Monday, July 19, 2010

Osmeña: Making decisions on mortgage debt financing


HOW advisable are all-cash payments when the purchaser is financially able to cover them? There was a time when debts, particularly mortgage debts on a home, were considered ill-advised.

Times, however, have changed, and with them our modes of living.

A problem of deep concern to prospective home buyers is how best to finance a home and how to derive a mode of payment that will cause the least strain on the family budget and not end in financial grief.

A secondary problem generally arises out of the purchaser’s desire to safeguard the investment into which he, like most home owners, has poured the bulk of his live savings.

Broadly speaking, home purchases fall into two groups.

One includes those who have accumulated limited savings and are thus unable to provide a substantial down payment.

The other is composed of those more fortunate in their financial standing, and who are able and willing to acquire a substantial equity in the home or pay entirely in cash.

The “pay as you go” home purchase plan, for several decades now, has proven to be sound in principle and a strong incentive toward the promotion of thrift and general “good housekeeping” among those who have adopted it.

Even where a home buyer has accumulated the required savings, the purchase of a home free from mortgage debt may not always prove advisable, since the purchase of a home converts savings from liquid assets to a relatively fixed and immobile form.

Sudden or emergency needs for cash may arise, and with “all eggs in one basket,” the raising of large sums over a relatively short period of time may prove costly and embarrassing.

Second, mortgage amortization payments constitute a form of regular and consistent saving which, as a rule, increases an owner’s equity faster than the resulting losses accounted for by wear and tear, the action of the elements and other causes that contribute to the decline in the value of the home investment.

Mortgage amortization thus indirectly contributes to stability and enhancement of the initial investment depending on the extent and rate at which amortization exceeds accrued depreciation.

Finally, a home can be more readily sold when the need arises, if it is subject to a mortgage debt, assuming that the mortgage bears a fair ratio to the price of property and is financed at currently available low rates of interest.

The reason for greater marketability arises out of the fact that a prospective purchaser need not finance the total purchase price, but merely raise the equity required over and above the existing mortgage debt.

There are, of course, laudable benefits that flow from “outright” home ownership, like satisfaction or civic pride of undisputed ownership of a home, free from debt.

Second, there’s the freedom from fear of monetary complications that may terminate in foreclosure of the home.

Third, there’s greater flexibility in the disposition of current income and, finally, a haven to which the unemployed, ailing or aged owners may retreat without fear of interference by an “unfeeling” mortgagee.

Yet, despite these advantages, an all-cash purchase of a home is not advisable where such cash outlay necessitates delay in home acquisition for many years (in order to accumulate the necessary savings) or where such cash requirements bankrupt a purchaser’s savings or obscures the real costs of home ownership.

It should be remembered that homes, like automobiles, furniture and fixtures, are consumer goods, which deteriorate and lessen in value with use and changes in design or the environment.

And yet, somehow, the concept that a home is an investment prevails, causing distress to home owners who are faced with the need to meet ever-increasing bills for home repair, or who suffer accelerated home destruction caused by wear and tear.

Flaws in ready-built homes can be detected without difficulty by an expert architect or builder, either of whom should be called in an advisory capacity by the buyer.

A planned “dream house” may turn out to be a financial nightmare if major construction flaws will later appear.

The ridiculous failure of the subprime mortgage debt financing in the United States is due, in part, to the hasty decision to own a home. Trillions worth of home mortgage plans were foreclosed due to the hidden costs of the “pay as you go” home purchase plan.


Published in the Sun.Star Cebu newspaper on July 14, 2010.

SMEs to have bigger role in outsourcing industry

Cesar Tolentino
Industry Analyst and Consultant

WHILE the current Philippine Business Process Outsourcing (BPO) industry is dominated by large players like Accenture, IBM, Aegis PeopleSupport, Convergys, and the like, recent trends have indicated that an increasing number of market niches are being created for SME BPOs. SMEs (small- and medium-sized enterprises) are defined as companies with 500 or less employees.

There were at least 64,600 SMEs in the Philippines as early as 2001, and the number is expected to be much higher by this year. Of these, an estimated 300 or so are in the BPO business based on a survey of BPO directory sites such as Offshore Outsourcing Experts (www.offshorexperts.com). There are currently more than 600 BPOs in the Philippines, covering such business services as voice services (call centers), non-voice services (back-office BPOs such as in Human Resource Management, Accounting and Finance, Purchasing, and Office Administration), software development and IT services, transcription and data migration, animation and game development, and engineering and design.

Interest in SME BPOs rose in the last two years after a local software development firm, Corebuilt Technologies, won the Outstanding Client Application of the Year Award at the e-Services Global Sourcing Conference 2009. Corebuilt Technologies was, in effect, elevated in the same category of business excellence and product/service quality as bigger BPOs such as Accenture and Sencor. Today, other SME BPOs that are establishing niches where larger players used to dominate include such companies as Proview Global (HR outsourcing), Anino Games (game development), Cutting Edge Productions (animation), AccessCall Solutions (call center), Visaya Knoweldge Process Outsourcing (knowledge process outsourcing), Extramind F&A Outsourcing (accounting and finance outsourcing), and Total Transcription Solutions
(transcription).

From a country-level perspective, SMEs account for 99.6 percent of all business establishments, 70 percent of the workforce, and contribute to 32 percent of the economy. Currently, however, SME BPOs are estimated to account for less than a third of all BPOs, less than 20 percent of the workforce, and contribute to less than 20 percent of total BPO revenues in 2009. It can be seen thus, that there is significant room for growth in the BPO industry for more SMEs to enter the market.

Based on the ecosystem of the country-level business environment, it can be projected that the Philippine BPO market has room for at least a thousand more SME players. But like the case with existing SME BPOs like Corebuilt Technologies, success in market entry into the BPO business will have to be as a niche player and not to offer everything under the sun as is the practice of bigger BPO companies like Accenture.

