Consortium bullish on PH, Cavite airport

Amid the deflating news of the massive dumping of Philippine stocks by foreign investors last week come bracing words from the foreign partners of a local consortium proposing to build an international airport and seaport on reclaimed land off Cavite City.

“They’re (the foreign partners) bullish about the Philippines and its development prospects, particularly the development of the country’s newest international gateway, one that will be responsive to the nation’s booming economy and thriving tourism industry,” said William Tieng, chairman of Solar Group, the lead local partner of All-Asia Resources and Reclamation Corp. (ARRC) consortium.

The ARRC is the local proponent of a proposed project to redevelop Sangley Point, the former United States naval station on the tip of the Cavite peninsula. The base was officially turned over to the government of the Philippines in 1971, ending 73 years as a US facility. It is now operated as a military base by the Philippine Air Force (the Danilo Atienza Air Base) and the Philippine Navy (the Heracleo Alano Naval Base).

“These foreign business entities have expressed in writing their firm commitment to participate in these modern and major job-generating projects,” Tieng said.

Tieng’s brother Wilson sits as chair of ARRC while Manuel Beriña Jr., former deputy director general of Public Estates Authority (PEA), is the firm’s president and CEO.

Tieng said their foreign partners, mostly Europe-based, include: Flugfahen Munich, operator of the Munich airport in Germany; Hamburger Hafen und Logstik, the biggest operator in the Hamburg port, also in Germany; the Italian rail company Ferrovie Circumvesuviana; power firm Isoluc Corsan; Deutsche Bank; COWI, Inros Lackner and GMP Architects; contractors Hochtief and Rizzani de Eccher; and Royal Boskalis Westminster, the lead reclamation contractor.

Sangley Pt. redevelopment

The ARRC submitted last Jan. 10 its letters of intent to undertake the twin projects to the Department of Transportation and Communications (DOTC) and the Philippine Reclamation Authority (PRA), the renamed PEA, the agency that acts as the clearing house for reclamation projects in the country.

The Inquirer has obtained copies of both letters, where Beriña proposed, among other things, naming their airport and seaport projects as ASIA and ASIS, short for Aquino-Sangley International Airport and the Aguinaldo-Sangley International Seaport, respectively.

He said the ARRC proposal was “in response to the need to develop premier international gateways in the country, as well as Executive Order No. 629, Series of 2007, directing the PRA to convert Sangley Point in Cavite City into an international logistics hub with a modern airport and seaport through an enabling reclamation component.”

The ARRC concept was “drafted in line with the vision of placing the Philippines in the forefront of international trade development. The concept project proposal will be undertaken in two phases at Danilo Atienza Air Base on Sangley Point,” Beriña said.

Proposed airport

Construction of Phase 1 of ASIA, or the airport project, is estimated to run from 2014 to 2018 (or up to 2020).

It calls for the “reclamation of 2,500 hectares on the flight line of the Atienza Air Base, development of a 50-million-a-year airport terminal and the first of two runway systems estimated to cost P56.2 billion and P45 billion, respectively,” the letter of intent read.

“The development of a 50-million-a-year passenger terminal is demand-driven based on the current 31 million annual passenger traffic in the Ninoy Aquino International Airport (Naia), the capacity of which is constrained by limited space,” it said.

Based on Manila International Airport Authority (MIAA) statistics, the four Naia terminals handled a total of 31.6 million airline passengers in 2012, an increase of 6.2 percent from 29.7 million passengers serviced in 2011. The 2012 figure is composed of nearly 14 million passengers who boarded international flights and 17.6 million passengers who took domestic flights.

Naia Terminals 1 and 2 have been operating way above their original designed capacities of 4.5 million and 7.5 million annually.

In 2011, Naia 1 was named the world’s worst airport by “The Guide to Sleeping in Airports,” an interactive website that gathers reports from various reviewers.

The ranking was based on reviews of travelers who complained, among other things, of safety concerns, lack of comfortable seating, rude staff, hostile security, poor facilities and general hassles of being in the airport.

