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‘Super-sizing’ the regions
North Luzon Agribusiness Quadrangle: Feeding the nation is big business

3“Super-sizing” the regions

Luzon Urban 14 Beltway

14 Luzon Urban Beltway: Keeping the country’s main arteries healthy 24 Central Philippines: A tourist haven 38 Agribusiness Mindanao: Making the promise a reality 50 The bright lights of the “ Cyber Corridor”

24 Central Philippines

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Agribusiness Mindanao

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The Rice Crisis: Staving off starvation and instability Tourism estates rake it in

62 Kapitan’s City 64 From malls to resort town 66 Ayala’s magic now extends to resorts 68 Pagcor’s $20B Las Vegas dream

54 The Rice Crisis

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From malls to resort town

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A tale of three cities
Boom town The greening of Makati Quezon City’s Triangle Park

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Business inflation forecasts for the second and third quarter
Sidebar: Measuring inflation expectations

68 Pagcor’s $20B Las Vegas dream

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Making sense of the triple bottom line

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Making sense of the triple bottom line

76 A vested interest in coffee 76 Green banking 80 Bankers turned volunteers

Some photos taken by Revoli Cortez The 2008 Philippine Business and Development Yearbook is published by Melison Media Enterprises with postal address at 1-34 Santor, Malolos, Bulacan. All rights reserved with Philippine ISSN 1908-9473

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President Arroyo’s State of the Nation Address

‘Supersizing’ the regions
By Ma. Salve Duplito
OF ALL OF ASIA’S CHILDREN, the Philippines through the years has remained some sort of a sleepy, laid-back child that visitors look at with mild interest, but pass over so they can exclaim with oohs and ahhs over neighbors China, Japan, Hong Kong, Singapore, and now even Vietnam. Don’t be misled. It’s not that the Philippines is the ugly one in the brood. But the puzzle is that while it doesn’t get many negative reviews, it doesn’t get rave ones either. It is more or less ignored. Anybody intimate with Asia knows that the country’s English-speaking and skilled labor force is sought after worldwide as senior managers and workers, that royalty and Hollywood personas beat the paths to its pristine beaches, and that its mineral deposits pull in the biggest miners in the world. That’s just to name a few of its attractions. Another is that the government has an avowed policy to bring an economy of more than 7,000 islands and a people of deeply diverse cultural backgrounds to the next level of economic advancement that’s sizzling enough for both international and domestic investors. After all, in this day and age, a respectable growth rate and “nice” smiling people will not cut it. The game has gone up many, many notches and there are compelling choices everywhere especially in Asia. Making a physically fragmented nation move in step—together—is no easy feat. On July 24, 2006 during the third regular session of the 13th Congress, President Gloria Macapagal-Arroyo showed the world what her background in economics has taught her about how to push economies ahead: competitive advantage. “Our three-part plan is moving. First, to recover from our decades of debt and lack of funds, to equitably share income to the people and to invest in health, education and jobs that they need,” the President told the nation in her State of the Nation Address. Then she reached for what was obviously hoped for as a defining moment. “And finally, Phase Three: to invest in the natural advantages and natural resources of each section of our nation so that, when harnessed together, the major economic regions of the nation are larger than the sum of its parts.” Native strengths Arroyo gave those who were listening a tour of five new “super regions” built around each area’s native strengths. As if showing off her intimate knowledge of the country she governed, she described a long list of hidden nooks and crannies in these super regions and commended local executives overseeing these dots on the Philippine map—even those where the political opposition ruled. “We will bring Masbate and Biliran into the RORO (roll-on, roll-off) Eastern Nautical Highway from Surigao through Leyte through Naval and Maripipi in Biliran through Esperanza, Aroroy and Burias Island in Masbate and on to Bicol. The much-awaited The 2008 PBD Yearbook I 

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10-megawatt generator set arrived in Masbate last Saturday. It is ready to power up the province before the end of the month,” was just one of her commitments during her 2006 SONA. Her vision and messages were simple and clear: let’s focus on our economic strengths. We now have the funds, so let’s build the roads and bridges that will help businesses thrive. The President is convinced that the newly created super regions will bring the Philippines to the cusp of economic glory and recognition—no later than 2010. Through Executive Order 561 signed less than a month after her closely-guarded SONA announcement, Arroyo made commitments to construct a slew of hard infrastructure projects that would require more than P1 trillion in investments for five super regions, namely: the North Luzon Agribusiness Quadrangle, the Luzon Urban Beltway, Central Philippines, Agribusiness Mindanao and the Cyber Corridor, which traverses all the four other regions from Baguio to Cebu to Davao. “The Super Region development concept aims to spread development across a larger area, through economies of scale, synergies and complementation. Considering the country’s limited resources, the Super Region aims to maximize returns on government investments by putting resources in programs and projects that will develop the natural competitive advantages of the country, regardless of political boundaries,” a copy of an official document brief from the National Economic Development Authority (NEDA) explains. The planning agency is currently in the process of drafting a new Medium-Term Public Investment Program wrapped around the entire concept of the super regions. Growth in the Philippines has been grossly skewed towards Metro Manila, with Southern Luzon accounting for almost half of the country’s economic activity while other regions, especially Mindanao in the south, languish in poverty. Arroyo’s wants her super region strategy to distribute development and take advantage of Philippines Inc., minus Manila’s sleeping potentials. “Guided by economies of scale, the government is investing in mega projects such as major irrigation projects, railways and road trunklines that will benefit a greater number of people,” the document states. The idea, The 2008 PBD Yearbook I 

however, will need a macroeconomic mindset to make sure that the master plan will not create random pockets of infrastructure marvel. “These projects are planned and implemented to support and complement each other such as roads that will bring commuters from the rural areas to ports and airports that will connect to markets in urban centers. This way, development gets to reach more Filipinos across the country,” it says. To prove to critics that the plan does not contain empty promises, the executive order also spelled out how these are to be financed: by revenues from tax reforms, governmentowned and controlled corporations, and government financial institutions as well as from partnerships and other support from private sector and from bilateral and multilateral donors. While the newly created super regions do not mess with existing political boundaries nor alter regional development councils already defined by law, they give e local executives marching orders to focus on certain primary, although not exclusive, development themes: • The Northern Luzon Agribusiness Quadrangle consisting of regions I, II, the Cordillera Administrative Region (CAR), and the northern part of the provinces of Aurora (north of Baler), Tarlac (north of Tarlac City), Nueva Ecija (north of Cabanatuan City), and Zambales (north of Subic) to maximize its strengths in agribusiness. Arroyo appointed thenProject Management Staff Arthur Yap (now Agriculture Secretary) to be the “development champion” for the region; • Luzon Urban Beltway, which starts from the National Capital Region (NCR), to Region IV-A, and encompasses the provinces of Bulacan, Bataan, Pampanga, Mindoro, Marinduque, as well as the southern parts of the provinces of Tarlac, Zambales, Aurora and Nueva Ecija as a globally competitive industrial and service center, to be championed by the SubicClark Alliance for Development chairman Edgardo Pamintuan; • Central Philippines composed of Regions V, VI, VII, and VIII, and the provinces of Romblon, Palawan, and Camiguin, and the Island of Siargao to maximize the potential of beaches, caves, and other natural resources for tourism, with Tourism

Willy Arcilla, president of Business Mentors Inc. Secretary Joseph Ace Durano as its point person; • Agribusiness Mindanao, to be composed of Regions IX, X except Camigiun, XI, XII, Caraga except Siargao, and the Autonomous Region of Muslim Mindanao as the country’s typhoon-free food bowl was also designated to be an agribusiness super region; and • Cyber Corridor, which traverses the above super regions from Baguio to Cebu to Davao, is envisioned to be competitive in information and communication technology and knowledge economy, with Commission on Information and Communication Technology Chairman Ramon Sales as its development champion. As of May 2008, the government’s achievement report reads like a shopping list of huge infrastructure projects: 20 projects announced during the 2006 and 2007 SONA completed, and these include 12 roll-on, rolloff ports, two airports, two roads, a bridge, two power projects, and a cold chain. Eighty-two more are being constructed, 30 of which should be completed by the end of this year, while 47 projects are still in the pipeline. Workable plan With 2010 fast approaching, the question, however, remains. Can it be done? Will the reorganization of the regions, like moving

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chess pieces on an economic board, bring in the elusive development so crucial for the Philippines to be among Asia’s exciting investment destinations? Will growth be equitably distributed? The desired outcome cannot be easily faked: growth in investments, a vibrant economy singing just the right tunes, higher purchasing power among Filipinos, and that coveted membership in “Asia’s Tiger Economy” club. AgriNurture (ANI) president Antonio Tiu, who operates a P4-billion nationwide agribusiness company, says the economics of the plan is fairly straightforward: a focused and strategic approach makes good sense whether in business or governance. Economies of scale will allow the government to take advantage of each super region’s competitive advantage. Commitment, funding and coordination are crucial, and a plan that can deliver all of these should work. Tiu’s biggest problem is speed. The government is not moving as quickly as it should, he says. “As with all plans Filipinos make, the idea of the super regions when I first heard it makes sense. But the implementation is always the problem. We are moving too slowly,” he says. As a businessman who has taken on himself to feed a whole nation with nutritious vegetables, and who wants to be a regional player in the Asian region, Tiu has decided not to wait for the government. ANI has constructed its own facilities that can process tons of vegetables and fruits per day. He beats on the doors of government agencies like the Department of Agriculture to propose projects. His latest: a P10-budget viand or ulam for Manila workers. He networks and brainstorms with government officials on how to distribute vegetables from the North more efficiently to Luzon. However, while he and the private sector can do their part, Tiu says the long wait for more effective coordination between local government officials take its toll on investors’ ardor. A pity, because the Philippines itself as a product is an exciting item to sell, says Willy Arcilla, a marketing expert and president of Business Mentors Inc. Arcilla says if he were to market the Philippines, he would have an easy time with all its attractions. “We have fertile lands, the best tuna grounds in General Santos, sardines in Zamboanga, good lumber in our forests, golden mining

As of May 2008, the government’s achievement report reads like a shopping list of huge infrastructure projects: 20 projects announced during the 2006 and 2007 State of the Nation Addresses completed, and these include 12 roll-on, rolloff ports, two airports, two roads, a bridge, two power projects, and a cold chain. Eighty-two more are being constructed, 30 of which should be completed by the end of this year, while 47 projects are still in the pipeline.
opportunities and the best tourist spots in Asia. It will be such a pleasure to market the Philippines,” says Arcilla, who has organized numerous trade missions. “The basics all have to be there first. We already have a sizable market because we are the 12th biggest populous country in the world but our purchasing capacity is still low because of high poverty. We offer an excellent gateway to the ASEAN region which will soon be economically integrated, but we have a host of other problems that we need to take care of first,” Arcilla says. Arcilla is talking about a menu of conditions that investors require before they bring in their money: low-cost production base, cheap food, low tax rate (instead of mere fiscal incentives), speed and ease of setting up businesses, good education facilities for training of more skilled workers, income equality and even hotel rooms and toilets for the tourism sector. “We need to solve these things and then business will come in. They cannot afford not to. The Philippines offers great opportunities for investors,” says Arcilla. Businessmen love to tell the story of the slipper salesman who went to a certain town and found that more than half of the people he met were barefoot. While most would think that he better skip town to sell slippers somewhere else, this salesman was beside himself thinking: “Think of all the slippers I can sell in this place.” The fact that the Philippines may not get much rave reviews now, in this respect, can make it a ripe investment destination for investors who see a slipper-less foot as a ripe business opportunity. The 2008 PBD Yearbook I 

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North Luzon Agribusiness Quadrangle

Feeding the nation is big business
EVERY OTHER WEEK, 33-year old mother and career woman Jenny Angoluan asks her husband to drive her and some of her mommy friends to well-known vegetable “bagsakan” Balintawak market in Quezon City where they buy fresh vegetables at a fourth of prices on supermarket shelves. Never mind that she ends her marketing around 11 p.m. and has to wear boots, especially on rainy days to protect herself from Balintawak’s muddy enclaves. She makes the extra effort to feed her family of five with fresh produce straight from Benguet and other parts of North Luzon. For the longest time, North Luzon has been the “pinakbet with rice” region of the country, says journalist Tony Lopez: Benguet is already the vegetable capital of the nation, Cagayan Valley and Nueva Ecija are rice granaries, and the west cost of Luzon and Batanes are rich in aquamarine resources. Feeding a nation, or at least Luzon, is big business. The only problem is infrastructure. Transporting goods from farms and processing plants to Metro Manila is a costly headache to agribusinesses. The results are tons of wastage at the producer level and expensive goods at the consumer level. This should all change if the grand plan encapsulated in the creation of the North Luzon Agribusiness Quadrangle (NLAQ)—one of President Gloria Macapagal-Arroyo’s super regions—is rolled out in totality. The entire NLAQ spans a total of 66,495 square kilometers of fertile land in 17 provinces and 15 cities within the Cordillera The 2008 PBD Yearbook I  Administrative Region (CAR), Regions 1, 2 and parts of Region 3, with temperate climate suitable for different kinds of crops including traditional high value tropical ones, potentials for mineral development, historical, cultural and ecotourism sites, river basins in the major rice-producing areas in Ilocos, Cagayan Valley and Nueva Ecija, as well as aquamarine potentials in the Batanes islands and coastal areas in the west. There are 10.2 billion people living in this super region as of the government’s official 2000 population survey and growing steadily every year. However, only six provinces have a poverty incidence level lower than the 33% national average. The population needed around 50,000 housing units in 2005. Last June 19, 2007, the President launched the NLAQ at the Isabela Hotel in Jones, Isabela, a symbolic act to reach out to local government officials and to urge them to use her “super region” plan to spur development. Governors and mayors from the Cagayan Valley, Ilocos and Cordillera Regions were given time to raise their concerns. The idea is to bring the super region to a production level that would supply cheap and fresh food not just to Luzon’s burgeoning population, but also export these to nearby Southern China, Taiwan, Japan, Hong Kong and Korea, which are just a few hours away by plane. Travel time from Laoag to Hong Kong, for instance, is an hour and 15 minutes; three hours to Shanghai, China and about the same time to Taiwan. Investors in the agriculture sector should note that the government would be giving priority to projects in post-harvest facilities, especially for Region II; flood control structures for the Cagayan River; processing facilities for corn, highland vegetable farming, silkworm culture, demonstration farms for giant bamboo and mushroom production, and livestock development for sheep, carabao and poultry. Looking for incentives and places to hatch a modern agribusiness company? There are pockets of industrial areas in NLAQ that can anchor the modernization of this agriculture basket, namely the existing and designated special economic zones of Baguio City, Poro Point in La Union, and two in Cagayan, which are ready for occupancy but are not yet fully used. Marine and fishery areas also abound in NLAQ. In 2003, the Ilocos Region was the largest producer of milkfish in the country, amounting to 8,000 metric tons or 67% of total marine production. It also had the third largest milkfish catch from aquaculture of 39,000 metric tons. North Luzon also has potentials for mariculture, particularly for oyster production. Its production (oysters, mussels, and seaweeds) in 2003 was 3,195 metric tons, representing 3% of the total. Mariculture zones are located in Badoc and Pagudpud (Ilocos Norte); Balaoan and Sto. Tomas (La Union); and Dasol and Anda (Pangasinan). Because the super region also boasts of rustic but charming places like Pagudpud’s beaches, Vigan’s Heritage Village, Sagada’s mummies, and, of course, Banawe’s rice terraces, tourism is also a major attraction in the region. Lately, droves of Taiwanese tourists have been

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communication technology as a marketing tool. Infrastructure support If life is a highway, NLAQ at present still has to get a life. There are 10 existing interregional roads that traverse NLAQ, but these are grossly insufficient to connect the area to each other to boost business and trade. There lies the opportunity for companies that are into construction of public highways. When it comes to transportation by air, the Laoag International Airport is the only one in Region I with international and national flights to Kaoshung, Hong Kong, Guangzhou and Pudong/Shanghai. The San Fernando Airport in La Union, the Vigan Airport in Ilocos Sur and the Lingayen Airport in Pangasinan continue to cater to just a small percentage of total air travel to the region due to inadequate facilities and low demand. Local flights in these airports include mainly general aviation, military, government and private flights. For Region II, four public airports need to be upgraded and improved. Additional airports are also needed, particularly in Sta. Ana, Cagayan to support the operations of the Cagayan Special Economic Zone and Free Port (CSEZFP) and in the island municipalities to attain the envisioned tri-modal transport system. For Cordillera, the air navigational facilities of Loakan Airport has been modernized, and is expected to increase its functionality, and support the fast-growing tourism, trade and industries of the CAR region. Included in the government’s wish list is the modernization of the Baguio Airport to support the manufacturing and tourism industries of the region through fast, reliable and safe air transport services, more frequent and direct flights between Baguio Airport and Manila, Laoag, Subic, Clark, Tuguegarao, Bagabag, and rural airstrips and helipads to cater to requirements of fast regional air travel to and from Baguio (e.g. medical missions, tourism, governance, etc). Seaports, which require massive investments and time, will have to be improved and constructed within the region. The main ports of San Fernando, La Union and Currimao, Ilocos Norte continue to cater to local and international vessels containing mostly cargo commodities moving in and out of the region. The 2008 PBD Yearbook I 

flocking to Ilocos Norte’s Fort Ilocandia, Pagudpud and Baguio for cultural immersion, sightseeing, golf, beaches and casinos. There’s golden potential also in hydroelectric power generation and irrigation, because NLAQ is the premiere watershed cradle of the Philippines, constituting 31% of the total drainage area of major river,basins. At least four companies have already taken advantage of NLAQ’s metallic and nonmetallic mineral resources such as gold, copper, chromite, calcite, manganese, white clay, sand and gravel. Well-known miner

Lepanto Consolidated is already mining gold; Bacnotan Cement Corp. is into limestone; while Philex Mines and Climax Arimco Corp. are extracting copper. The government, however, favor companies that are interested in sustainable, large and small-scale mining, and rehabilitation of abandoned mines in the region. To increase productivity in the region, the government’s master plan also includes promotion of investments in digital infrastructure like telecommunications, broadcast media and cable television to help businessmen use information and

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The Currimao Port was further developed for better passenger and cargo handling capability. The port has now a roll on-roll off ramp servicing the Ilocos Norte-Batanes route. Meanwhile, the operation and management of the San Fernando Port has been privatized under the Bases Conversion Development Authority. For Region II, its open sea attribute and its proximity to East Asian countries offer a potential for maritime sea transport. But Region II’s existing municipal port and fish ports need to be improved and upgraded, aside from the deficiency in sea or maritime vehicles, especially connecting Batanes to the mainland and the isolated coastal areas to urban hubs for socioeconomic interaction.

The idea is to bring the North Luzon Agribusiness Quadrangle (NLAQ) to a production level that would supply cheap and fresh food not just to Luzon’s burgeoning population, but also export these to nearby Southern China, Taiwan, Japan, Hong Kong and Korea.
Power projects With all the expected economic activity in the super region, will the existing power structure be sufficient to make the wheels of business turn? In Region I, the 345 MW San Roque Multipurpose Project in San Manuel, Pangasinan was completed in March 2003 through the build-operate-transfer (BOT) scheme. Exactly 20 barangays were energized from 2001 to 2003, bringing the barangay coverage to 99.69 percent. In the Cordillera region, all poblaciones have been served since 1997. At the barangay level, 91.29% (or 1,070 out of 1,172) have been energized at the end of year 2002. Kalinga, Ifugao, Benguet and Abra have service coverage of over 90%, while the The 2008 PBD Yearbook I 8

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province of Apayao has the least barangay coverage at 57.25%. In Region II, 331 barangays, or 27% of the population (about 15,000 families) are still not energized. However, the government is targeting 100% coverage by end of this year. The Cordillera’s first hydroelectric power plant, the 75-megawatt Ambuklao HEP, has been non-operational since the 1990 earthquake when it was heavily damaged. In 2002, the CAR’s net power generation was 627.76 megawatts per hour, which is 2.8% of the Luzon Grid. Having only a peak of about 107.5 megawatt, CAR is a net exporter of energy. Cagayan Valley is a region of rich water resource. Its four mainland provinces comprise about 58% of the entire area of the Cagayan River basin and are traversed by four major rivers and its tributaries, lakes and swamplands. The island province of Batanes also has its own share of inland and seawater resource. Given these endowments, the region possesses tremendous potentials for the development of about 240,000 hectares of land for agriculture.