And the opportunities for market entry are substantial, the market demand for BPO services covers a wide array of offerings from salesforce management (via call center services), to financial statement preparations and bookkeeping services (via accounting and finance outsourcing), and to advertising campaign conceptualization, design and execution (via advertising services outsourcing).

And the business proposition for Philippine SMEs to enter the BPO business is pretty much straightforward. Clients in target countries such as the US, Canada and Western Europe who are seeking BPO services are looking for the same quality they will normally find if they source the service locally but at lower contract prices.

And because of the lower costs of living, prevailing salaries (caused by currency exchange rate differences), and real estate costs, service companies in the Philippines have the opportunity to offer the same or similar quality at significant savings to the foreign client. It is estimated that for a typical service such as salesforce management, a Philippine call center can offer at least 20 percent in savings to a US client compared to if the contract had been given to a US service provider.

These savings are critical to most US companies, even among US SME businesses, as the US economy struggles to recover from the effects of the 2008 financial crisis. In spite of prevailing sentiment among the US population that outsourcing and offshoring to countries such as India and the Philippines will be detrimental to the welfare of the US workforce, US companies will be hard-pressed to maintain their business while significantly reducing their operating costs.

And in that context, outsourcing and offshoring practices (while hopefully retaining as much of their workforce as is financially viable) will be inevitable realities of any business in the coming years. This thus, presents an indisputable opportunity to Philippine SMEs – that an ever growing number of US companies will be looking for a wider array of services from other countries.


Published in the Sun.Star Cebu newspaper on July 16, 2010.

Investor sentiment in Phils. up in Q2: survey

ING, the global financial services group, has released data from its quarterly ING Investor Dashboard Survey that shows a major 18-percentage point increase in investor sentiment in the Philippines at 157 in the second quarter of 2010 from 139 in the first quarter.

Hitting its highest point since the fourth quarter of 2007, the Philippines nearly reaches very optimistic territory, signalling that investors are confident in the market.

The ING Investor Dashboard Sentiment Index for the Philippines ranks substantially above the overall pan-Asia (ex-Japan) ING Investor Dashboard Sentiment Index, which falls to 136 for Q2 2010 from 145 for Q1 2010.

Despite the drop, investor confidence continues to remain in the optimistic territory for the fifth consecutive quarter and the Index registers an 86-percent increase from the financial crisis low of 73 for Q4 2008.

The Philippines has been experiencing growth in investor confidence since Q4 2009, a trend that continued in Q2 2010, even as global recovery slows down.

“The fact that average daily turnover in stock market is higher 31 percent from a year earlier and mostly driven by local activity is affirmative of investors’ combined optimism on the economy and prospects of a new government,” says PJ Garcia, head and chief investment officer of ING Investment Management Philippines.

“Foreign investors have also been supportive of the local market after pumping in a net inflow of US$377 million to date.”

The rise in the Philippines’ GDP growth forecast this year from 3.6 percent to six percent in June on back of strong consumption may lead Philippine investors to be increasingly optimistic about the country’s economic situation in both Q2 2010 and Q3 2010.

The uptake in investor confidence was also spurred by improvements in key indicators such as the view on the stock exchange in the next three months, as well as return on investment (ROI) and personal and household financial situations.

Highlights of the Quarterly ING Investor Dashboard Survey

• The Philippine index is in the optimistic zone for the fourth consecutive quarter, hitting an all-time high of 157 in Q2 2010
from 139 in Q1 2010.

• The Philippines ranks as the second strongest driver of Pan-Asia (ex-Japan) sentiment and registered the greatest degree
of positive change in overall investor sentiment.

• Most Asia markets (ex-Japan) are more pessimistic in Q2 2010 than Q1 2010 in terms of local property price. The
Philippines is an exception, with the greatest increase in optimism towards property prices.

• Philippine investors see an increasing positive impact from U.S. economy on their investment decisions in Q2 2010; investors from other markets see otherwise.

• The Philippine Stock Exchange Index (PSEI) rose by 12 percent in Q2 2010, likely driving Philippines investors to increase their positive outlook towards both the stock exchange and the high risk/ high return investment sector in the next
three months.

• 75 percent of local investors believe that the new administration can promote a stable investment climate in the Philippines. (PR)


Published in the Sun.Star Cebu newspaper on July 16, 2010.

Group outlines tasks needed for RP to become medical tourism destination


TRANSPARENCY in medical packages as well as development and implementation of national policies on wellness and medical travel are among the concerns government should prioritize in order for the country to position itself as a leading international health care destination, a business leader said.

“Medical tourism is one of the few bright spots for the country. But more should be done for the country to develop its potential as an international health care destination,” said European Chamber of Commerce of the Philippines executive vice-president Henry Schumacher in his recent visit to Cebu.

Tourism, including medical and retirement tourism, was one of the industries touted as part of the seven “big winner” areas in the Philippines. The seven areas are expected to generate about 10 million jobs and $75 billion in foreign direct investments in the country in 2020.

In their recommendations to the Aquino administration, the Joint Foreign Chamber (JFC) highlighted the need for the negotiations on public insurance portability for international medical travel and retirement, promotion of transparency in medical travel packages and development as well as implementation of a national policy on wellness and medical travel.

Travel

They also called on the government to make possible the seamless travel of medical travelers and health professionals as part of exchange programs with overseas hospitals by issuing longer medical tourism visas for patients and their companions and streamlining procedures.

Schumacher said these concerns should be addressed for the country to compete with long-established medical tourism areas in Asia like Thailand, Malaysia, Singapore and Hong Kong.

Medical tourism involves people traveling to other places to obtain medical, dental and surgical care while enjoying the areas’ other attractions.

Reports said medical tourism in the country continues to grow as the number of overseas patients and clients rose from 60,000 foreign patients in 2007 to about 100,000 in 2008.

Foreign patients prefer medical treatment outside their home countries primarily because of lower costs.

