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Is Iloilo City headed toward a property bubble?

It’s not that I don’t want Iloilo City’s economic development to screech to a halt. But looking at the frenetic infrastructure projects now undergoing construction (private sector development), I am worried that this would lead to a property bubble. At the pace new condominiums and malls are being built, there is a real danger supply would overtake demand, and many developers will be left holding an empty bag.

The retail market, for instance, is not big enough to warrant the operation of more stores in Iloilo City. The present retail floor space that are available for rent is already more than what the market could accommodate. Just recently, SM City opened its new wing, and many store spaces are still empty. That’s not to mention a number of restaurant closures in the giant mall.

Robinson’s Mall is opening another complex in Jaro at what used to be the campus of the De Paul College. Atria has gone full blast in its operations, mostly with restaurants in Barangay San Rafael. The Florete Group of Companies is rushing the completion of its Plazuela II along the Benign Aquino Jr. Avenue. Meanwhile, Megaworld is also going full swing in its construction of its strip malls in the Iloilo Business Park.

Filinvest and Ayala Land are also racing with each other to build condominiums within a 2-kilometer radius in Mandurriao. Not too far away are condominiums of Megaworld. Also about to commence construction is the mixed-use complex of Gaisano in Bolilao, Mandurriao.

Smaller malls have also been put up in other parts of the city. Double Dragon Properties Corp. has opened its City Mall in Barangay Tagbac, Jaro. Another City Mall is slated to break ground in Barangay Ungka, Pavia before the middle of 2016. A third City Mall is going to loom large over the scenic Guimaras Strait as part of the Parola Ferry Terminal. The group of Alfonso Tan is now operating GT Mall near the Molo Plaza.

There is no mistaking that development is taking place at breakneck speed in Iloilo City. A quick glance at all these activities couldn’t fail to impress the observer. But we need to learn lessons from history — business history. Property bubbles are always a danger when development takes place at such high speed. The demand might not be able to sustain the market supply’s growth.

Among the developers, I find the Double Dragon strategy of locating its new malls in the periphery of the city more prudent. It avoids the potential congestion that might only worsen the already bad traffic situation on the Iloilo Diversion Road (aggravated by poor traffic management practices of the LGU). And as the City Malls are situated in the outskirts, they will be able to snare much of the people who want to avoid the traffic.

Of course, these developers didn’t just jump into pouring hundreds of millions of pesos in investments for malls and condominiums without extensive feasibility studies. That the developments are concentrated in the Mandurriao district seem to follow the model of Metro Manila, where malls and condominiums are built in concentric circles. The residences are  always a stone’s throw away from restaurants and shops. This is the model in Alabang, Eastwood, Greenfield in Mandaluyong and many more.

What I fear is that the buying power of Ilonggos might not be enough to fuel this growth. Even in the number of restaurants that have opened for business, one can easily see that customers flock to the newer ones, leaving the older restaurants with fewer diners. The dining market base hasn’t grown that much to make the opening of more restaurants viable. It’s the same way with shoppers.

I would want to see this growth sustained. The LGU should be laying the foundation for increasing the buying power of its people. Unfortunately, that is not happening. There are no industries that could provide good paying jobs for the people. If there are jobs being created, these can be found in the services sector — restaurants, retail outlets, call centers. This will fall short of what is needed to sustain this growth.

Our leaders should take steps to avoid a meltdown. They should not be lulled into a false sense of achievement. The public investments are being poured into the wrong areas. We are not building the necessary infrastructure for sustained development. The crash can happen sooner than anybody might expect.

 

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A mustard seed

The success of Eugenio S. Ynion Jr. in business illustrates how each of us can be like a mustard seed which is quite small and yet grows into the biggest of shrubs, an Ilonggo priest, Fr. Delbert Jardinaso, OSJ, said on Monday, July 28.

In his homily during the blessing and inauguration of the Yngen Group building in Barangay San Antonio, San Pedro Cty, Fr. Jardinaso said that “like the mustard seed, we can grow and become so magnificent by making use of possibilities.”

Fr. Jardinaso is now the parish priest of San Jose, Batangas. He spoke on the significance of the Parable of the Mustard Seed (Matthew 13:31-35) in our lives.

Businessman-philanthropist Julio D. Sy Jr. (right), assisted by Mrs. Carissa Gonzales-Ynion and Barangay Captain Eugenio S. Ynion Jr., cuts the ceremonial ribbon to formally inaugurate the Yngen Group headquarters building in sitio Guadalupe, Barangay San Antonio, San Pedro City on July 28, 2014.

