The Cebu and Central Visayas economy under P-Noy

With 5,000 sq. km. in land area, Cebu is 4.8 times bigger than Hong Kong and 7.4 times bigger than Singapore. Like the two city states, Cebu is also strategically located. It has a good seaport and airport. A new airport terminal is under construction and a new container port and BRT system are planned to be constructed soon, with the LRT following after the BRT, hopefully.

Cebu, too, is not far behind Singapore and Hong Kong in population. Growing at 2.2 percent annually, Cebu’s population is estimated to reach more than 4.5 million this year and 5.2 million by 2020. In 2014, the population of Singapore was placed at 5.52 million and Hong Kong, 7.26 million with much slower growth rates.

Unlike the rest of the Philippines, up to 80 percent of the workers in Cebu and more than 90 percent in Metro Cebu are now engaged in industry and service activities, away from agriculture which in the country still engage a third of the workforce. In the whole island of Cebu, the industry sector, where the productivity of workers is 2.03 times the national average, now employs up to 25.5 percent of the workforce; whereas, it is only up to 15.9 percent at the national level and 18.7 percent at the National Capital Region. In Metro Cebu, the proportion of workers engaged in industry is even much higher at 29.1 percent.

While the Philippines is now closing in on China in GDP growth, Cebu today is even doing much better. With Cebu, the GDP of the Central Visayas Region grew an average of 9.0 percent in the last five years up to 2014. This was 1.4 times faster than the whole country and the fastest among 17 regions.

As a result of its rapid growth that even exceeded or equaled that of China after the last global recession, from only 6.0 percent of the country in 2010, the Central Visayas GDP has increased to 6.5 percent in 2014. This is the fourth biggest after Metro Manila, Calabarzon and Central Luzon. Basing on population alone, Cebu contributes up to two-thirds of the Central Visayas GDP. This could be more actually if we consider that Cebu has relatively more workers engaged in highly productive industrial activities and high-level service activities than the rest of the region.

Central Visayas, therefore, with Cebu in the lead, is now fast emerging as a newly industrializing economy with its industry growing at 13.4 percent which is 1.5 times faster than the 9.0 percent overall growth of the Central Visayas economy. Industry growth like this is consistent with the experience of Asia’s NICs near us when they were still emerging.

Exceeding P800 billion at current prices in 2014, the Central Visayas GDP, more than 60 percent of which comes from Cebu, are now derived less from agriculture at 6.0 percent and more from industry at 39.0 percent, and services at 55 percent. This is again in line with the output structure of Asia’s NICs. Nationally, the structure of the national output is about 10.0 percent from agriculture, 33.0 percent from industry, and 57.0 percent from services.

The Board of Investments-approved investments going to Central Visayas are more attracted to locate in Cebu as shown by data on investment projects approved by the BOI, which amount to P1.47 billion out of P1.57 billion from 2010 to 2013 with 11.2 thousand jobs also being generated.

Cebu has six fully operational export processing/economic zones. They now have a total of 278 locators with P13.8 billion in investments, with 117,000 jobs created and $3.6 billion in annual export sales.

Cebu, which is in the top 10 of Tholons’ list of 100 Emerged Global Outsourcing Cities, is host to several EPZA-approved IT parks/buildings. In 2012, four of these I.T. parks had 139 locators (BPOs) with about 95,000 employed workers.  The Cebu City IT-BPO roadmap aims to generate US$2.4 billion in total revenues and around 150,000 employees by 2017. The challenge for Cebu is to get at least 20 percent of the national BPO and KPO market.

The value of total foreign trade of Cebu reached US$4.274 billion in 2009. This went up by 29.8 percent in 2010 to US$5.549 billion, but with the weakening of the global economy in 2010 resuming, this went down again by the same rate to $4.456 billion. The total foreign trade in Cebu reached $8.84 billion in 2014 with exports valued at $5.36 billion and imports at $3.48 billion with a favorable trade balance of $1.88 billion. Up to 90 percent of Region VII exports is from Cebu.

Cebu is also a favorite tourist destination in the Philippines. Tourism in Cebu started in the 1970s with the opening of the international airport in Mactan. In 2006, tourist arrivals reached a total of 1.247 million, consisting of 773,000 foreign tourists and 765,000 domestic tourists. This increased by 11.1 percent annually to 2.6 million in 2013 with foreign tourist arrivals growing at 13.5 percent and domestic tourists at 9.3 percent, annually. In 2014, growth in tourist arrivals in Cebu was ever much faster at 16.5 percent with domestic tourists growing at 17.8 percent and foreign tourist arrivals at 15.6 percent.

Next Friday, I will present my analysis of the 2015 performance of the Philippine economy.