Saturday, 16 April 2011
Friday, 15 April 2011
PriceWaterHouseCoopers released the findings of their research in March 2007 determining/estimating the economic standings of our cities after 13 years.
The index of The Worlds Richest Cities by 2020 includes GDPs & estimated Annual Growth of metropolitan areas and not the core cities alone. Extracted from the world ranking of 151 cities these will be the Richest Cities in Southeast Asia by 2020:
*City Urban Area / Country
Est GDP in 2020 in US$ /Est Annual Growth 2005-2020
1. Metro Manila, Philippines
$257 Billion, 5.90%
2. Jakarta, Indonesia
$253 Billion, 6.50%
3. Singapore, Singapore
$218 Billion, 3.60%
4. Bangkok, Thailand
$180 Billion, 4.80%
5. Ho Chi Min City, Vietnam
$98 Billion, 6.50%
6. Hanoi, Vietnam
$73 Billion, 6.60%
7. Bandung, Indonesia
$69 Billion, 6.70%
8. Yangon, Burma
$33 Billion, 4.80%
Thursday, 14 April 2011
OUTSIDE THE BOX
Two recent stories about the Philippines caught my attention the other day. From the Inquirer: “Naia 1 rated among world’s 10 worst airports” and “Philippines tops Googles’ places-to-visit search list.”
As airports go, Ninoy Aquino International Airport (Naia) Terminal 1 is “one of the world’s 10 worst airports and the worst in Asia in 2010.” As a resort destination that people search on Google, “The Philippines ranked on top of a list of ‘resorts’ that people all over the world look for on Google.com” and “The Philippines was the highest-ranked country from Asia.”
What that means, I guess, is that tourists want to come here for the Philippines’ resorts, but hate the airport when they get here.
On the Google list, the Philippines topped; Fiji, South Africa, India, Singapore, the United States, Trinidad and Tobago, Iraq, Canada and Namibia.
On the list of worst airports, the Philippines came in at No. 5, below Charles de Gaulle and Beauvais in Paris, France; Moscow’s Sheremetyevo, and Los Angeles International Airport. The winners were Singapore’s Changi, Incheon in Korea, Hong Kong, Amsterdam’s Schiphol and Munich, Germany’s airport. Is there any reason why the best airports are those frequently used by Filipino tourists and overseas workers?
There is no reason to dispute the Google list, although searching for vacation destinations in Iraq may be a little premature.
As far as airports go, it is not surprising to see Manila’s Terminal 1 on the “worst” list. But then again, personally, I have been in about 50 airports around the world, and I think they are all about the same with good and bad qualities. In Moscow, back in the days of the Soviet Union, instead of a prayer room was an area where you could read free literature about how wonderful the communist state was doing. I flew there from Singapore on the national carrier Aeroflot. The flight was delayed for three hours waiting for the wife of some important Soviet official who was finishing her Singapore shopping spree. So much for the equality of the “worker’s paradise.”
I was intrigued, though, why Manila would rank higher (or lower on the “worst” list) than Los Angeles.
The negative reviews about our airport came from a web site called sleepinginairports.net, which bills itself as “The Guide to Sleeping in Airports,” “For travelers who are really on a budget and are looking for a way to skim a few bucks off their travel expenses, why not consider sleeping in an airport?”
I do not know about you, but looking for and evaluating an airport for its sleeping qualities is just about the last thing I want to do. Sleeping in an airport is what you do when your hotel checkout time is 2 p.m. and the flight leaves at midnight. Or when you have a three-hour layover to change flights at 3 a.m. to get to Manila before dinnertime.
Here are comments from sleepinginairports.net. Paris Charles de Gaulle Airport: “The washrooms were dirty and had a really rank smell.” Moscow Sheremetyevo Airport: “The atmosphere in the terminal building is awful; it’s dark like cave, dirty and small space.” Los Angeles Airport: “I couldn’t relieve myself in the terminal bathroom because the stench was so horrible.” Manila Ninoy Aquino Airport: “Think of a bombed-out ruin and you’ll get some idea. Do not try to sleep in this airport.”
So Naia is the fifth worst airport in the world (and the worst in Asia) if you are too cheap or too broke that you need to sleep in an airport.
This story should have been treated like the joke it is and treated a little less seriously. Naia Terminal 1 is certainly old and a poor gateway to the country. I think that is why Terminal 3 was built. And the comments about the new terminal were positive even from the “sleepers.” “After nearly three months traveling in SE Asia, Terminal 3 was excellent.” “Terminal 3 has so many seats and good Wi-Fi.” “Clean, neat, lots of seats, toilets are clean, security is bored but friendly, and the food places are reasonable.”
