Data from the Philippine Statistics Authority (PSA) National Accounts showed that sectoral output, as measured by gross value added, contracted 1.3% to P715.51 billion in 2016 (at constant 2000 prices) from P719.74 billion the previous year. The negative turnout was a reversal of the growth (albeit flat) in 2015 at 0.1% and snapped the sector鈥檚 five years of consecutive growth.

The agriculture subsector, accounting for 82.7% of the total, contracted 0.6% to P587.56 billion. The forestry subsector also declined, decreasing by 10.1% to P3.62 billion. For its part, the fishery subsector shrank 4.3% to P122.96 billion.

In a separate report by the PSA entitled 鈥淧erformance of Philippine Agriculture, October-December 2016,鈥� agricultural output declined by 1.4% for the year, way below the government鈥檚 3-5% growth target for the year. The report attributed the decline to prolonged dry spell and damage caused by typhoons during the year.

鈥淭he devastating effects of typhoons Karen (internationally known as Sarika) and Lawin (Haima) pulled down production in the crops and fisheries subsectors,鈥� the PSA said in its report, adding that these drops offset increases in livestock and poultry.

Crop production, which accounted for around half of total value of farm output in 2016, contracted 3.3%, higher than the 2.0% fall recorded in 2015.

Production of palay (unmilled rice) 鈥� which contributed about a fourth to total value of farm output 鈥� decreased by 2.9% to 17.63 million metric tons (MT), against a 17.91 million MT full-year projection made in November that year.

Corn, which contributed 4% to total value for the entire year, inched down 4% to 7.22 million MT for the entire 2016.

Meanwhile, livestock production, which accounted for 17.9% of the country鈥檚 total farm output value, increased by 4.6% in value terms, 鈥淸e]xcept for goat, all components of the subsector registered output increments,鈥� the PSA report read.

Fisheries yields, which contributed 13.6% for the output total, decreased the most, posting a 4.2% downturn last year.

The draft Philippine Development Plan 2017-2022 released last January showed that the government hopes to prod agriculture growth to 2.5-3.5% annually from 2017 to 2022, after 2013-2015鈥檚 one-percent average. 鈥� Lourdes O. Pilar

Data from the Philippine Statistics Authority showed that the sector鈥檚 gross value added rose by 3.2% to P83.11 billion (in constant 2000 prices) in 2016, a reversal from the 1.5% contraction in 2015.

Nickel, the country鈥檚 top metal product with around a quarter share of the sector鈥檚 total output, plunged by 22.8% to P20.94 billion. The production of chromium also declined 2.9% to P46 million.

The increases seen in other subsectors, however, more than made up for the downtrend in nickel production.

Mining of crude oil, natural gas and condensate, with a 26.3% share of the sector鈥檚 output, grew 10.9% to P21.84 billion, followed by 鈥渙ther鈥� nonmetallic ores 鈥� comprising one-fifth of the total 鈥� which increased production by a whopping 45.4% to P16.76 billion.

Gold mining was also in positive territory, with a 9% growth to P5.51 billion in 2016, albeit slower than the 12% increase that it posted in the previous year. Upticks were also observed in 鈥渙ther鈥� metallic mining (11%), copper mining (6.4%), and stone quarrying, clay, and sandpits (4.3%).

According to the Mines and Geosciences Bureau (MGB), the metal mineral production of the country鈥檚 41 mines dropped by nearly a tenth in 2016 due to 鈥淸p]oor base metal price, a string of mine suspensions鈥� and non-operation due to unfavorable conditions.鈥�

During the year, world prices of gold and silver went up by 17% and 19% respectively while those of copper and nickel declined by 3% and 11%, respectively.

Furthermore, nickel direct shipping ore production volume and value went down by 23% and 41% to 24,652,913 dry metric tons worth P21.77 billion in 2016 from 32,076,948 dry metric tons worth P36.60 billion 2015.

Increases in gold and silver production, MGB noted, were not able to make up for declines in output of copper and nickel.

In its report, the agency likewise said that four of the country鈥檚 28 nickel mines had voluntarily stopped operations while seven others were suspended way before the government environmental audit that began in July 2016. 鈥� Ranier Olson R. Reusora

听

The sector鈥檚 output growth based on gross value added (or GVA, at constant 2000 prices) expanded 7% for the entire 2016, up from the 5.7% recorded in 2015, data from the Philippine Statistics Authority (PSA) showed.

Most of the manufacturing subcomponents registered growth with double-digit increases seen in office, accounting and computing machinery (with a 43% growth), basic metal industries (40.5%), machinery and equipment except electrical (24.9%), transport equipment (24.4%), rubber and plastic products (24.4%); wood, bamboo, cane and rattan articles (18.5%); and electrical machinery and apparatus (12.5%).

Food manufactures, which made up more than a third of manufacturing GVA, grew 8.2% in 2016, an improvement over the 1.6% figure in 2015.

Analysts have long emphasized the importance of manufacturing鈥檚 鈥渟pillover effect鈥� to other industries as a means to achieve sustained and inclusive growth, with the sector said to provide productive jobs to semi-skilled and skilled workers.

As a result, the Department of Trade and Industry expected the sector to grow 8-10% each until the end of the government鈥檚 term, with Trade Secretary Ramon M. Lopez noting that momentum has been building in the sector since 2013.

Last year, factory output growth based on the PSA鈥檚 Monthly Integrated Survey of Selected Industries averaged 11.5%, well-above the 8-10% target.

鈥淭he Philippines is now on the verge of economic transformation; while services [sector] was the main driver of growth in the past decades, manufacturing has been playing an important role and has been contributing substantially to economic growth since 2013. In the third quarter of 2016, manufacturing grew by 6.9%, more than one percentage point higher than the rate posted in the same period in 2015 (5.8%),鈥� Mr. Lopez said in his speech to delegates of the Manufacturing Summit at the Makati Shangri-La in November last year.

Mr. Lopez added that from 2013 onwards, third quarter manufacturing growth was 7.3% outpacing that of services which grew at an average of 6.7%.

Moving forward, Mr. Lopez said that the Trade department will focus on industries where the country is said to have comparative advantage in employment generation with manufacturing being one of the department鈥檚 priority sectors along with agribusiness, information technology-business process management, tourism, and infrastructure and logistics. 鈥� Jochebed B. Gonzales

Philippine Statistics Authority data showed that the sector鈥檚 gross value added (GVA) increased by 9.8% to P271.22 billion in 2016. This was faster than the 5.7% growth rate recorded in 2015 and was the fastest since 2010, when the sector posted 9.91%.

The electricity subsector saw its GVA rise by 10.44% to P235.61 billion last year and accounted for 86.87% of the sector鈥檚 total value.

On the other hand, water companies鈥� output increased 6.1% to P23.92 billion, while the steam industry鈥檚 GVA expanded by 5.4% to P11.69 billion. Water and steam subsectors accounted for 8.8% and 4.3% of the sector鈥檚 aggregate output, respectively.听

Data from the Department of Energy (DoE) show total sales going up 9.4% to 74,153 gigawatt-hours (GWh) in 2016. Total electricity consumption also rose by 10.2% to 90,798 GWh. As of July 2016, households with access to electricity stood at 20.36 million, or 89.6% of the total.

In its 2016 Philippine Power Situation Report, DoE attributed the increase in electricity consumption to the rise in temperature made worse by the El Ni帽o, national and local elections held in May, entry of power generating plants, and increase in demand brought by economic growth.

Power demand-supply remained stable in the first three months of 2016 despite the occurrence of El Ni帽o, the Energy department said in its annual report. However, in April and May, yellow and red alerts were declared in Luzon and the Visayas. In Mindanao, hydro capacities declined.

According to the DoE, El Ni帽o Mitigation Measures and preparation for the May elections stabilized the situation. The DoE said some of the measures were: 鈥渁ctivation of the Interruptible Load Program, ensuring minimal force outages, management of power plant maintenance schedules and optimization of hydro capacities specifically in Mindanao.鈥�

Manila Electric Co., the country鈥檚 largest power distributor, reported a net income of P19.2 billion last year, marginally higher than the P19.1 billion posted in 2015, citing an increase in electricity volume sales and higher financing income. Excluding exceptional items, core net income reached P19.6 billion, higher by 4% compared with P18.9 billion a year earlier due mainly to an 8% increase in electric consumption.

On the other hand, Maynilad Water Services, Inc.鈥檚 core profit fell 26% to P7.2 billion from P9.7 billion, while Manila Water Co., Inc. reported a 2% increase in net income in 2016 to P6.07 billion from P5.96 billion a year ago, with the company maintaining growth in its service connections at 3% as it breached the million mark at 1,008,918 last year. 鈥� Christine Joyce S. Casta帽eda

Philippine Statistics Authority data showed that the sector鈥檚 gross value added, or the contribution of a sector to gross domestic product (GDP), grew 13.7% to P519.70 billion, faster than the previous year鈥檚 11.6%. This is the fastest among other sectors for the year as well as the only one that posted double-digit growth figures.

Leading the charge was public construction, which posted double-digit growth figures for the entire year 鈥� expanding as fast as 38.5% in the first three months of 2016 before tapering into the fourth quarter which recorded a lower albeit still robust 19.2% growth. For the year, it grew by 28%, surpassing 2015鈥檚 25.5%.

The same trend could be seen in private construction, but it nevertheless posted 11.5% growth last year, beating the 7.6% reading in the year before.

On a quarterly basis, public construction has been growing by seven quarters straight (since the second quarter of 2015). This was after the time the government has cut back on infrastructure spending in 2014. On the other hand, private construction鈥檚 growth streak extended to 11 quarters as of 2016.

In terms of its contribution to employment, the sector鈥檚 share to the country鈥檚 total employment is 8.2% with 3.37 million workers said to be employed in the sector during the period. The figure represented a 25% increase as compared to some 2.69 million workers in 2015.

In a report released by the Construction Industry Authority of the Philippines for the year, the robust growth figure in public construction was attributed to an increase in government spending 鈥渁s it fast-tracks implementation of infrastructure projects of the Aquino administration and the Golden Infrastructure projects of the Duterte administration.鈥� Similarly, the increase in demand for high-rise residential and commercial buildings were cited for the growth in private construction.

Looking forward, the sector is said to accelerate further as much hope is placed in the current administration鈥檚 鈥淏uild, Build, Build鈥� program. This year, the government appropriated P847.2 billion (or 5.3% of GDP) in the 2017 National Budget for infrastructure projects.

Under this arrangement, the government will spend some P8 trillion-P9 trillion for the next six years, representing a rise to around 7.4% of GDP in 2022 from the planned 5.3% of GDP this year. The figure is a far cry to previous years when infrastructure spending averaged some 3% of GDP. The government has said that the program will be financed through expansionary fiscal deficits and through the planned tax reform which will increase higher revenue collection efforts. 鈥� Leo Jaymar G. Uy

GROWTH in wholesale and retail trade was sustained last year on strong consumption supported by the increasing presence of online platforms for buying and selling.

According to government data, gross value added in trade and repair of motor vehicles, motorcycles, personal and household goods grew 7.2% year on year, inching up from 2015鈥檚 7.1%.

Accounting for nearly 80% of the total output in the sector, the retail trade sub-group expanded 6.5% last year, 0.4 percentage points higher than the year prior.

Growth in wholesale trade was strong as well albeit decelerating to 9.8% from the 11.2% it recorded in 2015. Meanwhile, the maintenance and repair of motor vehicles, motorcycles, personal and household goods was recorded at 11.3% from 13.1% previously.

Nevertheless, consumption, which accounts for around two-thirds of the country鈥檚 gross domestic product, remained one of the country鈥檚 growth drivers, rising 7% in 2016 from 6.3% in 2015. Remittances from overseas Filipinos, known to support local consumption, grew 5% year on year, the fastest since a 7.2% annualized increase posted in 2014, and beating the central bank鈥檚 forecast of a 4% climb for the year.

