Despite crises, opportunities

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Sunday, December 22, 2013


THE damage wrought by two big calamities in this last quarter may have shaken most Cebuanos, but Cebu’s business sector finds opportunities to rise above the tragedy.

Asked to review how 2013 was for business, Cebu’s business leaders were mostly in agreement that the economy was able to maintain the growth it experienced in 2012.

Cebu Chamber of Commerce and Industry president Lito Maderazo said 2013 started on a very positive note, with the Philippines gaining investment grade credit ratings and showing it could grow at a fast pace--7.8 percent in the second quarter–when the rest of the world could not.

For Mandaue Chamber of Commerce and Industry president Philip Tan, the economy of Central Visayas was stable but he found a challenging area in infrastructure, which he believes is still an opportunity for industries to work on.

What changed was during the last quarter, when a magnitude 7.2 earthquake hit Bohol in Oct. 15 and super typhoon Yolanda made landfall last Nov. 8.

It caused rotational power outages due to damaged transmission lines and power plants in Leyte. Tourists held off their vacation plans to Bohol and Cebu, leaving hotels and resorts struggling to fill up their guest rooms. Agriculture also took a beating, as the calamities occurred before the harvest.

Growth target

Still, most believe the calamities have not made a dent on Cebu’s economy.

National Economic Development Authority (Neda) 7 assistant regional director Efren Carreon, in his yearend briefings, acknowledged the earthquake and typhoon may have affected Central Visayas’ growth outlook, but he still expects to attain its growth target.

Citing past trends, he pointed out that Central Visayas usually surpasses that of the national economy’s performance. As the national economy grew at 7.6 percent, Carreon is confident that Central Visayas registered an even higher growth rate. Results of gross regional domestic product, however, are officially released next year yet.

“The recent calamities that hit Cebu and Bohol may slightly affect the economic growth outlook of the region. However, since the events took place towards the end of the year, we are optimistic that the region would still be able to attain its economic growth target of at least 7.5 percent,” he said.

But Cebu Business Club president Gordon Alan Joseph was not as impressed, saying the year will end “relatively flat” compared with the previous year.

“While there has been growth in grocery item spending because of the earthquake and typhoon relief efforts, it does look like there is a general dampening of economic activity as a result of the two disasters,” he observed. He added that the events affected corporate and individual spending.

Prices

Prices of some goods have also gone up, with many agricultural lands in the Visayas damaged before the harvest, affecting supply.

Businesses in Cebu were mostly spared and the horrors of what happened after the typhoon made many realize the effects it would have brought had Cebu been in the center of it. This led the sector take an active role in relief and recovery efforts, pooling their resources to bring help to those who needed it most.

“After the calamities spared (most of) Cebu, we took it upon ourselves to be thankful.

Mas maayo nga kita ang manghatag kaysa kita ang tagaan (it’s better to give out relief than to be the recipients of it),” said Tan.

Still thriving

Aside from feeling a moral obligation to help affected families, Maderazo could not help but see how businesses can still thrive amid all the devastation.

He cited the case of Bantayan Island, which is known as a major source of eggs. He noted a lack of cold storage facilities, other businesses that could be related to the poultry industry like the processing of chicken meat and other related ventures.

He also observed that fishermen in the coastal towns do not have post harvest facilities and lack technology to increase their capacity, using the same old bancas that are easily damaged in storms, affecting their livelihood. He also said that the agriculture damage will force farmers to plant crops that will yield faster results so they can earn money.

Traffic

Maderazo said that if business is spread to the far parts of Cebu, traffic in the metropolis could be lessened.

For his part, Joseph said that in Metro Cebu Development and Coordinating Board meetings with Yokohama City and the Japan International Cooperation Agency (JICA), they have been informed that Cebu is the “preferred” Japanese investment destination in the country and one of the most preferred in Asia.

“I think that the best challenges and opportunities are yet to come. This, of course, creates opportunities henceforth, but we do need to show some urgency in addressing the issues that actually stimulate foreign investment,” he explained. He cited Cebu’s poor infrastructure and governance that needs improvement, including “adequate and professional urban planning.”

Also a sore point for investors is government bureaucracy, which makes setting up a business long and tedious, and political spats among local government officials.

Unite

“We need to unite and collaborate for development, for the good of all Cebuanos.

Happily, this is happening, but there are still situations which are of a concern to political investors,” Joseph said.

But if Tan has anything to say about local politics, it is not to rely on politicians.

He said businesses should survive on their own and rely on their own instincts and consider it a bonus if the government they are dealing with has been able to create an environment conducive to business.

Maderazo, for his part, admits any deadlock to development resulting from political fighting is always a problem for them. He hopes existing rifts can be set aside so that important projects can push through.

Joseph acknowledged that all the spending for relief and recovery will spike economic activity but feels this is a temporary situation and not indications of lasting growth.

“We must also be aware that both tourists and investors are more concerned about Cebu--it has been proven once and for all that we are vulnerable to earthquakes and major typhoons,” he said. He expressed concern that investors are worried about this.

“Unless we respond by creating a more competitive business environment in Cebu, we will lose out to our other competitors in the Philippines and in the Asia region.”

Growth drivers

Tourism, construction and the information technology and business process management industries were seen as the main growth drivers of the economy, paving the way for other industries like retail and transportation to do well. And with the rebuilding efforts following the calamities, construction is expected to soar even higher.

According to Neda 7, 4,891 new construction projects were approved in the first half of 2013 and were valued at a total P7.83 billion. Eighty-five percent of approved construction projects were residential buildings while 11 out of 13 projects registered with the Board of Investments during the period were for mass housing projects at an estimated cost of P3.2 billion.

Tourist bookings were affected after the earthquake and the typhoon, but Hotels
Resorts and Restaurants Association of Cebu president Cenelyn Manguilimotan said all the aid workers from foreign countries offset the cancellations in city hotels.

IT-BPM

No other industry has had such incredible growth levels like information technology and business process management (IT-BPM). In the first nine months of 2013, revenues of the industry in Central Visayas reached 84 percent of the revenues it achieved for the whole of 2012. Estimated revenues, according to the Philippine Export Zone Authority, was at $435.4 million for the first three quarters.

Carreon noted that IT-BPM companies continue to invest in Central Visayas, with Qualfon expanding operations in Dumaguete City last May and at least three new firms opening in Cebu--The Results Companies, EnfraUSA Solutions Inc. and EXL Philippines Services, Inc. The Results Companies expects to hire some 1,000 employees before the year ends. It was also this year that Cebu climbed a spot higher in Tholons’ list of top 100 outsourcing destination, placing eighth.

Despite the challenges, businesses see even better days ahead, as long as government does its role of paving the way for easier business transactions to encourage more investments that generate more jobs for Cebuanos.

Published in the Sun.Star Cebu newspaper on December 23, 2013.

Business

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