MIGUEL R. CAMUS
It has been a long wait but Quezon City will soon get its own Central Business District (CBD) akin to those in Makati City and Bonifacio Global City in Taguig City as a 2009 agreement between property giant Ayala Land Inc. (ALI) and state-led National Housing Authority (NHA) covering 29 hectares is set to be implemented this year.
ALI said in a press briefing on Thursday that it plans to start by September the construction of the joint venture—Vertis North—where the builder, company president Antonino Aquino said, is investing a total of P65 billion over 10 years.
Through the NHA, the government is eyeing to gain P11 billion in housing investments through its agreement with ALI. Vertis North is expected to generate about 200,000 jobs, 35,000 of which will be filled up during development of Phase 1.
While positioned to become a new landmark development for ALI, the project also highlights progress in the NHA’s efforts to relocate thousands of informal settlers, whose violent displays of protests in 2010 were blamed for delaying the creation of the CBD.
Areas of the development in the city’s North Triangle area will be ready in three to four years, ALI said, referring to the first phase of Vertis North. ALI is spending P12 billion to finance this phase, which covers the construction of 220,000 square meters of gross floor area for office, retail and hotel developments.
“Quezon City is fast becoming a center of gravity for economic developments as it works to be at par with international business standards,” Aquino said. The city was once the country’s capital until the honor went back to Manila.
ALI’s president said Vertis North will retain a separate and unique identity from Makati City and Bonifacio Global City, both also developed by ALI, and home to some of the largest local and multinational corporations.
“Quezon City has got the largest [land area]. It has the largest number of government offices. That is a differentiation that is going to be unique to Quezon City. It means there will be other types of businesses that will be attracted to Vertis North,” Aquino added.
Vertis North will rise beside the TriNoma shopping center, ALI’s initial foray into the Quezon City commercial segment. It will be located near developments by rival companies such as the country’s biggest shopping mall, SM City North Edsa, owned by the family of billionaire Henry Sy, and the Eton Centris mixed-use complex of taipan Lucio Tan.
The area is also serviced by various transport infrastructure projects through Edsa, Metro Manila’s main highway, and Metro Rail Transit 3 elevated railway.
During Thursday’s briefing, NHA General Manager Chito Cruz said his department is continuing its relocation program with 6,500 families out of 10,000 families having been transferred so far to areas in Rizal and Bulacan provinces. The remainder should be relocated by September, he added.
Friday, 6 July 2012
Mangun on Markets
THE headline read, “Ford to close Philippine assembly plant” and immediately the wailing and moaning started. From that point on came thousands of words analyzing the situation; the why did it happen, the how it could have been prevented, and the effects to the Philippines.
The columnists have been racing to their computers to tell stories of gloom and doom, how this is a major economic event for the country. “It’s a message to the world.” “The closing reflects on our investment environment.” “Ford’s departure proves more reforms are needed.”
My reaction was that Ford’s plant closing was long overdue. My second reaction was that I wondered what happened to the Ford executive who made the terrible decision to come back to PHL in 1999 anyway.
What it proves to the world is something that the world has known for 30 years; American automobile companies have less business savvy than your neighborhood sari-sari store operator.
Ford set the Santa Rosa plant to be a major exporter. Since 2002, Ford exported an average of 8,000 cars a year, about the same number as they sold in the Philippines. Big deal. The average auto plant in Southeast Asia assembles 300,000 a year.
A decision to ship high-end assembled cars out of the PHL was ridiculous. Why do you think Thailand and Malaysia are major auto exporters? Because they are more investor-friendly? Because they have a better work force?
No, they have a little thing called Singapore. If you are going to export heavy goods globally, it is always a good idea to locate near the second busiest seaport in the world; not next to a harbor that has been insignificant for the past 300 years, unless of course you do not care about being profitable.
I am willing to bet that Ford received some generous investment incentives in 1999 to set up shop here. They were probably very happy with the PHL investment environment then.
Ford invested $270 million here. Wow. That is about P12 billion. Can I let you in on a little secret? That P12 billion is about two weeks’ worth of spending by the call centers just on employee salaries. PHL’s outsourcing industry pays salaries of about P250 billion each year.
