Philippine News on Real Estate and Economy - September 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 ( expansion / downsizing of business, logistics. employment, construction supply chain, and other economic variables ).

from correspondent,  Alberto Agra :  

Dissecting PPP contracts #7: Right of Way 

Securing right-of-way (ROW), which is typically a contractual responsibility of the government, is seen being one of the main reasons for delay in completing public private partnership (PPP) projects. Determining the scope, allocating the responsibility and appreciating the necessity of ROW are critical in PPPs and PPP contracts.

ROW defined. defines ROW as a “right of passage, as over another’s land”, or the “strip of land acquired for use by a railroad for tracks”.

Need ROW. For infrastructure projects that traverse rows of private properties, access and permission must be obtained from the owners. Without ROW, there can be no such road, expressway, rail or power-interconnection project over or through private or public land.

Public purpose. PPP projects and all government projects are intended for the public good. If government funds will be used for ROW purposes, then public purpose is a must for government funds cannot be used for private purposes.

ROW is not free. When ROW is exercised, the parties to a PPP, and consumers and end-users benefit. Thus, the private owner who will be permanently disturbed or deprived of his or her land must be compensated. Apart from legal easements, ROW over or through private land requires the “taker” to pay the owner. While voluntary sale based on an agreed price is the ideal, the “taker” may seek relief from the courts by filing expropriation cases. Delay in negotiations and court proceedings are the real culprits.

ROW in PPPs. PPP arrangements require the identification and delineation of roles and responsibilities. For example, in build-operate-transfer or build-transfer-operate arrangements, the private sector assumes these three functions including the financing and designing of the facility. What remains with or what is normally assumed by the government is providing for ROW.

from  correspondent, Roy Stephen C Carnivel

BPO exec blasts ‘grandfather’ clause in Senate’s tax reform b

The Senate version of the administration’s first tax reform package would be keeping a crucial tax perk enjoyed by a subsector of the business process outsourcing (BPO) industry, albeit it would not be extended to new job offers starting next year.

Shameem Quarashi, chair of the Philippine Association of Multinational Companies Regional Headquarters Inc. (Pamuri), criticized the move, saying it “ignores the long-term goal” of making the Philippines a destination of choice.

The Senate version of the Tax Reform for Acceleration and Inclusion (Train) or Senate Bill 1592, approved by a committee this week, still allowed existing managerial and technical jobs in regional operating headquarters and regional headquarters (ROHQs/RHQs) to enjoy a 15-percent preferential tax rate (PTR). This covered 5,000 elite jobs in the industry.

If the law is passed, however, similar positions that have yet to be filled up would no longer have the same incentive.

Under the current tax regime, the annual salaries of these highly sought-after jobs —which average more or less P1.5 million yearly—are subject to only a 15-percent tax rate. For comparison, those with the same pay grade but in a different industry get a 32-percent tax rate.

Yet, some view the Senate’s version is a compromise to the blanket policy passed by their counterparts at the House of Representatives back in May—House Bill 5636.

“It’s a welcome improvement over the House bill but still ignores the long-term goal of attracting ROHQs/RHQs to put up their operations in the Philippines,” Quarashi said.

ROHQs and RHQs are established by multinational companies to cater to affiliates, subsidiaries, or branches in the global market. These services include, for example, corporate finance advisory, research and development, and marketing control and sales promotion—all of which are considered high-value jobs that stand out in the local BPO industry known particularly for its voice-based services.

Over the years, some Fortune 500 companies—such as Unilever, Chevron and Procter & Gamble—have selected the Philippines for their ROHQ/RHQ operations. The tax perk, in particular, was a crucial factor in their decision to operate here, seeing it as part of savings in a capital-intensive industry.

The Senate’s version of removing the PTR for future jobs goes against the goal of the subsector, which Quarashi said “is to continue to entice investments in the Philippines, beyond just protecting present locators.”

“We are encouraged that grandfathering was offered as a compromise but in the new bill—only [present] employees are protected—not future ones. The best way to grandfather is to protect the company, not just present employees,” he said.

Grandfathering exempts certain persons from restrictive provisions in a new law.

from the  correspondent, Roderick T. dela Cruz : 

MMDA chair envisions a bigger ‘Mega Manila’

The man in charge of putting order in Metro Manila has unveiled a multi-pronged plan to resolve the traffic problem, which involves reducing the volume of vehicles on the street by building mass transport systems, creating layers upon layers of roads above the ground and

underground and developing a much larger ‘Mega Manila’ to ease the population density. Metropolitan Manila Development Authority chairman Danilo Lim says the plan is in line with the Duterte administration’s ‘Build, Build, Build’ infrastructure program and strategy to spread

economic activities outside the metropolis.  Lim, 62, says in an interview at MMDA headquarters in Makati City that while these long-term solutions are being undertaken, there is a need “to swallow a bitter pill” to unclog major thoroughfares and other roads in the 614-square-

kilometer metropolis, which has a daytime population of over 20 million and a population density of over 20,000 people per square kilometer that ranks among the highest in the world.

