30 July 2015
Hotel Lorenza, Tacloban City
Introduction
As reported by the Philippine Statistics Authority (PSA), the Gross Regional Domestic Product (GRDP) of Eastern Visayas contracted from 4.5% in 2013 to negative 2.3% in 2014. This is a repeat of what happened three years ago. It can be recalled that in 2012, our GRDP also contracted, though at a much higher rate at negative 6.4%.
Unlike in 2013, we missed our 2014 target in the Updated Regional Development Plan (RDP), which was set at a range of 4.46-5.46%. With negative 2.3%, we are very far from the lower limit target of 4.46%. Throughout the entire country, it was only Region VIII who suffered from a negative growth and therefore, downscaled the most. Other regions’ economies also slowed down but not faster than ours and not to the negative level.
This reversal is not surprising because the ill effects of Supertyphoon Yolanda, which ravaged the region on the 11th month of 2013, were most heavily felt in 2014, the year after the onslaught of the disaster. It was the year when almost all socioeconomic activities got stalled and the region was hard-put in getting back to its feet.
The reported underspending of public funds must have also contributed to this economic shakedown. The Commission on Audit reported that the region was able to utilize only around 66% of its total budget for 2014. This utilization rate was lower compared to around 79% in 2013. This is understandable because the enormity of Yolanda’s destruction has ill-capacitated the region to spend allocated funds. This budget underspending has stymied the implementation of socioeconomic programs and projects of the government, thereby dragging the growth of the economy.
Possible Explanations based on Performance of the Various Subsectors
As in prior years, the Industry and Service Sectors were still the major drivers of the region’s economy in 2014.
The Industry Sector accounted for the biggest share at 41.4%, followed closely by the Services Sector at 40.7%. Agriculture, Hunting, Forestry and Fishery (AHFF) chipped in only 18.0%. Of the three sectors, only Services had an increased share to the GRDP; Industry and AHFF’s contributions were lesser in 2014 than in 2013.
Industry Sector
The Industry Sector nosedived from 13.9% in 2013 to 2.8% in 2014. How come? This was mainly because of the pull-down effect of the 16.0% shrinkage of the manufacturing subsector, which happens to be the largest sector in industry. The decrease in manufacturing, in turn, can be attributed to the 45% production decline at the Leyte Industrial Development Estate (LIDE) in Isabel, Leyte. In 2013, LIDE production was valued at $670,175,387.00 but slipped to $371,409,546.00 in 2014. For 2014, LIDE accounted for 77.4% of the region’s total export earnings. The value of exported cathodes reached $413,224,348.00, lower by 35.6% from $641,763,240.00 in 2013. The Yolanda-destroyed port in PASAR and PHILPHOS resulted to limited operations in transporting commodities, both imports and exports. One of the companies in LIDE, PHILPHOS, temporarily ceased to operate in 2014 after it was damaged by Yolanda. No production of mineral or chemical fertilizers had been recorded for 2014.
The year 2014 was also characterized by extremely volatile prices of metals used in industry, such as aluminum and copper, which LIDE produces. Copper prices fell to their five-month low due to lower Chinese demand for the product. This adversely affected the region’s export earnings, considering that nearly 87% of our cathodes are sold to China.
Moreover, exportation of agro-based products tremendously went down at almost 80%. This included Refined, Bleached and Deodorized (RBD) oil and abaca pulp. On a positive note, domestic sales of micro, small and medium enterprises (MSMEs) reached P415 million – 8.9% above the annual target of P381 million.
The negative performance of the manufacturing subsector was offset by the recovery of the mining and quarrying subsector from negative 24.3% to 18.2%. This is consequential to the resumed operations of the Strong Built Development Corporation located in Guiuan, Eastern Samar. In 2013, this mining company suspended its operation due to machinery breakdown and a nationwide moratorium on the issuance of ore transport permit (OTP)/mineral ore export permit (MOEP) on magnetite sand. Mineral production, specifically magnetite concentrate and chromite concentrate, grew by 52.2% compared to 2013. Sand and gravel recorded a hefty 262.2% growth from 2013 due to high demand because of massive reconstruction in the region.
The construction subsector accelerated by 30.8% compared to the previous year’s 9.8%. The rapid increase was obviously a result of the massive reconstruction of private and public infrastructure and dwellings damaged by Yolanda. Based on approved building permits, the total value of construction projects increased by 15%. Restoration of power and water supply and distribution facilities may have also caused the electricity, gas and water supply subsector to bounce back from negative 7.5% to negative 0.2%.
Services Sector
Transportation, storage, and communication slowed down from 8.0% last year to 6.0% this year. Again, this was obviously an effect of Yolanda’s damage to infrastructure. Destruction of ports, roads, bridges and vehicles, including the temporary disruption of services of the Land Transportan Office all had adverse effects on the transportation sector. Storage facilities such as warehouses have also been ravaged. Particularly in communication, the decrease may have also been due to the migration of telecommunication companies (Telcos) to fiber optics from microwave radio links, not to mention the physical damage to digital infrastructure.
While financial intermediation decelerated from 14.1% in 2013 to 10.6% in 2014, the deposit portfolio was up by almost one-fifth. This is a positive indication as it reflects increased public confidence in banks and improved savings among people.
The Information and Communications Technology (ICT) industry, which was also setback by Yolanda, has not yet fully recovered. ICT workers involved in non-voice business process outsourcing and online-based ICT jobs had been displaced.
