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A broader look at today’s business Sunday, March 25, 2018 Vol. 13 No. 165
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‘BBB’ fast becoming a threat to property developers T
n
By VG Cabuag
he 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 bigticket projects to boast, while real-estate prices continue to soar by the day.
Waiting game
“The TRAIN has been completed, hopefully the ‘wait’ is finally over and the ‘build’ will start,” a company executive said, referring to the first phase of the Tax Reform for Acceleration and Inclusion, or TRAIN, law that took effect early this year. Thus, as companies wait for the machines to actually dig the ground, many investors are instead putting their money into real estate. “They have so much liquidity, and they don’t know where to put it. We all thought that once we signed the documents [for the infrastructure deal], that’s it, the project will be started. But until now we’re still waiting,” the executive said.
Land sellers’ market
In the Philippines, only a few companies can carry out these big-ticket projects, with the likes of the Ayalas, the Sys of the SM group and Aboitiz, along with the companies headed by businessman Manuel V. Pangilinan. Ayala Land Inc. and the SM group, for instance, are rushing to acquire parcels of land for development in the reclaimed area of Entertainment City in Parañaque, as both ride on the tourism windfall of the huge integrated resort-casinos in the area. A new Ayala mall will rise at
the Aseana City complex adjacent to Pagcor Entertainment City, while the SM group is reportedly shopping for available land in the area, possibly the Ashmore property that sits right across Solaire Resort and Casino. The Wenceslao group, a construction firm, is also rushing to complete its Aseana City. According to Isidro A. Consunji, chairman of construction firm DMCI Holdings Inc., land prices will be skyrocketing over the next five or six years, and that prices already went up some five times in about six years in places like Pasig, Mandaluyong, Mall of Asia (MOA) in Pasay and Bonifacio Global City (BGC). “That’s good if you are selling land. But if it’s your raw material, then you will have problems because I think the price increase is too high,” Consunji said. DMCI is not as big compared with Ayala Land and SM Prime Holdings Inc., but it is in the business of property development since the 1980s, focusing on the residential part of the sector and not much into township. Consunji said in some areas in BGC, prices are now selling at P1.3 million per square meter and, in the MOA area, the price is at P300,000 per square meter. “It’s just unbelievable pricing. That [MOA area land prices] is expensive since you have to spend a lot on your foundation and then there’s a maximum height ceiling [of between 45 meters and 65 meters],” he said.
Double-whammy effect
According to Frederick Rara, research and consultancy manager of property broker KMC-Savills, there may be a double-whammy effect of the depreciating peso and rising oil prices on the Continued on A2
Workers at a construction site on Ayala Avenue, Makati City. Nonie Reyes
DOE embarks on crucial step in renewed renewable-energy push
I
By Lenie Lectura
n a bid to give power industry players enough time to comply with the renewable portfolio standards (RPS), the Department of Energy (DOE) has set a two-year period—from 2018 to 2019—as transition years to prepare the mandated participants in developing their compliance plans to the minimum RPS requirements. PESO exchange rates n US 52.1580
This is so since the success of the RPS, a DOE order that mandates distribution utilities (DUs) and retail electricity suppliers (RES) to source a portion of their power supply from eligible renewable-energy (RE) sources, relies on the power sector’s big players’ compliance. Violators are slapped with fines ranging from P100,000 to P500,000 or, upon the DOE’s discretion, revocation of license, franchise or authority to operate, and imprisonment of one to five years. This can easily be shelled out
by the big players, as most of them are also in the distribution and supply business.
Target
“[The] RPS is a good mechanism to help achieve the 35-percent renewables target. Enforceability and compliance are critical to make this an effective mechanism, and the current policy may need to be enhanced along these lines,” AC Energy President Eric Francia noted in an interview. “The DOE is giving the industry a head start to give time to build RE plants,” he added.
The DOE has issued Department Circular DC2017-12-0015, which prescribes the rules and guidelines in the establishment of RPS for on-grid areas. The circular mandates DUs and RES, including power-generation companies serving direct connection to customers, to source or produce a certain percentage of their electricity requirements from eligible RE resources. In particular, it should be less than 1 percent of their annual energy demand over the next 10 years. It also provides that eligible RE participants may use biomass,
waste-to-energy technology, wind energy, solar energy, run-of-river hydroelectric power systems, impounding hydroelectric power systems, ocean energy and geothermal energy, among the other systems, as defined in the RE Act. The RPS for on-grid areas is initially anchored on the country’s aspirational target of 35-percent RE share in the energy mix by 2030, which will be reviewed under the forthcoming updating of the National Renewable Energy Program (NREP). Continued on A2
n japan 0.4955 n UK 73.5323 n HK 6.6461 n CHINA 8.2414 n singapore 39.6126 n australia 40.1147 n EU 64.1700 n SAUDI arabia 13.9088
Source: BSP (March 23, 2018 )