Strategic Analysis and Research by the
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CENTER FOR STRATEGY, ENTERPRISE & INTELLIGENCE
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‘His net assets in 2002, the latest SALN we have, was P13.9 million, and we do not see there most, 40 of the [45] properties’ ~ Impeachment prosecutor Congressman Miro Quimbo, originally in Filipino, at January 12 press conference alleging that Chief Justice Renato Corona owned 45 properties
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‘We will have to make that reckoning insofar as that recollection, but that is not my recollection’ ~ Congressman Quimbo last week disputing a reporter’s view that he told media about the 45 properties
4 The High-Tech Future of Your Health
Life imitates art as technology thrusts health care and medicine further into the realm of science fiction. Today’s breakthroughs will revolutionize how we stay healthy • Telemedicine: Check-up and treatment by phone and PC — coming soon to a barrio near you • Doctor Twitter: Social networking media can help you stay healthy with a little help from your friends
16 How do you solve a problem
26 Making Money from Mass
Lambasted as one of the world‘s worst airports and a national embarrassment, Manila’s gateway gets set to reverse terminal decay • Horror story: A victim of airport theft recounts his tale • The P1.1-billion facelift: The government’s plan to beautify a 30-year-old airport • From NAIA to DMIA: Is the Diosdado Macapagal International Airport ready to become the country‘s next main gateway to the world? • From airstrip to Main Street: How airports are turning into mini-cities
Major property developers are venturing into low-cost homes. Can profits for the firm and service for the poor mix? • Give me a break: Incentives for low-cost housing providers • A seller‘s market: The mammoth demand for affordable homes
like NAIA?
Housing
34 Can Your Business Survive
POINT & CLICK
Just three years away before the deadline, are we ready for an ASEAN Economic Community? • Not the EU: Regional trade integration this side of the world is different from Europe’s, with less chance of a euro-style crisis
You can access online research via the Internet by clicking phrases in blue
ASEAN Free Trade in 2015?
40 The Growth Challenge
After last year‘s slowdown, here are some crucial factors that will shape this year‘s economic prospects • Spend, spend, spend: The government gears up to prime the pump
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48 The Framework to
Make PPP Work
The right policies and law are crucial in harnessing public-private partnerships for needed infrastructure • Public good, private gain: BOT, BOO, hybrid and other modes of PPP
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Center for Strategy, Enterprise & Intelligence provides expertise in strategy and management, enterprise development, intelligence, Internet and media. For subscriptions, research, and advisory services, please e-mail report@censeisolutions.com or call/fax +63-2-5311182. Links to online material on public websites are current as of the week prior to the publication date, but might be removed without warning. Publishers of linked content should e-mail us or contact us by fax if they do not wish their websites to be linked to our material in the future.
From political IT to health wonders, tech-head steps up This lead piece in this week‘s edition of The cenSEI Report discusses technology trends in health that we predict will be coming our way in the next 10 years, to help us diagnose ourselves, discover how we as individuals interact with certain drugs, and even “print out” replacement body parts and organs. These don‘t even include current advances in telemedicine that are already enabling longdistance diagnoses, and the growing popularity of social media for keeping in touch with medical and technological advances as well as patient feedback.
Ateneo graduate Mariano is always keen to learn about new things and tell readers about them
TCR‘s weekly technology section is our showcase for what we think are technological advances and issues that our assortment of readers should be aware of, if not because they‘re already locally available/applicable, then because they‘ll reach us soon enough. So in our still young collection of reports, we‘ve covered such topics as trends likely to govern the office of the future, the coming of cloud computing, and the possibility that smartphones might be equipped to help companies spy on their owners for commercial gain.
This week‘s lead piece comes to us from Tanya Mariano, a TCR writer-analyst who has covered other technology-related topics, such as the growing importance of biotechnology, the role of social media in promoting political activism, and the imminent displacement of the personal computer as the primary information-processing tool by smartphones and tablets. Every week, it‘s Mariano‘s responsibility to scour the online circuit for links to major empirical studies and science-technology news for discussion at TCR‘s Monday morning editorial meetings, a task for which she seems well-suited, coming as she does from a family of doctors and scientists. She remains familiar with the world of analytical, academic studies because while she graduated with a degree in Psychology from Ateneo de Manila University in 2007, she hasn‘t actually stopped studying, given that she‘s now pursuing graduate studies in Communication, also at the Ateneo.
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The Coming Technological Revolution in Medical Care Eight tech trends that could affect our health in the next 10 years By Tanya L. Mariano
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Breakthroughs in genome mapping, imaging technology, neuroprosthetics, robotic surgery, 3D bioprinting, and artificial intelligence are setting the stage for health care‘s high-tech future Telemedicine, mobile health, electronic health/medical records, and social media connect and empower both patients and physicians The rapid rate at which technology is advancing is opening myriad possibilities in the field of medicine and health care, and while it may be decades before “the singularity” – the point at which machines will become more intelligent than humans, should it actually come to pass – technological breakthroughs are already changing the face of health care and will continue to revolutionize how we take care of ourselves in the coming years. Here are a couple of trends that are likely to impact your health in the next decade, in no particular order:
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1. DNA-mapping while you wait What took thousand of years of evolution to encode can now be decoded in a single day for the price of a laptop. U.S. based company Life Technologies in January 2012 unveiled the “Ion Proton Sequencer,” a genome-sequencing machine, roughly the size of a tabletop office printer, that can map your entire genetic makeup in a single day for just $1,000, reports Reuters. The machine will be sold for $99,000 - $149,000, significantly cheaper than current sequencers, which go for about $750,000.
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Over the past few years, the cost of genome mapping has been in dramatic decline thanks to the rising speed of tehcnological progress. The following chart from Reuters illustrates this trend, with the success of the Human Genome Project in 2001 as starting point, and cites Moore’s Law. Life Technologies CEO and chairman Jonathan Rothberg expects research labs to be their primary customers, “using Proton to obtain the complete genome sequence of people with cancer or autism, for instance, and thereby elucidate a disease’s underlying genetic causes as well as possible ways to treat it,” according to the Reuters report. Yale School of Medicine, Baylor College of Medicine, and the Broad Institute have reportedly signed on to be the sequencer’s first customers. Among the important applications of insights gained from genome
mapping include gene therapy and pharmacogenomics. The Human Genome Project website defines gene therapy as a “technique for correcting defective genes responsible for disease development,” whereas pharmacogenomics is “the study of how an individual’s genetic inheritance affects the body‘s response to drugs,” holding the promise that drugs might one day be tailor-made for an individual’s genetic makeup. 2. Mobile health While closely related to telemedicine, mobile health (or “mHealth”) more specifically deals with mobile apps and devices. Mobile health, defined by WHO as “medical and public health practice supported by mobile devices, such as mobile phones, patient monitoring devices, personal digital assistants (PDAs), and other wireless devices” in Volume 3 of its eHealth series, “mHealth: New horizons for
THE GREAT GENOME PRICE SLASH
Chart from Reuters using data from the National Institutes of Health
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Telemedicine: Coming soon to a barrio near you Hardly a new phenomenon, telemedicine has grown leaps and bounds since its inception in the early 20th century, when Willem Einthoven, a Dutch physiologist, used a string galvanometer and telephone wires to remotely record electrical cardiac signals of patients, according to the 2006 paper, “One hundred years of telemedicine: does this new technology have a place in paediatrics?” published in the Archives of Disease in Childhood. The term “telemedicine,” however, was not coined until the 1970s, says the World Health Organization (WHO) report, “Telemedicine: Opportunities and developments in Member States.” WHO defines “telemedicine” as “The delivery of health care services, where distance is a critical factor, by all health care professionals using information and communication technologies for the exchange of valid information for diagnosis, treatment and prevention of disease and injuries, research and evaluation, and for the continuing
education of health care providers, all in the interests of advancing the health of individuals and their communities.” According to the report, which is Volume 2 of the “Global Observatory for eHealth” series, the past decade saw an increase in interest and adaptation of telemedicine due to shrinking costs and advancements in information and communications technology, with the Internet accelerating the pace of growth and “expanding the scope of telemedicine to encompass Web-based applications (e.g. e-mail, teleconsultations and conferences via the Internet) and multimedia approaches (e.g. digital imagery and video).” The study found that the biggest opportunity presented by telemedicine is increased access to health care, especially in underserved and developing countries, to the benefit of both patients and medical professionals. Initial findings of a study by the U.K. Department of Health involving 6,191 patients and 238 general practitioner practices also show positive results:
health through mobile technologies,” has seen rapid growth in recent years, fueled by innovations in mobile technology and the vast and still increasing reach of mobile cellular networks. An animated GIF from pingdom.com uses data from the World Bank to illustrate the growth of mobile subscriptions, from an average penetration of 0.4% per country in 1991 to 91.1% in 2010. The increasing popularity of smartphones and tablets has further boosted the possibilities for mobile health. The press release for the study, “Consumer Health Apps for Apple’s iPhone,” by MobiHealthNews reports that there is
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a total of 9,000 consumer health apps currently available on Apple’s AppStore and predicts this number to surge to 13,000 by 2012. As illustrated in this chart from the report, cardio fitness apps make up the bulk of available health apps. Earlier this year, trendwatching.com, a consumer trends research firm, named “DIY health” as one of the “12 trends for 2012,” and cites a couple of health apps on the market, including a wristband that tracks moving, sleeping, and eating patterns, an iPad attachment that measures blood pressure, and a smartphone app designed to diagnose malaria by analyzing a magnified image of a drop of blood.
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telehealth, defined in the report as “electronic sensors or equipment that monitors vital health signs remotely in a patient‘s home, or while on the move,” can reduce by 45% the mortality of those with long-term conditions such as diabetes or heart failure, bring emergency admissions down by 20%, bed days and elective admissions by 14%, and tariff costs by 8%.
Sarangani province. Kiamba Municipal Health Officer Dr.Lemuel Non encountered the fungal infection, called “Tinea imbricata,” on a walk-in patient, and, unfamiliar with the condition, took a picture of the infected area, and sent it via text message and multimedia message to the National Telehealth Center of the University of the Philippines. The doctor then received information from Dr. Belen Dofitas, a dermatologist at the Philippine General Hospital, regarding treatment.
Being an archipelagic country, the Philippines also stands to gain a lot from telemedicine, through the technology’s Telemedicine in the country is ability to bridge powered by a “multi-platform geographic barriers electronic technology that Image of a child with tinea imbricata taken to health-care service runs through a government in 1963 in Moprik, Papua New Guinea. Photo delivery and information broadband called Philippine from totallyfreeimages.com exchange. In July 2011, Research, Education and the Department of Government Information Science and Technology Network,” and is being (DOST) reported that it was through telemedicine managed by the DOST’s Advanced Science and that they found a rare skin disease afflicting Technology Institute, as reported in The Manila members of a tribe in Kiamba in Mindanao’s Bulletin in January 2011.
WHAT‘S ON THE APP STORE
Source: MobiHealthNews
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8 3. Real-time, high-resolution imaging “Reconstructing Visual Experiences from technologies Brain Activity Evoked by Natural Movies,” In a lecture about the future of health showed the subjects trailers of Hollywood care delivered at TEDxMaastricht, an movies and then recreated these images independently through functional organized TED Magnetic Resonance event in the Imaging (fMRI) Netherlands, and computational physicianmodels. In the scientist Daniel following video, Kraft says that clips on the left the exponential show the trailer increase in presented to the computational subjects, and images Scientists reconstruct images by analyzing speeds brought on the right are the subjects’ brain activity. Video from The about by reconstructions. Gallant Lab at UC Berkeley technological advancements is The breakthrough is most applicable in imaging technology. expected to help study the mental processes of people who are unable to communicate Developments in the field now allow verbally, such as coma patients, stroke scientists to peer into the human body in victims, and those with neurodegenerative real-time and in high-resolution, says Kraft, diseases. But before anyone gets paranoid, executive director of FutureMed, a program the researchers point out that the that explores exponentially developing technology is “decades from allowing users technologies and their healthcare and to read others’ thoughts and intentions,” biomedicine applications. The ability reports the UC Berkeley News Center. to more closely study the human brain, for example, allows for an increase in 4. Electronic health records understanding of the pathology of diseases The digitization of medical records is and the necessary therapies. Aside from envisioned to cut health-care costs and this, says Kraft, imaging technology increase the overall efficiency of healthadvances also provide some comfort to the service delivery. patient, for instance, through the possibility of having a virtual colonoscopy instead of Three years after the Health Information the uncomfortable traditional procedure. Technology for Economic and Clinical Health (HITECH) Act was passed in Today’s imaging technology has become 2009 as part of the American Recovery so advanced that it was reported in and Reinvestment Act, interest in the September that scientists at the University digitization of health-care records in the of California (UC) Berkeley, led by Shinji U.S. seems to be on the upswing. According Nishimoto, were able to reconstruct to a news release by health-care technology images in people’s minds by scanning their research advisory firm CapSite announcing brain activity. The authors of the study, the publication of their report, “2011
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U.S. Health Information Exchange (HIE) Study,” 74% of the 340 hospitals surveyed are planning on investing in healthinformation exchange services. Global research firm IDC is likewise optimistic, and predicts that the adoption rate of electronic medical and health records will increase from less than 25% in 2009 to over 80% in 2016, as detailed in a press release for their study, “IDC MarketScape: U.S. Ambulatory EMR/ HER for Midsize and Large Practices 2011 Vendor Assessment,” which evaluated 10 products from eight of the biggest vendors of electronic medical/health-care record technology in America.
if rescue parties and medical teams are aware of the profile of people in danger, put on standby the necessary equipment and drugs for those chronically-ill, and quickly identify those with special medical conditions upon rescue. This can be possible if the information is made available via a national EHR (NEHR) [system].” In the Philippines, four towns in Tarlac in 2010 received netbooks and broadband internet access under the Wireless Access for Health initiative, a public-private partnership that involves U.S.-based technology company Qualcomm, Smart Communications, the University of the Philippines’ National Telemedicine Center, RTI International, and the U.S. Agency for International Development, according to a June 2010 report in The Philippine Star. The program, which has made record-keeping virtually paperless and data retrieval and exchange instantaneous, has so far received positive feedback from health-care professionals in the area.
