How Duterte’s federalism could diversify the Philippine property sector

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The oft-politically incorrect premier is more nuanced than his brash public persona might suggestuntitled-presentation

Incendiary bordering on foul-mouthed: Rodrigo Duterte has been labelled the “Donald Trump of the East.”

The comparison between the recently inaugurated president of the Philippines and the Republican nominee for the US presidency may however be a lazy one.

His well-documented support for indigenous minorities, tolerance for marriage equality, and conciliatory approach to communist insurgents are not exactly what one might class as reactionary. Duterte is believed to have signed a landmark anti-discrimination ordinance in his native Davao City, where he was mayor for 22 years, after hearing that real estate agents were inconveniencing Muslim clients.

The self-styled “mayor of the Philippines” rode high on a platform of decentralisation, nay salvation, from the long-standing, lopsided allocation of economic resources to “imperial” Manila and the traditional elite based there. The first president to hail from the southern island of Mindanao, Duterte intends to set the country on course toward a federalist government.

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Part of the campaign’s strategy hinged on Davao being a model for successful urbanisation. According to research by CBRE, national property developers have trained their sights over recent years to Davao and also Cagayan de Oro, Cebu, Bacolod, and Iloilo as investment hubs outside Manila and its parent island Luzon.

Julius Guevara, director for research and advisory at Colliers International Philippines, attributed this shift to Manila outgrowing its infrastructure.

“It is bursting at the seams so it’s very apparent that we have to focus development elsewhere,” he said. “Alternative cities have to be pursued, and these have to be designed very well.”

Real estate giant Ayala Land has so far ploughed PHP10 billion (USD212 million) into Davao, while MegaWorld Corp will pour in PHP15 billion (USD318 million) over the next five to seven years to develop a new business district in the city. Condominium sales in the city have been on the rise: 2,000 units, at most, per year, Guevara estimated.

“It’s comparatively a smaller market (than Manila), but with the shift of the centre of gravity to Davao, that might increase,” he said, noting that hotel occupancy rates in the city almost topped 100 percent after Duterte’s win.

Duterte’s aversion to criminality — he vowed to “fatten the fish” in Manila Bay with the carrion of outlaws — has played out with harrowing verisimilitude in Davao, where some 1,400 people have perished in suspected vigilante killings.

However, these tough security ordinances, plus a sophisticated video surveillance system, have reportedly emboldened many Davao residents to leave their homes and vehicles unlocked. Such are the contrasting sides of Duterte’s controversial approach.

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These fastidious levels of crime-prevention seem to be in lockstep with the brisk expansion of business process outsourcing (BPO), an industry characterised mostly by night shift work. Outsourcing consultancy Tholons has identified nine of the world’s top 100 BPO destinations in the Philippines. He has also suggested leasing small islands to multinational corporations, creating “versions of Hong Kong, Taiwan, or Singapore.”

Duterte has repeatedly vowed to shine light upon the Philippines’ infamously opaque governance. He plans to short-circuit graft by rolling out a 70-day deadline on processing business permits. Still, he is not above criticism for his own, allegedly shady dealings. Duterte has grappled with allegations that he owns some 40 ill-gotten pieces of real estate. He also controversially appointed Mark Villar, whose family owns property development titan Vista Land, to the post of public works adviser.

Progressives, however, have welcomed some other cabinet choices: Gina Lopez, an activist against illegal mining operations, as environment adviser, and Rafael Mariano, chairman of a militant farmers’ union, as agrarian reform adviser among the most notable.

Initial signs indicate that under Duterte’s presidency a “genuine agrarian reform” bill could be signed into law and redistribute the country’s vast fifedoms to poor tillers. Time will tell if such moves fall foul of stalling efforts by the country’s powerful elite, many of whom, including the family of former President Benigno Aquino III, own prime tracts of land.

According to Claro Cordero, head of research and valuation at Jones Lang LaSalle Philippines, addressing the morass of land titling in the country could prove vital in attracting investors. “Consistent implementation and coordinated policies on land use planning and design would certainly help,” he said.

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Duterte has made addressing the crumbling infrastructure in the Philippines a top priority. In a departure from the previous administration, he will champion foreign investment over public-private partnerships to bankroll his big- ticket infrastructure projects, which includes Mindanao’s first railway network.

At a press briefing in June, Rick Santos, chairman of CBRE Philippines, commended Duterte’s railways projects, saying they will “diversify points of development of the country from its existing concentration in Metro Manila.”

The general view outside the Philippines may be focused on Duterte’s hard-line instincts when it comes to crime — and there’s no doubt that his prevention methods have major implications for human rights. However, with some considered policies quietly proceeding as the president continues to trash talk, it could be that there is method to his madness.

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