CDC 2008 Annual Report.pdf

CDC ANNUAL REPORT 2008

Table of ContentsI. Introduction 5

II. Pushing Development To The Next Frontier 7

III. Gains in a Challenging Year 9

Record Increase in Actual Employment 9 New Businesses, Renewals and Expansions 10 Business Assistance and Investment Support 10 Modest Growth in Exports 11 Enhancement in Power Infrastructure 13 Improved Trac Management 13 Automated Processing of Trade Transactions 14 Previous Infrastructure Improvements Recognized 14 Improved Lease Administration 14 Sustained Enhancement of Human Resources 15 Enhancing Clarks Status as a Tourism Destination 15 Economic Contribution Through Taxes and Duties Collection 15

IV. Balanced Approach to Development 17

Environmental Management 17. Corporate Social Responsibilty 17

V. Strategic Directions in 2009 18

Develop the Next Frontier 18 Completely Lease out CFZ areas 18 Enhance Clark Experience 19 Sustain Internal Competence-Building 19 Initiate Parallel Development Initiatives 19

VI. Financial Performance 21

Financial Statements 22

CDC ANNUAL REPORT 2008 1

These are the trying times, indeed.

With economic slowdown aecting the US and the world over, the Philippines and Clark Freeport Zone have to withstand the eects of the global contagion.

The past year saw our collective stand to face the challenge in the eye. Now, more than ever, we have to remain even stronger and more resolute in going through the economic hurdles.

Clark Freeport and the businesses inside the zone may not be spared from the grueling eects of the meltdown. This is one reality and one specter that we will have to endure. If it is to the comfort and assurance of everyone, the Clark Development Corporation is not only standing guard against the impact of the crisis. It is putting in place some measures that will stem the tide and shore up the various industries inside the Freeport. It will continually serve and protect the interests of all which ultimate result will be to buoy up the economy as we try to save jobs and livelihood of thousands of Clark work-ers.

In doing so, we ask for the cooperation and understanding of all concerned. Let us all remain steadfast and keep the faith in facing the challenges of the future.

Thank you very much

RIZALINO S. NAVARRO Chairman Clark Development Corporation


Message

The Corporation has been trying to fulll its mandate from the time of its inception. With all the challenges of the times, it endeavors to reach its goal of helping pump prime the economy.

The challenges have not gone any easier. On the contrary, they are tougher these days. The global situation, though, to look at it positively, calls for us to be more proactive. It calls us to revitalize and create strategic advantages to be ready to face the future.

While we are grateful for what we have achieved in 2008, reality tells us to gear towards keeping what we have attained.

CDC is taking steps and solid measures to keep Clark abuzzed with economic activities. We are befaced with a challenging job immediately ahead of us.

No matter how tough, we can make things easier and better if we remain focused. Let us maintain excellent public service and work in unity and with condence and trust.

Clark Freeport, as in the past, will always emerge to serve its role as an investment center and a catalyst of economic progress.

BENIGNO N. RICAFORTPresident and CEO


Message

The road to development never ends...


Introduction


The year 2008 may be far from typical but, as in previ-ous years, the Clark Development Corporation raised the level of its performance to meet the new chal-lenges.

For oil prices in the world market climb to historic highs only to plummet by yearend due to apprehen-sions of global recession illustrates the sweeping economic and social changes in 2008. The economic uncertainties which started with the US nancial sector has already aected the rest of the US economy and all its is trading partners, including the Philippines.

Yet every so often disturbance of global magnitude sweeps the economic and social landscape to expose areas of vulnerabilities and press for immedi-ate changes and reforms. Like occasional forest res which burn old undergrowths to permit the growth of fresh saplings, the nancial and economic disrup-tions in 2008 will bring in essential reforms and, in the process, bring in new opportunities more vibrant than what were possible in the former order of things. The Clark Development Corporation contin-ues to exploit these opportunities, the strategic inection points in these challenging times.

CDC recognizes that challenges are transformed into opportunities only to the extent they can enable the organization make critical changes more suitable to the altered environment. Challenging times are occasions for reappraisal of the organizations priori-ties and reassessment of strategies in the context of creating value to its various stakeholders. Mindsets compatible to organizational changes are more likely present in dicult than in easygoing, the reason tough times are suitable for introducing meaningful reforms.

Recognizing the timeliness of clarifying the func-tions and jurisdictions of CDC and Clark Interna-tional Airport Corporation (CIAC), and create synergy between the two corporations in the process, Presi-dent Gloria Macapagal Arroyo issued Executive Order 716 in April and transformed the CIAC into a

subsidiary of the Bases Conversion Development Authority (BCDA). The executive order mandated CIAC to operate and manage the 2,200-hectare Clark Civil Aviation Complex and focus business priorities to aviation, aviation-related services, and aviation logistics activities. This directive of the President further strengthened CDCs mandate as implement-ing arm of BCDA within the CFZ and CSEZ, pursuant to Sec. 15 of RA 7227 and RA 9400.

President Arroyos decision to clarify the mandates and administrative jurisdictions of CDC and CIAC through Executive Order 716 will certainly have immediate and long term positive impact on the eciency and output of both corporations. With increasing demand for leasable area, CDC now looks at the former Clark Subzone, as the Next Frontier of development.

