Philippine News on Real Estate and Economy - November 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 philstar.com correspondent, Iris Gonzales :

Andrew Tan to bring Ritz-Carlton Hotel to Philippines

MANILA, Philippines — Tycoon Andrew Tan is bringing the world renowned Ritz-Carlton hotel brand to the Philippines, marking the first time that the finest luxury brand will be in the country.

Tan will rebrand the existing Maxims Hotel, an all-suite accommodation at Resorts World Manila, and redevelop it into Ritz-Carlton Manila, industry sources said.

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“This may happen within the next three years,” sources said.

Sources said Tan deemed it the right time to bring the luxury hotel brand to the country given the country’s improving demographics and economic status.

“A country cannot be considered first world without a Ritz-Carlton,” said one source.

Tan is also hitching a ride on the increasing number of casino high rollers coming into the country such as Chinese and Taiwanese players.

This also explains why Tan is putting the hotel inside Newport City, where RWM is located, instead of in Fort Bonifacio where his property developer also has several township developments.

Swiss hotelier Cesar Ritz, known as the king of hoteliers and hotelier to kings, founded the Hotel Ritz in Paris and Ritz Hotel in London.

Later on, businessman Albert Keller established the Ritz-Carlton Investing Company which bought and franchised the Ritz name in the United States.

At present, the Ritz-Carlton is owned by Marriot International, which is also among the global hotel brands in Tan’s Newport City.

The hotel will also carry new luxury retail brands that are not yet in the Philippines, according to sources.

Marriot International is also on track to opening 16 new resorts in Asia Pacific across seven brands in 10 countries and territories this year.

At present, Marriot has 130 upper-upscale and luxury resorts in the Asia  Pacific region in countries including China, Malaysia, Vietnam and Thailand.

The new hotels range from tranquil resorts such as the beachfront Weligama Bay Marriott Resort & Spa, which is the company’s first hotel in Sri Lanka, to The Ritz-Carlton Haikou, which presents travelers with a new experience as Ritz-Carlton’s first golf resort in China, Marriot said.

“This is an exciting year for Marriott International in the Asia Pacific region as we deliver innovative, new ways to cater to today’s and tomorrow’s travelers,” said Peggy Fang Roe, chief sales and marketing officer for Asia Pacific.

“Our new openings demonstrate our promise to be where our guests want to be and provide them with everything they need to relax, recharge or celebrate a special milestone.”

Marriot said the new properties would benefit from growing demand from Chinese travelers, who today are the top source of outbound travelers.

China National Tourism Administration estimates China’s travelers will take 700 million trips over the next five years. As incomes rise, China’s middle class is looking for higher quality products and travel experiences – such as stays at Marriott’s newest resorts.

here's an article from businessinquirer.net correspondent, Roy Stephen C. Canivel :

Countries with best Infrastructure are Dictatorships – Razon

One of the country’s richest Filipinos said that infrastructure development and democracy cannot go hand in hand, hinting that there might be a benefit in being ran by a dictator.

 

International Container Terminal Services, Inc. (ICTSI) Chairman and President Enrique Razon Jr. said on Monday that some countries with the most advanced infrastructure are not democratic, but clarified that he is not “endorsing” one form of political system over another.

 

He said this during one of the sessions during the Asean Business and Investment Summit (ABIS), wherein he was invited to discuss issues in infrastructure development along with other officials in the private and public sector.

 

“If you really look at it, those that have the most advanced infrastructure are the ones that are not democratic. The countries with the best infrastructure in the world are dictatorships,” he said.

 

Razon, who was named the country’s 7th richest man by Forbes Magazine, said that the United States was the only country that advocated for democracy and achieved development, but noted that this was because the country is “so vast and has so much resources.”

 

“I’m not saying I’m endorsing one over the other but this is a fact. Europe is well-advanced but most of this [infrastructure] was built a hundred years ago and they weren’t a democracy then,” he said.

 

Following this comment, Ayala Corp. Chairman and Chief Executive Officer Jaime Zobel de Ayala, who was also part of the session’s panelists, said that infrastructures could still be developed with the right “ecosystem.” He did not say categorically if he agreed to Razon’s opinion.

 

“I’m not gonna go Ricky’s route but let’s just say I believe in private public partnerships,” he said.

