PH five places up in global competitiveness rank

Its stellar economic performance and improved business efficiency pushed the Philippines five places up a global competitiveness list this year.

The Philippines moved to ranking 38th of 59 countries in the 2013 World Competitiveness Yearbook (WCY) from being 43rd of 59 in the previous list.

This makes the country the 11th most competitive among the Asia-Pacific countries in the WCY, edging out India and Indonesia.

The Philippines posted improvements in three out of the report's four competitiveness measures namely economic performance, government efficiency, business efficiency and infrastructure.

It showed the most progress in economic performance, where it jumped 11 places to 31st from 42nd.

"This is backed by the 6.6 percent real GDP (gross domestic product) growth in 2012, the second highest in WCY," said a statement released by the Asian Institute of Management Policy Center.

The AIM Policy Center in Manila is the local partner of Switzerland-based International Institute for Management Development in releasing the WCY.

The Philippine's ranking in business efficiency meanwhile rose from 26th to 19th, an improvement the report attributed to the "soaring stock market."

In terms of government efficiency, the Philippines' ranking only slightly improved from 32nd to 31st, with the report citing an increase in debt-to-GDP ratio.

The Philippines, however, slid down the rankings in terms of infrastructure, placing 57th from 55th.

"The Philippines has one of the highest improvements in ranking in the region," the statement read.

Neighboring countries have also seen improved competitiveness, with Thailand taking the 27th spot from 30th and Indonesia, 39th from 42nd.

Malaysia slipped in the list, taking the 15th spot from ranking 14th previously. It remained to be among the highest-ranked Southeast Asian countries, however. 

This year's global competitiveness list was topped by the United States, Switzerland, Hong Kong, Sweden and Singapore.

source:  Yahoo

Home > Business > Featured Gallery > Central Luzon new ‘epicenter’ for property investments Central Luzon new ‘epicenter’ for property investments

If you build it, they will come north of Manila.

The convenience of transport made possible by the improved North Luzon Expressway (NLEx), the scenic Subic-Clark-Tarlac Expressway (SCTEx) and the planned expansion of the Clark International Airport (formerly Diosdado Macapagal International Airport) has been largely responsible for jumpstarting property developments and attracting local and foreign investments in Central Luzon northward.

For the past couple of years, local property giants have staked their claims in this wide 21,470-square-kilometer swath of land that encompasses seven provinces (Aurora, Bataan, Bulacan, Nueva Ecija, Pampanga, Tarlac and Zambales). Examples are Ayala Land’s Marquee Residences in Angeles, Pampanga; Robinsons Land’s nine housing developments in Pampanga, Tarlac and select locations in Northern Luzon (Ilocos Norte and Laoag City); and Ayala Land Premier’s Anvaya Cove in Morong, Bataan.

Foreign investors have also been eyeing the Central and Northern Luzon regions, according to property consultant CB Richard Ellis. The firm said investors were particularly focused on the Clark and Subic Freeport Zones, and on strategic locations in the Northern Luzon Urban Beltway (NLUB). In the pipeline for the region are mixed-use developments, an aeropark, a business park, hospitals, leisure tourism estates, condominiums, golf courses, an ecopark, an international school and a shopping arcade.

CBRE’s “The Central Luzon Market” report, furnished to Inquirer Property last week, indicated that the NLUB has been “transforming its landscape into a high potential investment destination” and that this has been “brought about by infrastructure developments that paved way to increased economic activity in Central Luzon as businesses started expanding from Metro Manila to its peripheries.”
 The key project that the region’s development hinges on, according to CBRE, is the Clark International Airport, which was built in 2008 and is up for significant expansion. CIA has been “envisioned to be the primary international gateway of the country, with the Ninoy Aquino International Airport (Naia) already operating at maximum capacity,” said the report.

CBRE added that CIA is expected to increase its passenger capacity to more than 2 million annually. The government is studying the possibility of maintaining the two main airports (CIA and Naia) side by side, or just designating CIA as the country’s main airport.

“Anticipating these developments, investors are now pouring in multiple high-value investments in Clark and Subic Freeport Zones and in other areas of the NLUB,” the report said.

CBRE cited as an example Clark’s upcoming Global Gateway Logistics City, a 177-hectare mixed-use development composed of a logistics park, an aeropark, a business park and a neighborhood town center. Once completed, the development will also feature a 150-bed tertiary hospital, which will be leased, equipped and operated by The Medical City starting this year.