In the Asia-Pacific region, the digitization of medical records was expected to have remained a priority of health-care providers in 2011 despite budget cuts due to the economic crisis, says another IDC report released in January 2011. Singapore, in particular, seems to be leading the way and is reportedly just two years away from full implementation, says Integrated Health “...by leveraging these technologies together, I Information Systems CEO think we‘ll enter a new era that I like to call Stage Chong Yoke Sin, as reported 0 medicine. And as a cancer doctor, I‘m looking by Web magazine ZDNews forward to being out of a job.” Asia. Integrated Health Information Systems is ~ Dr. Daniel Kraft, lecture at TEDMaastricht the IT arm of Singapore’s Ministry of Health. Still, some worry about the privacy In the same article, IDC Health Insights breaches such a technology could bring. research manager Janet Chiew shares The SailPoint report, “2011 SailPoint that the massive destruction caused by Market Pulse Survey: The Data Breach the earthquake and tsunami in Japan Battle,” revealed that, among respondents, underscored the urgent need for digital 80% of Americans, 81% Britons, and 83% medical records. In an email to ZDNet of Australians are concerned about the Asia, Chiew wrote, “Imagine the enhanced shift to electronic medical records, citing effectiveness and savings in resources potential threats of identity theft, medical
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10 records being exposed on the Internet, nosy health-care workers, and the possibility that an employer may find out about a personal medical condition. 5. Mind-controlled prosthetics If you think moving objects with your mind is just science fiction, the U.S. Defense Advanced Research Projects Agency (DARPA) will prove you wrong.
6. Robotic surgery In 2010, approximately 220,000 surgeries in the U.S. were assisted by the Da Vinci robot, as reported in The Washington Post in June, and only 14% of prostate surgeries in the U.S. in 2009 were performed without the use of the said device, according to a March 2010 article in Web-technology magazine Singularity Hub.
FDA-approved since 2000, the Da In September Vinci has robotic of 2011, one arms that handle of DARPA’s instruments through mechanical arms small incisions on the was successfully patient’s body, and Volunteer with tetraplegia moves robotic arm with his mind. Video from the controlled via are controlled by a University of Pittsburgh Medical Center neural signals surgeon using joystickcaptured by a like controls, with the brain implant in 30-year-old volunteer Tim aid of a 3-D visualizer screen. Hemmes, who was paralyzed seven years ago after a motorcycle accident damaged his Its maker, Intuitive Surgical, says use of spinal cord. In the following video, Hemmes the surgical system is less physically taxing touches the hands of his girlfriend for the for the surgeons compared to surgical first time in seven years, and gives her a procedures done by hand, requires fewer high-five. surgical assistants, decreases tissue trauma, and shortens recovery time. Surgeons The neuroprosthetic effort was funded who use the device also report increased by the University of Pittsburgh Medical dexterity, since every five inches of the Center, the University of Pittsburgh School doctor’s movement corresponds to a oneof Medicine, and the National Institute for inch movement by the robot, according to Neurological Disorders and Stroke at the the Singularity Hub article. National Institutes of Health, and made use of the prosthetic limb created by Johns The Da Vinci Surgical System can be used in Hopkins University for DARPA. cardiac, colorectal, gynecological, head and neck, thoracic, and urological surgeries. The U.S. Food and Drug Administration is reportedly fast-tracking the review of Speaking at TED in 2009, Intuitive Surgery the mind-controlled robotic arm, and, if Director for Medical Research Dr. Catherine clinical trials go well, the prosthetic could be Mohr says because of the convergence of available to the general public within four innovations in the field of surgery, surgeons years, reports the Los Angeles Times. will not just be healing their patients, they
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will be getting rid of the disease while keeping the patient “whole and intact and functional afterwards.”
July 2010 edition that the Da Vinci Robotic Surgical System was introduced in the country by The Medical City.
However, while the era of robotic surgery is already upon us, there are still barriers to its widespread adoption. For one, these devices are expensive, priced at $1 million to $2.3 million, plus over $170,000 in annual maintenance fees, according to the Washington Post article.
7. Bioprinting By using 3D printing technology and replacing ink with biological materials, scientists hope to be able to print a variety of body parts and, someday, entire organs. When that happens, transplant patients will no longer have to endure further health deterioration while waiting for months for a heart or a kidney to be available, as doctors will be able to print organs on demand.
Also, it seems that, despite testimonies from both surgeons and patients about the benefits of the technology, there is still no consensus on whether it is actually superior to hands-on surgeries.
Several pioneering research has been done in the field of bioprinting. In 2008, Japanese scientist Makoto Nakamura was able to create a functioning bioprinter and succeeded in “printing out” tubes similar to human blood vessels, as reported in weblog Impact Lab.
An October article in the Los Angeles Times reports on the divergent expert opinions as well as clinical trials with conflicting findings on the supposed benefits of robotic Another milestone surgeries, and cites a in the field was study conducted by made possible Dr. Marty Makary, a by Organovo, a surgeon at the Johns U.S. company Hopkins University that specializes Dr. Catherine Mohr discusses the “past, School of Medicine, in regenerative present, and robotic future” of surgery which asserts that the medicine, in at TED Talks in 2009 devices have become collaboration “more of a marketing with Invetech, an tool to attract patients than a medical automation firm based in Australia. The one to improve their care.” Marky says partnership produced a $200,000 3D that there is a dearth of clinical studies bioprinter that uses stem cells from bone proving the superiority of robotic surgeries marrow which are then “formed into to traditional ones. Still, he admits, droplets 100-500 microns in diameter and “I do think there‘s a role in the future for containing 10,000-30,000 cells each,” robotic surgery.” reports The Economist in February 2010. The machine will cater mainly to research In the Philippines, local health-care groups that are finding ways to create tissue magazine Medical Observer reported in its and organs for replacement or repair.
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In December 2010, Organovo announced that it has successfully created the world’s first fully bioprinted blood vessels. Within five years, Organovo expects blood vessels printed by the machine to be used as grafts in bypass surgery. Researchers led by James Yoo, a professor at the Institute of Regenerative Medicine at Wake Forest University, are also developing a portable 3D bioprinter that can print skin directly onto burn wounds, something that will be of immense help to injured soldiers in the battlefields of Iraq and Afghanistan, according to an article in PhysOrg.com. The project is funded by the U.S. Department of Defense, and has already successfully printed skin patches on a pig. Another pioneer in the field is Dr. Anthony Atala, who, onstage at the annual TEDMED gathering in 2009, printed a kidney-shaped
mold using biocompatible materials to demonstrate how the technology could one day produce transplantable organs. So when will we see fully functional bioprinted body parts? We may be years away from printing out complex organs, but clinical trials on human subjects for simpler parts such as joint cartilage, vertebral disks, and skin may begin within one to five years from now. The Washington Post provides a loose timeline: 8. Artificial intelligence (AI) It looks like IBM’s Watson won’t be just for playing games anymore. In September 2011, IBM announced that it is partnering with health-plan company WellPoint to put the Jeopardy! champion to work in the field of health care. According to this IBM press release, Watson is envisioned to aid doctors and
A BIOPRINTED FUTURE When will we print out which body parts?
VERY SOON
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Joint cartilage
Trachea and other throat cartilage
Vertebral disks
Heart valves
Skin, printed onto the patient
Anterior cruciate ligaments, Achilles tendons and other connective tissue that does not generally heal well
(Human trials may begin in two to five years)
(Human trials may begin within 10 years)
Peripheral nerves Meniscus tissue
GRAPHIC: Bonnie Berkowitz and Todd Lindenman - The Washington Post. Published May 9, 2011.
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nurses in the diagnosis and treatment of patients. The machine’s capability in natural language processing and semantic search, as well as its ability to “sift through an equivalent of about 1 million books or roughly 200 million pages of data, and analyze this information and provide precise responses in less than three seconds” make it an ideal partner of health care professionals in delivering services more efficiently. Watson is also envisioned to streamline the communication between physician and health care plan, and may even direct patients to the best doctor to visit given their condition.
several experts saying why they think the use of artificial intelligence in clinical care remained lukewarm despite the hype that surrounded it in the 70s and 80s. Among the reasons cited were usability concerns, compatibility issues between different systems, and the decrease in workflow speed as people learn to use new technologies.
Watch the video (see right) to see how Watson answers questions. However, some are still wary of the presence of AI in clinics. A January 2010 article in Scientific American quoted
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(Without huge technological leaps, human trials are at least a decade or two away) Heart Liver, kidney and other complex organs Cosmetic surgery in which reshaped cartilage is printed directly into a face
The
Four steps to an answer: Question analysis, hypothesis generation, hypothesis & evidence scoring, and final merging & ranking. Video from IBM
The article then cited a recent success in the application of AI in diagnosis. Researchers from the Mayo Clinic in 2009 created a program that helps doctors diagnose a certain heart infection, and found that the software determined with accuracy that half of the 189 patients tested did not have the infection, thus eliminating the need for traditional tests for the condition, which are invasive, painful, and risky. Concludes the article, “By helping doctors keep track of patients’ tests, make diagnoses and determine treatments, intelligent technologies could become invaluable in making health care more efficient.”
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Social media and online communities: With a little help from your friends A recent survey by global professional services firm PricewaterhouseCoopers found that social media is beginning to play a bigger role in health care. According to a press release announcing the results of the report, “Top health industry issues of 2012,” one-third, or 32%, of respondents said they have used social media for health-care purposes, such as connecting with healthcare organizations and other people of similar health interests. The results are based on an online survey of 1,000 adults in the U.S. conducted in 2011 (the report is available for free, and can be downloaded after registering at the PwC website). Another study, which surveyed 4,033 clinicians, found that doctors are also using social media channels for professional reasons, and that their most visited social media sites are online physician communities. In the 2011 study by QuantiaMD, an online hub for physicians, entitled, “Doctors, Patients & Social Media,” they found that over 65% of physicians already use social media to connect with colleagues, keep abreast of updates in the medical field, and, less frequently, communicate with patients. It was also found that, although many see potential for online physician-patient interaction for educational purposes, there is still concern over its risks, which usually involve patient-privacy and physician-liability issues. To help maintain professionalism on social media platforms, the American Medical Association has released guidelines on online conduct for physicians, which include suggestions that doctors be mindful of patient privacy and confidentiality at all times, and vigilant in monitoring their online presence to ensure that what is being said about them is accurate and appropriate. On the patients’ side, social media can be an empowering tool that enhances access to quality information from both health care providers and fellow patients. A study of the online presence of 14 top-ranked hospitals in the U.S. entitled, “Promoting Participatory Medicine with Social Media: New Media Applications on Hospital Websites that Enhance Health Education and e-Patients’ Voice,” gives some insight on how hospitals can use a variety of Web tools to further enable patients.
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The future of health care and medicine. Technology has always been there to support, if not cause, leaps in health care innovation, and it is no different today. We are in an era of rapid progress, peppered with breakthroughs every so often, yet still punctuated by challenges and setbacks. In the next 10 years, the field of health care and medicine will have advanced greatly such that things that had been conceivable only in science fiction will become reality. Computers are getting involved in almost every aspect of health care today, and they’ll be even more so 10 years from now. From how people stay fit and how they access health information, to how doctors diagnose and eventually treat patients, bursts of technological innovation will emerge to help you improve your health or enhance your quality of life, maybe even without your noticing some of them. With technology increasing people’s access to quality information as well as the availability and viability of more advanced alternative medical treatments, it should be safe to say that technology will empower people to take a more active role on their own journey to wellness.
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NEWS ON THE NET Technology
Smart bullet hits targets a mile away A new smart bullet built from commercially available parts using a system patented by Sandia National Laboratories in Albuquerque, New Mexico is said to be able to hit a target within eight inches from more than half a mile away. The four-inch bullets are equipped with electronically controlled and guided fins that can steer and adjust towards laserdesignated targets in midflight. More details about the technology are available in the company’s official news release and in this video. Another smart weapon, the XM25 Counter Defilade Targeting Engagement System, is featured in an article in Stars and Stripes, a newspaper for the U.S. military community.
Genes affected by weightlessness Astronauts have much to worry about already, health-wise, such as skeletal muscle loss, space radiation, and even complications arising from exposure to lunar dust. However, a study using a magnetic field to continuously levitate flies in zero gravity for a period of 22 days uncovered evidence of another significant risk arising from prolonged space flight: widespread
The
damage and disruption of cell processes. More than 200 genes were affected by weightlessness, including those affecting the immune system, stress responses and temperature changes. A full text of the study is provided by BioMed Central, an online publisher of science, technology and medicine journals.
Could smart Biomask regenerate burned faces? New technology being developed in the University of Texas in collaboration with the U.S. Army and the Northwestern University could give disfigured soldiers their faces back. The technology called Biomask is a face-shaped shell with sensors that monitor the condition of specific wound areas and provide feedback to physicians. While keeping the face ensconced in a vacuum, microvalves and microfluidic channels allow growth factors and stem cells to be pumped to promote tissue regeneration.
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The Biomask is expected to reduce the recovery time and chances of deformities associated with existing treatments. Soldiers disfigured in war can suffer tremendous trauma, such as related by this The New York Times article and this HubPages article.
