Philippine News on Real Estate and Economy - December 2017

hello everyone,

Here’s some select articles about Philippine Real Estate and our Economy from various newspaper correspondents that matters for your reference.  Take note that these articles when assessed actually guides us locally what direction the economy is going, what kind of issues our government is going through and generally, and how this affects our real estate market.  News directly affects investors / businessmen on their assessment of what business decision to make, this could be from the stock market ( which is a good barometer ) to daily activities ( hiring of workers, construction supply chain, and other economic variables.

here's an article from manilatimes.net.ph correspondent, Yen Makabenta :

PH Economy : Not just catching up, but leaving neighbors behind

First word

My upbeat title did not come from Palace communicators, who are probably hearing it for the first time. I took it from my continuing economic research and some very recent reports by international and national media on the economy.

Four reports this year have persuaded me that the Philippines is entering, if it has not already, a period of rapid economic expansion. This isn’t just another tease that the country will become the newest Asian tiger. In two decades, I daresay, the country will become one of the biggest Asian economies.

4 reports of economic strengthening

My journalistic exhibits are the following:

A report by Bloomberg News last Wednesday, November 29, headlined, “An investment boom in the Philippines leaves neighbors in the dust,” and bylined by Karl Lester M. Yap and Myungshin Cho.

Economy’s physical assets surge more than 10percent in one year. Capital investment in the Philippines is surging past the rest of Southeast Asia

2 .A report by the Nikkei Asian Review this year, entitled “Duterte’s six-year plan to spread the wealth” and bylined by Michael Flores. The president is not handcuffed by the problems that stymied his predecessor, Benigno Aquino 3rd; he has found other financing schemes through a major change in Philippine foreign policy, and they are likely to make all the difference.

3, The Economist last week, while noting that the “Philippines has the most persistent poverty in Southeast Asia,” reported that President Duterte is addressing the poverty problem and appears resolved to change the lives of the country’s poor.

4. A report and an editorial by the Manila Times on the decision of the Duterte government to lift restrictions on foreign ownership in the economy.

Leaving others in the dust

It’s not often that we see Bloomberg excited about the Philippines; but this year it has been very positive, and nowhere more so than in its report last week. If the Philippines did leave its Asean neighbors in the dust, the report left many Filipinos gasping.

Bloomberg reported: “In the first nine months of this year, net physical assets in the Philippines grew 10.4 percent from a year earlier. That compared with a 6.9 percent increase in Malaysia and 5.8 percent gain in Indonesia, according to data from statistics offices.

“There’s reason to remain bullish on the outlook. Philippine government spending jumped 28 percent in October, the largest rise in almost a year, with another record budget planned for 2018. Companies are also joining in: Metro Pacific Investments Corp. plans to invest as much as $16 billion through 2022 on road, water, and power projects, while Ayala Land Inc. is boosting capital spending to a record $2 billion next year.

“President Rodrigo Duterte is building a network of railroads and highways across the archipelago in an ambitious $180 billion infrastructure program. Investment firing up adds another engine to the economy, headed for a sixth year of growth exceeding 6 percent and among the world’s best performers.

The report’s conclusion could not be more cheering; “After lagging its neighbors for decades, the Philippines is catching up. Growth in net physical assets—or gross fixed capital formation—averaged 14.4 percent in the five years through 2016, the fastest in Southeast Asia and almost twice as fast as Malaysia, according to the World Bank.

“Duterte wants to transform the Philippines into an upper-middle- income country by the end of his term in 2022, and the cornerstone of his vision is a plan referred to as ‘Build, Build, Build.’ It includes the capital’s first subway and a 653-kilometer railway to the south.”

Duterte’s six-year plan

According to Michael Flores of the Nikkei Asian Review, President Duterte has a six-year plan to spread the wealth in the Philippines. He wants better transport links for the rural have-nots.