Donggwang Clark Corp., a South Korean firm, has likewise started construction of its 304-hectare leisure tourism estate. Its three-tower condominium complex was turned over in 2012, and the construction of its 36-hole golf course and clubhouse has commenced.

Other projects to be developed within the complex include a water park, spa and gymnasium, ecopark, business center, specialty stores and function rooms, an international school, a golf academy and driving range, a clinic and drugstore, a hotel, casino, a 500-unit villa complex and a shopping arcade.

The rapid property developments have resulted in Central Luzon’s prominent economic standing. The CBRE report said: “Central Luzon is now the third biggest contributor to the national economy with 9.1-percent share of the GDP in 2010. In 2011, the region posted the highest Gross Regional Domestic Product growth in the country at 11.9 percent, higher than the National Capital Region (7.5 percent) and Calabarzon (5.6 percent).”

It added: “The labor pool is one of the region’s core competencies. A total of 56,800 tertiary graduates were recorded in 2012, making it the second largest source of labor next to NCR.”

source:  Philippine Daily Inquirer

Raise regulatory limit, bankers urge BSP

INDUSTRY PLAYERS want the Bangko Sentral ng Pilipinas (BSP) to reconsider a regulatory limit on real estate exposures following a breach last year.

There is room to raise the cap, said Bankers Association of the Philippines (BAP) President Lorenzo V. Tan, to accommodate the property market’s rapid growth without sacrificing prudential standards.

Universal, commercial and thrift banks are required to keep their real estate exposure to only 20% of their total loan portfolio. This was slightly exceeded in 2012 when their exposure was valued at P821.7 billion, 20.9% of banks’ total loans.

"My point is it’s not the quantity but the quality of the portfolio. The limit may be 15% but if the loans are sub-prime we have a bigger problem," Mr. Tan said.

Real estate exposure remains healthy, he pointed out. Vacancy levels and bad loans are down, while future supply can be met by demand. Minimum down payments and mortgage payments are other indicators that can be watched.

"When these exceed acceptable norms, then it is time to impose macroprudential measures to slow down the market," Mr. Tan said.

He warned that it would be dangerous to prematurely curb property market growth given its role in supporting the economy.

"Real estate pulls in 50 industries with it -- glass, aluminum, cement, appliances, architecture [among them] ... You [must] continue [supporting] the sector, it adds to gross domestic product growth," he added.

Metropolitan Bank & Trust Co. research head Ildemarc C. Bautista urged the central bank to raise the cap given a broadened definition of real estate exposure.

The BSP last August tightened its monitoring of real estate lending by setting new rules.

Banks were required to report not just real estate loans but also investments in securities that finance real estate activities such as property acquisition, construction and development as well as buying/selling and rental/management. Banks must also include loans for socialized and low-cost housing developments, which were previously exempted from reportorial requirements.

Counting just real estate loans, banks only extended P703.2 billion in 2012, 17% of total loans.

"The 20% cap refers to real estate loans only while the new reportorial requirements refer to overall real estate exposures. It’s natural therefore to consider a higher cap to account for the expanded coverage," Metrobank’s Mr. Bautista noted.

Central bank Governor Amando M. Tetangco, Jr. has hinted that this could be accommodated to account for the new definition as well as developments in the property market since 1997, when the limit was first introduced.

Industry players said there were no signs of overheating. While property demand is robust, they said it was structural in nature and not speculative.

Overseas remittances and outsourcing revenues continue to boost the economy, creating employment and wealth for more, BDO Unibank, Inc. chief market strategist Jonathan L. Ravelas said. BDO Capital & Investment Corp. President Eduardo V. Francisco added that lower interest rates and longer loan maturities were also making it affordable to purchase homes.

Banks, he pointed out, are better off lending for real estate, rather than offering car financing and credit card services, since "borrowers will do everything to protect their home." Housing loans are also secured by collateral, he noted.

Other consumer loans and credit card receivables proved riskiest for banks last year, with 13.04% and 11.13% of loans non-performing. Only 4.64% of auto loans went bad, while housing loans had the lowest ratio at 4.12%.

The BSP keeps a close watch on the property market since it was ground zero during the 1997 Asian financial crisis and the 2008 global economic crisis.

BSP sees capital flows as threats

Although emerging economies in Asia, including the Philippines, have coped well with capital inflows, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco has reiterated the need to closely monitor the funds surge.

Capital inflows, or money from foreign investors that flows into the local stock market, government securities and other money market instruments, remain to be the biggest threat to the economy, Tetangco  said.

