Philippine Real Estate News – March 6, 2016

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hello everyone,

here’s some select articles about Philippine Real Estate and our economy from various newspaper correspondents that matters for your reference.

from Businessworld Correspondent, Victor V. Saulon


Foreign Chambers cite obstacles to Manufacturing Growth

THE Joint Foreign Chambers of the Philippines (JFC) has listed a number of constraints that are hampering the manufacturing sector from sustaining the steady growth that it has experienced in the last five years.

“While existing data spark optimism, industry players are cognizant that a number of constraints hamper the sector’s upward trend,” the group said in a policy note.The joint chambers — whose members are the Philippine business chambers of the United States, Australia, New Zealand, Canada, Europe, Japan and South Korea — said these issues cut across the diverse sub-sectors under manufacturing.JFC listed these as high power costs, congested ports, labor costs, bureaucracy, taxes and broken linkages in the supply chain. Manufacturing is also wary of the country’s non-inclusion in the Trans-Pacific Partnership (TPP) — the free-trade agreement whose major proponent is the US, the foreign chambers said.“The electricity cost in the Philippines remains among the highest in Asia,” the group said, adding that Manila has the third most expensive power cost in terms of residential tariff, generation cost, grid charges, and electricity taxes.The chambers classified electricity as among the top issues along with the country’s congested seaports at Manila and Cebu, which it said “significantly impact transportation and logistics efficiency, as well as manufacturing industries that highly depend on goods passing through ports.”Labor cost is another issue frequently cited by manufacturers as affecting their competitiveness, the chambers said, noting that the minimum wage in the Philippines is higher than several neighbors in the region with a big supply of workers such as Vietnam, Myanmar and Cambodia.

“Textile and garments, both labor-intensive industries, are the most affected by this issue. However, there are labor shortages in Malaysia and Thailand so in both countries companies must pay above the minimum wage for entering workers, but this is not so in the Philippines,” the chambers said.

They also “government bureaucracy experience” cited as a turn-off for manufacturers who had to deal with numerous permits, licenses and multiple steps, as well as submit hundreds of documents when securing regulatory requirements.

“An astonishing 7,500 products require import and permits by multiple agencies,” the chambers said.

They cited a report from the International Finance Corp. that ranked the Philippines as having the highest tax rate as a percentage of profit in the Association of Southeast Asian Nations (ASEAN). At 43%, the country’s ratio is way higher than Indonesia’s 30%, Thailand’s 28% and Cambodia’s 28%.

Another constraint is the broken linkages in the supply chain, especially for those in the supply chain manufacturing industries.

“Weak backward and forward linkages or poor access to raw materials compel manufacturers to rely on imported parts and intermediate goods. This situation hampers the ability of companies to move up the value chain,” the chambers said.

A new addition to the challenges faced by manufacturers is the signing of the TPP on Feb. 4, 2016 as this could result in trading partners moving to TPP member countries.

“In the textile and garments industry, some buyers from TPP signatory-countries are said to have expressed preference to transact with manufacturers located in TPP countries,” JFC said.

One of the features of the TPP is the elimination of tariffs on thousands of product lines traded among TPP signatory countries US, Japan, Australia, New Zealand, Canada, Chile, Mexico, Peru, and four ASEAN countries Malaysia, Singapore, Viet Nam and Brunei.

JFC said a large part of the manufacturing sector are micro, small and medium enterprises (MSMEs), which “continue to face competitiveness challenges and need the strong support and intervention in terms of access to capital, market, technology, and human resources.”

“To maximize the sector’s potential, and address issues and challenges hampering its growth, broad approaches applicable across sub-sectors must be pursued,” the chambers said.

JFC recommended addressing the high cost of power through tax credits and discounts; prioritizing infrastructure critical to industry growth; providing support to labor-intensive companies through wage subsidies or waiver of minimum wages; and streamlining regulatory processes.

Other recommendations include proving support to MSME development by giving them access to technologies and facilities and establish more economic zones while keeping the incentives offered to locators.

“Since the 1990s, manufacturing’s average growth rate in terms of gross value added has been steadily increasing. From an average of 2.5% growth in 1991-2000, average growth reached 4.1% for the period 2001-2010. In the last four years, average growth exceeded 7%,” JFC said.

from Business Mirror :

Ayala Land to launch Sicogon Island tourism-estate


AYALA Land Inc. (Ali) and Sicogon Development Corp. (Sideco) will launch Sicogon Island Tourism Estate development within the first half of 2016.

The Ali-Sideco joint venture is expected to drive economic progress in Western Visayas and the entire region, as it serves as a tourism hub for surrounding or nearby destinations like Gigantes, Bantayan and Concepcion islands.