Pirate Bay founders face jail time File-sharing site The Pirate Bay was dealt a serious blow last week when Sweden’s Supreme Court refused to hear an appeal by the company‘s founders regarding a long standing court case. This means that Peter Sunde, Fredrik Neij, Gottfrid Svartholm and Carl Lundström all face jail time and up to an equivalent of U.S.$ 6.7 million in collective fines in connection with charges of assisting in the distribution of illegal content online. The founders appealed an April 2009 sentence of up to a year in prison and fine of U.S.$4.2 million. The Pirate Bay has released a statement, calling 2012 “the year of the storm.” The website’s URL has also changed, redirecting site visitors to a Swedish address, in what some claim is a bid to duck possible legal complications with U.S. authorities.
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How do you solve a problem like NAIA?
Finding a long-term solution to the airport’s woes By Joanne Angela B. Marzan
STRATEGY POINTS The government is emabarking on a ₧1.1-billion facelift to the 30-year old NAIA Terminal 1 President Benigno Aquino considers the NAIA rehabilitation as a “stop-gap measure” until an alternative airport is identified and developed DOTC Secretary Manuel Roxas has called the Diosdado Macapagal International Airport (DMIA) located in Clark, Pampanga as the “airport of the future”
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The Philippines’ Ninoy Aquino International Airport (NAIA) Terminal 1 is one of the world‘s most talked-about airports, but not necessarily in a good way. In The Guide to Sleeping in Airports, NAIA Terminal 1 was named as the world’s worst airport in 2011 for its long lines, dirty toilets without running water and soap and the existence of theft and bribery. The annual list compiled by the blog sleepinginairports.net is a product of reviews from airport sleepers, online polls, and assessment of the airport’s facilities and passenger services, and is intended for travelers who plan to sleep in or transit through the airport.
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How do you solve a problem like NAIA
“Forget about sleeping in this airport! You will not want to even close your eyes here!” the guide tells readers, before going into a recitation of complaints locals are probably used to hearing: attempted bribery solicitation, corruption, theft, and dishonesty aspiring to the level of fraud. For its part, online travel guide Frommer’s ranked NAIA Terminal 1 as the 2nd worst terminal in the world in 2011. The travel website cited the Agence France Presse article “Ceiling caves in at Philippine airport, two hurt,” as published in the May 18 online edition of the Singapore Straits Times, as part of its bases for including NAIA among the world’s worst airports. “The terminal has been a frequent target of criticism with travellers and the business community complaining it is congested, run-down and filthy, with toilets that do not work,” the article added. (A week into the new year, restrooms at the arrival area of NAIA Terminal 1 had to be closed down for three hours on Saturday, January 7 after its toilets overflowed due to a clogged drainage pipe, according to a January 9 Philippine Star report.) It doesn’t stop there. NAIA Terminal 1 placed 5th in CNNGo.com’s poll of the most hated airports in the world in 2011, which was released in November. “Beleaguered by ground crew strikes, unkempt conditions, soup kitchen-style lines that feed into more lines and an overall sense of futility, NAIA brings the term “Stuck in the 1970s” to a new level,” the report stated. It did qualify, nonetheless, that “most hated” didn‘t necessarily mean “worst,” and that its list
The
was “admittedly unscientific” and based on its canvass of travel websites, blogs, and message boards along with the author‘s own memories. From most hated to most loved. In a Nov. 10 press briefing, presidential spokesman Edwin Lacierda stated the government’s goal for the country’s primary international airport. “We are certainly going to perform a lot of improvements and renovations in the said airport – hopefully, to take it away from the most hated to the most loved,” Lacierda said, as reported in a Philippine Star article.
A columnist‘s public lament Philippine Star sports columnist Joaquin Henson in his January 19 column recalled the harrowing experience he and his wife, Menchu, had at NAIA Terminal 1 en route to Hong Kong. Aside from experiencing long queues at the immigration counter, lack of available baggage carts and no identifying flight signs at the baggage carousels, his wife also lost her camera. “When we arrived in Hong Kong, our bags were among the last to roll out onto the carousel. We picked up our two bags, one each, and immediately noticed our colored straps were gone. The straps were wrapped around each bag through the handles so they couldn’t have been lost in transit unless they were deliberately taken,” Henson said. “After settling into our hotel room in Hong Kong, we unpacked our bags. Menchu noticed that the clothes and other things in her luggage were in disarray, like someone rummaged through them. Then, to her dismay, she discovered that her Canon Ixus gold camera – my birthday gift to her two years ago – was gone. The case was in the bag but not the camera…” the columnist continued.
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18 Five days later, Department of Transportation and Communications (DOTC) Secretary Manuel Araneta (“Mar”) Roxas announced that President Benigno S. Aquino approved a P1.1-billion rehabilitation plan for NAIA Terminal 1. “The plan is the result of DOTC’s comprehensive findings of the current condition of NAIA T1 facilities. We assure the public that we are doing all we can to provide them safe, affordable, reliable, and comfortable travel facilities,” Roxas said in a DOTC press release.
and was built to cater to the country’s international passenger traffic levels at the time. By 1991, NAIA Terminal 1 reached its annual passenger capacity of 4.5 million. Later improvements (in 1996, for the AsiaPacific Economic Cooperation summit in Manila) enabled the airport to handle 6 million passengers.
The 30-year old airport. According to the Manila International Airport Authority (MIAA) website, NAIA Terminal 1 was designed by National Artist for Architecture Leandro Locsin, completed in 1981,
Retaining Locsin. Roxas also announced that the government is retaining the services of Leandro V. Locsin and Associates for the rehabilitation of NAIA Terminal 1.
Today, NAIA Terminal 1 welcomes 7.3 million passengers annually, or 1.3 million more than the airport’s designed capacity.
What P1.1 billion is supposed to do Also mentioned in the aforementioned Department of Transportation and Communications press release is how the P1.1 billion allocated for the NAIA Terminal 1 rehabilitation will be spent. “Of the plan’s allocated budget, approximately P500 million is provisionally set aside for aesthetics and interior design of the facility. It will entail replacing the well-worn linoleum floorings, the ceiling and walls and partitions. Part of this is also to replace the old immigration counters and adding up to 50 percent more such counters to existing counters. Concessionaires will be relocated in order to make more room for passengers,” said the press release. “Another P300 million of the total budget is set aside for the construction of rapid exit taxiway (RET) to relieve runway congestion and minimize delays or waiting time for flights,” added the press release. DOTC believes that once the construction of RET is completed, the runway system of the airport would be able to accommodate around 41-43 events (a take-off or landing) from the present capacity of only 36. At present, NAIA already has 43 scheduled events every hour, thus the delay. “DOTC is also spending P20M for the repair and rehabilitation of all the 72 toilet facilities in T1, including fixing the lavatories, water closets, urinals, and amenities,” the press release also mentioned. And, another P340 million for the required structural rehabilitation prescribed by the 2010 National Structural Code of the Philippines (NSCP). P-Square, a structural and engineering firm affiliated with the Association of Structural Engineers of the Philippines said that the structural works that would be done to the airport include retrofitting of columns and the reinforcing of slabs.
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19 “They are in possession of the ‘as designed’ and ‘as built’ plans and blueprints of the airport. They know the exact location of the duct works, risers, pipes, water drainages, and other electro-mechanical configurations of the facility. In short, they know the ‘bituka’ of T1. We will work with them and avail of their intimate knowledge of the facility,” the DOTC chief explained. Furthermore, Roxas said that the government would also avail of the technical expertise of officials from Singapore’s Changi Airport for the NAIA Terminal 1 rehabilitation. Changi Airport has consistently been named the best airport in the world. In fact, Changi Airport topped the Golden Pillow awards by sleepinginairports.net 15 times. The blog awards its Golden Pillow to airports where passengers can have restful sleep. Changi airport experts as consultants. On November 28, 2011, a six-member team from Changi Airport arrived in Manila to inspect Terminal 1, as reported on the abscbnnews.com site. Changi Airports International senior vice president Jose V.A. Pantangco headed the team composed of experts in airport passenger and cargo flow systems, terminal design, electromechanical engineering, architecture and commercial revenue research. The team’s objectives, Pantangco said, are “(to) help the MIAA build up its maintenance capacities; assist in upgrading the airport to globally accepted standards; and explore options to further expand the current traffic of 7 million passengers per annum who go through the airport.”
The
He also said that based on Changi Airport’s experience, the size of an airport is not a hindrance to efficient operation. “But one thing is certain: if service levels are improved, and people get a lot more comfortable when they go through an airport, they tend to stay a bit longer, shop more, thus enhance the airport‘s revenuegenerating capacity, and generally say nice things about the airport when they get home,” he continued. Rehabilitation can only go so far. In a Manila Times article in October, Roxas said that the government can only can do so much to rehabilitate a 30-year old airport. The report cited a DOTC study stating that NAIA Terminal 1 is already at its saturation point and does not have much more room for expansion. The report quoted Roxas as saying that there were “some limitations on how much refurbishment and ‘botox’ [shorthand for cosmetic treatment] that the government can do” for a 30-year-old facility. In the Manila Times article, Roxas announced that the government was planning to sell NAIA Terminal 1, and use the proceeds – an estimated $2.5 billion – to fund the development of the much bigger Diosdado Macapagal International Airport (DMIA) in Clark, Pampanga. Even as he called DMIA “the airport of the future,” he qualified, nonetheless, that those plans were “just plans” and “will not happen overnight, or within one to three years.”
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From NAIA to DMIA As discussed in the Philippine Star’s Aug. 15 “Demand and Supply” column of Boo Chanco, the Japan International Cooperation Agency stated in its 2011 study Airport “Strategies for the Greater Capital Region (GCR)” that “unless adequate air transport infrastructure is developed as soon as possible, NAIA [Ninoy Aquino International Airport] and the Philippine nation could lose its competitive edge further… the runway capacity at NAIA is already almost saturated and the development of a new gateway airport in GCR is an urgent need.” The JICA report (which is otherwise not available online) is also in agreement with Roxas that the DMIA is the best alternative to NAIA Terminal 1. There is, however, a caveat to this conclusion. “The distance from Metro Manila and the current lack of express railway access makes it difficult for DMIA to be an alternative airport of NAIA. Presently, only road transportation is available and the required journey time from the city center to the North Luzon Expressway is unpredictable because of traffic congestion in Metro Manila. This congestion results in unpredictable journey times which can range from less than two hours to more than three hours between Manila and DMIA. The completion of NLEX-SLEX connecting link is expected to contribute to an improvement in the accessibility of DMIA,” the study reportedly said. Meanwhile, Clark Development Corporation President Felipe Remollo believes that the recent arrival of the country’s taipans (Chinese-Filipino business tycoons) in Clark to do business will help fast-track the goal of making DMIA the country’s next main international gateway, as reported in a December Philippine Star article. “All the taipans are already here and this will hasten the realization of Clark airport as the country’s main international gateway,” Remollo said, citing, among other developments, the intention of the Gokongwei family’s Cebu Pacific group to partner with a foreign company to establish a training center for Airbus 380 pilots in Clark, and the presence of the Air Asia group.
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Hong Kong’s example. Even if the government‘s plans will take some time and some doing, the DOTC secretary remains optimistic that DMIA will become the country’s next premier international airport. “Just like in Hong Kong when they sold the old Kai Tak airport in Kowloon, which paid for the transfer to the newer and expanded Chek Lap Kok airport on Lantau island,” Roxas said. While Roxas might have gotten his history wrong – the Kai Tak Airport was not sold at all, let alone sold to finance the development of the Chek Lap Kok Airport – Hong Kong‘s switch from Kai Tak to Chek Lap Kok might be instructive nonetheless. From 1925-1998, the Kai Tak Airport in densely populated Kowloon was Hong Kong’s international airport. According to the Civil Aviation Authority of Hong Kong, the airport underwent several expansions since the 1980s to accommodate the huge increase in airport traffic. In 1994, expansions made to the airport increased its design capacity from the original 18 million to 24 million passengers annually. In 1996, the airport received 29.5 million international passengers, far exceeding the airport’s design threshold. According to the 2010 paper Sustainable Financing for the Hong Kong International Airport by Justin Chapman and Andreas Georgoulias of the Harvard School of Design, the dense population surrounding the Kai Tak Airport was also one of the reasons for the decision of the government to close down the airport and build a new one.
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“As Hong Kong became one of the most dense cities in the world, residential construction put thousands of homes in the approach paths of commercial aircraft. This fact, both dangerous and inconvenient, was unsustainable, and helped spur the move to a new site,” the paper said. In the paper, Proposal to Optimise Kai Tak Capacity, prepared by the territory‘s Advisory Council on the Environment in 1994, noise mitigation measures for the residents within the vicinity of the airport was discussed amid the proposed plan to expand the airport’s capacity. “At the same time, we are conscious of the need to do all we can to reduce the impact of aircraft noise disturbance on affected residents to a minimum,” the paper said. In addition, the paper also quoted an article in Aviation Week and Space Technology that said, “Safety also is a factor. Fully laden 747s must perform a tricky 47-deg. turn on most approaches to Kai Tak, ending at 674 ft. above ground level. The World War 2-vintage runway also has insufficient overrun area and is surrounded by one of the most densely populated urban areas on earth, with 350,000 people living under the flight paths…” The airport was eventually named as the 6th most extreme airport in the world by the program 10 Most Extreme
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Airports of the History Channel. Below is an edited version of the documentary created and uploaded to YouTube by a certain ImpulsivePlay3r. ‘New’ takes time. As early as October 1989, then-Governor Sir David Wilson already announced a plan to construct a new airport at Chek Lap Kok in Lantau Island. At that time, Hong Kong was
still under British rule, as catalogued in the Hong Kong International Airport website‘s list of key dates and events. Site preparation as well as design contracts were awarded only in 1992, and on-site work on the island of Lam Chau commenced in December 1993. Airport-technology.com describes the magnitude of building Hong Kong’s new airport. In addition, the airport’s website claimed that the Hong Kong International Airport (HKIA) has been “one of the largest engineering and architectural projects in the world.”