But even Terminal 1 is better for sleeping than Paris, Moscow and Los Angeles. That should count for something positive if any one cares.
Something else is interesting about the ‘best’ and ‘worst’
Each of the airports considered “best” are operated by private companies, with responsibility to shareholders and founded with the purpose of making old-fashioned capitalist profits.
Singapore’s Changi Airport is operated by Changi Airport Group, a private for-profit company. Incheon International Airport Corp. (IIAC) operates Incheon International Airport for profit and is going to be privatized and publicly listed. Hong Kong’s Lantau airport is operated by the Airport Authority Hong Kong and intends to be publicly listed soon and currently receives no financial assistance from the government. Flughafen Muenchen GmbH (Munich) is an international private company. Schiphol Group, a private for-profit company operates Amsterdam’s airport.
Los Angeles International is operated by Los Angeles World Airports, which is the airport oversight and operations department for the city of Los Angeles. Moscow airport’s operator, Sheremetyevo International Airport, is a corporation not designed to make a profit. France’s Beauvais is operated by the Chambre de Commerce et d’Industrie de l’Oise, a nonprofit organization. Manila’s Terminal 1 is operated by a government agency, the Manila International Airport Authority, a branch of the Department of Transportation and Communications.
Only Charles de Gaulle Airport is privately operated by publicly listed French company Aéroports de Paris Group.
My personal opinion is that the natural pride of the Filipino (not government operational control), given the right tools and facilities to work with, has allowed Terminal 3 to be highly rated.
“Progressive” liberal thinkers who believe that the government and only the government should determine consumer prices, provide subsidies, manage the food supply, and otherwise control the economy, might do well to provide examples where this economic model ever works.
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Diversifying conglomerate San Miguel Corp., the Lopez group and seven other firms have formalized their intention to join the June auction of the MRT 3 (Metro Rail Transit 3) and LRT 1 (Light Rail Transit Line 1) operation and management (O&M) contract.
A list provided by a BusinessMirror source showed the following entities that submitted written expression of interest before the Special Bids and Awards Committee (SBAC) of the Department of Transportation and Communications (DOTC).
The nine firms are Autre Porte Technique Global Inc.; Miescorrai Inc., First Balfour Inc.; Abratique & Assoc. Phil. Inc.; Strategic Alliance Holdings Inc.; Federal Mgmt & Maintenance Inc.; Optimal Infrastructure Development Inc.; Gracia Y Caridad Ministry Foundation; and PMP Inc.
Optimal Infrastructure is 99.9-percent owned by San Miguel Holdings Corp. SMC president Ramon Ang sits in as chairman of Optimal Infrastructure.
First Balfour Inc., meanwhile, is a Lopez group company. It is a fully owned subsidiary of First Philippine Holdings Corp. It was awarded a contract in 2008 to build the LRT North Extension project together with D.M. Consunji Inc. The company also became part of the consortium of local contractors that won the bid to construct the Tarlac-La Union expressway.
Miescorrail is a subsidiary of Meralco Industrial Engineering Services Corp. or Miescor.
Autre Porte Technique offers complete railway solutions and is touted as one of the fastest-growing railway service provider in the country. It holds office in Makati.
Abratique & Assoc. is a professional civil and traffic engineering firm of consultants specializing in the design, deployment and maintenance of advance traffic control.
Strategic Alliance Holdings is engaged in large infrastructure projects, including Skyway, Star Tollway and automated election in the Autonomous Region of Muslim Mindanao.
Transportation officials expect more entities to submit their written expression of interest before the April 15 deadline. They also raised the possibility of extending the deadline but the committee has yet to decide on this.
The agency recently published an invitation to submit expression of interest and to apply for eligibility to bid for the four-year O&M contract of services for the operation and maintenance of LRT line 1 and MRT line 3 systems, extendable by one year.
The procurement of the required services shall be conducted through open competitive bidding procedures provided for by Republic Act 9184, otherwise known as the Government Procurement Reform Act, and its Implementing Rules and Regulations.
In order to qualify, prospective bidders should have completed a similar single contract with a value of at least 50 percent of the approved budget for the contract (ABC) and should meet all other minimum eligibility requirements stated in the eligibility documents.
Any firm or entity interested in the project must submit a formal expression of interest not later than April 15, accompanied by payment of a norefundable fee of P10,000.
Only those that have duly submitted their respective formal expressions of interest and paid the required fee on time will be issued eligibility documents by the committee.
The DOTC will also issue tender documents to entities found eligible to participate in the tender stage.