 

He said infrastructures are about creating ecosystems which go connect one component into another, from airports to roads and so forth. He also said that corruption could lessen if the country increases its per capita income as much as possible.

 

Nevertheless, he said that issues that hound inclusive growth are “very big and very valid.”

 

“I’m a believer of capitalism but the capitalist system needs to be adjusted to the needs of the broader community,” he said.

 

Razon’s comments would surely strike a chord among social circles who believe that the country is yet to truly move on from the Marcos dictatorship, the violations in which are yet to be met with accountability.

 

Many believe that such dark part of the nation’s history is under the risk of being subjected to historical revisionism, after President Duterte showed leniency towards the family of the late dictator.

 

from businessworldonline.com researcher, Lourdes O. Pilar :

 

Poll bares expectation of Faster Growth : 

 

 

ANALYSTS expect the country’s overall economic growth to have stayed above six percent last quarter on the back of strong domestic demand and recovering merchandise exports, results of a BusinessWorld poll showed.

 

A poll of 11 economists and analysts late last week yielded a median gross domestic product (GDP) growth estimate of 6.6% for the third quarter, edging up from the second quarter’s 6.5% and January-March’s 6.4%, but slower than the 7.1% recorded a year ago.

If realized, the figure would put the nine-month growth average at 6.5%, hitting the low-end of the government’s 6.5-7.5% target for the year. Philippine economic growth averaged 6.45% last semester.

Official third-quarter GDP data will be released on Thursday by the Philippine Statistics Authority (PSA).

Socioeconomic Planning Secretary Ernesto M. Pernia was quoted in earlier reports as saying that full-year growth will likely settle around the midpoint of the target band, with third quarter growth hopefully outpacing that of the second quarter due to the rise in exports and government spending on infrastructure.

Moody’s Analytics, Inc., in a report last Friday, gave a 6.6% estimate for July-September GDP growth, saying in a note that “domestic demand likely remained firm, as consumers benefited from steady inflows of overseas worker remittances and a healthy job market and investment stayed firm on the back of government-led infrastructure projects.”

Analysts polled by BusinessWorld last week pointed to household spending as the driving engine for growth, coupled by spending in the public sector as well as improved outbound shipments.

For University of Asia and the Pacific economist Cid L. Terosa, GDP third-quarter growth is estimated to hover at 6.5%-6.8%, saying that “[g]rowth was supported by household final consumption spending based on vibrant remittance growth and capital formation.”

He added that trade had likewise “perked up” although its contribution was “muted.”

Ildemarc C. Bautista, vice-president and head of research at Metropolitan Bank & Trust Co., gave a 6.6% estimate for the third quarter, saying: “We see strong government spending to be supportive of strong GDP growth on top of robust household consumption spending and improvements in exports, the latter two being supported by the weaker peso translating to stronger purchasing power for OFW (overseas Filipino workers) remittances and exports being more competitive-priced.”

“We expect further growth down the line…” he said.

Mitzie Irene P. Conchada, associate dean at the School of Economics in De La Salle University, was of the same opinion, saying: “Government spending as well as investments started to pick up in the third quarter and I think these would be the major drivers for growth. The government has been aggressive in its ‘Build, Build, Build’ projects and public expenditure on construction, I think, will make a big difference starting in the latter half of this year.”

“Aside from this, exports are getting stronger and we are expecting it to build-up this quarter. Moreover, the agricultural sector is showing signs of sustained growth,” she said, giving a 6.8% third quarter estimate.

For Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines, “[t]he domestic economy likely expanded at a steady pace of 6.5% year on year in the third quarter of 2017, as stronger consumer spending was likely offset by weaker annual growth in government expenditures and investments.”

He added that net exports improved, even though “the annual rate of improvement was slightly less than in the prior three months.”

On the other hand, Angelo B. Taningco, economist at Security Bank Corp., gave a 6.3% estimate, saying “[t]his forecast is based on the view that GDP growth may have moderated in Q3 2017 amid a growth deceleration in personal consumption, capital formation and government spending amid dampened consumer and business confidence levels as well as inflationary pressures.”

“Also, adverse weather conditions may have adversely affected agricultural output while manufacturing sector appear to post a sluggish performance in Q3 2017.”

Household spending, which accounts for more than three-fifths of GDP, has been supported by a steady stream of remittances from Filipinos abroad that grew 5.4% from a year ago to hit $18.595 billion as of end-August. So far in the third quarter, cash remittances were up 7.1% and 7.8% in July and August, respectively.