“Public-private partnerships, which yielded mixed results under former President Benigno Aquino 3rd, will remain a pillar of infrastructure development. But the institutional delays that dogged the Aquino administration will be bypassed, because Duterte has looked at other financing schemes, including development assistance from key trading partners like China and Japan.

“The government has set guidelines for tapping Chinese funding following Duterte’s visit to China in October.

The diplomatic shift has borne fruit. On March 7, Beijing and Manila resumed formal economic dialogue for the first time since 2011. During their talks, China agreed to fund three projects worth a total of $3.4 billion, including a railway link between Manila and the southern tip of Luzon, the main island. Chinese companies, meanwhile, have committed to invest $10.4 billion, according to the Philippine trade department.

“The improved relations with China did not go unnoticed in Tokyo. In January this year, Japanese Prime Minister Shinzo Abe visited the Philippines with an investment package worth 1 trillion yen ($8.6 billion) spread over five years.

“Philippine companies are responding to Duterte’s focus on less-developed parts of the country. San Miguel is constructing a brewery in Cagayan de Oro City, in Mindanao, as part of a $300 million expansion plan.

Universal Robina is also building snack factories there. SM Prime Holdings, the nation’s largest real estate company, is planning more shopping centers outside Manila.”

Persistent poverty gets attention

The Economist, perhaps the world’s most influential weekly news magazine today, took up the plight of the Filipino poor, and Duterte’s policies to address “the most persistent poverty in Southeast Asia.”

The Economist reported: “Low growth has been one key reason for the poverty problem. Between 1980 and 2005 the average annual increase in GDP was just 0.63 percent per person, a pathetic pace by regional standards. More recently a leap in remittances from the millions of Filipinos who work abroad and a boom in the outsourcing of back-office work to the country by Western firms have boosted growth. Forecasts suggest that GDP will expand by over 6 percent this year, as it did last year.

“But the growth is concentrated in Manila and the two neighboring provinces, which generate around 60 percent of the country’s output. Not only do people in the farthest-flung parts of the archipelago not share in the prosperity, they also do not have the money to move to Manila or the education to land a job if they get there….

“The government of President Rodrigo Duterte has pledged to help poorer Filipinos with all these problems. Mr. Duterte recently signed an executive order to speed implementation of a law passed five years ago to make contraception more easily available to the poor.

“Mr. Duterte’s government, in a comfortable position fiscally, is also spending more. His first budget laid out P3.4 trillion ($68 billion) of spending—an increase of 12 percent on 2016. Infrastructure is an important focus. New airports, roads and bridges will appear thanks to a planned increase in expenditure on such projects from 5.2 percent of GDP last year to 7.4 percent of GDP in 2022. These public works are critical to boosting the fortunes of the poorer bits of the country, by connecting them better to Manila.”

Lifting limits on foreign ownership

I end this survey of notable journalistic reports with the reportage and commentary of the Manila Times on the decision of the Duterte government to ease foreign ownership limitations in various industries in order to generate more foreign investments in the economy, spur competition, and create more jobs.

President Duterte signed on November 21 a memorandum order directing government agencies to fast-track the determination of other business sectors that can be opened up to foreign participation both through administrative means or through the amendment of pertinent laws.

The will to make reform may be finally the biggest factor why the country is performing better today in Southeast Asia under Duterte.

here's an article from bworldonline.com correspondent, Victor V. Saulon :

Pangilian say PLDT open to partnership with Chinese Telco :

PLDT, Inc. is keen on partnering with a Chinese company to become the third player in the country’s telecommunications industry.

“I think it’s a rather novel idea. And I think it’s something we should consider at the PLDT level,” said Manuel V. Pangilinan, PLDT president, chairman and chief executive officer, told reporters on the sidelines of the Management Association of the Philippines annual membership meeting on Monday at the Bonifacio Global City.

“Yeah, either at PLDT or at Voyager or both,” he added, referring to Voyager Innovations, Inc., the digital innovations unit of PLDT and subsidiary Smart Communications, Inc.