The schedule of submission of eligibility applications and tender documents shall be provided by the agency later to those which have submitted formal expressions of interests.
Whoever wins in the auction will have the right to expand and operate the LRT line 1 and MRT 3. This approach is geared towards achieving an integrated LRT 1/MRT 3 privatization.
But the Pangilinan-led Metro Pacific Investments Corp. (MPIC), which is expected to bid for the O&M contract, cautioned the government on this plan. “A structure that offers for bidding the expansion of LRT 1 but awards the O&M of LRT 1 and MRT 3 to the winning bidder of such expansion gives little value to the MRT 3 business and potential. This approach is neither beneficial to the government nor to the private shareholders of MRT 3,” said MPIC in its proposal sent to the DOTC in January.
The local flagship of the First Pacific Co. Ltd. seeks to double the railway system’s capacity by infusing $300 million. Separately, MPIC wants to gain control of the railway, which services the high-traffic Edsa highway by buying out government’s interest in MRT 3 for $1.1 billion.
It added that it would be difficult for any new investor to bid for the expansion of LRT 1 should they be made liable for the $1.1-billion MRT 3 equity value buyout (EVB) cost; assume LRTA’s existing debt of over $1.4 billion; and buyout Metro Rail Transit Corp.’s existing expansion rights valued at over $150 million. “These obligations aggregate $2.65 billion before any new investments for rehabilitation and expansion for all three systems are expended,” stressed MPIC.
Should government insists on this approach, the winning bidder will also be forced to set the initial average fare at no less than P60 per trip for MRT 3 alone, said MPIC. “The government assuming the cost of servicing $2.65 billion in existing obligations doers not, in our view, constitute a prudent or wise decision,” it added.
MPIC said it has not received any formal reply from the DOTC about the proposal.
Early this week, MPIC said it was still uncertain whether to participate or not in the planned auction. But it stressed that it has not withdrawn its proposal.
Wednesday, 13 April 2011
Tuesday, 12 April 2011
Bernardo M Villegas
MANILA, Philippines -- It is well known that consumer-oriented multinational companies like Coca-Cola, Nestlé and McDonalds are enjoying their highest sales growth in the emerging markets like China, India, Brazil, Indonesia, the Philippines and Vietnam. These firms, however, cannot be complacent that this bonanza will continue if nothing is done to counter the creeping contraceptive mentality with which the developed countries are infecting the developing nations, thanks to aggressive campaigns of the likes of U.S. Secretary Hilary Clinton to propagate “reproductive health” rights.
Demographic constraints in the rising economies that are expected to fuel future global growth are more serious and intractable than generally recognized. The multinational companies marketing consumer goods (both durable and non-durable) cannot be complacent about their presently booming markets in the developing countries. The marketing boom may be short-lived if nothing is done to arrest the fertility declines that are coming too prematurely in the emerging markets. As Nicholas Eberstadt comments: "Close to half of the world's population now lives in countries with fertility rates below the replacement level, which, as a rough rule of thumb, is 2.1 births per woman. In these states – absent steady compensatory immigration – current child-bearing patterns will lead to an eventual and indefinite depopulation. Almost all of the world's developed countries have sub-replacement fertility, with overall birthrates more than 20 percent below the level required for long-term population stability. But developed countries account for less than a fifth of the world's population, the great majority of the world's populations with sub-replacement fertility in fact reside in low-income societies."
Fortunately, when human beings are concerned, there are no irreversible trends. No matter how difficult the challenge may be, the threat of shrinking youth markets can be addressed with purposeful policy from all sectors of society: the State, the business sector, civil society and moral leaders. As Eberstadt concludes, "Left unattended the global demographic trends outlined above suggest serious and gradually mounting pressures on global economic development and may lead to downward revisions of worldwide material expectations. But feasible options do exist to alleviate some of these pressures – and to capitalize on new demographic opportunities that may arise. Addressing these new demographic challenges will require deliberate, concerted, and sustained efforts." Among his recommendations are augmenting human capital by expanding education, improving health conditions, and creating an economic environment in which greater returns can be generated by the world's human resources. These solutions can address the important problem of labor shortages brought about by the demographic winter. They, however, do not address the problem of shrinking markets, especially the very important youth markets that are crucial to the largest businesses of the world such as those in food and beverage, fashion goods, leisure and entertainment, home appliances, automobiles, etc. There must be some way of addressing the root problem of "the empty cradle," the very low fertility rate.