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“The construction of Hong Kong International Airport at Chek Lap Kok was one of the biggest operations in the industry. The core programme cost more than $20bn and involved four major sponsors, ten separate projects, 225 construction contracts and over 1,000
Singapore’s experience. According to the 2008 paper “Singapore Changi Airport: A Case Study of its Development” by Chow Kok Fong, Singapore’s original airport was at Paya Lebar. To respond to the increase of passengers arriving in the airport, the government initially decided in 1972 to
critical interfaces. The airport covers 12.48km² of reclaimed land between the two islands of Chek Lap Kok and Lam Chau. The airport increased the land area of Hong Kong by 1%. The airport opened for business in July 1998 having taken just six years to build,” the site elaborated.
just expand the existing airport by building a second runway. However, in 1975, the Singaporean government flip-flopped and decided to build instead a new airport in the main island of Changi.
By the time Chek Lap Kok Airport opened to the public in July 1998 and became known as the Hong Kong International Airport, Hong Kong was a Special Administrative Region of China, no longer under British rule. Kai Tak Airport was also closed down in 1998 and later used for government offices, automobile dealerships and showrooms, gokart racecourse, a bowling alley, a snooker hall, a golf range and other recreational facilities, according to a Wikipedia page on Kai Tak Airport.
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Factors that were considered for the reversal of decision were: potential for population growth in the existing airport that would make further expansions difficult, noise and emission problems for the residents within the vicinity of the airport and more expansion opportunities in Changi island that can be done through land reclamation. The Changi Airports International (CAI) brochure calls the development of Changi Airport “a case study of what airport master plans should be,” citing “a disciplined development strategy” that “remains strikingly in tune with the demands of the
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airport and the challenges of the industry,” even if the master plan had been conceived more than 30 years ago. As a result, the brochure continues, “it allows for the kind of flexibility and expandability which distinguishes the physical development of Changi from airports elsewhere. Because the master plan has taken in fully the airport’s development needs as it expands, nothing has to be demolished in the airport’s development down the years. The only work done relates to the upgrading of internal spaces, finishes and services.” NAIA expansion not the solution. It is apparent from the experience of both Hong Kong and Singapore that expanding an existing airport that has already reached its saturation point is not the solution, certainly not when the airport is in a highly urbanized area. In the case of NAIA Terminal 1, the airport is unable to deal with the high volume of passengers arriving in the country, and there is hardly any room for expansion because it‘s located in densely populated Pasay City. According to the aforementioned Japan International Cooperation Agency report (see box “From NAIA to DMIA”), one of the reasons why the country is unable to compete with other Asian countries in terms of tourist arrivals is the inability of NAIA Terminal 1 to expand and accept more passengers. “In summary, the Philippines appears to be in an unenviable position of not being able to expand its major international gateway
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airport (also its primary domestic hub) and not having any firm plans in place for establishing a new gateway airport to replace NAIA. The result is a constrained growth scenario for NAIA which is particularly negative for the country’s economic development ambitions. Airport capacity and ease of airport access and transfer has long been recognized as critical to a country’s competitive position and attractiveness as a place to do business and as a tourism destination,” the report concluded. It seems, though, that this is not the first time that the country has entertained the idea of closing NAIA and making DMIA as the country’s premier airport. Back in 2008, then-President Gloria Macapagal Arroyo already pushed for the development of DMIA to be the country’s main international gateway and the shut down of NAIA Terminal 1. “Ang problema natin sa NAIA, is masikip na talaga,… there’s no longer room for expansion. Unlike in Clark, kasi malaki iyong area natin doon so that’s why we’re transferring it to DMIA (NAIA is too crowded, there’s no longer room for expansion. Unlike in Clark, we have a bigger area there, so that’s why we‘re transferring it to DMIA)” thenPresidential Spokesperson Lorelie Fajardo told reporters in a GMA News report.
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24 NAIA rehabilitation not a long-term solution. The NAIA Terminal 1 problem has been evident for years and the solution quite obvious. The government’s plan to rehabilitate the airport may extend the life of NAIA a few more years but is not intended to be a long-term solution. In an interview via YouTube’s World View series, President Aquino admits that what his government will be doing to improve NAIA Terminal 1 is only a “stop-gap” measure. “There is a plan for it, for improving the NAIA, structurally and aesthetically... It will be a stop-gap measure for the next four or five years because we are looking for an alternative given the fact that it will be hard for us to support the 10 million tourist arrivals that we are targeting,” President Aquino said in the interview. Now, it is up to President Aquino to show firm resolve in looking for and developing an alternative airport to replace NAIA Terminal 1, the airport named after his father who, upon his return to Manila in 1983 from exile in the U.S., was assassinated on the airport’s tarmac.
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Not just airports but Airport Cities According to its website, the Hong Kong International Airport “has grown into one of the finest and busiest airports in the world.” HKIA sells itself not only as an airport but as a shopping, dining, and entertainment destination as well. HKIA’s Terminal 1 is described in the website as the “world’s best shopping destination,” with nearly 150 shops offering all sorts of gift and luxury items, while Terminal 2 is “a holiday mood shopping experience,” with 90 shops offering shopping, dining, and entertainment. For its part, Singapore’s Changi Airport hosts its own myriad of shops – 51 shops in Terminal 1, 79 in Terminal 2, 81 in Terminal 3, and 10 in its Budget Terminal – including a cinema, a spa and the world’s first airport gardens. In a 2008 paper on The Evolution of the Airport Cities and the Aerotropolis, Professor John D. Kasarda of the University of North Carolina‘s Kenan-Flagler Business School cites both airports, among others, as examples of what he calls the “Airport City” model, which he says has become the “21st century way for many airports.” “The Airport City model is grounded in the fact that in addition to their core aeronautical infrastructure and services, major airports have developed significant non-aeronautical facilities, services and revenue streams. At the same time they are extending their commercial reach and
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25
economic impact well beyond airport boundaries,” Professor Kasarda explained. According to Kasarda, a number of airports now not only have dining and retail shops, they also have “hospitality clusters, office and retail complexes, conference and exhibition centres, logistics and free trade zones and facilities for processing time-sensitive goods.” The development of the airport as a commercial and business hub shows how an airport can evolove from just “basic aeronautical infrastructures into complex multi-functional enterprises serving both aeronautical needs and profitable commercial development under the Airport City model,” he said.
The Airport of the Future according to Kasarda in 3D video
The coming of the Aerotropolis. The influx of businesses in the Airport City will eventually give birth to the Aerotropolis, Kasarda predicted. “Similar in shape to the traditional metropolis, made up of a central city and its commuterlinked suburbs, the aerotropolis consists of an airport city core and extensive outlying areas of aviation-oriented businesses and their associated residential developments,” he elaborated. The 3D video and image below shows the “multimodal infrastructure, commercial, and residential aspects of the Aerotropolis and how airport planning, multimodal transportation planning, urban planning, and business site planning can be synergized to create a new urban form that is economically efficient, globally competitive, attractive, and sustainable.”
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Mass Housing as a Business Venture: Can It Work?
The Philippines needs to house its ever-growing population – an estimated 95.8 million in 2011, and growing at an estimated 2.04% a year – and the country‘s housing stock might not be growing fast enough to meet the demand. In fact, the housing need is expected to exceed 5.7 million in 2016, per figures from the Philippine Development Plan 2011-2016 in the table below.
By Pia Rufino
STRATEGY POINTS Property developers are shift their attention to low-cost housing sector because of huge demand plus government incentives The private sector is looked upon to play a bigger role in addressing the country’s growing housing deficit, but others are concerned that a big portion of households won‘t be able to afford these houses anyway
On the supply side, one of the government shelter strategies has been to encourage the private sector to roll out low-cost housing to cater to the lower socioeconomic classes, with income tax holidays for such projects. For their part, property developers, e.g., Ayala Land Inc. (ALI) and its subsidiaries, and SM Development Corporation, have picking up on the government‘s cue.
REGION
2011 1,380,537
Philippines NCR
418,328
CAR
10,035
I - Ilocos
48,323
II - Cagayan Valley
29,582
III - Central Luzon
112,675
IV-A CALABARZON
158,723
IV - B MIMAROPA
27,696
V - Bicol
66,307
VI - Western Visayas
90,111
VII - Central Visayas
78,934
VIII - Eastern Visayas
44,759
IX - Zamboanga Peninsula
30,199
X - Northern Mindanao
54,446
XI - Davao
67,911
XII - SOCCSKARGEN
47,291
XIII - CARAGA
38,025
ARMM
57,191
Figures from the Housing and Urban Development million units by 2016. The National Capital Region of the total housing demand.
Source: Phi
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Ayala Land, one of the country’s leading real-estate developers, announced in November 2011 it will roll out affordable housing projects offering house and lot packages for as low as ₧400,000, with average amortizations of less than ₧3,000, as reported in the Philippine Daily Inquirer in November.
Ayala Land president Antonino T. Aquino, in a briefing covered in the Philippine Star a few days after the Inquirer story, said he expects the company’s newly launched affordablehousing project to become the group’s largest contributor in terms of revenues in the next 10 to 15 years.
‘Largest element in the pyramid.’ “This is the The Bella Vita brand, to be marketed under Ayala subsidiary South Maya Ventures, will be marketed mainly to minimum-wage earners and small entrepreneurs with P10,000 to P25,000 monthly salary. The brand‘s initial project will be a community development in General Trias, Cavite, offering 602 houses in the first phase of a project that will eventually consist of 1,378 units.
largest element in the pyramid, untapped by major developers. We want to take advantage of the huge demand for this type of residential projects,” Aquino said, noting that industry experts see promise in the affordable-housing segment, which they see as covering 34% of more than 17 million households nationwide. In a BusinessMirror report reposted on abscbnnews.com in November, Phinma Property
TOTAL HOUSING NEED, 2011 – 2016 (NUMBER OF UNITS) YEAR
TOTAL
2012
2013
2014
2015
2016
1,173,456
997,438
847,822
720,649
612,552
5,732,454
355,579
302,242
256,906
218,370
185,614
1,737,039
8,530
7,250
6,163
5,238
4,453
41,669
41,075
34,913
29,676
25,225
21,441
200,653
25,145
21,373
18,167
15,442
13,126
122,834
95,774
81,408
69,197
58,817
49,994
467,865
134,915
114,677
97,476
82,854
70,426
659,071
23,542
20,010
17,009
14,457
12,289
115,003
56,361
47,907
40,721
34,613
29,421
275,329
76,594
65,105
55,339
47,039
39,983
274,171
67,094
57,030
48,475
41,204
35,023
327,761
38,045
32,338
27,488
23,364
19,860
185,854
25,669
21,819
18,546
15,764
13,399
125,396
46,279
39,337
33,437
28,421
24,158
226,078
57,724
49,066
41,706
35,450
30,132
281,989
40,197
34,168
29,043
24,686
20,983
196,368
32,321
27,473
23,352
19,849
16,872
157,893
48,612
41,320
35,122
29,854
25,376
237,476
Coordinating Council indicate the magnitude of the housing need, estimated to exceed 5.7 (Metro Manila) and Regions 3 (Central Luzon) and 4A (CALABARZON) will account for about half
ilippine Development Plan 2011-2016, Chapter 8, Social Development, National Economic Development Authority, p. 242
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28 Holdings Corp. president Willie Uy said that his company would be looking to provide lowcost housing for the mass market in 2012. The plan comes as the company‘s third-quarter net income dropped by 67.14% from 2010 levels, Uy said, citing rising competition from other condominium builders building more units to market to lower-income prospects.
Incentives for mass housing The development of mass, low-cost housing is a priority economic activity, and it was one of the top performing sectors, generating P72.688 billion out of a total of P368.9 billion in investments in 2011, according to a Jan. 2 DTI report. The BOI Investment Priority Plan (IPP), which contains the list of promoted economic sectors eligible for government tax incentives, has been carrying mass housing industry as priority sector since 2007 because of its huge economic multiplier impact and strong jobs generation. It defines mass housing as housing units that cost more than P400,000 but not exceeding P2.5 million. Section 18 of RA 7279 or the Urban Development and Housing Act of 1992 requires every developer of subdivision projects to develop an area for socialized housing equivalent to at least 20% of the total subdivision area within the same city or municipality, whenever feasible, or a total subdivision project cost at the option of the developer. The BOI guidelines on compliance of vertical housing projects with the 20% socialized-housing requirement give registered developers an option of using an Investment Scheme or a Direct Participation scheme in developing a socialized-housing project. Under the Investment scheme, developer shall develop a socialized-housing project with a total floor or home lot area equivalent to 20% of the total saleable area of its BOIregistered project. The Direct Participation Scheme, on the other hand, requires the developer to make a contribution to an accredited nongovernmental organization or institution engaged in socializedhousing and community-development projects in the amount equivalent to 30% of the 20% of building construction cost of its BOI-registered project, or 40% of its ITH, at the option of the registered developer.
