Rethinking Cebu’s development strategy

By: Fernando Fajardo, Philippine Daily Inquirer: Inquirer Visayas, 12 January 2013

There is no single measure at the local level that we can use to measure Cebu’s economic performance. In the Philippines, the gross domestic product (GDP), the most widely used measure of economic performance, is disaggregated only down to the regional level, not the local level.

But if we were to believe Cebu’s business personalities, provincial growth in 2012 was phenomenal in at least three sectors—real estate, business process outsourcing (BPO) and tourism.

AYALA Center Cebu inside Cebu Business Park is undergoing expansion which is expected to be completed by last quarter of 2013. Cebu’s vibrant economy has triggered expansion in retail, trade and other allied services. CONTRIBUTED PHOTO

Cebu Holdings Inc. (CHI) president Francis Monera was quoted in a local paper as saying that the real estate sector in Cebu saw a revenue growth of 18.8 percent in the third quarter alone, which made it the fastest among the growth industries in Cebu.

Controlled by the Ayalas, CHI is the developer of the 50-hectare Cebu Business Park, which was built out of the golf course previously owned by the province. But then Gov. Lito Osmeña saw it fit to dispose of the property to create more jobs for Cebuanos instead of just keeping it as a playground of the rich. The move greatly contributed to the “Ceboom” that came in the 1990s.

Last year, Cebu Business Park itself and its nearby surrounding areas, including Cebu IT Park that was developed out of the former Cebu Domestic Airport, hosted several buildings being constructed to meet the growing demand for commercial, office and residential spaces in the fast-growing Metro Cebu. Local developer Jose Soberano III agreed with Monera, saying the real estate sector experienced unprecedented growth last year in terms of new projects launched and completed, increasing booked sales take-up and rental income, both in sheer volume and upward price movements.

THE CEBU Business Park is a 50-hectare premier business and commercial district being operated by Ayala-owned Cebu Holdings Inc. Real estate, business process outsourcing and tourism fuel Cebu’s growth in 2012. CONTRIBUTED PHOTO

The past year was also good for the BPO industry.

Cebu Investment Promotion Center managing director Joel Mari Yu cited 17 BPO companies that set up shops out of the 56 inquiries the center received. It turned out that the new BPOs were mostly of the knowledge-based (nonvoice) kind that uses more talents of the workers and pays more instead of the usual call centers that pay less.

About 11,000 jobs were created by the BPOs that came last year.

Rapid growth also characterized the local tourism sector.

Total tourist arrivals grew by 13 percent from 972,575 in the first half of 2011 alone to 1,098,634 in the first half of 2012, with foreign tourist arrivals growing much faster at 16.7 percent from 401,592 in the first half of 2011 to 468,529 in the first half of 2012.

In comparison, reports from Manila mentioned that the 11-month period of 2012 recorded 3,830,723 visitor arrivals to the country. This represented an 8.73-percent increase compared to the previous year’s volume of 3,522,887 for the same months. The higher foreign tourist arrival growth figure for Cebu once more proved its being the most attractive and fun to visit in the country. Together, the growth of the three sectors fuels expansion in the rest of the local economy, particularly in retail trade and other allied services.

Retail giant SM Prime Holdings Inc. opened its second mall in Cebu, SM City Consolacion, on Cebu North Road in Barangay Lamac, Consolacion town, in northern Cebu, on June 1, 2012. It is currently constructing its biggest mall in Cebu at South Road Properties, which is scheduled to be completed in 2014.

Many observers agreed that the three fast-growing sectors would continue to soar in 2013. Indeed they will as the local export sector, Cebu’s key growth driver in the last century, is still hampered by the slowing global economy and continuing appreciation of the peso that made Philippine exports less competitive globally. But more of the same is not necessarily always good for Cebu.

The real estate, BPO and tourism industries will still grow even beyond 2013, but they may not be enough to give a better life to all Cebuanos in the long run.

Concentrating in a few areas in Metro Cebu and requiring higher education and new skills, the sectors exclude from work many people who live elsewhere or do not possess the required qualifications.

The export firms, which used to hire plenty of workers directly in their own shops or indirectly through their many contract suppliers throughout the province, can no longer absorb them as the peso remains high, making it doubly hard for them to compete in the shrinking global market.

This is the time to rethink Cebu’s local development strategy, given that it now has about 2 million workers to employ out of its projected 4.3 million in population this year.

In 2013 alone, Cebu has to create 40,000 new jobs just to employ the new entrants to the labor force. Add to this the 400,000 to 500,000 workers (20-25 percent of the present labor force) who are still unemployed or underemployed, the need to create more jobs in Cebu is even more pressing.

Fernando Fajardo is a professor of economics at the University of San Carlos and former assistant regional director of the National Economic and Development Authority in Central Visayas.

Fajardo, F. (2013). Rethinking Cebu’s development strategy. Philippine Daily Inquirer.
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