The economic status of Philippine regions Robust growth outside NCR

(Part 1)

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

I was not surprised when, on April 28, the Philippine Statistics Authority (PSA) issued a press release saying that in 2021— the post-pandemic recovery year — 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) grew at a lackluster 4.4%, which, incidentally, was already the level of growth it was registering even before the pandemic. I did not buy the explanation given by PSA that the slower growth of the NCR was due to it having the longest lockdowns among the regions. Metro Manila had already been losing its premier position for some time now. There were years immediately before the pan-demic when regions like Davao and even Bicol were growing at 8% while NCR was struggling to grow at 4%. I had already celebrated the fact that Metro Manila was being dethroned by other more dynamic regions. This is something very positive for national economic development. There is increasing decentralization of economic activities away from the center to the periphery.

From April 13 to May 5, I had the good fortune of being able to spend three weeks in the City of Pines attending a long live-in seminar for continuing education in the humanities. I take very seriously the dictum that the acquisition of skills and knowledge is never ending. During these days of study, rest, and recreation, I saw how in Baguio, starting on Holy Week and the weeks following, Filipinos from all over Luzon had taken very seriously the “revenge traveling” that was foretold. The crowds of domestic tourists that filled this “smart city” made it seem that the pandemic never happened. Kudos to the local government officials who knew how to keep a proper balance between health measures and the growth of the economy.

I was not surprised that the Cordillera Administrative Region (CAR) also grew at an above-average 7.5%, outshining Metro Manila. Domestic tourism is in full force. A visit to the Balatoc mine site of Benguet Corp. in Benguet, complete with a briefing from the managers about their performance for 2020 to 2021, also made me realize 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 initial anti-mining measures enforced in the first years of the outgoing Administration, is a booming industry with record prices of gold, copper, and nickel that are prevailing because of the strong world demand for minerals. A recent report in the Financial Times (April 28) described a serious shortage of these minerals in Europe, as the whole region tries to significantly reduce its dependence on fossil fuels. Nickel and copper, among other minerals, are indispensable in the manufacture of batteries, solar panels, and equipment for wind mills — not to mention all the digital devices required for Industrial Revolution 4.0 such as laptops, smart phones, iPads as well as cables for telecom and electric networks.

It is also notable that CAR saw household spending grow at an above-average rate. While Household Final Consumption Expenditures grew at a national average of 4.2%, consumption grew at almost double the rate of 8% in CAR. It is unfortunate, though, that despite talk about Baguio City becoming a smart city — even vying to become an ASEAN Creative Industry hub — its infrastructure still leaves a lot to be desired. You still see a lot of trucks delivering water to the households, despite the presence of Manila Water in the area. Electric “brownouts” are not infrequent. Whoever were the local government officials elected in Baguio and the surrounding localities must assign the highest priority to improve these public services. A fair share of the funds that will result from the Mandanas-Garcia ruling should be budgeted for the improvement of these services. The LGUs, working in tandem with the private business people in Baguio, should also proactively search for foreign direct investors from such countries as Japan, South Korea, Taiwan, and Spain who can invest in these public services that have been liberalized with the amendment of the Public Service Act. In fact, Acciona, a powerful Spanish conglomerate involved in infrastructure ownership and management all over the world, already announced its plan to invest as much as $12 billion in the Philippines for the development of infrastructure, especially water utilities.

Another region that grew 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 the NCR’s 4.4%.

Like Southern Luzon, this is not the first time that Central Luzon has outperformed Metro Manila in regional growth. It had been systematically growing faster than the NCR for at least the last five years before the pandemic, especially in the areas that are referred to as the Pampanga Triangle (Angeles, San Fernando, Clark-Subic). All the major real estate companies with a national reach have major projects in Central Luzon, such as Ayala Land and subsidiaries, Megaworld, Vista Land, Robinson Land, SMDC, Federal Land, etc.

The surrounding provinces of Tarlac, Bataan, and Bulacan are also attracting investments away from Metro Manila, especially as major infrastructure projects like the railway from Clark to Bulacan to Calamba, and finally all the way to Bicol, will be completed in the next few years with the assistance of the Japanese. The International Airport project of San Miguel Corp. in Bulacan will be a major game changer. Another game changer for Central Luzon will be the bridge that will be constructed connecting Cavite to Bataan, passing through the island of Corregidor. This will facilitate travel to Bataan province which has one of the highest Human Development Indices in the country.

It is also notable that there are two regions in Mindanao that grew faster than the national average. These are Region 13, i.e., Caraga**, and the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM). This fact demonstrates the enlightened policy under the Duterte Administration in which the bulk of infrastructure projects funded by the Government 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 2020-2021 period, the height of the pandemic. This component of the 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 rates of growth in Caraga and BARMM must have been mostly due to government capital expenditures in infrastructure. This is a trend that must be continued by the next Administration. Government money for public works must be spent on farm-to-market roads, irrigation systems, post-harvest facilities, and others that can improve the lot of the rural folks.

Infrastructure in urban areas like Metro Manila and Metro Cebu must be generally funded by such private corporations as San Miguel Corp., ICTSI, Megawide, First Metro Pacific and other conglomerates that have been very active in building airports, tollways, skyways, subways, etc. The next Administration must make a special effort in attracting Foreign Direct Investments to supplement the long-term capital that these domestic corporations have been investing in the Build, Build, Build program.

In the Visayas, it is also a good sign that there are regions that are growing faster than Central Visayas to which Metro Cebu belongs. Central Visayas grew at the below-average rate of 5.4% compared to Western Visayas that grew at 5.9%, and Eastern Visayas at 6%. This represents a healthy trend that resembles what is happening to the Metro Manila region. There is decreasing concentration in Metro Cebu and more investments in Western Visayas, especially in the Iloilo-Bacolod corridor which will be even more attractive for investors once the bridge connecting Iloilo to Guimaras to Bacolod is completed. This will unite into one megacity these two Ilonggo urban centers. In fact, Iloilo is already considered a more attractive site for new investments in real estate, the hospitality industry, and the BPO-IT sector than traffic-infested Metro Cebu. The higher growth rate in Eastern Visayas bodes well for a more equitable distribution of income because Samar and Leyte have always suffered from having some of the highest poverty incidences in the country. n

(To be continued.)

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

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

BERNARDO M. VILLEGAS has a Ph.D. in Economics from Harvard, is professor emeritus at the University of Asia and the Pacific, and a visiting professor at the IESE Business School in Barcelona, Spain. He was a member of the 1986 Constitutional Commission. bernardo.villegas@uap.asia