In August 2008, President Arroyo appointed CDC Director Benigno N. Ricafort as President and CEO of the Corporation. Mr. Ricafort replaced Mr. Liberato P. Laus who submitted his resignation eective July 31, citing his desire to go back to the private sector. Mr. Ricaforts extensive and diverse experience as a banker, businessman, leader of socio-civic organiza-tions, aside from the fact that he has been director in the CDC board since 1993, will provide clear and steady directions as the Corporation steers in the rough waters of global business. Reective of his participative management style, soliciting ideas and suggestions through a series of consultations across the various ranks of the organization was one of Mr. Ricaforts earliest actions as President and CEO.


It is from these consultations that the decision to revive the various Oversight Committees of the Board of Directors was made. Part mentoring, part direction setting, every aspect of CDC operations was immensely benetted from the insights and experiences of the members of the board through these Board Oversight Committees. These creative collaboration, combined with the guidance provided the the policies crafted and approved by the board, made the developments and break-throughs realized during this challenging year possible.

In contrast with the uncertainties in the global economy, the conuence of key developments further enhanced the competitiveness of the zone for both local and foreign businesses. The vision of physically linking the Subic Bay Freeport Zone, the Clark Freeport Zone and the Central Techno Park in Tarlac was nally realized in 2008 when the Subic-Clark-Tarlac Expressway (SCTEx) was formally opened to the public. The opening of the 94-kilometer four-lane expressway is expected to jump start the rate of development in this acknowl-

edged growth corridor. Further, through the judicious petitions CDC to its mother company, the Bases Con-version Development Authority (BCDA), two exits to the Clark Freeport Zone the Clark South Interchange and the Clark North Exitare slated for opening early next year.The exciting developments at the Diosdado Macapagal International Airport (DMIA) this year will further strengthen the synergy of the airport with the rest of the Clark Freeport and Special Economic zones, especially along the tourism aspect. As more and more airlines, both low cost and full-service carriers, append the DMIA as a regular destination, it is expected that an increasing number of business and leisure travelers will delightfully nd Clark as a suitable gateway to the Philippines and the rest of the world.

Deliberately and in steady pace, the growth potentials of the Subic-Clark growth corridor are now turning into realities. Further supported by strong nancial and policy support by the national government, and the excellent working partnership with the various local government units, the aspiration of CDC to be the catalyst for further economic and social developments in the region will be the natural consequent.


Even before E.O. 716, the concept of a phased development of the Clark Special Economic Zone already started with the historical signing of the Joint Management Agreement (JMA) with the corporation with the Tribong Ayta (Aeta Tribe) in September of last year. The JMA with the Aetas gave the corporation the opportunity to co-manage the 10,684 hectares of the CSEZ covered by Certicate of Ancestral Domain Title (CADT).

Pushing Development to the Next Frontier

From their share in the lease income, the JMA hopes to realize sustained economic develop-ment and social security for these indigenous citizens of the Clark Subzone. During its last meeting for 2007, the CDC Board of Directors approved in the creation of a Special Bids and Awards Committee (SBAC) for the procurement of consultancy services for the preparation of a Master Development Plan (MDP) for the area covered by the JMA. On June 4, 2008, a joint venture between the Planning Resources and Operations System, Inc. (PROS) and Woodelds Consultant, Inc. (WCI) was engaged by CDC to prepare the Master Development Plan (MDP) for the 10,684-hectare CADT area.

Progress towards the timely completion of the Master Development Plan was made steadily through regular coordination between PROS-WCI and the designated technical team of CDC. The feedback received by the consultants from each progress report submitted ne-tuned subsequent submissions and the quality of the emerging master plan in relation to the corporations objectives of the CSEZ. By year-end, only the Socio-Economic Development Plan segment of the Master Plan and the Final Report are works in progress. Earlier segments from the Conceptual Physical Development Plan to the Market Study & Business Plan, from the Population & Demographic Projections to the Utility Requirement Projections have all been submitted, evaluated and modied to the requirements of the corporation.

By early next year, it is expected that the com-pleted Master Development Plan of the 10,684 hectare in the Clark Special Economic Zone would have been approved by the CDC Board for implementation.


Record Increase in Actual Employment

Notwithstanding the initial fallout of the slowdown in global economic activities, actual employment at the Clark Freeport Zone still increased by more than 5,000 compared to previous years gures. Based on the actual tally of the Customer Services Depart-ment, CFZ employment increased from 52,010 by yearend in 2007 to 57,790 in December 2008 another record increase of 5,780 workers in a span of one year.

As in previous years, CFZ enterprises in the industrial sector remain the zones top employing sector, even though employment its garments & sewing, furni-ture & crafts, and other manufacturing sub-sectors are lower than last years gures. Its electronics sub-sector remained resilient though notwithstanding the early eects of slackening demand for consumer electronics in its European and North American mar-kets.

Gains in A Challenging Year

It was the robust performance of the information technology-based, tourism and service oriented sectors which really pushed CFZ employment to another record level. The zones ICT sector employed close to 1,800 work-ers this year, mostly in its burgeoning Business Process Outsourcing eld a sector whose recruitment binge is expected to continue well into the incoming year.

DMIAs emerging status as an airport of choice continues to positively impact the zones tourism-based enterprises. The positive multiplier eect from the tourism-airport synergy continue to fuel investment in tourism-related infrastructure which, in turn, call for the active employ-ment of competencies needed to maintain these facilities ranging from chefs to golf caddies. More frequent waves of new tourist will nd the new and varied tourism facili-ties attractive enough to append Clark in their next busi-ness or leisure trip. No wonder, the tourism-estates alone hired close to 1,500 workers this year.