Capital flows are being watched closely.  Tetanco said they  they have the tendency to raise the risks of asset price bubbles and the currency exchange rate which can also potentially undermine financial stability.

Equally important, because capital can just as freely and quickly flow out of the country, such sudden stops and abrupt reversals can threaten the real economy.

Tetangco explained that the surge of capital to emerging market economies is a major consequence of the financial crisis in the United States and the Euro Zone.

The easy monetary policy and risk appetite in advanced countries are “pushing” money out of their markets, and the favorable macroeconomic prospects of and interest rate differential with emerging market economies are “pulling” in the funds.

Analysts say that with the recent credit rating upgrades given by Standard and Poor’s and Fitch Ratings, the rate of capital inflows may increase.

Tetangco said emerging Asian countries have also used macro-prudential and capital account measures to manage capital inflows and contain the build-up of excesses in specific sectors and in the banking system.
They have employed macro-prudential policies as the first line of defense against financial stability risks, especially since the relatively shallower nature of their financial markets means that asset price bubbles could form rather quickly.

But he added that policymakers should also be cautious about the use of macroprudential measures.
“At the BSP, we look at macroprudential measures to help maintain stability in the financial system while we work on the further development of the financial market,” Tetangco said in an article in Emerging Markets, a Euromoney publication distributed during the Asian Development Bank annual meeting.

Tetangco stressed that “the nexus between macro-prudential and monetary policies should be duly considered.”

For example, Tetangco said macro-prudential restrictions on borrowing may affect expenditures in other sectors and, subsequently, economic output.

They may also weaken the transmission of monetary policy by influencing credit supply conditions.

“Monetary policy, in turn, may impinge on financial stability. Policy rates affect the cost of borrowing with subsequent impacts on how market agents decide on leverage and composition of assets and liabilities,” Tetangco said.

“Efficiency dictates that we should have a clear assignment of tools to policy objectives - monetary policy should be focused on ensuring price stability, and macro-prudential tools should be used to manage potential build-up of systemic risks.

In many instances, both policies can be mutually reinforcing, such as when they both lean against the business and financial cycles,” Tetangco explained.

Since 2010, Tetangco said that emerging market economies have been receiving more than a trillion dollars of capital flows a year, with emerging Asia getting about half.

“While the potential benefits of capital flows are well recognized, the size and volatility of these flows create risks to financial stability. They also present challenges to the conduct of monetary policy,” Tetangco said.
In most of the emerging economies, he said the amount of capital exceeds the absorptive capacity.

“Liquidity management becomes a huge hurdle to monetary authorities. Subsequently, there is a risk of build-up of financial imbalances due to rapid credit growth and rising asset prices,” he added.

“The reversal of flows is the other side of this risk.  There is no doubt these may have a destabilizing impact on emerging market economies,” he said.

Tetangco stressed that the BSP has tried to make effective use of monetary policy instruments.
“We were able to reduce policy rates because of the benign inflation environment, and we have rationalized our reserve requirements. In general, Asian currencies have appreciated as a consequence of the flows. Sterilized interventions were mainly to temper volatility of currency movements, although these actions have resulted in rising costs of stabilization. In the case of the peso, the appreciation has been at 9 percent since 2009,” Tetangco said.

Although capital inflows to Asean countries including the Philippines have increased over the past few years, Bank of America Merrill Lynch (BofAML) said that the magnitude and volatility of inflows have not, however, reached previous peaks.

The US-based banking giant even cited the moves done by the Bangko Sentral ng Pilipinas (BSP) which include cutting SDA rates, banning foreign funds in special deposit accounts, and imposing a cap on banks’ non-deliverable forward holdings to temper capital inflows and ease upward pressure on the peso.

“Overall, we see further risk of more FX intervention and macro-prudential measures to contain bubble risks, while capital controls are less likely,” BofAML said.

But the BSP has said that should capital flows reach high point, possibly resulting to disruptions in asset prices and inflation, they are ready to combat these flows.

source:  Malaya

BSP considers changes to real estate financing

The Philippine central bank is considering changes to guidelines for real estate lending to avoid an asset-price bubble in the property market, Governor Amando Tetangco said yesterday,after data showed a rise in activity.
Tetangco said Bangko Sentral ng Pilipinas’s (BSP) monitoring of banks’ exposure to the property market confirmed an increase in activity, although growth in real estate loans remained consistent with overall credit expansion.

