Clark: The Next Metro

In the call to decongest Metro Manila, Clark has received much interest among developers.

The recent calls by the government to decongest Metro Manila, along with an influx of foreign direct investments (FDI) in the Philippines, have created the need to develop a new metropolitan area outside of the country’s National Capital Region (NCR). In response to these developments, the large real estate companies are setting aside billions of pesos to acquire and develop hectares of land in the provinces around the Metro. Following the trail of these developer’s recent capital expenditures often leads to one place: Clark, Pampanga.

The Clark Freeport and Economic Zone (CFEZ)

The Clark Freeport and Economic Zone (CFEZ) is the designated business hub of Central Luzon — spanning over 314 square kilometers and covering several towns and cities in the provinces of Pampanga and Tarlac. Clark is often at the front and center of any talks or discussions regarding the decongestion of NCR (SEE: Gov’t offices start Clark transfer, Daily Tribune) — and for good reason. The area’s (1) status as a free port and economic zone, (2) close proximity to Metro Manila, and (3) recently modernized international airport, make it an attractive alternative to the National Capital Region.

The area of Clark used to house one of the key US Military Air Bases in the Pacific up until the late 1980s. This base, however, was eventually transferred to the Philippine Government back in 1991. Today — in an effort to stimulate development, Clark is a designated free port and special economic zone (SEZ), which was created by the Bases Conversion and Development Act of 1992 (Republic Act No. 7227) and Presidential Proclamation No. 1063 of 1993. As an SEZ, Clark provides unique tax and regulatory incentives to private firms operating within the area. Some of the benefits include tax holidays, preferential corporate income tax rates, and zero-rated VAT classifications, among others.

The CFEZ is roughly 100 kilometers away from Metro Manila. Currently, this distance translates into approximately two hours of travel time through the North Luzon Expressway (NLEX) and Subic-Clark-Tarlac Expressway (SCTEX), either through a private vehicle or a P2P Bus. Moving forward, the travel time is expected to be cut in half upon the completion of the proposed ₱225 billion Manila-Clark Railway by 2021 (SEE: 17 stations of Manila-Clark Railway announced, Rappler). Once completed, Clark will only be 55 minutes away from the Ninoy Aquino International Airport (NAIA).

Speaking of international airports, Clark boasts the second busiest airport in Luzon and the fourth busiest in the country: the Clark International Airport (CRK). Currently, the airport is operating at  around 70% capacity — accommodating 2.7 million passengers from 25,000 flights in 2018. This four million passenger capacity is expected to triple to 12 million by June of 2020, upon the completion of a new ₱12.6 billion passenger terminal building (SEE: Clark expansion hits 25% completion, Business World). This international airport opens up Clark to foreign firms looking to set up operations in the Philippines.

An Influx of Foreign Direct Investments
The emergence of Clark as a potential business district outside of Metro Manila could not have come at a better time, as more and more foreign firms look to enter the growing Philippine market. In fact — in a recent trip of President Rodrigo Duterte to the Second Belt and Road Forum held in Beijing, the Philippines bagged 19 business agreements with Chinese firms worth around $12.2 billion or ₱634.5 billion (SEE: PHL bags $12B in investments from Duterte’s fourth visit to China, GMA News). These contracts are expected to generate over 20 thousand jobs in the country.

China is not the only source of these foreign direct investments either. Other countries such as Singapore (₱35.5 billion), the Netherlands (₱9.1 billion), Thailand (₱8.5 billion), Japan (₱5.5 billion), and the United States (₱2.2 billion) have contributed heavily to the ₱286.7 billion worth of foreign direct investments in just the first four months of 2019. This figure is up by around 46% from the ₱195.7 billion posted in the same period in 2018 (SEE: Investment pledges jump 46% as of April, Manila Bulletin). This trend is expected to continue in the foreseeable future as the country is set to enjoy rapid economic growth in the next decade (SEE: Oxford Economics: PH will be second fastest growing emerging market in 2019 to 2028, Inquirer).

Real Estate Development in the CFEZ
All of these new foreign firms, which are expected to enter the country, would surely need a base for operations. The congested state of the National Capital Region, however, means that they would have to look elsewhere and — as mentioned earlier — the CFEZ seems to be one of the best alternatives to the Metro. Recognizing this opportunity, the local real estate developers — such as Ayala Land Incorporated (ALI) and Filinvest Development Corporation (FDC) among others — are now all gearing up to develop Clark.

Ayala Land Inc.’s Sino-PHL Industrial Park
Ayala Land is in the final stages of land acquisition, to be used for the development of the first ever Sino-Philippines Industrial Park in the country (SEE: ALI plans to develop country’s first Sino-PHL industrial park, Business World). According to ALI’s chairman Augusto Zobel de Ayala, the estate would span an area of 200 hectares and will cater to the Chinese manufacturing firms looking to establish their operations in the Philippines.

Filinvest Development Corp.’s Mimosa+ Leisure Estate and New Clark City Industrial Park
The Filinvest Group has set aside a large chunk of its ₱39 billion 2019 capital expenditure budget for the development of various parcels of property in Clark (SEE: Filinvest Group sets ₱39 billion capex, The Manila Times). Among their projects include the Mimosa+ Leisure Estate and the New Clark City Industrial Park.

The Mimosa+ is an estate, which spans 200 hectares and is home to a lush green golf course, beautiful residential villas, and a deluxe hotel. According to its website, “To this day, it continues to be a thriving business and leisure destination that is incessantly patronized by both local and foreign visitors.” The New Clark City Industrial Park, on the other hand, is a proposed 120 hectare estate, which will take advantage of the influx of Chinese manufacturing firms in the country.

Moving Forward
The potential of Clark as the next bustling metropolitan outside of the capital is undeniable. It has the right mix of size, physical infrastructure, and legal infrastructure to support the demand of foreign firms. Based on where the money of the major real estate players of the country are going, it is clear that they see this potential too.