Monday, January 24, 2011

Zonal valuation adjustments to hike property taxes, prices

REAL ESTATE prices and taxes are bound to go up in most parts of the country once new zonal values are finalized by the Bureau of Internal Revenue (BIR), officials said last week.

"We are updating them (zonal values) again ... Most of them will likely go up because of developments in most areas," BIR Deputy Commissioner Nelson M. Aspe said in a phone interview Sunday last week.

District and regional offices of the BIR all over the country are now conducting public hearings on the proposed zonal values -- the worth of a property for taxation purposes, some of which have not been updated for 10 years.

For the country’s top commercial areas -- Manila, Makati, and Quezon City -- zonal values are expected to rise but those in areas hit by calamities such as Marikina are likely to remain the same or even go down, regional BIR officials said.

Makati and Quezon City revenue district officials declined to say how much the increases would be. For Revenue District Office (RDO) 33 covering Intramuros-Ermita-Malate in Manila, however, data obtained by BusinessWorld showed zonal values could rise by 35-40%.

BIR Commissioner Kim S. Jacinto-Henares, in a telephone interview last week, said zonal values were used to prevent the undervaluation of properties to avoid the payment of higher taxes.

"In selling your property, it has always been the zonal value or the selling price, whichever is higher," that is used as the basis for computing the required capital gains, documentary stamp, estate and income taxes, she explained.

These taxes are paid by the seller of the property. The adjustment in zonal values means the 6% capital gains and 1.5% documentary stamp taxes will have higher base prices -- that is, in case zonal values rise -- resulting in higher taxes to be paid by the seller, Ms. Jacinto-Henares said.

"For the estate tax, transfer of properties will be costlier," she added.

Ma. Victoria A. Villaluz, president of the Tax Management Association of the Philippines, said properties can be sold "lower than the zonal value" but in computing the taxes, the BIR’s "basis will be the zonal value, not the selling price."

Zonal value differs from the market value, or the price on a property agreed on by seller and buyer.

Victor J. Asuncion, executive director for research and consultancy at CB Richard Ellis Philippines, said real estate prices could also be expected to rise in Cebu and in Clark Field in Pampanga where "developments are expected to spur demand in buying properties."

"In Mindanao, of course, you will have to classify where the war is. The war is in Basilan, so there is possibility that zonal values will likely stay there but that is not true for the rest of Mindanao," Mr. Asuncion explained.

"More often than not, BIR does not adjust zonal values downwards. What [it does] is to hold them and wait until inflationary pressures pull them up again."

The BIR’s Mr. Aspe said updating of zonal values should be done "every three years" but "tedious process" prevents the bureau from doing so. In April 2010, then Internal Revenue Commissioner Joel L. Tan-Torres issued Revenue Memorandum Order 41-2010 ordering RDOs to update their zonal values "not later than June 30, 2010."

BIR data showed that out of 115 RDOs nationwide, only 13 were able to comply: Urdaneta, East Pangasinan; Tabuk, Kalinga-Apayao; West Makati; Bacoor, North Cavite; two districts in Calamba, Laguna covering Calamba City and the cities of Los Baños and Sta. Cruz and Victoria and Pila towns; Batangas City; Lucena City; Gumaca, Quezon province; Binalbagan, Negros Occidental; Catbalogan, Western Samar; Zamboanga Sibugay; and Zamboanga City.

Iluminada V. Lucero, officer in charge of the BIR’s Asset Valuation Division, last Tuesday said RDOs in East Makati, South Makati, Las Piñas-Muntinlupa, San Jose, Antique and Kalibo, Aklan, submitted updated zonal values last month but these were returned for a discrepancy check. She did not elaborate.

"It is a continuing program. There’s really no deadline for these RDOs to submit updated zonal values," Ms. Lucero said.

Before reaching the BIR national office, the proposed zonal valuations have to undergo a series of public hearings at both the district and regional levels.

Mary Anne A. Sumpay, secretariat of the technical committee on zonal valuation at the Quezon City regional office, said "public hearings have already been conducted" on the proposed increase in zonal values for Novaliches, Pasig East, Mandaluyong and Cubao.

"Two RDOs in Marikina and Pasig West, meanwhile, asked to retain their zonal values due to the ‘Ondoy’ tragedy," she added.

In 2009, tropical storm Ondoy struck Metro Manila, destroying around P11 billion worth of property, particularly in Marikina, Pasig and Pateros.

Minerva P. Podreo, member of the technical committee on valuation at the BIR regional office, said "most" zonal values in Makati would increase by "different percentage levels". Out of the four districts in Makati, only RDO No. 48 or East Makati was able to revise its zonal values last year.

