Current business
climate not conducive to new investments
POLITICS, the high cost of raw materials,
escalating fuel prices and falling foreign exchange
rates are dragging down local businesses and preventing
new investments from coming in.This was the collective
assessment of several business groups when asked whether
the current business climate is good for existing and
new investments.John Guillermo, Distribution Management
Association of the Philippines (DMAP) spokesperson,
said, the ongoing political tussle is presently the
biggest setback to business as it sends the wrong signal
to investors. "Investors are in a wait-and-see
mood. They don't want to get involved in the Philippines
until the current political crisis is over while some
investors have already started to pack their bags and
leave," he said.
"We are having a hard time surviving," he
added.This sentiment is shared by Erich Lingad, outgoing
president of the Philippine International Seafreight
Forwarders Association (PISFA), who said business recovery
depends on the political condition."There are no
new investments coming in, no growth. Investors are
hesitant to bring in more investments if the country's
foreign exchange rates continue to fall. Our existing
business climate is not conducive to new investors,"
Lingad explained.
Shift in preferences
The shift in preferences - for food, mode of transport,
even the kind of business companies are getting into
- is an indication of how bad business is.Guillermo
said people are shifting to cheaper kinds of food such
as noodles instead of buying canned goods as well as
taking jeepneys instead of airconditioned vehicles or
taxis.Sulpicio Lines, Inc. (SLI) vice president for
passage Salvacion Buaron said more people are choosing
to stay home than say, two or three years ago. "People
choose not to travel more because of the high cost of
living," she added.
Buaron claimed that the peak season, which usually extends
up to June or July, has been shortened as evidenced
by lower sales in the first five months of the year
- a proof, she said, of hard times being experienced
by Filipinos.The water transport sector led by shipping
giants Aboitiz Transport System (ATS), Negros Navigation
and SLI see conservative single-digit growth, if there
is growth at all.ATS has started to sell its other assets
in order to concentrate more on other profitable aspects
of its business.
Port operators Asian Terminals, Inc. (ATI) and International
Container Terminal Services, Inc.(ICTSI) also shifted
their business in order to post double-digit growth
in the next years.ATI is also negotiating to extend
its contract with the Philippine Ports Authority (PPA)
for another 25 years, and spill over to the new contract
the balance of its $300-million investment in the South
Harbor, claiming that current figures have failed to
meet projected growth stipulated under the old contract.
ICTSI, on the other hand, is concentrating on its port
operations overseas where growth is faster.
Shipyard operator Keppel Marine Philippines Inc., meanwhile,
said the Philippine market will continue to remain a
prospect and is banking on the overseas market for growth.
Critical six months
PISFA and DMAP see the next six months as critical even
as they expect flat growth or even lower figures in
the second half.
"Our recovery depends on how the political crisis
plays out; its effect could still be felt in the next
two to three years. If this problem continues until
next year, we will be in the doldrums," Guillermo
said.
"The longer it lingers, the more disaster for our
industry. The issue should be settled immediately,"
Lingad added.
Still, industry personnel remain optimistic that business
will pick up even if not immediately. "I think
we can still recover but not in the next two or three
years. We are down now, but where else can we go but
up?" Lingad said."The economy has started
to pick up the slack it suffered from the political
uncertainty and the rallies which are now dying down.
The economy is starting to recover," Guillermo
added.
Socio-economic Planning Secretary Augusto Santos echoed
such sentiment as he added that the country's economic
fundamentals are intact and growth of the economy is
only being overshadowed by the political noise.Santos
took note of the stock market investment, which he said
has now reached US$2 billion - more than three times
compared to last year."After this political noise,
the performance of the economy and the country will
be better," he said.
THE Philippine Shippers' Bureau (PSB)
is against the decision of the Transpacific Stabilization
Agreement (TSA) to increase the bill of lading (B/L)
fee by 50%.In a directive, PSB executive director Atty.
Pedro Vicente C. Mendoza enjoined all PSB-accredited
non-vessel operating common carriers, cargo consolidators,
freight forwarders and breakbulk agents to refrain from
paying the added cost.