Analysts attributed this sustained growth in household consumption to high consumer confidence, modest inflation as well as favorable labor market conditions.

Another factor is the country鈥檚 modest interest rates fueling households鈥� and corporates鈥� propensity to borrow. Central bank data show household credit totaled P780.81 billion in 2016, soaring by 22.5% from the P637.51 billion extended by banks a year ago. Since 2010, consumer loans have been growing by double digits, with the total breaching the P1-trillion mark in 2015 given a surge in borrowings to acquire cars and homes.

Rising consumer credit comes on top of increased lending for corporates, especially now that the government is pursuing an infrastructure push with big-ticket projects on the pipeline. 鈥� Jochebed B. Gonzales

Contributing around 8% to economic output, the industry slackened to a 5.9% growth last year with a gross value added of P615.71 billion from the P581.29 billion posted in 2015.

Growth in communications grew 4.3% to P364.45 billion in 2016, slower than the 7.8% posted in the year prior although the subsector still comprise more than half of the industry鈥檚 gross value added.

Meanwhile, transport and storage kept steady at 8.4% to P251.25 billion.

Broken down, air transport was the top growth driver with 13.6% to P30.45 billion in 2016 although it was a slight slowdown from the 14.9% netted in 2015. Second place was 鈥渟torage and services incidental to transport鈥� which accelerated 8.5% to P68.24 billion from the previous 7.5%.

Growth of land transport was 7.6% (from 7.5%) while that of water transport was 6.2% (from 8.3%).

The sector鈥檚 mixed results was reflected in the performance of its big players.

PLDT, Inc. reported a P27.85-billion consolidated core income in 2016, 20.9% lower than the previous year, due to lower earnings before interest, tax, depreciation and amortization or EBITDA and higher costs from its capital expenditures which was used to fund ongoing expansion in its fixed and mobile businesses. Its recurring core income 鈥� which strips out asset sales, depreciation, one-time provisions, and subsidies 鈥� reached P20.19 billion.

Ayala-led Globe Telecom, Inc., on the other hand, saw its core net income rise by an annual 6.1%, driven by growth in its data-related products and continued uptick in both its mobile and broadband subscribers. However, its net income dipped 3.75% to P15.88 billion in 2016 from the P16.48 billion recorded in 2015 amid a general slowdown in traditional legacy business and non-operating charges related to its acquisition of San Miguel Corp.鈥檚 telecommunications assets.听

Meanwhile, PAL Holdings, Inc., the listed operator of Philippine Airlines saw total revenues and the number of passengers increase 7.1% and 12.2% in 2016, respectively.

Its profit during the period was down 38.8% to P3.59 billion from 2015鈥檚 P5.87 billion on account of rising operating expenses.

On the other hand, the country鈥檚 auto sales grew 24.6% last year, sustaining a run of double-digit growth for the industry.

Data jointly released by the Chamber of Automotive Manufacturers of the Philippines, Inc. and Truck Manufacturers Association showed that member companies sold a total of 359,572 units last year, up from the 288,609 units recorded in 2015. The two groups surpassed their 2015 sales total last October and beat the groups鈥� 2016 target of 329,300 units by 12.4%.

Broadcasting companies also saw earnings up last year on account of election-related advertisements. ABS-CBN Corp.鈥檚 net income was recorded at P3.52 billion for the year, up 38.5% from the previous year while that of GMA Network, Inc. rose 71.5% to P3.65 billion. 鈥� Arianne Kristel R. Pelagio

Data from the Philippine Statistics Authority showed that the gross value added (GVA) of the financial intermediation sector increased by 7.6% to P588.17 billion last year, outpacing the 6.06% growth in 2015.

Among the subsectors, banking institutions 鈥� which accounted for a chunk of the sector鈥檚 total output at 45.4% 鈥� posted the highest improvement in GVA at 9.2% to P267.26 billion last year. It was followed by other financial firms doing 鈥渁ctivities auxiliary to financial intermediation鈥� which grew by 7.4% to P32.30 billion and making up 5.5% of the sectoral total.听

For its part, the insurance subsector saw its GVA rise by 7.2% to P101.08 billion while non-bank financial intermediation increased by 5.6% to P187.53 billion. The insurance and non-bank financial intermediation sectors, respectively, make up 17.2% and 31.9% of the sectoral total.

The year 2016 was a good one for the Philippine banking industry as it was able to book a record profit during the year on the back of higher deposits and loans while having a lower share of soured debts from a year ago.

Cumulative bottom line among banks was P154.13 billion, 13.9% higher than the P135.34 billion recorded in 2015, according to data from the Bangko Sentral ng Pilipinas (BSP). In particular, universal and commercial banks (UK/Bs) accounted for the bulk of the amount with a P136.96-billion income, up 13.9% from the P120.28 billion in 2015.

Consumer loans continue to be the banks鈥� bread and butter with UK/Bs and thrift banks having lent P1.27 trillion in consumer loans to households last year, which was 19.9% higher than the P1.06 trillion recorded in the year prior. Loans booked for housing lots was up 17.1% to P519.90 billion, while motor vehicle loans increased by 27.8% to P388.36 billion last year due to increased demand for private transport and flexible payment options offered to buyers.

Consumer credit is widely expected to rise further amid the optimism arising from the government鈥檚 infrastructure push with big-ticket projects on the pipeline.

On the other hand, the insurance industry鈥檚 total premium income was flat last year according to quarterly reports submitted by the life and non-life insurance companies to the Insurance Commission. The industry鈥檚 total income from premiums for 2016 was P231.88 billion which was up 0.3% from 2015 鈥� below the targeted P280 billion-P300 billion worth of premiums for the year.

The life insurance sector鈥檚 total premiums was down 3.0% in 2016, which was attributed to the decline of premium production in variable life insurance products which were allocated in the Philippine stock market.

Non-life insurance companies absorbed some of the losses as their net premium incomes grew 16.2% for the year. 鈥� Christine Joyce S. Casta帽eda

The real estate, renting and business sector continues to be one of the main growth drivers with gross value added reporting an 8.9% growth to P930.56 billion in 2016, higher than the 7.1% expansion it registered in 2015, and the services sector鈥檚 average growth of 7.4% in 2016.

For real estate sector alone, it grew by 6.9% to P222.03 billion from P207.70 billion in 2015, while that of business process outsourcing, renting, and other business activities grew by 14.7% to P417.84 billion, higher than 9.6% in 2015. Likewise, ownership of dwellings grew by 2.8% to P290.69 billion.

In its fourth quarter report, real estate consultancy firm Colliers International attributed the sector鈥檚 robust growth to three major drivers: influx of offshore gaming companies, continuous expansion of information technology and business process management (IT-BPM) firms, and tenants鈥� search for 鈥渇light-to-quality鈥� opportunities.

A total of 676,000 square meters (sq. m.) of office space was taken-up in central business districts in the metro in 2016, up 7% compared to 2015.

鈥淭he market was still primarily driven by IT-BPM companies. Close to 60% of take-up across Metro Manila came from IT-BPM companies. Non-BPO companies comprised 32%, while the balance came from off-shore gaming companies,鈥� Colliers said.

Colliers added that around 85,000 square meters worth of office space was occupied by offshore gaming companies in 2016, most of which came in the fourth quarter.

鈥淭he Philippine Amusement and Gaming Corp. (Pagcor) has launched POGO (Philippine Offshore Gaming Operators) late last year, initially setting 25 POGO licenses but with a potential to increase to 50 in the next six months,鈥� Colliers International said in its forecast for the local property industry this year.

On the heels of his oath taking last year, President Rodrigo R. Duterte planned to put an end to online gambling in the country. This led Pagcor to stop renewing online gaming licenses and since then has relied on offshore gaming licenses as a new source of revenue.

鈥淚n the last quarter of 2016, there was a surge in inquiries from offshore gaming companies, each with a minimum requirement of 10,000 square meters taking BPO spaces,鈥� said Colliers.

In its quarterly residential report, Colliers noted that pre-selling take-up of condominium units 鈥� an indicator for future growth 鈥� picked up after four straight years of decline, with total take-up for 2016 reaching 38,800 units.

Total licenses to sell issued by the Housing and Land Use Regulatory Board rose 15.2% to 473,210 units last year from 410,834 units in 2015, with middle- and high-end condominium units increasing 44.6% to 94,142 units from 65,104 units.

鈥淭ake-up has been strong across unit sizes as previous years鈥� launches are also sold,鈥� Colliers said, citing the favorable interest rate environment.

On the flip side, the real estate services firm reported soft sales take-up in Metro Manila鈥檚 secondary residential market amid the influx of new supply across submarkets.

For 2016, take-up only amounted to 2,000 units, 70% lower than the take-up the previous year with Colliers saying that developments in 鈥渇ringe locations鈥� have become viable alternatives to projects in the central business districts (CBDs). Fringe area completions in 2016 reached 4,800 units, higher than the 3,900 in CBDs.

A separate report by property services and advisory firm CBRE Philippines, Inc. shared a similar view, saying that the southern part of Metro Manila now poses itself as an ideal location for residential, commercial, and office projects.

Furthermore, 鈥渦ncertainties鈥� in the current administration did not induce unfavorable sentiments among the players in the office sector, CBRE said, adding that foreign investors remain confident about the country鈥檚 BPO industry.听 鈥� Ranier Olson R. Reusora

The sector鈥檚 gross value added听 (GVA) 鈥� a measure of the value of goods and services produced by a sector 鈥� increased by 7.3% to P841.70 billion in 2016, the Philippine Statistics Authority data showed.

The growth logged by the sector in 2016, however, was slower than the previous year鈥檚 8.3%.

All subsectors posted growth, but slower pace was recorded for the recreational, cultural, and sporting activities and the health and social work, dragging the overall performance of the sector.

Recreational, cultural, and sporting activities鈥� output 鈥� accounting for a fifth of the total sector鈥檚 production 鈥� increased by 7.7% in 2016 to P182.11 billion, slacking the most from the 12.4% increment recorded in 2015.

The Philippine gaming sector was in the spotlight last year after its casinos figured in the Bangladesh central bank hacking incident. Hackers in February last year transferred $81 million from the Bangladesh Bank鈥檚 account with the Federal Reserve Bank of New York to a Philippine bank. The stolen money was then withdrawn and transferred to casinos, where the money trail ended.

Out of the stolen $81 million, about $15 million has been returned to the Bangladesh government.

The incident prompted the government to include casinos under the coverage of the Anti-Money Laundering Act, the inclusion of which was signed into law (Republic Act No. 10927) in July this year.

Despite these developments, the gaming sector posted a P158.12-billion gross gaming revenues in 2016, 18.6% higher than the P133.28 billion in 2015, according to the Philippine Amusement and Gaming Corp.鈥檚 latest data.

Growth was likewise reflected in earnings of casino-resorts.

Melco Crown (Philippines) Resorts Corp., the operator of the City of Dreams Manila, reported a 63% jump in its net revenues driven by improved volumes across all gaming as well as its non-gaming segments. Bloomberry Resorts Corp., the owner and operator of Solaire Resort & Casino and Jeju Sun Hotel & Casino, reported a net profit of P2.32 billion last year, a reversal of the P3.38-billion net loss incurred in 2015, piggybacking on all-time high records in its gaming segments.

On the other hand, Travellers International Hotel Group, Inc., operator of Resorts World Manila saw earnings decline 15% during the period on account of lower revenues from its casino operations as well as increased financing costs due to the peso depreciation.

The health and social work subsector grew by 6.3% to P129.37 billion. Its growth, however, slowed from 9% in 2015.