A hike in zonal valuations would help the BIR collect more taxes although Ms. Jacinto-Henares said "there is no estimated collection target" as far as national property taxes are concerned.

The BIR, which accounts for about 70% of the government’s programmed tax revenues, is behind its 2010 collection goal based on official data, collecting only P753.3 billion as of November against the P783.03-billion target.

Final December and 2010 collection figures are scheduled to be released within the week, although Mr. Aspe earlier this month said the bureau may have missed its P73.78-billion December goal by "more than P1 billion".

Market Developments

is a rapidly growing industry in Singapore, Thailand, Malaysia and India
. The Philippines is fast catching up with a $25.3-million revenue posted in 2010, with foreigners contributing 60 percent of the revenues.

In the same year, the health and wellness industry hit a record of US$ 2 trillion. Research also shows that the Philippines has an even bigger potential in attracting medical tourists because of its culture of hospitality, quality healthcare services, competent medical practitioners, and cheaper medical treatments.

source: 012511

Investments in electronics

break all-time record at $2.32 B in 2010

MANILA, Philippines – Electronics investments in the country broke all time high record as fresh capital grew 380 percent in 2010 to $2.318 billion from $484 million in 2009, the Semiconductor and Electronics Industries in the Philippines Inc. (SEIPI) reported.

“This is the highest in the Philippine semiconductor and electronics industry’s history,” SEIPI president Ernie Santiago said in a statement.

This is also the 7th year the industry hit over $1 billion in investments. The $1 billion investments in the industry were previously registered in the years 2007, 2000, 1997, 1996, 1995, 1994.

Santiago further said there were 100 companies that registered their investments in the country last year.

Of these firms, ten are expansions while the rest are new projects. It is expected that these investments will generate 24,552 new direct jobs which include engineers, technicians and operators.

As a rule of thumb, Santiago reported that every one direct job, there are seven indirect jobs created.

Santiago also reported that during the SEIPI meeting with President Benigno Aquino III last year, the industry expressed its desire to double up exports in six years - from $ 22 billion in 2009 to $50 billion in 2016.

The electronics industry exports had a strong start and encouraging finish in 2010.

Its exports this year, too, are expected to hit over $31 billion or at least $9 billion to $10 billion increase over its 2009 exports of $22 billion.

“The industry is bullish for 2011,” Santiago said noting that the electronics sector will continue to be the driver of growth of Philippine exports.

SEIPI is projecting 10% growth for 2011 as no global electronics ‘crash’ appears to be looming for early 2011, Santiago said.

SEIPI, the leading and the largest organization of foreign and Filipino semiconductor and electronics companies in the Philippines, will present the industry’s strong performance in 2010 and its promising outlook for 2011 during SEIPI New Year’s Fellowship Night on Friday, January 28, at M/S Philippines, Manila Hotel.

source: Bulletin, Jan 25 2011

BPO: Statistics professionals see thriving employment prospects

MANILA, Philippines — The outsourcing industry boom has created more opportunities for Filipinos in different fields, taking up a considerable portion of the 1.011 million new jobs in the Philippines as of October.

This year, the Business Processing Association of the Philippines (BPAP) estimates that 84,000 new jobs will be created by the sector.

As the industry continues to grow and diversify, jobs other than customer service providers will be added. The knowledge process outsourcing (KPO), in particular, has opened job opportunities that require skilled workers with specific qualifications. One of the professions that the sector can look at – aside from lawyers and nurses – is statisticians.

“Aside from market research companies, which require statisticians to analyze data for its research, these professionals can work for financial BPO companies, which have begun to locate in the country,” said Germaine Reyes, Synergy Business Consultancy managing director. “Despite the profession’s decline in popularity, statisticians continue to be sought after by different industries in the country. In addition, statistical analysts are required in most BPOs to analyze and forecast call volume and project resource requirements for clients.”

According to the 2009 annual report of the UP School of Statistics, the number of undergraduate students produced by the institution range from 80–100. Moreover, according to a paper presented in the 10th National Convention on Statistics (NCS) of the Commission on Higher Education (CHED), as of 2007, 18 schools offer academic programs in Statistics. Masteral and doctorate programs are concentrated in Luzon. Furthermore, the number of enrolled students in statistics was dramatically lower than those enrolled in mathematics. As an example, in 2001, over 4,845 students were enrolled in mathematics, while only 1,317 were enrolled in statistics.

