Traffic, infrastructure, port woes dampen Cebu growth

CEBU, Philippines – Cebu's economy continued to grow in 2015 but problems such as the worsening traffic, poor infrastructure and port congestion continue to pose risks to its growth.

While she gave an upbeat assessment of the Cebu economy, Cebu Chamber of Commerce and Industry President Ma. Teresa Chan cited the traffic woes, lack of infrastructure and port congestion as main economic problems.

"We did not expect we would grow like this in the last five years that people would have more purchasing power. And that interest rates would be so low that more and more can afford vehicles," Chan said, referring to what has partly caused the worsening traffic situation in Metro Cebu.

Efren Carreon, Central Visayas director of the National Economic and Development Authority, claimed that traffic is a serious problem because it negatively affects productivity of companies and workers as well.

"It entails costs in the movement of goods and people," Carreon said in a yearend briefing in his office.

He noted that local government units should have measures now on how to decongest areas where car traffic is heavy.

For Chan, traffic is the result of Cebu's continued economic growth.

"We are the victims of our own success," the business leader said.

Lack  of  infra and port  congestion

Aside from traffic, the business community is also concerned about the lack of government-initiated infrastructure projects, which are essential to the economy.

Carreon admitted the lack of infrastructure is something the government should continuously improve and invest into.

A series of value chain analysis workshops led by CCCI were done early this year to identify sector-specific roads and infrastructure projects for smooth flow to goods and services of Cebu's various economic drivers.

The list of these projects was recently approved by the Regional Development Council (RDC) during its meeting last December 11.

The growing congestion at the Cebu port is also another problem which has already affected both exporters and importers.

Lawyer Tomas Riveral, president of Oriental Port and Allied Services Corp. (OPASCOR), explained that the increasing cargo volume, the truck ban and traffic are among the factors that have caused congestion at the port.

Speaking during the CCCI yearend briefing, Riveral noted that exports and imports at the Cebu port have been growing at an average 4% and 11%, respectively, in terms of cargo volume.

"The truck ban has also added to the problem," Riveral said. "The turnaround of the trucks would be very slow because of traffic. The port has not expanded while the volume has continuously increased."

The port official further added: "So while we welcome the growth (of Cebu) for the past five years, this volume will pose us a problem unless a new port can be built in the next five years."

The Central Visayas RDC recently announced the proposed new Cebu international container port might start construction in August next year if the plan for an official development assistance (ODA) funding will push through. It is targeted to be completed by second quarter of 2019.

The business community hopes that projects like these will be realized even with the impending change in administration next year.

In addition, NEDA's Carreon projected an increase in election-related infrastructure projects before the election ban takes effect.

Regional  economy

The regional NEDA chief believes the Central Visayas economy grew faster this year, buoyed by its main economic drivers such as retail trade, tourism and information technology-business process outsourcing (IT-BPO), among others.

"Hopefully we can achieve the 9% growth in 2015," Carreon said.

Last year the Central Visayas economy grew 8.8% from 7.4% in 2013.

Positive economic indicators, Carreon said, point to a continued strong performance of the regional economy this year, citing the steady growth in tourist arrivals in the region, the robust retail trade and IT-BPO sector, and the improving employment rate.

"Growth of the economy appeared to positively impact on the labor market as employment in Central Visayas," NEDA said in an economic situationer report, noting employment rate reached 94.4% this year from 94.1% last year. However, the downside is that underemployment remains high at 20.8% this year from 15.3% last year.

"This means that the types of work that have been generated in the region are largely not of the quality that pays well since more work is being sought by workers to cover cost of living," NEDA noted.

"The Central Visayas economy is expected to continue to perform well... with growth to be driven by the region's leading sectors," it added.

Cebuano economist Fernando "Perry" Fajardo, a former assistant director of NEDA in Region 7, pointed out the regional economy, which registered an average 9% growth in the last five years, is growing faster than the national economy's 6.2% average growth since the Aquino administration took office.

Cebu, Fajardo said, specifically contributes about two-thirds of CV's gross regional domestic product (GRDP), total income of the regional economy from three main sectors: services, industry and agriculture.

"Any movement in the CV GRDP is largely because of Cebu," Fajardo said in an interview.

The economics professor said that most economic activities in the region are concentrated in Cebu which fully operates six export processing/economic zones, hosts several PEZA-approved IT parks and buildings, locates most of the Board of Investments-approved projects and is recognized as one of the top ten global outsourcing cities with its robust IT-BPO industry.

The Cebu City IT-BPO roadmap aims to generate US$2.4 billion in total revenues and around 150,000 employees by 2017.

Fajardo also made mention of the big contribution of new shopping malls to Cebu's retail industry.

"Something is happening to Cebu. The coming of new malls in Cebu is a reflection of the growing business in Cebu," Fajardo also said.

Government intervention

The economist, however, emphasized the government, not just the private sector, should contribute more in promoting Cebu as an investment destination.

"For the existing businesses, how can we help them expand and prevent them from going out? How can we attract more locators?" he said.

The next government, he said, must ensure the continuity of policies and programs, warning that the change in administration will likely create uncertainty in the business climate.

In his yearend statement, Economic Planning Secretary and NEDA Chief Arsenio Balisacan said the next administration should continue the reforms being started by the current.

Balisacan also reported the Philippines' high growth trajectory continues in the last quarter of the year as domestic demand continues to be strong.

"Together with the recovery of advanced economies expected next year and of the global economy on the medium-term, economic growth can accelerate to a level that can bring us to higher middle-income economy status by the end of the next administration," Balisacan said.

But while the economy has grown at a rapid pace in the last five years, the official stressed that much still has to be done to achieve faster poverty reduction and more inclusive growth.

This year, the Philippines was so far growing at an average of 5.6% in the first nine months, with 6% growth in the last quarter due to strong domestic demand, more jobs and more public and private investments.

This puts the Philippines as one of the fastest growing economies in Asia, just after India, China and Vietnam.

Balisacan was confident the Philippines economy would grow at 6% for full-year 2015.

Since President Aquino took office in 2010, the county has been growing at an annual average of 6.2% as of 2014, the highest five-year average growth since the mid-70s. (FREEMAN)