“Let us develop a culture of discipline so that we can restore order in our streets.  Of course, that does not address the problem of overcrowding.   However, it can help mitigate the problems of Metro Manila,” says Lim, a retired brigadier general who was appointed to the MMDA post on May 22.

As MMDA chair, Lim has to contend with major concerns such as road congestion, flood during rainy days, garbage disposal, beautification of the streets and putting an order in the chaotic urban jungle where more than 20 million people produce over 10,000 tons of garbage daily.

“My hair is turning gray fast,” says Lim, the first non-elected politician to head MMDA, which is tasked to deliver metro-wide services to 17 cities and municipalities in the National Capital Region without undermining the autonomy of local government units.

Lim, who was born on June 2, 1955 in Solano, Nueva Vizcaya, studied at the University of the Philippines, Philippine Military Academy and US Military Academy and is a member of the Philippine Military Academy Makatarungan Class 1978. He was incarcerated at Camp Crame for four years from 2006 to 2010 on rebellion charges in connection with the 2003 Oakwood Mutiny.  He was freed on May 31, 2010 and joined the 2010 senatorial race, but lost.  He briefly served as deputy commissioner at the Bureau of Customs, but resigned in 2013.

On his first day at MMDA, Lim vowed to cleanse the ranks of erring personnel and ordered a thorough inventory of equipment and physical assets.

“I felt older, but a little wiser and a lot more determined to confront the problems and challenges that come with the position,” says Lim, when asked how he coped with the job.

“It is easier in the military, because the soldiers will immediately obey your orders.  Here, it is different.  If you want something done, you have to study it carefully, you have to consult people.  If you want to discipline someone, you have to deal with civil service eligibility of these people,” he says.

Lim says as MMDA chair, he cannot act on his own without consulting the mayors.  “We work through the Metro Manila Council. If we have resolutions and we have to implement a new system, it needs the approval of MMC,” he says.

“The chairmanship is not enough, in truth.  You have to deal with LGUs, especially the very established ones here in Metro Manila.  They were elected by the people.  They are independent and have their own authorities.  So you have to work through them, with them,” says Lim.

MMDA has only 2,600 plantilla positions, excluding contractual employees to address the needs of over 20 million people.   Its budget comes from the national government, local government units and the Road Board of the Department of Public Works and Highways.

Lim considers traffic congestion as his biggest challenge.  “The reality is it is really very hard to find a good solution to the traffic problem when your cars are multiplying, but the roads aren’t.  Last year, vehicle sales hit a record 420,000 units.  According to industry people, 65 percent of these vehicles found their way to Metro Manila.  This year, we expect vehicle sales to reach not less than 450,000 units,” he says.

“You can just imagine the new vehicles that are added each day to Metro Manila roads.  For the past several decades, there are no really big ticket infrastructure projects completed. We are four to five decades behind in infrastructure compared to other countries,” he says.

Lim says one solution is to create more space or roads.  “People spend an inordinate amount of time going from one point to another. We need to add space.  This is why we now build roads, bridges, subway, and bypass roads. This would have the effect of transforming a one-story house into a multi-level building. That’s what we are waiting for,” he says.

“In other countries, they have several layers of infrastructure above ground and below ground. Metropolises in other countries have never stopped putting up infrastructures,” he says.

Lim says to tackle the problem, the Duterte administration launched the ‘Build, Build, Build’ program.  “We will have a longer Skyway.  There will also be a first subway in the country from Mindanao Ave. in Quezon City to FTI to Ninoy Aquino International Airport.  There will be MRT 7 along Commonwealth Ave. and there is the NLEx-SLEx Connector Road.  The Philippine National Railways also plans to put up a rail line from Tutuban to Malolos to Clark,” he says.

“But for the meantime, while these projects are being built, we have to deal with the traffic problem.  We need to take a bitter pill as a remedy to the traffic problem.  Once these projects are completed hopefully within the term of President Duterte, the traffic congestion will ease,” he says.

Lim says there is also a plan to reduce the volume of vehicles on the street, such as retiring old vehicles and expanding the number coding scheme.  “A congressman suggested that we expand the number coding scheme to reduce the number of vehicles on the road.  We are open to the suggestion, but then again, I have to take this up with MMC,” says Lim.