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Even before all that talk in November, however, Ayala subsidiary Avida Land along with Cebu-based Aboitiz Land registered masshousing projects or mass-housing additions to existing projects to qualify for Board of Investments (BOI) tax incentives, as reported in the Philippine Star in April. The BOI is an attached agency with the Department of Trade and Industry (DTI) and the primary investment arm of the country. The Aboitiz Land project, Ajoya Residences Phase 3, will involve the construction in Cordova, Cebu, of 148 low-cost housing units costing from P1.71 million to P2.87 million, per a Malaya report reposted on the Philippine Real Estate News blogspot. As it turns out, Avida Land‘s San Lazaro project is the firm‘s 15th application for BOI registration, following applications for masshousing projects or expansions to existing housing projects in Tayabas (Quezon), Sto. Tomas (Batangas), Naga City, Cavite, Sta. Cruz (Manila), Cebu, Alabang and Makati City. Meanwhile, the SMDC and Gawad Kalinga (GK) signed a memorandum of agreement in January covering SMDC’s donation of a 3.84-hectare lot for a socialized-housing project for more than 200 families. Gawad Kalinga is accredited by BOI to receive contributions from registered vertical-housing developers. But that was only the latest foray into mass housing for SMDC, as SMDC was granted BOI tax incentives for P6.2 billion worth of mass-housing additions to three of its existing condominium projects in Metro Manila, as reported in the Philippine Star, also in April. P2.5 million or less. Under the 2010 IPP, mass housing units priced at P3 million and below were entitled to tax breaks for their
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developers--three years‘ worth for those in the National Capital Region and four years‘ worth for those outside the NCR. For the 2011 IPP, however, the BoI reduced the ceiling price to P2.5 million, noting that 90% of all vertical housing units sold in the country go for P2.5 million or less. “Statistically, (P2.5 million) is the price that can be considered mass, affordable housing. It’s what can be considered by 80-90 percent of the working population to be affordable housing. It’s what we believe will benefit the mass to middle market,” BOI managing head Cristino Panlilio said in a Philippine Daily Inquirer report in July, a few days before the 2011 IPP‘s release. Even if it were to turn out one million units per year, the government still cannot cope with the huge backlog, Panlilio told reporters at the National Developers Conference in October, as reported in The Manila Bulletin. While government estimates place the backlog at 3.76 million units as of 2010, he reportedly expressed the concern that the backlog could reach 6 million units by 2016. “This is so because although we have a strong demand, there is also the affordability issue.
Filipinos still cannot afford the low-cost mass housing units that are currently available,” Panlilio explained. Still not affordable for 30% of urban households. As mentioned in the United Nations Habitat 2011 report “Innovative Land Tenure in the Philippines” – available for free download through the link to the title – what private developers produce is often not affordable for the poorest 30% of urban households, which consist mostly of informal settlers. According to the Philippine Development Plan 2011-2016, households in informal settlements increased by more than 81% between 2000 and 2006 in Metro Manila, and across the country, six out of 10 Filipinos now live in urban areas. Alongside the basic market issue of affordability, the Philippines has spent relatively less on housing compared to other South and Southeast Asian countries. According to figures cited by the Philippine Institute for Development Studies in 2009, Philippine public expenditure on housing from 2000 to 2007 averaged 0.089% of gross domestic product, compared with Singapore‘s
LIVING IN THE BASEMENT Average annual public expenditure on housing, 2000-2007 Country Public Housing Expenditures
Singapore Nepal Mongolia Indonesia Sri Lanka Thailand Malaysia Bangladesh Philippines
(percent of GDP)
2.089 1.482 1.206 1.012 0.758 0.742 0.383 0.354 0.089
A sample of Asian countries and their average annual expenditures on public housing from 2000 to 2007. Source: Housing policy for the poor: revisiting UDHA and CISFA, Marife Ballesteros, Philippine Institute for Development Studies, Policy Notes 2009-04, November 2009, p. 6.
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average of 2.089%, Indonesia‘s 1.012%, Thailand‘s 0.742%, and Malaysia‘s 0.383%. The combination of low public expenditure on housing and the high overall demand for houses has resulted in a de facto public-private partnership to produce mass housing, and there are representatives of the urban poor who have taken issue with this partnership. “The government housing agencies and the private sector collude, to extract as much profits and kickbacks as possible from what
Significant demand for low-cost mass housing For its part, the Subdivision and Housing Developers Association Inc. (SHDA), the country‘s largest organization of private subdivision and housing developers, figured in a February 2011 position paper that there is significant demand for low-cost mass housing. The paper cited estimates of the National Shelter Program of the Housing and Urban Development Coordinating Council of a housing backlog of 3.76 million from 2000-2010, consisting of 2.59 million new households and 1.17 million from accumulated unmet targets from previous years. The SHDA then translated the government‘s estimates of new households into an annual average of 260,000, along with an annual average of 117,000 from accumulated unmet targets, and applied it to actual HLURB selling-permit data from 2000-2009, which indicated an annual average of 149,200. Of the annual increase in HLURB licenses to sell, 55% were for socialized and low-cost housing units, and 45% for middle- and upper-priced units. By SHDA‘s estimates, demand for socialized and low-cost housing accounted for close to 85% of a 1.61-million-unit housing backlog from 2000-2009.
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is supposed to be a social service especially to the poor, making mass housing costly for poor informal settlers,” Gloria Arellano, national secretary-general of Kalipunan ng Damayang Mahihirap (KADAMAY) told Bulatlat.com in October, on the occasion of an urban-poor group‘s protest over impending evictions of informal settlers in Quezon City. For his part, Anakpawis party-list Rep. Rafael Mariano said, “The very idea of eroding government involvement in the delivery of housing infrastructures and services, and encouragement of greater participation of the private sector will most likely turn mass housing into a profit-making enterprise for big companies instead of providing service to the poor.” In fact, harnessing private enterprise for public gain has worked, especially in areas where the government has time and again come up short on resources and drive to deliver what constituents need, be in power and water or election monitoring. Moreover, business also excels in coming up with innovative, economical and customer-friendly products and processes for the benefit of the buyer. To be sure, there must be a systematic review of low-cost housing schemes, to ensure that the poor are well served. And there could still be substantial state participation through subsidies, cheap loans, and ancillary facilities. But since there are a huge unmet need and much scope for additional resources and better management in the mass housing sector, then let business join hands with government in providing shelter to our homeless masses.
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NEWS ON THE NET Nation
Comelec to use PCOS in 2013 polls The Commission on Elections decided to use the precinct count optical scan (PCOS) technology for the coming 2013 polls. Comelec Chair Sixto Brillantes clarified, however, that the machines will not necessarily be supplied by the previous provider, Smartmatic International Corp. In 2010, Filipino voters experienced the first automated national elections through the use of the said PCOS machines. Using an automated election system for voting, counting, consolidating, canvassing, and/ or transmission of election results is allowed under Republic Act No. 9369.
of her dating partner who doubt his intelligence. “Whatever we talk about — whether politics, economics, books or music — he’s so knowledgeable,” the Korean television personality said. “Whenever critics say bad things about him, that he’s not aggressive or not matalino, I’d debate them and tell them he’s very smart.”
also released a survey which showed that self-rated poverty went down to 45 percent from the previous rate of 52 percent.
Meanwhile, the President missed the wedding of his former partner when he was running for office, but sent a gift to Valenzuela Councilor Shalani Soledad and her groom, Pasig Congressman Roman Romulo.
The Philippine government offered the United States of America opportunities for more joint military exercises and allowed the presence of more US troops around the country. At the same time, Philippine officials vowed that the Philippines remains committed to ensuring peace and stability in the Asia-Pacific region.
More Pinoys going hungry — SWS poll The latest Social Weather Stations survey showed that hunger incidence in the Philippines continues to rise despite a decrease in self-rated poverty. The survey, conducted from December 3 to 7, showed that 22.5 percent of the respondents, or an estimated 4.5 million families, claimed that they had experienced having nothing to eat.
Aquino’s new date ready to debate President Benigno Aquino III’s latest love interest Grace Lee told journalist Wilson Lee Flores she is willing to debate critics
PH committed to peace despite increased US military presence
In reaction, Chinese state media the Global Times published an editorial urging the government of China to impose sanctions against the Philippines. In a later press release, the Chinese foreign ministry called for more “effort towards peace and stability in the region.”
In September 2011, the hunger incidence rate was only 21.5 percent. Earlier this year, SWS
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Can Your Business Survive ASEAN Free Trade? Less than three years to 2015, Philippine enterprises gear up for the ASEAN Economic Community By Verbo Bonilla
STRATEGY POINTS ASEAN integration will bring about enhanced competition in the region, where those who can adapt will flourish while those who can’t will fail To survive, we must identify those specific opportunities presented by the ASEAN integration where our strengths, or competitive advantages, can be played up
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After the recent Foreign Ministers’ Retreat held in Cambodia on January 10 and 11, ASEAN ministers sought to reassure us of their commitment towards achieving regional integration by 2015. Their statement was issued amidst lingering doubts about the ability of the region and its member-countries to meet that target date. The Philippine government, for its part, made the same assurance late last year at the sidelines of the 19th ASEAN Summit in Bali, Indonesia, albeit with a hint of restraint. Trade and Industry Secretary Gregory Domingo, whose portfolio is at the center of the planned integration, used the words “cautiously optimistic” in describing our chances of achieving regional integration by 2015.
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Can your business survive ASEAN free trade?
Establishing a single economic bloc requires synchronizing widely diverse and divergent institutions in the 10 countries that make up our region. It will have deep and wide-ranging implications for all the ASEAN countries, affecting the way we conduct our professions, our businesses and other aspects of our lives. So is the Philippines, along with the rest of the region, really ready to join a single ASEAN Economic Community (AEC) by 2015? Can we handle the implications of integration for our country? ASEAN integration vis-à-vis the eurozone crisis. An economic bloc is in fact just one pillar of a more encompassing ASEAN Community—which also has
The
political-security and socio-cultural components-- laid out under the grouping’s Roadmap for an ASEAN Community. Discussions on the creation of an economic bloc, however, are of special interest because of its wide scope and the economic crisis currently saddling the European Union, whose economic partnership is now in trouble. The current troubles of the EU appear not to have dampened the resolve of ASEAN ministers in pushing through with economic integration in our part of the world. In fact, the ASEAN Community is now being viewed as a driver that would raise the region’s competitiveness and enhance its resilience to external shocks.
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34 Maintaining that the EU is a good example of integration, Sundram Pushpanathan, Deputy Secretary-General of ASEAN for the AEC, says that AEC has “learned a lot of lessons” from the EU experience, as reported in the English edition of the Chinese news site xinhuanet.com. However, he adds, “We are not looking at EU style. We are using our free trade arrangement as a means to come together, looking at financial integration as part of it. So our integration is very different with EU.” According to the ASEAN Economic Community Blueprint published in 2008, the ASEAN economic bloc would have the following four key related characteristics: a) a single market and production base (pp. 6-18) ; b) a highly
competitive economic region (pp. 1823); c) a region of equitable economic development (pp. 24-25); and d) a region fully integrated into the global economy (pp. 25-26). A single ASEAN market. ASEAN ministers envision free (or freer) movement of goods, services, capital and labor within the region, characterized by increased competition. It means little or no restrictions—i.e., taxes or tariffs, as well as non-tariff barriers (e.g. quotas, licenses, various requirements)-- on goods and services, especially those classified as priorities, moving in and out of countries in the region. It also includes faster issuance of visas and employment passes and equal treatment of citizen and non-citizen investors.
Differentiating the ASEAN Community from the EU Just how different is the planned AEC with the EU? The illustration below from Insight: Moving Forward with the AEC (p. 7), a paper from the Economic Intelligence Center of Siam Commercial Bank, sheds light on the difference between the two regional communities.
Features
European Union
ASEAN
1. Becoming a single market and production base Trade in Goods • Internal tariff rate • External tariff rate
- reduced to 0% - all member countries enforcing the same tariff
- reduced to 0% - each member country enforces its own rate
Trade in services (share ownership)
-100%
- 70%
Movement of labors
- free flow of labors
- free flow of only skilled labor
-single currency -European Central Bank: ECB -Supra-national authorities with central organizations such as: • European Parliament • European Court • European Legal System • European Competition Commission
- National currency - Intergovernmental method without clear authority over each member state
2. Other aspects of integration
Source: Insight: Moving Forward with the AEC, Economic Intelligence Center, Siam Commercial Bank, February 2011
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Can your business survive ASEAN free trade?
The planned integration can bring about an unprecedented level of development in the region. Theoretically, by facilitating the movement of the factors of production-goods, capital and labor— and helping them go where they are valued the most, we increase the economy’s efficiency. And the ASEAN is collectively a huge market of about 600 million people, or about 8.8 % of the world’s population-- bigger than that of the EU. With integration, its combined GDP of about US$1.85 trillion (in 2010) could grow much larger. Petri, Plummer, and Zhai, in their paper The Economics of the ASEAN Economic Community, estimated that the planned integration could yield benefits amounting to at least 5.3% of the region’s GDP. They further assure us, “there will be mild trade and investment diversion effects, but the world as a whole will benefit” from an AEC. Potential costs and benefits of integration. In theory, a single market means that we in Manila would be able to purchase the same product at the same price available in Singapore or Bangkok. There would also be new products or services available to us created by businesses driven to innovate by competition. For consumers like us, this means cheaper and better products and more varieties from which to choose. For some businesses, however, integrating the region into a single market could spell dire consequences. Businesses who have previously enjoyed some market protection may struggle to survive when national borders are opened up to more competition. If these businesses are unable to adjust and adapt quickly, they will fail. In the short
The
term, therefore, there may well be business failures, unemployment and possibly interASEAN migration. A ‘free-trade plus’ area? But lest we provoke confusion and unnecessary panic, a little clarification might be in order: what is actually being contemplated is something less than a single market. In the article Forming a Single Market: Theory and Reality, ASEAN Senior Adviser Romeo Reyes explains that it would be impossible to have a single price across countries. Because the ASEAN community will not, unlike the EU, adopt a single currency and will impose different national laws and tax rates, there would still be price variances across borders. What ASEAN leaders are really aiming at, he says, “is a free trade area plus some of the characteristics of a single market.” Be it free-trade area or one single market, ASEAN is moving towards a regime of enhanced competition. And competition is expected to come sooner in the following “priority integration sectors” (Blueprint, p. 16): • agro-based • air transport • automotive • electronics • e-ASEAN/ICT • fisheries
• healthcare • logistics • rubber-based • textile and apparel • tourism • wood-based
In fact, work to fully free up trade in these priority sectors have long been underway. The measures being implemented, as well as their targeted timelines, are encapsulated in the ASEAN Framework Agreement for the Integration of Priority Sectors, which has been in effect since late 2004.