He made the statement when asked about his views of a third player entering the industry as announced by President Rodrigo R. Duterte.

He said his “stock answer” would be that he welcomes a third, fourth or fifth player, which Mr. Duterte said he would offer to a Chinese company.

“Voyager is in the process of looking for strategic partners and it’s possible that we may have a Chinese partner,” Mr. Pangilinan said.

“Voyager is a start-up innovation company, not only in fintech, but they’re also in e-commerce, they’re also in marketing technology as well,” the PLDT chairman said.

He said it would not be up for the company to say whether there is room for a third player in an industry dominated by PLDT and Smart on one hand, and Ayala-led Globe Telecom, Inc. on the other.

But should the PLDT group partner with a Chinese firm, Mr. Pangilinan said: “Most likely they would come in at the Voyager, the parent company.”

“We will announce it when it happens,” he said, adding he would want the partnership to happen “as fast as we’d like to.”

Earlier this month, Mr. Duterte offered China the chance to operate the third telecommunications carrier in the country during a bilateral meeting with Chinese Premier Li Keqiang. No specific Chinese company was mentioned.

“The telecom industry’s duopoly is about to end with the entry of the Facebook subsidiary as well as the offer by the President of the People’s Republic of China to operate the third telecom’s carrier,” Presidential Spokesperson Harry L. Roque, Jr. had said.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a stake in BusinessWorld through the Philippine Star Group, which it controls.

here's an article from business.mb.com.ph correspondent, Madelaine B. Miraflor :

PH can only compete with World's best cities with advanced Urban Planning

The Philippines has a daunting task to face if it aspires to land on the list of well–established and most successful cities in the world, according to real estate services firm JLL.

Claro Cordero Jr., local director and head of research at JLL, said this as he cited the latest State of the Art of City indices by JLL and The Business of Cities, which benchmark and rank cities on almost every aspect of urban life.

The report measured various indices, including business and investor demand (17.6 percent), brand reputation and destination (15.0 percent), quality of life (13.0 percent), growth and jobs performance (9.8 percent), innovation and R&D (9.1 percent), sustainability and resilience (8.5 percent), infrastructure (5.9 percent), all-round studies (5.2 percent), Talent (5.2 percent), costs (4.6 percent), governance and smartness (3.3 percent), and finally, culture and diversity (2.9 percent).

These indices have a bearing on how city dynamics works, consequently guiding investors, businesses and workers as they make location choices.

The report points to cities which possess the ingredients for future success and help steer the real estate industry amid the changing urban landscape.

Cordero said that many of the requirements to be included in the list are the very same stumbling blocks that the Philippines has to hurdle.

At present, he said that there is a lack of urban planning designs in the country, a relatively low pace of infrastructure development, and there is little commitment to implement long-term plan towards sustainability and resiliency, given that most areas in the Philippines are prone to natural disasters.

“The new urban design of Philippine cities should incorporate advances in technology while preserving its heritage features to project a unique character and branding,” Cordero said.

He also stressed the need for the government to support creative infrastructure projects and future-proof urban designs.

At present, London and New York lead the pack of cities in the ‘Big Seven’ of the indices, followed by Tokyo, Paris, Hong Kong and Singapore.

Rounding out the Top 7 is Seoul, which has equipped itself for the 21st century through a combination of modern infrastructure, innovative global firms and exceptional digital connectivity.

Other Asian cities which are considered strong contenders in the elite circle of the Big 7 are Beijing and Shanghai.

The ‘Big Seven’ and the majority of the ‘Contenders’ are also, simultaneously, regarded as among the world’s largest real estate investment destinations.

New York and London still get the top spots as investment hubs, along with Tokyo, Los Angeles and Paris vying for the next positions. Other cities in Asia which have made it to the list are Shanghai, Seoul, and Beijing.

Moving forward, Cordero said there is still hope that cities in the Philippines will be included in the list of established cities.

