Philippine property sector appears headed for a slump November 28, 2008
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As I rode the bus along Ayala Avenue, I read the headline on the ticker tape screen in Insular Life Building saying the country’s property sector will endure the economic crisis. I tried to search on the Internet to see the full details of this news but I never found anything. Or maybe I am just not that good at searching.
But you see, I can not help but notice how many of the new high-rise residential condominiums built here in Manila especially in these last couple of years, are still unoccupied. Cement prices have also significantly dropped recently indicating slowdown in construction projects. Although the commercial space sector still continues to enjoy positive growth because of the foreign outsourcing companies, the residential property sector is becoming a huge question mark.
The property boom in the Philippines in the last few years saw property prices jump in astronomical levels. Buoyed up by speculative and foreign buying, property prices went up so high that many Filipino middle class families could no longer afford to own a home in the greater urban areas. Then the global financial and economic crisis struck out of nowhere, affecting most property sectors in most economies in Europe, the Middle East, and the Asia-Pacific region.
Now, the paradigm has shifted and property owners are forced to significantly lower price valuations in order to attract buyers. In many cases, these developers, which made their projects through loans from banks, will find themselves in a bind since they will be unable to meet their projected sales. The economic crisis has caused a decline in appetite for home purchases and for those who are willing, the credit crunch has made it difficult for people to obtain loans to finance their mortgages.
I am not sure how the property sector will survive the crisis without falling hard and eventually deal with consolidation. With tremendous supply of space and demand quickly drying up, the property sector here in the Philippines is going to need a massive shot in the arm in order to avoid an impending collapse.
What is there to cheer about the 3Q GDP growth? November 27, 2008
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Surely, the Philippine economy did beat analysts’ expectations but other than that, nothing is worth rejoicing about a 4.6 percent GDP growth. I am still very much amazed of how this administration continues to allay public concern about the risks of global economic meltdown. Even the Press Secretary still regards this figure as ‘positive.’ Clearly, our leaders in Malacanang and Congress have been behind the curve all this time since the crisis began.
One thing is for sure is that we are currently in an economic slowdown and it is disconcerting that the government has not openly discussed the solutions nor prepared us of what to expect next year. When our neighbors are already talking about stimulus plans to cushion the possible hard fall that is expected because of the economic and financial turmoil, our leaders in Congress are busy killing an impeachment complaint against the President and preoccupied with their investigations of the ‘Euro generals’ scam and former Agriculture undersecretary. Nothing wrong with these actions but their priorities are clearly skewed.
The jury is still out whether National Economic Planning Secretary Ralph Recto, who is a clear political appointee to the post, can steer the economy through an expected tumultuous 2009. The President’s economic team, are definitely going to have their hands full next year. Secretary Tevez of the Finance Department commands great respect from both the administration and the opposition in Congress and his experience is a huge plus. I am deeply concerned, however, with the liberal-minded Budget Secretary Rolando Andaya because of his inclination for high spending. For some reason, our filibuster-proof House of Representatives was more than willing to make sure government is paced for another record-breaking spending next year.
The new $800 billion rescue plan poised to bail out Main Street November 26, 2008
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I surfed through CNBC and Bloomberg last night and Treasury Secretary Hank Paulson was once again talking to the press. I do not have the luxury to watch these channels lately unlike in the previous weeks since my wife’s work schedule has now changed back to regular day shift. In other words, she gets absolute control of prime time television.
Nevertheless, the morning news reported what the press conference was all about. Surprise, surprise? Not quite. The Federal government has unveiled another multi-billion bailout package amounting to US$800 billion this time. If you recall, Congress approved last month a US$700 billion rescue plan that was supposed to ease the credit markets for businesses and consumers to gain access to credit. However, half of that amount has already been allocated to the financial sector but the credit markets has yet to fully thaw leading Federal authorities to realize that their plan did not materialize the way they were hoping for.
