Tax take down as POGO workers flee COVID-19
The Bureau of Internal Revenue (BIR) reported that tax collections from Philippine Offshore Gaming Operators (POGOs) have been declining due to the COVID-19 pandemic. BIR Deputy Commissioner Arnel Guballa said that POGOs are shutting down their operations due to the rising number of COVID-19 cases in the country. Meanwhile, the Philippine Amusement and Gaming Corporation (PAGCOR) said that there were about 55 registered operators as of September 8, down from the 60 reported previously. Two POGOs have also recently closed due to taxation problems. Data from PAGCOR showed that about 99 accredited local service providers and gaming agents have been given the green light to resume operations. Finance Secretary Carlos Dominguez said that the government can collect about PHP20 billion (USD413 million) in taxes from POGOs each year. In 2019, tax collections from POGOs reached PHP6.4 billion (USD132 million) due to the government’s crackdown on tax evading POGOs.
Colliers expects subdued demand from POGOs in 2020 due to travel restrictions. In H1 2020, Colliers only recorded about 261,000 sq metres (2.8 million sq feet) of transactions, down 64% from the 730,000 sq metres (7.9 million sq feet) posted in H1 2019. POGOs accounted for 30% of total transactions or 79,000 sq metres (850,000 sq feet) during the period. Pre-COVID, we projected that POGOs to absorb about 300,000 sq metres (3.2 millon sq feet) of the initial 900,000 sq metres (9.7 million sq feet) of office take-up that we projected for in Metro Manila in 2020. Despite the sluggish take-up from POGOs, Colliers believes that the traditional (covers non-POGO and non-outsourcing tenants) and outsourcing segments are likely to fill the void once the pandemic wanes and office demand recovers. Colliers encourages landlords to be more accommodating to non-POGO firms by offering extended fit-out periods and rental concessions.
Arrivals down 76%, but travel fair nets buyers
Data from the Department of Tourism (DOT) showed that international tourist arrivals from January to August 2020 reached 1.32 million, down by 76.3% YoY. Inbound visitor receipts also declined by 75.2% to PHP81.05 billion (USD1.7 billion) during the period. Despite the decline, 124 attendees worldwide were booked to join the upcoming Philippine Travel Exchange (PHITEX) 2020. The virtual hybrid trade event, scheduled from September 22 to 24, 2020, will be hosted in Panglao, Bohol featuring 161 sellers from several provinces in the Philippines. Tourism Promotions Board (TPB) Chief Operating Officer Maria Anthonette Velasco-Allones noted that the largest group of attendees will come from Indonesia, China, South Korea, Russia, the United States, and the United Kingdom. Bohol Governor Arthur Yap added that physical participants will be required to undergo quarantine and RT-PCR testing as part of the safety protocol.
In June 2020, DOT-NCR Regional Director Woodrow Maquiling Jr. mentioned that the agency was able to keep 478 hotels across NCR open during the quarantine. Operating establishments catered only to repatriated Overseas Filipino Workers (OFWs), health workers, and those from essential industries. For the remainder of the year, we expect demand for the hospitality sector to decline given the limited operations of hotels and the drop in tourist arrivals. This should result in lower occupancy rates for the remainder of 2020 and a 30% decline in Average Daily Rates (ADR) of hotels in Metro Manila. Government-led programs, such as the PHITEX 2020, will likely help boost the recovery of the sector once the pandemic is contained and travel restrictions are lifted. In the meantime, we recommend that operators utilize technology to upgrade their services and enhance the customer experience in preparation for the re-opening of tourism. Innovative features, such as robotic butlers and smart hotel rooms, may help attract travelers.
104 infra projects in the works in 2021
Acting National Economic Development Authority (NEDA) director general Karl Chua said that the government’s 104 infrastructure projects will likely be up for construction by 2021. These projects are expected to undergo pre-implementation of right of way, actual construction phases and other phases of implementation. Department of Finance (DOF) Secretary Carlos Dominguez also added that infrastructure projects will likely result in the creation of jobs and induce a multiplier effect to the economy. According to NEDA, the 104 infrastructure projects have a total value of PHP4.13 trillion (USD85 billion).
Data from the Department of Budget and Management (DBM) showed that the government plans to spend about PHP1.107 trillion (USD24 billion) for infrastructure projects in 2021, 13.4% higher than the 2020 spending plan of about PHP976 billion (USD20 billion). The 2021 infrastructure spending budget will likely account for about 5.4% of the country’s GDP. Colliers previously noted that infrastructure projects have the capability of improving accessibility, raising property prices, and unlocking land values. We recommend that developers closely monitor the upcoming projects due to be completed within the next 6-18 months such as the Skyway Stage 3, BGC-Ortigas Link Bridge, LRT-2 East Extension, Estrella-Pantaleon Bridge and the Clark International Airport. Colliers believes that the intensified infrastructure spending for 2021 should provide impetus for developers to ramp up completion of projects. These infrastructure projects should also raise demand in the property sector.