Employment


New Businesses, Renewals and Expansions

Promoting the zone to both new businesses and persuading existing locators to expand or renew their Clark opera-tions have yielded posi-tive results this year. Almost without excep-tion, all items in the corporations marketing department report showed positive growth from new leases and sub-leases, expansions, and renewals, along with the related investment and employment com-mitments of these approved projects. (see table 3). Overall, the number of approved projects this year exceeds last years tally

Signed Contracts

Modest Growth in Exports

In spite of the gloomy reports about the local economys export performance, and the equally foreboding fore-casts, CFZ exporters still managed to generate a modest growth of 7.41%.

While the zones exporters of furniture, garments and agricultural produce have started feeling the pinch of the global economic downturn, the strong export performance of information technology, tires, and specially the aviation-related sectors pushed the zones overall export performance beyond last years US$ 884 million. Several factors may underline this positive export growth, already unusual in the context of the increasing media accounts of slump in global exports.

It is possible that orders for the last quarter of the year might have been completed prior to the drop in consumer demand for these exports. Diversication in both exports and markets may be another factor that may help explain the robustness of the zones export performance.

by 46 projects, a growth rate of almost 40%. These projects have committed to infuse Php 10.05 B more investments, and employ close over 12,000 new workers compared to last years com-mitments.

A number of these new investments are in service-oriented, IT-related, industrial in nature, while the sizable portion of the investment and employment commitments came from tourism-related projects. Included in these so-called big ticket projects are CPR Palm Resort Corporations commitments to construct a P 210 million hotel, oce, restaurant, and health building; the Philip-pine Games and Amusement Corporations P 1B hotel and casino complex; and A-Tech Korea Co., Ltds 32,000 square meter retirement estate proj-ect. The IT-related sector is further strengthened with the entry of NCO Philippines call center and business process outsourcing services in Clark.


Exports

Business Assistance and Investment Support

Paying more than lip service to the preeminence of providing the best business and investment support, the Corporation through its Customer Service Department further reinforced its Customer Assis-tance for Retention and Expansion (CARE) Program this year. Through the CARE program, CDC seeks to provide maximum support to current CFZ locators in their planned expansion programs. With new lease arrangements, expansion programs undertaken by existing business enterprises are the most reliable source of additional revenues, investments and employment.

This year the CARE Brochure containing after sales procedures such as business permit, visa and import/export applications was created and was read-ily available to both existing and potential CFZ loca-tors. Through the CARE program, 26 expansions proj-ects and 73 renewals of contracts were facilitated.

Taken together these projects have revenue potentials of around US$ 5.3 million. Dedicated Account Ocers also serve as single contact persons for CFZ investors for the facilitation of their businesss nancial and facilities, security, exports, and utilities requirements.

Always hoping for the best but preparing for the worst, CDC management is already preparing for contingency relief measures in the event slump in global economic growth continues next year.

Depending on the magnitude, these measures will be oriented towards mitigating the impact of the economic decline among all its stakeholders.


This year the CARE Brochure containing after sales procedures such as business permit, visa and import/export applications was created and was readily available to both existing and potential CFZ locators. Through the CARE program, 26 expansions projects and 73 renewals of contracts were facili-tated. Taken together these projects have revenue potentials of around US$ 5.3 million. Dedicated Account Ocers also serve as single contact persons for CFZ investors for the facilitation of their business nancial and facilities, security, exports, and utilities requirements. The systems on job placement and visa processing were also streamlined to better serve the local and expat workers of the CFZ. Not only did the streamlining led to better and faster service, the programs even increase visa revenues by at least 20%.

The business application process was also signi-cantly streamlined for better eciency. This was made possible by CSDs registration ocers having real-time access to important information from the databases of other departments such as the Environ-mental Management Department (EMD), the Build-ing and Utilities Regulatory Department (BURD), the Treasury Department (TRE) and the Property Man-agement Department (PMD). As a result, business permit revenues increased from Php763,500 to Php 785,000 or an increase of around 3 % from the year 2007 level.

Through its Industrial Relations Section, the Customer Services Department continues to proac-tive monitoring of compliance to applicable labor standards. Through its routine preventive mediation and dispute resolution between management, no less than eight potentially disruptive labor disputes were resolved this year. Providing relevant business capability- building through human resource man-agement & development programs are also high on the corporations after sales support priorities.

Through active tie-up with industry partners, academic institutions and private organizations, a variety of seminars and training programs ranging from performance management to Filipino manage-ment styles benetted over 700 participants from a various CFZ enterprises.

Enhanced Power Infrastructure

In periods of growth, and especially in challenging times, the corporation is fully aware of the core impor-tance of managing the fundamentals. In the case of managing a Freeport zone, infrastructure and utilities, along with security and ease of doing business are clear fundamentals.