This new stimulus plan, on the other hand, claims to directly benefit consumers and businesses. Unlike in the first stimulus plan where the government infused funds directly into ailing banking institutions, the new package will buy troubled assets of institutions that are involved in providing student loans, credit cards, and auto loans. Likewise, it will also infuse massive amounts of money to improve liquidity of mortgage lenders Fannie Mae, Freddie Mac, and Ginnie Mae so that they will be able to service Americans who are planning to own a home but could not gain access to financing because of the credit crunch.
Government wants to make sure that struggling homeowners, who have seen their home equity dropped dramatically since the housing bubble burst, will have a better chance to sell their homes because potential buyers now have access to financing. This is also a welcome news to automakers who are hoping that the stimulus would make it easier for consumers to get car loans, something that they have been desperately wanting since this crisis began as flagging sales has threatened to put them out of business.
The Philippines could elect an independent president in 2010 November 25, 2008
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(Last of three-part series)
The global economic crisis would be a game changer next year. If the country falls into a recession or extreme slowdown, there is no way the President’s coalition will stand a chance in 2010. It would be a political suicide for somebody to run for president under the President’s coalition. However, the administration could spend their way out of the crisis in order to show to the people they have managed to cushion the effects of the crisis and end the year with a decent 4.8 percent growth in GDP and probably a 5.5 percent the quarter before the elections in 2010.
This, however, will come at a price because the nation might return to a fiscal crisis because of the government’s deficit spending. But none of this will matter because it is up to the next president to handle, may it come from the administration party or from the opposition. The Filipino public must be reminded, though, that the premise for the imposition of the VAT, which was vigorously pushed by the President’s allies in Congress, is to stabilize the country’s fiscal health and to balance the budget in 2010. At the rate of how events are unfolding in these last few fiscal quarters, a balanced budget may be entirely scratched out of the equation. Congress may be partly blamed for this as they let spending let loose.
Neither can the current administration take credit for their so-called achievement of the highest economic growth in a lifetime because despite growing a little above 7 percent in GDP, a country of 90 million people requires at least 9 percent of growth in order to sustain the population. Their case that the economy was in good hands under their watch is largely contentious.
The expected spike in unemployment, reduction in real income especially among the middle class and those below poverty line will pave way for the people’s increased appetite for fresh policies in terms of taxation and government spending. At the same time, the people will be smart enough not to buy into any divisive rhetoric against the government, which would likely come from the mainstream opposition, because they know better now the harsh consequences brought by extreme political division.
This kind of political climate is ripe for any independent presidential candidate to take advantage. If he or she can make her case to the Filipino people that she can unite a weary and divided nation and has the technical skills to run the economy more efficiently where an economic growth can be achieved that can sustain the current population, that candidate may have a chance.
Liverpool keeps pace with Chelsea despite dropping points vs Fulham November 24, 2008
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Not the best weekend for the so-called Big Four could hope for in the Barclays Premier League. Neither Liverpool, Chelsea, Manchester United, and Arsenal could gain maximum points as they were held by their respective opponents in last Saturday’s fixtures. As it stands Liverpool and Chelsea are deadlocked at 33 points.
Liverpool were clearly not in their usual dominant form in their game against Fulham, a game that ended in a 0-0 draw. The usual sharpness was clearly absent and they were caught a step behind in many occasions especially on the defensive end. It could have been fatigue that was caused by the international friendly fixtures in the mid-week where many of their players came back from international duties. Javier Mascherano, who captained Argentina in their win against Scotland, was constantly out sprinted by Fulham striker Bobby Zamora. Fernando Torres did not have his usual speed and his shots lacked power.
Captain Steven Gerrard’s absence was another crucial blow. He could have made a huge difference especially inside the box. Many times Albert Reira did managed to slip the ball inside the penalty area and had Gerrard suited up, he could have provided more threat to Fulham keeper Mark Schwarzer.
Manager Rafael Benitez’s tinkering with the lineup starting Lucas Lieva instead of the much experienced Xabi Alonso and opting to sit out Gerrard very much indeed proved costly for the Reds. As the game was wrapping up, I could not help but check the Chelsea-Newcastle game which was shown on the other channel because a Chelsea win would have brought them two points ahead. To my relief, Newcastle held their own in Stamford Bridge and ended with a goalless draw of their own.
