Federalism T U N A Y N A P A G B A B A G O

Transcription

1 Federalism T U N A Y N A P A G B A B A G O 25 th C R E B A A n n u a l N a t i o n a l C o n v e n t i o n B a g u i o C i t y, 1 4 O c t o b e r

2 Presentation Outline 1. How are we doing? 2. Where should we go? 3. How do we get there? 4. Implications for PH real estate sector

3 Left behind Country Rank (1= poorest, 185 = richest) Singapore 183 Brunei 182 Malaysia 141 Thailand 106 Indonesia 83 Philippines 63 Vietnam 60 Laos 58 Myanmar 55 Cambodia 43 Other Asian countries have progressed steadily, while the Philippines has been left behind by one after another of its neighbors Rankings on Gross Domestic Product (GDP) based on purchasingpower-parity (PPP) per Capita. Posted by Global Finance

4 Source: UNESCAP, From Atty Rita Linda Jimeno, Member, 2005 Consultative Commission In the whole of Asia, the Philippines is unique for being the only country to fail to halve poverty in 25 years, from 1990 to 2015.

5 Unsettled times HukBaLaHap/HMB CPP/NPA Political Warlords Failed Agrarian Reform UNSETTLED POLITICAL SITUATION: Insurgency Moro Rebellion Social Unrest (due to injustice, poverty, corruption, political warlords and dynasties, and failed agrarian reform)

6 Real GRDP/capita (in millions PhP) Real GRDP/Capita (in millions PhP) Average Region NCR Luzon Visayas Mindanao Average High Low Source: PSA, ChartPoints and Bloomberg NCR Luzon Visayas Mindanao

7 Presentation Outline 1. How are we doing? 2. Where should we go? 3. How do we get there? 4. Implications for PH real estate sector

8 Change is coming. Rodrigo Duterte wins on promise of real change

9 One proposed change: from Unitary to Federal Malacañan decides how much to give to local governments. In Federalism, states can make decisions with little interference from national government.

10 What is Federalism? A form of government where sovereignty is constitutionally shared between a central authority and states or regions National government focuses on national interests such as foreign relations, national security, and monetary policy Autonomous regions or states will be responsible for delivery of public goods and social services and local economic development.

11 Constitutional basis

12 AdvAdvantages of the federal idea 1) EMPOWERMENT : It will empower our citizens to become more involved in government decisions at the local level. They will be more willing to pay taxes to finance government programs and services that they can directly create and oversee.

13 AdvAdvantages of the federal idea 2) BETTER DECISION- MAKING : It will improve the ability of local government executives to quickly make decisions that respond to their unique circumstances. Over time, we will bring up a better class of leadership.

14 AdvAdvantages of the federal idea 3) GREATER ACCOUNTABILITY: It will bring government officials closer to their constituencies, strengthening oversight. Over time, platform and performance will replace personality-based politics.

15 AdvAdvantages of the federal idea 4) HEALTHY COMPETITION: States or regions will have to compete with each other to attract domestic and foreign trade, investment and credit. Over time, good performers and policies will prevail over bad ones.

16 AdvAdvantages of the federal idea 6) DIVERSITY AMID UNITY: The federal idea ensures a just and enduring framework for peace among the various ethnic, religious, and cultural communities. The legitimate interests of Moros and other indigenous peoples will be addressed and protected.

17 AdvAdvantages of the federal idea 6) DECONGEST METRO MANILA: Manila will become decongested as the different regions catch up in economic growth and employment opportunities. This catching-up will also propel us for the first time towards genuine self-sustaining growth as a country.

18 Presentation Outline 1. How are we doing? 2. Where should we go? 3. How do we get there? 4. Implications for PH real estate sector

19 x? Modes of charter change People s Initiative Constitutional Convention Constituent Assembly

20 Source: Centrist Democratic Party (CDP)

21 Advantages of the Federal System of In a federal system of Government government, states (or regions) will have the power to exercise taxation and keep the revenues for themselves, remitting only their respective contributions to the national government. CENTRAL LGU

22 Rebalancing gov t responsibilities Primary service responsibilities (National) What services can only be provided by the National Government? (e.g. Defense) Secondary service responsibilities (Shared) What services does the National Government have a significant interest in but are best delivered by a lower unit of government? (e.g. Education, Health) Tertiary service responsibilities (Local) What services are of primary concern to local communities? (e.g. Policing, Agriculture, Fire Protection) DAI/Facilitating Public Investment (FPI) Project 22

