The Daily News WE TELL IT LIKE IT IS Phil. Copyright 2002

Vol. 16 No. 103 June 5, 2015 WEATHER FORECAST

METRO 26°C to 34°C The Nation CEBU 27°C to 32°C DAVAO 24°C to 31°C  End to word war sought  PH to assert position on sea row Currency Currency 1 Peso in s House approves resolution on GMA COUNTRY in Peso in US$1 Currency house arrest US (dollar) 44.6570 1.0000 0.0224 Japan (yen) 0.3594 0.0080 2.7824 The Economy and Business UK (pound) 68.5038 1.5340 0.0146  New leverage ratio rules credit positive Hong Kong (dollar) 5.7603 0.1290 0.1736 – Moody’s China (yuan) 7.2055 0.1614 0.1388  BSP signals steady rates on bullish Canada (dollar) 35.8660 0.8031 0.0279

outlook Australia (dollar) 34.8692 0.7808 0.0287  410MW capacity added this year from New Zealand (dollar) 31.9252 0.7095 0.0313 10 new projects EMU (euro) 49.7881 1.0924 0.0201 Corporate Briefs

PESO–DOLLAR RATE  PLDT acquires Metro Phone 30 trading days to June 4, 2015  Petron Corp. starts producing Euro IV- Open: P 44.800 compliant products  Goldilocks Bakeshop, Inc. plans IPO 43.50 Close: P 44.815

44.00 High: P 44.750

44.50 Low: P 44.845 45.00 W.A.: P 44.808 45.50 Vol.: 619.25 Mn

PSE COMPOSITE INDEX 30 trading days to June 4, 2015 Open: 7,561.65

High: 7,562.04 8300 8100 Low: 7,515.77 7900 7700 Close: 7,553.65 7500 7300 Index: 7,553.65 7100 6900 Vol.: 0.610 Bn 6700 Val.: 6.941 Bn

Disclaimer: The articles in this Daily News have been culled from various media sources. We cannot, therefore, vouch for the accuracy of what is reported. For more information on the WBF, you can call 810-96-06 to 09, or visit our website at www.wallacebusinessforum.com.

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The Nation

End to word war sought City Rep. Mar-len Abigail Binay called yesterday for an end to the word war between Sen. Grace Poe and officials of the opposition United Nationalist Alliance (UNA) over her reported failure to meet the minimum residency requirement to run for higher office. Rep. Binay, who belongs to the UNA headed by her father Vice President , said questions on Sen. Poe’s residency are best settled in court. UNA interim president and City Rep. Tobias Tiangco earlier said Poe is not qualified to run for president or vice president since her stay in the falls short of the 10-year constitutional requirement for such candidates. “We maintain that this controversy can be properly resolved only in one way — before the courts,” Sen. Binay said during a press conference in Makati City. “This issue should not become a personal debate among lawyers who have different opinions and views, which will go nowhere except create a rift between my father and Senator Poe,” she said.

PH to assert position on sea row There’s no use responding to Beijing’s “juvenile rhetoric” as the Philippines would rather assert its position on the West Philippine Sea dispute with China before an international tribunal, presidential spokesperson Edwin Lacierda said yesterday. “We’d rather insist that we discuss this on a high level by resorting – and discussing it in the international forum – the international arbitration arena,” Mr. Lacierda said in a press briefing. He also defended President Aquino’s comparing China’s threatening activities in the West Philippine Sea to Nazi Germany’s annexation of lands in Europe before World War II. Chinese foreign ministry spokesman Hong Lei said the comparison was “inconceivable and unreasonable.” Lacierda said China has refused to take part in an international arbitration and its pronouncements and actions have caused alarm in the international community. Lacierda said the massive reclamation activities being done by China in the West Philippine Sea have spawned a situation that “clearly calls for arbitration, which the Philippines has done.”