“On the other side, some people oppose this, saying it is a violation of their rights.  Those who are rich with more than two vehicles can also get around the number scheme. Two months ago, I actually floated the idea of implementing the coding scheme twice a week, instead of the current one day per week.  I floated the idea to get the reaction, sentiment, feedback of our people, but there was a strong opposition to it, to the point that it was not tackled at MMC,” says Lim.

Lim says another solution is to start planning for a bigger ‘Mega Manila,’ a term first made popular by marketing agencies of consumer goods companies.  Lim says Edsa, the main thoroughfare in Metro Manila, is heavily congested because there was no traffic impact assessment done before any structure was put up along its stretch.  There are now 36 shopping malls and 45 bus terminals along Edsa, he says.

“We need to think of a solution. Let us look at areas outside Metro Manila.  Instead of thinking of Metro Manila, let us begin thinking about Mega Manila. For example, from Calamba to Angeles and everything in between,” Lim says.

“From there, let us start planning.  Our planning should already incorporate the projected economic growth and population growth over the next 40 years or 50 years.  Infrastructure development should consider the projected population and economic growth so that we can spread out development. We are currently stuck with Metro Manila, so why not spread out to other areas,” Lim asks.

He says the government began creating new centers of activities outside Metro Manila, with DOTr already transferring to Clark, Pampanga. “Let us spread the development so that we can defeat the problem in details and parts by parts.  Let us start planning.  Our planning should be 40 to 50 years ahead, covering infrastructure, population growth, economic growth.”

For the meantime, Lim says MMDA is in talks with Metro Manila mayors to support the Kalayaan Lane as an alternative road to Edsa.  He says the Department of Transportation also plans to adopt a Singaporean intelligent transport system using technology to mitigate traffic congestion.

MMDA also teamed up with the Department of Science and Technology to enhance the No-Contact Apprehension Policy using a technology-based application called Contactless Apprehension of Traffic Violators on 24-hours Basis, All Vehicle Detection System.   The system will display the vehicle’s detection and tracking, profiling, plate localization and plate character recognition for more detailed traffic violation identification.

Lim says on the garbage problem, MMDA plans to tap waste-to-energy technologies to convert 10,000 tons of garbage that the metropolis produces daily into electricity.  He says this would also free up space on landfills.

Lim says with the cooperation of local officials and basic discipline being observed by the people in Metro Manila, “somehow we can make this metropolis more livable and vibrant.” 

from correspondent, Lee C. Chipongian :

PH economy remains on track for expansion, says Tetangco

The Philippines looked set to becoming an upper middle-income economy by the end of the Duterte administration, according to former central bank governor Amando M. Tetangco Jr.

“With a reform-oriented government and a collaborative private sector, achieving the Philippines’ goal of becoming an upper middle-income economy by 2022 is indeed highly feasible,” said Tetangco in a speech before members of the Joint Foreign Chambers of Commerce (JFC). The group awarded him the Arangkada Philippines Lifetime Achievement during a forum last week.

Tetangco, who stepped down as a two-term governor of the Bangko Sentral ng Pilipinas (BSP) last July, continues to see the country’s “strong macroeconomic fundamentals, sound economic management, solid domestic demand and a young and vibrant workforce.”

“The Philippines is touted to become Asia’s next economic powerhouse,” said Tetangco, citing the World Bank’s June 2017 Global Economic Prospects projects that the Philippines “will be in the top 10 fastest growing economies in the world with a GDP growth forecast of 6.8 percent.”

Arangkada Philippines Forum has its own “Implementing the 10-point Agenda” proposals and Tetangco thanked the group for its “valuable partnership and inputs (and) its constructive criticisms.”

Tetangco said it is important to this agenda to enhance the competitiveness of the business environment, to fast-track economic growth and for inclusive growth. Tetangco pointed out that this was achievable and listed the factors that would continue to support growth such the country’s “low and stable” inflation, the well-capitalized and liquid banking system that he said “continues to intermediate funds to the productive sectors of the economy” and “poverty incidence that continues to decline over the years.”

“The BSP has helped cultivate this positive alignment of macroeconomic indicators through calibrated monetary policy, aided by enhanced surveillance and an expanded tool kit; responsive banking regulations, aligned with international standards but recognizing relevant domestic conditions; and market determined external policy, including the liberalization of foreign exchange regulations,” he said. The JFC Arangkada Lifetime Achievement Award is for individuals – not strictly Filipinos – who have “contributed significantly to improving the country’s business environment.”

