New ecozones seen boosting property demand

The recently approved economic zones (ecozones) in Batangas, Bohol, and Bacolod are expected to spur demand for office, residential, and retail developments in surrounding areas, driving land appreciation and income growth, according to property consultants.

“The announcement of new IT (information technology) parks or the expansion of existing ones introduces new job markets to the area and encourages the emergence of complementary developments,” Jamie Dela Cruz, research manager at real estate agency KMC Savills, Inc., said.

The increasing employment opportunities in these ecozones will raise demand for new residential, commercial, and retail developments, she said.

“People will gravitate to where the jobs are located, as long as the support services are available for business and residential locators,” Roy Amando L. Golez, Jr., director for research and consultancy at Leechiu Property Consultants, said.

“With the increased population, land around the ecozones will naturally start to develop, especially as income grows,” Mr. Golez added.

President Ferdinand R. Marcos, Jr. approved four new ecozones in the first half of the year, with projected investments totaling P3.2 billion, the Philippine Economic Zone Authority (PEZA) said last week.

Two of these ecozones are expansions of a manufacturing zone in Batangas, while the other two are new IT parks in Tagbilaran City and Bacolod City in the Visayas.

Ecozone developments are also likely to attract foreign investors and new locators due to improved procedures and incentives in the area, Ms. Dela Cruz said.

“They facilitate easier business operations by offering incentives and streamlining processes, helping attract BPOs (business process outsourcing) firms and foreign investments. This is evident in the leasing commitments seen in IT parks, even as their PEZA registrations are still underway,” she noted.

“The sustained demand from the IT-BPM sector in key provincial cities such as Bacolod and Bohol indicates that office rental rates are likely to remain stable, with the potential for moderate increases.”

The government also stands to benefit from the new ecozones through higher tax collections amid improved land values, Mr. Golez said.

To accommodate the increased need for land and space, local government units must improve their land use zoning near these ecozones, Mr. Golez noted.

“That means there is a need to create communities for commercial, logistics, residential, retail, and some institutional facilities to ensure long-term organized growth,” he said. “Ultimately, this will push up land values and rental rates in the area.”

A total of 32 ecozones have been proclaimed under the Marcos administration, generating around P13.41 billion in investments.

Source: Business World

Three key economic reforms

Big business groups last week praised lawmakers for passing three key economic reform measures aimed at boosting investments, improving transparency in government transactions, and speeding up key infrastructure projects.

The Makati Business Club (MBC) lauded Congress for approving amendments to the Foreign Investors’ Long-Term Lease Act, and the E-Governance Act, and the Right of Way (ROW) Act, reforms that “aligned with our advocacies for improvements in governance, infrastructure, and transparency, which we see as key drivers to attract more investors and create more jobs.”

 The Filipino Chinese Chambers of Commerce and Industry Inc. (FFCCCII), for its part, noted that the business sector had long been urging the government to enact these reforms to attract more foreign investments and ease bottlenecks in infrastructure development.

The changes to the long-term lease law seek to encourage more foreign capital by extending the allowable lease period to 99 years from 75 years previously, thus bringing the Philippines more in line with regional competitors and address the major issue often cited by prospective foreign investors on their limited ability to secure land for extended periods, which made long-term planning and investment riskier.

The E-Governance Act, meanwhile, seeks to promote transparency and efficiency by expanding digital access to government services. By mandating the digitization of public services and integrating platforms across agencies, the reform aims to reduce red tape and improve the overall ease of doing business needed by investors.

High ROW costs

The most important of the three is the ROW (Right of Way) amendments, which will hopefully put an end to a problem that has nagged previous administrations as far back as the 1970s. The ongoing P448-billion Metro Manila subway project is a case in point.

The administration of the late former president Benigno Aquino III removed the project from its pipeline due to issues such as high ROW costs. It was included in the ambitious “Build, Build, Build” program of former President Rodrigo Duterte in 2017 as the Mega Manila Subway and carried over to the present administration of President Marcos as part of its P9-trillion infrastructure flagship projects list. It was targeted for partial operation before the end of Mr. Marcos’ term in 2028.