To guarantee provision of ecient and reliable power for the forthcoming operations of the Texas Instruments (TI) plant in Clark. Phase 1 of Power Infrastructure Project for TI has been completed in June 2008. This phase of the project covers the installation of 230kV and 69kV Power Transmission Lines, and the construction of 2x50MVA Load End Substation. The second phase which involves construction of Clark Sub-Station is in full swing and is slated for completion by September 2009. An Opera-tions and Maintenance Agreement (O & M) between the National Transmission Corporation (TransCo) and CDC were also signed in October for phase 1 of the power project. Other related contracts such as Memorandum of Agreement (MOA) between TransCo and CDC, Cost Reimbursement Agreement (CRA), Connection Agree-ment, and Transmission Services Agreement (TSA) only await signing and approval of both the CDC and TransCo boards. Technical details related to the possible imple-mentation of the last phase of the TI project are still being evaluated by CDC in close coordination with National Economic Development Authority (NEDA) and other allied government agencies. Once the feasibility of this phase of the project is clearly established, it will be referred to the NEDA- Investment Coordination Commit-tee for possible consideration, and endorsement to the NEDA Board

Improved Trac Management

The corporation continues to invest substantially on important infrastructure projects as it spend over Php 35 million this year. Starting October, motorists along the Clarks M.A. Roxas highway have started enjoying the enhanced road and trac safety with the installation of modern trac control system along the highways strategic intersections. The new trac control system which costs more than Php 7 million were imported from China and installed by local contractor Trac Signal Builders, Inc.gate (inbound) to the implementa-tion of critical repair of roads and drainage systems.


Other equally important projects range from the construction of an Inspection Bay at the zones main modern trac control system along the highways strategic intersections.

Automated Processing of Trade Transactions

Starting December 1, import permit application inside the Freeport has been reduced to ve min-utes. The initiative, which is the initial segment of the Joint Management Order (JMO) the Corpora-tion together with the Subic Bay Metropolitan Authority (SBMA), Subic-Clark Alliance for Devel-opment Council (SCADC), and the Bureau of Customs (BOC), mandated that all import permits much be processed via the Electronic Transit Admission Permit Systems (E-TAPS). The E-TAPS enabled the locators to lodge their import permit applications, pay the required fees, and generate the permit electronically. No manual processing of import permits, save for regulated commodities, will be permitted. With the E-TAPS, permit applica-tions by locators will be processed in less than ve minutes for 24 hours and seven days a week or 24/7. The approved E-TAPS Single Administrative Document (SAD) will be printed online with the corresponding CDC logo, reference number and barcode as added security feature. The CDC Trade System which mirrors an equivalent system at the Subic Bay Freeport addresses both the data and processes requirements of CDC, SBMA and the BOC in ensuring that only duly-authorized locators and importers are admitted into the two Free-ports. The implementation of the E-TAPS coupled with intensied joint inspection with the Bureau of Customs (BOC) maintained the zero incidence of smuggling at the CFZ for the entire year as validated by the Presidential Anti-Smuggling Group (PASG).

Previous Infrastructure Improvements Recognized

Even though creating the best possible business environment, not award or recognition, is the primary motivation of CDC to continue enhancing the quality of available infrastructure in the CFZ, it is still rewarding to have its previous eorts appre-

ciated by others. For its previous project to have the telephone lines of the CFZ interconnected and inte-grated with the rest of Pampanga, the corporation was one of the top 10 winners of the 1st Gawad Pampub-likong Korporasyon (1st GPK) in December. Conceived as early as 2001, the project aims to interconnect Clark's telephone lines to Angeles City and the City of San Fernando, as well as other areas in the province of Pampanga.

With the interconnection project an initiative of the Metro Clark Advisory Council (MCAC), the Malacanang award is another showcase of what strong and positive collaboration between the corporation and its various publics can accomplish. As benecial as the project is already, it is still far from complete. CDC and MCAC have started negotiations with telephone companies to extend the same toll-free privileges to other prov-inces in Central Luzon.

Improved Lease Administration

With each new lease agreement completed espe-cially projects involving large areas of real estate like tourism infrastructure and business parksClark leas-able areas dwindle. This not exerts upward pressure on lease rates but also magnied the increasing opportu-nity losses from non-performing but prime assets.

To better monitor compliances and contractual com-mitments of the locators/investors and ensure strict enforcement of contracts, the Contracts Administra-tion Oce (CAO) was spun out of the former Legal and Contracts Administration Department. Placed organi-zationally under the Oce of the Assistant Vice Presi-dent for Legal Aairs and Legal Counsel, the CAO was instrumental in recovering some 47,484.70 sq.m of leased properties from 13 locators, and collection of arrears of close to Php 10 M.

A number of non-performing accounts cover some of the best prime areas in the zone but are enmeshed in challenging legal, nancial and administrative compli-cations. To nally set denitive solutions to these so-called big-ticket accounts, President Ricafort assigned a Senior Management Account Ocer (SMAO) to each of such accounts.

The SMAOs are directed to resolve whatever issues and complications surrounding the accounts assigned to them toward either the restoration of the accounts nancial health or the speedy recovery of the lease area for re-oering to new prospective investors.

Sustained Enhancement of Human Resources

CDC continues to invest on its human resources to acknowledge that it remains its most important resource. Salaries and other benets remain as one of the most competitive in the region. The corporations manpower complement is further enhanced with the hiring, promotion and/or transfer of some 76 person-nel. Close to 2,000 participants benetted from various seminars, workshops and other training opportunities ranging from the conduct of risk-based audit to eec-tive negotiations and conict management The new CDC Performance Evaluation System (PES) was already approved by the CDC Board of the Directors last December 16, 2008 and is scheduled for full implemen-tation in the rst quarter of 2009. The new PES hopes to institute a more accurate, valid and objective evalua-tion of performance, and will serve as reliable bases for future personnel trainings and promotions. Comple-mentary to the new evaluation system is the conduct of the review and updating of the Table of Administration of Discipline, the exercise of which is expected to be completed early next year also.