Despite the region’s abundant water resources, regional irrigation coverage merely stands at 47.70% or 225,691 hectares out of the potential irrigable area of 472,640 hectares. The national government lacks funds for irrigation or has a problem with delayed funding releases, and need more local government involvement in communal irrigation systems. Under the master plan for NLAQ, the national government, local government units and the private sector are investing in 23 massive infrastructure projects that will add seven new airports, three ports, three roads, four irrigation projects, a cold chain facility, three power and two flood control projects. “These investments shall increase agriculture production, hasten the delivery of agriculture produce from the farms to the markets, reduce transport costs, cut travel time, and increase farmers’ incomes while helping lower food projects,” a government document on updates on the super regions states. As of May 31 this year, the government has completed the Dingalan port in Aurora and windmills in Batanes. The La Trinidad

Fruit and Vegetable Minimal Processing and Packaging Plant in Benguet is expected to help preserve the quality and increase the shelf life of vegetables from Benguet. The Banaoang irrigation plant is happily ahead of schedule. The following projects are on schedule: the Baler-Casiguran Road, Casiguran Airport, the Poro Point International Airport. The following are still in the pipeline: Alaminos Airport, Salomague Seaport, and the 30-megawatt North Luzon Wind Power Project. The rest are delayed: Halsema Highway, the Tabuk-Tuguegarao Road, the Bagabag Airport, the Basco Airport, the Itbayat Airport, Port Irene, the Bangui Bay Windfarm Project, and the Agno River Flood Control Project. Feeding a nation with affordable food is a business that doesn’t run out of style, especially with the expected global economic slowdown. NLAQ appears to be a region well positioned for the times. – Ma. Salve Duplito The 2008 PBD Yearbook I 

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Luzon Urban Beltway

Keeping the country’s main arteries healthy
DRIVING THE LENGTH of the Subic-ClarkTarlac Exchange (SCTEX) for the first time makes motorists feel like they have been transported to the great highways of North America. More than the fact that it is wide and smooth, and that the sight of mountains blasted in the middle to make way for the only decent highway in North Luzon that is not used for drying rice on a clear day is breathtaking, the major treat provided by the SCTEX is this: it is the only major road project that will connect Luzon’s east and west coasts. It used to be that all goods from the Pacific side of Luzon still had to turn the bend at the tips of Luzon to get to Manila. That’s because before the SCTEX, all major roads in the area went South to North and vice versa like the North Luzon Expressway and the South Luzon Expressway. Thus, SCTEX is the shaft of an economic arrow, if you must, that should help Luzon by bringing Clark and Subic together and creating the biggest economic region in the country, both in scale and economic might. Construction projects like the SCTEX, roads, ports, railways, transmission lines, gas pipelines, wastewater treatment plants, food terminals and airports reduce the cost of business, attract investments, increase the value of land, and hopefully lift every citizen’s boat as well. In the Luzon Urban Beltway super region created by the government in 2006 through Executive Order 561, these mega infrastructure projects are at the crux of making the area a “globally The 2008 PBD Yearbook I  competitive industrial and service center with high quality of life for its people.” The Luzon Urban Beltway is composed of the National Capital Region (NCR), provinces in Region IV-A, and the provinces of Bulacan, Bataan, Pampanga, Mindoro, Marinduque ad the southern parts of Tarlac, Zambales, Aurora, and Nueva Ecija. Government’s vision for the super region is not just to make the Luzon Urban Beltway the center of the country’s industrial and service sectors but also to turn the region into something that will rival Hong Kong and Singapore, and other wealthy Asian cities. As of 2004, services account for 59% of Metro Luzon’s gross regional domestic product, while industry contributes 34% and agriculture, forestry and fishery a minimal 7%. Since the National Capital Region is already the center of commerce, business, industry, and media—home to the Makati and Ortigas business districts—and accounts for half of the country’s gross domestic product, that seems to be the most economically logical plan. The region, however, is bursting at the seams. Cavite is growing at 6% per annum and Rizal at 5.7 percent. Twenty-six million people as of 2000 occupy 41 square meters of land. Traffic is incredibly congested and the dreamed logistic strength, ironically, needs more infrastructure investment. President Gloria Macapagal Arroyo, in her State of the Nation speech indicated that she wasn’t blind to the weaknesses of the region. She said: “To be world-class, we invest in five comprehensive strategies for global competitiveness [in the Luzon Urban Beltway]: 1. Make food plentiful and affordable to keep our labor cost globally competitive; 2. Reduce the cost of electricity to make our factories regionally competitive; 3. Modernize infrastructure at least cost to efficiently transport goods and people; 4. Mobilize, upgrade and disseminate knowledge and technologies for productivity; and 5. Reduce red tape in all agencies to cut business costs. There are also other non-economic considerations, namely human trafficking and red tape. The business plan is to eradicate all these weaknesses with reforms in both soft and hard infrastructure. The network of roads and railways will move goods and people more efficiently.

Subic-Clark-Tarlac Expressway

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Socioeconomic conditions In a services-oriented economy, companies’ greatest assets, people that move up and down elevators and ride commuter trains may opt to migrate to other countries or scale down living to the provinces, and occasionally get burned out, cold feet, and even kick the bucket. No wonder that for the Luzon Urban Beltway, a high quality of life for its people is a crucial precondition for reaching First World status. People need to spend less hours on the road in traffic, have stable and high-paying jobs, be allowed to take time off for recreation, and build families that are happy and contented. The figures show there’s still much to be done. Marinduque, Mindoro Oriental and Mindoro Occidental suffer from worsening poverty, with an incidence level of 40%, higher than most of Asia. By Asian standards, even Bataan, Bulacan, Pampanga, Tarlac, Zambales, Cavite, Laguna, Batangas, Rizal and Quezon’s average poverty incidence level is still steep at 13% to 14%. Metro Luzon’s labor force makes up 39% of the country’s total. Because of the population density, many live in muddy shanties hidden under city bridges and behind

colorful, humongous billboards. Housing backlog is projected to be at 95,000 from 2005 to 2010, or 48.5% of the total backlog in the country. There are not enough hospitals, classrooms and teachers for the rising population. The government says it will solve these issues by improving the quality of basic social services (it is targeting medical tourism for subsidizing health services for the poor), creating onsite and off-site housing for informal and low income dwellers in Metro Manila and expanding the public transport system so they can still come to work without spending half of their day on the road. “So that our commuters in Metro Manila will not be so tired, we will spend money on expressways and trains. We will have a continuous highway from Clark to Metro Manila to Batangas Port. We will construct the Northrail to Clark and the Southrail to Lucena and on to Bicol, and upgrade the link between them. We will also extend the LRT to Bacoor,” Arroyo said in her 2007 SONA.

The government has also prioritized reducing air and water pollution, for example by cleaning up and developing Manila Bay, the Pasig River and other major river systems and tributaries, and turning concrete jungles into residential gardens. Property developers like Ayala Land, and other companies within the highly competitive real estate industry have taken on the challenge of greening Metro Manila. Lately, taxicabs that have converted to liquefied petroleum gas and buses that use compressed national gas have been plying Manila streets, and reducing air pollution, thanks to the spike in oil prices early in 2008. The vision The Arroyo administration envisions Bataan, Bulacan, Pampanga, Tarlac and Zambales— together—as a human resource transshipment and logistics hub in the Asia-Pacific region and as a developed industrial heartland with seamless and integrated physical access into the area. The least advanced of the super region,

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Mindoro Oriental and Occidental and Marinduque can be a gateway to southern Philippines and a food basket for Metro Manila and Calabarzon. Region IV-A (Cavite, Laguna, Batangas, Rizal and Quezon) will house the region’s greatest assets, with well-planned town clusters supported by modern intermodal transportation and digital infrastructure to connect them with each other and preserve their quality of life. The National Capital Region, stretching from Quezon City all the way to Paranaque and Alabang, will be maintained as a major business and transaction center in the AsiaPacific region. Information technology parks and special economic zones will play major roles in this vision. There are 24 IT parks now in the region, accounting for 82.75% of the country’s total and 39 special economic zones or 81.25% of the total. These areas were built to cater to companies looking for fiscal incentives, buildings designed for efficiency and structures that will complement industries. Clark and Subic are being groomed to be logistic hubs since they are located at the heart of Asia. Air travel from both areas to major cities such as China and Hong Kong takes less than two hours. Singapore, Seoul, South Korea and Thailand are just three hours away. Tokyo is four and the United States is 18. By sea, Tokyo and Kuala Lumpur are farthest, but only six hours away, while Seoul is five, Brunei, Beijing and Singapore at four, and Taipei and Bangkok are only three hours away by sea. Interventions The proximity, however, might as well be ignored without world-class airports and ports. Clark and Subic both have international airports and are increasingly servicing flights, but not yet at optimum levels. The government believes it can make the Batangas port fully operational before 2010, and use Sangley Point and Fernando Airbase for civil aviation. Electricity, however, is still expensive. At US$0.09 per kilowatt hour for residential areas, US0.0933 for commercial and US$0.0809 for industrial, power in the region costs much more than in South Korea, Malaysia, Vietnam, China, Thailand and Indonesia. This is a major concern for the super region, which will The 2008 PBD Yearbook I 

MRT-3 passengers

depend on efficient power distribution and generation and cheap electricity to electrify its industries and businesses. The controversial Wholesale Electricity Spot Market, the government says, has already reduced the cost of electricity since it was implemented in 2006. Other interventions to improve the super regions are to upgrade the information and community technology infrastructure (a big technology hub in Quezon City near the UP Diliman Campus is testament to the private sector and government cooperation about this), English training and streamlining of business approval processes. Compared with Vietnam, China, Indonesia, Malaysia and Thailand, Filipinos in the Luzon Urban Beltway have higher minimum wage rates at US$4 to US$6 per day. This is partly because of the high cost of living: food is expensive and cheap and potable water do not flow from faucets and are instead mostly bought. The government has listed both high on its priority list and has started plans to develop Aurora, Marinduque, Mindoro and Nueva Ecija as food baskets for the super region. Fruits, vegetables and other food items are to be efficiently transported from Mindanao and the Cagayan Valley to the Luzon Urban Beltway through efficient transport systems. New water sources are also being developed, namely the Wawa Dam, Laguna Lake and Laiban Dam.

To be truly an Asian center of commerce, the government wants to open up the Pacific Coast but are swamped by problems such as the narrow development corridor due to geographic constraints of the Sierra Madre Mountain range, the Laguna Lake and the Manila Bay. The solution: construct East-West roads like the Marikina-Infanta Road and the UmirayDingalan Road, and rehabilitate existing roads like the Nueva Ecija-Aurora Road. There will be new road constructions and upgrading of facilities in Real and Dingalan. Update on projects As of May 2008, four projects have been completed in the Luzon Urban Beltway super region: the roll on-roll off ports of Lucena and Cawit and the port of Batangas were the first to be completed in 2007. In early 2008, the Subic Port was finished, completing all four priority LUB projects. The four projects, amounting to P14.14 billion, enhanced the RoRo and sea port facilities and services in Luzon. Fourteen more road projects are being constructed to interconnect the industrial, commercial and transport hubs of the super region: 1. The Subic-Clark-Tarlac Expressway Project’s Clark to Tarlac leg and eight overpasses are under construction, which will truly make the expressway useful for agribusinesses from North Luzon;

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2. SCTEX Porac Interchange which will enhance traffic and logistics along the SCTEX and improve its accessibility to Pampanga; 3. Tarlac-La Union Toll Expressway, which will support the socioeconomic development of Regions I, II and CAR, and help decongest traffic along McArthur Highway; 4. Tarlac-Nueva Ecija-Aurora-Dingalan Port Road connecting the XCTEX to the Dingalan Port in Aurora; 5. North Luzon Expressway Project, which will connect existing roads through an 84.5-kilometer parallel expressway to the east of the Pan-Philippine Highway, from Plaridel, Bulacan to San Jose, Nueva Ecija 6. C5-NLEx-SLEx Link that will connect the North Luzon Expressway to the South Luzon Expressway via the C5 Road.

7. EDSA Rehabilitation Project, which is hoped improve travel time and pedestrian safety along Metro Manila’s main artery involves re-blocking, sidewalk rehabilitation, among other things. The Bicutan Interchange has already been completed and the EDSA-LRT Corridor construction is expected to be finished by March 2009. 8. C6 Lakeshore Expressway will serve as an alternative North-South expressway link to decongest EDSA, C5 and its arterial roads through a 16.7-kilometer expressway from the Bicutan Interchange to Ortigas Avenue Extension; 9. Metro Manila Skyway Stage 2 will link the NLEx to the SLEx. 10. SLEx Extension Project will rehabilitate, upgrade and expand the Alabang Viaduct and the toll road from Alabang to Calamba, and construct a toll road connecting SLEx to the Southern Tagalog Arterial Road;

11. Manila-Cavite Toll Expressway Project will connect Zapote, Las Pinas to Kawit, Cavite; 12. Daang Hari-SLEx Link Road will link Daang Hari in Bacoor, Cavite to the SLEx; 13. Southern Tagalog Arterial Road Project Phase II is a 19.74 kilometer road that will cut travel time from Sto. Tomas in Batangas to Batangas City by 40 minutes; and 14. Marikina-Infanta Road will link Sumulong Highway to Masinag, Antipolo, traversing the Sierra Madre Mountains to the intersection of Sinoloan-Famy-Real-Infanta rad. Government is investing around P202.23 billion in eight railways in the super region that will not only speed up travel but will also connect North and South Luzon and close the MRT and LRT loop. These are The 2008 PBD Yearbook I 

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1. Northrail Project is an 80.2-kilometer rail track that will cut travel time from Caloocan to Malolos, Bulacan by 42 minutes and from Malolos to Clark, Pampanga by more than an hour; 2. Northrail-Southrail Linkage Project will rehabilitate the 34-kilometer railway from Caloocan to Alabang and upgrade the 27-kilometer railway from Alabang to Calamba, Laguna; 3. LRT Line 1 North Extension will extend a 5.4-kilometer elevated seamless line from the Monumento Station of LRT Line 1 to the North Avenue Station of MRT 3 to reduce travel time from Monumento to North EDSA from 21 minutes to seven minutes; 4. Metro Rail Transit 3 Capacity Expansion will involve buying more light rail vehicles from 2008 to 2014 to transport more people; 5. MRT 7 is a 22-kilometer rail transit system, with 14 mostly elevated stations from the North Avenue station in EDSA, Quezon City to the Intermodal Transportation Terminal in San Jose, Del Monte Bulacan; 6. LRT Line 2 East Extension to Masinag extends the LRT Line 2 (Recto to Santolan) eastward to Masinag, Antipolo; 7. LRT Line 1 Extension is an 11.7kilometer railway line extension from LRT Line 1 in Baclaran to Bacoor, Cavite to cut travel time; and 8. Southrail Project Phase IA will rehabilitate the railway line from The 2008 PBD Yearbook I 8

Calamba, Laguna to Lucena, Quezon to shorten travel time. Two new airports, Diosdado Macapagal International Airport will promote Clark as one of the best international logistics and services center in the Asia-Pacific Region, and the controversial Ninoy Aquino International Airport 3 has a capacity of 13 million passengers per year on a 63.5-hectare site of the Villamor Air Base has already began servicing flights this year. Power and energy projects, amounting to P48.7 billion, are expected to improve the generation and distribution, and lower the cost of power. 1. The 230-kilovolts Concepcion-Clark Power Transmission Project will provide reliable and more efficient transmission system to serve the growing power demand of the Clark economic zone. 2. Bataan Liquefied Natural Gas Terminal will create a 180 million cubic feet per day facility that will serve as a receiving terminal of imported LNG. Discussions on business strategies have begun early this year. 3. Bataan-Manila Pipeline is a 140kilometer natural gas transmission line and distribution facility. This is expected to be completed in 2012, but discussions are ongoing. 4. Binan-Sucat 230-kilovolt Transmission Line Project will install a 14-kilometer transmission line at the Binan-Laguna and Sucat, Paranaque City substations to increase transfer capacity by 880 megawatts and accommodate the power

Government’s vision is not just to make the Luzon Urban Beltway the center of the country’s industrial and service sectors but also to also turn the region into something that will rival Hong Kong and Singapore, and other wealthy Asian cities. As of 2004, services account for 59% of Metro Luzon’s gross regional domestic product, while industry contributes 34% and agriculture, forestry and fishery a minimal 7%.

grid requirement of South Luzon. Bid documents are up for finalization. 5. 350 megawatt expansion of the Pagbilao Coal-Fired Power Plant. Studies and technical reviews are ongoing. Government is pursuing P9.88 billion worth of flood control projects, namely the KAMANAVA area flood control and drainage system improvement project and the Pinatubo Hazard Urgent Mitigation Project to lessen damages in Sasmuan, Guagua, Lubao and San Fernando City in Pampanga.Two water projects costing P11.35 billion will secure the region’s water supply. One will benefit 2.25 million people living in Muntinlupa, Paranaque, Las Pinas, Pasay, Bacoor and Imus; and the other will recover raw water lost due to leaks and ensure the structural integrity of Angat Dam, which conveys half of the water supply of Metro Manila. There are 80 small irrigation projects that have already been completed, but 40 more are ongoing, one septage treatment plant project in Antipolo, upgrading of 10 hospitals and relocations and housing projects. There is no way but up for this region, and the government is running on a deadline, things that astute investors are already taking advantage of. –Ma. Salve Duplito

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Central Philippines

A tourist haven

FOR YEARS, traveling by road from Mindanao, the southern-most major island of the Philippines, to Metro Manila was impossible. Around 2,075 islands and islets stand between Mindanao and Metro Manila; and before 2006, there was a lack of respectable roads, bridges and ferryboat facilities between them. In September 2008, Ma. Jennelyn and Jonathan Montales, a young couple eager to see the beauty of the Philippine countryside, decided to travel by land from Davao to Metro Manila when the company Jonathan was working for asked him to relocate. They left Davao with one-week’s worth of clothing and supplies in their Nissan Frontier, sat baby Jill securely in her seat, and went northward in the adventure of their lives. They had earlier shipped the rest of their belongings by container van to their new home in Malolos, Bulacan. The leisurely drive brought them from Davao to Surigao where they enjoyed a four-hour roll-on-roll-off (RORO) trip on calm seas from Lipata Port to Liloan Leyte. From there, they drove for two hours going to Tacloban, stopping along the road for lunch and snacked while driving. They even had time to see where Gen. Douglas McArthur landed and to sleep at Hotel Alejandro in Tacloban, a hotel with a historical collection of World War II memorabilia. “It was like Corregidor, and we enjoyed it immensely,” Jennelyn said. The next morning began with a drive that led them to San Juanico Bridge that connects Leyte and Samar; then another RORO ride (this time for two hours) going to Matnog, Sorsogon. They spent two days at Pepperland Hotel in Legazpi City and went on to Manila after the leisurely weeklong trip. The cost: less than P20,000 including fuel, food and port fees. Much cheaper than if Jennelyn, Jonathan and baby Jill took the plane and had the Nissan Frontier shipped to Manila. “It would have cost the company P36,000 just to ship the car. Plus we had a great time The 2008 PBD Yearbook I 2

Sailing in Boracay

bonding together as a family for one whole week,” said Jennelyn. “It was surprisingly easy and the roads, except for Samar’s, were really good,” she added. Transformation The transformation is part of the results of a master plan for the Central Philippines super region created by President Gloria Macapagal-Arroyo in 2006 under Executive Order 561. During her State of the Nation Address on the same year, Arroyo explained why the super region would be developed mainly for tourism.“Central Philippines has the competitive edge in tourism in its natural wonders and the extraordinary hospitality of its people. The area sweeps across Palawan and Romblon, the Visayas and Bicol, plus the northern Mindanao islands of Camiguin, Siargao and Dapitan. Topbilled by Boracay, Cebu, Bohol and Palawan, it attracts more than half of the foreign tourists to the Philippines. It is also the center of geothermal power in the country, which we continue to develop,” Arroyo then said. Central Philippines spans 24 provinces, 45 cities, 524 municipalities and 63 congressional districts. Its land area is 30.5% of the entire Philippines and it has 39% of the country’s coastline—long white beaches and rich coastal marine resources, which includes worldclass Boracay.Seven of the country’s mostvisited beaches are found in the geographical regions of Cebu, Aklan, Negros Occidental, Bicol, Samar, Palawan and Mindoro. Central Philippines has nine primary growth areas: Naga, Legazpi, Tacloban, Tagbilaran, Cebu,

Dumaguete, Bacolod, Iloilo, and Puerto Princesa. Outside these cities are mountains where peaks reach 900 meters, hills, river basins, flood plains, plateaus and valleys. The area is ripe for eco-tourism, a recent craze in the tourism industry. It has 73 declared National Integrated Protected Areas System areas covering more than 320,000 hectares; and 38 proclaimed watershed reserves accounting for almost 311,000 hectares of the super region.

Topbilled by Boracay, Cebu, Bohol and Palawan, Central Philippines attracts more than half of the foreign tourists to the Philippines
While tourists ranging from domestic to Hollywood personalities to royalty have beaten the path to Boracay, only few have discovered the lonely and pristine beauty of places like Sagay City where an island no bigger than

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the size of an average store in a mall during high tide boasts of ultra clear waters and a rich diving spot offering the sight of the biggest clam in the Philippines. There’s Pucio Point, suspected to be the deepest point in the world next to the Marianas Trench, in the Antique Province, and dozens more of hidden surprises for the tourist looking for places to unwind. The uneven development of tourist attractions indicates there is still huge untapped potential in Central Philippines. Tourism revenues from Central Philippines reached P83.82 billion in 2005, with Western and Central Visayas getting the lion’s share, raking in 38% and 35%, respectively. In 2007, 5.84 million tourists trooped to central Philippines. “Using sustainable tourism as the main development thrust enables this super region to tap the development potentials of even the smaller islands and protect these islands’ fragile marine and coastal ecosystem, Medium, small and micro enterprises, agribusiness and other job-generating activities will be spurred by an enhanced infrastructure program and an increase in tourism activities in this Super Region,” a government brochure on the super regions states.

