Ease and Cost of Doing Business in Makati City and Taguig City Amid Competing Claims

The decades long territorial dispute of Makati and Taguig Cities over the Enlisted Men’s Barrio (EMBO) Barangays and Inner Fort Barangays or the “Disputed Area” filled the headline news mid this year when the Makati Local Government Unit (LGU) asserted its claim, following the Court of Appeals ruling that the same is within its territorial jurisdiction.

The Disputed Area is bounded by the following landmarks:

  • North and northeast: Pasig River and Mandaluyong City
  • Northwest: Kalayaan  Avenue and Barangays Pinagkaisahan and Guadalupe Nuevo, Makati City
  • South: Manila American Cemetery
  • East:  Municipality of Pateros and Taguig City
  • West: Manila Golf Club in Forbes Park, Makati City

and includes the much coveted prime business district of Bonifacio Global City (BGC) and McKinley Hill, the EMBO residential districts and Inner Fort Barangays as shown in the map.

This 18-year old redevelopment of the former military base is now home to approximately 700,000 sq.m. of completed prime office buildings and approximately 19,200 units of residential condominium towers among other locators which includes  an international standard hospi-tel (hospital-hotel), high-end strip mall, the country’s first science museum  and international schools.

BGC also plays host to five (5) of the world’s largest Business or Knowledge Process Outsourcing (B/KPO) companies such as Deutsche Bank KPO, Logica Philippines, Hongkong Shanghai Banking Corporation (HSBC), Sutherland Global Services and JP Morgan Chase Bank. Over the past ten (10) years, the district has attracted numerable relocations from the Makati CBD as newer and more energy efficient buildings have been completed providing better options for tenants to choose from, at discounted rental rates over Makati. Major hotel investors including the Shangri-la Group and Grand Hyatt Hotel have poured in investments and are both undertaking massive construction in the area.

By the end of July this year, the Court of Appeals (CA) dismissed the complaint of Taguig LGU against Makati LGU for lack of merit and confirmed that the Disputed Area is within the territorial jurisdiction of Makati City. It has also ordered Taguig City to immediately cease and desist from exercising jurisdiction within the disputed area and return the same to Makati City.

Mak-Tag-Tugowar_Aug20

For better understanding of the history of Fort Bonifacio, we present a timeline of the milestones and important events leading to the Court of Appeals (CA) Ruling.