The Department of Tourism (DOT) expects the country to get a $3-billion share of the global medical tourism industry by 2015, with 200,000 foreign patients arriving annually.

“But of course we have to have things in place. Improve transparency, develop standard procedure, enhance English communication skills so we will be able to compete with other countries,” Schumacher said.

He also said the country has the potential to be a retirement destination.

Among the core health care services and treatment identified by the DOT to be in demand among foreigners visiting the Philippines are executive checkups, cardiovascular care, cancer care and stem cell therapy, joint replacement surgery, multi-disciplinary weight management care, eye care and sight restoration, dental care, aesthetic and dermatological surgery, spa wellness treatments and long-term care and retirement.


Published in the Sun.Star Cebu newspaper on July 17, 2010.

Investment hike ‘fueled by hot money’


THE net inflow of registered foreign portfolio investments for the first six months soared 245 percent compared with the same period last year.

The increase was fueled by “hot money” deposits, the Bangko Sentral ng Pilipinas (BSP) reported.

BSP recorded a net inflow of $687 million in hot money, which is credited with the significant rise in investments in time deposits, Philippine Stock Exchange (PSE)-listed securities and government securities.

Hot money describes funds that are quickly moved from one form of investment to another.

Time deposits rose from $1 million in 2009 to $385 million as of the end of June 2010 while PSE-listed securities increased by 27 percent and government securities by 38 percent.

Registered investments increased by 40 percent year-on-year to $4.4 billion.

In June, however, BSP-registered foreign portfolio investment transactions declined $86 million from $178 million a month ago.

BSP said the decrease was caused by concerns on euro-zone problems, the negative economic stance of the United States and China and the government’s budget deficit of P162.1 billion for the first five months of the year. (PR)


Published in the Sun.Star Cebu newspaper on July 19, 2010.

SM Prime allots P6B for 2 malls in Cebu

Written by Miguel R. Camus / Reporter
Sunday, 18 July 2010 19:39

SM Prime Holdings Inc., the country’s largest mall developer and operator, is investing P6 billion in Cebu over the next three years to launch two more malls in the fast-growing Visayan province.

In a chance interview last week, SM Prime president Hans Sy said the listed company is investing P5 billion to build a mall on a 28-hectare lot within the reclaimed 240-hectare South Road Properties (SRP) in Cebu City.

Sy said another P1 billion will be spent to develop an SM shopping center in a five-hectare property in Consolacion, a first-class municipality approximately 12 kilometers north of Cebu City.

Construction works in the two will start this year. The Consolacion mall, the smaller of the two, is expected to be completed by 2011. Sy said earlier that this mall will offer 50,000 square meters (sqm) of gross floor area.

The SRP mall, which will be the developer’s third shopping center in the island, will feature 250,000 sqm of gross floor area. SM Prime made its debut in the island province when its opened SM City Cebu in 1993.

Meanwhile, the P5-billion budget for the SRP mall represents a fourth of the P20 billion the SM Group plans to invest in the area, which is being positioned as a smaller version of its Mall of Asia Complex in Pasay City.

Apart from the shopping center, plans for the SRP complex include a 60,000-sqm convention center as well as hotels and condominium buildings to be constructed under SM Development Corp., the listed middle-income condominium developer of the SM Group.

SMDC president Rogelio Cabuñag said earlier his company has been “invited” to build projects near the SRP mall.

The hotel arm of the SM Group is also bullish on Cebu, with its plan to open within this year the 400-room Radisson Blu Hotel Cebu at the city’s North Reclamation Area near SM City Cebu.

SM Prime plans to be the first company in the Philippines to hold a Real Estate Investment Trust offer. The company is eyeing to raise up to $600 million by spinning off its “mature” mall assets into a separate entity to be listed and traded on the local stock exchange.

SM Prime earlier reported a 10-percent increase in its first-quarter net income to P1.9 billion while revenues grew 15 percent to P5.4 billion.

This year SM Prime plans to spend P12 billion to launch four new malls in the country and one in China. The company expects to have a total of 44 malls by the end of the year, of which 40 will be in the country and four in China.

Sunday, July 11, 2010

CREBA sets international confab in Macau

(The Philippine Star) Updated July 12, 2010 12:00 AM

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Dulalia and Carpio

MANILA, Philippines - The Chamber of Real Estate & Builders’ Associations, Inc. (CREBA) will hold its first international convention in the island-city of Macau on Oct. 25-27 with the theme “Go Global with CREBA.”

Florentino S. Dulalia Jr., CREBA national president, said that for the last 18 years of its 37-year history, CREBA has been holding an annual national convention every October, declared by government as the national housing month. The past conventions had been attended by some 500 industry stakeholders and policy-makers from all over the country.

Cognizant of the pump-priming effects of tourism, housing, infrastructure and real estate construction and development, the chamber has chosen Macau, known as the “Las Vegas of Asia,” as venue of this year’s confab, where a CREBA chapter is set to rise through the efforts of at least 18 Filipino community associations organized by the CREBA International Foundation.

The event will be held with the support of the 11-country Asia-Pacific Council of the International Real Estate Federation, more popularly known for its French acronym, FIABCI.

Dr. Reynaldo A. Carpio, CREBA executive vice-president and chairman of the convention committee, said events will include a major housing fair for overseas Filipinos; sight-seeing and tour of development models which are products of the world’s best practices; and globally-renowned speakers to share new ideas vital in harnessing business opportunities.