Businessman-philanthropist Julio D. Sy Jr. (right), assisted by Mrs. Carissa Gonzales-Ynion and Barangay Captain Eugenio S. Ynion Jr., cuts the ceremonial ribbon to formally inaugurate the Yngen Group headquarters building in sitio Guadalupe, Barangay San Antonio, San Pedro City on July 28, 2014.

“He was nothing like a mustard seed, but in the midst of nothingness and insignificance, Jun Ynion, showed us that we can reach great heights,” Fr. Jardinaso said.

However, this success can only be meaningful if it is shared with others, he said.

Fr. Jardinaso urged Ynion to help the community through genuine public service. “It is when we remove selfishness from our lives, when we share our gifts with other people, that our success becomes meaningful,” he said.

Jun Ynion is the chief executive officer of the Yngen Group which relocated its corporate headquarters to Barangay San Antonio from the urban congestion of Makati City. He is also the barangay captain of Barangay San Antonio.

The transfer of the Yngen Group corporate headquarters to Barangay San Antonio also puzzled Ynion’s business partner, Julio D. Sy Jr., or better known as “Jun Sy”.

“At first, I played the role of devil’s advocate to Jun,” Sy said. “But I realized I can’t question his determination to pursue his mission.”

Sy described Ynion as “passionate” and ultimately supported the move because he saw “how much he loved the community.”

“More good is bound to happen,” Sy said, although he realized that it is difficult to balance two roles.

Sy said that he can compare what Ynion is doing to the entrepreneurial work that NBA legend Magic Johnson had done for blighted communities in the United States, the Harlem in New York City in particular.

Magic Johnson, he said, became greater after basketball because of his work to uplift decaying American communities through entrepreneurship.

“What he has done is inspire the resurgence of the Harlem,” he said.

Sy found a parallel to what Ynion is doing for barangay San Antonio to the work of Magic Johnson.

He noted, for instance, that the property on which the Yngen Group building stood, as well as the Sabak Bldg, in sitio Guadalupe used to be a place of sin and crimes.

The construction of these two buildings will trigger a resurgence in the community, he said.

 

 

 

Convenience store chains race to win Iloilo market

Mini-Stop of the Robinsons group opened two stores in Iloilo City Thursday (July 24, 2014) to signal its intention to grab a slice of the growing convenience store market here.

The Mini Stop stores are located in the Robinsons Place Mall on Ledesma St. and in the IPSTA in Lapaz.

The entry of Mini Stop to the Iloilo market came in the heels of a virtual “invasion” by 7/11 which opened eight of a planned 25 stores just last month.

An announcement in Bloomberg Businessweek said Philippine Seven Corp. is eyeing the opening of another 80 stores in the next two years to take a commanding presence with 105 stores.7 11 logo

Not to be outdone, a local convenience store outfit, Quix Mart, has also opened new stores in several locations in the city. The Quix Mart is owned by the Que Family of the Iloilo Supermart chain.

Florete: ‘We can deliver’

(Part I of a Special Report on the Water Supply Situation in Iloilo City)

Flowater Resources (Iloilo) Inc. has the capability to deliver the contracted 25,000 cubic meters of processed water to ease the shortage of tap water in Iloilo City.

The problem is that its customer, Metro Iloilo Water District (MIWD), does not have big enough pipes to bring the water to the more than 139,000 households in its franchise area.

This was the assertion Sunday of Dr. Rogelio Florete, chairman of FloWater, during a plant tour and press conference at the company’s P1 billion water treatment facility in Barangay Nanga, Pototan.

“Would I be stupid to spend a billion pesos only to fall short on my commitment?” Florete remarked before a small group of media persons. Former city councilor Perla Zulueta, who had once served on the board of directors of the MIWD, was also present to hear Florete out.

To prove his point, Florete gave the media group access to the 5-hectare property beside the Jalaur River and the water flow metering station where the company’s main 800-mm pipe connects with the MIWD in Leganes, Iloilo.

At the intake pond on the northern bank of the river, Florete showed media that FloWater has three submersible pumps, each capable of drawing 15,000 cubic meters of raw water into its filtration and treatment plant.

Dr. Rogelio Florete explains to media the mechanics of how raw water from the Jalaur River in Barangay Nanga, Pototan is pumped into its treatment facilities from a P20-million intake pond beside the riverbank.

Dr. Rogelio Florete explains to media the mechanics of how raw water from the Jalaur River in Barangay Nanga, Pototan is pumped into its treatment facilities from a P20-million intake pond beside the riverbank.

“To meet the contracted volume of 25,000 cubic meters daily, we just need to operate two submersible pumps,” Florete said. The third one serves as a spare in case one of the two submersible pumps break down.

And it’s not all: Florete showed there are a total of six chambers (one unit for each chamber) on the intake pond for the submersible pumps. Three more are not yet equipped with submersible pumps; these are in anticipation of future business when demand for water grows bigger.

