Property firms must help decongest
DEMAND AND SUPPLY - Boo Chanco (The Philippine Star) - December 12, 2018 - 12:00am

No amount of emergency powers will significantly alleviate our horrible metro traffic problem. Added infrastructure should help, but even then something more basic must be addressed for long term sustainability.

Congestion of the Metro Manila area has affected our health, our economy, our quality of life. Rational human beings must do everything to address the issue frontally, but it seems we are just all choosing to suffer indefinitely.

Government is to blame, but so is the property development sector. The blind pursuit of profits at the expense of everyone’s quality of life is a simple case of corporate social irresponsibility.

Of course, the fact that government doesn’t have a good land use policy and competent corruption-free regulators made it easier for property developers to build their condos and office buildings anywhere they can get the space.

Back in 2014, an Ayala senior executive bragged to The Business Times of Singapore that Ayala had become a de facto government because of government’s lack of an urban planning or development agency. This was how the executive was quoted by the Singaporean paper:

 “The fact that there is nobody in the Philippines who regulates urban planning has been great for Ayala Land, because we are probably the only company there that has the scale financially to take on large plots of land…

“By developing big tracts of land, we become the government; we control and manage everything. We are the mayors and the governors of the communities that we develop and we do not relinquish this responsibility to the government.

“But because we develop all the roads, water and sewer systems, and provide infrastructure for power, we manage security, we do garbage collection, we paint every pedestrian crossing and change every light bulb in the streets – the effect of that is how property prices have moved.” 

That’s a fair and honest assessment of the situation. In fairness to Ayala, they are also actively developing land away from Metro Manila like that big development in Porac, Pampanga.

Megaworld has done the same in Iloilo, and Filinvest has a large project in Clark. Still, the property sector is building too much in Metro Manila and making our congestion problem worse.

According to Colliers, a property consulting firm, “of the 36 buildings and IT parks granted PEZA status, 21 are in Metro Manila, while the remaining 15 are in areas outside of the country’s capital such as Cebu, Bataan, Bulacan, and Laguna.” No wonder congestion is getting worse by the day.

Indeed, even their prime market is having problems being in the metro area. A friend of mine who runs a BPO in Makati complains that his staff is often delayed because of difficult commutes. If he has an important client interaction, his key staff members sleep in his house in Dasmariñas Village to make sure they will make it to office on time.

Give it to Ayala Land to find a profit source in a problem it helped create. They are now building and running dormitories for office workers in Makati and I understand, at BGC. It saves workers from the typical commuter’s daily punishment, but keeps them away from their families for most of the week.

Why can’t the property giants build their BPO buildings in the provinces instead? I know many BPO companies are on their own moving their call centers away from Metro Manila. They get to pay cheaper salaries and have healthier, happier employees.

The local head of Sitel told me he is very happy with his call center agents in Puerto Princesa. The Palawan State University graduates he has hired have given him good performance. This way, college graduates stay home rather than move to Metro Manila and add to the congestion.

There was a temporary decline in BPO expansion last year as the industry took a wait-and-see stance because of the Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO-2) which purges tax incentives provided to PEZA locators. But growth has resumed.

“Over the next 12 months, Colliers is projecting an estimated one million square meters of new office supply in Metro Manila. At present, only an estimated 41 percent of the space due to be completed in 2019 has been granted PEZA accreditation.

“Colliers believes that hitting the estimated net take up next year will primarily hinge on the availability of PEZA-proclaimed buildings as outsourcing firms almost exclusively locate in these towers.”

We identified congestion as a key problem when we were discussing what the then new Duterte administration can do about our traffic gridlocks. One solution was getting PEZA to stop granting tax perks to buildings in Metro Manila. If they want incentives, they have to move outside of Metro Manila.

For a while we thought the Duterte administration adopted this policy because Malacañang was not approving any new application for PEZA accreditation. But the moratorium apparently was caused more by bureaucratic inertia than a change in policy.  

Colliers believes the accelerated PEZA proclamation of office spaces in 2017, which are now about 70 percent occupied, is the reason for the strong market this year.

In the first nine months of 2018, however, only six applications were approved. A single application has yet to be approved in 4Q2018.

It is time for Malacañang to step on the brakes. If we are to give any tax incentives at all, it should be to those willing to locate away from our congested metropolis. Business is already too good in the metro area and no incentives can be justified.

Alternatively, property firms building high occupancy call center buildings should be required to also build low to medium cost residential units for those workers nearby.

In the absence of a mass transport system, we have to find solutions to keep our workers close to their workplace. This will alleviate our traffic issues.

Boo Chanco’s e-mail address is Follow him on Twitter @boochanco

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