“The youth should recognize that taking up statistics as their undergraduate course presents many employment prospects, not limited to the BPO industry. One can explore different fields of work with a single discipline like Statistics. It has high employability, actually,” said Reyes.

One statistics professional who has realized the breadth of opportunities in this discipline is Joana Duhaylungsod, who is currently working as a research analyst in Synergy. Duhaylungsod graduated early 2010 from the University of the Philippines (UP) Diliman with an undergraduate degree in BS Statistics.

“I was looking for a field to work in as we have so many options since there’s a lot of employment possibilities in Statistics,” said Duhaylungsod. “I was previously looking at the banking, market research, and analytics industries to work in. My first priority was to work in the banking industry as at that time, I thought that statistics was closely related to finance.” Eventually, she picked a field where she will be comfortable, which was market research.

UP School of Statistics Dean Dr. Erniel Barrios shares that there are many opportunities for statisticians in different industries such as in finance, pharmaceutical, health, manufacturing, quality control, government, telecommunications, credit investigation, agriculture, and biotechnology. “Statistics continues to be relevant, as it is an important aspect in businesses in terms of aiding in decision-making, risk management, and investing,” Dr. Barrios said.

Duhaylungsod handles consumer research projects that involve developing products to make them more appealing to consumers.

This is also true with Julie Amor Jardin, a research operations associate in Synergy. With her more than six years of experience as a statistician in market research, she said that she has seen many brands that have become successful because of the work that they put in. In her capacity, sampling and ensuring data accuracy are statistical disciplines she employs.

For details on RA 9646 or RESA Law, please visit is the central depository of all updates on the new law for the practice of real estate service in the Philippines. The Law has been passed and signed last June 29, 2009. Its implementing rules and regulations (IRR) has been published in July 2010 making the law fully operational as of August 08 2010.

source: Manila Bulletin, Jan 22 2011

FIT: For Sale above P13B?

THE LAST time the government bid out the 100-hectare plus Food Terminal Inc. at a floor price of P13 billion, no developer took a bite. But now that property values have gone up and with the property gaining new interest, the government wants to get more out of this prospective privatization.

Finance Undersecretary John Sevilla said the government would privatize the FTI property like it was selling a merchandise in Rustan’s and not the 168 Mall in Divisoria.

What about the old price of P13 billion? It’s “presyong pang-Greenhills (Greenhills price).” Ergo, no fire-sale expected.—Doris C. Dumlao, Inquirer - Jan 24 2011

For details on RA 9646 or RESA Law, please visit is the central depository of all updates on the new law for the practice of real estate service in the Philippines. The Law has been passed and signed last June 29, 2009. Its implementing rules and regulations (IRR) has been published in July 2010 making the law fully operational as of August 08 2010.

BOI: ITH for P2.5M/unit Low Cost Housing

BoI readies P2.5 M per unit compromise

For low-cost mass housing incentives

MANILA, Philippines – Following strong opposition from mass housing developers, the Board of Investments is willing to compromise for a P2.5 million price per unit ceiling for low-cost mass housing projects to be granted income tax holiday incentives.

This is an improvement from the BoI’s earlier proposal to reduce the cap to P2 million from the current ceiling of P3 million.

An official source said this BoI compromise is shaping up as three associations of mass housing developers have submitted their position papers asking to maintain current cap at P3 million per unit.

Trade and Industry Secretary Gregory L. Domingo has assured the housing sector that he will study their position, but the source said that the secretary is mostly to go for a compromise of P2.5 million.

The official said that P2.5 million price per unit is the most reasonable ceiling because the exemption from value added tax payments is pegged up to P2.5 million also.

“If we really want to help the buyers, this is the reasonable level,” the source added.

Also the BoI plan to limit the grant of ITH to low cost mass housing projects located in key cities may not be included in the 2011 Investment Priorities Plan following the strong clamor from the sector for the retention of incentives.

Under the 2010 IPP, the BoI grants three year ITH to low cost mass housing developers with projects located in the National Capital Region and four years for those outside the NCR. Housing is still listed in the planned 2011 IPP.

In opposing the BoI plan to lower the ceiling price per unit, low cost mass housing developers led by the Subdivision, Housing Developers Association Inc. (SHDA) and the Chamber of Real Estate and Builders’ Associations Inc. (CREBA) said the move is counter productive.

Bansan Choa, chairman of SHEDA, even cited Republic Act 7279, which has set the low cost mass housing price per unit at P2.5 million.

CREBA chairman and CEO Charlie A.V. Gorayeb said the BoI move is a disincentive and goes against the government’s very own battlecry for job creation.