Liverpool has a midweek Champions League fixture against French Ligue 1 club Marseille and will return to action in England against West Ham United on Monday, December the 1st.
The Philippines could elect an independent president in 2010 November 21, 2008
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(Second of three-part series)
What is certain in this country is that local politics is immune from events in the national political arena. This was especially true in 2007 after despite the President’s unity coalition’s humbling defeat in the Senate, she continued to maintain control of the House. In addition, during the 2004 elections, Fernando Poe Jr. managed to beat Mrs. Arroyo in not just a few but many provinces despite the clear handicap in terms of support in the local level since traditionally the administration maintains a stronghold in the local front.
In this scenario, the next president of the Philippines could be elected without massive support from the local politicians. The rules of elections have changed in these last few years. We are now seeing a decline the politics of patronage. In an election climate where the likely candidates for the presidency would come from the swing parties, this could be the best time for a third force to enter the fray.
Perhaps what will happen in 2010 will be the same of what happened in 1992 with the Laban ng Demokratikong Pilipino, the most prominent political party at that time, that involved then Speaker Ramon Mitra and then Defense Secretary Fidel Ramos. Mitra got the party’s presidential nomination but Ramos continued his bid and founded his own party, Lakas.
Let us just assume that Estrada picks Villar as the standard bearer for the opposition. I truly believe this would not matter. Just like 1992, I believe that there is no clear advantage from any of the cast of candidates at this point. So a blessing or a non-blessing from any Vito Corleone would not decide the election. What will decide the election is what matters to every Filipino family at this moment- the economy.
(To be continued)
The Philippines could elect an independent president in 2010 November 20, 2008
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(First of three-part series)
The official word is that the Palace has declared President Gloria Arroyo would indeed step down after her term of office ends in 2010. The presidential election that same year will virtually make People Power 2 in 2001 come full circle. That event shifted the political landscape of this country from a loose multi-party system to a somehow solid two-party affair, although not exactly the way how the Nacionalistas and the Liberals did for almost 25 years since the end of American occupation.
For most part of this century, the spectrum of the political arena is divided between the followers of Joseph Estrada, who was kicked out by a popular revolt in 2001, and those loyal to President Arroyo. For six years, Arroyo almost had a firm grip in both houses of Congress. But that changed in 2007 when the people decided there should change in direction especially in the Senate although the President’s coalition party continues to enjoy filibuster-proof in the House of Representatives.
The people are clearly beginning to get wary of the President’s tax measures and corruption charges that are consistently being put under the rug. Despite losing seats in the Senate, however, time is on the Palace’s side since most senators are likely to take their positions next year in prep for 2010. That brings us to the elections. Clearly, Estrada and Arroyo will not be participating but this would be potentially the last time their respective parties, Puwersa ng Masa and Kampi, will face off in a political battle.
The problem is, neither parties do not have candidates directly from their stable that can be considered ‘presidentiable’. Look at the current candidates that have openly declared their intentions for the presidency: Mayor Jejomar Binay (PDP-Laban, Makati), Senate President Manny Villar (Nacionalista, Las Pinas), and Bayani Fernando (Lakas-CMD, Marikina). Even other potential candidates rumored to be interested in the position are affiliated with other parties such as Senator Mar Roxas (Liberal, Capiz), Loren Legarda (Nationalist People’s Coalition (NPC), Manila), Francis ‘Chiz’ Escudero (NPC, Sorsogon), and Vice President Noli De Castro (Independent, Mindoro).
Filipinos seem to have largely forgotten about the hysteria of 2001 and the furious run-off battles that it brought which divided the nation for over half a decade. What I am saying is, the 2010 polls could be a potential free-for-all and those candidates mentioned above could definitely win without the baggage of an Estrada-Arroyo rivalry.
(To be continued)
Do GM, Ford and Chrysler deserve a Grand Auto Bailout? November 19, 2008
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Last night, the biggest three automakers in the US, General Motors, Ford and Chrysler ,also dubbed as the “Big 3”, went to Capitol Hill begging for a US$25 billion bailout from Congress. There has been a lot of opposition to this proposal because it still remains unclear where the money would be taken from to finance this another massive rescue plan.