CIPC: Bid out smaller SRP lots




Saturday, July 10, 2010 [ sunstar.com.ph ]
By Katlene O. Cacho
THE Cebu Investments and Promotion Center (CIPC) will be proposing to Cebu City Mayor Mike Rama the bidding out of 10 small lots of the South Road Properties (SRP) to interested investors.
The plan came after local investors expressed interest to CIPC to buy smaller lots in the SRP. CIPC is the marketing arm of SRP.
“In the last few months of Mayor Tomas Osmeña’s administration, I told him many have expressed interest in buying small lots in SRP. So, I told him why don’t we test and cut a small area of about 10 lots with lot cuts of 2,000 to 3,000 square meters and have it bid out?” said CIPC managing director Joel Mari Yu in an interview Thursday at the Casino Español.
Location
He told reporters the 10 lots would generate close to P1 billion in revenues as its retail floor price for bidding is pegged at P30,000 per square meter. These small lots, Yu said are located beside the SM properties.
“Investors now may put up commercial buildings in the area. However, they are advised to still follow the development plan of the SRP,” Yu said.
CIPC will still present the plan to Rama and as soon as it is approved, it will be presented to the public right away. “A map will be drawn on where these lots are located and will be shown to the people,” he said.
Aside from offering small lots in SRP, Yu said the CIPC is planning to invite St. Luke’s Medical Center to invest in the SRP.
Offer
“We will find a way to talk with St. Luke’s. We could offer it as a joint venture and even provide the land,” he said. Yu said they also approached some big hospitals in the city but they declined the offer due to insufficient funds.
The St. Luke’s plan, he said will also be presented to Rama.
St. Luke’s Medical Center is one of the country’s top medical facilities in such fields as cardiovascular medicine, neurology and neurosurgery, and cancer treatment.
Among the companies that have invested in SRP are the Bigfoot, SM Prime Holdings Inc. and Filinvest Land Inc.
Published in the Sun.Star Cebu newspaper on July 10, 2010.

3-day special property sale at PREF


(The Philippine Star) Updated July 09, 2010 12:00 AM

MANILA, Philippines - House and lots, condominium units and other real estate properties will be available at special prices and easier terms during the three-day special property sale at the 4th Philippine Realty Estate Festival (PREF) at the World Trade Center in Pasay City from July 29 to 31.

Major real estate companies and related industries, including banks and Pag-ibig Fund are participating in the three-day sale.

All types of developments from socialized, low cost housing, MRBs to high-rise condominiums will be offered at discounted prices from key, reliable and reputable developers.

Among the country’s top developers are San Miguel Properties, Crown Asia, Filinvest, Grand Monaco Homes, Fil-Estate, DMCI, Megaworld, Robinsons Land, Carissa Homes, Camella, Moldex, Cathay Land, Britany Corp, Eton Properties, Crown Asia, Camella Homes, Moldex Realty, Fairways and Blue Water.

Among the banks are BPI, Allied Bank, and Metrobank and PSbank.

The PREF is holding the three-day Special Property Sale to serve as a venue for property buyers to be apprised, gain access and buy quality realty assets at discounted prices, with fund matching support services.

Festival chair Rosemarie Basa said the 4th PREF is the “biggest and most comprehensive” exhibition and forum on the latest trends in real estate and tourism development that will be held in the country this year.

She said real estate and tourism industry leaders and practitioners from the US, Europe, the Philippines and other Asian countries are gathering in Manila to participate in the event.

Tourism heavyweights in the region, such as Thailand, Singapore, Malaysia, and Indonesia will also share some of their best practices and model projects that have helped draw consistently heavy tourist traffic into their urban and rural communities.

The festival theme is “Global Tourism and Real Estate Development – Sunrise Industries for the Philippine Economy.”

Basa said the festival aims to focus national attention on the growth potentials of the tourism industry as another engine of growth for the national economy.

For inquiries, email pref_eventsgmt@yahoo.com or call tel.8192058/8640224 or 09081608387.

Wiping out RP's housing backlog


By Mary Ann Ll. Reyes (The Philippine Star) Updated July 09, 2010 12:00 AM
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Serrano

MANILA, Philippines - Emphasizing the need to create a Department of Housing, the founder and chairman emeritus of one of the country’s most influential trade organizations has also urged whoever will be named government housing czar to work closely with the private sector and to have a firm resolve to address the country’s burgeoning housing problem.

In an interview with The STAR, lawyer Manuel Serrano of the Chamber of Real Estate and Builders Associations (CREBA) emphasized that the mistake of all previous administrations is that there has been no firm decision to really address the housing dilemma. “And this is the reason why government does not have the funds to solve the housing backlog, especially mass housing,” he said.

Serrano, who is also the founder and chairman of Business Against Graft and Corruption (BAGCOR) and the Subdivision Owners Association of the Philippines (now Social Housing Developers Association or SHDA), said the country currently has a housing shortage of about seven million units.

“There should be around 500,000 units being built every year but what is actually being built is just 30,000 per year. If we consider that the number of households is increasing by about 250,000 to 280,000 families each year, not only are we not addressing the annual requirement, we are also not solving the backlog which is growing and growing,” he pointed out.

Widely acknowledged as the real estate guru given his 48 years experience in all aspects of real estate (starting with his first project in 1962 – Better Living Subdivision in Parañaque), Serrano noted that government may not realize it but the real estate sector is the major economic pump-primer and could take the country out of the economic rut it is currently immersed in.

He explained that for every P1 investment in the real estate sector, the multiplier effect is 17 times in terms of other investments. “The housing industry is interrelated to 60 other industries. And that is why in case of any economic aberration, governments trigger housing first. The Philippines has not exploited the multiplier of the housing sector. It is the most labor and capital intensive industry,” he said.

Serrano stressed that the creation of a Department of Housing would give the sector the much-needed importance and focus that it deserves. At present, there is the Housing and Urban Development Coordinating Council (HUDCC) which oversees five agencies, namely Pag-IBIG, the Home Guarantee Corp, the National Home Mortgage Finance Corp., the National Housing Authority, and the Housing and Land Use Regulatory Board.

He said that almost every year, there is a housing bill being proposed and passed at the House of Representatives, but blocked in the Senate.

Serrano said the HUDCC should be elevated to a Department of Housing to ensure a speedier and more effective resolution of homelessness and squatting.

