Balamban, Cebu - ‘How a foreign direct investment transformed a rural town from poor to very prosperous’

The entry of foreign direct investments (FDIs) has been the main weapon by which many countries in East Asia achieved spectacular economic growth.

“The story of Balamban.” Balamban, Cebu is the municipality where the Tsuneishi shipbuilding enterprise from Japan decided to set up operations in 1994. The rising yen and high labor costs forced the shipbuilder to look for lower cost sites.

I have visited Balamban three times across the years and have seen its progression.

Balamban is on the western shores of Cebu’s central region. It is north of Toledo, the larger city. The shipyard faces Negros island directly.

For years, Balamban suffered economically from the decline of copper mining in Cebu. Rescue came from shipbuilding.

As things evolved, the Aboitiz group put up an export processing zone dedicated to shipbuilding. Tsuneishi became the locator, receiving investment benefits from the Philippine Export Processing Zone (PEZA). With Tsuneishi came other companies that are associated with its shipbuilding enterprise.

Shipbuilding requires principally welders – hundreds, literally, thousands of them. Welding metal is an important skill that Filipinos learn easily. Welders are found wherever machine shops – repair shops and foundries and construction jobs are found. After welders, labor requires a host of engineers, administrators, and security.

“Tsuneishi’s shipbuilding commences.” In 1994 Tsuneishi built its shipyards and within two years, it delivered its first ship, a 23,000 DWT cargo vessel.

Almost immediately, Tsuneishi began building even larger ships. By 1999, it built a ship of 45,000 DWT, almost twice as much as the first ship that it manufactured. Soon it was fabricating 52,000 DWT and 58,000 DWT vessels.

These are ocean-going merchant marine vessels delivered to worldwide shipping companies. They are much bigger than domestic vessels that ply our seas.

In 2010, it delivered its biggest ship, 180,000 DWT which was even inaugurated by President Aquino. This is 7.8 times bigger than the first vessel that it produced in 1997.

Today, the company fabricates an average of 20 ships per year. All in all (by May, 2014), Tsuneishi has delivered 178 vessels to the world shipping market, accounting for a total tonnage of 8.33 million DWTs of new ships.

Of these deliveries, 47 ships are of type 52,000 DWTs; 30 vessels of class 58,000 DWTs; and 18 vessels of 180,000 DWTs. These three classes of ships account for 90 percent of the total tonnage constructed and delivered, the rest being ships no smaller than 23,000 DWTs.

This illustrates the company’s impressive growth in the country and represents one of the most successful FDIs in the country. (With the recent addition of Hanjin, a Korean shipbuilder that set up in the Subic Bay area, the Philippines is now a major shipbuilding country in the world.)

“Impact on Balamban and Buanoy barangay.” In 1995, during the first year of operation of the shipyard, Balamban’s population was 49,983. By 2010, or fifteen years later, the town’s population had risen to 71,237. The immediate vicinity where the shipyard is located, Barangay Buanoy, had a population of 4,455 but this rose to 8,368 by 2010.

Balamban’s annual population rose 2.8 percent while that of Buanoy, 5.8 percent. As jobs opened in the area, so did labor migration into the town. Population moves to where job opportunities abound.

Balamban progressed from a poor, fourth class town into one of the country’s foremost municipalities. The collection of national taxes in the municipality of Balamban rose from P34.6 million in 2000 to P53.3 million in 2005 to P83.1 million in 2013. At the same time, local taxes collected grew from P9 million in 2000; to P25.6 million in 2005.

More tax collections meant the town could undertake more public improvements. It gains bargaining strength with the national government. This strengthens the provision of public services from infrastructure to social services.

“More indicators of growth in Cebu.” When I first visited Balamban in 1998, the outward signs of progress were not yet very visible. Today, it is a very different story.

The signs are all over town. Buildings are made of durable materials – concrete for walling and support and GI sheets for roofing – are spread throughout. Houses of different sizes, for small families and for richer ones can be seen along the highway. The residents have rising incomes and the first signs of this progress is home improvement.

An outward evidence of rising consumption can be seen by the growth of the town, the food markets, the restaurants and small stores, the shopping malls that have established. The demand for transport vehicles can be seen by the growth of many motorcycle shops.

Community institutions improve. The public buildings are dignified and vibrant. The municipal hall is in good shape, public schools are well-daubed with paint, churches, hospitals, and medium sized shopping malls (Gaisanos), hotels and rooming houses appear well provided. Housing looks dignified, and most of them painted, however tiny the abode might be and made of durable materials.

Educational institutions - both public and private – have grown. Two obvious improvements are the University of San Jose Recoletos and the satellite campus of the Cebu Normal University – two educational institutions with strong local commitments in the provision of local manpower.

There are commercial establishments and more signs of businesses that one would not see in other towns. There are many gas filling stations – a sign of pre-existing demand for gas. There are motorcycle dealerships galore. There are repair shops of every kind, some for motors, some for other types of repairs.

The remittance companies are advertising from any nook and corner, the banks and financial services company -- Western Union and Lhuillier and all kinds of Pinoy Express, Moneygram and Cash Padala -- all are thriving. The town has lamp-posts, more variety of personal services such as beauty parlors and hairdressers. New industries have sprouted all over the place.

“A good experience to replicate.” This experience needs replication across the land, but the country has fewer FDIs than some of our neighbour countries.

This is the major issue that the nation has to confront with policy reforms that are needed. What these are – well, my readers can review many things I have said before.

My email is: [email protected]. Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/gpsicat/

(Note: NEDA Region 7 helped in arranging my visit and supported data collection.)