In this regard, some insights were provided by a leading official of the International Right to Life Federation, former Philippine Senator Francisco Tatad. In an international conference held in Ottawa, Ontario, Canada last October 28-29, 2010, he delivered a paper entitled "Building A Global Culture of Life: An Asian Perspective." In that paper, he confirmed the demographic reality also prevailing in the emerging markets of Asia: "By purely human standards, the family and life situation in our region (Asia) is not less wrenching than that obtaining on both sides of the Atlantic and everywhere else. The plague of contraception, sterilization, abortion, homosexuality, broken marriages, pedophilia, etc. – happily we do not yet have to deal with euthanasia – continues to spread, borne on the crest of the moral depravity that threatens to sweep away the civilization which, in Sheed's words, was built by looking at man while listening to God."
Senator Tatad has gone for the jugular. He exposes the roots of the low fertility rate, which is intimately interwoven with lifestyles. There is no escaping the fact that some of the solutions that will have to be applied in reversing the fertility decline have to involve behavioral changes affecting marriages, families, and sexual behavior. Policy makers concerned with the "fertility implosion" cannot avoid confronting these fundamentally moral issues. No amount of financial incentives to have more babies will succeed if women – especially the educated ones – have developed a contraceptive mentality, even to the extent of considering pregnancy a disease. There must be a deep-seated change that should happen in attitudes towards marriage, the family, and the begetting and education of children.
For their long-term survival, companies like Coca-Cola, McDonald's, Unilever, Procter and Gamble, Samsung, Toyota, United Laboratories, Penshoppe, Johnson and Johnson, Alaska Milk Corporation, Nestlé and others that are highly dependent on young consumers must take interest in research and communication efforts related to the long-term sustainability of the youth markets. Even more important than the physical environment, the demographic environment conducive to the continuing profitability of consumer products addressed to the youth must be a concern of the business sector. People in business cannot take for granted that "the empty cradle" is inevitable in the long run.
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OUTSIDE THE BOX
You have heard this story before in this column, yet it so perfectly illustrates my point, that I must tell it again. Many years ago an old man (who was the same age then as I am now!) was employed as our gardener. The years and countless bottles of Tanduay had not treated him kindly. One day he asked me why, as a young man, one Philippine peso would buy one US dollar. When he asked the question, the “price” of a dollar was P20.
A proper explanation would have started with the repricing of the British pound to gold after World War I, progressing through the repricing of the dollar to gold and the US government’s confiscation of all privately held gold prior to World War II and, finally, because of the collapse of the 1945 Bretton Woods Agreement in 1971.
Not wanting to spend the item with the true reasons, I simply told him that it was because the US was rich and the Philippines was poorer. That was a false answer then, and it is a false answer now. But the point of my silly story is that my gardener was no less ignorant and uninformed about the reality of foreign exchange than most government policymakers and pundits.
The reason for this discussion about currency is that I am getting annoyed paying P55 per liter for unleaded gas, and there is no reason for that to be happening if the government took proper measures, because it is all about the currency.
A column in another newspaper recently spoke of the price of crude oil. I was a little startled when I read the statement that crude oil had doubled in the last decade, presenting a shocking unawareness about the price of oil. In May 2001 the average price of crude was $27 per barrel. Currently, crude oil is $125 per barrel, making more than a 350-percent increase in the last decade. Since May 2010 oil went up 78 percent in dollar terms from $70 per barrel.
According to this columnist, in principle, oil prices are always determined by supply and demand. By that reasoning, either demand is up 78 percent in one year, or supply is down by that amount, or a combination of both factors. That is not the least bit true.
As the price of any commodity rises, there is an element of speculative pressure that pushes the price higher. This can be the result of nonmarket- related dynamics, such as the political unrest as we have been seeing in the Middle East. However, oil increased 30 percent in the last six months of 2010, long before the protests erupted.
While the government and many “experts” take the view that high oil prices are inevitable and completely outside the control of policymakers, that is not true. By the same token, the assumption is made that Philippine inflation is also inevitable because of rising oil prices. That, too, is false. There are two solutions using sound currency policy.
The Philippine government has over $60 billion in gross international reserves (GRIs). Our import bill in January 2011 for mineral fuels, lubricants and related materials was about $1 billion.
Rather than trying to subsidize fuel costs for politically expedient sectors like jeepney drivers, the government could create a special peso rate for all oil-related imports. Oil-related import costs could easily and quickly be reduced by 20 percent by allowing importers to purchase dollars at a rate 20-percent cheaper than the peso-dollar market exchange rate. A 20-percent currency subsidy for oil imports based on an average annual cost of $15 billion would cost the government about $3 billion for 2011, taken directly from the international reserves, not from the national budget.