One columnist lamented that perhaps Ford left because the government will not do anything about high electricity costs. Having helped manage a call-center operation with nearly 2,000 employees, power costs are a major part of the budget and still these companies are profitable.
But what about the 250 Ford employees that lost their jobs? I don’t want to be harsh, but the call centers hire that many people every day…before lunch break.
Some of those 250 will go down the road to another factory and be hired, using the experience and skill they gained at Ford. Others, having received severance pay and holding perhaps more cash at any time in their lives, will open that business they never had the opportunity to do before and make more money than they ever could have at Ford. A few will go back to school and learn new skills, say in computers, and build a new career. Knowing how creative and determined Filipinos can be, one might start a business with a new idea, build it up, and in 10 years be listed on the PSE.
The Ford closing did not have anything to do with constitutional reform, political climate, labor policy, or investment environment. It had to do with Ford’s business model not being successful.
Back in the late 1980s, Laguna was dotted with what we called rubber-shoe factories. Now those are all in China. Guess what? PHL survived without them. And when are the experts going to understand PHL can never be a heavy manufacturing nation? For example, if you build steel mills it helps to have abundant iron ore. Of course, that won’t happen since iron ore must be mined.
Farewell Ford. Good luck.
Tuesday, 3 July 2012
OUTSIDE THE BOX
EVEN if you are not religious, the story in the Bible of Noah and the flood is great and illustrative of our current situation.
God tells Noah there is going to be a huge flood and Noah builds a boat to save his family. And you know exactly what his neighbor’s response was. “I’ve never seen a flood like that. My father never saw a big flood and neither did his father. In fact, there has never been a flood like you are talking about. Floods come and go. No big deal, Noah.”
Noah: “There’s going to be a big flood.”
Remember this fact well. There has never in the history of the world been a financial situation such as we now face. The ancient Roman Empire began its collapse because of currency debasement. But all of the other contemporary civilizations had no major problems.
There have been countless economic booms and busts but these were always temporary. But this time it is different.
Governments have always been able to help economies during down times. If it was a trade imbalance such as the US has with the world, a currency devaluation would be temporarily painful but effective to bring back the balance.
If you own or manage a business, you know exactly how to “stimulate” your business economy. Spend on advertising to increase market share. Do promos to increase customer spending. Cut expenses to save money and raise profit margins. Even if you have to borrow the money to do those things, you know they will pay off in the future.
But you do not borrow to pay the bills if revenues and profits are not going up. You will soon be out of business.
On June 7 I wrote that by June 30 a decision would be made to save the European financial system. No matter all the hard talk, on Friday Spain and Italy told Europe to either give them all the money they wanted or they would default on their debts and collapse the Western banking system. Case closed. The money printing has started.
I also wrote “That June 30 date will also mark the beginning of major price inflation.” And when the European Summit decision was announced, the US dollar fell nearly 2 percent, a huge one-day move. Crude oil had its fourth biggest daily gain on record, up 7 percent. Gold gained 3.5 percent.
Stock markets in Europe rose 5 percent with the New York stock market following with a 2.5-percent increase.
“Stock markets will rally and emerging-market currencies will go to levels not seen since 1997” is what I also said.
Yesterday the PSE traded at an historic high. Yesterday the peso traded below 42 to the US dollar.
The foreign press just called the Philippines a potential “Tiger” economy. That may sound impressive, but if we are going to talk about animal economies, maybe it would be better to describe PHL as a “Hyena” economy.
Tigers hunt down and kill for food. Hyenas feed off the remains of dead animals and the Western economies are dying. There is nothing wrong with that. Hyenas can be healthy and fat without chasing down their food.
There is much confusion why the PSE is going up. Simple. Filipino companies are making a lot of money. Listed firms’ first-quarter profits were up 24 percent over 2011. Outsourcing is booming as Western firms struggle to cut costs to stay alive.
Last week the West decided to take the path of continuing and unstoppable money printing that will only increase the debt problem. The “hyenas” of Southeast Asia will thrive and PHL is the leader of the pack.
Stock markets will continue to boom every time more Western money is released. Non-major currencies will continue to appreciate. Perhaps next year the IMF will ask PHL for $2 billion.
Noah’s neighbors never saw a big flood and the hyenas never ruled the jungle before...until now.
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