The GVA of hotels and restaurants rose by 8.2%, the fastest growth among all subsectors, to P144.62 billion in 2016 from 6.9% logged in 2015.

Education 鈥� which comprised 40% of the sector鈥檚 total output 鈥� went up by 7.2% to P339.54 billion.

Output of other services activities grew by 6.8% to P42.68 billion, while that of sewage and refuse disposal sanitation and similar activities increased by 3.2% to P3.20 billion. 鈥� Mark T. Amoguis

WHEN President Rodrigo R. Duterte won the race to Malaca帽ang last year, he didn鈥檛 just promise to wipe out the narcotics trade, criminality, and corruption 鈥� he also vowed to improve the country鈥檚 poor infrastructure to help spur the economy.

The former Davao mayor was right on the money.

After all, if the Philippines wanted to keep its growth engine humming, it needs to take care of, and even upgrade, its roads, bridges, and airports.

Obviously enough, that needs a lot of work.

Based on the UN Economic and Social Commission for Asia and the Pacific鈥檚 Asia-Pacific Countries with Special Needs Development Report 2017, the Philippines scored 0.336 in the Access for Physical Infrastructure Index (APII) for 2015. The ranking placed the country 24^th out of the 41 Asia and the Pacific countries, putting it in between Pakistan鈥檚 0.311 and Samoa鈥檚 0.350.

Within the 10-member Association of Southeast Asian Nations (ASEAN), the Philippines fared no better.

Although the country鈥檚 APII score was above Indonesia鈥檚 0.278, Lao People鈥檚 Democratic Republic鈥檚 0.225, Myanmar鈥檚 0.198, and Cambodia鈥檚 0.186, it fell below Thailand (0.418), Vietnam (0.419), Malaysia (0.502), and Singapore (0.708). Brunei was not included in the ranking.

The Philippines鈥� crumbling infrastructure has also resulted in transport and economic woes. A 2014 study by the Japan International Cooperation Agency (JICA) showed that, without intervention, traffic costs will likely surge to P6 billion a day by 2030 from P2.4 billion. The same study also said transport cost will be 2.5 times higher by 2030 if congestion is not alleviated.

To address this, Mr. Duterte said he will upgrade the country鈥檚 dilapidated infrastructure, which his economic advisers qualified as one of the reasons why the Philippines, one of the world鈥檚 fastest-growing economies, had lagged behind its Southeast Asian peers for so long.

KEEPING 鈥楽HOVEL-READY鈥� PROJECTS

Philippine history has shown that a newly elected president has always delayed 鈥� if not outright abandoned 鈥� pet projects pursued by predecessors.听

Recall the Estrada administration鈥檚 move to scrap the Ramos government鈥檚 practice of providing sovereign guarantees for build-operate-transfer (BOT) projects. The Aquino administration, during its incumbency, grounded the Arroyo government鈥檚 infrastructure portfolio, causing economic growth to slow sharply in 2011.

But Mr. Duterte鈥檚 aides gave an assurance that the current administration will not abandon the previous administration鈥檚 鈥渟hovel-ready鈥� projects.

鈥淵ou know in the past administration, they stopped all the projects for the first two years [to ensure systems are more transparent]… Here we did not; we approved everything. So we are continuing moving ahead,鈥� Finance Secretary Carlos G. Dominguez III said in a press briefing in Malaca帽ang on July 6, 2017.

Dubbed as 鈥淏uild, Build, Build,鈥� the Duterte government鈥檚 aggressive infrastructure program aims to jack up infrastructure and social spending to about 7.1% of gross domestic product until the end of its term, in a bid to boost the economy to 7-8% growth next year until 2022 from 6.9% in 2016, and slash poverty incidence to 13-15% from 21.6% in 2015.

Once underway, this 鈥済olden age of infrastructure鈥� is expected to听 reverse the backlog left by previous administrations, the current government said.

鈥淲ith sound macroeconomic fundamentals, effective policy reforms, and an aggressive infrastructure program, the Philippines is poised for an economic breakthrough. We now have the right ingredients and the right leaders to catch up with our ASEAN peers, and ultimately transform the Philippines into the 鈥楢sian tiger鈥� we are capable of becoming,鈥� Budget Secretary Benjamin E. Diokno said in an opinion piece published by 大象传媒 on May 24, 2017.

THE BIG SHIFT

To bankroll this huge infrastructure push, the Duterte administration said it will shift from public-private partnership (PPP) as the primary mode of financing and will rely more on public funding and official development assistance (ODA) to avoid delays and higher project costs. The government will also employ a 鈥渉ybrid鈥� model, in which construction is financed by the government or ODA and operation and maintenance is entrusted to the private sector.

The sudden change in funding modes is a departure from former President Benigno S. C. Aquino III鈥檚 high reliance on PPPs for major projects, which the Asian Development Bank (ADB) said must be continued by succeeding administrations.

Besides the ADB, the Philippines鈥� PPP program has also earned plaudits from JICA and Moody鈥檚 Investors Service. The hospitable international environment for PPP is understandable. As many governments around the world struggle with fiscal deficits, the PPP model has become a preferred mode of meeting infrastructure requirements.

According to a June 28 report, BMI Research said the government鈥檚 decision to diversify financing for big-ticket projects from PPP to state or donor-funded schemes could initially hurt investor appetite, but should eventually bode well for the country.

鈥淚n the short term, ongoing revisions and modifications of proposed PPP projects will result in increased uncertainty in the Philippines鈥� infrastructure market, as projects previously launched under the PPP program are withdrawn and switched to other procurement modes,鈥� BMI analysts said.

鈥淲e note while this will mean fewer opportunities for private investment in infrastructure. This shift will help reduce the likelihood of contractual disputes and uncertainty over financing that has weighed on proposed PPPs, thereby improving overall project implementation,鈥� they added.

In May, the government removed the plan to develop five regional airports from the PPP pipeline in favor of 鈥渙ther modes鈥� of funding. Last December, the Philippine Ports Authority also withdrew the Davao Sasa Port redevelopment from the PPP lineup to cut costs.

鈥淲e expect that other major projects currently part of the PPP program will be withdrawn and relaunched as government-financed or ODA-backed initiatives over the coming months, as the Duterte administration attempts to accelerate infrastructure development in the Philippines,鈥� the Fitch Group unit also said.

However, the change in funding modes, despite its supposed advantages, has also been questioned by experts.

In an opinion piece published on 大象传媒 on June 2, 2017, Bienvenido S. Oplas, Jr., head of Minimal Government Thinkers and a Fellow of SEANET, identified 鈥渋nherent problems and risks鈥� with that change.

If hybrid model becomes the dominant mode in building important infrastructure projects, the financing scheme 鈥淸will] not bode well for Filipinos.鈥�

Since an administration is limited to only six years, it has little political or corporate brand to build and protect, Mr. Oplas said.

As a result, 鈥渋t can worry less of what the people would say after its term has ended especially if the project is later discovered to be of inferior quality and tainted with corruption.鈥�

Moreover, ODA funding has tight strings attached, he added.

鈥淎 China-ODA [arrangement] would mean only Chinese contractors, suppliers, managers, and even workers would do the work. Local firms would be relegated to O&M (operation and maintenance) and their purchase of equipment and supplies might be constrained by the project specifications so that they will be forced to source these from China again,鈥� Mr. Oplas said.

CAPACITY QUESTIONS

Meanwhile, analysts from international think tank GlobalSource Partners has taken a step back to see the bigger picture.

And so far, it鈥檚 not looking good.

There has been little sign of the Philippines鈥� capacity to implement its P8.4-trillion infrastructure spending plan over the next five years, it said. It also cited the uncertainty fueled by questions on the government鈥檚 change in preferred funding scheme for these big-ticket projects.

In a July 2017 report, GlobalSource analysts said that the policy shift would likely add to political risks under Mr. Duterte, even as they identified the merits of other financing schemes. They also joined other observers in questioning the national government鈥檚 ability to take on these projects 鈥� citing, among others lack of technical expertise.

鈥淲hile the lack of policy continuity would add to assessments of political risk under this administration, one can in fact see the merits of de-emphasizing PPP as the principal driver of the country鈥檚 infrastructure aspirations,鈥� according to the report.

鈥淸N]ot many projects lend themselves to a PPP structure; and as government pursues more and more higher risk greenfield projects, a PPP arrangement may not necessarily bring value for money for government, particularly if it is forced to absorb a big share of the demand risk in order to make projects bankable.鈥�

In 2002, the ADB called on the Arroyo government, which was among the previous administrations rife with projects financed through ODA, to improve its use of foreign assistance as a means of easing poverty in the country. It noted that the state鈥檚 poor use of ODA continued to burden the government with additional costs while delaying program and听 (project benefits at that time.

In the meantime, as the Philippines starts building more roads and modernizing ports, the private sector is still finding it hard to carve out a niche in this 鈥済olden age of infrastructure鈥� with Mr. Duterte favoring foreign money to fund his massive infrastructure program.

With the absence of PPP while large-scale projects are still under construction, companies have opted to offering unsolicited proposals to take part in the government鈥檚 infrastructure drive.

While these ODAs carry extremely low interest rates and easy repayment schemes, they mostly require goods and services to be procured from the donor country, leaving Filipino contractors feeling sidelined after initially becoming enthusiastic about the prospects of the government鈥檚 aggressive infrastructure push.

But unlike its predecessor, the Duterte administration is more welcoming of unsolicited proposals, while criticizing the slow progress of PPP initiatives.

With a large political capital and plenty of financing options at its disposal, the Duterte government must work double time to听 improve its capacity to absorb big-ticket infrastructure projects.

Only after it does will it prevent a repeat of the previous administration鈥檚 slow infrastructure rollout.

Ian Nicolas P. Cigaral used to cover Malaca帽ang for 大象传媒.

THE DUTERTE GOVERNMENT鈥橲 P8-trillion infrastructure spending plan was what local lenders were waiting for.

When it was announced in April, it created a stir in the industry for obvious reasons.

By helping lend money to big-ticket projects, local banks would be able to deploy cash and earn more from loans, instead of just placing them in low-yielding instruments.

Over the past year, the Philippines鈥� money supply has been posting double-digit increases, thanks to rising deposits and banks鈥� bigger capitalization. As a result, amounts that were available for corporate and retail lending have also grown.

But this expansion drove borrowing rates lower, prompting the central bank to step in by capturing excess funds just to bring rates closer to its benchmark.

With the government鈥檚 鈥淏uild, Build, Build鈥� initiative, banks would have the opportunity to cash in on the infrastructure boom while also fulfilling a sense of duty to help upgrade the country鈥檚 roads and bridges.

THINGS CHANGED A MONTH LATER

What would have been a golden era for bank lending took a sudden turn when economic managers bared that the so-called DuterteNomics plan covering 2017-2022 meant a shift away from the public-private partnership (PPP) mode towards grant-funded and state-sponsored projects.

National Economic and Development Authority (NEDA) Undersecretary Rolando G. Tungpalan said in May that two-thirds of the projects will be wholly supported by government funds, with the remainder to be supported by other modes of financing. Some 18% will rely on PPP arrangements, while 15% will depend on official development assistance (ODA).

鈥淭he thing about the PPP program is because it was private-public, there was significant opportunity for banks to lend to the private side of PPPs… Now, we noticed a shift to ODA financing, which is really a government-to-government type, and that potentially could reduce the opportunity for banks to lend directly to these projects,鈥� Cezar P. Consing, president and chief executive officer (CEO) at the Bank of the Philippine Islands (BPI), said in an interview. 鈥淗owever, I will say that the infrastructure needs of the country are so great that there鈥檚 probably room for both approaches.鈥�

For this year alone, the government wants to spend as much as P847.2 billion for public infrastructure, accounting for 5.3% of gross domestic product (GDP). By next year, it is looking to spend over P1 trillion on projects nationwide, with the amounts expected to rise annually and peak at a share of 7.3% of GDP by 2022.