In its letters of intent, the ARRC also proposed the “redevelopment of the Naia complex with the relocation of the Atienza Air Base to Runway 06-24 in the Villamor Air Base. It also called for redevelopment of Naia 1 into a “greenbelt mixed residential area” between 2020 and 2025.

Better than Clark

Touting the advantages of its proposed airport, the ARRC report said “the adjacent areas and approaches to the ASIA are largely over water and would allow airport operation on a 24-hour basis.”

It said there is space available for the expansion of the airport for a third runway, which would not be possible anymore in the Clark International Airport at the Clark Freeport Zone, which now serves as a budget airline hub and has been widely touted as a possible main international airport for the country.

“The availability of space for the expansion of the airport for a third runway is possible while this will not be possible in the Clark International Airport anymore. This makes investment in the development of Sangley a long-term strategic outlook that is driven by logic and not politics … As Sangley becomes integrated into the Greater Metro Manila Area, this will enable the metropolis to retain its bragging rights of being the seat of the premier international airport and capital of the Philippines,” ARRC said.

Seaport project

Meanwhile, Phase 1 of the ASIS project calls for the reclamation of 50 ha offshore of the Atienza Air Base with a budget of around P8 billion, and the construction of a 200-million-liter capacity bulk liquid port, estimated to cost P10.8 billion.

“The development of the bulk liquid port is demand-driven, resulting from the proposed relocation of the existing 83-million-liter capacity of the Pandacan depot (in Manila), which supplies 70 percent of the shipping industry’s needs, 90 percent of lubricant requirements, 75 percent of all aviation fuel needs, and 25 percent of the demand for chemicals,” the ARRC explained.

Related infrastructures

The twin projects will also require the “development of the connecting road, rail and water transport infrastructures to enhance accessibility and sustain passenger and cargo traffic growth.”

The ARRC proposed the construction of the 17-kilometer Sangley-CavitEx to link the projects to the Naia complex; a 32.5-km Aguinaldo Light Rail Transit, using the alignment of the Sangley-CavitEX link to the Naia complex and Tramo to connect to the Metro Rail Transit Line 3 Taft Station; and an 8-km, four-lane, snake-shaped cable-stayed bridge linking the twin projects to Boulevard 2000.

The bridge project alone is estimated to cost at least $2.3 billion, according to ARRC.

DOTC, PRA briefed

On March 19, ARRC executives briefed top DOTC and PRA officials on the “technical and economic justifications for the development of Sangley Point,” as well as the “global projects and consultancy services track records” of the firm’s foreign partners.

Those who attended the presentation included Transportation Secretary Joseph Emilio Abaya and Undersecretary Rene Limcaoco; PRA General Manager Peter Anthony Abaya; and PRA Chairman Roberto Muldong, among others.

On April 5, the company wrote both the DOTC and PRA, committing to “complete the feasibility studies (of the two projects) within six to eight months from the issuance of a PRA board resolution approving the reservation of the right to reclaim in the designated areas (off Cavite City) and a DOTC comfort letter, acknowledging receipt of the unsolicited conceptual proposal of the ARRC.”

By Jerry E. Esplanada / Philippine Daily Inquirer / June 16, 2013

Markets plunge as foreign funds exit PH

MANILA, Philippines - Local financial markets suffered heavily yesterday as foreign fund managers continued to withdraw funds from equities and other local assets amid a slew of negative  news on the domestic front.

Analysts also said encouraging developments in the US prompted investors to exit the local bourse, dragging down the peso in the process to its lowest level in more than a year.

The Philippine Stock Exchange index (PSEi) plunged 4.64 percent or 318.95 points to settle at 6,556.65, the largest single day loss since slumping 5.13 percent on Sept. 23, 2011.

“Regionally, the trend is that foreign investors are exiting,” Jose Mari B. Lacson, head of research at Campus, Lanuza & Co. Inc., said in a phone interview.

“The selloff was driven by local economic data released yesterday plus the continued selloff of foreign fund managers,” said Freya Natividad, analyst at Papa Securities.