Enhancing Clarks Status as a Tourism Destination

On its 12th staging last February 7-10, 2008, the Philip-pine International Hot Air Balloon Festival was once again a success. The event that has become synony-mous with the Clark Freeport Zone attracted some 30,000 foreign and local tourists. Clark is also fast becoming one of the preferred venues for sporting events. The year commenced with the holding of the Clark International Marathon, an event envisioned to be one of the signature events in Clark. More than 1,200 athletes including Kenyan and Singaporean runners participated in the January 13, 2008 event. In March 2008, local fans had a taste of international cricket with the staging of the Clark Aviation International Cricket Sixes Tournament. Turbo Racing Club also chose Clark for its drag racing event in February and Turbo Race Cup: Season 3 in April 2008. Top duathletes from all over the country ocked to Clark to compete in the 2nd O-

Road Duathlon. In September 2008, 216 rugby players from dierent Asian Countries came to Clark for the 5th International Rugby Tournament at the Challenger Field of the Philippine Air Force area. Also in the same month, a biking tournament known as the Executive Race attracted around 290 cycling enthusiasts. The holding of the New Balance Power Race 2008 in November 15 and 16, 2008, which was participated by 1,400 runners further reinforced Clark as a prime venue for running events in the country.

Organized as a corollary activity held alongside the Philippine International Hot-Air Balloon Fiesta, Clarksiya-han was a memorable event lled with street dancing competition, a job fair, a cheering competition and a bikini showdown. The coronation night of the Ms. Earth International Pageant 2008 was held at the Clark Expo Amphitheater in November 2008. The event was aired live over ABS-CBN Channel 2, and Free TV on more than 20 dierent countries. The Regional Food Festival last November 14, 2008, showcased the best of Central Luzons cuisine and high-quality local products. For its holiday oer, the corporation jointly organized an Export Overruns Bazaar with Philexport Region 3, the Depart-ment of Trade and Industry, Region 3, and the Nayong Pilipino Foundation. The bazaar which ran from Novem-ber 14 to December 14, 2009, attracted more 16,000 holi-day shoppers.

Economic Contribution Through Taxes and Duties Collection

As with last year, the Bureau of Internal Revenue (BIR) and the Bureau of Customs Port of Clark have exceeded their previous years collection, in spite of the global economic slowdown in the latter part of this year. BIRs collection of P 1.052 B collections based on the summary of taxes collected from the Authorized Agent Banks located at the CFZ is P 26 M higher than last years P 1.026 B, or a 3% year-to-year growth rate. The double digit growth rate in the rst semester of the year enabled BIR to cushion the impact of the drop in revenue collection for the July to December period.

The Bureau of Customs performance is equally notable. From P 628 M collection last year, Port of Clark managed to collect over P 794 M in duties and other trade related taxes, or an impressive 26% growth. In almost every month of 2008, save for December, BOCs Port of Clark collection performance exceeded that of last years.



Environmental Management

CDC remains committed to its conviction that economic development and care for the environ-ment are mutually exclusive. Through its Environ-mental Management Department (EMD), the corpo-ration has been able to ably use its inuence that CFZ locators do their part in maintaining the environ-ment. The EMD conducted environmental regulatory compliance audit of all locators (100% coverage) in the Clark Freeport and issued corresponding Certi-cates of Environmental Compliance. This certicate is a prerequisite to the issuance of CFZ enterprises Permits to Operate. This coverage of inspections led to the granting of special awards (Clark Environmen-tal Award) to some locators for their outstanding and exemplary environmental performance. T h i s years award was given to CRL Environmental Corp., Clark Water, H3 Technology, Micro HiFi & Yokohama Tire Phils., Inc.

The EMD further intensied this year its various cam-paigns and programs to maintain the unspoiled Clark environment such as tree surgery, clean river project for the Dolores, Quitanguil and Dau creeks. EMD also established a control system on all wastes generated and declared as recyclable scrap materials by locators.

Corporate Social Responsibility

The social responsibility component has always been a cornerstone of CDC corporate governance. Clarks development will remain hollow, regardless of what its performance indicators indicate, if its neighboring communities do not benet from it. Through its Community Extension Services Oce (CESO), the corporation has continue to provide scholarship programs to deserving Aetas through the CDC-Angeles University Foundation Aeta Scholarship Program, where close to 60 students currently ben-et. Livelihood programs such as cattle dispersal and donation of mobile stalls continue to benet com-munities contiguous to the zone. Technical training on vegetable farming was also given this year in cooperation with East West Seeds (EWSCI) which

Balance Approach to Development

beneted some 30 Aeta farmers in the Kalapi area. Through networking/ linkages with various Non Governmental Organizations and socio-civic groups, CESO was able to organized several medical, dental and gift giving programs, the recipient of which are some 500 families in Clarks neighboring communi-ties with little or no poor health coverage. CESOs feeding program continues to provide free and healthy food to some 250 children who were diag-nosed with moderate to severe malnutrition. To make the program sustainable in the long run, complementary seminars on nutritious and aord-able food substitutes are also given to the childrens parents and guardians.

To formally acknowledge the fruitful and enduring partnership the corporation has had with its locators, CDC will be institutionalizing the Clark Freeport Choice Award by next year. Set to become an annual event, the program will recognize the notable busi-ness and people management practices and valu-able economic, social development contributions of Clark Freeport Locators as well as government part-ners. Key operating factors such as employment perfor-mance & human resource management, investment performance, export performance, and environmen-tal, health & safety management, and nancial performance. CDC seeks to imbue it with premium to make the award a seal of quality and approval, making it worthwhile to be included in advertising and promotion.