“By reducing the ceiling, we are also reducing the workers and the number of Filipinos who would like to buy houses. There is a big market for P3 million per unit segment,” Gorayeb said.

BoI managing head Cristino L. Panlilio, however, countered that, “If there is a big market then all the more that you don’t need the incentives.”

“If you really want to serve the low and middle income in Metro Manila then the P1 million to P2 million price range per unit is the right figure and this is the range that is even available for financing. That figure is the workable and livable concession with other agencies,” Panlilio said.

In the past two years, the BoI had been flooded with applications for low cost mass housing projects. This sector would account for the most number of projects approved by the BoI with incentives.

2 Solar Farm Facilities in Negros and Bohol

MANILA, Philippines - Youil Ensys, one of South Korea’s largest renewable and engineering power firms, is looking at investing some $160 million into the country’s solar power industry.

Scott Kim, Youil chief executive officer, told reporters over the weekend that its local office, Youil Renewable Energy Corp., will be putting up two solar farm facilities in Negros and Bohol.

He said they plan to construct a 30- megawatt solar power facility in a 70-hectare land in Negros with a project cost of about $120 million.

Another 10 MW is also being eyed by the company in Bohol with an estimated cost of $40 million.

Kim said they expect to put up these plants within six months after securing all necessary approvals.

But he said they would still be waiting for the approval of a feed-in tariff (FIT) before pushing through with these projects.

FIT offers guaranteed payments to renewable energy developers over a period of time.

This is the first time that Youil, a publicy-listed company in Korea, will invest in the Philippines.

Youil Ensys primarily operates in the environmental engineering industry. The company builds and operates solar energy plants. It was founded in 1980 and has headquarter in Hwasung, South Korea.

Kim said they are optimistic that the Philippine government will be able to resolve the FIT issues.

He said the Philippines would be the fourth country in Asia to adopt the FIT next to Korea, Malaysia and Thailand. FIT is also being carried out in Spain, Germany and Canada.

For details on RA 9646 or RESA Law, please visit is the central depository of all updates on the new law for the practice of real estate service in the Philippines. The Law has been passed and signed last June 29, 2009. Its implementing rules and regulations (IRR) has been published in July 2010 making the law fully operational as of August 08 2010.

source: Inquirer, Jan 24 2011

PPP: Public - Private Partnerships

End project guarantees, gov’t urged - SMC

MANILA, Philippines—San Miguel Corp. (SMC) is urging President Benigno Aquino III to drop all state guarantees for projects under the public-private partnership (PPP) program, including railroads, toll ways, seaports and airports.

“The Philippine government should not make any guarantee in any form. It should only make sure that the bidding process is fair and square,” SMC president Ramon S. Ang said in a recent interview with the Philippine Daily Inquirer at the SMC headquarters in Ortigas Center in Pasig City.

Ang urged Mr. Aquino to ensure that the winning bidder provide the best service at the least cost to the public for the entire 25-year term of the build-operate-and-transfer contract.

The President should bid out all the PPP projects in the first quarter and compel all winning bidders to finish the projects within the next three to five years or face forfeiture of their contracts, he said.

During the launch of the PPP projects last year, Mr. Aquino said the government would protect investors from regulatory risk and not market risk.

“If private investors are impeded from collecting contractually agreed fees—by regulators, courts or the legislature—then our government will use its own resources to ensure that they are kept whole,” he said in a speech at the opening of the public-private partnership conference in Pasay City on Nov. 18, 2010.

The President said the government would compensate the private concessionaire for the difference between what the tariff should have been under the formula, and the tariff which it was actually able to collect.

South Luzon Expressway

Mr. Aquino was referring to the Malaysian-backed South Luzon Tollways Corp. (SLTC), which was earlier stopped by the Supreme Court from implementing higher toll rates on the South Luzon Expressway.

SLTC recently raised its rates, aimed at helping it recover the minimum of P12 billion it spent to rehabilitate and modernize the road from Alabang, Muntinlupa, to Sto. Tomas, Batangas.

Ang said the government should stop offering state guarantees just to make infrastructure projects attractive to local and foreign investors because these were viable and Mr. Aquino’s high trust rating has made doing business in the country attractive anew.

Although Ang cited 30 PPP projects, the current administration has revealed an initial list of 10 items—Metro Rail Transit (MRT)-Light Rail Transit expansion (P70 billion); MRT Line 2 extension (P11.29 billion); Bohol airport (P7.54 billion); Puerto Princesa Airport (P4.36 billion); North Luzon Expressway-South Luzon Expressway link (P21 billion); Cavite-Laguna Expressway-Manila side section (P10.5 billion); and Daraga International Airport (P3.07 billion).