Philippines’ robust economic growth failed to offset figures in the jobless rate as unemployment rose to 7.5 percent in April from last year’s 6.9 percent while merchandise exports declined 12.8 percent last month.

“The critical here is the flow of foreign funds, until when will this rebalancing persist,” Justino Calaycay Jr., analyst at Accord Capital Securities, said in a phone interview.

The sharp plunge in the equities market brough the peso  to its lowest level in more than a year, closing  42 centavos lower at 42.78 to a dollar. This was the peso’s weakest performance since it hit 43.27 last June 8,2012. The Bangko Sentral ng Pilipinas (BSP) was quick to calm the market, which it said is reeling from positive news in the United States, which could trigger the scaling down of cheap stimulus money.

 “Just like other currencies in the region, the peso’s movement today has been driven largely by news from Japan and over the weekend from the US,” BSP Governor Amando Tetangco, Jr. said in a text message to reporters.

On the other end of the spectrum, private sector analysts and industry players have instead welcomed the development, saying the peso’s weakness is making the Philippines more competitive.

Sergio Ortiz-Luis Jr., president of the Philippine Exporters Confederation, said the country’s exports, which plummeted 12.8 percent in April, could become more attractive to buyers abroad at cheaper price.

 “This is good news for us,” Ortiz-Luis said in a phone interview

The export industry was the sole drag to the already fast first-quarter economic growth of 7.8 percent, according to data from the National Statistics Office. Exports of goods and services contracted 6.6 percent during the period.

To help the exporters, the peso should move at its current level versus the dollar “for at least 60 days” which is the lag between the order and delivery of products, Ortiz-Luis pointed out.

The peso started weakening last May and has lost 2.3 percent since June 7, its biggest two-day drop since August 2007.

For his part, Jonathan Ravelas, chief market strategist at BDO Unibank Inc., said a weak currency adds value to remittances from overseas Filipino workers (OFWs).

This, in effect, could give families more purchasing power, driving consumption and investments to support growth. As of the first quarter, remittances grew 5.6 percent to $5.112 billion, BSP data showed.

Emilio Neri Jr., an economist at the Bank of the Philippine Islands, said a five percent depreciation of the peso is additional five percent value for remittances, “which could not be taken for granted.”

 At the same time, Ravelas said business process outsourcing (BPO) companies, projected to become $16-billion industry that employs 720,000 people this year, are also likely to benefit.

Regional markets also down

Regional markets also suffered losses after Bank of Japan refused to implement more stimulus programs. Japan’s Nikkei 225 slipped 1.45 percent while Hong Kong’s Hang Seng index dropper 0.99 percent.

“We are entering a more volatile period,” Lacson said, adding that PSEi’s rally on Monday was quickly erased.

Locally, all counters were in the red, led by property firms that plummeted 6.15 percent or 171.17 points to 2,613.62.

Alll active shares were in the red. SM Investments (-5.47 percent), Globe Telecom (-2.4 percent) and PLDT (-4.19 percent) reported heavy losses.

The value of shares traded eased to P12.54 billion from P14.22 billion on Monday.

“From being a bear-dominated market, we can see more tug-of-war happening,” Calaycay said, adding that there will be a wide range of trades moving forward.

Source: The Philippine Star / Business Update as of June 12, 2013

VIEW: Where did Philippines' growth come from?

VIEW: Where did Philippines' growth come from?

By Cielito F. Habito in Manila/Philippine Daily Inquirer |Asia News Network – 10 hours ago

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  The Manila skyline at night. (Yen Baet)

Manila (Philippine Daily Inquirer/ANN) - Now it's official: the Philippines is the fastest-growing economy in Asia. Beating China's first quarter growth (7.7 percent) by a hair, the 7.8-percent growth in gross domestic product (GDP) was proudly homegrown, achieved in the face of a hefty drop (-7 percent) in exports.

This implies that domestic demand for the economy's goods and services grew at such a rapid pace that not only did it offset the export decline; it even pushed overall growth to what many see as an unusually high rate.