House approves resolution on GMA house arrest The House of Representatives adopted last night the resolution urging the Sandiganbayan to place former President and now Pampanga Rep. Gloria Macapagal-Arroyo under house arrest on humanitarian grounds. The resolution was approved last month by the justice committee headed by Iloilo Rep. Niel Tupas who said the measure was not compulsory for the Sandiganbayan. Rep. Arroyo is currently detained at the Veterans Memorial Medical Center (VMMC) in in connection with the alleged plunder of P366 million in funds of the Philippine Charity Sweepstakes Office. Mr. Antonio Abad, former dean of the Far Eastern University Institute of Law and Adamson University College of Law, earlier said moves to place Rep. Arroyo under house arrest were not only based on humanitarian grounds but on legal foundation. He said Rep. Arroyo should be granted house arrest not only for humanitarian reasons but also because it is justified under the doctrine of equal protection of laws.

The Economy & Business

New leverage ratio rules credit positive – Moody’s The newly-issued regulation on banks’ minimum leverage ratio is “credit positive” for the lenders, Moody’s Investors Service said in a report yesterday. “The higher minimum leverage ratio together with stricter Basel III minimum capital requirements established in 2014 is credit positive for Philippine banks because it would require them to hold more capital, making them more resistant to losses,” Alka Anbarasu, vice president and senior analyst at Moody’s said. “The stricter norms will also prevent excess credit and asset growth in the system and come as Philippine banks’ assets both on and off-balance sheet are growing at an annual rate of 15 percent or more,” the analyst added. The Bangko Sentral ng Pilipinas last week required universal and commercial banks to keep at least 5% in leverage ratio, which measures their Tier 1 capital against total on- book and off-book exposures.

BSP signals steady rates on bullish outlook The Central Bank has again signaled it will keep monetary policy on hold despite dismal growth data in the first quarter, adding that “sufficient” liquidity and state spending would give the economy enough stimulus. But in a new research note, Citigroup said El Niño -- or the unusually warm ocean temperatures in the Equatorial Pacific -- could add to the Bangko Sentral ng Pilipinas’ (BSP) headache given the percentage weighting of food in the country’s consumer price index basket. BSP Governor Amando Tetangco, Jr. on June 3 told members of the American Chamber of Commerce of the Philippines that while the 5.2% gross domestic product (GDP) growth seen last quarter may have come as a “surprise”, it should not be a cause for worry. “I would tend to agree with what Sec. [Arsenio] Balisacan said that it’s too early to abandon our 7-8% growth target. After all this is just one data point,” Gov. Tetangco said in his speech, a copy of which was e-mailed to reporters yesterday. Apart from “sufficient” liquidity, he said that “government initiatives to mitigate El Niño can push agriculture 2

[and] FDI (foreign direct investments) inflow associated with liberalized entry of foreign banks and their corporate investors should boost manufacturing, construction.”

410MW capacity added this year from 10 new projects Ten power generation projects with combined capacity of 410 megawatts (MW) have been added to the country’s power supply so far this year. Data from the Department of Energy (DOE) showed that these plants went online between February and May. Of the total, 286.3 MW were added to the Luzon grid. A 10-MW solar power plant in Pampanga went online in February and another solar project -- with a capacity of 41.3 MW -- started commercial operations in Cavite last March. South Luzon Thermal Energy Corp.’s 135-MW coal plant, meanwhile, came on-stream last April and Millenium Energy, Inc. brought in its 100-MW diesel facility last May. Visayas had additional 70 MW after the completion of Universal Robina Corp.’s 46-MW bagasse cogeneration facility in Negros Occidental last February. Phil. Solar Farm Leyte, Inc. also started commercial operations of its 24-MW solar plant in Leyte. Four diesel projects in Mindanao totaling 53.8 MW, meanwhile, went online last February. These projects are Mapalad Power Corp.’s (MPC) 12-MW plant in South Cotabato and Mapalad Energy Generation Corp.’s 15-MW l facility in Iligan City.