In defending the shift to ODA, Socioeconomic Planning Secretary Ernesto M. Pernia said the government simply wants faster and more efficient results, given that the Aquino administration鈥檚 PPP program saw but four projects completed within his six-year term against 53 on the pipeline.

Lined up under the DuterteNomics program are the P255-billion North line of the Philippine National Railways to be funded by ODA from Japan, eyed to link Metro Manila to Clark, Pampanga in 55 minutes; while funding for the P285-billion South line 鈥� which will connect Manila to Bicol 鈥� will be sourced from the Chinese government.

The first phase of the Mindanao Railway that was planned to start by the fourth quarter will also be supported by a grant from Beijing, with the Tagum-Davao City-Digos segment seen to cost about P31.544 billion.

But will the new route taken towards the so-called 鈥済olden age of infrastructure鈥� leave banks out in the cold?

Despite the shakeup in project financing options, Bangko Sentral ng Pilipinas Governor Nestor A. Espenilla, Jr. said the lenders will not run out of chances to cash in on infrastructure opportunities. These are so huge that it鈥檚 beyond what the banking system can support by itself.

With wider project selection, there鈥檚 more than enough to go around as far as banks are concerned.

鈥淭here might be friction, but if we look at it more holistically and with a more long-term view, you鈥檒l realize there鈥檚 really room for both,鈥� Mr. Consing said, noting that the goal was to get the construction plans up and running.

Instead, the opportunity lies on what he calls the 鈥渟econd- and third-order benefits鈥� drawn from getting more roads and transport systems, such as new business hubs which would need fresh funding as they sprout 鈥� new malls, offices, restaurants, housing sites, among others.

Developers are quick to put together townships, placing office buildings and condominiums around train terminals as communities rise with the new transport routes.

Colliers International cited Fairview; San Jose del Monte, Bulacan; Novaliches; and Commonwealth Avenue in Quezon City as good sites for development, especially with the construction of the Metro Rail Transit Line 7 in the works.

Outside the capital, the provinces of La Union, Pangasinan, Tarlac, Batangas, Naga, Iloilo, Bacolod, Cebu, Davao, and Cagayan de Oro are also seen as strategic locations for budding townships with blueprints for more link roads and local railways in sight.

Besides construction companies, the household sector, wholesale and retail trade, and food production are among those expected to benefit from higher infrastructure spending, the NEDA said.

For his part, Security Bank Corp. President and CEO Alfonso L. Salcedo, Jr. said that lenders can take part in the infrastructure story by lending to domestic contractors and suppliers, who would need to tap fresh funds for its working capital.

鈥淎s they participate in infrastructure development, their business with banks will also expand,鈥� he said.

But this is not to say that Security Bank has limited resources to support government spending by way of lending to build more roads, bridges, and trains.

Currently, the Philippines鈥� fifth-largest bank in terms of assets boasts of fresh capital, giving it the capacity to lend more to conglomerates involved in big-ticket projects despite the 25% single borrower鈥檚 limit (SBL) imposed by the central bank.

鈥淲e are well-positioned to support the financing requirement of our large corporate customers because we have a higher SBL for our corporate customers as a result of the P37-billion capital investment by MUFG (Mitsubishi UFJ Financial Group) in Security Bank last year,鈥� Mr. Salcedo said. The lender can also leverage on the expertise of its Japanese partner in terms of project finance, the executive added.

Both BPI and Security Bank see the construction boom as a net plus for the local economy, noting that the ODA financing track should not be viewed as competition.

Melissa Luz T. Lopez is a senior reporter of 大象传媒. She covers the Bangko Sentral ng Pilipinas and the banking sector.

CONSUMERS have long been clamoring for a third player to break the duopoly in the telecommunications market plagued by poor service quality and slow Internet speeds.

President Rodrigo R. Duterte has threatened to open up the sector to foreign competition if incumbent operators PLDT, Inc. and Globe Telecom, Inc. do not improve their services. But having a new entrant in the mature market is easier said than done given the massive financial resources needed to be able to mount a competitive stand against the two major players.

With the bandwidth-hungry public becoming more impatient by the day, the government is doing its share to boost Internet connectivity across the country, especially in far-flung areas. Could the government become that elusive third player?

鈥淚t鈥檚 not an impossible dream especially if the government would use creative solutions to bringing Internet connectivity. The mind-set that Internet service can only come from a telco needs to change,鈥� said Mary Grace Mirandilla-Santos, lead convenor of the Better Broadband Alliance.

The Department of Information and Communications Technology (DICT) plans to offer free wireless Internet service in public areas such as national and local government offices, schools, hospitals, airports and parks, among others. This forms part of a broader government initiative called the National Broadband Plan aimed at accelerating the deployment of fiber and wireless technologies to increase Wi-Fi speeds and bring down the cost of Internet connection.

GAP IN THE MIDDLE MILE

The free Wi-Fi initiative is envisioned to enable the public to get better access to services in education, health, agriculture, and other sectors. It bridges the digital divide, allowing those who cannot afford to subscribe to broadband service get into the digital bandwagon from an education and business standpoint.

The Pipol Konek program entails the installment of an estimated 250,000 hot spots nationwide in six to seven years 鈥� a seemingly tall order considering that the project has only reached more than 800 sites as of early October.

The slow progress could be traced to the gap in the middle mile, or the domestic backhaul that brings bandwidth from the landing station where consumers get most of their capacity to the provinces and municipalities before it reaches the access network, said Ms. Mirandilla-Santos, also the vice-president for policy at the Internet Society – Philippines Chapter.

鈥淓ven in first- and second-class municipalities where you would expect good connectivity (due to proximity to the urban centers, population density, and relatively high income of residents), plug and play was not possible as the telcos鈥� presence did not translate to enough capacity required to connect the public Wi-Fi,鈥� she said.

DICT Undersecretary Eliseo M. Rio attributed the sluggish start to the birth pangs of the project and manpower issues, noting that the agency can now go full blast on its implementation after President Duterte signed into law Republic Act No. 10929, or the 鈥淔ree Internet Access Program鈥� in August.

The government is bidding out contracts to put up free Wi-Fi hot spots covering specific areas using the technology of their choice, Mr. Rio said. The service will have an average speed of 鈥渘ot less than 10 megabits per second.鈥�

Aside from PLDT and Globe, the free Wi-Fi project has attracted smaller players like AZ Communications Network, Inc.; Converge ICT Solutions, Inc,; and We Are IT Philippines, Inc., providing an opportunity for third players to make an impact in the market.

鈥淚f the government is by your side at least the barrier to entry for third players [that have] technology but who may not have the capital has been eradicated. It opens an opportunity for these third players to come in,鈥� said Rens V. Cruz II, analyst at Regina Capital Development Corp.

Analysts have said the free Wi-Fi program may force the telcos to level up and offer higher value services to keep their subscribers.

GOV鈥橳 AS THIRD TELCO PLAYER?

For the DICT, the government should not be seen as a competitor, but a partner that will enable the telcos to expand their services and subscriber base.

Unlike in other jurisdictions, the private sector owns most of the country鈥檚 telecoms infrastructure. Many remote areas have had difficulty securing Internet service because providers cannot justify the cost of building out infrastructure to areas with few people to serve.

鈥淚t鈥檚 like [the whole Philippines], [our] roads are privately made and charge tolls [that鈥檚 why] telecom services [are expensive]. The analogy is the government must make roads for its citizens,鈥� DICT鈥檚 Mr. Rio said.

The government, however, has had a terrible track record in building and operating telecom networks, the latest of which is the National Broadband Network deal with ZTE Corp. of China that fell through due to corruption allegations.

鈥淚f we considered these factors 鈥� high capital requirements, economies of scale, and sunk cost 鈥� as the only givens in network infrastructure, government would indeed be the best candidate to do the job. But these are not the only things that need to be considered. The government鈥檚 capacity, track record, and performance in similar initiatives (e.g., MRT) cannot and should not be ignored,鈥� she said in a blog entry for Telecom Asia.

With the free Wi-Fi program still at the early stages, the government is relying on existing infrastructure to deliver free Wi-Fi in select locations. PLDT and Globe have joined forces to provide free Wi-Fi in transportation hubs such as airports, train stations, and seaports. They are also behind the free Wi-Fi on EDSA, the country鈥檚 major thoroughfare.

PLDT Chief Revenue Officer Eric R. Alberto admitted that while the program may cannibalize its offerings, they are complementary.

鈥淵ou鈥檇 find that data use will be a fixture in your habit and by the time that happens 鈥� we hope that happens sooner than later 鈥� there will be propensity for you to top up,鈥� Mr. Alberto said.

鈥淣othing is free so when you log in, you鈥檙e giving me your data. By opting in, it tells us you鈥檙e allowing us to perform analytics to serve you better in the digital world,鈥� he added.

Aside from being the largest supplier of bandwidth for the project, the telcos鈥� own mobile broadband service can be offloaded to Wi-Fi hot spots through interconnection agreements with community wireless ISPs that will deploy the Wi-Fi networks in their respective areas. This will allow the telcos to serve their subscribers in areas where they would not have any signal otherwise, Ms. Mirandilla-Santos said.

FREE WI-FI TO IMPROVE CONNECTIVITY

The presence of another connectivity option could allow mobile base stations to breathe especially during peak hours, thus, improving the quality of service of mobile data in areas where both services are available, she added.

鈥淚n the long run and the government鈥檚 plans around free public Wi-Fi and improvement of connectivity expected to improve the digital milieu in the country, the telco incumbents should recognize the long-term return or benefits to their businesses once the entire country picks up and embraces digital transformation in a few years time,鈥� IDC Philippines Country Head Jubert Daniel Alberto said.

IDC Philippines welcomed the strategic ICT push of the government to improve technology adoption from an overall perspective.

However, the government should review its policies, followed by rules on peering and infrastructure sharing among telco incumbents, and explore areas where the government can partner with them for a more holistic view.

鈥淚f the implementing agencies succeed in identifying key options for this project and coaxing telcos into long-term partnerships, we may well see improvement in the next five years,鈥� IDC Philippines鈥� Mr. Alberto said.

Krista Angela M. Montealegre is the national correspondent of 大象传媒.

IT鈥橲 AN OLD IDEA 鈥� a Mindanao railway 鈥� dating as far back as the late 1930s after the Luzon rail was completed.

Then the Second World War came along and 鈥渋t was put on the back burner,鈥� National Economic and Development Authority-Davao Region Director Maria Lourdes D. Lim narrated, citing historical information based on government archives that are contained in the latest feasibility study for the Mindanao Railway System (MRS).

Rehabilitation of the Luzon rail was made a priority post-WWII and it wasn鈥檛 until 1957 that a train system for Mindanao, the country鈥檚 second biggest island after Luzon, was again considered.

A project study was undertaken by the Philippine National Railways (PNR), identifying a 1,570-kilometer (km.) track that would have required a P2.6-billion budget at that time.

It was probably the cost, but no one can say for sure now why the transport system was never pursued. It would remain shelved for more than three decades.

It was under former President Fidel V. Ramos, who started his six-year term in 1992, that the Mindanao
railway got back on the national government鈥檚 radar.

But more than two decades later, after numerous plans and studies under different administrations, the railway remained on the drawing board.

鈥淚n the past, we were never listened to; sometimes (the national government pretended listening but it was only lip service,鈥� said Vicente T. Lao, chair of the Mindanao Business Council.

Ms. Lim explains that the way government works is that localities and regional agencies basically 鈥渃ompete鈥� for funding and prioritization, particularly for big-ticket projects, and decisions are ultimately made at the national level with socioeconomic, technical as well as political considerations coming into play.