There is something both usual and unusual about the first quarter growth. On one hand, such extraordinary growth is not so unusual for an election year. Recently, I noted how election years have seen growth exceed the average for nonelection years by 2-3 percentage points ("Elections and the economy," Inquirer, 5/14/13). This is because massive election spending by both candidates and government has a strong stimulative effect on the economy. In fact, the economy actually grew by an even faster 8.4 percent in the first quarter (and 8.9 percent in the second quarter) in the previous election year of 2010. With this, one would think that the recent growth was not such a mean feat after all.

But it is. Even with the above observations, there is still something unusual and impressive about the first quarter growth. Consider this: the Q1-2010 growth of 8.4 percent followed Q1-2009 growth of a mere 0.5 percent. This means that growth in Q1-2010 was built on a relatively low base, making it easier to post a higher percentage growth at the time. This is the so-called "base effect," which can go the other way around when the past year's growth is strong.

Note, however, that the country achieved 7.8-percent growth in Q1-2013 even as growth in Q1-2012 was a brisk 6.5 percent. This makes the recent growth even more impressive as it was built on a normal if not relatively higher base. Economic Planning Secretary Arsenio Balisacan was thus justifiably proud in dismissing doubts on the past year's already impressive growth rates as "being due to base effects only." The numbers clearly suggest otherwise, and that the economy is sustaining robust growth with vigor coming from within, at least so far.

It is constantly said that overseas remittances have propped up the economy's growth, as they put huge amounts of money in people's pockets to spend on their consumption requirements. Thus, it has largely been a consumption-driven growth especially prior to 2010, whereas an investment-driven growth would have been more desirable inasmuch as investment, by its very nature, builds even greater capacity for growth in the future.

Well, not this time. Household consumption had actually slowed down to 5.1 percent in the first quarter, after averaging 6.6 percent over the previous four quarters in 2012. But it was investment spending ("capital formation" in the GDP accounts) that zoomed, growing at a whopping 47.7 percent in the first quarter. Construction was the major driver: government construction grew by 45.6 percent over the past year, while growth in private construction was no less impressive at 30.7 percent. Meanwhile, investment in durable equipment and intellectual property products grew at 9.4 and 10.4 percent, respectively. What all this tells us is that growth was not primarily government-induced, as private investment was rather strong as well, reflecting continued high level of confidence in the business and general economic environment.

What did people invest in? Apart from new buildings and structures, the data show investments in durable equipment-growing most in tractors, mining and construction machinery, other specialized industrial machinery, air conditioning and refrigeration equipment, and other general industrial machinery. These data suggest that farms, mines and factories are being built or expanded, even as government has been building more roads, bridges and other public infrastructure to help generate more business.

What production activities pushed the economy's growth? This time, industry, particularly construction and manufacturing, posted the fastest growth at 10.9 percent, while services and agriculture grew by 7.0 and 3.3 percent respectively. I am particularly heartened that manufacturing accelerated further to 9.7 percent from an average annual growth of 7.5 percent since 2010, especially after writing last week of how the country now appears to be resuming the erstwhile aborted industrialization. Food manufacturing provided the primary boost (12.2 percent) along with radio/TV equipment, chemicals/chemical products, basic metal industries, machinery and equipment, all of which grew at double-digit growth rates. But mining took a beating, contracting by 17 percent overall with steep drops in the production of gold (-43.3 percent), nickel (-19.5 percent) and nonmetallic mining (-81.2 percent).

Banking and insurance led the growth in services, followed by government services and real estate. As expected, broadcast media, awash with campaign ads, boosted recreational services to a 21.3-percent growth. But agriculture has remained sluggish with a 2.8-percent growth, although fishing did better with 5.5 percent.

Overall, the good news lies in the brisk growth in the industrial sector, as it tends to bring better quality jobs. But the country needs to do much more work on agriculture. As the nation tries to broaden the sectoral composition of growth, it needs to ask not just where the growth is coming from, but more importantly, who benefits from that growth.

COPYRIGHT: ASIA NEWS NETWORK