About three years ago, CREBA suggested the creation of an OFW Mutual Fund to finance the construction of mass housing.

A study conducted by the Asian Development Bank (ADB) then showed that while around $17 billion is being remitted annually, the same amount is retained by these OFWs.

The fund gives these OFWs a mechanism whereby they can invest these money, by way of savings and investment bonds. The interest income is immediately given to the investors while the principal will be utilized by government for mass housing. Unfortunately, the HUDCC did not agree to the suggestion.

The CREBA-OFW Mutual Fund, he said, will encourage the inflow of excess OFW foreign exchange earnings into the country and channel the same for housing, infrastructure development, debt-servicing, and other vital projects, which may eventually put an end to foreign borrowing.

In 2008, HUDCC said the proposal for the issuance of Retail Treasury Bonds for OFWs and the establishment of a housing-oriented mutual fund for OFWs, while laudable, may compete and not complement the existing programs of the key shelter agencies.

But Bangko Sentral ng Pilipinas (BSP) deputy governor Diwa Guinigundo said CREBA’s proposal deserves support especially since it is aligned with the BSP’s advocacy program to promote savings and investments for OFWs and their households. “It is through investment vehicles like this that we can encourage the flow of remittances into productive endeavors such as infrastructure and housing,” he said.

Guinigundo, in a letter to HUDCC secretary general Lucille Ortile, said he does not believe that the proposal to establish a housing mutual funds dedicated to the needs of OFWs would compete with government’s efforts to provide public housing.

“Instead, the synergy between the efforts of the public and private sectors to address the large backlog in low and medium-cost housing would have significant positive economic and social ramifications that would support broad-based and more robust economic growth and development. We believe that it is actually an opportune time for overseas Filipinos to direct their savings to meaningful endeavors. These gives them the opportunity to optimize the returns on their investments of their hard-earned savings,” he added.

Serrano also suggested the restoration of the Unified Home Lending Program, which pools the housing programs of the various government financial institutions into one fund. “The program had its flaws and it was not properly implemented. But we gave government the solution to the problem, by adopting the contract to sell throughout the contract term instead of the mortgage origination approach,” he said.

He pointed out that funding should be there, not for the developers, but for the buyers.

Serrano meanwhile pushed for an enhanced securitization program under a Centralized Homebuyer Financing Program, designed to ensure the sustainability of the National Shelter Program by permanently linking the primary and secondary capital markets for housing in a continuing process of fund generation, home lending, and fund recycling.

Another suggestion raised by the CREBA founder is to give the HLURB expanded powers. “Ejectment and questions involving right of way and easements should be under the HLURB and not the regular courts,” he explained.

During the interview, Serrano likewise proposed that the conversion powers of the Department of Agrarian Reform (DAR) be limited to awarded lands. “Right now, under the CARP law, there is the presumption that all lands are agricultural lands and therefore, before any land can be converted to non-agricultural uses, it has to be approved by DAR. Local government units should be given the power to decide the best use for non-agricultural lands. Food security and housing are equally important and should be balanced,” he said.

This jurisdictional issue, he stressed, impedes housing and other non-agricultural development activities and causes the unabated spiral of land prices and development costs.

CREBA is pursuing the promulgation of an executive order or enactment of a law that will place beyond DAR’s authority all lands zoned by LGUs for non-agricultural uses pursuant to RA 7160, all urban lands as defined in RA 7279, and all private “striplands” along national and provincial roads set aside for human settlement under PD 399.

Also pending before the Supreme Court are cases he filed on behalf of the CREBA and the industry, including those calling for the annulment of the creditable withholding tax for every sale of real property, the repeal of the two percent minimum corporate income tax to spare firms that incur losses, and the annulment of the Energy Regulatory Board requirement for developers to advance the cost of installing lines by the Manila Electric Co. (Meralco).

Thursday, July 8, 2010

Market Cebu as ‘English hub’


THE positioning of Cebu as a prime destination for English learning will not only help produce English-proficient Cebuanos but spur economic activities in the island, organizers of an international Tesol (Teaching English to Speakers of Other Languages) conference said yesterday.

Cebu Hub of English Language Excellence (Chele) vice president Roy Lotzof said this strategy will also attract more international students to study in Cebu and at the same time provide a venue to improve the proficiency of Cebuanos, as demand for workers keeps rising in call centers and related outsourced service providers.

Chele oversees the international students’ well-being and safety while studying in Cebu. It accredits professional service providers and provides a list of professional language providers.

Promoting Cebu as a global English learning hub, Lotzof added, will open job opportunities and increase spending and investments in the city.

Chele and the Asian EFL (English as a Foreign Language) Journal yesterday announced it will host the 1st Cebu International Tesol Conference on Aug. 12-15 at the Cebu International Convention Center, Cebu Doctors’ University-Mandaue Campus and Benedicto College.

Lotzof said the conference will showcase Cebu Province and allow international experts to examine how Cebu can better its English proficiency. The activity also aims to establish links between schools and universities.

“This activity will also help determine and develop the teaching structure of the English language based on the requirements of international students,” Lotzof said in a press conference at the City Sports Club.

The conference, dubbed as “The English Language: The Power to Connect,” will bring together international and national speakers and has so far attracted abstracts from over 100 educators nationwide.

Tesol-Asia president Paul Robertson said if Cebu establishes itself as a global hub for English learning, it would be easy for the island to cater to more international students not only from Korea, but also the Middle East, Japan, China and Taiwan.

“The country would then be the biggest supplier of English teachers in the world in the next five years, if its language skills will be enhanced,” Robertson said.

Among the topics the conference will cover are second language acquisition theories, teaching English to international students, professional issues on educational standards, alternative approaches and latest trends in teaching English as a Second Language (ESL) and English for Specific Purposes (ESP).

This year’s conference expects to draw at least 1,000 delegates from the academe and professional organizations. The event is supported by Cebu’s business organizations, the Cebu City and Provincial Governments and the One Cebu Festival organizers.