I watched Treasury Secretary Hank Paulson last night in his hearing with the Senate Finance Committee and he reiterated to senators that the TARP was exclusively for the financial sector and does not include the automakers. There was no secret though that some lawmakers, especially from the Democratic aisle, are bent on getting the Detroit triumvirate a piece of pie from the TARP. Some argue, though, that the Big 3 should just use the US$25 billion granted to them in a separate legislation earlier this year for creating cleaner cars. And there are those who think that GM, Ford and Chrysler should simply declare bankruptcy and directly face the day of final reckoning.
For those who think that the auto makers should be left to file Chapter 11, they have a point. First of all, the business model of the Big 3 is not efficient and has hemorrhaged them for years because of the lopsided contracts they entered with the auto workers’ union and with the car dealers. How do you expect the American taxpayer to bail out a company and never hope to get their money back? Second, bankruptcy will eventually make these companies deal with their inefficiencies and will get them to trim down and be more competitive against the Toyotas and the Hondas, which have been pretty successful in the US.
It is understandable that politicians will look after the interests of their constituents and they will fight tooth and nail to keep the Big 3 afloat thus averting the situation of massive layoffs. However, the world has changed and the new rules point towards the survival of the fittest. The Big 3 are the now the dinosaurs of the auto industry. And we all know what happened to those humongous reptiles.
Is the TARP turning into a huge joke? November 18, 2008
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I was appalled to see the latest headline on CNBC.com that a Netherlands-based insurance company Aegon is looking to buy a small Maryland thrift company just to gain access to bailout funds from the TARP amounting to US$1 billion. It gets me thinking perhaps I should set up my own company as well because guess what, I also need a bailout.
Let me just offer a refresher. This crisis broke out a couple of months ago when Lehman Brothers opted to declare bankruptcy that led to a domino effect in the financial sector. The US Congress, through the insistence of the Treasury department, pushed the panic button and declared to infuse US$700 billion of taxpayers’ money to the faltering industry.
However, it proved to be that the devil is in the details since companies that were never intended to receive the funds initially can now have access to it if they change the nature of their business or if they have friends in the Democratic-controlled Congress like the Detroit auto giants GM, Ford and Chrysler.
Treasury Secretary Hank Paulson’s shift in position last week that offers bailout for non-bank institutions even made it more possible for party crashers to cash in into federal funds. There is a joke in Wall Street that coffee-chain giant Starbucks in also asking for a bailout. Good for them.
But the latest move by the Dutch insurer is just mind boggling. Americans taxpayers have no business bailing out non-US companies. There has to be some order on how these funds are allocated. Because so far there has been little of it.
Liverpool dumps Bolton as race with Chelsea gathers steam November 17, 2008
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I missed most part of the game because my wife and I spent extended hours for the second tranche of our gift buying for our nieces and nephews for the holidays. As soon as we got home, we both raced for the television and we had a huge sigh of relief when the scoreline showed Liverpool were two goals ahead of Bolton Wanderers. It stayed that way until the final whistle and the victory put them at the top of the table in the Barclays Premier League with 32 points which Chelsea would match a few hours later with a predictable victory over Stoke City.
The game involved a Dirk Kuyt goal in the 28th minute off a feed from Fabio Aurelio. Liverpool captain Steven Gerrard also got into the score board in the 73rd minute after a terrific cross from striker Fernando Torres. More scoring opportunities were given for Liverpool where Robbie Keane could have made it two-nil before halftime and Xabi Alonso and Torres missed their respective chances for a third goal for the Reds. But in the end, there was no need for it.
There were some scare for the Liverpool defense especially in the second half as Bolton showed some physicality. A header goal by Bolton’s Gary Cahill that was disallowed offered a few controversies in the match to the dismay of the local supporters at the Reebok Stadium.
Liverpool will face dangerous Fulham this Saturday while Chelsea is set for a huge showdown with Newcastle United as both clubs vie for some more breathing space between them and inconsistent Manchester United and faltering Arsenal.