鈥淚t helped a lot when President Duterte won,鈥� she said, referring to former Davao City mayor Rodrigo R. Duterte, the first from Mindanao to be elected president.

鈥淎nd infrastructure investments are really a focus of this administration,鈥� said NEDA-Davao Chief Economic Development Specialist Mario M. Realista.

TRAIN SYSTEM FINALLY TAKING OFF?

The Duterte government is looking to put up as much as P9 trillion worth of infrastructure projects from 2017 to 2022.

In June this year, the NEDA Board鈥檚 Investment Coordination Committee (ICC) approved three major railway projects with a combined cost of more than P532 billion.

Two are in Luzon: the P285-billion South Line of the North South Railway Projects and the P211.43-billion Malolos-Clark Railway Project, both planned for funding through official development assistance (ODA).

The third is Phase 1 of the MRS, a 102-km. track covering the Tagum-Davao-Digos (TDD) segment, with the P35.91-billion budget to be sourced from government funds.

Mr. Lao 鈥� who, like most in the Mindanao business community he represents has seen and been through a roller coaster of hopes and disappointments from government plans and promises 鈥� carries his optimism for the MRS with a grain of salt.

鈥淭his time, I hope it will get realized,鈥� he said in an interview before the Department of Transportation (DoTr) announced in mid-August that the House of Representatives鈥� appropriations committee has already earmarked an initial P6.58 billion to jumpstart the MRS TDD segment.

Rep. Johnny T. Pimentel, a member of the appropriations committee who comes from the Mindanao province of Surigao del Sur, said he is glad to see the project 鈥渇inally taking off and not being kicked around anymore.鈥�

For the operation and management of the MRS, the House committee on government enterprises and privatization and committee on transportation jointly approved earlier this year several bills, which all seek to create the Mindanao Railways Corp. (MRC)

鈥淭he (MRC) bill was originally filed in 1987, during the 8^th Congress. It was continuously refiled in the succeeding Congresses, but always failed to reach the Plenary. But now in the 17^th Congress, with our President coming from Mindanao and the proposal being among the top legislative agenda of the House, the long-awaited dream may come true with the construction and operation of the Mindanao railways system,鈥� Mr. Sarmiento said.

Senator Juan Edgardo 鈥淪onny鈥� M. Angara, chair of the ways and means committee, said he understands that the MRS is a dream come true for Mindanao鈥檚 people.

鈥淎 train system can be a ticket out of poverty for many of them. Cheap, reliable and fast movement of goods would increase incomes and value to products,鈥� Mr. Angara said, 鈥淚t is also a driver for peace because as communities become interconnected, economies are linked, growth spreads, and travel brings cultural exchanges.鈥�

Mindanao鈥檚 dream would come at a cost, not just in terms of capital expenditure but also in the first decade of operations.

Based on the NEDA Secretariat鈥檚 assessment, the TDD segment would need an average of P290 million in government subsidy for the first 10 years of operations. Construction is scheduled to start by 2018 and completion within two years.

Romeo M. Montenegro, deputy executive director of the Mindanao Development Authority (MinDA), said while the first track of the MRS won鈥檛 be immediately profitable, the 鈥渓ong overdue鈥� project should be seen more as a 鈥渃atalyst for Mindanao鈥檚 growth鈥�.

STARTING IN THE SOUTH

The Tagum-Davao-Digos segment within Davao Region, located in the southeastern part of Mindanao was recommended to become the starting point for construction 鈥� rather than the Iligan-Cagayan de Oro section in the Northern Mindanao Region as considered in earlier plans 鈥� given the 鈥渉igh sectional volumes鈥� in terms of passenger and cargo traffic.

Davao Region鈥檚 gross regional domestic product (GRDP, at constant 2000 prices) was higher in 2016, as in the two previous years, at P333.02 billion against Northern Mindanao鈥檚 P305.45 billion. In terms of GRDP growth rate, Davao has also been faster at 9.4% compared with Northern Mindanao鈥檚 7.6% last year.

The TDD segment was also considered for its connectivity to the growth areas of General Santos City, Koronadal City, and Cotabato towards the east, and San Francisco, Butuan City, and Surigao City towards the northwest.

Mr. Montenegro, who has been with MinDA and its predecessor Mindanao Economic Development Council since 2001 and been part of the MRS discussions over the years, said the government has to put in infrastructure and transportation systems to encourage private investments, especially in areas that have been neglected.

鈥淲ith a better transportation system, there will always be someone who will take advantage, to explore areas never been explored,鈥� he said.听

While only Phase 1 of the MRS has so far been included in the government鈥檚 鈥淏uild, Build, Build鈥� priority list, the Duterte administration aims to have at least the funding in place, possibly all through ODA, for the rest of the rail segments.

NEDA Director-General Ernesto M. Pernia has said that China and Japan have expressed interest in the MRS.

Based on the MRS Development Framework, the train system will have an 830-km. main loop and 702 km. in spur or branch lines.

The main circumferential line, aside from the TDD, is composed of the following segments:

Butuan-Nabunturan-Tagum (208 km.)

Iligan-Cagayan de Oro-Butuan (285 km.)

Digos-Iligan (234 km.)

The spur lines are:

Butuan-Surigao (109 km.)

Kabacan-General Santos (141 km.)

Iligan-Zamboanga (338 km.)

Iligan-Dipolog (114 km.)

Cost for each of the planned segments has yet to be determined.

The TDD 鈥� the shortest segment at 102 km., with eight stations, one terminal in Davao City and a depot that will be built on a 10-hectare area in Tagum City 鈥� will have an average cost of P343 million per km. Using the TDD average as reference, the entire 1,532-km. Mindanao railway would need an investment of about P526 billion.

鈥淲hat we (in government) have to look out for is the enabling environment and conducive policies to do business here鈥� This (MRS) is a demonstration of the commitment to address infrastructure support. Mindanao has really been behind in competitiveness in terms of infrastructure,鈥� Ms. Lim said.

Mindanao鈥檚 six regions 鈥� Zamboanga Peninsula, Northern Mindanao, Davao, Soccsksargen (South Cotabato, Cotabato, Sultan Kudarat, Sarangani, General Santos), Caraga, and the Autonomous Region in Muslim Mindanao 鈥� had a combined 14.3% contribution to the gross domestic product in 2016. This is in comparison to the regions where the two other railway projects approved by NEDA-ICC are located: the National Capital Region contributed 36.2%, Central Luzon with 9.3% and Calabarzon (Cavite-Laguna-Batangas-Rizal-Quezon) with 17.2%.

Ms. Lim said the goal is to boost intra-Mindanao commerce as well as exports through complementing industries among the regions.

PEACE AND ORDER ISSUES REMAIN

As for security concerns, the feasibility study on the TDD segment notes that the Digos-Cotabato-Iligan section is considered to have peace and order issues, which is why it has not been recommended for immediate implementation. 鈥淚t is hoped that in time, the current situation shall improve,鈥� the study said.

For the TDD, Ms. Lim said the Davao Regional Development Council, where she sits as vice-chair, has already undertaken initial coordination with the security sector, and the military鈥檚 10^th Infantry Division has committed to create a special task force to look after the project once it gets rolling.

Secretary Datu Abul Khayr Dangcal Alonto, chair of MinDA, said in November last year that the MRS is intended to serve as a uniting tool for Mindanao.

The Marawi City-born Mr. Alonto, the first Muslim to head MinDA, said not even the crisis in his birth town should deter development programs in Mindanao.

鈥淲e cannot let terror, lawlessness, and violence shatter what we have built for Mindanao all these years. We call on our fellow Mindanawons to stay the course 鈥� be vigilant, but continue to be warriors of peace by spreading hope not fear,鈥� said Mr. Alonto, who also served as chair of the former anti-government group Moro National Liberation Front.

Back in November, he said, 鈥淚f a person can have his breakfast in Zamboanga, eat his lunch in Iligan, then dinner in Davao, that is the one, connected and united Mindanao we envision. That is home.鈥�

Marifi S. Jara is 大象传媒鈥檚 Mindanao bureau chief and Carmelito Q. Francisco is 大象传媒鈥檚 Mindanao correspondent.

AS THE BATTLE for consumers shifts online, Philippine conglomerates are marching into unchartered territory by taking over logistics companies to ride the emerging e-commerce wave.

LBC Express, Inc. is unfazed by the entry of the big wigs, drawing strength from its expertise honed by decades of moving lives, businesses, and communities.

鈥淒iversified offerings and solutions are a by-product of increasing competition in this sector 鈥� which is always a good thing for consumers. But for LBC, I鈥檓 proud to say that our heritage and years of experience in this industry is really what sets us apart,鈥� LBC President and Chief Operating Officer Mike A. Camahort said.

Founded in 1945, LBC operated as a brokerage and air cargo agent before evolving into an express delivery service. It became the first Filipino-owned private courier company to provide time-sensitive deliveries and pioneered 24-hour door-to-door express delivery in the Philippines.

LBC is now a household name in express delivery after mastering B2B, B2C, and parcel delivery. It boasts of an extensive retail footprint servicing capability, with a network of over 6,400 locations, partners, and agents in more than 30 countries.

鈥淭he country鈥檚 logistics industry has been steadily expanding, thanks to globalization and the rise of e-commerce. These definitely contribute to the opportunities that our industry has for growth and is expected to reshape the business in a big way,鈥� Mr. Camahort said.

Online purchases make up only less than 1% of total retail sales in the Philippines. With e-commerce expected to take off, conglomerates are future-proofing their businesses and logistics is a crucial part of their strategy.

While the new entrants are still on the drawing board, LBC is in a unique opportunity to showcase its ability of not only fulfilling deliveries, but also customizing solutions that meet the needs of small to medium enterprises.

鈥淎ll things considered, I鈥檇 say that despite challenges, there are far more opportunities that will pave the way for continued growth in the logistics sector. This is an industry that will continue to challenge us, and adapting to these changes is critical to making sure we continue to achieve our targets and serve our customers,鈥� Mr. Camahort said.

LBC is not resting on its laurels. The logistics service provider is relentless in taking a more proactive approach towards refining systems and processes to better serve the market.

The company is improving its IT infrastructure and automating key facets of its services. For instance, the company is implementing back-end service and systems innovation focused on customer convenience. Couriers are using handheld units during deliveries and SMS alerts are automatically sent to recipients and consignees after packages are scanned and sent out for delivery.

LBC, likewise, is ramping up its expansion by going deeper into untapped areas where the need for a reliable express delivery service is critical. About 100 stores are planned for opening this year, nearly double the 48 branches rolled out in 2016.

To grow the business, LBC is working on sealing key partnerships, leveraging on automation, fleet modernization, and growth and development of its team members. It is also rolling out additional products related to warehousing and the whole supply chain.

The integration of Southeast Asian economies also excites LBC, as open access to manpower, raw materials and other key resources will boost demand for the company鈥檚 services.

With more robust regional economic activity, the entire industry is pegged to grow by a staggering $41.3 billion over a four-year timeline. That means a lot of collaboration 鈥� not just internally for individual brands, but between industry players 鈥� must take place to maintain the growth trajectory.

鈥淚t鈥檚 exciting to see how the integration will play out among larger, heritage brands and smaller start-ups and how this can possibly pave the way for more innovation in the logistics sector,鈥� Mr. Camahort said.

Krista Angela M. Montealegre is the national correspondent of 大象传媒.

As a secondary mortgage institution, it purchases mortgages from originators 鈥� banks, property developers, government agencies, among others 鈥� to relieve these institutions of some of the long-term risks of home lending, and sell them back to the public through the issuance of mortgage-backed financial instruments.

