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What the Sangley Airport Means for Our Economy
September 5, 2022 by Matthew Du
Filipinos love investment and the Sangley Point International Airport in Cavite along Manila Bay, being bought out by the SPIA Development Consortium next month is one of the biggest construction contracts that we’ll likely ever see. The Inquirer reported on this incident and highlighted that a representative of the SPIA Development Consortium was invited by the Cavite government to attend the awarding and signing ceremony of the airport project.
There were so many failed biddings that took place last year, as no offers were placed prior to the deadline. This airport is extremely important given its primary aim is to reduce congestion from the Ninoy Aquino International Airport, the country’s largest gateway.
The SPIA consortium will be joined by the Samsung C&T Corp, Munich Airport International GmbH, and the Arup Group. Samsung C&T Corp built the iconic Petronas Twin Towers and Burj Khalifa. Munich Airport International GmbH, on the other hand, is the management services arm of Europe’s only five-star rated airport, Munich Airport. Last but not the least, the Arup Group is known for many high-profile development projects in the world. They got the contract after completing a competitive challenge, the swiss challenge. The awarding and signing ceremony of the new airport is tentatively scheduled for September 14.
The airport in Bulacan, spearheaded by San Miguel Corporation, had the exact same goal. Basically, they wanted to create a fully modernized, world-class, green airport in light of the supposed increase in demand for air transport services and air travel over the next 30 to 40 years. As operations in NAIA became phased out and too old, where do we expect the influx of foreign nationals, tourists, and Filipino domestic travelers to go?
The answer is the Sangley airport. Here’s what the implementation of a new airport means for our economy.
The Good Things About The Sangley Point International Airport
Photo from discoverthephilippines.com
One of the good things about the Duterte regime is that they implemented the Build Build Build program in an effort to improve poverty rates, encourage economic growth, and reduce the overall congestion in Metro Manila by addressing the country’s infrastructure gap.
There were so many infrastructure projects implemented during this time and it seems as though the Sangley airport is in line with many of its goals.
While this means that infrastructure spending will only continue to increase, it’s an investment project that the government seems to be more than willing to take. Infrastructure spending in the Philippine government increased two-fold compared to the past six government administrations. On that same note, you should know that infrastructure spending from 2016 to 2019 was at an alarmingly high 4.9% of the country’s gross domestic product, which, according to the Inquirer, is more than double the 2.4 percent average spending that the Filipino government has grown accustomed to over the last 50 years.
What may be interesting to note is that according to the World Economic Forum, improving infrastructure and growth often come hand in hand, a good sign for the country. In a published paper by Arrow and Kurz, the two authors incorporated infrastructure into the theory of growth literature infrastructure, and empirical literature more than supports the role of infrastructure in promoting growth, citing that productivity increases when the people, government, and manufacturers have the capacity to create. The World Bank reviewed the importance of infrastructure and astutely pointed out that the development of a government’s internal infrastructure leads to economic growth, poverty alleviation, and improved decision-making when it comes to the environment.
Anecdotally, these claims make total sense. Say, for example, you’re a farmer whose farm and land are located deep into the mountains. What would normally take hours of trekking to reach the market is made quicker and halved by the infrastructure of building roads, railways, and pathways to the city.
Telephone lines and communication lines make the entire process easier. In India, for example, the information era reigns supreme. One could argue that India has become one of the most connected countries in the world. They sell 15 million cellphones a month and there are currently over 509 million cellphones in Indian hands. Just imagine the sheer amount of telephone poles needed to connect all of this. The 15 million cellphones that they sell every month? Yeah, that’s the most number of connections that any country makes, including global superpowers like the US and China. This has also paved the way for an increase in India's digital numbers. It tapped the potential of India due to the number of people who'll get phones for the first time. This can be seen with the sudden rise of two Indian channels being the most subscribed and third most subscribed YouTube channels in the world. Indian cricketer, Virat Kohli is also the 17th most followed person on Instagram with 212 million followers. He is ahead of Nicki Minaj, Neymar, Lebron James, Drake, and even Blackpink's Lisa.
Why are we telling you this? Well, that’s because India has shown that all this investment into infrastructure works. They have the fifth-largest economy in the world in terms of purchasing power.
This, we believe begs the question: is the Philippine Economy growing?
Is The Philippine Economy Growing?
Honestly speaking, there’s so much more nuance that goes into this question. The Gross Domestic Product in the Philippines was worth 394.09 billion USD in 2021, up from the 2020s 361.75 billion USD.
That’s great right? But don’t forget that this was all expected. 2020 was a horrible year for the world economy. The pandemic shut down so many things that we’re lucky to not have experienced something similar to the Asian Financial Crisis.
Here’s the thing: we’re experiencing the reeling effects of the immense growth of 2021. The Philippines' economy is not growing at the moment, but so is the rest of the world’s. The US government, for example, updated the estimate of the US economy’s performance in the April-June quarter and confirmed that the economy shrank for two straight quarters. This means that the United States of America, by definition, is in a recession.
So far, the signs don’t point to anywhere else except the Philippines as well.
When Does The Philippine Economy Flourish?
Here’s what we can do to ensure that the Philippine Economy flourishes:
1. Defending Against Global Slowdown
As we mentioned earlier, the world and the Philippines are currently experiencing not just an economic slowdown, but a recession as well. The economy may have proven quite resilient. What the Philippines, may need is for fiscal reform and policies to take effect.