Meanwhile, the government spent a total of P683.7 billion last quarter, 6.97% more than expenditures in 2016’s comparable three months albeit slower compared to the 14.44% growth it registered last year. Furthermore, Department of Budget and Management data showed infrastructure and capital outlays amounting to P142.1 billion for the third quarter, 3.1% more than the P137.8-billion program and 15.4% bigger than the year-earlier P123.2 billion.

The analysts as well as economic managers expected government spending to have picked up last quarter as more infrastructure projects were rolled on the second year of the current administration. For this year, the government is looking to spend P847.22 billion on public infrastructure, equivalent to 5.32% of GDP. This forms part of a P8.44-trillion spending plan that runs up to 2022.

Farm output growth — scheduled to be reported on Nov. 15 — is estimated to have been little changed from the second quarter performance of 6.18%, Agriculture Secretary Emmanuel F. Piñol told reporters last month. The sector is coming off a low base due to a prolonged dry spell that weighed on output well into 2016. To recall, farm output growth in the third quarter of 2016 was 2.98%.

Latest trade data saw year-to-date export and import growth at 12.2% and 7.4%, respectively, way above the official 5.0% and 10% targets for 2017. This brought the country’s balance of trade as of September with a net deficit of $18.942-billion, improving from last year’s $19.520 billion.

On the other hand, manufacturing slowed last quarter, with the PSA reporting a 3.7% decline in the volume of production index in September, its worst turnout in almost six years, bringing third quarter average to a 1.9% contraction.

from http://news.abs-cbn.com Investigative and Research Group correspondent, Edson Guido :

Philippines among Top Gainers in ASEAN Trade, FDI Inflows :

How much has the Philippines gained from trading with fellow ASEAN countries? Let us count the ways.

With President Duterte stressing the importance of being part of the ASEAN bloc together with the ASEAN economic integration in December 2015, one might wonder how much exactly the Philippines benefits from this.

"It is equally important that we make our peoples understand how important ASEAN is,” Duterte said in a speech at the 14th ASEAN Leadership Forum last April 28, 2017. “How its past gains have directly contributed to their well-being; and how the realization of ASEAN’s goal will make their lives better."

An economic integration’s primary objective of having free movement of goods, services and investments usually results in a deeply integrated economy that promotes trade and foreign direct investments (FDI).

Examining key macroeconomic indicators show that the ASEAN economy has been vibrant through the years and that the Philippine economy has been benefiting from its inclusion in the regional bloc, more so after the ASEAN economic integration.

Background

Established on August 8, 1967, it has five original members--Indonesia, Malaysia, Singapore, Thailand, and the Philippines. Brunei Darussalam joined in 1984 and afterwards, Vietnam, Lao People’s Democratic Republic and Myanmar followed in the 1990s. Cambodia was the last to join on April 30, 1999. Collectively, these 10 countries compose the 10 ASEAN member-states, collectively called ASEAN 10.

To enhance regional integration and cooperation in the ASEAN, they agreed to establish an ASEAN Community, comprised of three pillars: the Political-Security Community, the Economic Community, and the Socio-Cultural Community.

The formal establishment of the ASEAN Community on December 31, 2015 became a major breakthrough in the ASEAN’s objective of having a more cohesive regional economy, which promotes growth that is robust, inclusive and sustainable.

Recovery in PH trade amid slowdown in ASEAN

Policy measures that facilitate trade, resulting in free movement of goods within the region, were some of the benefits provided by economic integration.

In general, ASEAN trade in goods slowed down the past two years after a period of steady growth. This was consistent with the moderating trend in global trade. The same pattern was observed in intra-ASEAN trade.


The Philippine trade situation closely followed the ASEAN trend through the years. However, in 2016, while global trade slowed down, the Philippines had a recovery both in terms of total trade and intra-ASEAN trade. Intra-ASEAN trade in the Philippines increased from $25.6 billion in 2015 to $30.9 billion in 2016, equivalent to 22 percent of total trade.

In comparison, trade with China, Japan, United States and the European Union accounted for 16 percent, 15 percent, 11 percent and 10 percent of total trade in 2016, respectively.


The ASEAN region as a whole exported more than it imported since 2004, resulting in trade surpluses.