The money generated by trading bonds and other forms of securities enables NHMFC to buy loans from originators. Unburdened, originators are in a better position to lend to more aspiring homeowners. 鈥淥ur mantra is 鈥楨very Filipino deserves a home, and it shouldn鈥檛 take too long,鈥欌�� said Dr. Felixberto U. Bustos, Jr., president of NHMFC.

Under its securitization program called 鈥淏ahay Bonds,鈥� NHMFC has offered two successful fixed-income security products: Bahay Bonds 1 and Bahay Bonds 2. The former was launched in 2009, becoming the first residential mortgage-backed security (RMBS) to be issued by a Philippine government agency and sold to institutional investors. It was worth more than P2 billion. The latter, consisting of P603.7 million worth of socialized and low-cost housing loans, was issued in 2012. It was the first-ever listed RMBS in the country and made available to both institutional and retail investors.

NHMFC will soon release a successor to Bahay Bonds 2: BALAI Bonds 1. (BALAI is the acronym for Building Adequate Livable Affordable and Inclusive Filipino communities, a broader housing program involving multiple government agencies like NHMFC.) This new offering will be made up of select socialized and low-cost housing loan portfolio estimated to be worth P608.1 million, more or less.

BALAI Bonds 1 will not be that much different from Bahay Bonds 2: It will still be affordable (P5,000 is the minimum investment amount) and accessible to both retail and institutional investors.

But instead of marketing the new set of bonds in key urban areas like Metro Manila, Mr. Bustos said, 鈥淲e鈥檒l just focus on the provinces,鈥� citing financial exclusion in these places. Mr. Bustos said they are preparing to conduct road shows in Mindanao, particularly in Cagayan de Oro City and Davao City, to emphasize the merits of the new bonds.

In offering BALAI Bonds 1, NHMFC will play the role of a servicer.

Its partners, along with their roles, are: Landbank 鈥� Investment Banking Group (arranger and underwriter); Romulo Mabanta Buenaventura Sayoc & de los Angeles (legal and tax counsel); PricewaterhouseCoopers (portfolio auditor); Development Bank of the Philippines-Trust Banking Group (special purpose trust); Philippine National Bank-Trust Banking Group (trustee, account bank); Philippine Rating Agency Corp. (rating agency); Home Guaranty Corp. (guarantor); Philippine Dealing & Exchange Corp. (listing agent); Philippine Depository & Trust Corp. (registrar/paying agent/security agent); and LandBank Investment Sales & Distribution Dept., plus other banks and investment houses (co-underwriters/selling agents).

NHMFC will also roll out BALAI CMP Bonds for housing developers. CMP, short for Community Mortgage Program, is a government-funded undertaking administered by Social Housing Finance Corp. (SHFC), a wholly owned subsidiary of NHMFC, for assisting informal settlers obtain land tenureship.

NHMFC and SHFC are collaborating with private developers to generate funding for socialized housing, officially defined as dwelling places with prices that do not exceed P450,000.

According to Section 18 of the Republic Act No. 10884, or the 鈥淏alanced Housing Development Program Amendments,鈥� owners and/or developers of subdivisions and condominiums should develop an area for socialized housing equivalent to at least 15% of total subdivision area or total cost of the project, and to at least 5% of condominium area or project cost.

鈥淚t鈥檚 going to be a big problem for the big developers,鈥� Mr. Bustos said, adding that socialized housing is not exactly their expertise. NHMFC decided that it would issue BALAI CPM Bond to help them. 鈥淚f you buy it, then it becomes alternative compliance,鈥� Mr. Bustos said. The Housing and Land Use Regulatory Board has already authorized the purchase of the CMP-backed bonds by private developers as alternative compliance with their balanced housing requirements.

BALAI CPM Bonds, valued at P2.7 billion, will be sold to 19 institutional investors and carry a floating interest rate. NHMFC will act as the financial advisor and program manager in the future issuance of these bonds. It will be joined by Landbank-Investment Banking Group (arranger/underwriter); Romulo Mabanta Buenaventura Sayoc & de los Angeles (legal tax counsel); PricewaterhouseCoopers (portfolio auditor); Development Bank of the Philippines-Trust Banking Group (special purpose trust); Philippine National Bank-Trust Banking Group (trustee, account bank); Philippine Rating Agency Corp. (rating agency); and its own subsidiary, SHFC (servicer).

Both BALAI Bonds 1 and BALAI CPM Bonds are subject to the approval of the regulatory bodies.

Once given the green light, the bonds will follow another successful NHMFC project meant for senior citizens, the Reverse Mortgage Program or the MAginhawang BUhay dahil sa baHAY (MABUHAY) Program. The rationale of the program is that by giving seniors the opportunity to convert a portion of their home equity into cash, they can lead longer, happier, bountiful and worry-free lives. – Francis Anthony T. Valentin

BUSINESS LEADERS in Western Visayas remain hopeful of one day seeing a railway system chug through the region鈥檚 mainland, Panay.

Understanding the cost of such an undertaking, they bear no ill-feelings for the President, who mentioned the possibility of reviving Panay Railways during his first State of the Nation Address in July 2016, even though it was later excluded from the priority list for its 鈥淕olden Age of Infrastructure.鈥�

As a result, although the project may no longer get the government鈥檚 full support, it could still be pursued through a public-private partnership, Iloilo Business Club Executive Director Lea E. Lara said.

鈥淚t entails a huge cost which would need an investment from a private partner,鈥� she said in an interview.

Cesar S. Capellan, director of state-run Panay Railways, Inc., the firm that used to operate the 117-kilometer railway in the 1980s, earlier said that a Chinese firm has expressed interest to conduct a new feasibility for the project.

Ms. Lara said a thorough study would definitely be needed, particularly on the return on investment.

鈥淚f the revenue will solely depend on passenger fees without cargo, it will not be cost-effective to investors. It should be complemented by agricultural produce鈥� It becomes a white elephant if we cannot sustain it,鈥� she said.

The retired railway 鈥� which was constructed starting back in 1907 and closed down in 1983 鈥� used to transport agricultural produce and other cargo within Panay Island, composed of the provinces of Aklan, Antique, Capiz, Iloilo, and the city of Iloilo.

Ms. Lara said the business sector would like to see improved access between Iloilo City, the commercial and political center of Western Visayas, to other provinces to level economic development across the region.

鈥淎nything that can improve the travel time would incredibly help. Having the railway would cut your travel time from four hours to only about 30 minutes to one hour,鈥� she said.

Dona Rose O. Ratilla, president of the Philippine Chamber of Commerce and Industry鈥檚 (PCCI) Iloilo chapter, agrees that rehabilitating the railway would bring down transport cost and improve logistics, which would then motivate the agricultural sector.

鈥淔armers will be encouraged to produce more since they will have bigger markets,鈥� Ms. Ratilla said, adding that PCCI-Iloilo is willing to pass a resolution expressing support to pursue the project.

鈥淲hile there is still no definite plan for it, the concept of having it is there and we look forward to that. We also passed a resolution before in support of the Jalaur megadam,鈥� she told 大象传媒.

BEYOND BORACAY

Ms. Ratilla also said that a cheaper, faster and more convenient means of transport as provided by a rail system would give Panay provinces better opportunity to share in the tourists attracted by popular island destination Boracay, located off the mainland鈥檚 northwestern tip.

Western Visayas 鈥� which has a 5.5 million arrivals target this year, up from the actual 5.193 million tourists recorded in 2016 that brought in P114 billion in tourism receipts 鈥� has hit the two-million-visitor mark in the first half of 2017, based on partial data from the Department of Tourism鈥檚 regional office (DoT-6).

Aklan, including Boracay, continued to be the most visited province with 1.1 million tourists from January to June, followed by Iloilo City with 410,061 from January to May, and Bacolod City with 269,232 in the first four months.

However, Antique, which is adjacent to Panay and has diverse nature attractions, had just 43,277 tourists from January to March.

鈥淒oT Region 6 takes into consideration these numbers because this is where we align our tourism products and services to make Western Visayas one destination with diverse culture,鈥� said DoT-6 Regional Director Helen J. Catalbas, adding that campaigns are directed towards promoting areas that Boracay鈥檚 crowd could look into.

Antique Governor Rhodora J. Cadiao, also the chairperson of the Regional Development Council (RDC)-Western Visayas, said she, likewise, continues to look forward to having a railway in Panay.

鈥淭he train would be able to service even the far-flung areas in Antique,鈥� she said.

Western Visayas鈥� gross regional domestic product (GRDP) growth rate slowed down to 6.1% in 2016 from 8.3% in 2015, the second fastest that year.

The deceleration in 2016 is attributed mainly to a drop in the agriculture, hunting, and fishery sector鈥檚 performance, which DoT鈥檚 Ms. Catalbas said also has an impact on the tourism sector.

Ms. Catalbas said a broad review of data indicates that the net income from the 2016 tourism receipts could have been higher if dining establishments were able to source more local raw supply.

鈥淭his is money spent on products that came from outside Western Visayas,鈥� she added.

Under the Western Visayas Regional Development Plan for 2017-2022, the end-period GRDP target growth rate is 9.8% to 11%. Among the main strategies to achieve this is expanding agri-fishery production, developing tourism circuits and destinations, and enhancing public infrastructure efficiency.

HIGHWAYS VS. RAILS

Iloilo Governor Arthur D. Defensor, Sr., meanwhile, pointed out that a feasibility study on the railway undertaken during the time of President Fidel V. Ramos indicated that the project would not be viable.

Highway-widening projects from Iloilo to Capiz continue to be undertaken, he said.

Nonetheless, he added, it would be worth finding out the real score through another formal assessment.

鈥淚 hope they can find ways to make these projects viable,鈥� he said.

National Economic and Development Authority Western Visayas Regional Director Ro-Ann A. Bacal, for her part, said the construction of an expressway, instead of a railway, is being considered.

鈥淲e started talking to business groups and they expressed apprehensions on the multiple handling cost when it comes to the railway. They are thinking of an elevated expressway from Iloilo to Capiz,鈥� she said.

Ms. Bacal stressed that various ideas are in the 鈥渃onceptual stage鈥� and will be undergoing brainstorming within the regional and national levels.

鈥淲e鈥檝e been asking our representatives in Congress and even the local leaders on their thoughts about the idea of having an expressway or railway,鈥� she said.

In the meantime, three big-ticket projects in Western Visayas have been listed under the administration鈥檚 鈥淏uild, Build, Build鈥� program: the Iloilo International Airport improvement amounting to P30.4 billion; Panay-Guimaras-Negros Island Bridge worth P27.156 billion; and the Panay River Basin Integrated Development Project in Capiz with a budget of P19.3 billion.

Ms. Bacal said the government is committed to implement these projects, possibly finish before the end of the Duterte administration, as they are considered 鈥渃ritical to make sure that the goals, objectives and target of PDP (Philippine Development Plan) are achieved.鈥�

And for now, Panay鈥檚 community is looking forward to seeing these promised infrastructure get off the ground.

Louine Hope U. Conserva is 大象传媒鈥檚 Mindanao correspondent.

]]> /research/2018/01/04/99990/alternative-metro-manila-offers-new-chance-urban-redemption/ Thu, 04 Jan 2018 04:42:17 +0000 http://www.bworldonline.com/?p=99990 BY听 ARRA B. FRANCIA

METRO MANILA traffic continues to spawn Internet memes and has been the stuff of everyone鈥檚 rage, humor, and urban angst.

This can only be fueled by the daily congestion on EDSA, the Philippines鈥� busiest avenue, and the long lines at the MRT, the train system traversing the same highway.

In an area populated by over 12.5 million people combined with more than 2.5 million vehicles, traffic and the throng of people trying to avoid it have become nothing but the new normal.

In a bid to solve this perennial problem, the government crafted a plan to push businesses out of the metro and into the provinces. The idea was to establish other areas of development outside the country鈥檚 capital, so citizens would seek employment in their home provinces and minimize migrations to the big city.