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FINANCIAL SERVICES SUBSECTORS IDENTIFIED FOR LIBERALIZATION BY 2015 Sub-sectors
Insurance
Banking
Capital Market
Other
Member Countries
Direct Life Insurance
Indonesia, Philippines
Direct Non-Life Insurance
Brunei, Cambodia, Indonesia, Malaysia, Philippines, Singapore and Viet Nam
Reinsurance and Retrocession
Brunei, Cambodia, Indonesia, Malaysia, Philippines, Singapore and Viet Nam
Insurance Intermediation
Brunei, Cambodia, Indonesia, Malaysia, Philippines, Singapore and Viet Nam
Services Auxiliary to Insurance
Brunei, Cambodia, Indonesia, Malaysia, Philippines, Singapore and Viet Nam
Acceptance of Deposits and Other Repayable Funds from the Public
Cambodia, Laos and Viet Nam
Lending of All Types
Cambodia, Laos and Viet Nam
Financial Leasing
Cambodia, Laos and Viet Nam
All Payment and Money Transmission Services
Cambodia, Laos and Viet Nam
Guarantee and Commitments
Cambodia, Laos, Myanmar and Viet Nam
Trading for Own Account or for Account of Customers
Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand
Participation in Issues of All Kinds of Securities
Indonesia, Philippines (subject to constitutional and legislative limitations)
Asset Management
Indonesia, Philippines, Singapore and Thailand
Settlement and Clearing Services for Financial Assets
Indonesia, Philippines, Singapore and Thailand
Provisional and Transfer of Financial Information, Financial Data Processing and Related Software by Suppliers of Other Financial Services
Philippines and Myanmar
Advisory, Intermediation and Other Auxiliary Financial Services
Philippines, Singapore, Thailand and Viet Nam
Source: ASEAN Economic Community Blueprint, Annex 1, p. 56.
Some of the financial services identified for liberalization under the ASEAN Economic Community, and the member countries where the liberalization should take place
Are we any closer to establishing an ASEAN Community? According to the ASEAN Economic Community Scorecard (2009), a report tracking the accomplishments towards integration in 2015, “significant progress” has already been made in complying with the targets in the priority sectors. As for progress in the overall effort to create an economic bloc,
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the ASEAN Annual Report 2010-2011 cites a more specific accomplishment: 67.9% of all 2008-2011 targets contained under the AEC Blueprint has already been achieved as of April last year (p. 30). Without sifting through the minutest details of the claimed accomplishments vis-à-vis commitments made under the
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Strategic Schedule for ASEAN Economic Community-- or this 58-page list of products under the priority sectors-we can only take this and similar pronouncements of accomplishments with a grain of salt. A more sober view is provided in a report in Philippine Star, which cites experts saying no “dramatic change” will come upon the enactment of the AEC on Jan. 1, 2015. Dr. Kitti Prasertsuk, a professor of Political Science in Thammasat University in Thailand, was quoted as saying “ASEAN is notorious for ‘implement deficit.’” He cited delays in law and regulation amendments among the country members as major impediments to realizing the AEC. In short, it remains to be seen whether we are actually any closer to economic integration by 2015, as a lot will still depend on sustaining the integration efforts down the stretch. Implications of ASEAN integration for the Philippines. What are the implications of ASEAN economic integration for the Philippines? In terms of competitiveness, we have much to improve and much to gain from joining an ASEAN economic bloc. Reports like the 2011-2011 Global Competitiveness Report of the World Economic Forum and the IFC Doing Business Report 2012, for instance, have consistently ranked us second-to-thelast in competitiveness in our region, better only than Cambodia. The findings of the Global Competitiveness Report prompted a Philippine Daily Inquirer business columnist to ask: “Will Cambodia overtake us in global competitiveness?”
The
Presumably, ASEAN integration would help raise our competitiveness by facilitating our country’s access to opportunities and providing the impetus for improvement. Our businesses and workers would be able to locate more readily elsewhere in the region, and our products would easily find their way to richer markets. Our entire economy’s productivity could increase following regional integration. How much more? According to Ruperto Majuca, Assistant Director General of the National Economic Development Authority, our gross domestic product could grow by as much as an additional 3.2% after the establishment of an ASEAN economic community. Majuca further cites studies that find Philippine exports would grow by as much as 45.5%, the construction sector by 4.3 % and the transport sector by 7.3%. But alongside these opportunities are foreseen challenges we must face and overcome. We must prepare our businesses, especially small businesses in the priority sectors, for enhanced competition. We must also identify those specific opportunities presented by integration where our strengths, or competitive advantages, could be played up. Otherwise, opportunities presented by the impending AEC will pass us by and we will, indeed, be overtaken by Cambodia and other lower-rung countries. Philippine competitive advantages. Where do our competitive advantages lie? Anand Kumar of Synovate Business Consulting, opines that the Philippines has the potential to emerge as the next manufacturing hub in the ASEAN, as
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reported in the BusinessMirror. He cites our English-language proficiency, our competitive wages, and our proximity to demand centers in the region as factors that would help us realize this potential. Kumar says that we must “take full advantage of the ASEAN free-trade agreement” and “expand to offering higher value-added services.” The Joint Foreign Chambers of the Philippines, in their advocacy paper Arangkada Philippines 2010: A Business Perspective, cites other specific sectors, in addition to manufacturing, where our country enjoys competitive advantage. The paper proposes seven big “winner” sectors: (1) Agribusiness, (2) Information Technology-Business Process Outsourcing, (3) Creative Industries, (4) Infrastructure, (5) Manufacturing and Logistics, (6) Mining, and (7) Tourism, Medical Travel, and Retirement. There may well be other sectors in the Philippines worth focusing on, but the fact that the above sectors are being proposed by foreign investors—including the biggest aggrupation of foreign investors-- indicates that there is considerable demand for development of these areas. The Philippine government would do well to consider this group‘s proposals carefully. Prospects for Philippine integration into the ASEAN Community. There are encouraging reports about the preparedness of our local firms for the ASEAN economic community. At last year’s ASEAN 100 Forum, a yearly assembly of
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the region’s business leaders, top local firms explored opportunities to become more competitive through ASEAN integration. “We’re already working toward that. The way we approach our food and airline business is from a regional perspective,” said Lance Gokongwei, president of conglomerate JG Summit Holdings, which owns the Cebu Pacific airline, food manufacturer Universal Robina Corporation, and JG Summit Petrochemical, among other business interests. The Lopez Group of Companies, which operates energy firm First Gen Corporation, is also reportedly looking at “exporting its expertise in geothermal power generation to other neighboring countries.” Apart from these big firms, however, it is important that our other, smaller and less established businesses also be aware of and prepared for the ASEAN Economic Community. These are precisely those businesses which could be affected most -- and perhaps adversely -- by enhanced competition in the AEC. Going by official ASEAN reports, we may or may not achieve full integration by 2015, but in any case, we should recognize that the AEC’s realization appears to be just a matter of time. As such, Philippine businesses will be in better shape to deal with increased regional competition by becoming aware of, and preparing for regional integration looming over the horizon.
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NEWS ON THE NET World
More than 100 injured in Peru quake A magnitude 6.3 earthquake hit coastal Peru 15 kilometers southeast of Ica, according to the U.S. Geological Survey. Over 100 people were reportedly injured and 40 homes were structurally affected. This is the second earthquake to hit the area in less than four months; last October a 6.9 earthquake struck the same location. Like most of the South American Pacific Coast, Peru is on the meeting point of two tectonic plates. The country is no stranger to natural disasters of this nature. In 2007, a 7.9 earthquake occurred in the southwestern part of Peru, killing over 500 people and injuring more than 1000.
Chinese workers kidnapped in Egypt freed Chinese and Egyptian media reported that 25 Chinese workers kidnapped in Egypt were freed, a day after they were taken hostage. The freed workers were in good condition, and were released after talks were held between the captors and top security and army officials.
The
Days before the kidnapping in Egypt, 29 Chinese workers were also abducted by rebels in Sudan. This marked the third time Chinese workers have been taken hostage in Sudan since 2004.
Romania’s former PM sentenced to prison for corruption Former Romanian Prime Minister Adrian Nastase was found guilty of illegally raising millions in campaign funds, which he used to run for the presidency in 2004. Nastase’s sentence followed more than two weeks of citizen protests against unchecked corruption in the Romanian government– a valid issue, considering that the country was barred last year from joining the EU’s Schengen passport-free area due to other nations’ concerns about Romania’s level of corruption.
OFWs in Barcelona oppose closure of PH consulate The Department of Foreign Affairs’ decision to shut down the Philippine Consulate in Barcelona, Spain has been met with loud and active opposition from several parties. Overseas Filipino workers urge the DFA to reconsider, as they say the diplomatic post is helpful to the large number of Filipinos in the area. A protest page on Facebook, the “No to Closure of Philippine Consulate in Barcelona. Yes to public service!” has gained over 4,500 members as of Friday, Feb. 3. In a strange twist, Akbayan Rep. Walden Bello and Ilocos Norte Rep. Imelda Marcos to both support the movement to keep the Consulate open. Bello was a prominent figure in the antiMarcos dictatorship movement.
In the so-called "Aunt Tamara" case, Nastase had also been accused but found innocent of bribing the former head of Romania's anti-money laundering agency to delete documents related to his wife's financial transactions.
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The Growth Challenge
CHANGING GEARS: QUAR Real percent increase ove
Will the economy rebound from last year’s slowdown? By Ricardo Saludo
STRATEGY POINTS Three issues face the country in rising from last year’s disappointing slowdown: Can we get a ratings upgrade without squeezing government spending? Can domestic growth surge while overseas income slows? And can sustain economic expansion through another global slump, as we did in 2009? “I am very confident about growth this year. There will be a much-improved growth scenario, especially in the first half.” So said Budget Secretary Florencio Abad in a recent media interview. He sought to lift confidence after the January 30 release of disappointing economic data which showed last year’s growth down by half from 2010. And since one big reason for the slowdown was government underspending, the budget czar’s assurance could buoy hopes. Still, seasoned watchers of the Philippine economy might not warm to Abad’s optimism. After all, things have not exactly gone the way pointed by the government in the past year. For instance, the much-
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hyped flagship public-private partnership program has awarded just one minor project more than a year after President Benigno Aquino III launched PPP in a November 2010 conference for local and foreign business (see story on p. 50). And before official quarterly data come out, there have been upbeat statements from top officials as well as the National Economic and Development Authority, only to be doused by the cold numbers. Days before NEDA’s affiliate, the National Statistical Coordination Board, reported 2011 growth, the state planning agency itself estimated a rate of as high as 4%, with October-December expansion below 5%.
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The growth challenge
RTERLY ECONOMIC GROWTH er same quarter off past year 10% 8% 6% 4% 2%
Source: National Statistical Coordination Board (NSCB)
NSCB reported 3.7% for both full year and fourth quarter.
and minus spending on foreign staff and assets in the country.
“Amidst the obstinate exogenous economic woes, the government underspending on infrastructure in the second and third quarters, and the sustained decline in fishing, the domestic economy grew in 2011 by a relatively feeble 3.7 percent compared to 7.6 percent in 2010,” NSCB Secretary-General Romulo Virola announced last week.
On the demand side, both exports and government spending pulled down growth. Merchandise shipments, led by electronics, dropped 5.3% in inflation-adjusted terms, while services exports, up 3.4%, barely matched the overall economic growth. On top of the 0.7% decline in government consumption, underspending on public works dragged overall construction to a 4.1% fall. The 70-fold surge in inventories pushed capital formation to double-digit growth, but that itself may suggest slowing industry sales.
Sources of slowdown. The national statistician blamed the deceleration in gross domestic product (GDP) on the global economic slump, which hit exports and remittances, as well as the slowdown in state construction, which cut industrial growth to a measly 1.9% (see table on this page and succeeding article). Growth in gross national income fell even more to 2.6%, less than a third of the 8.2% surge in 2010. GNI, formerly gross national product, is GDP plus earnings from labor and property abroad
The
Even more worrisome, especially for the poor, is the stagnation in average income. “With the weakened economic growth in 2011,” Virola explained, “per capita GDP slowed down to 1.8 percent from 5.6 percent in 2010. Likewise, per capita GNI decelerated to 0.7 percent from 6.1 percent.” And since actual income growth are never the same for all individuals, the
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42 near-zero increment in per-capital GNI suggests that more Filipinos would have seen their real earnings drop last year than in 2010. Further on GNI, for most, if not all of the 38 consecutive quarters of growth during the Arroyo administration, gross national income grew faster than GDP, helped by burgeoning remittances from overseas Filipino workers. As the chart on the opening pages show, GNI growth even exceeded 6% when the domestic economy creeped at 0.5%-1.6% quarterly increase amid the 2009 global recession. And when the economy rebounded in first quarter of 2010, galloping at 8.4%, GNI was still ahead, managing double-digit expansion of 11.5%. But since July 2010, GNI has consistently lagged GDP growth, slipping to 1.5% in the second quarter of last year, half the domestic growth then. The rate has accelerated since last July, but it was still below GDP growth in the last quarter of 2011. The two rates bear watching, given the major role of net earnings from abroad — the additional component in
GNI — in sustaining consumer spending and property investment. Key issue: With double-digit annual growth in remittances seemingly over since 2009, as Bangko Sentral data shows (see below), will the external accounts now be a burden to the overall economy, rather than the boost it had been for decades? Ratings up, growth down. A second growth issues is deficit spending. With the need to boost growth amid the global slowdown, the government has to balance its push to win upgrades from credit rating agencies with the need for infrastructure spending to generate growth and jobs, and enhance the efficiency, competitiveness and attractiveness of the Philippines for industry and investment. Through much of last year, infrastructure spending took a back seat to the deficit reduction urged by credit rating agencies. Public works fell by half in real terms in the second quarter from 2010, even as the budget deficit plummeted to less than one-fifth of the ceiling. The gains culminated many years of fiscal
DOUBLE-DIGIT NO MORE Overseas Filipino Remittances, 2005-November 2011 AMOUNT
INCREASE
$ billion
% from year ago
2005
10,689
25.0%
2006
12,761
19.4%
2007
14,450
13.2%
2008
16,427
13.7%
2009
17,348
5.6%
2010
18,763
8.2%
2011 January-November
18,317
7.3%
YEAR
Source: Bangko Sentral ng Pilipinas
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reforms and consolidation, which saw the government deficit-to-GDP and debt-toGDP ratios fall (see charts).
price: the slump in public spending and economic growth.