Published in the Sun.Star Cebu newspaper on July 7, 2010.

New councilor proposes ‘shelter framework’ plan


TO ADDRESS the increasing number of urban poor dwellers, a local legislator wants to pass legislation creating a shelter framework plan for Cebu City.

Councilor Alvin Dizon, a former nongovernment organization head, said the plan will define the goals, objectives, and the implementation in addressing the housing and land problem of the homeless and the city’s poor.

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Dizon said the City has yet to develop a strategy or framework that seeks to solve the housing problem of the urban poor.

“I will try my best that housing for the urban poor will be given a paramount priority and attention in the council because I am the representative of the urban poor in the council,” he said.

In 2006, there were 58,000 urban poor families registered in the city, 38,000 of whom availed themselves of the housing programs of the City and the National Government.

Bigger

“And this (the number of squatters) has increased today and we now have a bigger problem, that’s why we need a shelter plan,” Dizon said.

The councilor said he will include in the shelter plan a clear guideline for the purchase and development of relocation sites, as well as their development.

Dizon said there are seven relocation sites in the city, including one in Barangays Busay, Pit-os and Budlaan, but these are not well-developed.

“Daghan kaayo ta’g relocation sites dinhi sa atong syudad pero P5 na la’y plite paingon sa langit, wala’y provision of basic facilities, wala’y tubig, kuryente (The locations are so far and these lack water and electricity),” he said.

Development

Dizon said the development of the relocation sites is imperative as a way of solving the problem on housing for the urban poor.

“Mobalik ra gihapon na ang atong urban poor dwellers sa city kung di na ma-develop kay wa’y tubig, wa’y kuryente, wa’y
livelihood components (The urban poor will return to settle in the city center if we can’t develop the relocation sites),” he said.

Dizon assured he will be in constant dialogue with the urban poor to know what laws are needed to strengthen and advance their welfare.


Published in the Sun.Star Cebu newspaper on July 6, 2010.

Ayala to buy more land


BULLISH about Cebu’s real estate industry, Ayala Corp. intends to buy more land to strengthen its presence in the province.

“We will definitely expand,” said Ayala Corp. chairman and chief executive officer Jaime Augusto Zobel de Ayala in a recent visit to Cebu.

“We are putting emphasis on our real estate business by slowly bringing to the province the Ayala Land brands,” Zobel said, citing the high-rise commercial building and residential projects Avida Towers and eBloc 2, which were launched earlier this year.

“Let’s see where else we can find potential areas in Cebu,” he said.

Zobel was in Cebu to receive the Cebu Chamber of Commerce and Industry’s Grand Chamber Award for Ayala Corp. for its adoption of sustainable development in all its strategies, practices and activities.

Ayala Corp. was the first group of companies to issue a Global Reporting Initiative-compliant Sustainability Report in the Philippines.

Rights offer

Aside from strengthening its real estate presence in Cebu, Zobel said the firm will intensify the operations of its banking arm, Bank of the Philippine Islands (BPI).

Zobel said BPI is looking at expanding the bank’s loan portfolio after its P10-billion stock rights offer.

According to the bank’s disclosure to the Philippine Stock Exchange, BPI conducted the rights issue to grow and strengthen its market-leading businesses and core franchises, and to further solidify its industry-leading capital adequacy and financial strength.

BPI said it hopes to increase loans and other credit products.

“We will be putting more weight on loans to consumers and small businesses,” he said.

Capital base

He said BPI’s stock rights offer, while mainly to strengthen its capital base, is also a sign of the firm’s belief that business activities in the sector will continue to expand.

BPI has appointed J.P Morgan (S.E.A) Ltd. to manage the stock rights offer.

BPI reported a net income of P2.7 billion in the first quarter of the year, down from P2.8 billion a year earlier.

Its total asset base, however, grew by eight percent to P695 billion as deposits expanded by eight percent to P558 billion, mainly from low-cost peso deposits.


Published in the Sun.Star Cebu newspaper on July 6, 2010.

PLDT launches campaign to develop entrepreneurs

PLDT-SME Nation will further serve the small and medium enterprise (SME) sector through the “Bossing Ako” campaign that aims to encourage more Filipinos to become entrepreneurs.

It also seeks to inspire Filipino small-to-medium-scale entrepreneurs to continue striving for success and meet the challenges of growing their business.

“The Philippines needs more entrepreneurs in order to ensure our economic future. Today, about 90 percent of income in the Philippine economy is generated by SMEs. As we move forward into the 21st century, we’ll need more SMEs to provide more jobs, more income and more purchasing power,” said Kat Luna-Abelarde, vice president and head of PLDT-SME Nation.

The nationwide campaign kicked off with the launch of the song “Para sa mga Bossing” by Rico Blanco, collaborating with Journey lead vocalist Arnel Pineda.

A parallel effort focuses on icons of Pinoy entrepreneurship, telling their success stories to inspire SMEs.

These “Pinoy Bossing” include Lily Monteverde of Regal Films, Jay Aldeguer of Island Souvenirs, founding trustee Joey Concep-cion of Go Negosyo and PLDT Chairman Manny V. Pangilinan.

Great examples

lso representing the “Bossing Ako” movement are Les Reyes of Reyes HairCutters, Gardy Cruz of Pancit Malabon Express, Raphael and Jenni Soon of North Park, Ronald Pineda of Folded & Hung, Benjamin Liuson of The Generics Pharmacy, Darius and Carlos Hizon of Pampanga’s Best, Louie and Dulzi Gutierrez of Silverworks and Vicki and Cristalle Belo.

“The entrepreneurs we tapped for this campaign are all great examples of SMEs that others could look up to for inspiration.

The selection is both diverse and of top-notch quality, representing various industries,” said PLDT-SME Nation marketing head Amil Azurin.