It was this intake pond that became the cause of delays in the plant’s commissioning. “My agreement with the contractor was design, build and transfer,” he said. However, the contractor wanted Florete to start paying him even before construction work could even start, he explained.

“When he continued to drag his feet on the intake pond, I threw him out of the project and took over the work,” Florete added.

Florete also complained the contract imposed a deadline that was impossible to meet. “We were given only six months from the award of the contract to start delivery,” he said. Within that period, he pointed out that he was expected to buy land where the plant was to be built, obtain approval for its conversion from agricultural to industrial, develop the facility and lay out the pipes. “Even just the process of getting the conversion approved took months,” he said.

Workers at the intake pond of the FloWater Resources (Iloilo) Inc. use a vacuum hose to suck sludge from the bottom to keep its depth at optimum level and ensure uninterrupted flow of raw water into its pumping stations.

Workers at the intake pond of the FloWater Resources (Iloilo) Inc. use a vacuum hose to suck sludge from the bottom to keep its depth at optimum level and ensure uninterrupted flow of raw water into its pumping stations.

But Florete said he plodded on, determine to make his own positive contribution, and legacy, to the growth of Iloilo City.

The idea of a bulk supply contract to meet MIWD’s requirements came after its management realized its existing network of deep wells augmenting the main supply line from Maasin was simply inadequate.  MIWD has deep wells in Oton and San Miguel that draw tens of thousands of cubic meters from a known aquifer in the area. Not only was the volume of water pumped from underground sources not enough; there’s concern about overdrawing from the aquifer that could result in salt intrusion. If that happens, the aquifer would be rendered useless, as the process is irreversible.

The mainstay for MIWD’s water supply is the antiquated intake dam in Barangay Daja, Maasin, where the water is then pumped several kilometers to the filter and treatment facility in Barangay Talanghauan, Sta. Barbara. The facilities were designed and built in 1926 during the American colonial rule in the Philippines.

Supply is not the only problem. A critical factor, too, for the MIWD’s inability to deliver a steady stream of water to households is the derelict network of pipes serving the franchise area. Hundreds of millions of pesos have been spent for pipe-laying during the last two decades, but it appears much of the money went to corruption. It was discovered that most of the pipes on the ground are old, with leaks springing every hundred meters or so.

Because of these problems, a study commissioned by the World Bank, known as the “Castalia Report”, showed that MIWD is able to provide water to less than 20% of the 139,000 households in its franchise area. The study was conducted seven years ago, and since then, more subdivisions have sprouted all over the city. That number could easily rise to 145,000.

The situation is rather embarrassing for a city that aspires to host the 2015 APEC sub-ministers meeting and markets itself as a tourist destination. Its hotels depend on twice-a-day deliveries from water tankers to keep their faucets flowing. Only a few areas in the city enjoy 24-hour water service. In many areas, hardly a drop of water reaches households. The business of water tanker deliveries has enjoyed brisk sales because of this.

Hence, the need for a bulk supplier to meet the city’s needs.

(To be continued)

Labor day

I am surprised nobody among our congressmen is pointing out the glaring disparity in the minimum wage levels and fuel prices in Iloilo versus those in the national capital region. As pointed out by Bayan Muna party list Rep. Neri Colmenares recently, the minimum wage level in Iloilo is just P265 per day while workers in Metro Manila are mandated to receive P404 per day. And yet, on the other hand, Iloilo residents pay at least P5.00 per liter more on the price of fuel products than those in the national capital. That’s not to mention that our electricity rates are grossly more expensive than in Metro Manila.

If we go by the logic of compensation theory, workers who face a higher cost of living deserve to be paid more. The indices of cost of living should necessarily include gasoline prices and electricity rates. There can be no debate that these two costs weigh heavily on the economic conditions of a community. Hence, the question begs to be asked: why is the minimum wage in Iloilo lower than Manila?

And while that question is hanging in the air, let me also echo the question posed by Rep. Colmenares: why is the price of oil-based fuel considerably higher in Iloilo than the national capital? How do oil companies determine the P5.00 difference in prices? Transportation costs? If that is so, then a transparent procedure must be established to make it clear to everybody why it is so. We are not unreasonable people. But we have to be informed.

Our congressmen are expected to fight for our interests, economic, social or whatever. This is clearly a major battleground in terms of the economic plight of Ilonggos. There has to be a sense of balance to the way we do things. We should not just accept things as they are. We should learn to question and challenge, especially with the celebration of Labor Day yesterday.

Suspension of WESM for Visayas operations sought

The skyrocketing of spot market rates for electricity to as high as P32 per kilowatt hour (kwh) in the Visayas during the first few days of trading is proof that the region is not ready for the scheme mandated by the power industry reform law, Rep. Salvador “Kiting” Cabaluna III of the 1-CARE party list said.