It is designed to interconnect with other rail systems — the operating Lines 1 and 2 of the Light Rail Transit system and the Metro Rail Transit Line 3 on Edsa; the MRT Line 7 (another project that has been delayed for years now), and the North-South Commuter Railway Extension at the FTI and Bicutan Stations.

Thorny issue

Based on a plan dated Sept. 27, 2019, construction of a section of the subway was to start in 2019 and operate in 2022. Construction of the remaining sections was to begin in 2022 and operate in 2025. It has become doubtful if partial operation can start by 2028 as ROW problems continue to hound the project.

These same issues have also delayed the completion of a key segment intended to link the North Luzon Expressway–South Luzon Expressway connector road to the Metro Manila Skyway Stage 3 as well as many other important infrastructure projects across the country.

The Accelerated and Reformed Right-Of-Way Act that will amend the current ROW law addresses the thorny issue of compensation, perhaps the most common cause of ROW delays, by updating the standards for assessing the value of property subject to negotiated sale using Republic Act No. 12001, or the Real Property Valuation and Assessment Reform Act, which was signed in January this year.

Ease of doing business

At the end of the day, however, a law becomes truly effective only when it is put into action. As MBC noted, it hopes that the proper implementation of these reforms will achieve the intended goal of enhancing the country’s competitiveness.

For the E-Governance law, its success will depend a lot on whether local government units, which are notorious for bureaucratic red tape, embrace the digitization of public services and for the different departments to integrate their platforms across agencies as mandated by the proposed law.

This will hopefully improve the overall ease of doing business and attract investors, particularly outside the traditional urban centers of Metro Manila, Cebu, and Davao.

For the ROW amendments, the involvement of all concerned agencies will be crucial to successfully implement these reforms, which the FFCCCII describes as essential changes to break a cycle of failure.

“Standardized valuation based on fair market principles, guaranteed funding for land acquisition, and structured resettlement programs address the root causes of delay: arbitrary pricing, fiscal uncertainty, and inadequate planning,” it pointed out.

And as Transportation Secretary Vince Dizon emphasized, solving ROW issues is not just a problem of his agency, but concerns that need “a whole-of-government approach.”

Source: Inquirer

Rethinking road pricing

When Electronic Road Pricing (ERP) was first introduced in Singapore in 1998, the naive journalist that I was believed it would be a suitable intervention for Metro Manila. Congestion in high-traffic areas could be minimized if motorists were made to pay to use certain streets during specific hours.

ERP essentially turned Singapore’s regular roads into tollways, with pricing determined by congestion and time of use, rather than distance traveled. Fees were higher during peak hours. The system used gantries equipped with sensors at entry and exit points and automatically collected fees via in-vehicle units.

ERP is similar to the electronic toll collection system we have locally — except that in ERP, fees are charged for using public roads during peak hours. If applied to EDSA, for example, motorists would pay a fee for using the road during high-traffic times. Outside these hours, EDSA would remain toll-free.

For the sake of discussion, let’s use a base fee of P100 for all motorists using EDSA between 6-9 a.m. and 5-9 p.m. If traffic volume spikes by 7 a.m., the fee could increase to P200 to P300. During pricing hours, fees would be dynamic — rising or falling depending on traffic levels.

The idea is to discourage motorists from using EDSA during rush hour and to encourage them to take alternative routes. The goal is to decongest EDSA, which is the main artery for public transport and commuters using the train system. By setting different rates for private vehicles and public utility vehicles, ERP can also benefit public transportation.

To an extent, I believed ERP was a logical solution for EDSA. After all, it has worked well in Singapore (since 1998) and London (since 2003). Singapore is now transitioning to a next-generation, satellite-based ERP system that uses GPS to charge motorists more precisely, rather than relying solely on gantry sensors, as we do with our current tollways.

Singapore’s ERP system features dynamic pricing that varies by time, location, and traffic volume. It is fully automated, with no toll booths or barriers. Enforcement is seamless. Fees are reviewed regularly and adjusted based on real-time congestion data.

Available information indicates that ERP in Singapore led to a 30% reduction in traffic volumes in congested areas. Peak-hour travel speeds in the city center improved from 20 km/h to 30 km/h. Air quality improved due to fewer idling vehicles, and public transport usage increased. ERP fees also help fund public transport infrastructure and road maintenance.