Looking at the list of imperatives to become a successful city is the availability of talent, which, according to him, we have an abundance of.

 

“With an altered mind set among our young population and strong political will and commitment, we can create the cities that will be able to respond to the ever-changing urban landscape,” Cordero said.

here's an article from www.philstar.com correspondent, Ding Cervantes :

EU Investors remain bullish on Philippines "

MANILA, Philippines — European Union (EU) Ambassador Franz Jessen said yesterday political and trade relations between the EU and the Philippines “are going very well,” despite President Duterte’s recent statements against the EU.

“You may not be aware of it, but Philippine exports to the European Union has increased by 34 percent,” Jessen said in a press conference during the inauguration here yesterday of the new five-story building of the Mercedez Bena Group Services Philippines Inc. (MBGSP), a wholly owned subsidiary of Germany’s Daimler AG.

Jessen said the EU investors are unaffected by negative statements from the President, as he noted that they have always been “driven by business interests, not political statements.”

“I think we have seen enough things going on in the country in the last 18 months that are very interesting,” he said, citing the expension here of MBGSP on top of its operations in Cebu City.

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“They are not diversifying to make sure their operations continue no matter what hurricane hits outside the Philippines and they are doing it within the Philippines,” he said.

“I can imagine the company had different options outside of the Philippines but they chose to be here,” he said.

He said the investors find that the adjustment process in the Philippines “very peaceful and short” and that Filipinos share similar values with EU countries.

Jessen decribed the Philippines as a “medium sized power” and with an economy similar to a medium sized member of the EU.

Only last month, Duterte threatened to expel EU ambassadors within 24 hours, for allegedly threatening to expel the Philippines from the United Nations amid his drug war.

Malacañang later said the statement were mere “expression of outrage” to criticisms by a small group of European lawmakers and aides who visited Manila and expressed objections to Duterte’s war against illegal drugs.

here's an article from rappler.com correspondent, Camille Elemia :

Senate approved Tax Reform Bill on final reading

MANILA, Philippines – The Senate approved on 3rd and final reading the first package of tax reforms proposed by the Duterte administration, seeking to increase Filipinos' take-home pay while raising taxes on fuel, cars, housing, and sugar-sweetened beverages.

Voting 17-1, the chamber passed Senate Bill 1592 or Tax Reform for Acceleration and Inclusion (TRAIN) on Tuesday, November 28, after marathon deliberations. Only Senator Risa Hontiveros opposed the passage of the measure.

Now that the Senate has finalized its version, it will have to convene a bicameral conference committee with the House of Representatives to thresh out differences.

Senate Minority Leader Franklin Drilon expects a difficult time in the bicam due to the polarizing provisions in the two versions.

"Nakikita ko na pahirapan ito dahil sa maraming mga iba't-ibang disagreeing provisions. Talagang mahirap ang bicam dito," Drilon told reporters ahead of the TRAIN approval.

(I expect rough sailing because of the many disagreeing provisions in the Senate and House versions. The bicam will really be difficult.)

The Senate version reduced income tax rates of almost all or 99% of the 7.5 million individual taxpayers.

Filipinos earning an annual P250,000 and below will be exempt from paying income taxes. This includes self-employed individuals and professionals.

The Senate also exempted the first P250,000 annual taxable income and retained the P82,000 tax exemption for 13th month pay and other bonuses.

For self-employed individuals, the Senate approved an 8% flat tax on gross sales or receipts to "encourage" them to pay their taxes correctly.

The 8% flat tax is made optional for those earning below the value-added tax (VAT) threshold of P3 million so they can choose which tax scheme is more favorable to them – either the 8% flat tax or schedular personal income tax rate with deductions.

Excise tax on fuel

The tax rates on fuel approved by the Senate are lower than that of the House.

The Senate version excluded kerosene as it is widely used for lighting and cooking by around 3 million households in far-flung areas. The House, meanwhile, approved a tax rate of P3 per liter for 2018, P5 for 2019, and P6 for 2020.