The 1,100-hectare Sicogon Island will feature a balanced mix of developments, such as a resort-town center, hotels and resorts, as well as commercial and residential establishments, supported by an on-site airstrip.  The groundbreaking of the airport runway is scheduled for the second half of the year.

“The initial development will concentrate on building the airport and runway, to ensure accessibility to the island,” said Jose Emmanuel Jalandoni, ALI senior vice president and group head of commercial business.  “The 1.3-kilometer runway will allow immediate access from Manila and Cebu to the island development.” He said test flights to Sicogon are being targeted for the first quarter of 2017.

The project is supported by public, private and community organizations, and government bodies alike because of the potential economic benefits it will bring to the region.

A framework agreement was signed by Ali, Sideco, and the Federation of Sicogon Island Farmers and Fisherfolk Association (Fesiffa) in 2014 to pave the way for the sustainable development of Sicogon Island.  The group has been assisting the local community through skills training and livelihood programs to make them active partners in the development.

“We strongly believe and hope that poverty alleviation will be achieved through tourism projects.  These will give us various job opportunities and help us improve farming and fishing methods,” said Raul Ramos, Fesiffa president.

Jalandoni said sustainability will be a main focus of the project.  Aside from allocating more than 50 percent of the development for open green space, Ali will also work with the Department of Environment and Natural Resources (DENR) to continue stewardship of Sicogon’s forested area, and work on coastal protection and marine- life rehabilitation in support of sustainable development.

“More than becoming a premier tourist destination and a tourism hub for the region, Sicogon is envisioned to provide inclusive growth and economic development through long-term recovery and livelihood programs and job creation,” Jalandoni said.

Ali estimates that the Sicogon Island development will provide 20,000 jobs either directly or indirectly with increased tourism, and approximately P1 billion in earnings for the community through business opportunities that will come from retail and commercial establishments.

from Business Mirror :


PHL switches on SEA’s largest solar farm

CADIZ CITY—In a race to harness clean renewable energy (RE), the Philippines switched on Thursday Southeast Asia’s largest solar-power plant—the P10-billion, 132-megawatt (MW) solar farm in Barangay Tinampaan, Cadiz City, Negros Occidental.

The massive solar farm, sprawled over 176 hectares of land, went online in a simple formality attended by national and local officials, as well representatives of Soleq, the Asian utility company that built the facility.

“Sunlight is the cleanest and most abundant energy source readily available. It is naturally replenished every day, so we should use it to power up our homes and our industries,” said former Sen. Juan Miguel Zubiri, a Negrense who was among the guests at the switch-on ceremony.

Including the Cadiz farm, the Philippines now has 10 fully functional solar-power plants with a combined installed capacity of 377 MW, Zubiri said. He authored the Renewable Energy law of 2008.

“Without question, Negros Island is now the solar-power capital of the Philippines and the whole of Southeast Asia, considering the number of solar farms either already up and running or set to operate here,” the former senator said.

He added that additional solar farms are now being put up in Bacolod City, La Carlota City, and in the municipalities of Murcia and Manapla in Negros Occidental, and Mabinay in Negros Oriental.

Using panels designed to absorb the sun’s rays, solar farms convert sunlight directly into electricity, or use the sun’s heat energy to drive conventional power generators.

The builder of the Cadiz solar farm, Soleq, is focused on becoming Southeast Asia’s largest independent solar-power producer. It is a unit of Equis Funds Group Pte. Ltd., a Singapore-based private venture capital company.

The Philippines already has Southeast Asia’s largest wind-power generator—the 150-MW wind farm in Burgos, Ilocos Norte.

Zubiri earlier said more than 2.9 million jobs—mostly in construction and engineering services—have been created by the boom in solar, wind, geothermal, hydro and biomass power projects in the countryside.

Soleq’s solar farm was built by more than 2,500 workers, and now employs a regular staff of 200, Cadiz City Mayor Patrick Escalante said.

Besides creating new jobs and other economic benefits, Zubiri said RE produces little to zero carbon-dioxide discharges, thus, helping to improve air quality and public health.

He said the vast and unlimited sources of RE assure the country of a more dependable supply of electricity at stable prices in the years ahead.

The Renewable Energy law, authored by Zubiri, has accelerated the development of the country’s “green” energy resources. The law aims to lessen national dependence on electricity generated by fossil fuel-fired power plants.

At present, the country is 63-percent dependent on coal, diesel and fuel oil for electricity.

from Manila Standard correspondent, Julito G Rada :


Fitch Ratings says big PH banks solid

GLOBAL debt watcher Fitch Ratings said Friday big banks in the Philippines will be able to comply with the liquidity coverage ratio, a new Basel 3 rule recently adopted by Bangko Sentral ng Pilipinas, because of their strong financial status.