In 2013, former President Benigno S. C. Aquino III led the groundbreaking for the first government-led project of this kind, called the Clark Green City in Pampanga. The National Economic and Development Authority had initially approved the master plan presented by state-run agency Bases Conversion and Development Authority (BCDA).

Situated within 36,000 hectares of military base land rented by the United States until the Senate rejected an agreement to extend it in 1991, the sprawling 9,460-hectare development has been slated to become the next big business district outside Metro Manila.

Now called New Clark City (NCC) under President Rodrigo R. Duterte鈥檚 administration, the BCDA is once again set to submit a new master plan for the project, consisting of three phases that will run in the next 50 years.

MASTER PLAN FOR NEW CITY OUTSIDE METRO MANILA

While Metro Manila has practically no concrete master plan to speak of that would piece together the development of its 15 cities and municipalities, NCC has the BCDA, which is careful to avoid the errors that have caused the perennial Metro Manila traffic.

鈥淚 don鈥檛 see a comprehensive Metro Manila plan. What I see is an individual land use plan or master plan for each of the CBDs or municipalities here in Metro Manila so on that aspect you can see that they make their own plans without regards to the other plans kaya nagkakaproblema sa transportation, density development,鈥� BCDA Senior Vice-President for Business Development and Operations Joshua M. Bingcang said in an interview.

The lack of a concrete master plan made Metro Manila the victim of its own progress and development.

In a report prepared by property consultancy firm Colliers International Philippines entitled 鈥淪hifting Orbits,鈥� the company explained that the development of satellite master-planned communities would help relieve the metro of its population growth and poor public transport systems.

鈥淭hese issues continue to constrain Metro Manila from achieving its full growth potential. Developers are bridging infrastructure gaps and unlocking opportunities by building master-planned communities that have the potential to become major catchment areas for business activities in the country鈥檚 capital,鈥� read the Colliers report.

The blueprint for the entire development would allow BCDA to correctly time the sequence of projects for NCC. For instance, phase one would target only around 500 hectares out of the entire estate. This includes the infrastructure for power and water services, the construction of which is targeted to start by October this year.

鈥淲e鈥檙e just targeting core development,鈥� Mr. Bingcang said.

Other than the necessary utilities, Phase 1 would also include at least five government buildings, three schools, and mixed-income housing projects. The first phase of development will span five years until 2022.

Another key component for the city would be the creation of a mass transport system that would remove people鈥檚 dependence on cars.

鈥淪o the top priority will be mass transportation and least priority will be cars. If we can discourage the use of cars in the city, we might as well do that. [Of course, we can鈥檛 just remove cars.] But we鈥檒l provide an efficient mass transportation network,鈥� Mr. Bingcang said.

The executive cited the current state of Bonifacio Global City (BGC) to exemplify the need for a mass transport system in a business district.

More than two decades since it was developed by the BCDA in partnership with the Ayala Group, the area is falling prey to the traffic problems in other areas in the metro, making travel in the 240-hectare estate more time-consuming than it鈥檚 supposed to be.

鈥淲e take pride here in BGC, we have a master plan here. But we still lack spaces for mass transportation [which is causing traffic because of the lack of mass transportation]. Unlike in Clark City, the priority, the hierarchy will be mass transportation,鈥� Mr. Bingcang said.

Once in place, mass transport will make traveling easier for the 1.2 million citizens BCDA looks to attract. The cap for the city鈥檚 population will be put in place to ensure low density in the area, roughly comparable to the combined land masses of San Juan, Mandaluyong, Makati, Pasig, and Pasay cities. In contrast, the population of the five cities combined currently stands at over three million.

鈥淪o we don鈥檛 foresee congestion on human population. So those are some of the features in our master plan, that we take note of the problems here in Metro Manila,鈥� Mr. Bingcang said.

ALTERNATIVE TO METRO MANILA

With the master plan for its development already set, the next question to ask is whether companies would be willing to locate and expand into Clark.

Currently, Gotianun-led Filinvest Land, Inc. has two estates set to be developed in the Clark area, one of which is located inside NCC spanning 288 hectares. Meanwhile, another project called Clark Mimosa spanning 200 hectares is being pursued with Clark Development Corp.

鈥淢ost of our big-ticket projects now are in Clark, it鈥檚 for efficiency managing [them also]. The Clark airport, NCC, transportation requirements, the railway. [That鈥檚 the] necessity on why [companies] should be in Clark,鈥� Mr. Bingcang said when asked why investors should take their expansion plans to the Pampanga area.

Several big-ticket projects under President Duterte鈥檚 aggressive 鈥淏uild, Build, Build鈥� program are located in Clark as the area has already been being eyed as the alternative to Metro Manila, given its congestion problems.

For instance, the P12.55-billion Clark International Airport expansion will be the among the first infrastructure projects to finally see progress following the government鈥檚 search for bidders for its operation and maintenance.

Additional capacity to be shouldered by the expansion of the Clark airport would be welcome relief, as the Ninoy Aquino International Airport in Manila has long been accommodating passengers well beyond its capacity. In 2016, NAIA reportedly handled 39.5 million passengers, higher by a third than its average capacity of 30.5 million.

The P300-billion railway project connecting Manila to Clark is also gaining ground, after the Department of Transportation named the first six stations for the project earlier this year. The transport department looks to start construction by the end of the year.

Moreover, major toll roads currently link Clark to other areas of growth. The Subic-Clark-Tarlac Expressway (SCTEx) covering 93.77 kilometers has helped spur economic growth in the Central Luzon Region by reducing travel time from Clark to Subic to 40 minutes and Clark to Tarlac to 25 minutes.

The expressway also serves as the pathway linking Subic Seaport and Clark International Airport, pushing Central Luzon to trade directly with international markets.

The SCTEx has further prompted the construction of the 88-kilometer Tarlac-Pangasinan-La Union Expressway, which aims to shorten travel time from Manila to northern parts of the country.

As long as the elements needed for Clark to accelerate its growth are properly set in motion, it may not be too long before the Philippines sees a new, world-class metropolis rise in Pampanga.

Arra B. Francia is a reporter for 大象传媒. She covers the Philippine Stock Exchange and the Securities and Exchange Commission.

]]> /research/2018/01/03/99785/new-regulations-prevent-govt-execs-writing-checks/ Wed, 03 Jan 2018 10:40:38 +0000 http://www.bworldonline.com/?p=99785 by ELIJAH JOSEPH C. TUBAYAN

When former President Benigno S. C. Aquino III got elected in June 2010, he vowed to get rid of corruption and institute good governance reforms.

Three months into his term, he signed an Executive Order (EO) to stop government-owned and -controlled听 corporations (GOCC) officials from receiving excessive bonuses 鈥� a practice that was institutionalized during his predecessor鈥檚 administration.

Upon signing EO No. 7, then-President Aquino imposed a moratorium on increases in the rates of salaries, allowances, incentives, and other benefits on all GOCCs.

Despite disallowing directors of government corporations from writing their own checks, they were nevertheless entitled to increased adjustments, thanks to Joint Resolution No. 4 of 2009, or the Salary Standardization Law (SSL) 3 鈥� which some GOCCs currently follow and which was approved by then-President Gloria Macapagal Arroyo, then-Senate President Juan Ponce Enrile, and then-Speaker Prospero C. Nograles.

To further tighten check government executives鈥� salaries and performance, President Aquino signed Republic Act (RA) 10149 into law.

The GOCC Governance Act of 2011 created a regulatory body for the state-run corporations called Governance Commission on GOCCs (GCG), resulting in the review for a standardized compensation scheme for government corporations.

Four and a half years later, Mr. Aquino signed EO 203, allowing all GOCCs covered by the Governance Act to adopt a Compensation and Position Classification System (CPCS). Simply put, the move makes GOCCs鈥� salary schedule competitive with their private sector counterparts, and more attractive than the SSL3 adopted by national government agencies, as well as some government-run firms.

The measure also intended to curb abuses 鈥� as any additional incentives outside the schedule has to be approved by the GCG and the President 鈥� but still allowed them to enjoy higher paychecks, 鈥渢o attract, retain and motivate a corps of competent civil servants.鈥�

Meanwhile, this same presidential directive 鈥� which makes salaries of government executives commensurate to private sector pay 鈥� was suspended later on by Mr. Aquino鈥檚 successor.

A year after assuming office, President Rodrigo R. Duterte signed EO 36, which discontinued Mr. Aquino鈥檚 EO 203, due to the same problem: GOCCs鈥� abuse of excessive salaries and perks. This included the repeal of Section 6 in the same EO, which authorizes additional incentives outside the CPCS upon the approval of the GCG and the President.

In suspending Mr. Aquino鈥檚 EO, President Duterte even made sure that any pitch to increase salaries in government-led corporations will have to pass by his office first, adding he wasn鈥檛 inclined to approve it.

鈥淵ou cannot do it on your own. You have to direct it to the Executive Secretary and I will just tell you, I am not inclined to give increases right now,鈥� the President said in his second State of the Nation Address, days before he signed EO 36.

Without these incentives, Mr. Duterte鈥檚 directive may discourage officials 鈥� especially those coming from the private sector 鈥� to continue working in government corporations.

However, according to GCG spokesperson Johann Carlos S. Barcena, these orders nevertheless had the effect of allowing officials to see increases in their salaries, thereby making them stay in their positions.

After all, even though Mr. Duterte suspended Mr. Aquino鈥檚 EO 203, officials were still entitled to increased adjustments, based on Joint Resolution No. 4 of 2009.

As a result, 鈥渢here were officers and employees affected in the sense that their compensation even increased,鈥� Mr. Barcena said in an interview.

This is because ever since Mr. Aquino laid out GOCCs鈥� uniform salaries, and the approved additional allowances that came with them, none of the state-run firms really had the capacity to adopt it.

鈥淒espite the issuance of EO 203, no GOCC was able to fully comply with its requirements. As such, GOCCs still remained to either be SSL-covered or SSL exempt,鈥� said Mr. Barcena. Salary adjustments still would 鈥渄epend on the financial capability of the GOCC and their corporate operating budget,鈥� he added.

Currently, almost half of over 200 GOCCs covered by GCG are bound by the 2009 SSL, while some are exempt.

Based on Mr. Duterte鈥檚 order, SSL-covered GOCCs shall uniformly adopt the听 Modified Salary Schedule under EO 201. On the other hand, those exempted can choose to maintain their current compensation framework, or likewise follow EO 201, with the GCG鈥檚 approval.

鈥淪o by implementing EO 36, that actually moved to retain talent in these corporations that followed the SSL,鈥� said Mr. Barcena. 鈥淚t was the issuance of EO 36 that would allow these GOCCs to follow the compensation schedule under EO 201.鈥�

Since the moratorium, some SSL-exempt GOCCs haven鈥檛 had any salary increases for the past seven years, even adjustments for inflation.

鈥淪o in that sense, that move was to at least retain certain talent in these corporations instead of seeing them move to the private sector or elsewhere,鈥� Mr. Barcena said.

However, it does not end there. EO 36 only acts as an interim measure, a prelude to a bigger reform agenda for a new rationalized and harmonized compensation plan 鈥� which the GCG is currently reviewing.

鈥淓O 36 is鈥� an interim measure, moving forward for implementing a CPCS, unique to government corporations,鈥� Mr. Barcena said.

The new scheme would be consistent with the same standards laid out in RA 10149, ensuring that the rates of government employees in the government corporate sector would be comparable to the private sector.