Gasoline would immediately drop to around P45 per liter. Most other consumer prices for those goods that a high transportation cost component would also fall. Instead of companies and consumers spending money for imported oil, those funds could be put to building this economy, creating jobs, and increasing the government’s revenue income.
The boldest solution would be to allow the peso to appreciate against the dollar to 40, a 10-percent increase. The simple announcement by the government that it is intended to allow the peso to strengthen to that target would see a dramatic rise in foreign direct investment, foreign purchases of government debt paper and the stock market, and the immediate repatriation of a tremendous amount of money that Filipinos hold offshore. But what about the overseas Filipino workers and exporters? What would happen to them?
Remittances at the most will be $20 billion this year. Total gross exports will be about $50 billion in 2011, and that does not net out the approximately $15 billion of imported components, like electronics that are assembled and then exported. Outsourcing accounts for about $10 billion coming into the country. Each of these sectors wants a depreciated and cheap peso, which is not good for the country. But they also all need to be protected.
It would cost the government less than $10 billion of the GIRs to give these sectors a special peso-dollar rate at a 10-percent discount to market. And also those sectors would be big winners from the increased purchasing power of using pesos domestically.
Either of these two currency policies would significantly reduce the cost of transportation fuel and electric power, as well as the cost of all other imported goods, dramatically increasing the purchasing power of all Filipinos.
It would be as if the nation received a 10-percent wealth increase while, at the same time, reducing prices.
A gradual implementation of these policy options would not disrupt the economy nor create any inflationary pressure from a sudden infusion of money into the system.
The government is not creating sound economic policies. That silly, ill-conceived fuel subsidy is like sticking a pacifier in a crying baby’s mouth until you can prepare the bottle of formula. Eventually, you have to make the baby’s bottle. Pacifiers will not work and is not a long-term healthy option.
When is the Philippines going to have imaginative, innovative and forward-thinking leadership?
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Monday, 11 April 2011
Marites S. Villamor
CEBU CITY -- SM Prime Holdings broke ground here on Friday over its P20-billion mixed-use complex anchored by a four-level shopping mall as part of its broader strategy to expand in the provinces where more tracts of land are available.
The SM Seaside Complex will feature a P4.5-billion, four-level retail site, claimed to be the largest in the Visayas, and will be about three-fourths the size of the SM Mall of Asia, officials said.
This will be SM’s third mall in Cebu, after the SM City Cebu that opened 17 years ago and the SM Consolacion that is under construction.
Negotiations are ongoing for a fourth, said SM Prime President Hans T. Sy.
Work on the road network within the 30-hectare complex will be undertaken first, followed by the construction of a modern, all-white church.
Construction of the mall, which features a nautilus-inspired design that departs from the box-type design, is targeted to start by the third quarter of this year and will be completed before its target opening date in the second quarter of 2013, Mr. Sy said.
Promised major attractions include a 30-storey structure with a viewing deck for tourists and a possible restaurant and sculpture made of glass and LED lights. The new mall will also have a roof garden, an ice skating rink near the food court, an 18-lane bowling center, an IMAX Theatre and a five-theater Cineplex.
Aside from anchor stores SM Department Store and SM Hypermarket, the mall will also host over 800 food and retail outlets.
Hotels, a convention center, residential buildings and community facilities will also be built. Under study is the construction of a hospital and a school, which would either be the Cebu campus of the Sy-owned National University or a local university.
“Every time we build a new mall, we try to improve ourselves. With this ultra-modern design, we want to attract the new generation -- the young ones,” Mr. Sy told reporters after the launch.
This is in line with SM Prime’s plan rolled out back in 2007 to open new malls and acquire land in Metro Manila and also provincial areas where bagging large tracts was said to be more possible.
The firm recently raised P5 billion from issuing five-year floating rate notes to bankroll such expansions.
The mall developer and operator had said it plans to open a total of three new malls: SM City Masinag in Antipolo City, SM City San Fernando in Pampanga and SM City Olongapo in Zambales.
By the end of the year, SM Prime will have 43 malls nationwide with a gross floor area of 5.2 million square meters, according to earlier reports.
Meanwhile, Mr. Sy said they have increased the budget for SM Consolacion to P1.2 billion from P800 million to accommodate changes in the design and work plan.
SM Prime had planned to reconfigure an existing structure in Consolacion town, about 12 kilometers north of this city, but decided to just demolish the building and build a new one.
A third level has been added to the original two-level design and the gross floor area will now be around 70,000 square meters from the previously planned 57,000 square meters, Mr. Sy said.
“I’m keeping my fingers crossed that this will be finished this year,” he added.
SM Prime shares closed 1.18% higher on Friday from the previous close at P12 apiece.