forecasting among firms with operations in the region. "Firms surveyed said that they have disparate information systems and data about their cash flows, which basically means that they’re playing a guessing game about where there money is," said Michael Fullmer, SunGard-AvantGard senior vice president, in a teleconference held this week at the firm’s office at the Solaris One tower in Makati City. The survey had 913 4 The Wallace Business Forum, Inc. May 13 – 19, 2013 Philippine Weekly Update respondent-firms spread out among 14 industries with operations in 17 countries. Majority or 60% of firms have an annual sales turnover of less than $1 billion, 25% in the $1 billion to $10 billion category, and 15% above $10 billion. Of the total respondents, 250 have operations in the Philippines, according to SunGard-AvantGard.

ICT expected to generate $50Bn by 2016 The Aquino administration is confident that the information and communication technology (ICT) industry would be able to deliver $50 billion worth of revenues by 2016 amid the continued strengthening of the peso against the dollar. Monchito Ibrahim, deputy executive director of the Department of Science and Technology-Information and Communication Technology Office (DOST-ICTO), said the government has laid down the groundwork for the ICT industry. Mr.Ibrahim said the country’s information technology and business process outsourcing (IT-BPO) industry is expected to deliver revenues amounting to $25 billion, while other ICT services such as animation is expected to deliver the other $25 billion by 2016. He pointed out that the Philippines has a reliable and redundant connectivity as major telecommunications companies and that the government is also offering competitive investment incentives including 4 to 8 years income tax holiday, special 5% tax on gross income, other tax and duties exemptions, domestic sales allowance of up to 30% of total sales, and additional deduction on total manpower training cost.

BOI plans to submit 2013 IPP proposal in June The Board of Investments (BOI) plans to submit the proposed 2013 Investment Priorities Plan (IPP) to the Office of the President by next month, later than initially planned. Under Executive Order 226 or the Omnibus Investments Code, the IPP must be submitted to the President not later than the end of March of every year. However, the BOI has yet to give the IPP to the President since it still needs to consult other government agencies regarding sectors that could qualify for incentives. The IPP identifies activities or sectors, which could be given fiscal and non-fiscal incentives by the government. The 2012 IPP listed the following as preferred activities: agriculture/agribusiness and fishery, creative industries/knowledge-based services, shipbuilding, mass housing, iron and steel, energy, infrastructure and Public Private Partnership projects, research & development, green projects, hospital and medical services projects, motor vehicles, strategic projects, and disaster prevention and recovery projects.

BSP urged to raise real estate regulatory limit Industry players want the Bangko Sentral ng Pilipinas or BSP (central bank) to reconsider a regulatory limit on real estate exposures following a breach last year. Bankers Association of the Philippines (BAP) President Lorenzo Tan said that there is room to raise the cap to accommodate the property market’s rapid growth without sacrificing prudential standards. Universal, commercial, and thrift banks are required to keep their real estate exposure to only 20% of their total loan portfolio. This was slightly exceeded in 2012 when their exposure was valued at P821.7 billion, 20.9% of banks’ total loans. Mr. Tan said, "My point is it’s not the quantity but the quality of the portfolio. The limit may be 15% but if the loans are sub-prime we have a bigger problem." He added that the real estate exposure remains healthy. Vacancy levels and bad loans are down, while future supply can be met by demand. Minimum down payments and mortgage payments are other indicators that can be watched. He warned that it would be dangerous to prematurely curb property market growth given its role in supporting the economy.

Weekly Indicators

OFW inflows up 3% to $1.749Bn in March Remittances from overseas Filipino workers (OFWs) went up 3% to $1.749 billion in March from $1.69 billion a year ago. This was the slowest expansion recorded since August 2009 when remittances grew 2.8%, the Bangko Sentral ng Pilipinas or BSP (central bank) reported. For the first 3 months of the year, dollar remittances rose 5.6% to $5.112 billion, still above the BSP’s 5% growth outlook for 2013. However, remittances have been recording a slower growth since January when expansion went down to 8% from 9.7% a month ago. In February, growth slowed to 6%.

Budget deficit seen to reach P84.66Bn in 1H2013 The government expects to incur a budget deficit of P84.66 billion in the 1st half of the year or more than double the P34.5 billion recorded in the same period in 2012, as it continues to pump-prime the economy with increased expenditures. Data from the Department of Finance (DOF) showed that expenditures are seen to reach P945.7 billion from January to June this year, 18.9% higher than the previous year’s P795.4 billion. Total revenues are forecast to hit P861.04 billion, up 13.16% from P760.92 billion a year earlier. Tax collections are seen to reach P791.36 billion. Of this amount, P620.28 million will come from the Bureau of Internal Revenue, which represents an increase of 19% from the P521.16 million collected a year ago. Meanwhile, the Bureau of Customs is expected to contribute P163.85 billion to state coffers. The Bureau of Treasury, however, is seen to remit P31.59 million in the first 6 months of the year, lower than the year ago’s P50.22 million. For April to June alone, the country is targeting a budget deficit of P493 billion. Government spending, on the other hand, is seen to amount to P493 billion.

