Cebu's growth: We could have done more

Ask anybody in Cebu who is in the know of the local economy and he will certainly tell you that the identified drivers are tourism, business process outsourcing (BPO) and export.   If you are 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.

This fact was confirmed last week by the National Statistics Office (NSO) in its report that “merchandise exports growth slowed to 4.2% in June from a year ago as demand for electronics continued to plummet”. As reported, “a total of $4.31 billion worth of goods was shipped during the month, higher than last year’s revised $4.13 billion”. Though “it was the third consecutive month of year-on-year growth, the pace was slower than May’s 19.7% and April’s 7.6%”. The same report further revealed that “on a monthly basis, export receipts contracted by 12.6% from May’s $4.93 billion”.

What makes the situation a bit of concern was last Wednesday’s report that that country’s “annual inflation, at 3.2 percent, hit a six-month high in July”. Though our Central Bank Governor assured as that “inflation was expected to remain at manageable levels”, NSO said that such rise is “faster than market estimates and picking up from 2.8 percent in June”. However, with the recent calamities destroying our farms, we can expect inflation rate to rise further in August. 

Moreover, apart from the heavy toll brought about by the monsoon rains as well as the poor performance of our export-related industries, commodities as basic as oil remain a big concern. For anyone who dreams of lower oil prices this year must have to wake up.   Oil prices won’t change significantly in the second half of 2012. If there is, it will be slightly upwards or towards the US$120 per barrel (Brent) as experts predicted. This is not because of supply and demand issues because the world’s biggest economy, the USA, is still in limbo and the second largest (the remaining bright spot), China, experienced an economic slowdown last month. This frustrating development shall be primarily due to some arm-twisting tactics and influences of major oil producers and powerful countries as they push for their preferential prices. 

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. 

These calculations, however, were made four years ago. And we all know that there have been a lot unfavorable developments, like the political turmoil in the Middle East, that largely influence prices. Moreover, 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, US economists said 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. Allegedly, 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. In saving its own citizens, naturally, the USA shall influence the oil prices in the world market. 

Today, the crude oil scenario has changed a  lot. Factor in the political situation in the Middle East, prices will surely go up towards the end of the year.   Thus, Cebu, should make its move to shield its citizens from the ill effects of this unpalatable development.

For one, 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” hasn’t improved for quite awhile now.

“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 track 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 (who are mostly dependents of skilled but not adequately schooled workers).

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. Obviously, we see and feel the construction boom in Cebu. Hotels and office buildings are rising. Residential subdivisions and condominiums are sprouting. This construction boom has become a saving grace for the people in the Visayas and Mindanao, in general, and the Cebuanos in particular, as it directly generated thousands of employment. On top of these, the boom itself helps the furniture industry rise above water as the domestic demand for furniture increased as well. 

However, Cebu could have done more. Unfortunately though, due to our leaders’ misplaced pride and lust for power, some surefire solutions have remained dormant. Undeniably, the ongoing rift among Cong. Tomas Osmeña, Mayor Mike Rama 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 - 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. 

Fortunately, 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.

The years 2012 and 2013 bring 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 Cong. Osmeña’s, Mayor Rama’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 2012 prospects and beyond largely depend on us.

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