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April 23, 2018

PH to benefit from China’s growth

Maybank Kim Eng, the leading investment bank in ASEAN region, sees the rise of China and new technology as two key forces that will drive ASEAN over the next 10 years and the Philippines stands to largely benefit from this since it has been getting a lot of funding from the world’s second largest economy. On the sidelines of Maybank Invest ASEAN conference being held now in Singapore, John Chong, Chief Executive Officer of Maybank Kim Eng Group, told reporters how the rise of China can lead the overall growth of ASEAN region in the next decade. He said that between 2006 and 2016, China’s outward investment into ASEAN has risen at a compound annual growth rate (CAGR) of 45 percent, from US$1.8 billion to US$ 71.6 billion, making it the largest foreign direct investment (FDI) contributor to ASEAN. Trade between ASEAN and China has also increased by 16 percent from 2016 to 2017. “For Maybank Kim Eng, the dual rise of China and tech presents new opportunities for us. For instance, we are looking into how we are able to provide access and open up channels for our clients to participate in this growth. We are also keen to capture the financing opportunities, particularly for the infrastructure projects,” Chong said. In particular, Chong said Maybank is on the lookout for opportunity as Philippines start to get more official development assistance (ODA) and investment pledges from China. “China is finding assets [in the Philippines] where they can invest in. It is looking [at sectors] to fund like infrastructure,” Chong said. “We are working on this”.
(Source: Manila Bulletin, 27 March 2018)


Data from the Philippine central bank reveal that foreign direct investments (FDIs) from China more than doubled to USD28.8 million last year from USD10.8 million in 2016. While still not among the major sources of foreign inflows, Colliers believes that the country’s improving stature as an ideal investment destination should encourage more Chinese firms, including those into property development, to aggressively invest in the Philippines in the next few years.  Colliers sees greater foreign participation in funding major infrastructure projects that should prop up land values across the country. Among the infrastructure projects that are up for possible financing are the Davao City expressway, Panay-Guimaras-Negros Inter-Island Bridge, Subic-Clark Railway, and the Laguna to Bicol passenger rail. All projects are outside of Metro Manila, lending support to the government’s decentralization thrust. Colliers believes infrastructure implementation and decentralization should provide a favourable backdrop for a thriving Philippine property market.

ALI grooms Prime Orion as logistics, industrial estate arm


Ayala Land Inc. is transforming Prime Orion Philippines Inc. (POPI) into its logistics and industrial estate arm with a P3-billion share-swap deal that will infuse Laguna Technopark Inc. (LTI) into this subsidiary. ALI has agreed to exchange its 75 percent stake in LTI into additional shares in POPI, owner and developer of Tutuban Center, the popular bazaar in Divisoria. POPI will issue 1.22 million common shares to its parent company in exchange for the stake in LTI. This transaction will boost ALI’s direct ownership in POPI to 63.90 percent from 54.91 percent, ALI said in a disclosure to the Philippine Stock Exchange. “Combining LTI and POPI will create a bigger entity that will pursue real estate logistics and industrial development and reposition POPI to be a leading real estate logistics and industrial estate developer and operator in the Philippines,” ALI said.
(Source: Philippine Daily Inquirer, 23 March 2018)
Robust manufacturing activities in the country are pushing firms to be more aggressive in developing industrial land and constructing warehouses. Developers have been acquiring parcels of land in Northern and Central Luzon in anticipation of greater industrial space demand due to the implementation of three major infrastructure projects in the region – Clark Airport expansion and modernization, Clark-Subic cargo rail, and Manila to Clark passenger rail. These projects should be complemented by and Cavite-Laguna expressway and NLEX-SLEX connector road. The Philippine economy has been accelerating over the past few years and we see this growth being sustained over the near to medium term by sectors such as investments, manufacturing, and exports. These economic segments also propel the demand for industrial parks and facilities across the country. Data from the Philippine central bank reveal that manufacturing investments rose to USD1.15 billion in 2017 from USD334 million in 2016. Meanwhile, storage and transportation investments surged to USD48.5 million in 2017 from USD7.8 million in 2016.


‘BBB’ fast becoming a threat to property developers

The Duterte administration’s “Build, Build, Build” (BBB) program promises to usher in a “golden age” in infrastructure buildup in the country to boost the economy and subsequently improve the lives of Filipinos as the Chief Executive promised in his campaign sorties in 2016. However, almost two years after President Duterte assumed power, the construction industry sector is yet to experience the fulfillment of that promise, or even just half of it. A company executive has noted that the Duterte administration only has a handful of big-ticket projects to boast, while real-estate prices continue to soar by the day.
(Source: Business Mirror, 25 March 2018)
Overall, Colliers believes that the government’s “Build, Build, Build” program  should play a crucial role in propelling  the country’s economic growth and this should trickle down to major sectors such as real estate. The ushering in of the "golden age of infrastructure" lends support to the government's decentralisation push which should unlock land values in areas outside of Metro Manila and stimulate business activities in the countryside. Among the provinces in the Northern-Central Luzon corridor that should benefit from ramped up infrastructure spending are Pampanga, Bulacan, and Tarlac. To the South, we see Cavite, Laguna, and Batangas benefiting from the  government’s infrastructure push. Given this, we recommend that developers zero in on the thriving opportunities outside of the country's capital. Ultimately, we see the government's infrastructure policy dictating the strategies of both local and national developers.



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