The good news is tourism fared better in 2014, as manifested in increased tourist arrivals and receipts. Arrivals was 32% higher than in 2013. This yielded total tourist receipts of P7.09 billion, up significantly by 125.1% against 2013’s P3.15 billion. The increased receipts could be due to the longer stay of tourists in the region from an average of 1.08 day in 2013 to 1.8 days in 2014. These positive developments in the tourism subsector, however, were negated by disrupted education, health, and other social services, thus the deceleration of the other services subsector.
AHFF Sector
The AHFF further plunged to negative 12.8% in 2014 from negative 6.6% in 2013. This is the lowest in the country. The region’s agricultural produce, at 3.3 MMT, registered a slippage of 14.01%. The contractions in the top three contributors to agricultural production in the region, namely, crops, fisheries, and livestock altogether contributed to the decline. Crops, contributing 63% of the total agricultural output, shrank by nearly 14%, whereas livestock, which was the second biggest contributor in 2014, contracted by 9.6%. Meanwhile, fisheries was down by 20.40%.
Coconut and abaca suffered negative growths by almost 27% and 23%, respectively. Palay and corn harvest also contracted but only at less than 2%.
The overall dismal state of agriculture is mainly a consequence of the big disaster that was Yolanda, exacerbated by two more calamities that hit the region. Before 2014 came to a close, Typhoons Ruby and Seniang came after the other. The ongoing rehabilitation of Yolanda-damaged fishponds and fish cages further delayed production, contributing to the continued drop in fishery. Overfishing was also cited as a reason.
Development Outlook
Despite our economic shakedown, we still have good reasons to see better days ahead for Eastern Visayas.
For one, the approval of the Yolanda Comprehensive Rehabilitation and Recovery Program (YCRRP) in August 2014 will usher in more reconstruction projects with sure funding. Hopefully, by the end of 2016 or shortly after 2016, all CRRP deliverables would have been completed, and bring us back on track towards our original development goals of attaining a robust economy and reducing poverty incidence as embodied in the Updated RDP.
The Bottom-Up Budgeting, a program that ensures equitable allocation of substantial amount to all LGUs for priority poverty reduction programs and projects, jointly spearheaded by the Department of the Interior and Local Government and the Department of Budget and Management, is expected to address the concern on underspending of public funds. Both investments in the implementation of BuB and the YRRP implementation will spur the region’s economy in the coming years.
As of May 2015, the Infrastructure Cluster on Yolanda rehabilitation reported 66% completion of a total of 122 reconstruction and recovery projects of various kinds. More improvements in the infra sector are also expected to happen as more and more infra projects are either ongoing and expected to be completed soon or have been endorsed for funding and future implementation. Among the major ones are the ongoing Secondary National Roads Development Project (SNRDP), Samar Pacific Coastal Road (SPCR), and Road Infrastructure to Support Tourism. These projects, now in various stages of completion, are envisioned to boost our economy, especially in Samar Island. Recently endorsed projects by the Regional Development Council (RDC) VIII include: the Storm Surge Protection: Road Heightening and Tide Embankment for Tacloban-Palo-Tanauan, the proposed Tacloban Water Supply Distribution System that will address the water supply needs in resettlement areas, the Hilongos-Mahaplag and Jaro-Ormoc road projects, various port projects, infra projects in Baybay City (a booming city of the region), among others.
CRRP implementation bottlenecks are expected to be looked into as NEDA absorbs the functions of OPARR with the issuance of Memorandum Order No. 79. This could lead to a more integrated and convergent implementation of projects by implementing agencies, given the agency’s mandates as the Vice-Chair for Rehabilitation and Recovery under the National/Regional Disaster Risk Reduction and Management Council (RDRRMC) and the secretariat of the RDC.
In industry, continuing improvements in the business environment through various reforms in doing business such as the streamlining of the Business Permits and Licensing System (BPLS), investment promotion such as the Bahandi 2015, the enactment of the Competition Law and the Cabotage Law will have positive repercussions in our economy.
The continued presence of development partners from the international community until 2016 would continue to speed up our rehabilitation.
The implementation of the Accelerated and Sustainable Anti-Poverty (ASAP) Program of the government, side by side with the 4Ps, will help us in our poverty reduction goal.
The workshop series on Inclusive Growth jointly conducted by the RDC VIII, GIZ and the Eastern Visayas Chamber of Commerce and Industry will also propel positive actions as linkage in local and regional planning is enhanced. Through these workshops, local government units became more conscious of their role in the attainment of inclusive growth. Such consciousness is translated into the respective provincial action agendas prepared by the six provinces of the region.
The NEDA VIII-initiated Interagency Forum on Agriculture held in March 2015 prompted the conduct of a series of planning workshops for the various subsectors in agriculture and fishery. These will create a ripple effect that will ultimately help the agriculture sector regain momentum.
The Challenges
Given the economic situation now, the challenges we face as a region come aplenty. These include: putting our acts together for the smooth and effective implementation of the CRRP projects, formulation and implementation of rehabilitation projects after Ruby and Seniang, improving our budget utilization so that there will be no more underspending of public funds, intensifying our investment promotion, and a lot of how-tos such as: how to arrest the continuing decline of the agriculture and fishery sector, how to sustain gains in tourism, how to improve our governance, how to ensure that our local producers will not lose in the ASEAN Economic Community as the ASEAN Free Trade Agreement (AFTA) comes into full force in December 2015, and how to prepare the people for the eventual pull-out of the foreign benefactors on Yolanda.
Another big challenge for Eastern Visayas is to fully equip itself on Disaster Risk Reduction and Management/Climate Change Adaptation (DRRM/CCA) so that whatever economic gains and social improvements it will attain henceforth will not be threatened by another calamity.
