Press Release
March 2, 2009

To promote stock market's growth at a faster pace
SENATE OKAY EXPECTED FOR RP's REIT FRAMEWORK

Sen. Edgardo J. Angara today said that the Senate approval on 3rd reading of the introduction of real estate investment trust (REITs) will boost the growth of our Philippine stock market to better function as an engine of economic growth in the country.

"Our stock market is considered one of the oldest in Asia; but its inferiority in size is a matter of national embarrassment. Its small size explains in part why it can be quite challenging for many Filipino workers to get a job and for many small companies to expand its business. In other words, the slow development of our stock market mirrors the slow economic development of our country," said Angara who chairs the Senate Finance Committee.

Angara cited that a stock market functions as an engine of economic growth. He said that it facilitates the inward flow of capital to create or expand businesses that in turn generate livelihood opportunities for thousands of subcontractors, and jobs for tens of thousands of workers. Also important is that it can provide savers with ready investment opportunities and entrepreneurs with convenient capital-raising vehicle.

He added, "If we fail to introduce REIT into our country, we might find our stock market further lagging behind our neighbors. It's obvious to see that in the catch-up game we are engaged in, the markets that we are trying to catch-up with are also moving and continuing to develop. So the REIT bill included measures to ensure that we are not only moving towards the direction our neighbors, but we also start to proceed at a much faster pace."

Angara, former chair of the Senate Banks, Financial Institutions and Currencies Committee, said that small and large investors will enjoy advantages from investing in REITs.

First, there is a common trend in markets with successful REIT models: REITs receive tax incentives from the government, but are required to pay out a substantial part of their distributable income by way of dividends to shareholders, in addition to other requirements to ensure investor protection.

Second, these companies provide investors with the opportunity to participate directly in the ownership and financing of large-scale real estate projects at affordable rates of investment.

Thus, investors can make the investments in the REIT without being burdened by the disadvantages of illiquidity, high transaction and management costs that are associated with traditional private real estate ownership.

Third, investors also enjoy the assurance of a fair, transparent and efficient market for buying and selling the REIT securities, because the REIT law will require the listing of the REIT stocks in the local stock exchange. Therefore, it is easier to buy or sell the REIT shares than to directly buy and sell real properties.

Fourth, investment risks are minimized, because the REIT assets are managed professionally by an independent fund manager and property manager.

Finally, cross-border investments in REITs will also encourage strategic foreign investments in the Philippine capital market.

Angara is optimistic that having a REIT framework will help the country buck the Global Financial Crisis. He said that even amidst the global financial crisis, the number of listed REITs grew and that continued expansion of REITs is best seen in Asia.

"The REIT bill will help accelerate our stock market's growth by providing a legal and regulatory framework for the successful introduction of an investment instrument that helped, and continues to help, other stock markets expand," added Angara.

News Latest News Feed