Corporate Briefs

A unit of Philippine Long Distance Telephone Co. (PLDT) has acquired a major player in Southern Philippines that accounts for 75% of the fixed line business in Mindanao…PLDT president Napoleon Nazareno said in a statement that the company would be able to service more customers in Mindanao after PLDT Philcom Inc. acquired Metro Kidapawan Telephone Corp. (Metro Phone)….Petron Corp., the country’s biggest oil refiner, has started producing Euro IV-compliant gasoline products, which are now available in its service stations in Mega Manila….the Euro IV-compliant fuel will soon be available in all Petron service stations nationwide, ahead of the government’s Jan. 1, 2016 mandatory schedule…the Euro IV standard is a globally accepted European emission benchmark for vehicles which requires fuel to have significantly low amounts of sulfur and benzene…Goldilocks Bakeshop, Inc. is planning an initial public offering (IPO) to finance expansion plans, which include doubling its store network in 5 years... the company is likely to fix the listing date after election season, a key official said…“We have not yet saturated the Philippines, and then the 10 ASEAN (Association of Southeast Asian Nations) countries. Vis-Min (Visayas-Mindanao) is growing so that’s where we’re focusing, and anywhere where Filipinos are, that’s where we will go,” Goldilocks Vice-President Franklin Go said on the sidelines of a briefing in Makati City…while it has yet to finalize the amount it plans to raise, the 49-year- old company will likely use the proceeds to finance expansion plans of its 2 other brands: American restaurant chain Domino’s Pizza, as well as Canadian burger chain Triple-O.

Word‐for‐Word

BusinessMirror Editorial says:

Once again, we are hearing about all the Japanese foreign direct investment that is going to come to the Philippines. Certainly, a part of this is because of President Aquino’s trip to the Land of the Rising Sun. But a search through the past shows this is a reoccurring story.

From March 7, 2012, and the Associated Press newswire: “Philippine officials claim that foreign biz barons are looking to relocate to the small Southeast Asian nation. Philippine Trade Secretary Gregory Domingo reported ‘very strong interest’ from Japanese electronics, shipbuilding and steel companies, and more investor fact- finding missions from foreign firms than ever before.”

There is substantial Japanese investment in the Philippines, with 2 Japanese suppliers of aircraft interiors and components recently investing P106 million in the Clark Freeport to expand their operations. Further, Japanese bicycle manufacturer Shimano Inc. has just opened its P1.32-billion facility in Batangas, creating perhaps 1,000 new jobs. This is its 40th factory. The Philippines was not on the top of its list before.

However, we must be sensible. Apple products manufacturer Taiwanese firm Foxconn has been talking about moving some of its operations out of China because of increasing wages. While not a Japanese firm, the excuses of high-labor costs are cited as the same reason as for the Japanese companies. Yet, Foxconn has been talking about this for years with little if any movement. In fact, last year we were told Foxconn was coming to the Philippines.

Except, Foxconn is telling the Indians the same thing. Last week Indian Chief Minister Devendra Fadnavis said the government has been discussing with Foxconn the possibility of setting up such a facility in India’s state 3

of Maharashtra.

Nobuo Fuiji, head of the Japanese Chamber of Commerce and Industry of the Philippines Inc., was reported to have said in May that, in the next 5 years, they will transfer all their 200 manufacturing companies in China to the Philippines.

While we do not doubt Mr. Fuiji’s sincerity and truthfulness, he also said in April, “Changing the current incentive scheme may curtail the competitiveness and attractiveness of the Philippines, as well as deter prospective Japanese investments in the Philippines. If the incentive situation is changed, some Japanese companies may think, ‘This is a setback and we don’t want to invest in the Philippines.’”

Japan’s investment position might best be summarized by this: “China’s politics and rising wages are killing us, and we love the Philippines. But, if we can get a better deal somewhere else—including China—sayonara, pare.”

While we must encourage and welcome Japanese investment, we should also temper our excitement, and let things progress in a business-reality manner.

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