Burden on taxpayers

The SMC president said previous state guarantees that covered proponents from legal and financial risks had mostly turned out to be a burden on the public as the government usually ended up shouldering the bulk of the costs and passing these on to consumers in the form of higher fares and toll or higher taxes.

“If this is the case, the government can implement the project itself rather than let a private company make a killing at the expense of the public,” Ang said.

Huge losses from subsidized fares on the Light Rail Transit and Metro Rail Transit lines in Metro Manila have prompted Malacañang to give the go-signal to increase fares.

In certain big build-operate-transfer (BOT) projects in the past, the government guaranteed the foreign debt of private firms and losses from currency devaluation.

Ang said all proponents should keep their profit goals modest and their period of recovering their capital much longer to ensure that the railway systems, toll ways, seaports and airports would be affordable to a broad range of consumers.

Reasonable return

Ang said a reasonable return on investment would be about 10 percent per year.

He favored stretching the period for recovering capital to the entire 25-year term of the project, with an option to amortize part of the loan in an extension.

Ang said a proponent could put in as low as 20 percent of the project cost as capital and borrow the rest at very low interest rates and at long-term repayment schemes while still getting a reasonable return without unduly burdening the public.

He cited as an example the North Luzon Expressway which had a toll of P10.25 from Manila to Angeles City when it was still under Philippine National Construction Corp. After it was “asphalted” by an Australian firm, the new operator charged P130 for the same stretch of road, he said.

“If I bid for it and charged 20 percent more, that would be abusive. If I increase it by 10 times, that is out of place,” Ang said.

The SMC head said a bidder’s intention would make all the difference for the public paying either P50 or P500 for the use of a toll road from Manila to Bicol.

Low toll, fare

“Of course, the public would suffer if the winning bidder wants to get his capital at the shortest time possible and maximize his earnings for almost the entire duration of the project. The government should insist on striking a balance between profit and public service. I believe that the public should benefit right away from these projects through low toll fees and fare rates,” Ang said.

According to him, proponents know that the PPP projects would increase the value of their real estate holdings. They should “spread the wealth” by sharing the gains from their properties by reducing the amount they charge their users, he said.

“They have to compute the appreciation in their real estate valuation because this is part of their profits. This way they don’t have to charge spectacular rates in their businesses,” he said.

Ang also said the proponents should not give excuses for demanding that the state guarantee their profits in undertaking PPP projects because low-cost and long-term financing was available.

All bidders are assumed to be good businessmen who are well aware of the risks involved in putting their money in PPP projects, he said.

Too often, Ang said, the government focused mostly on the time it would take over the project (after 25 years) rather than on ensuring that the winning bidder would deliver its service at affordable rates.

He said the new administration should also watch out for bad habits in bidding out BOT projects, such as allowing mere brokers or dummies to make a bid, settling for negotiated offers rather than pushing for competitive bidding, and allowing the BOT proponents to extend their contracts in the middle of their existing deals and without a new bidding.

To maximize the economic impact of the PPP projects, Ang said the President should award these as soon as possible (within the next three months) to ensure that these would be completed under his term.

Deter dummies, brokers

Ang said Mr. Aquino could deter dummies or mere brokers from taking over projects and waiting for financiers by rescinding their deals if they did not finish their projects within three to five years.

“Just imagine the multiplier effect of implementing all these projects at the same time. We will have millions of jobs created and the economy will be alive with activity for years from the suppliers to the subcontractors,” Ang said.

With a projected revenue of P518 billion (roughly $11.8 billion) and cash flow of P81 billion ($1.84 billion) this year, SMC will make a bid for all of the 30 PPP projects planned by the Aquino administration, Ang said.

“When we do business with the government, it should not only be for ourselves but for the good of the country. We will make sure that our bid will be very low,” said Ang who has taken pride in being able to effect more competition in government bidding with SMC’s entry into areas outside its traditional business of beer and food.

Over the past six years, SMC has rebuilt itself from a food and beverage giant into a diversified holding firm with interests in airports, trains, mining, oil and power.

For details on RA 9646 or RESA Law, please visit is the central depository of all updates on the new law for the practice of real estate service in the Philippines. The Law has been passed and signed last June 29, 2009. Its implementing rules and regulations (IRR) has been published in July 2010 making the law fully operational as of August 08 2010.

source: Inquirer, Jan 24 2011