Late last year, the central bank asked banks to provide more information on their real estate-related lending and investments. Data suggest that the non-performing real estate loan ratio for banks as a whole continues to be “stable.”

“Despite such front-line indicators, however, the BSP will be studying possible policy adjustments that may be warranted, both on a per institution basis, and across the system as a whole,” Tetangco told Reuters through email.

“We are not yet ready to announce the exact form of such adjustments but we will certainly do so as soon as we firm these up,” he said.

Tetangco also said the central bank was closely monitoring banks’ credit underwriting standards to ensure that “standards have not been sacrificed in order to help real estate developers move their growing inventory.”

At present, banks are allowed to lend only up to 20 percent of their total loan portfolio to the property sector, and the central bank has previously said the ceiling is being reviewed.

Banks’ exposure to the sector reached 561.6 billion pesos ($13.73 billion) at the end of June 2012, up almost 19 percent from a year ago, according to the latest central bank data.

source:  Malaya

Philippine Daily Inquirer Editorial: Investments and Ratings

International credit watchdog Standard & Poor’s Ratings Services affirmed last week the Philippines’ investment-grade status, a month after Fitch Ratings gave it its first investment-grade credit rating. Malacañang spokesperson Edwin Lacierda, Finance Secretary Cesar Purisima and Bangko Sentral ng Pilipinas Governor Amando Tetangco all credited the good governance platform of President Aquino for the upgrade. They said the S&P action would trigger an influx of investments that, in turn, would fuel and sustain the economy’s stellar growth. Will it, really?

The term “investment grade” historically referred to bonds and other debt securities that bank regulators and investors viewed as suitable investment outlets. Now, the term is broadly used to describe issuers like governments or corporations with relatively high levels of credit-worthiness and credit quality.

In its latest ratings action, S&P cited the Philippines’ increased ability to pay its foreign debts, as evidenced by its dollar reserves that currently stand at about $84 billion and are driven largely by remittances from Filipinos overseas, foreign investments in the business process outsourcing sector, and “hot money” (foreign investments mainly in the local stock market). S&P also noted the Philippine government’s declining debt burden, which it attributed to a nearly decade-long effort to improve tax collection. After peaking at 74 percent in 2004, the ratio of the government’s outstanding debt to the country’s gross domestic product declined to about 50 percent by the end of 2012 and is projected to fall further to 47 percent by yearend. “The current and previous administrations improved fiscal flexibility through restraining expenditures, reducing the share of foreign currency debt , deepening domestic capital markets and more recently through modest revenue gains,” S&P said.

But S&P did not say that foreign direct investments would start flowing to the Philippines. What exactly do credit ratings mean? Here is what S&P has to say: Credit ratings are opinions about credit risk. S&P ratings express the agency’s opinion about the ability and willingness of an issuer, in this case the Philippine government, to meet its financial obligations in full and on time. They are just one factor investors may consider in making investment decisions. Credit ratings are not guarantees of credit quality or of future credit risk.

While the forward-looking opinions of rating agencies can be of use to investors and market participants who are making long- or short-term investment and business decisions, S&P pointed out that credit ratings are not a guarantee that an investment will pay out or that it will not default. While investors may use credit ratings in making investment decisions, S&P said, its ratings are not indications of investment merit. In other words, the ratings are not buy, sell, or hold recommendations, or a measure of asset value. They speak to one aspect of an investment decision—credit quality—and, in some cases, may also address what investors can expect to recover in the event of default, it added.

“In evaluating an investment, investors should consider, in addition to credit quality, the current makeup of their portfolios, their investment strategy and time horizon, their tolerance for risk, and an estimation of the security’s relative value in comparison to other securities they might choose. By way of analogy, while reputation for dependability may be an important consideration in buying a car, it is not the sole criterion on which drivers normally base their purchase decisions,” S&P said.

Foreign investors entered the banking sector in the 1990s and the retail sector starting in 2000 when the Philippines was not investment-grade. They also recently entered the mining industry when the Philippines was not investment-grade. They did so because the government allowed them to—by removing restrictions andother barriers that were provided in the Constitution and in laws and regulations.

Purisima said something very significant when he was asked to comment on the S&P upgrade last week. In a TV interview, he said the Aquino administration was preparing measures that would open up certain sectors of the economy to foreign investors, economic activities that would not need time-consuming congressional action to amend the Constitution.

Now that—and not a ratings upgrade—will really excite investors.