Cebu's 2010 prospects depend on us

Cebu’s economists are in unison as far as the identified drivers of local economy are concern.   These are tourism, business process outsourcing (BPO) and export. If one is keen enough, you would notice that these are foreign-money driven. Tourism largely depends on foreign tourists’ spending. Obviously, BPOs and exports cater to foreign companies’ need. While tourism and BPO industries have sustained us, exports of goods have remained undesirable.

Also, apart from the performance or non-performance of certain industries, commodities as basic as oil remain a big concern. For anyone who dreams of lower oil prices this coming year must have to wake up.   Oil prices won’t change significantly in 2010. If there is, it will be slightly upwards. This is not because of supply and demand issues but primarily due to some arm-twisting tactics and influences of major oil producers and powerful countries as they push for their preferential prices. As I wrote in my April 13, 2009 column, when I predicted oil prices to hover between US$55 and US$75 per barrel towards the end of the year (which certainly happened), I emphasized that they would like to impose their prices, in whatever means possible, to sustain their economies.    Deutche Bank, for one, calculated late 2008 how high oil prices have to be for OPEC countries to maintain their budgets. Iran and Venezuela, two of the most vocal and seemingly arrogant countries who are often the first to call for production cuts, need the highest price per barrel of US$95. Russia needs about US$70, while Saudi Arabia, OPEC's largest producer and de facto ruler, needs about US$55 a barrel. But taking all these measures together, the bank says US$60 a barrel seems like a probable place for oil prices to level off. 

However, Deutche Bank (in making such calculation) failed to consider USA’s influence in the world’s oil prices. In doing so, it should have factored in the oil drilling activities in the USA and the companies’ expected returns on investments and operating costs. For instance, in the last quarter of 2008, while the majority of the rest of the USA was in distress, the oil producing town of Bradford in Western Pennsylvania was booming. However, with prices going below their operating costs in the last quarter of 2008 and the first quarter of 2009, this “boomtown's bustle is as quiet as the surrounding late-winter forest”.   The oil price collapse was simply unbearable and sent some producers packing. For these oil producers to sustain their operations, oil price should not go down below US$75 a barrel. They find no sense to maintain their wells with oil prices below this level. 

As earlier declared, with these figures on hand and the ability of Saudi Arabia, Russia and the USA to impose their will, I predicted in my April 13, 2009 that even before the expected rebound of the US economy in the last quarter of 2009, oil prices will certainly move upwards. I further mentioned that in understanding these numbers, we must prepare for the effects on our economy of oil prices to be hovering between US$55.00 and US$75.00 a barrel. True enough it did and in the ensuing year (2010) we must get accustomed to these prices and factor them in into our budgets to comfortably move forward.

On the other hand, one of Cebu’s major industries is faced squarely by some unsettling developments in its largest buyer, the USA.   USA’s “housing starts” and “new home sales” continue to plummet.

“Housing starts” and “new home sales” statistics are very relevant for us. Rightly so, because there is one industry in Cebu that will be directly benefited by its rise and will be badly hit by its fall. These statistics are used in the USA as indicators of the state of the economy. These are very important indicators because they show how much money the general public has. If there is a rise, it will simply mean there is more money in the economy. If there is a fall, it means the economy is cash strapped and unemployment must have gone up. 

Statistically, “housing starts” records building activity at its inception, measures the number of private housing units on which construction is begun each month. It includes all types of accommodations designed as family living quarters, whether single units or apartments. Apartments, however, are counted separately, so that a 5-door apartment building is tabulated as 5 housing starts.  

As we rack and analyze the rise and fall of “housing starts” as well as “new home sales” in the USA, we must be aware that there are many industries whose fates are tied to residential construction. Apart from the easily identifiable construction materials like lumber, cement, roofing materials, etc., the furniture industry is among those directly affected by its movements. Any drop in the “housing starts” statistics coupled with an unequivocal dependence in the US market could mean disaster for Cebu’s furniture industry. Any rise, however, could mean bounty for industry players and their dependents.

Therefore, with the oil prices so unforgiving, coupled with the country’s retailers greed still persisting and would-be export markets still languishing, the only way out of this present economic ills are just us, Cebuanos. 

Fortunately, the solutions are in our midst. Unfortunately though, due to our leaders’ misplaced pride and lust for power, these surefire solutions have remained dormant. Undeniably, the ongoing rift between Mayor Tomas Osmeña and Gov. Gwen Garcia, rendered the would-be saviors - such as, the developments of the Cebu City’s SRP, the Province of Cebu’s Ciudad and Camp Lapulapu, as well as the possible resolution of the Barangay Luz controversy and the LRT-BRT issues - as unlikely hostages. 

If realized, these projects can easily generate thousands of employment and fill hundreds of thousands of stomachs during construction alone. As buildings rise, these shall be stuffed with furniture, fixtures and accessories thus helping the ailing furniture industry. More importantly, if the LRT-BRT issues are resolved, not only will the metropolis will have orderly traffic, it shall also help decongest it as it will come out logical to reside in areas as far as Dalaguete in the south and Catmon in the north than squeezing into a phalanx of shanties on squatted lots.

Luckily, it isn’t a completely hopeless situation at all. Cebuanos should bring back that era when the CEOs of the City and Province Cebu were harmoniously working together. To recall, such harmony brought about with ease the transformation of the Club Filipino-managed golf course into what now stands as the bustling Cebu Business Park. Similarly, such healthy relationship brought about the conversion of the then exclusively-for-affluent Lahug Airport to what is now dubbed as the multi-million dollar earning IT Park.

2010 brings us the opportunity to bring back such fruitful era in the Cebu Island’s economy. As election nears, let us ponder on how we can help bring this forth. Forget about Mayor Osmeña’s and Gov. Garcia’s reconciliation. Knowing them, that will never happen. What is now at hand is for us to try to help realign the political forces in Cebu for the economy’s benefit. We can do this by trying to influence each other (voters of the city and province of Cebu) in trying to vote for the LGUs’ CEOs who, despite their misplaced pride and unceasing lust for power, have existing alliances for the betterment of the Island of Cebu. All said, the brightness or dullness of Cebu’s 2010 prospects and beyond largely depend on us.

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