“Major universal and commercial banks in the Philippines should be well-positioned to meet new Basel 3 liquidity rule… Ample domestic system liquidity, and banks’ balance sheets being mostly funded by deposits, are positive structural factors that will help banks comply with upcoming Liquidity Coverage Ratio requirements,” it said.

“Nonetheless, those with relatively large pools of corporate deposits will have a greater reason to pursue retail deposits more aggressively, and long-term debt issuance may rise,” it said.

Bangko Sentral announced on March 1 new rules requiring universal and commercial banks to meet an LCR of 90 percent by Jan. 1, 2018, rising to 100 percent by Jan. 1, 2019.

However, Fitch said aside from meeting the overall requirement, banks would likely need to monitor their LCRs for certain currencies where they have significant activity as well. It said the US dollar could be one such currency for many banks, other than the peso.

The new rule aims to strengthen the ability of individual banks to withstand short-term liquidity shocks. It seeks to ensure that banks hold sufficient cash and other high-quality liquid assets to meet their liquidity needs—including potential deposit withdrawals—under a 30-day stress scenario.

“System liquidity is healthy in the Philippines, as evident in the reported banking system loan-to-deposit ratio of 70.7 percent and liquid assets-to-deposits of 53.5 percent at end-2015. Banks’ surplus funds are often invested in peso or US dollar-denominated Philippine government bonds, which would typically qualify as high-quality liquid assets under the LCR framework—for US dollar bonds as long as they back US dollar liabilities,” Fitch said.

And although more detailed guidelines have yet to be published, Fitch’s internal estimates for its rated banks indicate broadly that most of the top 10 domestic banks should comfortably meet the LCR rules, based on the last available annual reports.

“That said, loan growth has exceeded deposit and M3 liquidity growth over the last five years, and system liquidity would tighten gradually if this dynamic were to continue. Against this backdrop, the LCR regime will enforce an added layer of balance-sheet discipline on the Philippine universal and commercial banks, in addition to existing conservative regulatory hurdles on capital,” it said.

It said the new rules would provide even more of an incentive for banks to raise retail deposits, particularly customers’ current and savings accounts. It said banks with strong retail deposit franchises will enjoy an advantage in meeting the LCR hurdle, as such balances are usually more stable in times of stress.

“Those that rely more on corporate deposits, however, could be subject to higher run-off assumptions under the LCR calculations, which would result in lower ratios on a like-for-like basis,” Fitch said.

from Manila Standard correpondent, Jennifer B. Austria :


SM Group increases capital by over 100%

SM Investments Corp., the holding company of the Philippines’ richest man Henry Sy, is increasing its authorized capital by 133 percent to P28 billion from P12 billion to pave the way for a stock dividend declaration and obtain flexibility for future expansion.

SM Investments said in a disclosure to the stock exchange its board approved the hike in the capital to have enough unissued capital stock to declare stock dividends of P4.015 billion.

It said the increase in capital would provide the conglomerate the capability and flexibility for future capital initiatives.

“With availability of sufficient unissued capital stock, the corporation will be ready to take advantage of opportunities as they arise,” SM Investments said.

The conglomerate, which has investments in banking, property development, shopping malls and retail sectors, said it would spend as much as P90 billion in 2016 primarily to roll out more shopping malls, hotels, office developments and residential projects.

This year’s capital spending will be funded through internally generated funds and borrowings.

Meanwhile, the board of SM Investments also approved the declaration of 50-percent stock dividends, based on the company’s 2015 consolidated net income.

The terms of and conditions of the stock rights offering remain to be finalized.

The conglomerate currently has P12 billion in authorized capital stock divided into 1.19 billion common shares and 10 million non-voting, cumulative and redeemable preferred shares both with par value of P10 per share.

With the proposed capital increase, SM Investments will have P28 billion authorized capital divided into 2.7 billion common shares and 10 million non-voting, cumulative and redeemable preferred shares both with par value of P10 per share.

SM Investments’ said net income in 2015 reached P28.4 billion, as revenues grew 7 percent to P295.9 billion.

Recurring net income, excluding extraordinary items, jumped 13 percent in 2015 as income from operations increased 8.5 percent to P56.9 billion from P52.5 billion in 2014.

The conglomerate said the underlying earnings increase was driven by a 17-percent growth in retail earnings, 14-percent growth in property recurring net income and 10-percent rise in bank net income.

SM Investments said core units would continue with aggressive expansion plans this year.

SM Prime Holdings, its property development unit, is set to open five new malls and plans to expand two existing malls.


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Robert G. Sarmiento Properties
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