"The imposition of the increase was made unilaterally
and without the consultation nor negotiation with the
affected parties, particularly the shippers and consignees,"
Mendoza explained.
TSA increased the B/L fee at the start of the month
from $20 to $30 per B/L.PSB is asking TSA to justify
the TSA on the rate increase as well as seeking to defer
implementation of such.PSB expects the additional cost
will be passed on to shippers."In view of its detrimental
effect to our shippers, we enjoin all stakeholders to
either refrain from payment of the increase or pay under
protest pending submission of TSA's justification,"
Mendoza said.
THE Bureau of Customs (BOC) together
with Customs leaders from the Association of Southeast
Asian Nations (Asean) signed an agreement with their
European counterparts to promote free flow of goods
and commodities across the two continents while intensifying
the fight against smuggling and terrorism.
Newly-installed Customs commissioner Alexander Arevalo
said the pact will modernize customs services in the
region and would reduce the cost of business transactions
for better competitiveness among trading partners in
Asia and Europe.
The BOC last week hosted a three-day Asean-European
Union (EU) trade facilitation workshop aimed at promoting
better business activities and sharing experiences and
knowledge, particularly on customs matters.
Arevalo said among key issues of the agreement is the
implementation of the Trans Regional EU-Asean Trade
initiative (TREATI), which is expected to reduce red
tape, streamline management processes and eventually
eliminate tariff barriers.
Aside from modernizing and improving trade facilitation,
Arevalo said smuggling activities will also be reduced.
"Legitimate businesses will be much easier and
faster as customs procedures would be more simple and
uncomplicated," Arevalo said.
He added that modernizing customs procedures, practices
and formalities will ensure sustainable export growth
and promote better investments between Asean economies.
In a related development, the EU also granted the BOC
some three million euros to improve its computer system.
As early as last year, the BOC has embarked on a computerization
program in its bid to increase collection and reduce
red tape in the agency.
TAIWAN'S Wan Hai Lines, will launch
seven new vessels in the next five months to improve
its fleet and take in more cargoes.Two vessels with
a capacity of 2,646 TEUs and five with 4,256 TEUs will
be delivered before the end of 2005.
Two new vessels have already been named (Wan Hai 311
and Wan Hai 501) and are expected to be launched this
month. The other vessels, Wan Hai 502 and Wan Hai 503,
will be launched in September and October, respectively.
Wan Hai Lines is Taiwan's third-largest shipping line.
Its routes include Taiwan, the Kanton and Kansai areas
of Japan, Korea, Mainland China, Hong Kong, the Philippines,
Thailand, Malaysia, Indonesia, Singapore, Vietnam, Burma,
Cambodia, India, Pakistan, Sri Lanka, and the Middle
East.
In 2004, Wan Hai Line had 66 fully-container vessels
in operation, with capacity of over 90,000 TEU. In addition
to the exclusive terminal in West 17 of Keelung, Wan
Hai also leased No.34, No.35, No.63, No.64 in Taichung
and Kaohsiung, which makes Wan Hai the only carrier
in Taiwan with exclusive terminals in the northern,
middle and southern parts of the island. So far, 15
routes of the present 20 routes in operation provide
direct calls to 43 major international commercial ports
in Asia, the most comprehensive and intensive service
network available in Asia.
NEDA
approves full use of JBIC funds for Batangas expansion
THE National Economic and Development
Authority (NEDA) has approved the full use of the entire
programmed loan for Batangas Port, according to the
Philippine Ports Authority (PPA).NEDA has allowed PPA
to use the entire P5.5-billion budget from the Japan
Bank for International Cooperation (JBIC) for Batangas
to further expand the port and procure the necessary
cargo handling equipment, said PPA general manager Oscar
Sevilla.
PPA is now waiting for Department of Finance approval
on the matter.PPA will use the funds to procure cargo
handling equipment for Phase 2 to make the port operational
by next month. The port agency also plans to extend
the berthing area by another kilometer to accommodate
post-panamax vessels. The current berthing area is only
designed for panamax vessels.