As of 2004, Central Philippines accounted for 20.8% of the country’s economic output, with Central Visayas and Western Visayas providing bulk of economic activity. In 2006, the region saw the highest growth in mining and quarrying, followed by the sectors of electricity, gas and water, agriculture and fishery, trade, and consumption. Private services, which include tourism, grew 6.5% but contributed 10.2% to the super region’s gross regional domestic product. The master plan for the Central Philippines Super Region, based on documents from the National Economic Development Authority, shows that seven “strategic themes” for the area revolve around harnessing coastal and marine resources and addressing the small islands’ fragile ecosystem, linking the islands through efficient transportation and communication facilities, promoting the Central Philippines Tourism Center, developing agribusiness, small-and mediumsized enterprises and export potential, pursuing responsible mining and quarrying, optimizing power potentials and ensuring adequacy and sustainability of supply and enhancing social services.

Harnessing coastal and marine resources Central Philippines’ numerous bays and gulfs are far superior to those of other Southeast Asian countries, and yet, none are included in popular Asian cruises. The super region’s fishing grounds account for 37% of the national fish production. There are 10 existing mariculture parks (at least five hectares in size) that yield milkfish (bangus), grouper, siganid, seaweeds, abalone, mussel and oysters. Thirteen more are planned for Samar, Cebu, Bohol, Negros Oriental, Palawan, Coron and Calatrava. For ecotourism, the Northwest Panay Peninsula Reserve, for example has been declared the last ecological frontier in the Philippines, with endangered species such as the writhed-billed hornbill (aceros waldeni), the Visayan tarictic (Penelopides panini), the Negros bleeding heart pigeon, the Philippine hawk eagle, and the Visayan spotted deer. There are 15 more smallisland fragile ecosystems scattered all over the region that indicates there’s something in the Central Philippines not just for the senses, but also for the soul seeking to understand nature. The 2008 PBD Yearbook I 2

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Boracay sunset

However, years of overfishing using cyanide and dynamite, siltation in mangrove habitats and both domestic and industrial pollution may endanger these ecosystems. The national government, with the help of local government units in the super region, is rushing to create fish sanctuaries in municipalities and enforce fishery laws to prevent more damages. The plan to protect these ecosystems also involves planting mangroves, rehabilitating coral reefs, and using an integrated approach to watershed/ river basin and coastal management. Across the super region’s coastal areas, all these interventions will not be sustainable without the support of locals, many of whom through years of ignorance and neglect, pollute their natural treasures. Linking the islands Jennelyn and Jonathan’s experience two months ago shows that the western, eastern, and central nautical highways are not purely government public relations stunts, but the ambitious plans to link the more than 2,000 islands within the Central Philippines super region will require even more investments in roads, bridges and RORO facilities.Road links from places like Cataingan to Aroroy, Masbate, and then a RORO-boat link from Aroroy to Pilar, Sorsogon, plus a host of other capitalThe 2008 PBD Yearbook I 2

intensive road projects are expected to reduce travel time from Mindanao through Visayas to Luzon by 10 hours and to cut transport cost of people by 40% and cargo by 30%, based on the 2004-2010 Medium Term Philippine Development Plan of the Arroyo government. A NEDA-United Nations Development Program study released in 2005 shows that freight cost P1.75 per kilo via container van, but this can go down to P1.68 via RORO. Losses and spoilage, handling and wharfage costs are also bound to come down, resulting in a total transport cost savings of P1.35 per kilo. These may, however, be offset by taxes and regulatory fees from local government units and cargo handling costs in RORO ports. There is also much to be done to improve existing air links in the region. Airports and feeder ports are a major component of the Arroyo’s infrastructure plan for Central Philippines so that the region can fully benefit from the country’s proximity to major cities like Japan (four hours away from Mactan Cebu International Airport), Hong Kong (two hours) and Singapore (three hours). Small things also matter much to the weary traveler like signages, rest areas and clean toilets.

Because the business and knowledge process outsourcing sectors are major investors in the region, the Arroyo administration also dreams of a central Philippines that is not just linked by roads and nautical highways, but also by fiber optic and wireless networks. This is a challenge especially in smaller islands that abound in the super region, a problem that can only be solved with the support of local government units. Promoting tourism and small businesses From rich dive sites, to Palawan’s famous underground river, from caves to volcanoes, from whale sharks, to manta rays to dolphin watching, possibly no area in the entire Asian region is more densely packed with natural wonders as Central Philippines. The super region master plan has created a more focused tourism brand image for the region, with coordinated marketing of tourism sites packaged together in island hopping experiences, for example. As the tide of tourism is lifted, so do boats of small business serving the sector, as well as export companies that can be competitive with the rest of the world. At present, the major exports of Central Philippines are sea vessels, electronics, furniture, wearables, fashion accessories, handicraft, house décor, gifts, toys and house wares and agriculture products like coconut and

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Whitewater rafting

the increasingly popular virgin coconut oil (12% of Central Philippines is planted with coconut), mango, abaca, nuts and seaweeds. In The shipbuilding industry received in 34 bulk carrier orders in 2006 for delivery in 2009. To realize the vision of more tourist arrivals and SME growth, the government has gone on numerous entrepreneurship workshops and caravans, created one-stop shops for business documentation and enterprise advisory under the Department of Trade and Industry, improved infrastructure like airport and port facilities and is hard at work on ensuring reliable power supply. Available areas for investments are the Rio Tuba Special Economic Zone in the ROPA region with 423.9 hectares, the Bicol Industrial Park, Global Industrial Maritime Complex, the Isarog Heights Special Economic Zone, the Legazpi City Special Economic Zone, the Naga AgroIndustrial Center, te Rapu-Rapu Economic Zone and the Tiwi Ecozone in the Bicol region. Further down south are the Leyte Industrial Development, the Leyte ICT Park, the Amihan Woodlands Township, the Asia Town, The 2008 PBD Yearbook I 28

Bais, Cebu Cybertown IT Park, the Cebu Light Industrial Park, the Cebu South Road Properties, the Federated IT Park and the Mactan Export Zone in the Eastern Visayas. Mira Nila in the Central Visayas appears to be the largest with over 3,000 square kilometers. The others are the MRI Ecozone, the New Cebu Township, the Panglao Tourism Estate, the Pulambato-Bogo, Polo Ecocity and West Cebu Industrial Park, all in Central Visayas. Responsible mining Some of Central Philippines’ riches will have to be extracted and dug out to be enjoyed. Based on June 2006 estimates, there’s an estimated $367.4 billion worth of nickel reserves in the super region, accounting for 90% of the area’s potential mineral resources. Copper is valued at $30.2 billion, while gold is at $14.2 billion. Central Philippines also accounts for almost 20% of the country’s mineral production, which is why there are around 18 existing mining projects in the area and at least 16 more are starting to explore in what they believe are mine sites that will yield precious metals and

minerals.However, the government is watching out for unsustainable practices of informal or small-scale mining operations, conflicts arising from overlapping claims made by mining companies and indigenous communities, poor community acceptance of large scale mining operations due to environmental concerns and share in benefits and sand extraction in offshore areas resulting to a scarring of the environment. With the help of organizations like the US Agency for International Development, even non-government organizations are trying to help solve the problem by simplifying procedures for processing local government units’ share in excise taxes to give them ownership over the mining operations that are approved in their areas. Some of the interventions for Central Philippines also involve rehabilitating minedout areas in accordance with Environmental Protection and Enhancement Program and Postmining Land Use Plan. The Philippine Mining Act and People’s Small Mining Act are also expected to help improve responsible mining in the areas, as well as a more robust partnership between province and private sector through corporate vehicles.

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Power supply Tourism and business will not thrive when power supply is intermittent or faulty. As of 2006, geothermal energy in Central Philippines still had the highest generating capacity, while hydroelectric power has not yet been fully tapped. This has caused power rates to be fairly expensive in the region. The Bicol peninsula has the highest at up to P9.19 per kilowatt-hour for residential consumers, P8.72 per kwh for commercial establishments and P10.15 kwh for industrial users. In the region, power is cheapest in some parts of central Visayas with P5.04 per kwh for residential, P4.9 per kwh for commercial and P4.84 per kwh for industrial users. Many Palawan, Masbate, Northern Samar, and Eastern Samar baranggays still do not have electricity, but all other barangays already enjoy power. The problem is that by 2011, the government expects critical capacity for the Visayas to start. This can partly be solved by Transmission Corp.’s upgrades and installation of transmission lines and substation capacities in the area and interconnect small island grids of Bantayan, Guimaras, Siquijor, Camotes and Romblon. With sustainability of power becoming more of an issue, not just in central Visayas but also the rest of the Philippines, there is renewed search into potential renewable energy sources which include micro hydro, rice residues, and coconut residues. Wind energy is also encouraged for Catanduanes, Guimaras, Masbate, Northeast Coast of Negros Occidental and Palawan. Solar energy and biofuels also present ripe opportunities for investors in the region. Update on projects There are 52 priority infrastructure projects for central Philippines including 18 seaports, 16 airports, nine power and electrification, six roads and bridges, two flood control projects and one railway system. As of May 2008, 11 have been completed, namely two roads, seven RORO ports and two airports. The improvements are happening, but businesses and tourists want more, so that the rest of the world can see what Central Philippines can offer. –Ma. Salve Duplito The 2008 PBD Yearbook I 0

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Agribusiness Mindanao

Making the promise a reality
When the Mindanao super region was created in 2006, President Gloria Macapagal-Arroyo said the country’s second biggest island is the government’s priority for agribusiness investments in the south, and that she will plow in more money in the super region than in the others. “Our investment priorities mirror those for North Luzon and more because Mindanao has the poorest regions and poorest provinces and because we have to spend on a logistics system linking it to the north,” she said in her 2006 State of the Nation Address before the 13th Congress. The super region is composed of 25 provinces, 27 cities, 411 municipalities and 10,044 barangays encompassing Regions IX, X except Camiguin, XI, XII, Caraga except Siargao and Autonomous Region of Muslim Mindanao. It is where more than 18 million Filipinos live. Then presidential adviser for the peace process (now press secretary) Jesus Dureza was appointed as development champion for the region and he promptly met with local government executives in Mindanao eager to jumpstart economic activity in the super region, which accounts for 35% of the country’s land area. The pregnant expectations from local chief executives were to be expected. The plans for the super region were anchored on the creation of five major growth centers that would turn central and northern provinces into a major transshipment hub; western and northern provinces into a fishery and mariculture center; the northern and eastern provinces into an agro-forestry and mineral center; the center provinces into an agri-industrial core and the eastern southwestern provinces, including Davao, into an urban and agri-industrial center. Imagine how these would benefit the 8.514 The 2008 PBD Yearbook I 8

million persons in the labor force as of 2006, 5.4% of which were unemployed and 26% were underemployed. Official poverty statistics also showed that 39.1% of Mindanao was still under the poverty line. The super region, likewise, accounted for 23% of the national housing backlog with almost 140,000 housing units needed. Strategic themes As is the case when government and business want to invigorate an economy, infrastructure investments take priority. These projects are expected to turn Mindanao into the country’s main agri-fishery export zone with brisk activity in fruit and vegetable production and processing, feed milling, animal production, meat processing, snack foods, coconut, ornamental horticulture production and industrial tree plantations. Almost all rubber exports, for example, come from Mindanao, with six oil palm and rubber plantations scattered all over the super region. The other major crops include cacao, pineapple, banana, coffee, cassava, corn and coconut. There are eight banana plantations that cluster in the central area of Mindanao and two pineapple plantations, one in Bukidnon and another in Polomoloc. The major agricultural exports so far are coconut oil, banana, tuna, pineapple (fresh, preserved and juice concentrates), oil, rubber and desiccated coconut.Several companies have already discovered the seaweed, palm oil, cocobased and halal poultry industries’ potentials.

Economic zones that are ready for occupancy for new entrants include the Ayala de Zamboanga Park in Region IX, First Cagayan de Oro Business Park, Jasaan Misamis Oriental Ecozone, Pueblo de Oro IT Park, Global Ispat Industrial Park and NSC Special Economic Zone in Region X. In Region XI, the five ecozones are the Apo Estates Special Economic Zone, the First Oriental Business & Industrial Park, the Samal Casino Resort, the SRC Calumpang and Tiger Valley Industrial Estate. Region XII has four, namely, the CIIF AgroIndustrial Park, Filinvest Technology Park General Santos, the General Santos Special Economic Zone and the Sarangani Economic Development Zone. In the Caraga Region, there’s the Nasipit Agusan del Norte Industrial Estate, the Philnico Industrial Estate, Shannalyne Technological and Environmental Park and the Tuba AgroProcessing Center. In ARMM, there is only one, the Maguindanao Ecocity. Official figures show that minimum wage rates in Mindanao are still much lower compared with neighboring countries (Malaysia, Thailand, Taiwan, South Korea and Singapore), at $3.28 to $4.10 per day. Electricity costs are also lower at P4.62 per kilowatt-hour, compared with the P6.27 per kilowatt hour average price for the country. The way for an even better agri-business sector, based on the super region master plan, is to intercrop in coconut plantations and to urge

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local government units to invest in post harvest facilities. Hybrid rice and corn are also being promoted and state universities have been given mandates to research and develop better ways of expanding mariculture development and agri-business produce. For fisheries, the Medium Term Philippine Development Plan envisions an aquaculture, fish processing and canning, crab and prawn production, as well as seaweed farming and processing center for Mindanao. There is much to be done to reach this status: establish multi-species hatcheries, seed Lake Lanao with fingerlings, form fishermen’s cooperatives and buy bigger and better boats. For mariculture development, the government’s priorities involve establishing seaweed nurseries, post harvest equipment such as smokehouses and seaweed solar driers, mariculture parks in the Island Garden City of Samal and promote exports.As of 2006, Mindanao contributes 42% of total fishery production and is the center of the tuna and sardines industry. It is also a major producer of carageenan. The marine and fishery areas are in Pangul, Butuan, Gingoog, Sibuquey, Lianga, Murciellagos Bays and in the Sulu Sea, also in Davalo and Moro Gulfs, and in four lakes, Lanao, Buluan, Mainit ad Pinamaloy. Seaweeds are most prominent in Lanao del Norte, Sulu and Tawi-Tawi. Aquaculture products with high potentials include groupers (lapu-lapu), seabass (apahap), eels (kasili), mussels (tahong), oysters (talaba), sea urchin (tuyom), milkfish (bangus), carp (tilapia), prawns (sugpo), crab (alimango), catfish (hito) and aquarium fish. For livestock and poultry development, government’s priorities are for preventive measures against avian flu and other diseases, processing plants, cold storage and laboratories, improving genes of existing production stock, quality standards for pork and poultry products and strict quarantine measures and other related regulations. The plan also intends to expand goat production to cater to the Middle East market, develop a home-based meat processing industry and encourage public and private partnerships to further develop the halal food industry. Mineral resources are also a major strength of the super region, since it is rich in gold, nickel, copper, iron, ore, lead, zinc, chromite, and magnetite. Mindanao accounts for nearly of the country’s gold reserves and 83% of nickel reserves. Its nickel deposit is the largest in Asia. The 2008 PBD Yearbook I 

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Zamboanga, Surigao and Diwalwal are the most notable mineral reservations so far, but at least 11 major mining products and corporations are already exploring Mindanao. The value of potential copper reserves has been placed at $6.49 billion, gold at $2-$3 billion and nickel at $2 trillion. Gas and oil deposits are also found in the Sulu Tawi-Tawi shelf, the Cotabato basin and the Agusan Davalo Basin. Roads and bridges Under the plans for the super regions, the government intends to supply international demand for fish products. For this to be sustainable, it will regulate fishing in traditional areas. Mindanao will also increasingly become a source of food to Visayas, Central Luzon, Metro Manila and Calabarzon, all of which suffer from the loss of agricultural lands and from increasing population. To supply such demand, all these strategic themes will need road networks, seaports and airports to work, which will link Mindanao to these areas through the Western, Central and Eastern nautical highways. Transporting goods through the highways reduces cost by 11% and time by 10 hours. Mindanao is the beneficiary of nationwide farm-to-market roads, small irrigation projects, and hospitals. On top of that, government has lined up eight more roads, one bridge, seven airports, two seaports, one major irrigation project, and eight power and electrification projects. The going, however, has been slow. Only three projects have been completed since that meeting. There is the Diosdado Macapagal Bridge in Butuan City, which now enhances travel from the Surigao-Agusan-Davao Road to the Butuan City-Cagayan-Iligan Road. The goal iss to support the growth of the Caraga geographical region, especially sleepy Butuan City. And then, there are the 210-megawatt clean-coal-fired power plant in Misamis Oriental and the solar power pPlant in Cagayan de Oro, both are now contributing to Mindanao’s power requirement. Aside from the three completed, there are 25 more projects waiting in the wings in the massive region, and these will incur equally massive costs. The 2008 PBD Yearbook I 0

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Government is spending P20.43 billion in all for new major road networks in the Mindanao super region to make it easier to bring farm produce to the market faster and cheaper. The Dakak-Dapitan Road project will widen 10 kilometers of road in Dapitan City leading to Dakak, which is famous for its coral reefs and diving spots. Businessmen and tourists should have a more reliable, efficient and safer access to Dapitan City and Dakak by August 2009, when the road is expected to be finished. A bigger and longer road, the Dinagat Island Road Network, should also be passable by April 2009. It connects the municipalities of Cagdianao, Loreto, Dinagat, San Jose, Basilica, Libjo and Tujanon in the province of the Dinagat Island, with a total cost of P504 million. Even barangays in Esperanza, Agusan del Sur will be included in another road network costing P92 million, but the project is still in the process of completing detailed engineering. In the works is a P2.07 billion, 88-kilometer road project that will provide access to the agricultural, industrial, fishing, commercial and tourism activities in the provinces of Maguindanao and Sultan Kudarat. The government expects that the contract packages will be completed by October 2009. Iligan City’s growing traffic congestion is expected to be eased by a new circumferential road costing P363.1 million, allowing transfer of goods to and from the “City of Waterfalls” to be quicker and cheaper by December next year. The Zamboanga West Coast Road, also known as the Sibuco, Saraway, Siocon, Baliguian, Gutalac Coastal Road in Zamboanga del Norte will serve as a backbone link connecting seven coastal towns and two major cities, namely Zamboanga City in the south and Dipolog City in the north. Construction is still in its early stages as of May 2008, but the government is targeting to finish by December next year at a cost of P3.65 billion, which will make it easier to transport the area’s major products – yellow fin tuna, corn, coconut and rice. In Davao, the strongest geographical region of Mindanao, a major P6.84-billion road project will rehabilitate 448 kilometers of road straddling Surigao del Norte, Surigao del Sur, and Davao Oriental. The project has been divided into six sections, namely Bacuag-Claver, Marihatag-Hinatuan-Bislig, The 2008 PBD Yearbook I 

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Manay-Mati, Cortez-Tandag-Marihatag, and Bislig-Manay. As of end-May 2008, the 66.65-kilometer Manay-Mati section in Davao Oriental is almost complete (90%), and the whole project should be completed by June 2010. The Davao region, which has traditionally been agri-based is morphing with amazing speed into a center for agroindustrial business, trade and tourism because of its bananas, pineapples, fresh asparagus, and fish products that are exported to different countries, especially to Brunei Darussalam and parts of Malaysia and Indonesia. To link Tubod, Lanao del Norte and Tangub City in Misamis Occidental, which has the biggest area of brackish-water fishponds in the region and is famous for seafood, the government is also constructing the P4.45billion, 2.36-kilometer Panguil Bay Bridge. Based on the plan, the bridge will allow unimpeded flow of goods and services between Lanao del Norte and Misamis Occidental. Airports and sea ports Aside from road networks, airports are also one of the major components of the Arroyo administrations infrastructure plan for the Mindanao super region. Nothing delights a businessman or investor more than modern, efficient and well-maintained airports. Government has seven airport projects for Mindanao to transport people and produce from the region to the Luzon Urban Beltway, costing P9.802 billion. The Butuan Airport’s timetable shows it should have been done by September 2008, but the project has been delayed. Improvements were made in the runway extension, widening, asphalt overlay, air navigation facilities, airfield lighting system and the terminal building. Cotabato Airport is expected to be completed in February 2009, at a cost of P302 million. Some of its components like the supply and installation of the O-shaped carousel conveyor, relocation of runway lights, rehabilitation of the terminal building and air navigation facilities were still in the bidding process as of end-May 2008, but the asphalt overlay of the runway and its widening has been completed. Dipolog’s airport also got a facelift to the tune of P353 million. The project involved shore protection, asphalt overlay for the runway and widening, a perimeter fence, a better administration, terminal and fire station buildings, and air navigation facilities. The 2008 PBD Yearbook I 2

In Misamis Oriental in the northern part of Mindanao, a totally new international airport is being built in Laguindingan. Airlines are expected to start using the airport by January 2012, providing people and goods access to Cagayan de Oro City and Iligan City. It will replace the existing Lumbia Airport in Cagayan de Oro and will be the first international airport in Northern Mindanao. Other areas that will benefit are five coastal towns in Lanao del Norte, El Salvador City and Gingoog City of Misamis Oriental. Three other airports are also being rehabilitated and improved, one in Ozamis, another in Pagadian and the last in Zamboanga del Sur, costing the government a total of P987.46 million. As for seaports, two major projects costing P995.49 million are expected to contribute to the super region’s competitive edge in agribusiness. The Cagayan de Oro port in Misamis Oriental should be fully operational by February 2009 with a better back-up area for the newly constructed wharf. The Davao Port in Sasa, Davao City will cost P422.62 million and is expected to be completed by January next year. Irrigation and power In an agribusiness zone, water and power come together to improve yield. Irrigation projects in the Mindanao super region is seen to expand the country’s palay production by 302,851 metric tons. The Kabulnan Irrigation project straddles Maguindanao and Sultan Kudarat, costing a huge sum of P13.52 billion and expected to be completed by December 2012. It will have the capacity to irrigate 20,000 hectares of land, boosting palay production by 109,795 metric tons annually. Documents from the National Economic Development Authority (NEDA) show it should benefit up to 10,000 farm families in the area and allow the fisheries sector to benefit from the 610-hectare water surface area of the reservoir. On top of that, it will generate up to 66 megawatts of hydroelectric power. Government is already looking for funds for this massive irrigation project. Aside from this, 119 small irrigation projects have already been funded in 2007, while 141 are still undergoing restoration and rehabilitation. All told, they cover 16,933

hectares, which should benefit 18,000 families and increase palay production by about 138,851 metric tons. Power and electrification has been major problems in this huge super region. Although the 210-megawatt Mindanao coal-fired power plant by the National Power Corp. in 2006 provided adequate power supply until this year, government forecasts that Mindanao will need additional capacity of 100 megawatts. The Arroyo administration is, thus, preparing to spend P29.22 billion on nine electrification and power projects to meet this rising demand. The P16.27-billion 210-MW clean coal-fired power plant, constructed under the buildoperate-and transfer scheme and currently operated by STEAG State Power Inc., was built

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to increase the energy supply of Mindanao by generating an additional 210 megawatts (MW) of electrical capacity. It currently supplies 20.61% of Mindanao’s total generation mix. Completed and operational in November 2006, the plant is currently helping stabilize Mindanao’s power supply by reducing its dependence on relatively expensive oil-based power plants. The solar-powered plant in Cagayan de Oro was built at a cost of P265 million and started operations in September 2004. The plant, which consists of 6,5000 polycrystalline silicon-based panels, is located in Brgy. Indahag, Cagayan de Oro City, Misamis Oriental but provides power for the municipalities of Jasaan, Tagoloan and Villianueva in Misamis Oriental. The plant is 100% emission-free and has no identified threat to the public’s health. Moreover, the plant’s operational costs are minimal, as compared to conventional power plants (i.e., diesel and coalfired power plants) since its operation is fully automated, requires only ancillary services for daily maintenance.