In contrast, the Philippines has always been a net importer for years. The aforementioned trade recovery in 2016 was also due to an increase in imports. However, the proportion of intraregional exports and imports of goods to their respective totals went up in 2016, illustrating deeper trade integration within the region.


Source of data: ASEANstats database

According to the Philippine Statistics Authority, electronic products were the top Philippine exported goods to ASEAN member-countries at $5.634 billion (equivalent to 65 percent of exports to ASEAN countries) in 2016. They were also the top imported goods from ASEAN countries at $5.017 billion.



Source of data: Philippine Statistics Authority

Trade in services has been steady

ASEAN trade in services has been on an upward trend since 2010, with a slight dip observed in 2015, followed by a recovery the year after.


Trade in services for the Philippines has also been increasing since 2010. That being said, the Philippines has been a net exporter of services from 2010-2016, which is in contrast to the ASEAN region.


Source of data: ASEANstats database

No clear trend in ASEAN FDI inflows

In terms of FDI inflows, there was no consistent trend that can be established in the ASEAN region from 2010-2016. Intra-ASEAN FDI inflows have shown more of a consistent upward trend from 2010-2016.


In the Philippines, there was a clear upward trend in inflows of FDIs from 2010-2016. These inflows usually came from countries outside the ASEAN region. In 2016 however, intra-ASEAN FDI inflows in the Philippines went up significantly, increasing by more than nine-fold from $57 million in 2015 to $534 million in 2016. The proportion of intraregional FDI inflows to total FDI inflows went up to 7 percent in 2016, from 1 percent in 2015.


Source of data: ASEANstats database

Interaction with ASEAN member-countries

Singapore was the Philippines’ top trading partner in recent years. Furthermore, most of our FDI inflows in the region also came from Singapore.

The heat map illustrates FDI inflows or direct investments made by investors from other ASEAN member countries to the Philippines. High FDI inflows usually lead to economic growth, job creation, and technology transfer.

The larger the bubble of a country in the map, the higher the FDI inflow from that country. The two bar charts on the right show the trade figures between the Philippines and the different ASEAN member countries. The top chart shows the trade totals, while the one below it disaggregates the totals into exports and imports.

By using the filters at the upper left corner, the interactive visualization can be viewed by year and country. It is possible to view more than one year and country on the list. Clicking “Select All” will restore the map and charts to default view.

The data on the map and charts are interconnected. For example, clicking on a country on the map will show the corresponding details for that area in the tables while clicking on the countries in the chart will likewise reveal the corresponding information on the map. Clicking on the white space anywhere on the chart will restore the map and charts to default view.

 

ASEAN countries’ robust growth

In 2016, gross domestic product (total value of all goods and services produced within a country over a specific period of time) of ASEAN countries was collectively valued at $2.55 trillion at current prices.

For comparison, GDP (at current prices) of United States, European Union and China were valued at $18.57 trillion, $16.40 trillion and $11.20 trillion, respectively.

That being said, ASEAN’s GDP more than quadrupled from 2000, the first full year of the ASEAN-10, when it was valued at $616 billion.


In recent years, Indonesia and Thailand produced more than half of the total ASEAN output, while the Philippines contributed more than 10 percent.


In terms of GDP per capita, a measure of productivity, ASEAN has been growing steadily since 2002. There were contractions in 2009, 2014 and 2015 before registering positive growth again in 2016.


ASEAN real GDP growth has been robust the past few years, consistently growing by more than 4.5 percent since 2010 after the dip in 2009 because of the global financial crisis.


The ASEAN economic integration is an ongoing process in an economic environment that is very dynamic. However, even if the economic integration is in its early phase, one can already see how the Philippines benefits from it.

The regional integration enhanced the Philippines’ intraregional linkages in trade and investment. Both the country’s proportion of intraregional trade to total trade and the proportion of intraregional FDI inflows to total FDI inflows increased in 2016, coinciding with the establishment of the ASEAN Economic Community. These illustrate deepening trade and investment integration amid the recent uncertainty in the global economic environment.

here's an article for philstar.com correspondent, Czeriza Valencia :

Heavy Infra Buildup to fuel up to 9% Philippine Growth

MANILA, Philippines — The Philippines needs to aggressively invest in infrastructure to attain as much as nine percent economic growth and make progress felt by more Filipinos, business leaders said yesterday.