THE BATTLE AGAINST RED INK
Philippine Budget Deficit/Surplus as % of GDP (negative values are deficits) PHILIPPINES GOVERNMENT BUDGET Percentage of the GDP
NATIONAL GOVERNMENT DEBT AS % OF PHILIPPINES GOVERNMENT DEBT TO GDP Percentage of the GDP
Deficit-to-GDP and debt-to-GDP charts by Trading Economics, with data from Department of Finance and International Monetary Fund
All those years of tough measures paid off. Last June both Moody‘s Investor Service and Fitch Ratings followed Standard & Poor’s November 2010 upgrade. Moody’s and S&P put Philippine sovereign debt just two notches below investment grade, while Fitch rated it just one rung down. But slashing the deficit and lifting credit ratings came at a hefty
The
This year the quest for an investment grade rating continues. In December both President Aquino and Finance Secretary Cesar Purisima called for more upward adjustments, which would bring Philippine debt to investment grade or just a notch below it, depending in the rating agency. And two weeks ago Prudential Asset Management fund
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44 manager Richard Rountree in Singapore was the latest of several analysts forecasting more upgrades for the country.
pronounced: “Without imposing new taxes, the Philippines has managed to raise its revenue effort through improved collection
CHASING TRIPLE-A: SELECTED ASEAN SOVEREIGN CREDIT RATINGS, JUNE 2011 Sovereign credit ratings S&P
Fitch
Moody‘s
Country
Ratings
Notches from Investment grade
Outlook
Ratings
Notches from Investment grade
Indonesia
BB+
-1
Positive
BB+
-1
Positive
A-
4
Stable
A-
4
Malaysia
Outlook Ratings
Notches from Investment grade
Outlook
Ba1
-1
Stable
Stable
A3
4
Stable
Philippines
BB
-2
Stable
BB+
-1
Stable
Ba2
2
Stable
Singapore
AAA
10
Stable
AAA
10
Stable
Aaa
10
Stable
Thailand
BBB+
3
Stable
BBB
2
Stable
Baa1
3
Stable
Vietnam
BB-
-3
Negative
B+
-4
Stable
B1
-4
Negative
Table by Arangkada Philippines; data from Asia Bonds Online (ADB), Standard & Poor’s, Fitch, Moody’s
Spend and collect. So will the Aquino administration again sacrifice growth and infrastructure for higher credit ratings? It seems to have learned its lesson: OctoberDecember infrastructure expenditures of ₧87 billion exceeded the ₧86 billion total for January-September. The deficit too nearly doubled from ₧96.2 billion in the first three quarters to ₧191.6 billion at year’s end. Budget Secretary Abad pledges to maintain that pace of spending, predicting a “surge” most likely in the coming months till June. Would the new spending tack derail the ratings upgrade train? Not if Abad and the rest of the Development Budget Coordinating Committee keep the red ink in check, which the DBCC has shown itself quite capable of. Moreover, the revenue agencies are improving their collection efficiency, with the revenues-to-GDP ratio — the key indicator watched by credit rating agencies — probably reaching 14% last year, from below 13% in 2010, based on the estimated 13% growth in revenues last year. Thus, as early as last October, HSBC
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... If the government maintains its course, we believe the medium-term fiscal deficit target of 2% of GDP is within reach.” And collections would further improve if new revenue measures are enacted, including the liquor and tobacco excise tax bill filed last week. Thus, investment bank Alliance Bernstein says, despite a larger budget deficit in 2012, “our outlook for the government’s debt securities is positive, based on the relative dovishness of the central bank, a track record of fiscal prudence and the economy’s resilience. And the Philippines may indeed be on the way to a historic investment grade rating in 2012. The global factor. With government spending set to rise and consumer spending tipped to play its usual anchoring role in the economy (it grew 6% last year), the remaining growth issues are private investment and the global economy. The Bangko Sentral’s fourth quarter Business Expectations Survey (BES) index rose to
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38.7, sustaining the rising trend in the second half of last year.
employment levels remain historically low, unemployment was falling, and investment, while slowing, may pick up as concerns about the U.S. economy and the euro crisis abate. Two days later global stocks surged after the jobless rate fell for the fifth straight month to the lowest in three years at 8.3% in January.
Approved investments also rose 38% in 2011 to ₧763 billion, potentially creating nearly 200,000 jobs. And the NSCB’s Leading Economic Indicator index also kept rising in However, Europe’s the last quarter, recession and with seven of the continuing fiscal U.S. Federal Reserve Chairman Bernanke in Congress: Jobs and investment are up 11 components debacles continue to making positive cloud the year ahead. contributions. The World Bank’s Lifting LEI were new business start-ups, newly released Global Economic Prospects tourism arrivals and hotel occupancy, January 2012 report downgraded growth power consumption, stock and consumer forecasts everywhere. World output will prices, and exchange rates. Money supply, slow to 2.5% in 2012 — the borderline for imports, terms of trade, and wholesale recession — down from 2.7% estimated prices bear watching. last year and 4.1% in 2010. East Asia and the Pacific is tipped to lead the world with The global picture has shown some 7.8%, led by China’s 8.4%. Excluding China, improvement since the height of developing economies would crawl at 3.8% international concern over debt woes in expansion. the U.S. and Europe several months ago. Last week Federal Reserve Chairman Ben Plan for economic slowdown. Andrew Bernanke reported on the U.S. economy to Burns, lead author of the Bank report, notes the House in a video Budget interview that Committee. capital flows Testifying to developing for over countries are two hours, down by half Bernanke due to the risk noted that aversion that while overall has spread consumer worldwide sentiment amid the and Europe World Bank economist Burns: ‘Prepare for the unexpected’
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46 and U.S. fiscal crises. With their “vulnerability,” GDP growth in developing countries could decline by as much as four percentage points in worst-case scenarios, much like 2008-09. His advice: “Prepare for the unexpected. ... Take a cold, hard look at what might happen and plan ahead.” That includes raising money now while financial markets are still receptive. The U.N. Department of Economic and Social Affairs’s World Economic Situation and Prospects 2012 echoes widespread fears of a repeat recession. “The world economy is on the brink of another major downturn,” says DESA. Capital flows and commodity prices remain volatile, and trade is moderating, with adverse impact on resources for growth and development. Economic and Social Commission for Asia and the Pacific (ESCAP) warns of a slowdown in its region from last year’s estimated 7.1% growth to as low as 5.6% in its downside scenario. So what’t the bottom line for the Philippines in 2012? With the global slowdown, the need to boost government, investment and consumer demand at home becomes even more crucial if the economy is to avoid another disappointing year. There will be even greater pressure on the Aquino Administration to deliver, especially with mid-term elections coming next year. And with last year’s lessons plus the biggest budget ever at its disposal, there would be no excuse for failing to prime the economic pump again.
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Spend, spend, spend At the end of 2001, the first year of the Arroyo Administration, then Budget Secretary Emilia Boncodin noted that budget utilization had exceeded 90%, against a historic average of 85%. This high absorptive capacity accelerated public works and other state programs. But it also strained public finances, which could no longer count on 15% of national appropriations being left unspent every year. In its first year the Aquino administration had the opposite problem: underspending slashed the deficit, but left many state projects undone. And the economy suffered, with the public spending slump squeezing government consumption expenditures, state construction, and overall growth. Underspending was especially felt in construction and the overall industry sector. The table (see right) from the National Statistical Coordination Board shows public works slowing by a huge 29.4% in real or inflation-adjusted terms, compared with the same period a year ago. This cut output in overall construction by 6.4%, which dragged down growth in the entire Industry sector to a crawling 1.9%. That was the slowest among the three production sectors comprising gross domestic product, with Services growing 5% and making up for Agriculture, up 2.6%, and Industry. On the demand side of the ledger, the 0.7% decline in government consumption spending damped overall demand. So did the 4.1% contraction in Construction, which constricted Capital Formation, a major demand component of GDP. President Benigno Aquino III was quick to justify the underspending as part of his program to reduce waste and corruption. “It’s really just a question of not just managing the resources, but really having that mindset that this is the people’s money,” he said in his YouTube interview last November. Transportation and Communications Secretary
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UNDER-CONSTRUCTION Gross value added in construction, 2011 at current and 2000 prices, in million pesos At Current Prices
INDUSTRY/INDUSTRY GROUP
2010
At Constant Prices
2011
Growth Rate (%)
2010
2011
Growth Rate (%)
1. PUBLIC
301,577
220,245
-27.0
144,247
101,902
-29.4
2. PRIVATE
647,829
728,706
12.5
346,413
368,400
6.3
GROSS VALUE IN CONSTRUCTION
949,406
948,952
0.0
490,659
470,303
-4.1
GROSS VALUE ADDED IN CONSTRUCTION
551,230
541,783
-1.7
325,820
305,064
-6.4
Mar Roxas chimed in: “If you look at the components of underspending, they are really the fruits of good governance.” For all that justification, however, the government has, in fact, seen the error of underspending. President Aquino himself announced a Disbursement Acceleration Program to speed up spending of ₧72 billion in budget outlays. Last month the government reported that 96% of the entire amount for the acceleration program had already been spent by the end of December.
Source: NSCB 2011 Construction sub-sector data
than a month in the current fiscal year. Secretary Abad added: “The early, substantial releases will also allow the Administration to jump-start most of its programmed infrastructure projects and complete them well before the rainy season and its typhoons set in.”
While the early budget allotments are welcome, they only authorize departments to use their respective outlays. Projects still have to be actually contracted out, execute, and paid for. The level of actual public spending, and the growth of the economy, will again rest on the ability of agencies to carry out their assigned programs and projects.
For 2012, the government announced in December that it will “jumpstart And it’s not just one economic growth” in year’s economic the next fiscal year. expansion at stake, but President Aquino on YouTube: ‘This is the people’s money’ “In contrast to 2011 future growth, investment when infrastructure and jobs. Slow growth spending was and poor infrastructure delayed, we intend to begin 2012 on a very are perennial problems raised by investors and strong note,” said Budget Secretary Florencio Abad. enterprises, such as the Arangkada Philippines group “Various infrastructure projects amounting to around of foreign business chambers. Finance Secretary ₧140 billion can be implemented by departments Cesar Purisima delivered the same message at a and agencies as early as the first working day of Credit Suisse forum last year. January 2012.” So remember: if the government doesn’t spend True enough, the Budget Department announced last a budget it rushed Congress to pass, we miss an month that 90.5% of the 2012 budget of government opportunity not just to boost 12 months’ GDP, but to departments had already been released, just less bring in capital, jobs and wealth for years to come.
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Making PPP Work for Philippine Infrastructure Development By Mary Grace V. Pulido
STRATEGY POINTS Infrastructure development is crucial in the delivery of public goods and services and in promoting economic growth PPP is a useful scheme to finance and carry out government’s infrastructure program A stronger regulatory framework and tighter implementation of projects are necessary to ensure the success of the Aquino administration’s PPP program
The government‘s PPP presentation, brought to you in a YouTube video
Public-private partnerships (PPP) can be a potent tool in promoting a government’s infrastructure program. It is in fact the Aquino administration’s centerpiece program in pursuing “accelerated infrastructure,” a major strategy under the Philippine Development Plan 2011-2016 to achieve “inclusive growth and poverty reduction.” Quoting from the development plan further, government says it “will accelerate the provision of safe, efficient, reliable, costeffective, and sustainable infrastructure.” Unfortunately, since the launch of President Aquino’s centerpiece program in 2010, only one project -- the Daang Hari Road Link Project – was bidded out by the end of 2011. The government earlier cancelled – but later renegotiated – some PPP contracts at the start of President Aquino’s term, perhaps highlighting some of the risks involved in investing in the Philippines. The unnecessary delays as well as the problematic PPP projects undertaken in the past could arguably have been avoided had the country a clear and robust PPP legal framework. What then are the laws governing PPP in the country, and is it time to introduce some changes?