鈥淲e鈥檙e really keen on reforms, even under this administration,鈥� Mr. Barcena said. 鈥淭hey want results at the shortest possible time, and we鈥檙e trying to do the best that we can to deliver the results to ensure that during the term of the President, we can have something to show that will benefit the people.鈥�

Elijah Joseph C. Tubayan is a reporter for 大象传媒. He covers the Department of Finance and the macroeconomy sector.

Sycip Gorres Velayo & Co. (SGV) continues to be the most sought-after auditing firm by the country鈥檚 biggest corporations in 2016.

Not only did it manage to keep its top ranking among auditors, it also increased its market share, bagging more than half of the companies in this year鈥檚 listing.

The Philippine member of Ernst & Young (EY) audited the financial statements of 513 companies that made it to the latest Top 1000 Corporations ranking, adding 74 more than in 2015 and increasing its market share to 51.3% from 43.9% in the previous year.

Meanwhile, Isla Lipana & Co. (ILC), the Philippine member of PricewaterhouseCoopers (PwC) landed on the second spot with 152 clients, adding 12 more firms from the previous edition鈥檚 140. Consequently, its market share increased 15.2% from 14% previously.

R. G. Manabat & Co. (RGM), a member of KPMG International, followed with 98 firms or 9.8% market share, down from the last edition鈥檚 118.

Punongbayan & Araullo, a member of Grant Thornton International, maintained its fourth spot as 45 of its clients landed on the Top 1000 list, lower by four companies from the previous year.

Completing the top five auditing firms was Reyes Tacandong & Co. 鈥� a member firm of RSM network which is administered by RSM International Ltd. 鈥� with a 2.3% market share, or 23 client firms which made it to the list. However, this was lower than the 30 firms in the previous edition.

鈥淚n the last five years, through SGV鈥檚 Talent Hub and the EY Global Delivery Services office, SGV has focused on delivery support to the audit and advisory services of the global EY organization. Our service footprint has expanded not just locally but also into the international market,鈥� said SGV Chair and Managing Partner J. Carlitos G. Cruz.

For their part, ILC Chair and Senior Partner Alexander B. Cabrera said: 鈥淲e focus not only on our core business but also help certain sectors of the industry.鈥�

鈥淵ou can help and you don鈥檛 need to earn all the time. If that helps business, or the economy in general it is still worth it. There is nothing wrong about working to improve the overall business climate and business environment because that is the environment where we play,鈥� he added.

Meanwhile, RGM Chair and Chief Executive Officer-Designate Sharon G. Dayoan said: 鈥淪ince the new management took over 10 years ago, we have been able to register a positive growth in our revenues and clientele despite economic and regulatory challenges.鈥�

Companies in the top 20 spots retained their auditors except for Pilipinas Shell Petroleum Corp. (4^th in this year鈥檚 Top 1000 list) and Toshiba Information Equipment (Philippines), Inc. (5^th spot). Pilipinas Shell Petroleum Corp. was previously engaged with ILC but tapped SGV in 2016. It was the other way around for Toshiba Information Equipment (Philippines), Inc. (from SGV to ILC).

On the other hand, companies who changed auditors were 65^th-placer Metro Drug, Inc. (moved to RGM from ILC), 107^th-placer听 STMicroelectronics, Inc. (from ILC to SGV), 110^th-placer听 Alaska Milk Corp. (from RGM to ILC), 130^th-placer Shell Philippines Exploration B.V. (from ILC to SGV) and 141^st-placer Pilipinas Kao, Inc. (from SGV to ILC).

The number of auditors that had five or more clients in this year鈥檚 Top 1000 dropped to 11 from the previous edition鈥檚 13.

Christine Joyce S. Casta帽eda is a senior researcher of 大象传媒鈥檚 Research Department.

How does your firm keep its edge?

SGV Chair and Managing Partner J. Carlitos G. Cruz: Given our 71-year track record in the Philippines and the region, SGV understands that we should always stay ahead of the curve of the ever changing business environment while maintaining our values of integrity, excellence and accountability. In order to do this, we have to be able to spot and move beyond barriers that reduce our ability to engage, creatively solve problems, and continuously learn and perform on the job.

One of our core values is lifelong learning and we take this to heart by constantly updating our knowledge and skills, sharing valuable thought leadership on the market, industries, business developments and future trends that can help businesses forge ahead.

From quality client service to the personal and professional development of its people, SGV鈥檚 deep and abiding quest for excellence flows through the entire organization 鈥� and even beyond, as seen in the numerous professionals who have gone to serve as outstanding leaders in both the public and private sectors.

ILC Chair and Senior Partner Alexander B. Cabrera: It鈥檚 not about keeping the edge. It鈥檚 about keeping true to who we are as a firm and as a group of professionals. We strive to be excellent in our profession, but we are not just about our profession. That鈥檚 why we also stay close to the advocacies of our people and we look for different ways to express those advocacies and our people鈥檚 creativity.

The medium of expression can be intra-firm, or to the business community, or through social corporate responsibility projects. For example, we act as knowledge partner for different organizations and come up with unique publications that not only provide information but also amuse the readers.

RGM Chair and Chief Executive Officer-Designate Sharon G. Dayoan: We differentiate ourselves by keeping our clients at the center of our business coupled with strong evidence of our commitment to consistently observe professional standards and regulations. We make sure that we understand our clients鈥� business and growth ambitions to be able to deliver quality professional work and value added services to them. We do this by enhancing our expertise on high-growth sectors 鈥� building and sharing knowledge on these sectors across our audit, tax and advisory teams. Our affiliation with KPMG also ensures that resources to build our capability such as various Centers of Excellence and global leading practices and methodologies are accessible.

Technology also plays a big part in keeping our edge. In audit, for example, we have adopted Data & Analytics which has enabled us to test complete data populations and understand reasons behind outliers and anomalies thus providing a more efficient and value adding audit.

Lastly, and more importantly, we have not wavered in our focus on our people. Our people and training programs are top priorities and we regularly send our people to secondments and trainings abroad to hone them professionally and to bring over best practices.

What do you think are the reasons why companies have entrusted or have continued to entrust their financial reports to you? How do you take care of your clients?

Mr. Cruz: SGV has earned a reputation for excellence in serving the Philippines鈥� top companies. The depth and breadth of our organization provides us with the resources to meet a multitude of client needs. Our unparalleled services have been sought by emerging companies as well, making our client network stronger and more diverse. It is our goal to not only provide top-quality audit services, but to also become a trusted business advisor for our clients.

All our services are designed to address every client鈥檚 particular needs. A key element of the firm鈥檚 process is our focus on the business itself on top of the financial aspects of a business鈥� operations. SGV鈥檚 emphasis has always been on selecting and developing the very best people because the competence, care, and commitment of the individuals who perform the audit make the real difference in the quality of our service.

SGV has in place a Quality Management System to ensure quality in the delivery of its services and compliance with local and global professional standards. In our work, we recognize our responsibility not only to our clients but also to a broader group of stakeholders who rely on our work such as investors, financial lending institutions, the profession, the government, and the public in general.

Mr. Cabrera: Firstly, we need to stay agile, even as we take care of our clients鈥� and our firm鈥檚 reputation. If that reputation is protected, the co-branding that you鈥檝e established with the client is also protected. Our reputation over the firm鈥檚 95 years of existence is built with integrity at its core. Agility requires us to really understand, solve not only the inquiries that our clients put forward but to solve their business issues. We focus on the business issue behind the problem, not only the surface of the problem.

The financial reports are just some of the things that they entrust to us. The firm is so much more than the audit or assurance. The firm is about taxation planning, business consulting, a lot of IT-related services, deals assistance and corporate finance, and data analytics. Nowadays, it鈥檚 really more than just the financial report. It鈥檚 how you maximize that financial report and other data outside the report to your advantage.

Ms. Dayoan: Trust is not earned overnight. We believe that our commitment to quality and excellent service are the main reasons why we have become over time a trusted auditor and advisor.

We take care of our clients in many ways possible. We invest in infrastructure and hire highly talented people for our clients. We evolve, innovate and access technological and technical solutions that are responsive to their current issues and challenges. We ensure that our level of engagement that we have with them allows working shoulder-to-shoulder for more upfront and frequent discussions on issues. We don鈥檛 stop thinking on how to further improve our services.

How was the competition in the auditing industry last year?

Mr. Cruz: Competition, as always, has been brisk and challenging. We welcome this, because we believe that the rise of the competition from audit firms is an excellent indicator of the sound fundamentals of the Philippine economy. This pushes us to provide better services for our clients, which, in the long run, can translate into a stronger business community for the country. In the end, the clients will always benefit from a highly competitive, increasingly competent professional services industry.

Mr. Cabrera: I would say that the competition sometimes engages in a race to the bottom. We are very careful in proposing this way because we are not working around the fee that was set but rather what really needed to be done. In our case, regardless of the fee that we propose, we need to come up with quality work that is required. We don鈥檛 take any shortcuts 鈥� you can blame us for that 鈥� but that is also how we have protected our reputation.

Ms. Dayoan: The competition in the auditing industry has been steadily increasing given the demands of the business sector and regulatory charges. The local regulators are increasing focus on audit practices and stepping up their efforts to be in line with what the members of the IFIAR are doing. A lot is also happening outside the Philippines. The audit firm rotation in EU has caught on. There are some global companies who voluntarily adopted the same policy. Accordingly, a number of global tenders have been made and this affects the local industry as well. The impact can go both ways for the local players.

Last year, what were the challenges you faced in auditing companies鈥� financial reports? How were you able to cope with those challenges?

Mr. Cruz: Digitalization and globalization, coupled with more complex accounting standards, have made business transactions, processes and eventually the preparation of companies鈥� financial statements and other reports more complex. We were able to address these through the application of our audit methodology and risk management processes, utilizing the strength and resources of our global network, and supported by rigorous training for our people with an increased emphasis on professional scepticism and quality service delivery.

Mr. Cabrera: I think the challenge would be 鈥� not for us in particular but for the entire industry in general 鈥� is the expectation of the companies. Somehow, they鈥檙e bordering on the expectation that you will catch fraudulent transactions and this is actually a challenge for all auditing firms because the inherent limitation of audit is fraud and collusion. You need a special kind of audit 鈥� the forensic audit 鈥� in order to uncover fraud and collusion inside the company. Clients have some expectation that you will catch fraud happening. That鈥檚 very challenging for an auditing firm especially if the scope is not for that purpose. I think that鈥檚 a problem not only for us but for the entire industry, these changing expectations. This is even made more difficult by the fact that sometimes the

audit firms race to the bottom as far as fees are concerned. It is more difficult for the fee not to impact the resources you will devote.

We grow our clients to the extent that we can still give them our personal attention because that is what clients like about us: that we鈥檙e able to engage them in a more personal manner and we need to be present when they need to see us.

Coming up with more efficient ways of working is also important. The rest of it is just really living with these realities. We try to educate our clients about the value that we bring. If clients value those things that we can provide, then they would also appreciate that it is really value for money that they鈥檙e getting.

Ms. Dayoan: Last year was the first time that a discussion of Key Audit Matters (KAM) is required to be included in the audit report on financial statements of companies with publicly traded shares. KAM are matters, which in the auditor鈥檚 judgement, were considered significant in the audit of the current period financial statements.

Although this was implemented in 2016, we have been preparing for this much earlier. In 2014, our partners and teams already started discussions about this with our clients. Then in 2015, we presented customized draft KAM to our clients鈥� Board of Directors and/or Audit Committees (ACs) to give them an opportunity to see, much earlier, how KAM will look like, what matters are discussed and address any concerns that they may have had with this requirement of the Philippine Standards on Auditing at least a year before implementation. This has allowed better communication with by the Board and ACs when the KAM discussion was made mandatory in the 2016 audit reports. Internally, the firm designated a committee of experienced partners that was tasked to review the KAMs drafted by audit teams to ensure consistency of compliance with the requirements and with leading benchmarks.