::: SUN.STAR ECONOMIC FORUM 2004 :::

March 10, 2004

Cebu’s economy ‘faring better’ than the country
By Karen M. Flores

SPEAKERS and reactors to the morning session of the Sun.Star Economic Forum 2004 Tuesday sang Cebu’s praises as a haven for investors and tourists.

Rex Drilon, who was with Cebu Holdings Inc. before he became chief operating officer of Ortigas and Co., announced to participants how “clean” the Cebu City Government is.

“In my four years here, I never had to bribe anyone to get anything done,” said Drilon, a panelist to the presentation of Securities and Exchange Commission (SEC) Chairperson Lilia R. Bautista.

For his part, Dr. Vicente B. Valdepeñas Jr., a member of the monetary board of the Bangko Sentral ng Pilipinas who spoke during the first session, noted Cebu’s international reputation for its “safe streets” compared to Manila.

ECONOMIC FORUM. Atty. Lilia R. Bautista (center), chairperson of the Securities and Exchange Commission (SEC), answers a question from the audience in reaction to her speech on investments strategies and business outlook for 2004 during Tuesday's Sun.Star Economic Forum. (Sun.Star Foto/Arni Aclao)

Other than reputation, however, both Bautista and Valdepeñas presented figures to show how Cebu has been faring better than the rest of the country.

The nationwide increase in the number of new corporations registered from 2002 to 2003 was 0.57 percent while in Cebu, the figure was 17.46 percent, Bautista said in her presentation.

Cebu center

Annual exports from 1998 to 2002, meanwhile, steadily increased from $2.036 million to $3.108 million.

In the regional scene, Central Visayas is now the fourth largest economy in the country, next to the National Capital Region, Southern Tagalog and Central Luzon.

With the employment opportunities and the quality of life here, Drilon noted that the per capita income in Cebu is 2.5 times bigger than the national figure.

At an estimated $2,500, Cebu’s per capita income is even bigger than Thailand and “almost as high” as that of Malaysia.

He also pointed out that there are at least 60 banks in Cebu and 1,500 hectares of business parks and economic zones scattered all over the island.

Moreover, Drilon said the island has been “hardly tarnished by the reputation of the wild, wild east” that has bugged the country and even this region of Asia what with reports of terrorism.

“Why invest in Cebu? Because it’s the center of the universe,” he told forum participants, who laughed at this comment.

Drilon explained that Cebu is within four hours of “any major city in Asia,” which makes it a convenient stop and area for business transactions.

Legislated wage cuts jobs
By Cherry Ann T. Lim

BUSINESSMEN in Cebu backed the central bank’s move to stabilize the peso and voiced support for the scrapping of the minimum wage law, but said these were not enough to bring investors back to the country and help the economy grow.

“I never believed in minimum wage laws, especially for economies with rapid population growth,” said Dr. Vicente Valdepeñas Jr., member of the Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas (BSP), Tuesday during the Sun.Star Economic Forum 2004 at Waterfront Cebu City Hotel.

He said the government doesn’t know enough about productivity in factories to determine wages and would be better off following the examples of Thailand and Malaysia, which have no minimum wage laws but determine their wages through collective bargaining agreements.

Besides, “the vast majority of manufacturers (in the Philippines) don’t comply with the (minimum wage) law,” he said.

On the sidelines of the forum, Glenn Westerman, president and chief executive of Lexmark International (Phils.) Inc., said he was for the scrapping of the minimum wage law.

“Legislating minimum wage is the way to lose jobs,” he told Sun.Star.

Doesn’t help

According to Wester-man, also the immediate past president of the American Chamber of Commerce of the Philippines in Cebu, that law applies to unskilled labor, a segment in which the Philippines is not competitive against China, Vietnam and Indonesia.

“Your regulating unskilled labor doesn’t help,” he said.

If the Philippines wanted its economy to grow, the better strategy, he said, was for government to help its citizens “move up the value ladder.”

Enabling Filipinos to do high-skilled work would allow them to command better salaries that they could use to buy cars and houses, which would spur the economy.

Local businessmen have long advocated more flexibility in the wage rates, saying it was better to pay low wages and save jobs than to pay high legislated wages and discourage employment.

This is why the Cebu Chamber of Commerce and Industry, Cebu-Gifts, Toys and Housewares, Philexport-Cebu, Cebu Furniture Industries Foundation Inc., Mandaue Chamber of Commerce and Industry, Fashion Accessories Manufacturers and Exporters Foundation, and Cebu Business Club last year voiced their support for Republic Act 9178, which exempts barangay micro business enterprises from income taxes and the minimum wage.

During the forum, Valdepeñas also said the Bangko Sentral was “managing the peso-dollar rate” because it was part of its obligation as a member of the International Monetary Fund to manage volatility in the exchange rate.

The peso has been hitting its record low of 56.35 to the dollar in recent days amid political uncertainty ahead of the May presidential election.

This was his response to the question by Philippine National Bank chairman Francisco Dizon on why the BSP increased the bank reserve requirements by two percent, siphoning off P30 billion from the banking system, instead of just letting the peso fall and making the exporters happy.

Hardest hit

Valdepeñas said it was the national government that would be hardest hit by a peso depreciation because unlike exporters, it doesn’t earn in dollars but it borrows overseas in dollars.

A weak peso would mean it would have to use more pesos to pay for its dollar loans.

Part of the problem, he said, is that the Bureau of Internal Revenue (BIR) collects only half of the collectible taxes because there is “a lot of cheating going on in this country.”

If the BIR could collect enough, the national government wouldn’t have to borrow overseas to fund its budgetary requirements.

As it is, every P1 depreciation results in a P300-million increase in the budgetary deficit for the national government.

Lexmark’s Westerman agreed on the need to have a stable foreign exchange.

He said a peso depreciation was favorable to exporters and foreign investors in the Philippines, like Lexmark, but it affects the employees, who earn in pesos, because it “lowers their standard of living.”

When the peso goes down, prices of basic commodities go up because many things, like petroleum and other products, are imported.

The way to grow the economy, he said, was to keep the peso stable and to keep the government stable.

Marilou Ordoñez, immediate past president of the Cebu Travel and Tours Association, said the weak peso was good for inbound travel, but not for outbound travel, which is by far getting much more business than inbound.

Despite the currency advantage, which tourists exploit to shop for cheap brand-name clothes in the Philippines, the country has still not been getting that many foreign tourists, she said, because of the bad publicity it is always getting.

Warning

Anastacio Muntuerto Jr., former president of the Cebu Chamber of Commerce and Industry, said the weakening peso should be a warning to exporters not to rely so much on the US economy.

He said the US dollar was projected to devalue further and the peso would suffer “because we are pegged to the dollar.”

The United States and Japan are the major buyers of Philippine exports.

Muntuerto said the US was currently suffering from excess capacity so a deflationary trend could be expected.

“Right now, their personal consumption is okay. That is driving the US economy. But what if it will drop if unemployment goes up?” he said.

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