One way to defend against a recession, for example, is to reduce taxes. While it may come at the obvious cost of widening the budget deficit, the economy may receive an aggregate boost, especially if they’re capable of keeping spending the same despite increasing the budget deficit.
Basically, what we want to keep on happening here is continuous consumption and progression of the economy - in the sense that people still spend. If people continue to spend, then goods and services will continue to rise in demand. It creates jobs and boosts the overall economy, which is a good outcome nonetheless.
2. Inclusive Growth
Inclusive growth is another must-have for the Philippine economy to flourish. Trickle-down economics is a thing of the past and we need to have infrastructure that promotes continuous growth here in the Philippines. What does this mean? More and better jobs, lifting up people from socioeconomic classes and improving the overall quality of life.
How To Invest In The Philippines
Aside from government and private investment in the Philippines, another way that we could increase and boost the economy is by investing our own personal money into the Philippines.
Here are three things that you could put your money into:
Stocks may be a slightly risky investment but when you’re investing in the financial market, make sure that you’re investing with an amount that you’re not afraid of losing - such is the way of life with the financial markets.
This is a great thing to do, especially if you’re still young. There’s more risk in the financial markets than, say, something like bonds or other investments like cryptocurrency or whatnot. Being young means that you have the capacity to take on more risks in your life - especially when you remain at the wealth-building stage of your life. If you do happen to lose immense wealth at this point, you could just as easily make that back.
2. Your Personal Business
Starting a business may be difficult but the lessons you learn along the way are worthwhile. Aside from the obvious benefit of potential monetary certain life lessons cant can only be taught through hardship and building something with your bare hands.
When building a business, find something you love and look for a way to monetize it. That way, you could also give back to the community by building assets and having better jobs.
The best part about starting a personal business, perhaps, is that you could diversify your assets and make your money work for you. Diversification is a great way to protect your wealth. It allows you to build wealth through various means while also hedging the risk you’re taking on. Say, for example, if you were to make a bet on mining as an industry through the stock market and the market went down due to unforeseen circumstances, these losses could easily be offset by your earnings from your business.
Diversification is the embodiment of the phrase “don’t put all your eggs in one basket”.
3. Real Estate
If there’s anything that we here at Crown Asia know about, it’s real estate. Crown Asia has been one of the Philippines’ leading real estate developers for the past twenty-five years. There’s just so much experience that we have that we’d love to share with you.
Why would you ever want to invest in real estate? The answer is simple: the value almost always goes up. As an investment, Crown Asia’s properties create positive net income and the ability to generate cash flow. As homes to live in, we offer so much utility and value to the people within the community. From property management to full-time security and upkeep, we make it a point to have the people within the neighborhood live their best life.
Real estate is one of the best investments you could make no matter what age you are. Because real estate, most of the time, appreciates in value. With a good investment, you can turn a profit whenever you’re already looking to sell. In the meantime, why not generate cash flow with rent? Rental value tends to rise over time, which is good for the renter, right?
Through real estate, you could build equity and wealth. As you build equity then, you can then use the power of leverage and borrowing money to buy more properties and increase cash flow.
For example, a house and lot for sale in Cavite will only increase in value as time goes by due to the sheer number of infrastructure developments happening in and around the province - one such is the Sangley Point International Airport. Having a home near the airport is really good as the demand for land near the airport will be high due to the potential of having people going to and from the airport. It also gives residents in a house and lot for sale in Cavite easy access to the airport. Just like the saying goes, the most important thing in a real estate investment is Location, Location, Location.
Investment Strategies For Any Filipino
From a personal level, we ask ourselves: is there anything we could do? Well, here are some investment strategies that any Filipino could follow.
1. Passive Investing
When you wish to buy an asset and leave it for an extended period, look towards passive investing. Also known as a “buy and hold” strategy, its foundational objective is maximizing gains while minimizing assets' buying and selling. Thus, a passive investor looks to hold a security for the long term with the firm ideology that the market posts positive returns over time.
2. Active Investing
On the other hand, we have active investing, an investment strategy that involves maximizing gains by actively buying and selling assets with specific characteristics. The goal is to beat the results of the indices and the general financial market by building a portfolio of investments that generate great income.
3. Value Investing
Value Investing is an investment strategy that involves picking an asset that appears to be trading for less than the outlined intrinsic or book value. The core principle is to ferret the assets the markets may be underestimating. While these assets may be few and far in between, the potential for growth after finding one is tremendous. Value investing is most notably the investment strategy employed by famed investors Warren Buffett, Benjamin Graham, and Charlie Munger.
4. Growth Investing
Focused on speculative investments, growth investors typically look to invest in young or small companies whose earnings are expected to increase at incredible rates compared to the market at large. While this investment strategy may provide impressive returns for the ingenious few, young companies are often untried and untested, thus often posing a fairly high risk for the investor.
5. Tactical Asset Allocation
Finally, we go over Tactical Asset Allocation, an active management portfolio strategy that relies on shifts in asset allocation percentages to take advantage of the current market environment, pricing anomalies, or abnormally strong market sectors. This investment strategy allows an investor to take on a diversified portfolio and grow it how they see fit. When data suggests that there will be a substantial increase in demand for a particular asset, this strategy dictates that a prudent investor may look to shift more capital into that asset class to take advantage of the opportunity.
Read more: The Benefits of Living Near an Airport