The economic status of regions in the Philippines Robust growth outside the NCR

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PHOTO CREDIT: ROAD AHEAD-UNSPLASH

(Part 1)

In 2019, before the pandemic, I wrote that Batangas Province will be the epicenter of the next metropolis that will rival Metro Manila as the economic engine of the Philippines.

I was not surprised when, on April 28, the Philippine Statistics Authority (PSA) issued a press release stating that in 2021 – the year of post-pandemic recovery – Calabarzon* or southern Luzon was the fastest growing region at 7.6%, which was far above the national growth of 5.7%.

The National Capital Region (NCR) experienced lackluster growth of 4.4%, which, by the way, was already the level of growth it was seeing even before the pandemic. I didn’t buy the explanation given by PSA that the NCR’s slower growth was due to it having the longest lockdowns among the regions. Metro Manila had already lost its prominent position for quite some time. There were years just before the pandemic when areas like Davao and even Bicol were growing at 8% while the NCR struggled to grow at 4%. I had already celebrated the fact that Metro Manila was dethroned by other more dynamic regions. This is something very positive for national economic development. There is an increasing decentralization of economic activities from the center to the periphery.

From April 13 to May 5, I was lucky enough to be able to spend three weeks in the Cité des Pins to attend a long continuing education seminar in the human sciences. I take very seriously the saying that the acquisition of skills and knowledge is endless. During these days of study, rest and recreation, I saw how in Baguio, from Holy Week and onwards, Filipinos all over Luzon had taken the “journey of revenge” very seriously. announcement. The throngs of domestic tourists that filled this “smart city” made it seem like the pandemic had never happened. Congratulations to the local elected officials who have been able to maintain a fair balance between health measures and the growth of the economy.

I was not surprised that the Cordillera Administrative Region (CAR) also experienced above-average growth of 7.5%, surpassing Metro Manila. Domestic tourism is in full force. A visit to the Balatoc mine site of Benguet Corp. in Benguet, accompanied by a managers’ briefing on their performance for 2020 to 2021, also made me understand how and why CAR has grown faster than the national average. Mining, thanks to the more reasonable policies followed by the Duterte administration after the first anti-mine measures applied in the early years of the outgoing administration, is a booming industry with record prices for gold, copper and nickel prevailing due to strong global demand for minerals. A recent report by the Financial Times (April 28) described a severe shortage of these minerals in Europe, as the whole region tries to drastically reduce its dependence on fossil fuels. Nickel and copper, among other minerals, are essential for the manufacture of batteries, solar panels and wind turbine equipment – not to mention all the digital devices necessary for the industrial revolution 4.0 such as laptops, smartphones , iPads as well as cables for telecom and electrical networks.

It should also be noted that the CAR has seen household expenditure increase at a higher than average rate. While household final consumption expenditure increased at a national average of 4.2%, consumption grew at nearly double the rate of 8% in CAR. It’s unfortunate, however, that despite talk of Baguio City becoming a smart city – even vying to become an ASEAN creative industry hub – its infrastructure still leaves a lot to be desired. We still see many trucks delivering water to households, despite the presence of Manila Water in the area. Electrical “blackouts” are not uncommon. Whoever elected local officials have been in Baguio and surrounding communities must give the highest priority to improving these public services. A fair share of the funds that will result from the Mandanas-Garcia judgment should be budgeted for the improvement of these services. LGUs, working in tandem with Baguio’s private businessmen, should also proactively seek out foreign direct investors from countries such as Japan, South Korea, Taiwan and Spain who can invest in these utilities. which were liberalized with the amendment of the Civil Service Act. In fact, Acciona, a powerful Spanish conglomerate involved in the ownership and management of infrastructure worldwide, has already announced plans to invest up to $12 billion in the Philippines for infrastructure development, particularly water services.

Another region that has grown much faster than the NCR is Region 3 or Central Luzon which, like Calabarzon, is already replacing Metro Manila as a residential, commercial and industrial hub. In 2021, the region posted a growth rate of 7.4% compared to 4.4% for the NCR.

Like South Luzon, this is not the first time that Central Luzon has overtaken Metro Manila in terms of regional growth. It had consistently grown faster than the NCR for at least the last five years before the pandemic, especially in areas called the Pampanga Triangle (Angeles, San Fernando, Clark-Subic). All major nationwide real estate companies have major projects in central Luzon, such as Ayala Land and its subsidiaries, Megaworld, Vista Land, Robinson Land, SMDC, Federal Land, etc.

The surrounding provinces of Tarlac, Bataan and Bulacan are also attracting investment away from Metro Manila, especially as major infrastructure projects like the railway from Clark to Bulacan to Calamba, and finally to Bicol , will be completed in the next few years. with the help of the Japanese. The San Miguel Corp. International Airport Project. in Bulacan will be a game changer. Another game changer for Central Luzon will be the bridge that will be built connecting Cavite to Bataan, via Corregidor Island. This will facilitate travel to Bataan province, which has one of the highest human development indices in the country.

It should also be noted that two regions in Mindanao grew faster than the national average. These are Region 13, ie Caraga**, and the Autonomous Region of Bangsamoro in Muslim Mindanao (BARMM). This fact demonstrates the enlightened policy under the Duterte administration in which the bulk of government-funded infrastructure projects were focused on the underdeveloped regions of the countryside. The Build, Build, Build program accounted for the very high growth rate of gross capital formation during the period 2020-2021, at the height of the pandemic. This component of GDP (in addition to household final consumption expenditure, government final expenditure, exports of goods and services, and imports of goods and services) grew at an astronomical double-digit rate of 20.3% . The high growth rates of Caraga and BARMM must be primarily due to government capital spending on infrastructure. This is a trend that must be continued by the next administration. Government money for public works should be spent on farm-to-market roads, irrigation systems, post-harvest facilities and others that can improve the lot of rural people.

Infrastructure in urban areas like Metro Manila and Metro Cebu usually has to be financed by private companies like San Miguel Corp., ICTSI, Megawide, First Metro Pacific and other conglomerates that have been very active in building airports , tolls, airways, subways, etc. The next administration must make a special effort to attract foreign direct investment to supplement the long-term capital that these national companies have invested in the Build, Build, Build program.

In the Visayas, it is also a good sign that there are regions that are developing faster than the central Visayas to which Metro Cebu belongs. Central Visayas grew at the below average rate of 5.4% compared to Western Visayas which grew by 5.9% and Eastern Visayas by 6%. This represents a healthy trend that resembles what is happening in Metro Manila. There is a decreasing concentration in the Cebu metropolitan area and more investment in the Western Visayas, especially in the Iloilo-Bacolod corridor which will be even more attractive to investors once the bridge connecting Iloilo to Guimaras to Bacolod is completed. This will unite these two urban centers of Ilonggo into a single megalopolis. In fact, Iloilo is already considered a more attractive site for new investment in real estate, hospitality industry and BPO-IT sector than traffic-infested Metro Cebu. The higher growth rate in the Eastern Visayas bodes well for a more equitable distribution of income, as Samar and Leyte have historically suffered from one of the highest incidences of poverty in the country. not

(To be continued.)

* A portmanteau of the names of the provinces of Cavite, Laguna, Batangas, Rizal and Quezon.

** The region includes five provinces: Agusan del Norte, Agusan del Sur, Dinagat Islands, Surigao del Norte and Surigao del Sur.

BERNARDO M. VILLEGAS holds a doctorate. in Economics from Harvard, is Professor Emeritus at the University of Asia and the Pacific and Visiting Professor at IESE Business School in Barcelona, ​​Spain. He was a member of the Constitutional Commission of 1986. [email protected]

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