The Agus 3 yydroelectric power plant in Pantas, Lanao del Norte is a P1.68-billion project. The Lanao Hydropower Corp. has created a special purpose company, the Agus 3 Hydropower Corp., to implement, construct, operate, and eventually maintain the power generating facility in the long run. The P1.90-billion Agus 6 yydroelectric power plant units 1 &2 upgrading project in Iligan City shall enhance the power generation capacity of the plant by the time it is completed in December 2010. The National Power Corp. is currently reviewing bids for the project. By 2009, the P8.01 billion Abaga-KirahonMaramag-Bunawan transmission project will establish the backbone transmission system from Northern Mindanao, where the majority of the cheap and environment-friendly hydro plants are located, to Southern Mindanao, where the bulk of the major industrial and commercial customers are. The project is divided into three (3) transmission sections: the Abaga-Kirahon (138 kV), Kirahon-Maramag (230 kV), and Maramag-Bunawan (230

kV). All the portions are under right-of-way acquisition for the power sites and stringing sections. The whole project will be completed by June 2010. The General Santos-Tacurong 138 kV transmission line project will straddle the provinces of South Cotabato and Sultan Kudarat and cost P1.09 billion. This project, which will be implemented by the National Transmission Co., is under bidding. The government has spent P1 million to initiate the development of Jatropha nurseries in Bukidnon. This shall help promote biofuels as an alternative energy source. Right now, the Philippine National Oil Co.’s Alternative Fuels Corp. is conducting a technical and economic evaluation of the Zubiri Group’s proposal to assess the feasibility of establishing nurseries in Bukidnon. In Gen. Santos City, P1.5 million has been spent on Jatropha nurseries. One (1) production sit in Brgy. Calumpang is in operation while negotiations for site acquisition and development are under evaluation by PNOCAFC. The 2008 PBD Yearbook I 

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The plans for the Mindanao super region are anchored on the creation of five major growth centers that would turn central and northern provinces into a major transshipment hub; western and northern provinces into a fishery and mariculture center; the northern and eastern provinces into an agroforestry and mineral center; the center provinces into an agriindustrial core and the eastern southwestern provinces, including Davao, into an urban and agri-industrial center. Businessmen come in all shapes and sizes, but they agree on one thing. Mindanao’s typhoonfree land is best suited for agribusiness. The land and seas are ripe with potential; there are no doubts about that. It’s just that the government and investors have to fight a different kind of cyclone that has ravaged this super region for years, and that is poverty and unrest.
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The list of projects indeed shows that “construction is crisscrossing Mindanao,” as Arroyo claimed in 2007. Investors and businessmen are hoping all these road networks, airports and seaports will make it easier and cheaper for the country’s “food bowl” to truly supply even Luzon with much-needed produce at cheaper rates. As it is, shipping pineapples and other produce to Hong Kong is cheaper than Metro Manila. More importantly, these developments are hoped to bring a sense of inclusion among Filipinos living in Mindanao, and put an end to the peace and order problem that has been the bane of the super region. Official figures from the National Statistical Coordination Board give hints that these projects are bearing fruit. The Mindanao super region grew 5.1% in 2007, with all the regions of Mondanao registering increases in per capita gross regional domestic product, with Caraga turning in the best performance.

Zamboanga peninsula accelerated 5.2 percentage points from almost zero in 2006. Davao’s per capital GRDP went up to 5% in 2007 from 2.6% in 2006. ARMM and Northern Mindanao rose to 2.9% from 1.3% and 5.7% from 4.7% respectively. Socksargen was sluggish, however, and grew 4.4% in 2007, hardly budging from 4.2% in the previous year. “If we can harness the forces of good in our nation, the positive force at work here at home and those from abroad such as the US, Malaysia, the OIC and others, we shall prevail in Mindanao with a peace agreement that brings freedom and hope to all Filipinos. With this peace, we would reap dividends in resources invested in agribusiness, not aggression, to build up, not tear down, the Philippine south,” Arroyo said in 2006. A dream that many, even those who are not the administration’s allies, also wish will happen for the Mindanao super region, proving that the master plan is indeed more than a “gimmick” but more of a blueprint for development. – Ma. Salve Duplito

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The bright lights of the ‘Cyber Corridor’
IN NOVEMBER 2008, President Gloria Macapagal-Arroyo inaugurated the UP-Ayala Land Techno Hub on Commonwealth Ave. in Diliman, Quezon City, a 20-hectare affair that already has modern-looking structures, two of which has HSBC and IBM prominently displayed on one side. The techno-hub, Arroyo says, is the Philippines’ version of US’ Silicon Valley and would be the country’s foremost IT laboratory, training ground and incubator. Arroyo, with Ayala Land president and chief executive officer Jaime Ayala and University of the Philippines president Emerlinda Roman “pressed the button” instead of cut ribbons to signal the official launching and start of operations of the techno hubs. The area, once home to Ferris wheels and other rides especially during Christmastime, is expected to significantly fuel the information and communication technology (ICT) sector’s already-bristling growth. The ICT sector brought in more than $5 billion revenues for the economy in 2007, almost one third of what the government collected in taxes for that year and is already a major source of foreign exchange for the economy. The Arroyo administration hopes the industry will bring in $6.8 billion in 2008 and that by 2010 the figure would reach $13 billion. At the ground level, the industry has become a savior for many Filipinos, including Analy Pinaroc, 34, who needed a job to supplement the family income and send her three children to better schools. Analy has never been to the United States, but her English is clear and immaculate. It was good enough for her supervisor, who promoted Analy this month. Then there’s Marx Vergel Melencio, an owner of a small company who rakes in The 2008 PBD Yearbook I 0 around $8,000 monthly in revenues from his BPO business. He’s blind. He discontinued his studies in UP Diliman after an unknown gunman shot him in the head and in the chest, hit an optic nerve and rendered him blind. However, he continued studying at the UP Open University to learn all about computers and discovered that with the Jaws screen reader, he could do what anyone could, or even better. The vision From the point of view of policy makers in Malacanang, this is welcome proof that the creation of a CyberCorridor Super Region in 2006, straddling all the major Philippine islands, was an idea way ahead of its time. Back then, the vision was to create an ICT channel—a virtual highway—running over 600 miles across the country, from Baguio City in the North and Zamboanga down south of the archipelago. “Supported by a $10-billion high bandwidth fiber back-bone and digital network, the CyberCorridor is home to numerous cyber service providers that supply expert services in various fields of ICT like BPO, contact centers, animation, medical and legal transcription, software development, elearning, e-entertainment and gaming, and other back office operations (e.g. finance and accounting, human resource development, etc.),” a brochure on the super region says. For these businesses to flourish, the government has said it would sharpen education, training services and career advocacy in the areas of IT network and project management finance and accounting, engineering and other related services. It would invest P66 billion in the super region, a princely sum, but something the Arroyo administration hopes would create jobs for the country’s growing labor force. From more than 343,000 employed in the industry in 2007, the National Economic Development Authority (NEDA) projects that more than 900,000 will be employed in the industry by 2010. “I had coffee with some call center agents last Labor Day. Lyn, a new college graduate, told me, ‘Now I don’t have to leave the country in order for me to help my family. Thank you.’ I was so touched, Lyn, by your comments. With these structural reforms, we not only found jobs, but kept families intact,” Arroyo said during her 2006 State of the Nation Address before the 13th Congress. Many others are making decent careers and earning sizable incomes in the industry, especially those who are reaping the gains from the industry’s shift into knowledge process outsourcing (KPO). The Philippines is known for its highly intelligent workforce, and KPO offers just the right opportunities for managers who used to look for jobs abroad to work at home and earn more money.

UP-Ayala Land Techno Hub

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KPO offers services higher up in the value chain like financial capability assessment for mortgage companies, enterprise resource planning, process mapping engineering, financial markets, process control, animation and simulation (think Disney and gaming), automotive and aerospace design and development, writing and content development, and international financial reporting systems, for example—and can thus charge clients higher fees. These are not just data entry jobs; these are lots of think work for hotshot Filipino MBA holders, software engineers, accountants, management engineering experts, and mathematicians. John Clements International Consultants says in an article that the country serves as a fertile ground for KPO firms that deal with engineering design, financial consulting, and medical content and services. “Projections for industry growth for BPOs is estimated to reach up to US$ 20 billion by 2010, compared to US$ 12 billion for KPO,” it says. According to the Professional Regulation Commission, the Philippines has over two million licensed professionals in 2006. Of this number, more than 100,000 are certified public accountants, over 120,000 are midwives, there are over 26,000 electrical engineers, electrical and communications engineers, as well as chemical engineers number up to more than 22,000 each, there are over 16,000 architects, medical technologists number up to over 40,000, while there are more than 95,000 licensed physicians and over 40,000 dentists. Official government figures also show that the Philippines has a skilled labor force of 29 million people. There are 350,000 tertiary level graduates every year and 36,000 of these graduate from ICT-related degree programs like computer science. Around 100,000 receive degrees in commerce or business administration. The META Research Group has ranked the Philippines eighth among knowledge workers from 47 countries back in 2000. Rubin Report also ranked the Philippines number one producer of knowledge workers. Another thing that makes the Philippines a hot outsourcing destination: Filipinos are more attuned to Western culture than most Asians. Few in this country appreciate a touchdown but most understand what a three-point shot can do to a basketball game in the last three minutes.

This distinctly American culture has made the call center business and the ICT sector as a whole the fastest growing industry in the Philippines in recent years. According to AT Kearney, a top Netherland-based consulting firm, the Cyber Corridor ranks eighth in the 2007 survey of preferred ICT destinations in the world. The plan For the government, the direction appears to be well-lighted and clear: the Philippines is already a favored offshoring and outsourcing destination, so the Cyber Corridor Super Region should spur more of this growth through more investments in infrastructure, education and training. In the Arroyo administration’s Medium Term Philippine Investment Program (MTPIP), the government identified the following projects for the Cyber Corridor: government broadband network budgeted at P5.1 billion (this has been scuttled due to allegations of graft), the ICT education and distance learning at P11.1 billion, the public access and postal program at P3.5 billion, the disaster prevention and Preparedness at P3 billion, the government mass media and broadcast services at P4 billion, and the technical assistance projects at P221 million. Because of the increasing demand for knowledge workers, CICT chair and Cyber Corridor super region development champion Ramon Sales is pushing for a better education system. At present, there are some fears in the industry it will soon run out of talent, and this is exacerbated by poorer and outdated curricula even in top schools in Metro Manila. The answer: the National English Proficiency Program being implemented by the Department of Education and the Commission on Higher Education, the distance learning program to be implemented by the DepEd; and training for work scholarship project implemented by TESDA. When it comes to setting up capital-intensive infrastructure, government encourages partnerships with the private sector and persuades local government units to also pick up the tab when necessary. In May 2007, for example, the ICT sector got a boost from a 20,000 Asian American Gateway (AAG) fiber optic cable network in Bauang, La Union in Northern Luzon, providing a boost to the Cyber Corridor dream.

The AAG project will link Malaysia to the US via Singapore, Thailand, Brunei, Vietnam, Hong Kong, the Philippines, Guam, Hawaii and the US West Coast through an undersea cable system that is not easily disrupted by national disasters. The network is owned by a consortium that includes the government of Brunei, Telstar of Australia, AT & T of the US, Bharti of India, CAT of Thailand, PLDT of the Philippines, PT Telekom of Indonesia, Telekom of Malaysia, StarHub of Singapore, and VNPT of Vietnam. “The award-winning communications system will support the rapidly growing business process outsourcing and call centers industry in the country and strengthen its bid as the most favorable investment destination for BPOs and call centers,” President Arroyo said during the launching for the facility. For Arroyo’s Metro-Manila-is-not-thePhilippines pronouncement to actually happen, infrastructure and investments must be spread across the regions. The CICT has been trying to do this through three projects: the PC ng Bayan program (which provides cheap computers using open source software), the Community e-Center Project and the National Broadband Deployment Plan. The last one has been scuttled due to allegations of corruption. Under the Community e-Center Program, the CICT began in 2006 the Internet in Schools (iSchools) projects to wire schools, empower teachers so that they know how to use these computers for a better classroom experience for students (ICT literacy/competency training for teachers, lab management, sustainability), tech support, and monitoring and evaluation. So far, there are 1,671 high schools with connectivity, spread out all over the country. There are eCare Centers (target is to have one per region) specially designed to provide access and training programs for persons with disabilities (PWDs). Then there’s the eLGU CeCs to enable local government units to deliver services more efficiently, while providing their respective constituents with access to the Internet and other ICTs. The project also recognizes model websites and best practices in the local government to encourage replication of useful and innovative applications. The CICT also hopes that regional ICT Centers will spur regional development through the use ICT in education, commerce The 2008 PBD Yearbook I 

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and governance and spearhead the building of local e-marketplaces or one-stop-shops for e-commerce, e-learning and e-government services.

can allow their backroom operations in the Philippines to answer calls from their customers at a quarter of the cost. AOL is a major example. Accounting, data entry and payrolls of companies in the US were done by staff in Quezon City. In 2003, Forrester Research, a technology research company in Cambridge, Massachusets, predicted that by 2017, 3.3 million back-office jobs in the US will migrate to other countries, including China and Russia. The Philippines is widely expected to get bigger, and bigger slices of that pie. Companies outside Metro Manila have discovered that the industry is like a gold mine. Davao, Metro Cebu, Subic, Bacolod, Clark in Pampanga, among others, had been abuzz with the golden opportunities. Arroyo has just given a directive to Sales to create an ICT hub in every province, enabling it to house at least one call center. “We need to wire the entire country to attract more BPO and hardcore technology companies, and help train young Filipinos into world class workers in programming, embedded technologies and network engineering,” she said in a speech at the UPAyala Techno Hub. Even real estate companies have been getting in on the action. They are capitalizing on the ICT boom by building structures that are uniquely designed for ICT firms. Cyber parks have sprouted all over the country, with many aspiring for tax incentives from the government—and getting them. Telecommunications companies like ePLDT found a growing demand for broadband. As a result, mother company PLDT’s stock rose from P300 to more than P3,000 per share at the beginning of 2008. Then the US economy collapsed dragging the rest of the world with it and created a cloud of fear that choked everyone, especially those in the richer parts of the globe. At a time when the world’s biggest countries are in recession, can the Philippines’ CyberCorridor super region continue expanding as it had in recent years? There are more positive thinkers than naysayers. American companies who are not in the brink of shutting down are desperate for ways to cut costs—now more than ever—and these will turn to countries like the Philippines, BPO executives, the government and foreign analysts say.

The ICT sector brought in more than $5 billion revenues for the economy in 2007, almost one third of what the government collected in taxes for that year and is already a major source of foreign exchange for the economy. The Arroyo administration hopes the industry will bring in $6.8 billion in 2008 and that, by 2010, the figure would reach $13 billion.
Global crisis Since Arroyo’s nationwide address in 2006, it looked like the happy days will never end. American and European companies have discovered that cutting edge connectivity The 2008 PBD Yearbook I 2

A recent survey by the Business Process Association of the Philippines (BPAP) and Outsource2Philippins (O2P) and managed by strategic marketing communications firm TeamAsia, shows that 65% of respondents felt that 2009 prospects were “excellent to outstanding” given the shift in the industry to higher-value services. BPAP expects to grow 35% to 40% this year, and 40% annually until 2010, to employ around one million people from 300,000 at present. There are some early signs that this optimism is not just a sick man’s last grasp for hope. StarTek based in Denver, Colorado, is expanding its workforce in its first facility in Makati City to provide customer care, sales support, complex order processing, accounts receivable management, among others. It operates 21 facilities in North America and the Philippines. Major player Oracle says the financial crisis will force US firms to keep their best talents and find out how to maximize their employees well, a trend that augers well for human resource software programmed in places like the Philippines. Citigroup, which has been bailed out by the US government, says it will expand its workforce in the Philippines, picking the country as its hub for its BPO operations. Convergys will be opening and staffing five new facilities. The first facility, Cebu Asiatown i3, was opened in September. Two more sites are scheduled for opening in December—UP Science Ayala Park and Nuvali in Laguna. In April 2009, the Glorietta 5 facility in Makati and San Lazaro in Manila would likewise be opened. That will make 15 facilities from just one in 2003. London-based outsourcing firm Logica has said in early November that it would double its workers by end-2008 from 400 to 800. Curiously, Logica is currently in a restructuring mode and is depending on its operations in the Philippines to cut down its costs. Logica provides software support for SAP customers in Europe. The Bank of New York Mellon, a global leader in asset management and securities servicing, in fact believes it’s the country’s BPO/KPO industry that will help the country weather the global financial crisis, mirroring the BPAP’s sentiment that the BPO sector is “one of the few bright lights amid the gloom and doom of the global financial crisis.”

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The picture, of course, is not totally peaches and cream. Major call center firm Advanced Contact Solutions reportedly retrenched 900 workers in October 2008. eTelecare, another big contact center, has reported a 17% drop in its net income as of September 30. An investors guide Investors who want to position themselves for growth in the ICT sector despite the global crunch have five mature sites in the Philippines to choose from, namely Metro Manila, Metro Cebu, Clark, Pampanga, Baguio City and Metro Davao. There are 21 locations with existing strategic ICT plans already and the CICT is schedule to conduct scorecard exercises for 10 more. The scorecard currently used by the CICT is a highly detailed and intricate scoring system developed by the McKinsey group. It provides prospective investors and businesses with a highly measurable list of attributes so they can make an informed decision on where they should bring their business. Prospective investors would be interested to note that score cards use metrics such as workforce development, presence of telecommunications facilities, real estate development, vendor support, local government unit and community support, sustained power supply, tax incentives, peace and order, and transportation, among others to help locators or investors determine where they want to bring their business. The first part is on human capital development and potential as a supplier and the second part on infrastructure and potential as a location. To determine whether investors would have access to a sufficient talent pool, the scorecard measures workforce development by assessing the number of top colleges and universities in the area, the presence of bridge program providers, whether major fields of study are ITrelated, accounting, nursing or physical therapy degrees, whether graduates prefer to work in the area and whether special programs that help graduates to speak English flawlessly and give them the financial support to do all these things are offered. Telecommunications infrastructure is the lifeblood of ICT firms, and the scorecard measures the number of telecommunication providers in the city, fiber-optic capabilities, bandwidth and whether there is still room for new entrants.