Develop the Next Frontier

The phased development of the Clark Special Economic Zone, starting with the 10,684 hectare CADT area will be one of the ve focal points in the corporations agenda for next year. To hit the ground running upon the approval of the CDC board of the Master Development Plan, the corporation will be working for the resolution of all the administrative issues such as the possible Memorandum of Agree-ment with the Philippine Export Zone Authority (PEZA) for the administration of incentives. CDC will be actively coordinating with the zones utility providers and allied government agencies to ensure that water, power, and telecommunication facilities would have been placed, in identied critical areas, at the very least. Roads and other public infrastruc-tures in key areas identied in the Master Develop-ment Plan will also be set in place. And yet the CSEZ becomes truly ready for development only after the satisfactory resettlement of the current inhabitants of critical areas, the nature of the resettlement of which is attuned to the settlers economic, social and cultural sensitivities. The corporation will also pursue the business dimension of the development of the Next Frontier with the same vigor. Special attention will be given to addressing all the remain-ing administrative and legal issues surrounding the pending investment proposals in the area.

Leasing of Remaining Areas in the CFZ

Focus on Big-Ticket Items

Notwithstanding the expected slowdown in global economic growth next year, CDC will still seek to lease out the remaining leasable areas in the Clark Freeport Zone. To realize a lofty aim as this, espe-cially in an economically challenging year, the corporation will intensify its focused marketing cam-paigns, even jointly with other Investment Promo-tion Agencies (IPAs) like the Subic Bay Metropolitan Authority (SBMA) and the Clark International Airport Corporation (CIAC). Objective targets for the leasing out of the so-called big ticket accounts such as T-60 and T-309, as well as small ticket items will be estab-lished. Metrics-based program on the prevention of existing, and control of new intrusions of, informal

To completely lease out the Freeport zone, the corpo-ration will also seek to nally privatize Mimosa at the terms most advantageous to all the concerned publics. Finally, while its management of the Clark Expo (former Expo Pilipino) has improved both the returns and level of utilization, still CDC will continue explor-ing various schemes to nd out the best use of Clark Expo.

Strategic Directions in 2009

settlers will also be set in place. Marketing eorts to all on-the-pipeline projects will continue, especially towards business enterprises with acknowledged formidable value chains. Given the increasing oppor-tunity costs on the zones land resources, the objective is geared towards increasing the per capita productiv-ity of CFZ lands. This goal can only be realized by persuading more businesses with better track record and indisputable industry standing. Recognizing the fact that the development of the entire region is closely connected with the development of the CFZ (in the wider context of the Subic-Clark-Tarlac growth corridor), further advancing the zones role as catalyst for regional, if not national, development will continue to remain a primary focus.

Even as the CFZs exports already comprise 34% of Region IIIs US 2.77 B worth of exports this year, and 2% of its 3.5 million recorded employment, the zone still abounds with so much potential that growth is immi-nent as it is vital.

Demarcations of Height Restrictions and Administrative Boundaries

CDC will also actively work with CIAC for the delineation of the administrative boundaries, the possible phased turnover of enterprises operating in areas transferred to CIAC. This would require the immediate completion of the Implementing Plan for EO 716, P-GMAs directive which eected the transfer in the rst place. Working with the Civil Aviation Authority of the Philippines, (CAAP) and other concerned agencies, CDC also hopes to resolve the building height clearance requirement for the CFZ and adequately address its implica-tions..

Enhance Clark Experience

Unmatched Business Reception

The corporation will actively build up from prog-ress it has made in recent years to further enhance the unique Clark experience for both its locators and tourists. Whether the eort involves the harmonization of its business processes and systems with allied agencies like SBMA and CIAC, implementation of projects to improve in the qual-ity and costs of power and other utilities within the CFZ, or the undertaking of initiatives to improve public health and safety, all eorts will all be oriented to make doing business in Clark most ecient at the most cost eective way possible.

A number of projects of this nature have already been identied and lined up for implementation next year. CDC will continue pursuing for the implementation of the third phase of its Power Infrastructure Project. With the Clark and Subic Freeports ably linked to utilize the natural synergy between them, the goal of toll free telecommuni-cation between the two freeports becomes a busi-ness imperative. Initial stage of discussion with ClarkTel PLDT, initiated this year, will be vigor-ously pursued next year. The Electronic Transit

Admission Permit System (e-TAPS) will be further improved, and its coverage expanded to possibly include the on-line processing of export clearances, and constructive imports (bring-ins) and exports (bring-outs). To realize this objective, the setting up of the Import/Export Monitoring Oce will be a priority next year.

Tourism Destination of Choice

For its growing business and leisure tourists, CDC will complete its Clark Tourism Development Plan in 2009. The plan will signicantly broaden the range of activi-ties currently oered to Clarks tourists and visitors with newly conceptualized and Clark-branded activi-ties similar to the Philippine Hot Air Balloon Festival. By next year, tourism-related projects such as facilities the Philippine Tourism Authority (PTA) plans to put up a wake-boarding facility in Clark would have been realized. Various tourism sits and facilities will be reha-bilitated and enhanced, all to strengthen Clarks posi-tion in the local and even regional tourism market. Given the growing scope of its tasks and functions, the manpower complement in the Tourism Promotion Oces Organizational structure will be re-evaluated. This will enable the oce to carry out its goals of implementing its Tourism Marketing Plan, and enhance its collaborative work with other public and private agencies engaged in tourism development and promotion.