Important Milestones and Events leading to the Court of Appeals Ruling
1902 US Government acquired a 25.78 ha property and turned it into a military camp, which was called Fort William McKinley.
1916 3rd Battalion of the 31st Infantry Regiment was formed in Fort McKinley and became part of the USAFFE’s Philippine Division in World War II. The formation of such a unit outside American soil is rare.
1942 The Japanese Army took control of Fort Bonifacio.
July 4, 1946 After liberating the Philippines from Japanese occupation, the US surrendered all rights of the Philippine territory to the Republic of the Philippines except the use of US military bases.
May 14, 1949 Fort McKinley was turned over to the Philippine government by virtue of US Embassy Note No. 0570. The facility became the home of the Philippine Army and later, the Philippine Navy
July 10, 1957 Fort McKinley was renamed Fort Andres Bonifacio.
July 12, 1957 President Carlos Garcia reserved parcels of land in Pasig, Taguig, Paranaque, Rizal and Pasay as military reservation through Proclamation No. 423.
1978 A cadastral survey of Metro Manila resulted to a 2.10 ha territory for the Municipality of Pateros. However, then Mayor Nestor Ponce claimed that its total land area should be 10.4 ha including Fort Bonifacio.
January 7, 1986 President Ferdinand Marcos issued Proclamation No. 2475 declaring Fort Bonifacio as part of Makati and that the same is open for disposition.
January 31, 1990 President Corazon Aquino through Presidential Proclamation No. 518 affirmed that Fort Bonifacio is part of Makati.
January 18, 1991 Pateros filed an action for Judicial Declaration of the Territorial Boundaries of Pateros against Makati before the RTC of Pasig City, Branch 154 (Pasig RTC) which was dismissed for lack of jurisdiction and further it should have been filed before the Makati RTC.
March 13, 1992 President Corazon Aquino issued Republic Act No. (R.A.) 7227 that created the Bases Conversion and Development Authority (BCDA) with a mandate to develop and dispose various military bases in the country.
December 8, 1992 President Fidel V. Ramos issued Executive Order No. 40 placing under the administration of the BCDA 2.4 ha of Fort Bonifacio identified and described in Plans Swo-00-001265 and Swo-00-001266. These plans specifically identified the 2.4 ha under the Municipality of Taguig, Metro Manila.
November 22, 1993 The Municipality of Taguig filed in the Regional Trial Court (RTC) of Pasig City, Branch 153, an action for judicial confirmation of its territory and boundary limits against Makati docketed as Civil Case No. 63896.
Taguig sought the declaration of the unconstitutionality and nullity of Presidential Proclamations Nos. 2475 and 518, which declared and affirmed certain parts of Fort Bonifacio as part of the City of Makati.
For its part, Makati has argued that Fort Bonifacio had been under the city’s jurisdiction since the Spanish era citing censuses from 1948 to 1980 mapping these areas as part of Makati.
December 8, 1993 As directed by Pasig RTC, Pateros filed with the RTC of Makati a Complaint against Makati and co-respondents for the judicial declaration of the territorial boundaries of Pateros based on supporting pieces of evidence, and for the nullifaction of Proclamation No. 2475.
January 20, 1995 President Ramos conveyed to the BCDA, through Special Patent No. 3595, “the tracts of land of the public domain situated in Barangay Fort Bonifacio, Municipality of Taguig, Metro Manila, identified and more particularly described as Lot Nos. 1 to 4 and 6, Swo-00-001265, containing an area of 877,318 sq.m, and Lot Nos. 1 to 23 and 25, Swo-00-001266, containing an area of 2,344,300 sq.m.”
February 7, 1995 President Ramos issued Special Patent No. 3596 canceling Special Patent No. 3595 and conveying 2.17 ha of land situated in the Municipality of Taguig to Fort Bonifacio Development Corporation (FBDC) described as Lot Nos. 1,2 and 6, Swo-00-001265, containing an area of 673,979 sq.m, and Lot Nos. 17,21,22 and 23, SWO-00-001266, containing an area of 1,497,837 sq.m.’
February 10, 1995 Original Certificate of Title (OCT) No. SP-001 covering the 2.17 ha land was issued to FBDC.
1995 BCDA bid out and awarded the development of the property to Bonifacio Land Development Corporation (BLDC), a consortium led by the Metro Pacific group.
April 18, 1996 The City of Makati filed Civil Case No. 96-554, a petition for prohibition and mandamus before the RTC of Makati, Branch 141.
May 23, 1996 “The Municipality of Taguig moved to dismiss Civil Case No. 96-554 on the grounds that the RTC-Makati has no jurisdiction over the nature of the action.”
September 25, 1998 The Makati RTC Branch 141 dismissed Civil Case No. 96-554 on account of forum shopping.
March 14, 2003 Pasig RTC Branch 153 Judge Briccio Ygana upheld the jurisdiction of Taguig over the entirety of Fort Bonifacio, including the Bonifacio Global City.
June 6, 2003 Court of Appeals affirmed the ruling of Makati RTC Branch 141.
June 27, 2008 “Supreme Court (SC) Judge Leonardo Quisumbing dismissed the suit of the Makati City, seeking to nullify Special Patents 3595 and 3596 signed by Fidel Ramos conveying to the Bases Conversion and Development Authority public land in Fort Bonifacio, Taguig City”.
June 16, 2009 Supreme Court Judge Antonio Eduardo B, Nachura denied Pateros’ petition against Makati and conveyed that amicable settlement of involved parties should be pursued on boundary dispute pursuant to Section 118(d) of the Local Government Code.
January 2012 Pasig City RTC Branch 153 Judge Leili Cruz Suarez upheld the territorial jurisdiction of Taguig City over Fort Bonifacio and several Makati barangays (the EMBO villages).
July 30, 2013 Court of Appeals Associate Judge Marlene Gonzales-Sison ruled the following:1. Dismissing the Complaint of Taguig for lack of merit and confirming that the Disputed Area comprising of the EMBO Barangays and Inner Fort Barangays (Barangay Post Proper Southside) in Fort Bonifacio are within the territorial jurisdiction of Makati City;2. Lifting the injunction issued by the lower court against Makati;3. Declaring Presidential Proclamation No. 2475 and Proclamation No. 518 as constitutional and valid;4. Ordering Taguig to immediately cease and desist from exercising jurisdiction within the disputed area and return the same to Makati; and 5. Ordering Taguig to pay the cost of suit.