New investors also need buildings suitable to their operational requirements. The scorecard measures the number of existing and planned IT parks or buildings, availability of IT-ready buildings, three-star hotels or better, and longterm accommodations for principals. (You don’t want your American counterpart to be sleeping in a hovel). Vendor support that service telecommunications, hardware and software requirements are also included in the scorecard, and even the time needed to get a qualified engineer for on-site support is scored (can he be reached within four hours? for example) They say it takes a village to raise a child. In the ICT sector, it takes multi-stakeholder support to have a cyberpark up and running. The scorecard puts much weight on whether the mayor to the governor to the local chamber of commerce is on-board. Having an investment promotion body and even nongovernment organizations providing support to the industry are also plus factors. Most ICT businesses continuously consume power 24x7 after launching day, just like any 7-11 store. Thus, the cost of power, guarantee of no brownouts, quality and availability of sustainable energy sources are rated highly in the scorecard. This is also true when it comes to availability of transportation for cyber services workers, number of flights per day, and international flights to the area. In keeping with the move to rationalize fiscal incentives, the Philippine government maintains that quality of labor and infrastructure pull in investors more forcefully than tax incentives. But for companies that can ensure transfer of technology and locate in areas outside Metro Manila, the Arroyo administration offers tax incentives. These are also part of the scorecard. Quality of life, in the scorecard, is measured by assessing peace and order, traffic congestion, recreational amenities, air pollution, health care facilities fit for expatriate communities. Excluding Metro Manila, there are currently 24 “Next Wave Cities” established as part of the Philippine Cyber Corridor. Out of these 24 cities, 17 currently host major offshoring and outsourcing operations, namely Bacolod, Bacoor, Baguio, Batangas, Cabanatuan, Cagayan de Oro, Cainta, Camarines Sur Province, Cebu, Clark/Angeles,

Davao, Dumaguete, Iloilo, Legazpi, Lipa, San Fernando in Pampanga, and Sta. Rosa in Laguna. All these have passed the scorecard. More cities are in the process of being scored. After accomplishing the scorecard, cities and local governments are required to: 1. Conduct initial educational or priming activities; 2. Conduct a multi-stakeholder SWOT analysis workshop; 3. Accomplish cyber services corridor scorecard which assesses key parameters; 4. Have a strategic planning workshop with CICT or Department of Trade and Industry officials to develop targets, action plans and roles; 5. Implement their plan and evaluate their progress periodically and modify them if needed 6. For the CICT and DTI to present the status of the new location to the ICT industry. Challenges With the lofty goals and vision of empowering the Philippines through the ICT sector, the government’s work is cut out for it, and the job doesn’t look like child’s play. Even after years of continuous growth, the ICT sector still has a long to-do list. The demand for knowledge workers has far outpaced supply. More and more ICT companies are finding it difficult to look for qualified ICT workers, and the headhunting business has become highly competitive. Telecommunications and transportation infrastructure are still experiencing hiccups especially when there is high traffic of information going through the wires. More IT Parks and office facilities are still needed, power in some regions are still expensive, red tape is a continuous headache for companies looking to set up their businesses and in some areas, especially in Mindanao, there is a problem with insurgency and crime rates. Yet as they say, the proof of the pudding is in the eating. Big players are confident that the crisis notwithstanding, the Philippines will continue to attract offshoring and outsourcing companies looking to cut costs, and the Cyber Corridor, is poised for more growth. The 2008 PBD Yearbook I 

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Rice field

Staving off Starvation and Instability
By Norman Sison
Three dollars a day won’t get you far at today’s food prices. If you live in the United States, it isn’t even enough for a gallon of gasoline. But that’s what ordinary people in Haiti make daily. So when food prices steadily went up by at least 40% beginning in 2007, it didn’t take much to connect the dots and predict where the situation was heading. After all, when inflation goes up and incomes remain stagnant, something’s got to give way. The 2008 PBD Yearbook I  Finally in April earlier this year, like a pot of rice steaming on the stove, simmering anger at rising food prices reached boiling point. Haitians took the streets and demanded swift government action, setting up roadblocks, looting stores, burning tires, battling with police and troops, and attacked the presidential palace. Not long after Haiti, similar protests or street demonstrations flared in Burkina Faso, Cameroon, Cote D’Ivoire, Egypt, Indonesia, Mozambique, Uzbekistan and Yemen. Even in reasonably prosperous Malaysia, the ruling coalition was nearly ousted by voters concerned over soaring food and fuel prices. In Thailand, which is the world’s largest rice exporter, supermarkets placed signs limiting the amount of rice that shoppers were allowed to purchase. The riots in Haiti and elsewhere were a clear lesson that government leaders in other countries—especially in developing countries like the Philippines—understood only too well.

The Rice Crisis

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At least 70% of the nation live below the poverty line, with poor Filipinos living on a dollar or two a day. Based on a poll of 1,200 household heads across the country conducted last June 27-30 by Social Weather Stations, about 2.9 million Filipino families or 16.3% had no food on the table at least once in the past three months due to soaring food prices, up from 15.7% in March and higher than the 10-year average hunger rate of 12.1 percent. Politics of food Jeffrey Sachs, an economist and special adviser to United Nations Secretary General Ban Ki-moon, said soaring food prices worldwide is the “worst crisis of its kind in more than 30 years.” President Elías Antonio Saca of El Salvador called it a “perfect storm” at a meeting of the World Economic Forum in Cancún, Mexico. Sachs predicted “more political fallout to come” unless the situation eased soon enough. Fearing protests, Indonesia revised its 2008 budget and increased the amount to be spent on food subsidies by about $280 million. In the Philippines, the Arroyo administration contracted rice imports in advance, spending almost P59 billion. President Arroyo phoned Vietnamese Prime Minister Nguyen Tan Dung herself to purchase 1.5 million tons of rice. The Philippine move was the result of two factors. One, Thailand, which produces 10 million more tons of rice than it consumes, moved to limit its rice exports. Two, Thailand and other rice exporting countries briefly toyed with the idea of forming a cartel similar to the Organization of Petroleum Exporting Countries, raising the possibility of even higher food prices. In early April, the national government hosted a conference at the Clark Special Economic Zone in Angeles City, Pampanga, and unveiled a P36.5-billion agriculture program to counter the looming food crisis. This was on top of the P5 billion in subsidies set aside for farmers and an additional budget of almost P3 billion given to the Department of Agriculture and meant for boosting rice and corn production. “We must work harder to grow and breed what we need,” Arroyo told delegates. “We are going to cluster our food production drive

in six assistance packages, which are the essential ingredients in making food abundant, accessible, and affordable.” In line with the Filipino penchant for shortcutting names with acronyms, the program, dubbed FIELDS (short for fertilizer, irrigation and infrastructure, education and extension, loans, dryers and other postproduction facilities, and seeds and other genetic materials), hopes to solve the country’s perennial rice shortage once and for all. Of the P36.6 billion set aside for the new agriculture program, P500 million would go to organic fertilizer production, P12 billion for irrigation and infrastructure, P2 billion for research and development, and P3 billion for educating and training. At least P2 billion will go to building rice and corn processing centers and P8 billion for procuring seeds. Almost half of the funding, P15 billion, will be earmarked for loans, benefiting at least 200,000 farmers. Leadership failure Driving north from Manila on the way to the Ilocos region or vice versa, the rice fields are ripe for harvest. To avoid being slowed down in bustling Urdaneta City, Pangasinan, motorists can detour by taking a two-lane cement road that leads to Asingan. But because of the lack of drying facilities, farmers use one lane of the road during harvest time to dry their golden brown palay. However, the practice forces irate drivers to carefully move to the shoulder to avoid collisions and avoid falling into the paddies as well or to just drive over the grain and get back on the lane after an oncoming vehicle has passed. The lack of agricultural facilities is one of several factors that Rolando Dy blames for the rising price of rice. This is a result of decades of “under-investment in agriculture and infrastructure,” says Rolando Dy, dean of the University of Asia and the Pacific’s School of Management and concurrent executive director of the university’s Center for Food and Agribusiness. In her State of the Nation Address in July, President Arroyo said domestic rice production had been growing by an average of four percent annually since 2002. She took care to point out that the figure was growing faster than the country’s annual population growth rate, currently at two percent.

However, the Philippines needs to import at least two million metric tons annually to maintain a two-month stock as a buffer against shortage. So if there is no shortage, why is an agricultural country like the Philippines, once a rice exporter in the 1970s and home to the International Rice Research Institute, the world’s top rice importer? Dy’s estimates, based on figures from the National Food Authority, pegs Philippine rice consumption from 122 kilos per person in 2002 to 134 kilos today. But Dy emphasizes that the biggest factor, which other experts are also pointing out, is the inability of more and more people to afford the staple. He says the situation is “really an income crisis” rather than a simple supplydemand problem. “The primary reason is the low purchasing power of the masses,” Dy outlined in a paper issued in March, caused by the government’s failure to reduce the wrenching poverty in the country. With the cost of fertilizer also going up, it seems unlikely for the prices of rice and other farm produce to go down in the near future. Dy said the huge demand for fertilizer in Brazil, due to its hard push into the production of biofuels, is pushing fertilizer prices up. “The days of cheap fertilizer are gone,” he says. “It will be difficult to establish food security if farmers don’t have enough access to fertilizer.” Adding to the problem, the Philippines suffers from a lack of large land areas suitable for rice paddies like the Mekong delta in Vietnam. This problem could be offset if government improves productivity by investing in agriculture and support infrastructure like irrigation, roads and research and development. Dy also blamed chronic corruption, which had resulted in substandard farm roads and lack of agriculture infrastructure. Folly of complacency The Philippine government isn’t alone in its shortsightedness. In the 1960s, population growth outpaced food supply in Asia, raising the threat of starvation in poor countries. Wealthy nations stepped in and poured billions of dollars into crop research to improve yields and to avoid a looming hunger crisis. The 2008 PBD Yearbook I 

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By the next decade, the resulting food selfsufficiency eventually became known as the Green Revolution and the threat of starvation faded by the 1980s. So did most funding for crop research from wealthy nations in the 1990s. That included money for the International Rice Research Institute (IRRI), one of 14 institutes in a global network of research centers left as a legacy of the Green Revolution. Known collectively as the Consultative Group on International Agricultural Research, the centers focus on improving crop yields and food production in developing countries. “Rice prices declined steadily in the 1990s, leading many governments to believe that the supply of food was plentiful. Lower prices were taken for granted, leading to complacency in agricultural research and development,” according to a 12-page paper issued earlier this year by the IRRI, based in Los Baños, Laguna, to explain what’s happening around the world. Then came a host of other factors, both shortand long-term, that eventually orchestrated a worldwide crisis by the turn of the millennium: growing population, declining crop yields, lack of areas for farm expansion, failure to develop agriculture, skyrocketing crude oil prices, extreme weather believed to be caused by global warming, and recurring pest outbreaks. As in the 1960s, the foremost factor is, again, rising population. “The poorest of the world’s poor are the 1.1 billion people with income of less than a dollar a day. Around 700 million— almost two-thirds—of these people live in rice-growing countries of Asia. Rice, the dominant staple in Asia, accounts for more than 40% of the calorie consumption of most Asians,” according to the IRRI. “Poor people spend as much as 30-40% of their income on rice alone. Ensuring sufficient supplies of rice that is affordable for the poor is, thus, crucial to poverty reduction. Given this, the current sharp increase in rice price is a major cause for concern.” Thanks to the Green Revolution, higher crop yields led to lower rice prices. But the decline ended in 2001. Prices rose and sharply increased in the first quarter of 2008. The 2008 PBD Yearbook I 

In 2001, rice traded on the international market at $300 per metric ton. These days, it’s between $500 and $700 per ton. In January this year, the Philippines was buying rice at nearly $500 per ton. It has gone up by at least 40% since then. The upward price movement during the past seven years, according to the IRRI, indicated that “we have been consuming more than we have been producing.” The higher consumption was due to growing population in Asia. “Population growth is outstripping production growth and this is projected to get worse. Demand for rice in Asia is expected to continue to rise as its population expands. Even after allowing for some decrease in per capita rice consumption in Asian countries with higher income levels, it is projected that in 2015 Asia will need to produce 38 million more tons of rough (unmilled) rice than it produced in 2005. Globally, demand is increasing by around five million tons each year. This means that in 10 years, the world will need to produce 50 million tons more than it does now.” This was compounded by gradual decreasing crop yields, which the IRRI said, has “decreased substantially” over the past 10-15 years in most countries. In South Asia, average yield growth decreased from 2.14% per year in 1970-1990 to 1.40% per year in 1990 to 2005. “In the major rice-growing countries of Asia, yield growth over the past five-six years has been almost nil. Globally, yields have risen by less than one percent per year in recent years,” the IRRI paper stated. The IRRI attributed the decreasing crop yields to a number of factors. Among them is extreme weather due to global warming. “Global temperatures, particularly night-time temperatures, have steadily risen in recent decades because of increasing greenhouse gas concentrations in the atmosphere. Some evidence suggests that rising temperatures may have already contributed to lower rice yields in recent years, but a thorough global assessment is yet to be conducted. Further, human-induced climate change is expected to increase the severity and frequency of extreme weather events.”

In Australia, a six-year drought blamed on global warming is forcing a giant rice mill to shut down, taking off 20 million tons from the world export market. Another is higher crude oil prices, which resulted in higher transportation costs, especially for countries that import rice. It also pushed up at least the cost of transporting fertilizer. “Rising oil prices and concerns about climate change have also spurred rapid investments, particularly in developed countries, in biofuels such as ethanol produced from maize grain or biodiesel produced from oilseeds. This has increased pressure on international trade of grains and livestock feed as well as on agricultural land in some countries. Until now, the direct impact of biofuels on rice Rolando Dy, Dean of the University of Asia and the Pacific’s School of Management. production and rice trade has likely been small. However, if the industry continues to grow, rice production and prices may be affected more seriously,” the IRRI paper warned. With supply now threatened, major rice exporting countries imposed export restrictions to protect their domestic consumers and ward off possible foot riots. “These restrictions have further contributed to the recent increase in rice price as the rice supply in the world market has dwindled. While exporters are holding on to their stock of rice, importers are rushing into the market to buy more rice to meet their consumption needs and to build their own stock. Hoarding by traders for speculative purposes has added fuel to the fire in some countries.” From plenty to want Ironically, the food surpluses during the 1970s to the 1990s eventually led to a worldwide crisis that experts now say would need a second Green Revolution to solve – and this time with sustained attention. A case in point is the International Rice Research Institute, which saw much of its funding disappear. Money comes from government donations, private grants and aid from international development institutions.

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Planting rice “Public spending on agricultural research in Asia grew by an average of 3.9% per year during the 1990s, compared with 4.3% annually during the previous decade. In 2000, overall public research intensity, measured by the percentage of agricultural gross domestic product invested in public agricultural research, remained low at 0.53 for developing countries as a whole,” according to the IRRI paper. Even if the institute gets adequate funding now, solving the worldwide food crisis could take a few years. Combating the brown planthopper pest problem, for instance, could take four to seven years, according to experts. A brown planthopper outbreak could destroy 20% of a harvest and they are currently multiplying by the billions throughout the region. The IRRI could create rice varieties resistant to the insects, which live only on rice plants, but the institute lacks the funding. Work on rice varieties that could prove crucial in coping with global warming had to be dropped as well. “Since 2005, planthopper outbreaks have affected several million hectares of rice land in countries such as Vietnam, China, Indonesia, Korea, and Japan, particularly in growing seasons with abnormally higher temperatures. In Vietnam, planthopper and virus outbreaks were a major reason behind the government’s decision to restrict rice exports,” according to the IRRI paper, which also attributed the higher seasonal temperatures to global warming. Jacques Diouf, director general of the Food and Agriculture Organization of the United Nations, estimates revitalizing the world agriculture could run up to $30 billion a year. “The problem of food insecurity is a political one,”’ he said during the June conference held in Mexico, criticizing wealthy countries for cutting funding on agricultural programs meant to feed the world’s poor. “It is a question of priorities in the face of the most fundamental of human needs. And it is those choices made by governments that determine the allocation of resources.” World leaders are now rushing to act. In May, US President George W. Bush asked Congress for $770 million to help boost agricultural productivity in poor countries. However, the IRRI has yet to receive the needed financial boost. “There has been much talk of increased funding, but we haven’t seen much of it yet,” says IRRI spokesman Adam Barclay. “We have been told that USAID (United States Agency for International Development) will reverse its decision to significantly cut funding to IRRI and the other Consultative Group on International Agricultural Research centers. We don’t have any figures yet, though.” World Bank president Robert B. Zoellick impressed on the Mexico conference that the crisis was “man-made” catastrophe. “It does not take complex research. We know what has to be done,” he said in his prepared speech. “We just need action and resources in real time.” Earlier this year, the Asian Development Bank pledged to support the IRRI and other institutions in efforts to boost productivity. Haruhiko Kuroda, president of the ADB, blames the food price surge on several “shortterm cyclical and long-term structural factors” outlined by the IRRI. He also attributed part of the blame on Asia’s developing economies, saying that improving incomes have resulted in more and more people The 2008 PBD Yearbook I 

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Based on figures from the National Food Authority, Philippine rice consumption has increased from 122 kilos per person in 2002 to 134 kilos today. But University of Asia and the Pacific’s School of Management dean Rolando Dy emphasizes that since more and more people are unable to afford the staple, it is more than income crisis rather than a simple supplydemand problem.
The 2008 PBD Yearbook I 8

eating meat, which, in turn, are pushing the price of food and feed grain. “Looking at the supply-demand dynamics, we believe that the era of cheap food is over,” Kuroda wrote in a May opinion-editorial to the Wall Street Journal, warning that over a billion people in Asia alone are “seriously affected” by the surging food prices. The ADB estimates that up to 60% of average incomes goes to food; up to 75% if you include the cost of energy such as gasoline, which is partly pushing food prices up. For the short-term, Kuroda believes that “targeted income- and cash-support measures are more effective” in helping the poor cope with the situation. “Through targeted support to the poor rather than general price subsidies, governments will be able to focus on the truly needy and ensure better coverage, as well as free up resources to boost much-needed investment in the farm sector,” he wrote in the Journal. Even those living just above the poverty line may not be spared. An increase of 30% in food prices would increase the number of poor by an additional nine million in the Philippines alone. If food prices continue to rise beyond the reach of the poor, Kuroda says, the situation could erase gains made in the past years to ease much of the wrenching poverty in Asia by 2015 as set by the United Nations in its Millennium Development Goals. In a paper issued in July, the ADB announced that its short-term response would be to strengthen “targeted safety nets” aimed at helping the poor such as cash transfers, foodfor-work, food stamps and school feeding programs. Already, the ADB has sent missions to several Asian countries seeking assistance to map out measures in collaboration with other development institutions such as the World Bank and the International Monetary Fund and the Food and Agriculture Organization of the United Nations. The ADB will provide up to $500 million to finance its short-term support for the hardesthit countries.

For the medium and long term, the ADB will provide funding for vital infrastructure—rural roads and bridges, rural electricity, irrigation, among others— to boost agricultural productivity. Gauging from its current project pipelines, the ADB estimates that up to $4.7 billion would need to be invested in agriculture across Asia in the next two years. Over 70% is expected to go to financing rural infrastructure development. Kuroda expects at least $2 billion to be spent on boosting agriculture in 2009 alone. The IRRI estimates that the world would need to produce an additional 50 million tons of rice annually, or nine percent over current production, to meet projected demand. Asia alone is expected to account for 58% of rice consumption. “The best strategy for keeping the price of rice low is to ensure that production increases faster than demand,” the IRRI stated in its paper. “To achieve this, a second Green Revolution is needed now as much as the first Green Revolution was needed to avoid famine and mass starvation.” However, with land being continuously lost to urbanization, industrialization and biofuel production, among other things, the IRRI doubts that Asia’s rice areas could be expanded from the current 136 million hectares to meet future demand. “The main source of additional production will, therefore, have to be yield growth.” Global average rice yields must continue to increase by an annual rate of at least 50 kilos per hectare or 12% above current levels to keep pace with the demand. In its paper, the IRRI outlined a list of short and long-term measures: investing in agricultural research and infrastructure, develop a new generation of rice scientists and researchers, strengthening safety nets for the poor, accelerating use of higher-yielding rice varieties, and changes in government policies. Nations “must invest now” in agriculture, the institute warned, to avert a worldwide crisis. “Rice production can be revitalized, but there are no silver bullets.”