Quality After-Sales Service

These initiatives reect the corporations adherence to the principle of continuous improvement, especially in the area of after sales service. Rendering the best service to the clients in every phase of interaction with them is the ultimate dierentiator, even in the eld of Freeport zone management. Ultimately, it will be the quality of service to the various clienteles which will set the corporation apart from its competitors and any investment in this area will spawn a multitude of ben-ets, not only to the client, but also to the corporation as well.



Sustain Internal Competence-Building

Since its success in realizing its objectives for next year depends to a large extent on the skills and apti-tude of its manpower complement, internal compe-tence building will remain a priority. The corporation looks to the full implementation of its completely redesigned Performance Evaluation System (PES) to achieve greater organizational eciency and improved performance, both at the organizational and personal levels. CDC intends to continue invest-ing in the thorough training of its manpower to keep them attune to the changing requirements of the highly competitive business world. And to provide internationally recognized third party validation for all these eorts, the corporation will be working towards the certication of several key quality man-agement systems to the ISO 9000:2008 quality stan-dards. Not only will this enhance the corporations reputation, but will also assure that the kind of service provided by the corporation will remain consistent and up to par with the best in the world.

Initiate Parallel Development Initiatives

Clark will continue with its role as catalyst in spurring parallel developments in its surrounding communi-ties. CDC intends to explore alternative develop-mental strategies instead of the typical to dole-out oriented approaches. Empowering the community towards self-suciency will be the guiding orienta-tion in all community-based programs in the years to come. CDC is convinced that breaking away from the culture of dependency, more than any other economic and social relief program is the key to the long term solution to poverty alleviation. To help create economic opportunities for individuals and communities with various competencies may be one of the keys to nally break away from the weight of economic deprivation. Aside from seamlessly integrating the Freeport zones and business parks within the Subic Clark growth corridor, the opera-tions of the Subic-Clark-Tarlac Expressway (SCTEX) oers vast possibilities for the development of the areas within the stretch of entire expressway. To

capitalize of this huge potential, CDC will closely work together with concerned Local Government Units (LGUs) for the possible development of other economic zones within the SCTEX corridor. The operation of other economic zones will certainly spur fresh economic activities, attract new invest-ments and business opportunities, and create employment opportunities, not only for the region, but for the entire country as well. Another promising avenue is the packaging of the various historical and tourism sites of Clark and the neighboring areas, and jointly promoting these packages to both local and foreign tourists.

Even with the current global economic slowdown, the prospects of tourism-related investments and activities, especially regional tourism, remain upbeat and appears to be resilient to recession. To capitalize on this bright spot, CDC will actively work with tour-ism oces and agencies of LGUs and the private sector in jointly promoting the various tourism attractions in the area.


The Challenges Ahead

As with the rest of the world, CDC hopes for a speedier recovery from the current economic slow-down. The prospect of new businesses and the expansion of existing ones widely depend on the restoration of business and consumer condence in both the local and international economies. Given the complex nature of the crisis, the corporation will focus its attention in preparing for the eventual upturn in global business. To counteract the fragility of a too narrow range of trading partners and prod-uct oerings, CDC will deliberately work for the broadening of trade beyond its traditional trading partners, and the diversication of product oerings for added resiliency in future export performance.

CDC will also continue to pursue the persistent strategic challenges which has hampered its opera-tions for years such as the problem with informal settlers, and legal complications surrounding some prime but problematic accounts. There may not be any quick x solutions to these nagging challenges, but CDC will continue to explore all means to nd denitive solutions. The assigning of Senior Man-agement Account Ocer (SMAOs) to specic accounts has show promising output, in both the quality and speed of the results. The corporation will continue to employ this approach with the intention of nally clearing up its records of all problematic accounts. The campaign to halt the chronic problem of informal settling will remain a challenge, espe-cially with the next year being a prelude to an elec-tion year. Still, the corporation will attempt to slow down, if completely stopping the practice remains dicult, by creating cross-functional teams to address this diculty.The corporation hopes that it will get better results from this approach since the diverse competencies of the cross-functional teams will be able to inte-grate the economic, social, political, nancial and public relations component of this problem into their proposed solutions.


Financial Performance

Like other local and global market players, the prevailing global economic slowdown has aected CDC in various ways.

As anticipated, operating expenses rose 14% while income from operations declined by 11%. Swings in the foreign exchange market fueled by uncertainties in the US nancial market led to loss in the value of the corporations foreign exchange holdings. Income directly dependent on the volume of CFZ transactions such as permits and licensing, and other business income also declined.

Still CDC was able to generate over P 276 million in net income, an impressive 180% higher than last years P 98 million, and the highest net income thus far in its corporate history.

This impressive performance in an acknowledged dicult year was made possible by triple digit increase in interest income, and double digit growth in rent and miscellaneous income.

Leading the pack of better than projected perfor-mance is the Petroleum, Oil, And Lubricants (POL) Distribution section of the Special Resources Department (SRD). Due to the historic high prices of oil in the world market, the POL section of SRD was able to generate over P 104 million in revenues this year.

Together with revenues from river management, commercial stall rentals and produce from its mango orchard, the SRD alone was able to generate over P 133 million in revenues this year.