In October, PLDT-SME Nation and Go Negosyo will host the MVP Bossing Ako Awards Night.

The awards will recognize the achievements of various entrepreneurs nationwide.

“At a time of great challenges for our country, we aim to promote entrepreneurship by showing the inspiring stories of SME owners nationwide,” said PLDT SME Nation Internet category head Christian Lim. (PR)


Published in the Sun.Star Cebu newspaper on July 7, 2010.

Wednesday, July 7, 2010

'Increase VAT but cut income tax'


TO IMPROVE revenue generation in the country, a former government official has voiced her support for an increase in the value-added tax (VAT) rate from 12 percent to 15 percent, an increase in sin tax collection, and an improvement in the business climate to attract more investors.

"I'm for an increase in the VAT (rate to 15 percent), as long as income taxes are reduced," said Solita Monsod, a former director of the National Economic and Development Authority, during the 14th National Press Forum held last June 24 at Diamond Hotel in Manila.

She said it was better to tax consumption, which is what the VAT does, than to tax earnings, which is what the income tax does, because the rate of avoidance of income taxes by non-wage earners is high and it is easier to monitor consumption.

In 1996, due to tax avoidance, the effective tax collection rate for those earning P500,000 a year and below was 29 percent, but for those earning more than P500,000 a year, it was four percent, she said.

A 'crime'

As for sin taxes, which refer to the taxes on alcohol and tobacco products, Monsod said, "It's a crime how small our sin taxes are."

She said the taxes on cigarettes should be raised.

"Any high tax will stop the young from starting (to smoke). The old are hopeless cases, so tax them, so revenues will go up," she said.

Monsod, a professor at the University of the Philippines School of Economics, said the House of Representatives and the Senate had passed good bills, but a "poison pill provision" was inserted at the bicameral conference, so that the 1996 prices of cigarettes were made the basis for the sin taxes, "except for the newcomers."

The country could also increase tax collection if it had more businesses to tax, but in 2009, the Philippines received only $300 million in net foreign direct investments (FDI).

Partly to blame for this low investment, she said, was the high cost of doing business in the Philippines due to corruption.
A reduction in corruption would not only lead to lower costs of doing business, it would also lead to better quality of infrastructure, which is what businessmen like, she said.

It has been said that contractors use substandard materials on government projects to contain their costs, as they also had to spend on bribes to government officials.

Corruption

Corruption also drains the government coffers, she said, when "we undertake projects that are not necessary at all because maganda ang kita (the money is good for corrupt officials)."

Asked how the country could get more FDI, she said: "If investors see that there's really a change for the better, you'll be surprised to see that investment will come in."

Monsod said things aren't all bad for the Philippines.

It is no longer the basket case of Asia, but it still has a lot of work and catching up to do.

The economy grew faster during the Arroyo administration than other administrations, but poverty is still around.

From 2001 to the first half of 2009, the gross domestic product (GDP), which refers to the amount of goods and services produced by a country, grew an average of 5.2 percent a year, compared to four percent during the Aquino years, 3.8 percent during the Ramos years and 2.9 percent during the Estrada years, she said.

Poverty incidence was 30.1 percent in 1991 under Corazon Aquino, 20.5 percent in 1997 under Fidel V. Ramos, 22.3 percent in 2000 under Joseph Estrada, and 22.1 percent in 2006 under Gloria Arroyo.

But while the Philippines boasted of economic growth of 7.3 percent in the first quarter of this year, its neighbors Singapore and Thailand did much better, growing at 15 percent and 12 percent respectively, in the same period.

Monsod said that in 1965, the income of the average Filipino was 10 percent more than that of the average Thai. But in 2008, the average Thai earned 2.19 times more than the average Filipino.

This developed, she said, after Thailand's GDP grew much faster than that of the Philippines, coupled with the Thai population growing slower than that of the Philippines.

According to the Asian Development Bank, the Philippines and Thailand had about the same population in 1970, with 36.6
million for the Philippines and 35.7 million for Thailand.

But United Nations Children's Fund statistics show that by 2008, with a better population management program, Thailand had 67.4 million people, while the Philippines had 90.3 million.

Unicef said Thailand's population grew one percent annually from 1990 to 2008. Its GDP per capita grew at an average of three percent yearly during this period.

On the other hand, the Philippine population grew at a faster average of 2.2 percent yearly from 1990-2000, and 1.9 percent yearly from 2000-2008. GDP per capita grew at a slower average of 1.9 percent yearly from 1990-2008.


Published in the Sun.Star Cebu newspaper on July 3, 2010.

Thursday, July 1, 2010

PSE launches REIT in Cebu


TO BOOST investor awareness and local participation in the country’s stock market, the Philippine Stock Exchange (PSE) introduced its latest product, the Real Estate Investment Trust (REIT), to the Cebuano business community last week.

“We have conducted our first roadshow here in Cebu because we see a lot of potential in increasing our investor base.

There are a lot of investable companies here,” said lawyer Val Antonio Suarez, chief executive officer of the PSE, during the GreenTrepreneurship Conference at the Cebu International Convention Center.

REIT is a stock corporation created for the purpose of owning and managing income-generating real estate, such as office buildings, residential condominiums, shopping centers, hotels, warehouses, hospitals, airports and tollways.

Suarez said Cebu is one of the favorable markets for REIT outside of Metro Manila because of its upbeat real estate industry and its booming business process outsourcing industry.

Suarez reported that of the 250 companies listed in the country’s stock exchange, more than 15 percent or 39 firms are real-estate related.

Yearend

“We are targeting at least two big firms for REIT listing before the year ends,” Suarez said on the sidelines of the conference.

He said about 20 firms have expressed interest in REIT listing.

Republic Act 9856 or the REIT Act of 2009 requires REITs to list their shares of stock on the PSE. The REIT distributes 90 percent of its distributable income to investors in the form of regular dividends and receives special tax considerations as an incentive.