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The 2008 PBD Yearbook I 

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Tourism estates rake it in
By Emmie Abadilla
Property markets elsewhere in the world have slumped but that of the Philippines continue to flourish. Despite difficult times and skyrocketing fuel costs, local developers and buyers see the country as one of the hottest real estate hubs in Southeast Asia to date. “Investment opportunities in real estate, tourism and infrastructure remain high in this country,” stresses property services global leader CB Richard Ellis (CBRE) Philippines general manager Trent Frankum. “Foreign investors are looking at the positive effects of the stable Philippine peso, increasing tourist arrivals, the business process outsourcing (BPO) boom, and the positive effect of overseas Filipino worker (OFW) dollar remittances.” Last year, tourist arrivals broke the two-million mark for the first time since 2004, with arrivals rising to 3.091 million. CBRE expects new markets, such as Russia, Middle East, China, and Korea, to sustain tourism growth. CBRE also projects arrivals will increase to 3.4 million this year and generate US$5.8 billion in international tourism receipts. In addition, hotel room occupancy rates rose to 73.06% in 2007 from 71.95% in 2006. “New hotel and resort developments are currently in strategic business locations such as Makati City, Fort Bonifacio, and the Bay Area as well as top tourist destinations such as Cebu and Boracay, further enhancing industry prospects,” he points out. The projected number of tourists arriving in 2008 is set at more than 3.4 million, the majority of whom will pass through the National Capital Region, Metro Manila, and some 30% or 1.02 million will use new direct flights to the Mactan-Cebu International Airport as their entry point to the Philippines. New development projects include the US$153 million Kingdom Hotel, a combined hotel and The 2008 PBD Yearbook I 0 residential condominium rising in Makati City. “We expect 18,143 units from 28 upcoming residential condominiums to be completed between 2008 and 2013. Likewise, in Fort Bonifacio, 11,652 units will come into the market from 33 residential condominiums being constructed in the same period,” Frankum says. BPO boom The offshoring and outsourcing (O&O) boom in the Philippines has created further opportunities for the real estate market, Frankum points out. “Major investors and businesses are looking at the Philippines because it is one of the largest Englishspeaking nations in the world and has 33.5 million Filipinos in the workforce.” Already, major multinational BPO operators are expanding their presence in the Philippines. Accenture leased 1.3 million square feet. Teletech, which has six facilities in Metro Manila, is starting to build call centers outside the metropolis. In addition, major financial companies such as HSBC, Citigroup, and JPMorgan are enlarging the Philippine sites of their customer support operations. Hongkong Shanghai Banking Corp. (HSBC) currently has four locations, which total to 859,200 square feet, and plans to open more sites. Citigroup and JPMorgan, on the other hand, have 214,812 and 107,400 square feet of space leased, respectively. “Third party BPOs are not stopping in their expansion, with a handful such as Convergys, IBM, Sykes, TeleTech and People Support already securing more sites in the country,” Frankum noted. Other major O&O service providers continue to develop sites in Metro Manila and Metro Cebu. According to CBRE research, a total of 731,871 square meters of property in Metro Manila has been earmarked for new O&O facilities this year, with 189,614 square meters already pre-committed before start of construction. “Offshoring and outsourcing will continue to drive demand for real estate, particularly in the office space market.” Tourism estates Significantly, the country’s biggest developers, which had shied away from mega-touristoriented developments for a long time, have made the plunge and are now reaping profits. Everyone has ventured into multi-billion peso tourism real estate and leisure community projects, from Ayala Land Inc. (ALI) to SM Investments Corp., from tobacco tycoon Lucio Tan’s Eton Properties Phils. Inc. to the stateowned Philippine Amusement and Gaming Corp. The slump of property markets overseas has not dampened the luxury property sector either. “We even registered stronger sales in Middle East and Asia for this year. The domestic real estate market has been quite good. The Philippines continues to grow 6 to 7%, so the market is still strong and demand-driven,” ALI president Jaime Ayala pointed out mid-year. Increasing prices has not stood in the way of sales either, considering that local construction costs are shooting up by more than 35% this year due to record price increases of oil, steel, cement and global shipping on the back of the devaluing American dollar. As a result, developers have immediately slapped at least 20% increases for preconstruction projects and 15% price adjustments corresponding to the rise in global construction costs over the next six months. Nearly all construction materials used for building Philippine high-rise buildings are imported. Exporters of steel reinforcement

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bars, electrical wirings, aluminum, copperbased components and Portland cement from China, Korea, Malaysia and Taiwan are expecting over 40-50% price increases due to the depreciation of the US dollar combined with record high oil prices which is constantly pushing up shipping costs. Nevertheless, all these will have minimal effect on the industry in general and even less effect on the current market base. “If you know your trade, if you are offering a good product, the market is here to stay. Real estate markets go in 10 year repetitive cycles. We had far worse time in the past two cycles during the late ’80s and the Asian financial crisis near the end of the ’90s compared to today,” says Beth Collingz, overseas marketing director of PLC (Pacific Concord Properties) Global, lead marketing partners for the Lancaster brand of condo hotels in the Philippines. At the time, they only had a very limited market base with Philippine real estate investors confined to wealthy local Chinese businessmen. Few owned cellular phones and mobile technology has not come into fashion. The internet was not even around yet and communication was limited to sending a fax offer to buy properties. When mobile telephony and electronic mail came of age, “The whole world suddenly became our market in the new millennium,” says Collingz. And her company’s sales from some 10 million Filipinos abroad, combined with foreign investors from Asia, Europe and the Middle East, continued to climb. “Today’s technology, unheard of 15 to 20 years ago, is the heart of our sales campaign. Now, I receive daily calls and emails from buyers in Australia, Hawaii, New York, Doha, Dubai and the UK. I even get calls from clients located in Fiji and Mauritius. Communication drives the sale of Philippine real estate upwards through 2008 well into 2012 and beyond,” she says. Although the property purchases of some Filipinos based in the US plummeted because of the credit crunch, it is not enough to slow down the industry. “It is a blow, but an insignificant one,” Collingz maintains. “We do not focus on the US as a sole marketplace for our sales. Many new investment clients are out there. Global

investors want to replace failed pension plans and other saving schemes with solid investments in real estate. The savvy ones look for investments that will earn them a monthly income for their retirement. Our hotel rates, for example, are the same, if not more expensive than those in the US or Europe, but the entry level to purchase real estate is only

specialists, David Stanley Redfern Ltd., PLC’s UK-based marketing partners, expect the Philippines’ real estate sector will sustain at least a 24% per annum growth for the next five years. Reliable OFW money Surprisingly, many European investors have not yet discovered the potentials of the Philippine real estate market. But that is not even a cause for worry. Dollars from overseas Filipinos alone can sustain a property boom good for the next half decade, according to industry experts. At present, real estate purchases account for as much as one third of around $14 billion foreign remittances from OFWs per year. Overseas workers and their families no longer splurge on consumer goods as they did in the past. And they acquire property for their own use, not for speculation. Equally significant, the current crop of OFWs are mostly professionals such as nurses and information technology people. Gone are the semi-skilled and unskilled workers, laborers, factory workers and domestic helps that the country exported in the 1990’s. The shift to savings and investments came two years ago when OFW remittances started to pick up, confirmed Century Properties managing director John Victor Antonio. “Up to 70% of all our online inquiries come from abroad. Overseas Filipinos want to stretch the value of their dollars, so they buy properties here,” he explains. Half of Century Properties’ total sales come from OFWs although the figure could go as high as 60% of all sales in other firms. “About 30% of all remittances end up in spending for the real estate sector, whether it is used to buy or property or spent on housing improvement.” Hence, developers, from ALI and Century Properties to Megaworld Corp. and Robinsons Land Corp., are now jumping on the bandwagon, courting OFW buyers, going on road shows all over U.S. and Europe, with some establishing overseas sales offices in promising areas. Everyone is banking on the boom, which can last four more years or longer. The 2008 PBD Yearbook I 

Everyone has ventured into multi-billion peso tourism real estate and leisure community projects, from Ayala Land Inc. to SM Investments Corp., from tobacco tycoon Lucio Tan’s Eton Properties Phils. Inc. to the stateowned Philippine Amusement and Gaming Corp.
10% of what they have to pay for a studio in Manhattan, credit crunch or not. So, investing here is ideal.” Actually, Russians are taking up some of the slack. First-time Russian overseas buyers are now scouting for purchases in South East Asia, the Philippines, specifically. Overseas property

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Kapitan’s city
BEER MAGNATE LUCIO TAN has joined the band wagon of tycoons cashing in on the tourist estate boom via the P10 billion Eton City, the first master-planned residential island development in the country. His Eton Properties Philippines, Inc. (EPPI) broke ground last December 2007 on a 1,000hectare site along the South Luzon Expressway in Sta. Rosa, Laguna to launch Eton City’s maiden showcase, South Lake Village. It also happened to be EPPI’s ninth project since it became a real estate company last year. Location map No doubt about it, Tan is positioning the mixed-use leisure township as the future “Makati of the South”. To be developed over a ten-year span, Eton City integrates residential enclaves with world-class hotels, a business district, and a golf course, plus a full range of commercial and resort-style recreation facilities found only in next generation cities on the other side of the planet such as The Palm and The World in Dubai, and Lake Las Vegas in Nevada, and Foster City in San Francisco, California, both in the United States. In fact, Foster City serves as the main inspiration for South Lake Village, reveals Eton President Danilo Ignacio. “This island, built on engineered landfill by the bay, is very popular with Asians living in the United States,” he says. Naturally, EPPI believes Eton City will be just as popular in the country. “We have a one-of-a-kind development, something nobody has done in the Philippines. We offer not just lake front lots but actual ‘island lots’ and ‘island homes’,” Eton City General Manager Alex Jazmines points out. Centerpiece Eton’s centerpiece, South Lake Village, features 18 islands, each measuring a hectare within a 35-hectare man-made lake. Eton may even add a 19th island to cater to social events like weddings. The lake villages, connected to the mainland via land bridges, are slated to be turned over to homeowners in the middle of 2009. The 2008 PBD Yearbook I 2 Waterfront properties and waterfront living are hot these days. “It’s one of the current trends in the real estate market. In Thailand, Singapore, Australia and the US, areas near water are considered prime property,” confirms architect Nestor Mangio of NS Mangio & Associates(NSM&A), Eton’s partner.

Each island accommodates 8 to 12 residential lots of three types: lake village lots about 500 to 600 square meters each, lakefront lots measuring 600 to 800 sqm, and island lots that span 800 to 1,200 sqm. The lots are priced between P10,000 and P12,000 per sqm. Together, the lake island villages will occupy about 150 hectares and will showcase waterfront living in the Philippines. Homeowners here are meant to have the best of both worlds: resort-style living with city luxury and comfort. The second phase of Eton City covers one more high-end residential village while phase three entails the development of a central business district that houses shopping malls, office buildings for business process outsourcing hotels and residential condos. Phase four includes the construction of an 18hole golf course and still another village. Waterfront living

NSM&A has designed several waterfront development projects in Bermuda and inthe Philippines and is now executing the master plan of South Lake Village. “Our studies showed lakeside communities offer significant growth as a result of the robust tourism market,” Ignacio says. “Given the steadily increasing remittances from overseas Filipino workers, the low interest rate regime, the upsurge in foreign tourist arrivals, and BPO requirements, we are confident the market will be keen on Eton’s inventory and line-up of new projects. We believe that demand for our core business will remain resilient.” Green architecture NSM&A takes care of the “green architecture” and sustainability of Eton City. Its environmental plan addresses concerns ranging from lake water supply, mosquito infestation, flooding and erosion, to conservation and pollution. First of all, live rivers surrounding the area ensures ample water supply. Rainfall and natural creeks will feed Eton’s man-made lake. “The continuous inflow and outflow of lake water will prevent stagnation and mosquito breeding,” Jazmines says.

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In addition, developers are seeding fish in the lake, fattening them on mosquito larvae before anglers sport with them. For good measure, they have also installed filtering systems and aerators. A detention pond sifts creek water before it is channelled into the lake. In addition, fountains on the lake corridor double as aerators, maintaining proper oxygen levels. Lake liners, earth fill, rock layers and vegetation contain erosion on the lakeside. To curb pollution, only kayaks and electric boats will be allowed on the waters. “We have looked into a 50-year flood study, taking into account the highest flooding levels in the area,” Jazmines notes. As a result, Eton City’s villages will be elevated at the same height as the expressway, out of harm’s reach. Most important of all, Eton City is naturefocused. So, EPPI is leaving out 47 per cent of the 1,000 hectare site as open spaces, way beyond the minimum requirement of 30%, allowing the lush greenery to create the ambiance of a tropical sanctuary. In all, the luxury lake village community will have 11 kilometers of waterfront and plenty of parks. Residents can enjoy good views of Laguna de Bay and Mount Maquiling, along with their very own lake. The playgrounds, tree-lined roads, linear parks along the river and lake-view corridors and bridges are all consistent with Eton’s green plan while the man-made lake forms the heart of community sports and recreation. Residents can build their own private docks, sail and fish on the lake or take their boats to the country club. The lake homes typify contemporary Asian architecture, matching the relaxed, resort-like atmosphere. “The design goes well with our tropical climate. Windows face south and north to lessen the heat. It’s like countryside living with all the urban amenities,” the architects explain. The luxury amenities include a 2.2-hectare South Lake Sports and Country Club, with a swimming pool zone where residents can relax in the infinity pool or outdoor jacuzzi; a kid’s zone where children can go to the gym or play in the art corner; an adult zone for a variety of sports and entertainment; a food and beverage or F&B Zone for banquets and dinners; a

health and spa zone with a gym, aerobics area, clinic and salon; and a landscape/ outdoor Zone for family barbeques and lake activities. The country club shares come free with South Lake Village lots. Other amenities on the drawing board include the River Grove, a world-class championship golf course, a commercial strip with shopping and dining areas, high-end residential and office condominium communities, a complete central business district. On top of everything, residents will enjoy enhanced 24-hour security with a guarded entry and exit, roving guards, security cameras and a road-lined perimeter that keeps the property away from the edge of the development area. “We are using the latest security equipment to ensure the safety of Eton City dwellers,” the developers note. Eton City’s strategic location makes for a final selling point. The lake community is on both sides of the South Luzon Expressway, right at the entrance of the existing Eton CityGreenfield interchange so residents can easily travel in and out of Metro Manila. After all, Santa Rosa is a major gateway to the metropolis, a high growth hub hailed as the next lifestyle hub minutes away from Makati. In its own right, the area is a center for commerce, not only in Laguna but also in the entire CALABARZON. It hosts industrial estates, large-scale firms and multinational companies, along with commercial centers and first-class housing projects. Strategic location, green architecture plus relaxed resort living combined with urban luxury makes Eton a true next generation lakeside city. – Emmie Abadilla

To be developed over a ten-year span, Eton City integrates residential enclaves with world-class hotels, a business district, and a golf course, plus a full range of commercial and resort-style recreation facilities found only in next generation cities on the other side of the planet such as The Palm and The World in Dubai and Lake Las Vegas in Nevada, and Foster City in San Francisco, California, both in the United States.

Eton City landmarks The 2008 PBD Yearbook I 

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From malls to resort town

Swimming pool

PROPERTY MAGNATE HENRY SY builds resort towns as well as he builds malls. He proves it with Hamilo Coast in Batangas. The P7-billion project is his first foray into ecotourism real estates and “green development”. And this early, his SM Investments Corp. (SMIC) expects 2008 sales to hit P2 billion from the 40-hectare Pico de Loro, the first of 13 coves in his pioneering 6,000 hectare project along the South China Sea. Riding the country’s tourism surge and going with the government’s strategy to position the country as one of Asia’s leading tourist destinations has been a well-timed move on the tycoon’s part. “Promoting Philippine tourism should be the task of every Filipino because tourism allows us to compete in the global marketplace,” SMIC chairman Henry Sy stresses. Needless to say, Hamilo Coast is also reviving the economy of Batangas. “We expect to employ as many as 70,000 people for this whole project. Most of them will come from the local community,” SMIC vice president for investor relations, Corazon Guidote notes.

The premier coastal residential and resort town combines two sunshine industries: property and tourism. Add to that, Hamilo Coast merges urban planning with environment-friendly development. Based on the master plan of Cadiz International, Manila and ML Design, Brisbane Hamilo Coast will be an integrated network of coastal resort communities with a balanced mix of residential, commercial, eco-tourism and leisure amenities such as sports facilities, a full-service beach, country clubs, a golf course, forest parks, exclusive beach enclaves, marina and yacht clubs. The developers has conscientiously followed the natural terrain of the vast property, which covers 13 natural coves, limestone cliffs, virgin forests, natural parks, rock formations, plus 32 kilometers of coastline. In keeping with Hamilo Coast’s backdrop of forest and sea, the architecture of residences, resort hotels and other buildings is modern tropical.

SM Investments Corp. expects 2008 sales to hit P2 billion from the 40-hectare Pico de Loro, the first of 13 coves in its pioneering 6,000hectare project along the South China Sea.
But even while SMIC combines commercial convenience and home comforts with nature and adventure, it will see to it that the beach and sports facilities are environmentally safe and friendly. It will develop low-density neighborhoods, ensuring that the building of the residential condominiums, beach and country clubs, retail shops, as well as a marina and yacht club create a low impact on the natural surroundings. In other words, Hamilo Coast is a serious, green development. In fact, it is the Philippines’ first community designed for ecological sustainability with a defined environmental program from concept, planning, design to construction and operation.

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Hamilo Coast beachfront The 2008 PBD Yearbook I 

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Condominium exterior Hamilo Coast

To ensure that the project will comply with international environmental standards, SMIC has partnered with a global conservation organization, WWF-Philippines. WWF advise the company on proper land use to preserve the area’s natural ecosystem and to sustain the needs of future generations. They employ Coastal Resource Management to revive the habitats of fish and other marine creatures along the shores, measure the impact of Hamilo Coast on the biological capacity of Nasugbu, and stabilize the soil in the area to keep the construction debris and run-offs from killing the sea. Furthermore, Hamilo Coast has commissioned adventure specialists, Sandugo, to define ecofriendly and safe adventure courses customdesigned for the site’s topography. Currently, Sandugo is designing trekking and biking trails in the property.

Buyers’ response Not surprisingly, buyers have snapped up shares of the Pico de Loro Beach and Country Club. A few months after SMIC launched the project, 300 individual club shares have already been purchased of the 3,200 to be floated once the beach club is finished. Individual shares have sold for P460,000 each while shares for corporate buyers have fetched P850,000 each. Likewise, the first condos offering studio-type units have sold out fast, confirms Efren Tan, SMIC vice president for sales. To date, SMIC is starting work on Hamilo Coast’s second phase, fine-tuning it based on buyers’ response by scrapping out studio-type pads. From this time onwards, the smallest condominium units will be one-bedroom affairs aimed at families eyeing vacation homes outside Metro Manila.

Location-wise, Hamilo Coast has the advantage of being just two and a half hours away from the metropolis by car and 20 minutes by helicopter. Soon, the travel time will be cut to just one hour by ferry from SM Bay City in Pasay. Future plans include linking SM Bay City seamlessly with Hamilo Coast to allow guests to fly to Manila and check in a hotel at SM Bay City before they hop on to a ferry for a Hamilo Coast eco-tourism experience. And Hamilo Coast is just the beginning. In the coming years, SMIC projects its tourism estates will become an equally important contributor to the company coffers. “Our prospects are bright and the possibilities are endless,” executives conclude. – Emmie Abadilla The 2008 PBD Yearbook I 

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Ayala’s magic now extends to resorts
A LATECOMER IN RESORT DEVELOPMENT, Ayala Land Inc. (ALI), has hit the jackpot with its $600-million Anvaya Cove in near Subic Bay and is now scouting south of Metro Manila for similar sun and sea sites. While most Filipinos are tightening their purse strings, ALI sold out the P3.5- billion phase one of its first leisure community project much faster than expected, leaving a market still hungry for premium space. “The demand is very strong,” ALI president Jaime Ayala confirms. “Anvaya Cove has done very well. We sold out phase one, so we are openeda new phase last August. We will also offer complete units by fourth quarter of 2008,” he says. Anvaya, which means “family” in Sanskrit, is a three-phased, 20-year eco-sensitive development pitched as a retreat for bonding and communing with nature. It offers activities ranging from barbecues and spas, picnics and camping to kayaking and golf, trekking, diving and snorkeling. Target clients include rich locals looking for weekend homes as well as overseas Filipinos from America and Europe who intend to retire in their homeland. Phase One covers the bulk of the property, 58% of the 320 hectares, and includes a beach club, golf course plus 18 executive villas, worth over P20 million each. Since 2007, buyers have snapped up the villas, which were sold with condominium titles to do away with the ban on foreigners owning property, as well as the house and lot packages. Add to that, ALI has unloaded a total of 300 residential lots ranging in size from 367 to 1,200 square meter, priced at between P6,640 The 2008 PBD Yearbook I  and over P14,000 per sqm. Buyers are now starting to build a dozen residences. “Every year, we bring new assets. We have sold out our beach and nature club early this 2008 and we have stopped selling shares,” according to Ayala. “Now, we are developing the nature camp.” It was fast work too. In 2005, ALI partnered with the Subic Bay Development and Industrial Estate Corp. (Sudeco), the privately owned real estate holding firm of businessman Carlos De Leon’s family, and started earthworks right away on the latter’s coastal lands in Morong, Bataan. The area is just 20 minutes away from Subic Bay Freeport, a tourist hub in itself complete with dive sites, equestrian center, jungle environment, a survival training camp, zoo, ocean theme park, butterfly gardens, insectarium and aviaries, go-kart track, car raceway, golf course, yacht club, duty-free stores and restaurants. And just this April, the joining of the new Clark-Subic Tollway with North Luzon Expressway (NLEX) made the leisure community “the fastest accessible leisure property in the country”, just 1.5 hours drive from Manila. Master plan ALI contracted architect Leandro V. Locsin, Jr. for Anvaya’s master plan. Fusing design, environment, economics and planning, they created a community “where the mountains meet the sea” with clusters of vacation and retirement homes, a mountain and beach club plus a nature camp in an area that overlooks the South China Sea in the backdrop of the Zambales range. Its showcase Cliffside homes, atop a 1,500 foot promontory at the south of the site’s main cove, comes with its own one-hectare nature park and commands a view of the beach, the bay and the mountains. On the other hand, homes at Mango Grove look out into the cove, the green valleys, the beach club and nature camp. Around the clumps of fruit trees, ALI built a 10,000-squaremeter park to protect over half a century-old mangoes, narra, cupang, cashew and bamboo. The smallest residential cluster, Wood Park, features a natural brook and a Sunset Park. Building around natural features, the developer carved out rolling asphalt roads, low-impact pedestrian, bicycle and cart paths, infinity pools and big playgrounds. They transformed one stream into a lake for kayaking and lined the beachfront with restaurants and bars. Recreational areas blended wild greenery and rolling hills with man-made structures like shaded foot and jogging paths lined with benches, a multi-purpose gazebo that blends with existing land forms and interactive playgrounds. Location map

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Anvaya Cove Beach Club

While most Filipinos are tightening their purse strings, Ayala Land, Inc. sold out the P3.5billion phase one of Anvaya Cove, its first leisure community project, much faster than expected and left a market still hungry for premium space.