In London, the congestion charge system has been in place since 2003. It uses a flat-rate model: the equivalent of about P1,100 per day per vehicle entering central London between 7 a.m. and 6 p.m. on weekdays. Cameras and license plate recognition systems monitor entry points. Emergency vehicles, taxis, electric vehicles, and persons with disabilities enjoy exemptions or reduced rates.

London has reportedly seen a 15% to 20% drop in traffic volumes within the charging zone, reduced congestion delays, improved air quality, and a rise in cycling and walking — especially after the addition of bike lanes and pedestrian zones. Most of the collected fees are reinvested in London’s transport system.

Stockholm (since 2006) and Milan (since 2012) have also implemented time-of-use pricing on city roads. Stockholm uses time-based pricing, while Milan combines time- and pollution-based pricing. Both cities have reported improvements in traffic flow and public health outcomes.

In January, New York City began charging drivers a $9 fee to enter Manhattan below 60th Street during peak hours, with reduced rates at other times. Early data shows a 13% drop in vehicle entries, shorter travel times, more people using public transit, and increased pedestrian activity. In just three months, the program collected around $160 million earmarked for transit upgrades.

However, in March, the US federal government revoked its prior approval of the NYC program, claiming it imposed financial hardship on working-class commuters. The programs also lacked toll-free alternatives for the public. The Metropolitan Transportation Authority (MTA) sued to challenge the decision, and the case is now pending in court.

I consider ERP a form of usage-based taxation. It taxes motorists for using a specific road at a specific time. This “usage tax” is conceptually similar to the excise taxes that Filipinos pay on gasoline, cars, jewelry, tobacco, and alcohol. The revenue collected can be earmarked for public transport infrastructure and road upkeep.

In Singapore and London and Stockholm, driver education is arguably more advanced than in the Philippines. Public infrastructure is better. Their mass transit systems — trains, subways, buses — are far more efficient. These cities have shown that congestion pricing works because of three things: effective public transport, transparent use of funds, and well-informed drivers and commuters.

More importantly, road pricing in these places perhaps does not significantly impact the cost of living. Here, the typical argument is: “We already paid taxes to build the roads — why pay again to use them?” An ERP here would add to the existing burden of taxes and fees already imposed on car owners.

Moreover, I reckon cities like Singapore, London, and Stockholm do better than us at planning and implementation. Their systems are relatively reliable. Their citizens are more accustomed to following rules. And they are ahead of us in fighting corruption. Most importantly, they have efficient, reliable, and comfortable public transport systems.

These, I believe, are the essential ingredients that made ERP a “success” in Singapore, London, Stockholm, Milan, and New York. That said, I understand the criticism that ERP could be financially burdensome for the working class, especially if toll-free alternatives aren’t available.

In EDSA’s case, I suspect congestion pricing would simply divert traffic to other roads, without significantly decongesting EDSA itself. Worse, the additional costs from ERP could be passed on to commuters as higher fares (except for trains) and higher vehicle operating costs.

Clearly, our public transport system still has major gaps. Only when we have efficient, affordable, and comfortable light rail and bus rapid transit options — especially on EDSA — will people willingly leave their cars at home. That’s when road pricing can genuinely work, with or without ERP.

For policymakers considering ERP for EDSA or other major Metro Manila roads, this effort must be part of a broader traffic management plan. ERP cannot be a one-off fix. It must complement plans to upgrade public transportation, modernize roads, automate traffic management, and reform vehicle taxes and registration policies.

Without these supporting elements, ERP will simply become another burden — an additional cost for private motorists and public utility vehicle operators. Worse, it may not solve congestion at all but merely redistribute it to surrounding streets.

The government cannot keep building more roads. Land is finite, and only so much can be allocated to road infrastructure. Vehicle ownership will continue to rise. Road pricing is only effective if implemented alongside a comprehensive suite of solutions to manage traffic and transportation demand.

An efficient, comfortable, and cost-effective mass transit system remains the most viable solution to congestion. Without it, road pricing cannot be implemented fairly — or effectively. It shouldn’t be considered at all. Leave the fees to the tollways.

Source: Business World