23 Redefining taxation and fiscal transfers Primary National Government Services <= Federal Tax Secondary National Government Services <= Conditional Grants Tertiary National Government Services <= Block Grants Limited Scope Special Infrastructure Transfers Transfers to Improve Fiscal Management DAI/Facilitating Public Investment (FPI) Project 23

24 Source: LoGoDeF, 2016 Another view on rebalancing

25 Sharing taxation powers Tax/Level Federal States Counties Natural Resource Taxation (Profits) Policy X Administration/Collection X Customs Duties Policy X Administration/Collection X Corporate Income Taxation Policy X Administration/Collection X Personal Income Taxation Policy X Administration/Collection S S Value Added Taxation Policy X Administration/Collection X Sales Taxation Policy X Administration/Collection S S Excise Taxation Policy X Administration/Collection S S Natural Resources (Royalties, Fees, X Charges, Severance Taxes) Policy S S Administration/Collection Presumptive Taxation Policy S S Administration/Collection S S Property Taxation Policy S S Administration/Collection X Index X = Sole responsibility S = Shared Responsibility DAI/Facilitating Public Investment (FPI) Project 25

26 Another view on sharing taxation powers Source: LoGoDeF, 2016

27 Presentation Outline 1. How are we doing? 2. Where should we go? 3. How do we get there? 4. Implications for PH real estate sector

28 Issues Legal and political Industry structure Supplydemand imbalances Continuing restrictions on land ownership by foreigners (not just in PH but also in other ASEAN countries like Indonesia and Myanmar). These may limit full positive impact from freer cross-border investment flows post-asean integration. BSP concern that industry is dominated by conglomerates controlled by less than a dozen families, most of whom have aggressively borrowed. Low-income housing deficit projected by SHDA to hit 5.8 MM by Possible oversupply at the high-end of residential market. BSP supposed to release new housing price index in 2015 to monitor overheating. Poor physical infrastructure hampers proper matching of property supply and demand. Sources: Wall Street Journal; Lamudi; MyProperty.ph 28

29 Housing demand & supply

30 Outlook Philippines PH will lead ASEAN in real estate market growth. There is no truth to the rumor that there will be a real estate bubble! Eduardo Ong, Chair, Board of Real Estate Service Metro Manila MM dislodged Madrid to join JLL Top 30 list in From 28 th largest city GDP in the world in 2010, MM will rise to 25 th place in 2020 and 18 th place in MM far more geared to IT than its regional peers. Ranked 10 th in Tech-Rich Cities global index for 1Q 15, above San Diego, Osaka, Munich, and Beijing. MM real estate market has one of the highest absorption rates in Asia, and is still one of the most affordable in the world. Sources: CBRE 2015 APAC Real Estate Markets Outlook; PWC/ULI Asia Pacific Report 2015; JLL Global 300 Index report,

31 Opportunities (2015) Investment niches Provincial cities ASEAN integration Puregold and Vista Land will invest Php 3.5 BN and PhP 15 BN respectively to expand into retail over the next 5 years. Megaworld has doubled to 20 the number of township projects in its national portfolio New business hubs like the PhP 1.5 BN development in Palayan City, Nueva Ecija. Developers expanding into Cavite, Batangas, Laguna, and other provincial cities as Metro Manila becomes saturated. Prospective new office demand from ASEAN companies expanding into PH ASEAN brands entering PH retail market, eg H&M s first mall in Sources: Wall Street Journal; Lamudi; MyProperty.ph 31

32 Regionalization of real estate sector (1) Infrastructure buildout Business expansion and demographic shifts One international airport per state? More seaports on long PH coastline Improvement in access infrastructure, eg last mile connectivity from tourist access point to tourist destination New provincial hubs will drive the creation of interstate value chains, whether in agricultural processing, manufacturing, or services sector Growth of suburbs Lift foreign investment restrictions Will a new constitution allow states to permit majority land ownership by foreigners? FDI policies could then become a competitive tool of states 32

33 Regionalization of real estate sector (2) Land use policies and administration Mortgage finance market Low-cost housing backlog No more one-size-fits-all national land use code that is hostile to real estate and commercial development Land use policies become still another competitive tool of states Strong and autonomous states can provide credit support to mortgage instruments during rollout of primary and secondary markets The Bangsa Moro state can serve as conduit for other states into the billion-dollar regional Islamic finance market More creative policy responses will come from state- and lower-level housing development agencies, eg exemption for low-income housing bonds from state and municipal taxes 33

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35 Thank you! Gary B. Olivar Convenor President Duterte Constitutional Reforms Towards Federalism (PDu30 CoRe)