Anvaya follows the lay of the land, leaving as much as 60% of the site’s natural environment untouched, maintaining wide open spaces, protecting wildlife habitats from beach combers. It has allocated sanctuaries: a nesting cove for sea turtles plus a stretch of wetlands for migratory fowl, eagle owls and mallard ducks. The master plan includes view pavilions and lookout towers along with ecological trails through the forested parks, foot paths to the coves and secluded beaches, “discovery classrooms” and obstacle courses for adventure seekers. The beach club cum nature camp have trained coordinators to assist families in planning and customizing mountain and beach activities, eco adventures, sunset cruises, romantic private picnics, spas and massage services. The club has, likewise, hired local fishermen to serve as lifeguards, marine and forest rangers as well as guides. To light up the place without disturbing sea turtles laying eggs or confusing hatchlings who are sensitive to strong lights, Anvaya has waist-high bollards along the roadway instead of electric posts. No cables are in sight, with all wiring buried underground.

In addition, home owners are allowed to build on only 35% of their lots, ensuring ample margins along their perimeters. Residents whose homes surround My Park, have to build without fences or keep their walls low, if at all. “We want people to feel relaxed and pampered here,” the Ayala says. Ecotourism Originally, the locals thought the area should host a technology park but favoured ALI’s project when it came because Morong is best suited for ecotourism. “Anvaya is a better alternative because the influx of industrial locators will destroy our town,” they commented. However, future homeowners at Anvaya have to share the responsibility in caring for the environment and protecting the coral reefs on the bay. Meanwhile, ALI plans to develop an Amara resort villa community close to the Mactan International Airport, in a 45-hectare land fronting the sea. For the Ayalas, building dream homes in leisure communities has become a serious and lucrative business. – Emmie Abadilla The 2008 PBD Yearbook I 

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Pagcor’s $20B Las Vegas dream
Pagcor’s future city NEXT YEAR, a $20-billion Las Vegas-style casino-entertainment complex will rise on the 800-hectare reclaimed site off Manila Bay, adjacent to the SM Mall of Asia. The chips—and some $1.5-billion revenues for the Philippine Amusement and Gaming Corp. – will roll in soon after. First called Pagcor City in 2001, the project goes by several names: “Manila Bay Tourism City”, “Bagong Nayong Pilipino Integrated Tourism City”, and just plain “Tourism City”. Whatever moniker it ends up with, the project signals the state company’s shift from gaming to entertainment. “Today’s thrust is no longer casino gaming but total entertainment,” PAGCOR chairman and chief executive Ephraim Genuino says. “In the global arena, only 25% of the revenues of gaming destinations, such as Las Vegas, come from actual gambling.” Pagcor City models itself after The Strip, a section of Las Vegas which hosts the majority of the world’s largest casinos and 18 of the 25 largest hotels in the world, with a combined capacity of over 67,000 rooms. The Strip rakes in over $6 billion per annum. “We are not just building casinos and bringing in gamers. We want to bring in tourists.” says Pagcor president Rafael Francisco. “With Pagcor City, we can quadruple our tourist arrivals to 10 million in five years. We can catch up with Singapore, which recently allowed two casinos, and Macau, Asia’s casino capital.” Pagcor, of course, has to rake in the cash too, being the biggest money maker for the government. When its property project is fully operational, the state-run company projects to easily triple its 2007 annual income of $500 million. The 2008 PBD Yearbook I 8

To be completed within 7 to 10 years, the three-phased project can, likewise, generate 200,000 new jobs for Filipinos. Bluprint Under the plan, the reclaimed site, easily accessible from the Ninoy Aquino International Airport (NAIA), seaports, as well as the major commercial and urban centers, will be divided into specialized areas with nongaming operations accounting for 65% of the development. Pagcor’s blueprint includes a “Tropical Area” with white sand beaches and lagoons facing Manila Bay, a “Winter Park” with large ice skating rinks with real snow and skiing facilities as well as six-star hotels, worldclass theme parks, educational and cultural complexes. It will also have a marina complex with walkthrough glass tunnels showcasing different marine species in the Asia-Pacific, a fish port and a seafood restaurant patterned after San Francisco’s Fisherman’s Wharf, shopping malls, a commercial district, sports stadia, celebrity-themed restaurants, convention halls, state-of-the-art theaters, gaming facilities, residential villages, and a hospital district. Boardwalks will provide public access to promenades lined with specialty restaurants and outdoor cafes. An almost 2,000foot observation tower will dominate the landscape. “It’s important to have attractions that ensure a pleasant stay for casino visitors, most of whom

travel with their families and take side trips,” Genuino explains. So far, only 25% of Pagor City’s land area has been reclaimed. The rest will be added as the project gets underway. Of the total, only 35% of the total property is allocated for casino development. In 2007, Pagcor started the first phase of Pagcor City which consists of a resort hotel, a theme park, and gaming centers. Covering 40 hectares and entailing an investment of about $10 billion investments. “Our goal is to complete Phase I in two years and immediately proceed with the second phase, which would involve residential villages, a resort, more hotels and casinos,” Genuino says. Phase III covers a hospital district, retirement villages, and wellness centers. Japanese investors, in particular, want to develop a retirement village within the reclaimed area to cater to the rapidly expanding retiree market. This will include a casino with a 2,500 room hotel, an oceanarium, a giant Ferris wheel known as the Manila Eye (after the London Eye), an art museum displaying religious icons, a theatre, sports arena and commercial facilities. The casino is expected to open around April 2010. Investors Foreign investors are bankrolling 90% of the cost. Already given the nod to proceeds are Aruze Corp.of Japan, Genting Berhad Group

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along with a major entertainment and sports center. However, Bloombury needs to pull its act together after negotiations for a partnership with Crown Ltd., the entertainment and gaming firm of Australia’s third richest man, James Packer, fell through. Crown declined to participate in Bloombury’s proposal to develop an integrated casinoentertainment complex in Manila Bay due to the global credit crunch which pushed up borrowing costs and made it harder to squeeze profits from investments. For its part, SMIC is committed to help develop Pagcor City by investing in its own Mall of Asia complex close by. of Malaysia, SM Investments Corp., and Bloombery of Australia. The Japanese group, which is into the manufacture of pachinko and slot machines, has forged a partnership with Wynn Resorts, operator of Las Vegas and Macau casinos, to build the Okada Resort Manila Bay. Construction starts in January 2009. “The most important thing is to attract people all over the world, get them to have fun and give them a pleasant experience,” Aruze chairman Kazuo Okada says. For its part, the Genting group has partnered with a local conglomerate, Alliance Global Group Inc., which owns the McDonald’s Philippine franchise and Megaworld Properties. Genting’s Star Cruises Ltd., the world’s third largest cruise operator, and AGI’s subsidiary, Travelers International Hotel Group Inc., has forged a joint venture to build a hotel and casino complex. Add to that, the Malaysian group is leasing 35hectares to put up a theme park. Genting, the franchise holder of Universal Studios theme parks in Asia, has invested S$6 billion in an integrated resort project in Sentosa Island. Bloombury Investments Ltd., a British Virgin Islands firm, also plans to lease 15 hectares in the reclaimed area and sink in at least $1 billion to build three luxury hotels for a total of 500 rooms, high-end retail shopping, celebritythemed dining, a showroom and museum, Recently, SMIC has contracted hotel services provider Carlson Hotels Worldwide-Asia Pacific to manage Regent- and Radissonbranded hotels within the MOA. Earlier, it was reported that SMIC is partnering with Australia’s Asia Pacific Gaming to build a world-class gaming facility close to Pagcor City. Belle Corp. has also surfaced as a possible partner for SM’s casino project. But while a casino may be in the works, nothing is definite todate, according to SMIC vice chairman Tessie Sy-Coson. Theme park On top of all these, Pagcor City plays host to “Bagong Nayong Pilipino”, one of its biggest locators to date. Nayong Pilipino is a unique, interactive, educational park featuring miniature versions of the country’s tourist attractions. It showcases Filipino cultural and historical heritage along with the replicas of the archipelago’s natural and made-made wonders. The theme park operator closed down its old site in Pasay to pave the way for NAIA Terminal 3. It broke ground recently on its new 15 hectare home within Pagcor City. If all goes well, this newest gamingentertainment mega-complex may yet be the local version of Las Vegas and Macau’s Cotai, fulfilling the Philippine dream to be Asia’s leisure capital.— Emmie Abadilla The 2008 PBD Yearbook I  Groundbreaking ceremony

Philippine Amusement and Gaming Corp.’s project by the bay is expected to generate 200,000 new jobs and quadruple tourist arrivals to 10 million in five years’ time. It will also easily triple Pagcor’s 2007 annual income of $500 million.

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A Tale of
Boom town
Among the cities in the country today, Taguig stands as the most competitive city for doing business. This is the finding of a World Bank report entitled “ Doing Business in the Philippines 2008. “ The WB report is part of the East Asian subnational series, which ranks 178 economies in terms of doing business on 10 topics , namely : starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and closing a business. The report, which was done in cooperation with the AIM Management Policy Center and the International Finance Corp., also include 14 other cities in Metro Manila (Caloocan, Las Pinas, Makati, Malabon, Mandaluyong, Marikina, Navotas, Paranaque, Pasay, Pasig, Quezon City, San Juan and Valenzuela); three cities in the Visayas (Cebu, Lapulapu, and Mandaue) plus Tanauan in Batangas and Davao in Mindanao. In the WB study, Taguig emerged No. 1 in ease of starting a business. A businessman needs to take only 15 steps , spend 27 days and 6.9% of his minimum paid-up capital to be open for business. In contrast, one must undergo 23 procedures in 42 days in Davao; 22 steps in 37 days in Valenzuela; and 15 steps in 52 days in Manila. Getting the paperwork needed for construction is also easiest in Taguig – 23 steps in 121 days compared with Pasig’s 33 procedures in173 days . The WB study also highlighted one major cause of the delay is getting an electricity connection – three months in Metro Manila and only five days in Tanauan. The 2008 PBD Yearbook I 0 Fort Bonifacio Perhaps the most notable physical development in Taguig is the emergence of Fort Bonifacio as the next business district of the country. In the last six years alone, this former military camp has welcomed A-list institutions and establishments such as Fort Strip, Market! Market!, Serendra and the Fort Bonifacio High Street its skyline has been dramatically changing every year, indicating rapid pace of growth and development. Within the next three years, the city is poised to become the next tourist destination, with the construction of five luxury hotels with a combined 3,000 rooms in Fort Bonifacio. Upon its completion, the 66-storey Grand Hyatt constructed by Federal Land, the property unit of Metropolitan Bank and Trust Co., will be the tallest building in the country. Other hotel facilities that are confirmed to rise in Fort Bonifacio are Sofitel Pullman, Discovery Suites, Ascott Hotel, and Shangri-La. A civic center patterned after those in Hong Kong, Singapore, and the United States will also be built.. The mixed use complex will house hotel facilities, convention centers, and even retail establishments. Other positive developments include the ongoing negotiations between the Philippine Stock Exchange and Metro Pacific Corp. for the transfer of the unified stock exchange to a 5,000 square meter lot in Fort Bonifacio, the construction of St. Luke’s Medical Center, and the relocation of the embassies of Singapore, Korea, and the United Kingdom. On the other hand, the city government is also coming out with their projects to deliver womb-to-tomb services to its residents such as a new state-of-the-art 110-bed district hospital, a new university, a Taguig Science High School, and mass housing for the poor. A 5-hectare city cemetery will be built next to the upscale Heritage Park. And in addition to the housing for the poor, the city’s teachers, firemen, policemen and other professionals will have their housing. Perhaps, the most ambitious vision for Taguig of Mayor Tinga is the building of an international airport in Taguig’s 7-kilometer lakeshore area. The place, which is very near Makati, can accommodate two runways unlike the Ninoy Aquino International Airport, which has only one runway. With so many ongoing activities, there is no doubt that Taguig will continue to boom. – Rizal Raoul Reyes

The greening of Makati
Being the country’s top business district, the city of Makati under Mayor Jejomar Binay has outlined a long–range development plan to ensure there will be balanced growth in the area formerly known as San Pedro de Macati. Part of that balanced growth involves identifying and designating areas where green spaces, pocket parks, and landscaped gardens can be developed and linked according to an overall Green Plan. This plan, which has been be formulated based on the city’s Land Use Plan, will include: • Utilization of some commercial land parcels in the CBD as green space. Private property owners will be encouraged to utilize part of their lots, although zoned as commercial land in the 1981 ordinance, as green space. • Enhancing streetscapes through landscaping and the aesthetic improvement of sidewalks. Key street segments that extend throughout the city will be identified for priority implementation of landscaping and sidewalk

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Three Cities
improvement measures such repaving, tree planting, removal of clutter and obstruction, signage improvement. In general, priority will be given to pedestrians. Identified streets are JP Rizal Ave., Chino Roces Ave., Lawton Ave., Makati Ave., Ayala Ave., and Sen. Gil Puyat Ave. When completed, and by extending across the two city districts, these landscaped street segments will also form a series of green corridors that visually integrate the Old Town, the CBD, and the Fort Bonifacio areas of the city. • Development of pocket parks and landscaped gardens. Small but strategically located and highly visible land parcels (e.g. street corners, vacant areas of public facilities, rotundas, etc.) will be developed into pocket parks and landscaped gardens. • Expansion of riverside park. The existing Liwasang Makati will be a major element of the Green Plan. It is in a unique location that offers the opportunity to integrate open and green spaces with active recreational and commercial land uses. • Landscaping of major infrastructure elements. Recent infrastructure projects such as the Edsa-MRT3, the Kalayaan flyover, and the Skyway link have become very conspicuous parts of the city’s urban form. The aesthetic impact of these infrastructure elements will be improved through landscaping and other features that will reduce their heavy and obtrusive image. • Enhancing local capability to manage and maintain green spaces. The Plan serves as an initial step towards the establishment of an institutional framework and corresponding organization needed to manage and maintain the city’s green spaces. This organization will cover support requirements such as tree and plant nurseries and will include substantial private sector participation. The Land Use Plan also identifies special development areas that, because of their unique activities or location, can be covered and guided by more detailed development plans. These include: • A government center along JP Rizal Ave., which can anchor an urban renewal program in the traditional part of the city; • The riverfront development area, with Liwasang Makati as it primary element, but which extends throughout the Pasig River frontage to include residential, recreational and some commercial uses; and • The green circuit or the set of street corridors identified in the proposed Green Plan that can have a distinct landscaping treatment to serve as an integrating element of the city. Bank as, “the center of gravity of commercial developments in Metro Manila in the coming years.” In fact, the World Bank commissioned Japanese firm Almec to complete the framework plan. The estimated P3- billion project aims to transform a largely institutional and partly blighted area into one of the most economically vibrant districts. At present, the city government is working hand-in-hand with national government agencies and various stakeholders for the development of the area. Property experts believe the area has good prospects because of its accessibility to metropolitan areas metropolitan access. It has connections to three rail stations and one of the biggest areas covered by EDSA. The Triangle Park Project calls for the formation of five distinct commercial cum residential districts. Triangle Exchange is envisioned to have the highest densities of the Triangle Park. It will have commercial and residential establishments fully integrated with the transit facilities, providing the best regional links and commuter access. The Veterans area is envisioned to be a mixeduse community with a residential focus from high-rise condominiums to medium and lower density dwellings. Greenbelt areas will be built for the residents. The Downtown Hub will host institutional locators such as medical, training, science, among others integrated with commercial and residential developments. The Emporium section will be technology hub while the Commons area will consist of a park with cultural, recreational, entertainment and amenity focus. Property giant Ayala Land is an early bird by virtue of building the Trinoma mall. —RRReyes The 2008 PBD Yearbook I 

Quezon City’s Triangle Park
QUEZON CITY joined the business district development bandwagon when Vice President Noli de Castro and Quezon City Mayor Feliciano Belmonte Jr. recently discussed the blueprint for the Quezon City Central Business District (QC-CBD) otherwise known as the Triangle Park. De Castro and Belmonte chair and cochair, respectively, of the Urban Triangle Development (TriDev) Commission will spearhead in charting the strategies for the development of the QC-CBD, a 25-hectare area located in the North and East Triangles and Veterans Memorial Area. According to the city government’s website, the project has been hailed by the World

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Business inflat
2008 second quarter
RESULTS OF THE SECOND QUARTER 2008 survey on inflation forecasts showed higher inflation expectations for both 2008 and 2009 . The mean inflation forecast for 2008 was higher at 8.8% compared to the previous quarter’s 4.9 percent. The upward adjustment in inflation expectations stemmed mainly from the acceleration in fuel and food prices, the impact of which has already started to feed into the prices of other goods (such as fast food meals) and services (such as transportation). Analysts noted that additional inflationary pressures could come from the rising global prices of metals and steel for construction as well as coal and natural gas. Meanwhile, contrary to expectations of a strong currency as a downside risk to inflation in the previous quarter, the depreciation of the peso (almost 10% year-todate) could support inflation as it will translate to higher import costs. For 2009, the survey also showed a higher mean inflation forecast of 6.1% compared to the previous quarter’s 4.2 percent. Citing base effects, most analysts expect inflation to peak in the third quarter of 2008. The mean inflation forecast of analysts is 10.6% for the third quarter of 2008 and 10.2% for the second quarter of 2008. be defined as the differential between the yields of one-year bonds and the 91-day T-bill rate. Studying charts on actual inflation versus the term spread, it can, therefore, be observed that the term spread could correctly move up with the actual inflation (12 months forward), e.g., in March 2002 or in June 2003. It also moved down with actual inflation (12 months forward), e.g., in October 2005. However, there were also some periods when spreads did not predict future inflation well, especially when there were shocks in commodity prices. Such weakness could be due to the following: 1) the presence of other inter-temporal risks incorporated in the premium between different yields; and 2) information among bond investors may not be fully available 12 months earlier. In a previous study, the coefficient of the three-month spread (182-day versus. 91day T-bill rate) was found to be significant and positive, so that a larger differential is associated with a rise in the inflation rate. Moreover, the differential enters with a lag of four months, so that the differential turns Based on the probability distribution of respondents’ forecasts, there is a 31.7% chance that average inflation for 2008 will be within 8.1-9% and a 31.2% chance that inflation will be within 9.1-10 percent. This indicated that there are expectations that inflation will be above the 4% (+1.0 percentage point) target for 2008. Consistent with the survey conducted by the Bangko Sentral, the Asia Pacific Consensus Forecasts for Philippine inflation also showed rising expectations during the quarter in review. As of June 2008, inflation for 2008 is now forecast at 7.3%, higher than the 5.1% forecast in April 2008 and 4.4% in June 2007. — by Bangko Sentral ng Pilipinas out to be a good indicator of what happens to inflation four months hence. The lag has an intuitive basis: inflation developments up to three months ahead are covered by what happens to the 91-day T-bill rate, while the gap between the 182-day and 91-day T-bill rate covers what is expected to happen to inflation after three months. Following the adoption of inflation targeting, the BSP started to look at the market’s view of inflation as represented by private analysts’ inflation forecasts. One way was to conduct a survey along with the publication of its inflation report. Looking at the historical movements of forecasters’ expectations over time, the trend of the forecasts generally moved along with actual inflation (annual average for the following year). This is a good indication that the information contained in the survey is a good measure of inflation expectations. Presently, the survey also gathers not only respondents’ deterministic forecasts, but also information in probabilistic terms, particularly on the probabilities attached to the various ranges of inflation.