During a forum on infrastructure development at the ASEAN Business and Investment Summit, Ayala Corp. CEO Jaime Augusto Zobel de Ayala said the consumption-based Philippine economy could be transformed into an investment-driven one, if adequate infrastructure is in place.

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The domestic economy, he said, has to sustain a growth of up to nine percent annually for growth to be more equitable. To do this, the country has to invest heavily in infrastructure.

“We have to make the economy investment-driven. Growth has to kick up to seven, eight, nine percent to make it count for all,” he said.

As funding remains a concern for infrastructure in the country and within the region, business leaders and multilateral development institutions urged ASEAN member-states to allow greater private sector participation in their infrastructure buildup to plug a $60 billion financing gap within the region and implement projects faster.

Enrique Razon, chairman and CEO of port giant International Container Terminal Services Inc., said connective infrastructure that immediately builds up capacity to service the needs of the growing economy must be undertaken immediately.

“We need to build out capacity, we need to have the capacity to absorb the activity of the economy,” he said.

Implementing smaller connective infrastructure such as airports, roads and railways in secondary cities and provinces are also equally important as pursuing big-ticket ones as it will immediately contribute to attaining inclusive growth in the region, he added.

“Infrastructure is also building projects quickly like building smaller airports in the provinces and stimulating the economy,” said Tony Fernandes, CEO of budget carrier AirAsia. “For us, we want smaller airports that will cost $100 million to $200 million (to build) rather than large ones that will cost $500 million.”

Fernandes said building smaller airports in the region would unlock ASEAN’s tourism potential which is supported by the cultural diversity of its member states.

“In terms of infra, airports are critical. For some reason, airports take a long time to build. So I would encourage more PPPs in airports. I think we should also look into secondary cities, there is great potential in there,” he said. “ASEAN is seen as tourism market. We have 10 markets with much diversity.”

Development partners likewise said more public-private partnerships would address the connectivity problem in the region faster. It will also enable governments to tap the technological expertise of the private sector.

“We have a long way to go. To get developments across, we need infrastructure and we need huge investments to fill the gap,” said Diwakar Gupta, vice-president of the Asian Development Bank (ADB). “We need huge investments to fill the gap, $60 billion just to catch up. And from there, PPPs are a great way to move forward.”

Pursuing more PPP contracts for infra projects, however, would require that an enabling environment and conflict-resolution mechanisms be firmly established.

“To attract more funding, we need dispute resolution mechanisms and an enabling environment,” said Gupta.

Thomas Hardy, acting director of the US Trade and Development Agency, said PPPs would work best provided commitments are honored and there is transparency of procedure.

“PPP is interesting. But it all goes down to sanctity of law, commitment on both sides and transparency,” he said.

Philippine economic managers recently said the government will award more big-ticket projects to the private sector on the condition that these projects are of good quality and can match the speed of execution of projects implemented using government funds and official development assistance (ODA).

The government will be accepting unsolicited proposals for large infrastructure projects but would demand  that these projects break ground within a minimum of 18 months and would be subject to conditions such as non-provision of subsidies or guarantees. The proposal would still have to be subjected to a Swiss Challenge.

Economic managers recently met with top business leaders to assure them that the government is open to teaming up with the private sector on big-ticket infrastructure projects under the ambitious Build Build Build program through solicited and unsolicited proposals for PPP or joint venture (JV) schemes.

Solicited proposals should be consistent with conditions under the law such as the 50 percent cap on government undertakings on project cost. Negotiated JVs, on the other hand, can be initiated by the private sector or by the government if the competitive selection fails. This, however, would still be subjected to a Swiss Challenge.

The Public-Private Partnership (PPP) Center which used to be the main Philippine government agency handling PPP transactions for projects at the national scale, has shifted its focus to assisting local governments in the use of the PPP mode of project delivery for smaller but vital projects.

For its part, the Japan International Cooperation Agency (JICA) reaffirmed its support for ASEAN infrastructure initiatives.

“Connectivity is key in ASEAN so we support connectivity projects like airports and railways,” said Shinya Ejima, senior vice president of JICA.

He noted, however, that projects proposed for funding must be consistent with national development plans.

“JICA and ASEAN have been good partners. In recent years, JICA has been emphasizing quality infrastructure for quality of growth. It should be consistent with the national growth plan,” he said.

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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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