The Batangas Port Development Project Phase 2 is a foreign-assisted
project with an approved budget of P2.9 billion. The
JBIC has allotted P5.5 billion for port development.
"Having these improvements prior to the privatization
of cargo-handling operations for phase 2 would certainly
improve attractiveness of the port to possible investors,"
Sevilla said.PPA is targeting to privatize the operations
and management of the port within six months or by the
first quarter of next year.The Batangas port is one
of 10 ports being groomed by the PPA to meet international
standards by 2010.
THE Philippine Economic Zone Authority
(PEZA) reported a drop in Philippine exports by 3% in
the first five months of the year from $12.63 billion
last year to $12.24 billion this year.Figures from the
agency showed that for the five-month period, total
merchandise exports still registered a 4% growth from
$15.42 million a year ago but is less than the 10% growth
being projected for the entire year. In May alone, total
shipments were up slightly by 1.1% compared to the same
month last year.
PEZA said the tamed performance of export zones shows
the performance of the entire exports sector which has
been sluggish in the early part of the year due to a
slowdown in global demand and stiff competition in the
electronics sector.Exports from eco zones accounted
for 76% of total merchandise exports which totaled $16.045
billion while private ecozones exported a total of $9.42
billion between January and May, down 3.7% from $9.79
billion in the same period a year ago.
The PEZA's export performance on a monthly basis, on
the other hand, has been growing, starting at $2.32
billion in January, $2.34 billion in February, $2.483
billion in March, and $2.5 billion in April.
Exports from companies in the four government-run ecozones
- Baguio, Bataan, Cavite and Mactan - posted a 4% increase,
shipping $2.88 billion worth of products compared to
$2.76 billion in the five-month period of 2004.
THE Philippine government will indemnify
Takenaka Corp. $100,000 to escape possible legal charges
from NAIA-3 developer Philippine International Air Terminals
Co. (Piatco). The arrangement is expected to push the
Japanese airport contractor to agree to completing NAIA-3
by yearend.Sources from the Department of Transportation
and Communication (DoTC) said Takenaka also agreed to
sign within the month a general framework of agreement,
a multi-million dollar financial settlement between
Takenaka and the Philippine government.
The two parties are also finalizing a construction work
agreement that will detail completion and commissioning
schedule of NAIA-3.In May, Takenaka agreed in principle
to commission the equipment and complete the construction
of NAIA-3 at 50% lower than its bargaining price of
$106 million.Piatco lawyer Liwayaway Vinzons-Chato,
however, said Takenaka Corp. cannot enter into an agreement
with the national government for completion of NAIA-3
without violating its contract with Piatco, adding the
company may sue the foreign contractor for damages.
The Supreme Court in May 2003 declared as illegal the
contract between the government and Piatco for the construction
of NAIA 3.Piatco refused to give up the facility until
it is reimbursed for project expenses, forcing the government
to expropriate the facility in December 2004. Piatco
wants $625 million in compensation, but the government
is offering only $300 million."We are still in
negotiations with Takenaka. In fact, the general framework
of agreement has been approved by both parties. We are
just waiting for finalization of the construction work
agreement so we can sign both documents," the DoTC
source said.
A new vessel of Cheng Lie Navigation
Co. (CNC) recently made its first call to the Manila
International Container Terminal (MICT), International
Container Terminal Services, Inc.'s (ICTSI) flagship.
Arriving from Jakarta, Indonesia, the 1,740-TEU capacity
MV Sea Alfa docked at MICT's Berth 3, offloading
108 TEUs and loading 61 TEUs After Manila, the vessel
returned to Jakarta. Atiko Trans, Inc. is CNC's Philippine
agent. Photo shows William Gutierrez (3rd from left),
ICTSI Customer Relations Manager presenting a commemorative
certificate to Capt. Poprochalov Valeri (2nd from left),
vessel master. With them were Ray Lin (extreme left),
CNC owner's representative, and Noli Mendoza, Atiko
vessel operations officer.