Measuring inflation expectations
Yield Curve Traditional measures of inflation expectations are contained in the yields of various securities in the financial market. This is based on the fact that inflation expectations influence the shape of the yield curve by affecting expected short-term interest rates. For example, when investors revise their expectations about longterm future inflation rates upward, the yield curve is projected to steepen. This is so because since investors are concerned about their real returns, they would naturally demand nominal returns that are high enough to protect them against expected inflation. Term spreads, based on the yield curve, serve as another proxy for inflation expectations in the absence of sufficient time series data. One term spread (forecast 9-12 months ahead) may The 2008 PBD Yearbook I 2

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ation forecasts
2008 third quarter
PRIVATE SECTOR FORECASTS are higher for 2008 and 2009, although the forecast curve appear to be flattening. Third quarter 2008 inflation forecasts showed higher inflation expectations for both 2008 and 2009. The mean inflation forecast for 2008 at 9.7% was higher than the previous quarter’s 8.8 percent. Lingering inflation was expected to continue to affect the average price level in 2008. Higher inflation expectations were largely driven by A comparison of the resulting mean forecasts of the BSP survey with current inflation (actual inflation during the quarter when the survey is done) reveals that private sector forecasts follow the path of the said current inflation. In general, this observation is common among the other measures of expectations. For a more frequent reading of market analysts’ inflation expectations, one can look at other surveys conducted by private organizations such as AP Consensus and Bloomberg. Fortunately, both surveys are done on a monthly basis. The mean forecasts from AP Consensus have tracked actual inflation considering that a lot of information is already available with the minimal (one month) lag within which the actual values are predicted. Meanwhile, the results from the Bloomberg survey more closely followed the movements of the corresponding actual inflation (one month ahead). The narrower deviation of the Bloomberg mean forecasts over actual inflation stemmed from the fact that the lag between the time the forecasts are done and the release date of actual inflation is relatively short (less than fuel and food prices during the fist half of the year. The weaker peso, which drives upward the cost of imported products , also added to the price pressures. Meanwhile, some analysts reported that inflation may have already peaked and pressures have somehow subsided recently. The softening of commodity prices, especially energy, due to the slowdown of global demand, was expected to support the decline in inflation. At the same time, weaker consumer spending would likely keep demand pressures on a downward path. For 2009, the survey also showed a higher mean inflation forecast of 6.5 percent. The mean inflation forecast of analysts is 11.1% for the fourth quarter of 2008 and 9.2% for the first quarter of 2009. Based on the probability distribution of respondents’ forecasts, there is a 56.9% one month). Thus, respondents to this survey have a lot of information available to them when they make their forecasts. Conclusion The wide range of available measures of expectations provides policymakers with important information on how stakeholders react to evolving price conditions. If these measures indicate that expectations are already persistent, then they signal to monetary authorities that there is a possible emergence of inflation inertia. At the same time, the different measures of expectations can be used by the BSP to test whether its actions in terms of transparency and accountability have been effective in strengthening the inflation-targeting framework by anchoring inflation expectations. This can be done by comparing the BSP’s targets against expectations. If expectations should be observed to have increasing causal relationship with the inflation target, then one can conclude that inflation expectations would have a significant degree of dependence or anchoring on the BSP inflation target. chance that average inflation for 2008 will fall within 9.1-10%, above the 4% target for 2008. The Asia Pacific Consensus Forecasts for Philippine inflation in 2008 and 2009 showed rising expectations in July and August, but yielded lower inflation expectations in September 2008 relative to the previous month. BSP Inflation Forecasts The Bangko Sentral’s baseline forecasts indicate that inflation will likely settle above the 2008 and 2009 targets. However, future inflation is expected to decelerate to single digit levels in 2009 to reach the targetconsistent path by 2010. The current inflation outlook continues to show that inflation could settle above the inflation targets for 2008 and 2009 targets. The inflation forecasts for 2008 and 2009 declined due to the lower-than –projected inflation outturns for September 2008, the easing in prices of oil and non-oil commodities in the world market, and for 2009, some base year effects from high inflation in 2008. The emerging baseline forecasts show that inflation will unwind over the next few months. Decelerating to single-digit levels in 2009, to reach the target consistent path by 2010. The balance of demand and supply conditions, as captured by the output gap ( or the difference between actual and potential output) provides an indication of potential inflationary pressures in the near term. Inflation tends to rise (fall) when demand for goods and services exert pressures on the economy’s ability to produce goods and services, i.e. when the output gap is positive (negative). Based on revised GDP data, preliminary estimates yielded an output gap of 4.2% in the second quarter of 2008, which was higher than the previous quarter estimate. The positive output gap could indicate demand pressures that may contribute to higher inflation. — by the Bangko Sentral ng Pilipinas The 2008 PBD Yearbook I 

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Col. Nicetas Katigbak helps Lipa reclaim ins title as the country’s “Barako Capital”

Making sense of the triple bottom line
By Rizal Raoul Reyes
THE MAJORITY OF THE BUSINESS community, particularly members of the League of Corporate Foundations are quite aware of the triple bottom line approach (economic, social and environmental profits). “The LCF has been engaging chief executive officers and the whole C-suite to coordinate strategies on corporate giving with their foundations and community relations teams,” says former president Pacita Juan. Although LCF members have yet to achieve integration in their programs, Juan says different companies are implementing in a different stages of integration. “The good thing is that everybody now wants their CSR efforts integrated into their core businesses,” says Juan. are guided by the big picture of where their small efforts which will be substantial in the long run. Further, Juan says the members are going to realize that this is not mere corporate philanthropy. CSR survey In a survey presented during the LCF 2008 Forum, Asian Institute of Management Professor Felipe Alfonso said 75% of the respondents pointed out that CSR “makes a “tangible contribution to the business bottom line.” “Twenty-two percent of the companies still doubted that corporate citizenship yields significant business benefit,” he said. As far as spending was concerned, 58% of the companies say they invested more financial resources in 2007 as compared to 2005 while 37% said their investments remained the same.
Felipe Alfonso, Chairman of the Lopez Group of Foundations

On the other hand, 45% blamed lack of resources while 35% believed it was lack of support from top management that impeded corporate citizenship. Meanwhile, 30% of the respondents said lack of interest among employees was also a major factor.

For other basic activities like community relations, the LCF urges members to craft bigger CSR roadmaps either in education and environment. At this stage, Juan says doing the basics for the meantime is a good start while members The 2008 PBD Yearbook I 

Pacita Juan, President of Figaro Foundation, Inc. and former president of the League of Corporate Foundations

Alfonso says 83% of the respondents think the public expect companies to deliver quality CSR programs to the stakeholders. However, 52% of the respondents think companies should raise the bar higher in terms of being more committed in implementing corporate citizenship to the ground level. “Across companies, the top drivers for corporate citizenship are that CSR fits with the company’s values; expectations that it will improve the company’s image and reputation; and adoption of CSR as part of business strategy,” says Alfonso.

When asked if their company is investing more time and attention, 60% said their companies allotted more or somewhat more in CSR efforts. This trend, according to Alfonso, calls for bigger involvement of companies in pursuing corporate citizenship. In the 21 statements given to the respondents, providing skills development training for the incumbent workforce and improving the safety of the products emerged as the top three issues preferred to be involved by business. On the other hand, supporting dependent care for the elderly, developing alternative energy sources and safeguarding human rights were the least favored by the business sector.

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Agriculture Secretary Arthur Yap hands over P50 million to finance projects of the Philippine Coffee Board

For the top five issues, improving the quality of products got the highest with 86% followed by skills development training for the incumbent workforce with 77% while close at third was the improving the safety of products with 76 percent. Despite these challenges, Juan believes it is just a matter of time that companies can find ways to share best practices to implement their respective CSR programs. Furthermore, she says LCF members have to intensify their efforts to reach out to management and stress to them the importance of corporate citizenship. “When management realizes the importance, it can now rally the employees to pursue corporate citizenship,” she says.

“The question is: To what bigger roadmap can I connect my initiatives with? And in LCF we have answered that. Over the last three years, a lot of our member foundations aligned their efforts with these two roadmaps. So, no effort, no matter how small, is wasted but contributes to a bigger goal,” Juan points out. Juan says the beauty of their involvement is there are many areas waiting for their assistance. For instance, she says education has many areas that LCF members can help. She cites teacher training which can deliver a multiplier effect bigger than textbooks or schoolhouses in the long run. “Feeding programs may do well because an empty stomach is an empty mind which cannot accept any kind of information,” she says. For instance, the Philippine Business for Education has been active in encouraging students to take up education courses as part of developing of pool of skilled teachers in the future. As far as raising the competency levels of industries is concerned, Juan says the Philippine Coffee Board (PCB) is one of the more sustainable industry boards not only because of the popularity of coffee but also because it is in the forefront of addressing of declining production levels. Even in the coffee industry board, the challenge is the sustainability of its projects, given that the trustees have their own businesses to run. “Our consumption is ever increasing mainly because of our information efforts on the good quality of our local coffee. As a result,

consumption is even higher than we projected five years ago. We have been successful in educating the consumers about Philippine coffee. Now it is time to concentrate on the other end of the spectrum--the farmers” says Juan. Juan says the current challenge of the PCB is to work double time or double the farmer populations, increase the hectares for coffee plantation. Meanwhile, Maria Fatima Reyes, founder and principal of the Sustainability Strategics (Asia) Philippine Institute of Certified Public Accounts, sees leadership and commitment, business case for transparency and organizational competence and capacity as the issues to be reckoned in enabling CSR to be sustainable. Reyes points out companies must tap accountants and auditors for their CSR initiatives must tap the support of the accounting and auditing sectors for their CSR data collection and repository “Accountants and auditors can help companies develop standards for measurement and reporting strategy,” says Reyes. With measurable and comparable data, Reyes says companies can now develop a stronger corporate structure for sustainability in CSR reporting. In the long term, Reyes sees Philippine companies implementing the Global reporting initiative (GRI) in their CSR projects. Further, she says the Philippines will be active in more green projects as part of the global initiative to enhance environmentalism. The 2008 PBD Yearbook I 

In a survey presented during the LCF 2008 Forum, 75% of the respondents pointed out that corporate social responsibility “makes a “tangible contribution to the business bottom line.” However, 52% of the respondents think companies should raise the bar higher in terms of being more committed in implementing corporate citizenship to the ground level.
Sustainable program Juan, who heads Figaro Foundation, Inc., says the amount of assistance given by a company does not matter; the more important thing is the assistance is channeled to a sustainable program.

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A vested interest in coffee
Pacita Juan, co-founder of Figaro Coffee Co. and current president of Figaro Foundation, is one of the champion advocates of the Philippine coffee industry. Aside from promoting the Filipino brand abroad, Figaro also uses only handpicked Philippine Arabica from the top coffee farms in the country. She says this enables Figaro to offer at least 12 flavors of coffee any time to the customers. According to Juan, a company’s corporate social responsibility (CSR) CSR program must be related their lone line of business. “Otherwise, it is someone else’s CSR,” she says. For its CSR undertaking, Figaro revived the

production of the Barako, a local variant of coffee that has been in declined in terms of production since the 1990s. The result is a winwin situation for both Figaro and the farmers because Figaro enjoys a stable supply of coffee and the entire value chain benefits. “It is fine to have a vested interest so that one can sustain the very program a company chooses to adopt. Why support a cause that is so far removed from your business? How do you sustain the activity if it does not make good business sense,” she asks. But for Juan the quest does not stop there. She is leading the drive to raise the competency levels of industries, particularly coffee. Juan said the Philippine Coffee Board (PCB) is one of the more sustainable industry boards in the country, not only because of the popularity of coffee but also because it is in the forefront of addressing of declining production levels. Even within the coffee board, Juan says the challenge is the sustainability of its projects, given that the trustees have their own businesses to run..

“Our consumption is ever increasing mainly because of our information efforts on the good quality of our local coffee. AS a result, consumption is even higher than we projected five years ago. We have been successful in educating the consumers about Philippine coffee. Now it is time to concentrate on the other end of the spectrum--the farmers,” says Juan. Reviving the country’s coffee industry is a relevant cause. Being a coffee lover herself, Juan knows the stuff she is talking about.

Green banking
ASIDE FROM BEING A VITAL COG in development banking, the Development Bank of the Philippines (DBP) is also a major force in green banking. The bank raised the ante of green banking when it recently signed an agreement with the Japan Bank for International Cooperation (JBIC) for a 10-billion-yen facility to enable business enterprises to implement clean development mechanism (CDM) projects. JBIC also funded the bank’s Environmental Infrastructure Support Credit ProgramPhase II with a combined credit component of 20 billion yen and a technical assistance component of 529 million yen. The objectives of the grant were to promote the protection and enhancement of the quality of the environment and to mobilize, encourage and support activities and investments in environment -friendly projects. The 2008 PBD Yearbook I 

Signing of agreement between DBP and JBIC officials Right now, 87% of the bank’s official development assistance (ODA) funds are provided by JBIC. These loans are open to both public and private enterprises at competitive terms through the bank’s retail and wholesale lending windows of the bank. “JBIC 6 is a great leap forward for DBP in its efforts of advocating green banking and in support of DBP’s corporate social responsibility. This loan project adds on more teeth and provides a real bite into DBP’s avowed commitment in developing more socially responsible and ecologically sound operations in business and industries. This only means that projects that adhere to CDM standards can be financed even in a more economic and longer basis,” says

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DBP president and chief executive officer Reynaldo David The partnership between the two organizations has been bolstered in this agreement through financing of CDM projects that can contribute to the reduction of global greenhouse gas emissions while, at the same time, attract investors through the monetary incentives through CDM participation. The facility finances the acquisition of fixed assets, machinery andequipment; building and plant construction; rehabilitation, modernization or expansion of existing facilities; civil works; and working capital requirements of environment projects. To avail of the facility, a project should either pass as a CDM project or have direct or indirect business relations with Japanese enterprises or market. The CDM Forestry program CDM is one of the features of the Kyoto Protocol which allowsindustrialized countries with a greenhouse gas commitment like Japan to invest in programs aimed at reducing emissions in Third World countries as an alternative to the more expensive emission reduction schemes. In May 2006, DBP transferred all CDM-related functions to Financial Institutions-Business Development and Marketing from Program Development. The transfer generated the following accomplishments in 2006: • Build-up of nine potential CDM projects that are included in the priority sectors of DBP; • Entry into two-profit or service-oriented collaborative arrangements for CDM projects with international CDM brokers; and • Explored matching of loan building requirements and available funds in coordination with fund sourcing to address funding requirements of business development marketing on CDM nourish nature’s growth.” Forest program Green banking started in 2005 when the bank launched its Forest Program help in the reforestation efforts of typhoon-stricken towns in Quezon. Today, the program covers 25 forest projects spanning 5,946 hectares nationwide. The program aims to create a double impact by planting tress and integrating the rural communities into the mainstream of economy by providing livelihood opportunities. “This, of course, is on top of several other initiatives ranging from credit support to technical assistance that promote the adoption of environmentally-sound practices among businesses,” says Santo Tomas. The program is being implemented through DBP’s alliances with people’s organizations, local government units, state colleges and universities which work with concerned communities. Under the program, the bank provides the funds for the acquisition of seedlings as well as the establishment and maintenance of the project. Meanwhile, the partners such as Department of Environment and Natural Resources, LGUs and other agencies provide equity contribution. Kreditanstalt fur Wiederaufbau, the German development agency, provided the initial seed fund of P50 million. DBP’s initiatives have been recognized by the major institutions and agencies. Its forest program was cited recently as an outstanding environmental project by the Association of Development Financing Institutions in Asia and the Pacific during its annual convention held in Colombo, Sri Lanka. In 2005, the energy saving programs of the bank got a five-star rating for the bank from the national government’s energy audit team.. The rating was equivalent to a total percentage score of 90 percent. Further, the Institute of Corporate Directors named DBP as the top government-owned and -controlled corporation in the corporate governance scorecard. The ICC is a non-profit organization advocating corporate governance reform and professional corporate directorship in the Philippines. In 2005, the Social Security System awarded DBP the best financial institution for social development loans. Sustainable development from within The bank is also active in pursuing sustainable development in its own backyard. Bank officers and employees are active in resource conservation by practicing prudence in the management, use and disposal of office resources such as paper, water, electricity, among others. The 2008 PBD Yearbook I 

“The bank has always been a strong proponent of environmental stewardship,” she says. “As the need for ecological conservation, preservation and rehabilitation become more pressing concerns, the bank has taken upon itself to adopt a more radical green approach to business-decision-making, and to strive to

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“Living up to our distinction as the first bank in the country to be ISO 14001- certified, our sustaining quest for continual improvement in all our activities continued to be guided by the processes and procedures defined under the DBP environmental management system. Looking forward, we intend to replicate our success in this area with the rollout of EMS in the branches starting with four pilot branches,” says Santo Tomas. Further, the bank’s EMS remains compliant with the 2004 version of the ISO 14001 based on the upgrade audit done by the AJA Registrars Limited on December 2005. “In the home front, DBP has maintained its resolve to consistently improve on its environmental performance. Through established processes and procedures under the bank’s EMS, resource conservation and environmental responsibility have become ingrained in every aspect of DBP’s operations,” says David. DBP is creating opportunities to enable other institutions to adopt environmental protection and pollution prevention projects focusing on renewable energy sources, community water systems, pollution control and solid waste management. Under its various lending facilities, the bank’s combined loan releases for 2005 and 2006 totaled more than P6 billion.

environment project

Mission statement Green banking is embodied in the bank’s environmental policy statement: “The DBP, in its developmental mission and initiatives, is committed to environmental protection and sustainable development and shall integrate and implement environmental considerations into all aspects of its operations and services, asset management, and business decisions.” Further, the bank commits to this policy to • Develop, implement, and continually improve an environmental management team; • Encourage other institutions to pursue environmental protection and pollution prevention through the bank’s lending and technical assistance programs, and pursue environmental management practices, including environmental due diligence inquiry to risk assessment and management; • Comply with relevant environmental laws, regulations and agreements to which DBP subscribes; • Set and review environmental objectives and targets along identified significant environmental aspects; and • Ensure that all employees of all levels are made aware of and are actively involved in the bank’s environmental policy and programs through appropriate training and information.

David points out the gains achieved by DBP’s CSR programs anchored on the green banking have been a source of pride for the bank. He said partner agencies such as the JBIC, KFW and the World bank have made significant contributions to help support DBP’s environmental programs on-stream. “Sustainable progress must always be attached to an important corollary environmental protection. Guided by this basic principle, our operations have always pivoted on proving that profits can be compatible with preserving the gifts of nature,” he says.— Rizal Raoul Reyes

Patricia Sto. Tomas, Chairman of the Development Bank of the Philippines The 2008 PBD Yearbook I 8

“Sustainable progress must always be attached to an important corollary environmental protection. Guided by this basic principle, our operations have always pivoted on proving that profits can be compatible with preserving the gifts of nature.” — Reynaldo David, president and chief executive officer of the Development Bank of the Philippines

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The 2008 PBD Yearbook I 

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Bankers turned volunteers
THE SPIRIT OF bayanihan lives in Land Bank of the Philippine. The bank motivates its people to practice corporate social responsibility programs that embody “beyond the bottom line” principles. Thus, giving back to the community is a commitment that Landbankers translate into practice. Specifically, the LandBank’s CSR initiatives are geared toward enabling the bank’s priority sectors, employees, stakeholders and the communities it works with to attain a quality life leading to economic prosperity and wellbeing. At the forefront of the bank’s CSR initiatives are its environment-related programs and projects, including tree-planting, the Adopt-aWatershed program, Manila Bay Clean-up, and the adoption of six coastlands/wetlands and bird sanctuaries. Every year, bank volunteers from Metro Manila, Luzon, Visayas, and Mindanao, troop to parks, public schools and other public areas to plant trees. This has become a major part of the Bank’s anniversary activities every August. In its Adopt-a-Watershed program, the bank commits to protect six critical watersheds in the country. These are Magat River in Nueva Vizcaya, Angat-Ipo River in Bulacan, Bago River in Negros Occidental, Binahaan River in Leyte, Lasang River in Davao del Norte, and Silway River in South Cotabato. In partnership with the Department of Environment and Natural Resources, the bank sees to it that regular clean-up and tree-panting activities are conducted in these watersheds. Bank employees have also taken a personal stake in this program as they contribute their time and effort for the areas’ rehabilitation and protection. Recently, the bank has adopted six coastlands/ wetlands and bird sanctuaries in the country: the Las Piñas-Parañaque Critical Habitat and Eco-Tourism Area in Metro Manila, the Cabusao Avian Sanctuary in Camarines Sur, the Lake Mainit in Surigao del Norte, the Olango Wetland Sanctuary in Cebu, the Guiuan The 2008 PBD Yearbook I 80 Clean up time for employee-volunteers of Land Bank of the Philippines

Wetland in Eastern Samar, and the Vitali Wetland in Zamboanga. This is another tie-up with the DENR, which aims to support the national government’s thrust for environmental protection and conservation. In this project, the bank commits to take part in cleaning up the surroundings of the bird sanctuaries and planting mangroves. Another bank program is its annual Manila Bay Clean-up, wherein Landbankers from the Head Office and NCR branches gather to help clean the Manila Bay. Now on its fifth year, the program has been further expanded through a a memorandum of agreement with the city of Manila, DENR, the Manila Yacht Club, and the 101st Squadron of the Philippine Coast Guard Auxilliary. Under the MOA, the bank will finance the construction of trash traps in Remedios and Padre Faura in Manila. The bank will also shoulder the gasoline and engine-tune up expenses of the boats used to clean Manila Bay. In response to the environmental problems hounding our society, LandBank is steadfast in its mandate and immerses its people in serving the community. As the bank advances this meaningful cause, which to generate profit to finance countryside development, it drives and inspires its people to be drivers of change in the society.

At the forefront of Land Bank of the Philippines’ CSR initiatives are its environment-related programs and projects, including tree-planting, the Adopt-a-Watershed program, Manila Bay Clean-up, and the adoption of six coastlands/wetlands and bird sanctuaries.

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12/22/08 5:27:47 PM