“This investment instrument allows investors—especially small or retail investors-to participate in the ownership of one or more income-generating real estate (firms),” he said.

The PSE said property companies with predictable cash flows could form REITs to facilitate the realization of their projected gains ahead of time. This translates to immediate access to fresh capital, which may be plowed back into new projects and investments, redounding to new jobs and bringing economic development.

Ayala Land Inc., SM Development Corp., Robinsons Land Corp. and Megaworld are among the country’s major real estate
development companies that have expressed their intention to organize REITs to avail themselves of the benefits of the law.

PSE reported that there are more than 193 publicly traded REITs in the United States, with assets surpassing $500 billion.

In Australia, listed property trust assets have reached $106 billion, while property trust assets in Singapore are valued at $25 billion.

Published in the Sun.Star Cebu newspaper on July 2, 2010.

Before anything else, fix housing

Written by Marvin A. Tort / Sway
Friday, 02 July 2010 00:11

If Albay Gov. Joey Salceda is to be believed, former Naga City mayor and Ramon Magsaysay awardee Jesse Robredo may soon head the National Housing Authority. If this will be the case, then Robredo will be a good choice. Housing—and squatting—is a major problem not only in Metro Manila but in other urban areas as well, and getting someone like Robredo to help makes plenty of sense.

Vice President Jejomar Binay may want a crack at the problem as well, in the same way that Vice President Noli de Castro was housing czar during the Arroyo administration. One major achievement to his credit is the way he helped in the relocation of squatters along the rail lines in Makati City several years back, while he was still city mayor.

Obviously, there is more to public housing than squatting. Another area that desperately needs government attention is financing for more public- housing projects. Singapore, with its current housing-development model touted to be a great success, reportedly patterned its existing housing- development program after that of the Philippines.

To date, however, while Singapore has managed to build modern residences for its people, the Philippines still has a long way to go in terms of providing decent housing, particularly for the middle-class and the urban poor. To a large extent, project financing has been an issue, considering the government’s fiscal situation.

But to the government’s credit, there are attempts to creatively finance the construction of more dwellings, if only to provide for a credible shelter program. For instance, the National Home Mortgage Finance Corp. (NHMFC) is reportedly looking at issuing P2.2 billion in residential mortgage-backed bonds later this year to raise more money for public housing.

NHMFC uses funds from the Social Security System (SSS) and Pag-IBIG, or the Home Development Mutual Fund, to buy quality residential mortgages from banks, developers and state housing institutions. It then uses these mortgages as a sort of “collateral” for bonds sold to the public. And from the sale of the bonds, funds from the SSS and Pag-IBIG are paid back. Meantime, bond buyers also make a small profit from the “investment.” Everybody wins.

Something similar was actually conceptualized late in the Aquino administration, and implemented early in the Ramos administration, to help finance public-housing development at the infamous Smokey Mountain in Tondo, Manila. As a result, today, what used to be the dump for a mountain of garbage is a bustling harbor development hosting homes and businesses.

However, even a successful urban- development financing program is not without controversy. On June 18 a complaint was filed at the Office of the Ombudsman against then-Vice President Castro and several other officials for trying to find ways to break the 18-year-old legal impasse involving the financing of Smokey Mountain project.

The complaint accused de Castro and other officials of taking part in a “midnight deal” to settle government obligations of around P4.4 billion to the state-run Home Guaranty Corp. (HGC). This settlement or payment by the government, the complainant alleged, would lead to overpayments to the Smokey Mountain project developer, R-II Builders.

But the fact is, as noted in a recent Court of Appeals decision in one of several cases involving the project, CA Associate Justices Noel G. Tijam, Ramon M. Bato Jr. and Antonio L. Villamor all affirmed that R-II Builders is hardly the beneficiary of the P4.4 billion. Most of the money will be used to pay investors or financiers, and only a small fraction will actually go to R-II.

When the Smokey Mountain project was conceptualized in 1992, the government had no money for the project. Thus, the state approved the creation of an asset pool or a special fund—with money sourced from various government financial institutions such as the SSS and Pag-IBIG—to help pay for the project.

Funders were issued certificates to indicate the amount of money they lent to the asset pool or asset fund. The asset pool, in turn, infused a total of P4.1 billion into the project. As a result, 33 temporary buildings were built, and 21 permanent buildings now occupied by over 2,500 families. Also, 79 hectares of land were reclaimed.

Of the P4.4 billion now sought as payment, inclusive of interests, and which was validated by the government itself after three years of audit and verification, P1.2 billion will actually go to the SSS as holder of Smokey Mountain Development certificates, and P3 billion will go to state-run HGC. And with that, project financiers will be fully paid.

R-II Builders, meanwhile, will get only the residual amount of the asset pool, if any is left, in line with development agreement it had signed with the government. And it will receive its share only after all project obligations and liabilities have been settled, and the asset pool finally dissolved.

In his inaugural address on Wednesday, President Aquino asked the public to do its share in helping the government achieve national goals. But how can one expect private business, particularly, to do its part if it cannot be guaranteed fairness and due process in its dealings with the government, as in the case of the Smokey Mountain development project?

The developer has been waiting over 18 years (and five presidents) to get paid for its work, for agreeing to the government challenge to transform a former dump, a national embarrassment, to productive property. But the seeming lack of clarity in the rules of engagement just resulted in a long-running legal dispute with the state, to its financial disadvantage.

But even as the government acknowledges the obligation, and the amount due, and that its own agencies such as the SSS and HGC will benefit from the settlement of the obligation, the hapless developer still cannot collect his due after almost two decades. And attempts to amicably settle the matter has just been held hostage by a graft suit.

With its current financial situation, and its promise of social alleviation, the new government is in dire need of extensive private support and investments, particularly in infrastructure, to help improve the lives of the poor. One can only hope the President can quickly fix the troubled housing sector, and boost investor confidence in new and better ways to finance public housing projects.


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