To-date however, the Taguig LGU continues to govern over the disputed area as it has filed a motion for reconsideration with the Court of Appeals. Thus, business and property taxes as well as permits are dispensed by the said LGU. Anecdotal evidence from investors and end-users alike are unperturbed with this tug-of war as it points to “politics as usual” with an expectation that this dispute will be long drawn.

Implication in the event of a shift in local government jurisdiction

The implication to the property market has been nil so far with no immediate changes in the business decisions of potential tenants and investors considering BGC. In the medium to long term, we have assessed the sensitivity of the different property sectors to criteria such as:

a)  Total Occupancy cost including rent, service charges and utilities

b)  Property and business taxes

c)  Ease of doing business

d)  Availability of human capital / labor

e)  Accessibility to infrastructure such as public transportation, telecommunications and power

f)  Availability of supporting amenitiesThe sensitivity table is presented below.

Figure 1. Sensitivity of the property market in the event of a shift in local government

Sensitivity Table

The top three (3) primary considerations in choosing a location notably:

1. Total Occupancy Costs including rent, services charges, utilities

2. Access to infrastructure including public transportation, power (and redundancies) and telecommunications and

3. Availability of human capital

will continue to be BGC’s competitive advantage and will augur well for its continued marketability. But the biggest impact in the shift of local government jurisdiction will lie in the investment cost and operational costs of businesses as it pertains to taxes and ease of doing business.

In a survey of 25 Philippine cities conducted by the World Bank in its “Doing Business in the Philippines 2011” report, Taguig City ranked 3rd in terms of Ease of Starting a Business; 2nd in terms of “Ease of Dealing with Construction Permits” and 6th in terms of Ease of Registering a Property.” In the same study, Makati City ranked 20th, 9th and 21st in the same categories.

Table 1: Cost of doing business – Makati City versus Taguig City

Cost of doing business

Whilst Makati is indeed the Philippines’ Central Business District (CBD), it will do well for its competitiveness if it will be sensitive to its World Bank ranking in Ease and Cost of Doing Business and make the adjustments where necessary.

 

Sources

Table 1:

Makati – The Revised Makati Revenue Code, City Ordinance No. 2004-A-025

Taguig – The Revenue Code of Taguig (Municipal Ordinance No. 24 Series of 1993), as amended by City Ordinance No. 85 Series of 2005

The World Bank. Ease of Doing Business in the Philippines. http://www.doingbusiness.org (accessed October 30, 2013).

Historical timeline was developed from the following sources:

GMA News Online. http://www.gmanetwork.com (accessed August 12, 2013)

Wikipedia. Fort Bonifacio. http://en.wikipedia.org (accessed July 2013).

Pedroso, Kate. “What Went Before: Disputes over Fort Bonifacio.” Inquirer News. http://newsinfo.inquirer.net (accessed August 2013).

Avendano, Christine O. “CA rules Makati City, not Taguig, has jurisdiction over Fort Bonifacio.” Inquirer News. http://newsinfo. inquirer.net (accessed August 2013).