The Senate also reduced the tax rate for liquefied petroleum gas, which is commonly used for cooking. The Senate version imposes P1 tax per liter until 2020 while the House wants P3 tax for 2018, P2 for 2019, and P1 for 2020.

As for diesel and bunker fuel oil, the Senate approved lower tax rates of P1.75 per liter for 2018, P2 for 2019, and P2.25 for 2020.

The original proposal of the Department of Finance (DOF) was a straight out P6 increase, while the House approved a scheme of P3, P2, and P1 until 2020.

The Senate version also approved a "safeguard" provision that would suspend the increase if Dubai crude oil exceeds $80 per barrel or if the consumer price index (CPI) breaches the maximum inflation target set for the year.

Sugar-sweetened beverages

Just like the House, the Senate excluded milk and coffee from being taxed, as well as 100% natural fruit and vegetable juices, unsweetened tea, meal replacements, and medically indicated beverages.

The Senate also excluded sweetened beverages that use coco sugar and stevia.

The chamber used a 3-tier classification. It lowered the tax rate on beverages using caloric and non-caloric sweeteners to P4.50 per liter and imposed a tax of P9 per liter for beverages using high fructose corn syrup.

On the other hand, the House approved a 2-tier scheme, where P10 per liter will be imposed on local sugar and P20 on imported products.

Senate ways and means committee chairman Juan Edgardo Angara said this violates the World Trade Organization (WTO) rule that prohibits higher taxing of imported products to favor local products.

Automobiles

The Senate also approved a 2-tier tax scheme for automobiles that is supposedly easier to administer.

Under the Senate version, cars with a net manufacturing price of P1 million and below will be taxed 10% while those that cost more than P1 million will be levied 20%.

Hybrid and electric cars are exempted from taxation to encourage greener and cleaner transportation options.

VAT

The Senate increased the VAT threshold from P1.9 million to P3 million. Ths means small businesses with total annual sales of P3 million and below will be exempt from paying VAT.

The chamber also retained the VAT exemptions for raw food and agricultural products, health and education, as well as those for senior citizens, persons with disabilities (PWDs), business process outsourcing (BPO) firms, and cooperatives.

The Senate approved the VAT exemption for the sale of prescription drugs and medicines for all Filipinos as well.

It also retained VAT exemptions for leases below P15,000 per month, and of socialized housing, amounting to P450,000 and below. Mass housing projects that are worth P2 million and below located outside of Metro Manila will also continue to enjoy VAT exemption.

Coal, mining, other taxes

In an attempt to counter revenue loss from lowering the tax rates on fuel and other sectors, the Senate doubled the existing documentary stamp tax rates on documents, instruments, loan agreements, and papers from P1.50 to P3; the sales or transfer of shares of stock from P0.75 to P1.50; and certificates of profits or interest in property or accumulations from P0.50 to P1.

It also increased the final tax on foreign currency deposit units from 7.5% to 15%, and capital gains tax for stocks not traded in the local bourse from 5% or 10% to 15%.

The Senate also added a provision that would impose 10% excise tax on cosmetic procedures and body enhancements undertaken for purely aesthetic reasons.

Coal excise tax was also increased from P10 per metric ton to P100 per metric ton in 2018, P200 in 2019, and P300 in 2020 and succeeding years.

In an unusual move, the Senate also doubled mining taxes despite the absence of committee hearings earlier to discuss the issue.

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Thank you.

robert

Robert G. Sarmiento Properties

Professional Affiliation :

Philippine Association of Real Estate Boards

Member, City of Taguig Real Estate Board 2016, 2017

Real Estate Broker’s Association of the Philippines 2000 - 2015

President, Greenhills Chapter 2008, 2009

Philippine Association of Real Estate Boards

San Juan Mandaluyong Chapter 1998, 1999

PRC # 6569

PRC Lecturer’s License # 0294

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