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Current Events - May 2014

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Mitsubishi to invest P10B in PH
Japan manufacturer wants to put up 3rd Asian hub here

May 19, 2014/ By Amy R. Remo/Philippine Daily Inquirer/

MANILA, Philippines—Mitsubishi Motors Corp. (MMC) is eyeing an initial investment of P10 billion in its Philippine operations to establish its third Southeast Asian manufacturing hub in the country, a statement from the Department of Trade and Industry’s foreign trade office in Japan showed.

The proposed capital infusion would be used to increase the current production of Mitsubishi Motors Philippines Corp. (MMPC) to as many as 100,000 units annually, from the current 15,000.

MMC officials, led by their chair Osamu Masuko, made the disclosure before President Aquino in a visit to Malacańang in March this year.

The plan to increase production volumes was also confirmed by MMPC officials in an interview with reporters last Friday.
MMPC president and CEO Hikosaburo Shibata said the company’s acquisition of the factory site in Sta. Rosa, Laguna, from Ford Motor Co. Philippines would allow the company to further increase its capacity, and even add a new model to be produced in the country.
“We have a strong intention to add a new model (in our lineup) as we’d like to continuously work here. Manufacturing cars is very important because we cannot rely only on imported cars. But Cainta is becoming largely a residential area, so further expansion is very difficult. This is why we transferred to the Sta. Rosa industrial area,” Shibata explained.

MMPC’s existing facility in Cainta, Rizal, can produce the Lancer EX, Adventure, and L300 at a rate of 30,000 units a year. The current utilization rate, however, is only half at 15,000 units in 2013.

But the Sta. Rosa facility can already produce some 50,000 units, which may be doubled to 100,000 units by 2020. At this rate, not only can MMPC serve domestic demand, it can also export locally produced motor vehicles to neighboring countries, Shibata said.
According to the MMPC chief, they have yet to decide on which new model to produce here, but one of the candidates being considered is the Mirage, which the company currently imports from Thailand.

“We are on the decision-making stage and we have not yet decided” which model to produce, Shibata said.
The company is now discussing its proposal with the DTI and Board of Investments, as it hopes to secure support from the Philippine government, he said.

“We’d like to stay here in the country and produce a new model, but the reality is, compared to Thailand and Indonesia, production cost in the Philippines is higher.”

MMPC will start to relocate its operations from the Cainta facility to the Sta. Rosa factory by September or October this year. By January, it expects the Sta. Rosa plant to be fully operational. It is now building up its inventory to prepare for a two-month lull in production when the relocation will be in full swing.

MMPC is highly bullish of its prospects in the Philippines, which it considers a growing market. While its production and sales volumes may be higher in other countries, MMPC enjoys a healthy chunk of the Philippine automotive market with over 20-percent share.
“Everybody in the world is watching the Philippines. Your GDP per capita is now at the $2,700 level and demand is rapidly increasing. The Philippines … shows big potential. So now is the right time to have a new model here for the Filipino people,” Shibata said.

That is great news! A more stable credit rating means more opportunities for economic growth. It has a domino effect and will eventually benefit a lot of sectors including the real estate industry.

"Why expats are buying luxury condos in PH"
MANILA, Philippines - Asian real estate investors and expatriates in the country are fueling the demand for luxury residential condominiums, according to CBRE Philippines.
CBRE Philippines senior director for research and consultancy Jan Custodio said expats in the country are now buying condo units, instead of just renting.
"We see a shift from expats from renting to buying units. They're availing of the 60-40 ruling on ownership of condo units... It's a win-win situation for the expatriates. They do their business here, they buy their units and by the time they have to leave, they sell their units and make a tidy profit as well," he said in a press briefing in Makati City on Tuesday.
While foreigners are not allowed to own land in the Philippines, they can own condominium units but subject to conditions of the Condominium Act.
Expatriates are keen on luxury condos, which are generally located within the business districts of Makati, Rockwell and Bonifacio Global City. If they rent the units, rents range from P230,000 to P250,000 a month.
However, if they buy the unit, they stand to benefit since the value of these luxury developments have been soaring.
"Case in point are units in One Roxas and Pacific Plaza. In 2007, the units were selling for P35 million for a 300-square meter, 3-bedroom unit. Right now, we've had reports from our residential group that some units have been selling for as much as P50 million," Custodio said.
Asian real estate investors are also becoming keen on the Philippines, as Hong Kong and Singapore have implemented tax measures to make it difficult for investors and speculators to buy properties in the two cities.
"We're now seeing Singaporean, Hong Kong, mainland Chinese, Korean buyers coming in. It's the start of more overseas investment capital coming into the Philippines, especially on the residential side where you can buy condo units... We are seeing a lot more foreign investors coming in due to the tax and cooling measures in HK and Singapore. From overseas perspective, PH looks very cheap and cost-effective, from an investment standpoint, at a per square meter basis," CBRE chairman Rick Santos said.
Some hotel developers are now taking advantage of this demand by launching luxury residential projects. Development of three luxury projects -- Shangri-la in Bonifacio Global City; Grand Hyatt Hotel and Discovery Privea in Makati -- are ongoing.
"Now with the increased demand in the (luxury) segment, we see three ongoing projects, I guess that proves the point that the luxury segment is one of the segments to watch out for in the coming years," Custodio said.
BPO growth seen for next 10 years
At the same time, the Philippines' business process outsourcing industry (BPO) is seen to continue growing for at least the next 10 years.
"The Philippines is where India was in 2002. We're looking at 10 to 12 years of record growth...India in 2002 was at the beginning of a 10-year growth cycle. And that's where we are now... But our macroeconomic fundamentals and leadership are stronger, more confidence here," Santos said.
The Philippines remains one of the most cost-effective destinations for BPOs in the world. He noted that US expense pressures are leading to more BPO expansion in the country.
"If you are a US, European company looking to reduce cost, outsource and improve earning - the Philippines is the place for call centers and Business process outsourcing," Santos said.
Demand from BPOs and multinational companies are seen to drive growth in the office property market. "The resilient office market is expected to continue its strong performance for the rest of the year, and increasing office space demand from multinational and BPO companies shall sustain growth in the sector," Santos said.
CBRE said the Philippines remains one of the Asian countries with increasing rents and occupancy rates. As of the second quarter, the Philippines still has the lowest prime rent across Asia with Makati rates at $26 per square foot a year. Bangkok is second lowest with $32, followed by Bangalore with $36, New Delhi $41 and Kuala Lumpur with $46.
Vacancy rates, especially in Makati central business district and Bonifacio,have continued to drop this year as demand for office spaces picked up. As of end June, overall occupancy rating in the business districts of Metro Manila is at 97.49%.


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