And before its continued operations could cause in “irreparable damage” to ordinary consumers, Cabaluna asked the Philippine Electricity Market Corp. (PEMC) to suspend the commercial operations of the wholesale electricity spot market (WESM) for six months to allow stakeholders, notably electric cooperatives, enough time to secure bilateral contracts for their power supply.

“Time and again, our sector has cautioned the government the situation in the Visayas is not ripe for the operation of WESM, and this opposition is not without factual basis,” Cabaluna said in a letter to PEMC president Melinda C. Ocampo dated Jan. 3, 2011.

Cabaluna said that “even the Department of Energy (DoE) had postponed its implementation several times because conditions then, as they are now, are bound to result in failure.”

The WESM began operations in the Visayas region on Dec. 26, and as feared, the spot rates had gone as high as P32 per kwh during peak demand, Cabaluna said.

At the same time, Cabaluna questioned the legality of the WESM implementation, which he said began operating without the sanction of the Energy Regulatory Commission (ERC).

Cabaluna said that two years ago, the ERC had ordered the PEMC to submit a package of mitigating measures to protect the market from volatile price fluctuations. On Dec. 10, 2010, the ERC issued a second order on the subject, but the PEMC has failed to comply with it, he added.

“Without such ERC authority, distribution utilities would be violating the law if they pass on to consumers the cost of electricity drawn from the spot market,” Cabaluna wrote.

Cabaluna explained that the rural energy sector that he represents is not against the implementation of WESM. However, he insisted that “structural defects” must first be addressed before it goes into operation.

He said a basic “structural defect” in the WESM operations is the tight energy supply situation in the Visayas. Three new coal-fired power plants — two in Cebu and one in Iloilo — are set to go into full operations on March 26 this year yet, he added.

Cabaluna said the situation is bound to “go haywire” because many electric cooperatives have not yet secured bilateral supply contracts to ensure that they get the bulk of their requirements at a fixed price.

“We have repeatedly argued that we need extra time as most ECs had expiring bilateral contracts with the National Power Corp. on Dec. 31, 2010,” he said.

Because of this, the ECs were not able to complete their negotiations for new bilateral contracts when the WESM was put into operation, he added.

The implementation of WESM on Dec. 26 placed the ECs in a vulnerable situation because they are now forced to draw a big portion of their supply needs from the spot market, he said.

Cabaluna said that in the end, the impact of the spiked rates would fall upon the shoulders of ordinary consumers, as the distribution utilities and transmission firm would simply pass on the cost to their customers.

Cabaluna said that in the end, the impact of the spiked rates would fall upon the shoulders of ordinary consumers, as the distribution utilities and transmission firm would simply pass on the cost to their customers.

Visayas electricity sells for P25/kwh on spot market

Just three days after the Wholesale Electricity Spot Market (WESM) in the Visayas got underway, the “spot rate” of power reached an astronomical P25 per kilowatt hour (kwh) during mid-day trading as demand peaked, quickly drawing a sharp reaction from a party-list congressman representing the rural energy sector that his “worst fears are happening.”

Rep. Salvador “Kiting” Cabaluna III of the 1-CARE party list said it didn’t take long for the “spot market” to manifest the “structural defects” he had warned about when he sought the deferment of the WESM implementation three months ago.

“We saw this coming, but the Department of Energy brushed aside our objections,” Cabaluna said. “The situation is not ripe for the spot market scheme because key elements such as excess power supply and firm supply contracts for distribution utilities are not in place.”

The WESM was established as part of the reforms for the power industry under RA 9136. It seeks to create a “spot market” for excess, or uncontracted generated electricity, to give distribution utilities a choice in buying their power supply and bring about a more efficient power industry.

The law mandates electricity distributors to buy at least 10% of their requirements from the spot market during the first 5 years of the scheme.

Cabaluna said Visayas power utilities are not ready to take part in a WESM scheme because many have not firmed up their bilateral supply contracts with independent power producers (IPPs).

“This leaves these distribution utilities, particularly electric cooperatives, highly vulnerable to the volatile nature of the market,” he said.

The scheme works on the law on supply and demand, he pointed out. When demand is high, and supply is short, then the tendency of prices is to go up, he said.

This is what happened on Dec. 29, he added. At 3 o’ clock of the same day, the spot market rate slid to P15.04 per kwh, which, he said, is still “precipitously high” as far as ordinary consumers are concerned.

Cabaluna said he will monitor the spot market closely to validate his observations.

When Congress resumes session next month, he will reiterate a resolution he had filed three months ago seeking a legislative inquiry into the implementation of the WESM for the Visayas.