P P

P P

P 317,453 P

P P

As of December 31

2008 2007Unaudited Audited Amount %

ASSETS

Current Assets Cash and cash equivalents P 1,906,058 739,269 1,166,789 158%Trade receivables - net 148,839 202,914 (54,075) -27%Other current assets 31,287 17,051 14,236 83%

Total Current Assets 2,086,184 959,234 1,126,950 117%

Noncurrent AssetsInvestments 618,674 629,108 (10,434) -2%Property and equipment - net 1,731,003 1,568,738 162,265 10%Due from subsidiary - CIAC 1,268,448 1,228,708 39,740 3%Due from operating units 442,045 272,630 169,415 62%Other noncurrent assets - net 209,333 122,980 86,353 70%

Total Noncurrent Assets 4,269,503 3,822,164 447,339 12%

P 6,355,687 4,781,398 1,574,289 33%

LIABILITIES AND STOCKHOLDERS' EQUITY

Current LiabilitiesPayables P 293,219 (24,234) -8%Deferred credits 42,162 28,845 13,317 46%Current portion of loans payable 89,592 89,592 - 0%Other liabilities 145,408 79,799 65,609 82%

Total Current Liabilities 570,381 515,689 54,692 11%

Noncurrent LiabilitiesSecurity deposits 198,087 152,381 45,706 30%Advance lease 587,797 349,871 237,926 68%Loans payable (due beyond one year) 377,007 466,599 (89,592) -19%Due to Other NGAs 1,000,522 - 1,000,522 100%Other noncurrent liabilities 85,825 75,840 9,985 13%

Total Noncurrent Liabilities 2,249,238 1,044,691 1,204,547 115% 2,819,619 1,560,380 1,259,239 81%

Stockholders' Equity 3,536,068 3,221,018 315,050 10%

P 6,355,687 4,781,398 1,574,289 33%

C L A R K D E V E L O P M E N T C O R P O R A T IO N

Increase (Decrease)

BALANCE SHEET

(In Thousands)


STATEMENT OF CASH FLOWSFor the Year Ended December 31(In Thousands)

2008 2007Unaudited Audited

CASH FLOWS FROM OPERATING ACTIVITIES:Collection of receivables P 196,834 P 172,318 Receipt of advance lease/unearned housing income 310,531 84,699 Receipt from operating units 58,049 170,495 Collection of income 563,692 356,847 Receipt of performance/bidders bond 147,346 5,627 Locator's security deposit/performance bond 57,401 45,042 Payment of operating expenses (396,489) (399,499) Payment of payables (251,587) (188,825) Refund of bidders bond (58,143) (2,665) Refund of advance lease (24,109) - Refund of locator's security deposit/performance bond (258) (6,745) Others (36,807) 27,734

Net Cash Provided by Operating Activities 566,460 265,028

CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sale of property and equipment 435 793 Advances to subsidiary - CIAC (39,014) (132,847) Acquisition of fixed assets (229,034) (53,906) Funding for Holiday Inn renovation (33,891) - Advances to other government offices (6,330) (13,869)

Net Cash Used in Investing Activities (307,834) (199,829)

CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from borrowings - Deutsche Bank loan - 121,154 Withdrawal from PVB Radar loan facility acct. (Restricted fund) 63,823 65,952 Fund transfer to PVB Radar loan facility accts. (Restricted fund) (125,733) (53,728) Funding from DBM for power supply project 1,000,522 - Payment of PVB loan principal (32,500) (32,500) Payment of Deutsche Bank loan principal (57,092) (49,422)

Net Cash Provided by Financing Activities 849,020 51,456

EFFECT OF EXCHANGE RATE CHANGES ON CASHAND CASH EQUIVALENTS 59,143 (95,445)

NET INCREASE IN CASH AND CASH EQUIVALENTS 1,166,789 21,210 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 739,269 718,059

CASH AND CASH EQUIVALENTS, END P 1,906,058 P 739,269


CLARK DEVELOPMENT CORPORATION

STATEMENT OF INCOME

For the Year Ended December 31(In Thousands)

2008 2007Unaudited Audited Amount %

GENERAL INCOMERent income P 511,489 P 439,713 P 71,776 16%Other business income 332,752 333,771 (1,019) -0.3%Service income 17,429 15,715 1,714 11%Permits and licenses 10,108 12,133 (2,025) -17%

871,778 801,332 70,446 9%

OPERATING EXPENSESPersonal services 403,642 351,311 52,331 15%Maintenance and other operating expenses 327,023 292,121 34,902 12%

730,665 643,432 87,233 14%

INCOME FROM OPERATIONS 141,113 157,900 (16,787) -11%

OTHER INCOME (EXPENSES)Interest income 63,331 30,155 33,176 110%Gain (loss) on foreign exchange 59,123 (95,188) 154,311 -162%Miscellaneous income 33,954 20,199 13,755 68%

156,408 (44,834) 201,242 -449%

INCOME BEFORE INCOME TAX 297,521 113,066 184,455 163%

PROVISION FOR INCOME TAX 21,321 14,249 7,072 50%

NET INCOME P 276,200 P 98,817 P 177,383 180%

Increase (Decrease)

Adm. Armando Q. Madamba (Ret.)

CDC ANNUAL REPORT 2008

CDC 2008 Annual Report.pdf

Documents

Transcript of CDC 2008 Annual Report.pdf