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Making PPP work for Philippine infrastructure development
The need for a clear PPP framework. The World Bank’s PPP in Infrastructure Resource Center defines PPP as “arrangements between the public and private sectors whereby part of the services or works that fall under the responsibilities of the public sector are provided by the private sector, with clear agreement on shared objectives for delivery of public infrastructure and/ or public services.” In a presentation, the Pacific Economic Cooperation Council opined that the legal framework of every PPP should define the business model (structure of revenues and costs), the regulations scheme (restrictions and obligations), and the main source of risk (the core risk of any given PPP business). The cost and availability of financing the PPP projects, according to them, depends strongly on these issues.” PPP laws in the Philippines. In the Philippines, no less than our Constitution (Section 20, Article II) recognizes “the indispensable role of the private sector as the main engine for national development.” In line with this fundamental policy, laws have been passed to enable and encourage private sector participation in government programs, such as in infrastructure development. 1. The Build-Operate-Transfer Law, Republic Act (RA) 6957 as amended by RA 7718, and its Revised Implementing Rules and Regulations Passed during the term of President Corazon Aquino, this law allowed government to engage in partnerships with the private sector through arrangements
The
such as build-operate-transfer, buildoperate-own, build-transfer-own, management, concession, or joint venture contracts. The most common among these PPP arrangements is build-operatetransfer (BOT) whereby the contractor, in the words of RA 7718, “undertakes the construction, including financing, of a given infrastructure facility, and the operation and maintenance thereof.” The contractor transfers the facility to the government at the end of a fixed term, presumably after it has recouped its investment plus a reasonable rate of return. Both the national and local governments as well as other government agencies can enter into partnerships with the private sector (Rule 2, Sec. 2.1 (a) of the Revised Implementing Rules and Regulations). The BOT law also aims to ensure the linkage of projects undertaken with overriding strategic policies of the government. It provides that, “the lists of all such national projects must be part of the medium-term infrastructure programs of the agencies concerned and must be duly approved by Congress. Local projects funded and implemented by the local government units concerned shall be submitted to the local development councils for confirmation or approval.” 2. RA 9184, or the Procurement Law This law imposes the strict observance of competitive bidding in government acquisition of goods, consulting services, and construction of infrastructure projects. This is in line with government’s policy of “a transparent, competitive, streamlined and accountable bidding process” in all its procurement activities.
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50 3. Executive Order No. 8 This Executive Order actually does little more than rename the Build-OperateTransfer Center into the Public-PrivatePartnership Center, and transfers it from the umbrella of the Department of Trade and Industry to the National Economic Development Authority. The PPP Center retains its primary responsibility of facilitating projects, providing technical assistance, and issuing recommendations and guidelines for the implementation of PPP programs. Obligations and contracts. PPPs involve contracts between the government and the intended private partners. It is paramount that parties honor the stipulations entered into in these contracts. Incidentally, the PDP 2011-2016 suggested measures to improve project preparation, development, and implementation as part of infrastructure development. It included “monitoring, management, and evaluation of PPP projects for the immediate mitigation of potential problems during contract implementation, while maintaining clear lines of accountability between contracting parties and the oversight agency.” The European Chamber of Commerce and the Joint Foreign Chambers of Commerce in the Philippines, however, believe that the slow entry of foreign investors in the Philippines is due to fears that the present government might suddenly cancel or suspend valid PPP contracts, as discussed in a Manila Times editorial in December. The investors’ concerns are not without basis. In 2011, President Aquino called off several projects already agreed upon
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between the Philippine and foreign governments and corporations.
1. The North Rail project This timeline of the North Rail project from abs-cbnnews.com shows that as early as 1994, the Philippine government had conceptualized the creation of a railway system connecting Metro Manila to Clark, Pampanga. A memorandum of agreement for this project was signed by the government’s North Luzon Railways Corporation and China National Machinery and Equipment Group (CNMEG) in 2002. However, a Senate inquiry into allegations of corruption surrounding the North Rail agreement stalled the project. When President Aquino assumed the presidency, he immediately ordered a review of the project. In late 2011, it was reported that the Chinese and Philippine government agreed to reconfigure the funding and design terms in order to revive the project, with the Department of Transportation and Communications (DOTC) recognizing the railway system as an important infrastructure for transportation.
2. The planned Laguna de Bay rehabilitation
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Belgian construction firm Baggerwerken Decloedt En Zoon (BDZ) proposed to undertake the ₧18.7-billion Laguna Lake Rehabilitation Project. As reported in SunStar Manila in November, the project was supposed to dredge the Napindan Channel to deepen it for easier navigation of boats and barges to and from the Manila Bay and Laguna de Bay. But in November 2010, President Aquino publicly announced the cancellation of the project, which stunned the Belgian firm, who claimed that it was never informed about the Philippine government’s move prior to the announcement. This prompted BDZ to sue the Philippine government before the International Centre for Settlement of Investment Disputes in Washington D.C. seeking at least ₧4 billion pesos in damages.
3. Ro-Ro no more President Aquino also called off the Rollon-Roll-off Project (RORO), involving the construction of 72 RORO ports in the country, with the Eiffel-Matiere S.A.S. Consortium and the French government. In a an August news report of abs-cbnnews. com, former Senator Aquilino Pimentel commented on the cancellation of the RORO project saying, “it would severely retard the development of remote islands and further deepen rural impoverishment.” The report further noted that President Aquino’s decision to cancel the contracts
The
was based on DOTC assessments that the country needed only six such ports, and that the ports were being built in areas with unusually high waves, which would violate the contract warranties of the French supplier EiffelMatiere. Those assessments were disputed by Pimentel, who said the number and selection of ports came from the Philippine government. PortCalls Asia reported in October that the Philippine government and EiffelMatiere agreed to cancel the contract and renegotiate the deal, with the Philippine government paying the contractor for work already done. Settlement moves aside, the series of contract cancellations could still make prospective foreign investors wary of the Philippines‘ resolve to comply with and observe contract stipulations. ‘Unquantifiable loss to the public sector.’ The report Delivering the PPP Promise, by PricewaterhouseCoopers, said that there may well be an “unquantifiable loss to the public sector of the delay in many projects that slow PPP procurement brings about.” Unfortunately, it is not only the public sector that is affected by slow PPP turn-outs. As reported in the English edition of xinhuanet.com in November, “the country‘s construction sector slowed owing to the delayed implementation of the government‘s Public-Private Partnership (PPP) program.”The contributed to the poor economic growth in the third quarter of 2011, according to the National Statistical Coordination Board press release.
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52 Regulatory risk protection. During the launch of the government’s PPP program in November 2010, President Aquino personally made a commitment to the investors in attendance that his administration would minimize investor risk in a fair and meaningful manner. In his speech, he said, “The government will provide investors with protection against regulatory risk. Infrastructure can only be paid for from user fees or taxes. When government commits to allow investors
In a feature article, More public debt, less gov’t responsibility, IBON Foundation believes that regulatory risk insurance could do more harm than good. The local think-tank is of the opinion that “it is reasonable to expect every profit-seeking investor that will participate in PPP projects to ask for the said insurance.” Furthermore, the think-tank noted that, “the risk insurance guarantee may also have the effect of undermining the system of checks and balances and the use of courts to protect public interest.” On the other hand, under the BOT Law, a direct government guarantee is defined as an agreement whereby the government or any of its agencies or local government units assume responsibility for the repayment of debt directly incurred by the project proponent in implementing the project in case of a loan default.
to earn their return from user fees, it is important that that commitment be reliable and enforceable.” Regulatory risk, according to the International Risk Management Institute, Inc., is “the risk that a change in laws and regulation will significantly impact an institution. A change in laws or regulations enacted by a governmental or regulatory body can dramatically increase the costs of conducting a business, decrease the attractiveness of an investment, or change the competitive landscape.”
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Hypothetically, in the event that the public feels a PPP project is likely to cause environmental harm and turns to a court to seek injunctive relief such as a Writ of Kalikasan, the court can issue an environmental protection order. But with the regulatory risk protection offered by the government, the court order may become ineffective since investors will receive compensation from the Philippine Infrastructure Development Fund, which will be funded by contributions from government financial institutions. In a paper entitled The Country Needs a Stable PPP Policy, former Justice Secretary Alberto Agra observed that “the President is, in effect, saying that a contract entered into by his government is
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immune from judicial inquiry, and will be honored, at least financially, regardless of the result of any review by the courts.”
with the Right Quality, undertaken by the Right People and accomplished Right on Time.”
Unlike the Philippines, other countries, like Pakistan, provide for better management of risks where their PPP policy provides Risk Framework Guidelines that covers generic risk and the principles of dealing with them, including at the sector level.
Hope for Philippine PPPs. The UK Foreign and Commonwealth Office in its country update for business, assessed that despite the delays, “the Philippine government remains committed to PPPs, and will likely use different models according to the project in question, and the type of funding available.”
Present status and potential. Our laws recognize the financial capability, as well as the management and technical expertise, of the private sector to undertake infrastructure projects. With these laws in effect, government has been engaging the private sector more and more in constructing public infrastructure, i.e., toll roads, mass-transit systems and energy power plants. There is hope for PPP in the country. Alongside the previously mentioned problematic projects are successful ones, such as the Metro Rail Transit-3 of the Ramos administration connecting major cities in Metro Manila, and the San Roque Multipurpose Dam in Pangasinan. Lists of other BOT projects in 2010 and PPP projects for 2012 are provided by the Department of Budget and Management. When Benigno S. Aquino III assumed the presidency in 2010, this scheme of partnership with the private sector became an integral part of his administration’s development agenda. In his speech at the Philippine-Fujian Business Conference in 2011, President Aquino stressed that partnerships with the private sector must be guided by what he calls the 5Rs. He said, “our partnerships must represent the Right Project, at the Right Cost,
The
The UK-FCO sent an infrastructure investment mission in December 2011 to educate the Philippine officials on PPP and other infrastructure development opportunities. UK Foreign and Commonwealth Office Minister Jeremy Browne reminded the Philippines though that infrastructure development must be accomplished in a clear and transparent manner. Notably, the British make up the largest group of European investors in the Philippines. Legislation has been sought to regain the PPP’s momentum brought about by the setbacks in implementation. The legislative branch has initiated passing on new legislation to address this concern. Senator Edgardo Angara filed Senate Bill No. 3090, entitled “An Act Enhancing the Public Private Partnership (PPP) in Infrastructure Development in the Philippines.” The bill pushes for adequate protection of rights, consistent enforcement of contracts, and continuation of competitive bidding as the center of government procurement policies. With these, the fear of foreign investors mentioned above can be dispelled, and more private sector investments can be made.
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Making PPP work for Philippine infrastructure development
The many ways of mixing public good and private gain The following data from the World Bank shows the number of public infrastructure projects undertaken in the Philippines with private sector participation since the BOT Law took effect. These projects include management or lease contracts, concessions, greenfield projects, and divestitures.
TOTAL INVESTMENT IN PROJECTS, 1990-2011 YEAR
NUMBER OF PROJECTS
1990
3
98
1991
1
433
1992
1
214
1993
10
1,934
1994
17
1,978
1995
9
322
1996
4
3,320
1997
8
12,766
1998
2
1,807
1999
2
888
2000
4
2,152
Secretary Roxas explained that with the hybrid PPP the government will privatize the operation and maintenance aspects once the infrastructure is completed. He further said, “the hybrid-PPP scheme would cut the cost of projects because of cheap foreign funds that would eventually result in lower cost of transportation.”
2001
4
2,738
2002
1
863
2003
3
916
2004
8
1,551
2005
0
768
2006
5
1,983
2007
3
3,964
This improved version of the PPP structure is supported by local micro-entrepreneurs. As reported in The Manila Bulletin in December, Rep. Teodorico Haresco, from Ang Kasangga party-list organization, which represents micro-entrepreneurs, said that this modified version of the PPP scheme would address the issue of guaranteed large returns on investment of private investors, which is currently at 20 to 35%.
2008
5
3,344
2009
13
5,506
2010
5
2,817
2011
0
0
Hybrid PPP? In September, DOTC Secretary Manuel Araneta Roxas crafted the idea of a hybrid PPP to improve contracts for future government infrastructure projects. Under this scheme, instead of depending on private investors for financing, the government will rely on overseas development assistance (ODA) loans from multilateral lenders with low interest rates.
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INVESTMENT IN US$ million
Source: Private Participation in Infrastructure Database, Country Snapshots – The Philippines, Public-Private Infrastructure Advisory Facility, The World Bank Group
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NEWS ON THE NET Business
and the Bureau of Customs. Finally, the Revenue Performance Evaluation Board (RPEB), mandated under RA 9335, may be convened this month or next, Finance Undersecretary Carlo Carag said in a Business World interview last week.
Cebu Pacific to launch flights beyond Asia The Gokongwei-owned budget airline Cebu Pacific is set to add flight destinations in Europe, the Middle East, the U.S., and Australia next year among its services. The airline's president Lance Gokongwei says that this will facilitate more regular visits to home by overseas Filipino workers. “Now, they will be able to come home three or four times a year,” he said. Currently, Cebu Pacific's fleet is limited to flying around the AsiaPacific region. Last year it was voted the third best budget airline in a poll published by Smart Travel Asia.
Putting the squeeze on the taxmen It’s been half a dozen years since the Attrition Act of 2005 was enacted to remove poorperforming collection agents of the Bureau of Internal Revenue
The RPEB includes the Finance Secretary as chairman, with the Budget and Socioeconomic Planning Secretaries, the BIR and BoC chiefs, and representatives of officials and staff of the two agencies. So if your taxman puts the squeeze on you or helps you file your return, know that the pressure may be on him too.
Facebook sets historic IPO Facebook filed for an initial public offering (IPO) last week, which could value the social networking site anywhere between U.S.$75 and $100 billion -- potentially making this one of the largest American stock market debuts of all time. In the Securities and Exchange Commission filing, the company stated that it is seeking to raise $5 billion in share sales. It posted a profit of $1 billion in 2011, from more than $3.5 billion in revenues.
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Facebook's offering could top Google's 2004 IPO, which currently holds the record for the biggest U.S. Internet IPO. It raised $1.9 billion and was valued at $23 billion.
GMA inks 3-year deal with Fox GMA Worldwide Inc. (GWI), the content acquisition and distribution subsidiary of GMA Network Inc., has signed a three-year deal with Fox International Channels. The agreement involves a minimum of 350 hours of local programs and 25 films to be aired this 2012 through cable channels handled by Fox. Other than this deal, GWI posted strong sales in Africa, Brunei, China and Korea, with over 2,000 hours of programming delivered to these locations. GMA Television productions included in the Fox deal are local soaps as well as various television adaptations of classic and renowned dramas, and news and public affairs programs.
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