FDI seen rising in 2H2013 The upswing in foreign direct investments (FDI) last February could be an indication of more to come in the 2nd half of the year, following the country’s promotion to investment-grade status, an investment bank said. “FDIs have been viewed as the missing link amid the strong macro improvements in the past couple of years. Even the pick-up so far this year still looks muted,” Nomura said in a research note. “However, we think it is just a matter of time before we see sharper increases,” it added. Net FDIs more than doubled in 5 The Wallace Business Forum, Inc. May 13 – 19, 2013 Philippine Weekly Update

February, hitting $436 million from $192 million a year ago, the central bank reported last week. A net inflow indicates more investments entered the country than left. For the first 2 months, however, FDI is still down 18.7% to just $1.012 billion. The Bangko Sentral ng Pilipinas or BSP (central bank) has forecast FDI to reach $2.2 billion by year-end although that outlook is being reviewed. The Philippines has been a laggard in terms of FDI versus neighboring countries based on data from the International Monetary Fund (IMF). From 2000 to 2011, the country attracted $25.59 billion, well below Malaysia’s $114.56 billion, Thailand’s $146.12 billion, Indonesia’s $185.80 billion, and Singapore’s $617.92 billion

Hot money surges in April Foreign portfolio investments surged nearly 240% in April, bringing the year-to-date tally closer to the Bangko Sentral ng Pilipinas’ or BSP’s (central bank) target for the year. Portfolio placements recorded a net inflow of $1.131 billion last month, more than 3 times the previous year’s net inflow of $333.43 million. Foreign portfolio investments were largely placed in publicly traded stocks, Treasury bills (T-bills), T-notes and T-bonds, and time deposits. For the first 4 months of the year, net portfolio placements hit $2.218 billion, up 178% from $797.88 million a year ago. The central bank has forecast a net inflow of $3 billion this year.

Record loss for BSP in 2012 The Bangko Sentral ng Pilipinas or BSP (central bank) posted a net loss of P95.38 billion in 2012, nearly triple the P33.69 billion recorded the prior year. The amount was also well past the previous peak of P86.94 billion hit in 1997. The BSP earned P65.73 billion last year, down 44.64% from 2011’s P118.74 billion. The bulk, or P40.92 billion comprised interest from international reserves, down by 1/10 from P45.62 billion. Miscellaneous income provided the biggest dent to revenues, last year yielding just P24.81 billion, a 66.06% drop from P73.11 billion in 2011. The BSP said in its annual report, The dwindling revenues were not enough to offset expenses, which decreased in 2012. The central bank spent P110.69 billion last year, down 4.5% from P115.97 billion recorded in 2011. Interest expenses accounted for P90.76 billion, down 5.1% from P95.63 billion, while other expenses added P19.93 billion, inching down from P20.33 billion.

Infrastructure Power suppliers told to submit contracts for RCOA The Energy department has directed power generators, suppliers and distributors to submit their detailed power supply contracts in preparation for the commercial operations of retail competition and open access (RCOA) this coming June. Under the RCOA, end- users who have an average monthly peak consumption of 1-megawatt can choose their own electricity suppliers. Likewise, electricity suppliers can provide tailored supply packages based on their customer’s consumption and preferences. In a circular dated May 6 and published this week, the Department of Energy (DOE) obliged all generation companies, distribution utilities, suppliers and local suppliers to submit details of their supply contracts. Specifically, generation companies were instructed to submit on a regular basis, all power supply contracts entered into with distribution utilities and suppliers. The circular reads, "The report shall, among others, indicate the contract price, contract levels and duration, and any value-added services."

NEA’s authority over electric cooperatives strengthened President Aquino has signed into law the measure strengthening the National Electrification Administration (NEA) through charter amendments. The new law essentially gives NEA more teeth over electric cooperatives, some of which are financially bleeding and heavily indebted because of mismanagement and unpaid services. For instance, the law strengthened NEA’s authorized capital stock to P25 billion from P1 billion. It also allowed NEA to act as guarantor to electric cooperatives in their transactions to various parties including their power supply contracts. Furthermore, NEA may now grant loans to electric cooperatives for the construction or operation of subtransmission and distribution facilities necessary to supply power to their service areas. Another amendment provided by the new law is the so-called step-in rights in cases of ailing cooperatives.

DOTC prequalifies 7 groups for Cebu airport project The Department of Transportation and Communications (DOTC) has prequalified all seven groups, led by the country’s largest conglomerates, vying for the P17.5-billion Mactan Cebu international airport project. The agency’s bids and awards committee has prequalified the MPIC-JGS Airport consortium, the AAA Airport Partners, the Filinvest-CAI consortium, the SMC and Incheon Airport consortium, the First Philippine Airports consortium, the Premier Airport group, and the tandem of Indian-owned GMR Infrastructure and Megawide consortium. First Pacific’s infrastructure conglomerate Metro Pacific Investments Corp. (MPIC) led by top businessman Manuel Pangilinan has tied up with tycoon John Gokongwei’s JG Summit Holdings Inc. to form MPIC-JGS Airport Holdings Inc. that includes the ADLMS MCIA. The group has tapped airport experts including French-owned Aeroports de Lyon and OVE Arup Group. Other partners of the MPIC-JGS airport consortium are Manila North Tollways Corp. (MNTC), Leighton Contractors Philippines Inc., European construction firm Bouygues Batiment International, Hyundai Engineering and Construction Co. Ltd, EGIS Avia, Pascal+ Watson Ltd, Advanced Logistics Group, Prointec SA, Ove Arup and Partners Hong Kong Ltd, Integrated Designs Associated Ltd, DP Architects Pte Ltd, and Woodhead Pte Ltd.

6 The Wallace Business Forum, Inc. May 13 – 19, 2013