“Mr. Tetangco was chosen by the JFC for
accomplishments as BSP governor that were very
important to the foreign investment community,” a statement from the group said. Past awardees include former President Fidel V. Ramos, former PEZA director general Lilia de Lima, SGV founder Washington Sycip, and former foreign affairs secretary Roberto Romulo.

from correspondent, Melissa Luz T. Lopez 

Investor confidence intact — S&P

INVESTOR CONFIDENCE remains fairly intact more than a year into the administration of President Rodrigo R. Duterte, as policy uncertainty has dissipated on the economic front despite persistent political noise, an analyst at S&P Global Ratings said yesterday.

Andrew Wood, associate director at S&P for sovereign and international public finance ratings, said investor worries about the Philippines have generally eased as far as fiscal policies are concerned, although risks remain due to the bloody war on narcotics and ongoing martial law in Mindanao.

“The Duterte administration has shown itself to be in favor of sound and orthodox fiscal and monetary economic policy making across the board by generally keeping what worked for the Aquino administration and bringing it over,” Mr. Wood said in a webcast yesterday.

“In that sense, I think political risks has somewhat declined over the past year, but of course we are still keeping an eye on the social aspects of the President’s agenda,” he added.

“The President has strong focus on improving law and order which has allegedly resulted in numerous instances of extra-judicial killings since he came to power. In our view, there remains some policy uncertainties with regard to Mr. Duterte’s social agenda in particular. This is also true in terms of the application of martial law in Mindanao.”

Thousands of people have been killed — some under dubious circumstances — since Mr. Duterte took office at end-June 2016 from legitimate police operations and by suspected vigilantes as his government adopted a mailed-fist policy against narcotics peddlers and users.

“Nevertheless, we don’t see these policies have undermined the economic momentum in the Philippines or investor sentiment at this stage,” Mr. Wood said.

S&P still expects the Philippine economy to grow by 6.5% this year, which if realized would hit the low end of the government’s 6.5-7.5% growth goal and cement the country’s position as one of the fastest-growing economies in Asia.

Congressional approval and enactment of the first package of the tax reform agenda will serve as a litmus test for the Duterte administration — a measure long-awaited by investors as it is expected to improve the ease of doing business in the Philippines while trimming costs.

Mr. Wood noted that Mr. Duterte’s “pretty strong support” in Congress has been instrumental in ensuring legislative action on tax reform.

Despite concern among Mr. Duterte’s economic managers over how much support this measure has in Congress, the Senate Ways and Means committee yesterday approved Senate Bill No. 1592 (read story on S1/11), which reduces personal income tax rates and offsets the expected foregone revenues with higher excise tax rates on fuel and cars, an excise tax rate on sugar-sweetened drinks, and reduced value-added tax (VAT) exemptions. It also simplifies the estate and donor’s taxes — providing a uniform six percent rate — in a bid to encourage compliance and plug billions of pesos in leaks from these systems.

SB 1592 has a few differences from House Bill No. 5636 — particularly in the tax on sugar-sweetened drinks, the phased implementation of higher tax rates on oil products, and VAT base expansion — which itself secured final-reading approval at the House of Representatives at the end of May.

The fresh revenue stream will fund the state’s P8.44-trillion spending plan under the “Build, Build, Build” initiative until 2022 when the current administration ends its six-year term.

At the same time, Mr. Wood said approval of tax reform — for which there will be up to five tranches — will not automatically bag for the Philippines a credit rating upgrade from S&P, as the debt watcher would have to evaluate its long-term impact on the country’s fiscal position.

“What we need to see is more structural and a little bit more long-term in nature. We need to see this infrastructure spending translating into significantly higher real GDP growth on a consistent basis for a few years,” the analyst said.

“That [tax reform] factor alone is probably unlikely to bring the rating upward, but [it will exert] significant upward pressure on the rating in the future.”

The Philippines currently holds a “BBB” rating — one notch above minimum investment grade — with a “stable” outlook from S&P.


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Robert G. Sarmiento Properties

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Robert G. Sarmiento Properties
Professional Affiliation :
Philippine Association of Real Estate Boards
Member, City of Taguig Real Estate Board 2016 - 2019
Real Estate Broker’s Association of the Philippines 2000 - 2015
President, San Juan 2008, 2009
Philippine Association of Real Estate Boards
San Juan Mandaluyong Chapter 1998, 1999
PRC # 6569
PRC Lecturer’s License # 0294
+ 632 5536051 ( trunkline )
+ 632 4781316 ( telefax )
+ 632 8561365 ( line 3 )
+ 632 8041701 ( line 4 )
+ 6325148481 ( mobile landline )
+ 63 917 5364829 ( globe )


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