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Last Updated:
11/10/98 08:17:30 AM

(MANILA TIME)

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The Eastern Visayas Economy
As of 2nd Quarter, 1998
1

Sections: [Agricultural Production] [Tourism] [Other Sectors] [Investments] [Prices] [Practical Indicators] [Concerns]

The synchronized national and local elections, centennial celebrations, local festivities, the El Niņo and the currency crisis all contributed to the general weakening of the regional economy.

Production of major crops declined due to the El Niņo. The airline and banking industries were in difficulty primarily de to the currency crisis. However, positive performances in the tourism and telecommunications sectors somehow minimized the adverse impact of these events.

An additional three establishments closed in the last three months while some 43 establishments resorted to retrenchment. Total job losses for the last quarter is estimated to be 465, 293 of which were directly attributed to the peso's depreciation. As of July last year, employment rate was pegged at 91.6%. This is expected to drastically decline as creation of new jobs by new investments failed to offset lost jobs.

Agricultural Production

Total palay area harvested declined by 21% mainly because of the lack of rain. Correspondingly, total production dropped by 34%. In irrigated areas, production dropped by 24% while production in rain-fed areas plummeted by as much as 50%.

The province of Leyte (the region's biggest rice producer with the highest percentage of irrigated land) experienced a 25% drop in production compared to the same quarter in 1997. Leyte accounts for more than 50% of total rice production in the region. Biliran and Southern Leyte, the next largest rice producers, experienced 22% and 34% drop in production levels respectively. This drop is much more dramatic in the rain-fed areas.

The farmers had a rough time as prices of farm inputs climbed, capital became costly and scarce, and production plummeted. The consumers however were spared of price increases as an adequate stock of rice was maintained by the National Food Administration (NFA).

Coconut production also fell by 4% as immature nuts fell off before harvesting due to the El Niņo. Most coconut farmers however shifted their concentration to abaca, which despite a low production, commanded a high price due to the dollar appreciation and the significant improvement of fiber quality because of the shorter drying time. Northern Samar actually increased abaca production and export.

The period was also unfavorable to sugar producers as production was low and sugar prices remained dampened.

Excluding chicken, livestock production also declined because of the decreasing available grazing area and lack of water supply. Lack of nutrition of livestock resulted in lower conception and higher mortality rates. Hog inventory is expected to continue its decline as feeds become more scarce and expensive due to the decline in palay and corn production.

Chicken inventory however posted a 35% increase as survival, growth and fertility rates improved as the El Niņo weather proved beneficial to chickens. It was also noted that the demand for chicken meat was high bringing up prices. Backyard poultry producers enjoyed a good share of the market.

National estimates place the entire agricultural sector of the country shrank by 7% because of the El Niņo.

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Tourism

The tourism industry continue to live up to expectations by continuously performing better every quarter. The elections significantly beefed up domestic tourism as several national candidates and their supporters campaigned all over the region. The month of May registered the highest number of convention-related events since the start of the year. Domestic tourist arrival increased by 13.8%.

Foreign tourist arrival however declined largely due to the Asian crisis. This was compounded by the struggles of the country's flag carrier Philippine Airlines (PAL) to stay afloat that resulted to irregular and fewer flights.

Among accommodation facilities, tourist inns still enjoy healthy profits and good market share as they continue to offer low prices with reasonably good facilities. Average occupancy rate in said establishments was 50% for the last quarter, up from 40% of the previous quarter. Standard hotels recorded a 19% occupancy rate.

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Other Sectors

Power demand of households and businesses were high mainly due to election-related activities and the numerous fiestas held during the period. Maximum power demand (or peak-load) was at 130.5 megawatts resulting to an increase in sales for the National Power Corporation (NPC). Industrial power consumption however was low as PASAR and PHILPHOS (the two biggest industrial establishments in the region) scheduled their preventive maintenance during the period. This drop in industrial consumption pegged the total energy growth sales for the region at only one percent.

The National Power Corporation registered 158 incidents of power outages throughout the region in the past three months. The electric cooperatives recorded 484 separate incidents of power failures with LEYECO II (servicing the regional capital of Tacloban City) recording the highest number of interruptions at 97. Believe it or not, these statistics are actually an improvement over the same same period last year when 563 incidents of power outages were recorded in the first quarter of 1997 and a whopping 756 in the 2nd quarter of the same year. NEDA attributes this "improvement" to the "upgrading" of power lines. What is not mentioned in this report is that despite this clearly lousy service by the NPC and the electric cooperatives, the region is still saddled by one of the highest electric power rates in the country.

Mineral production and mining in the region continues to be in a standstill as mining companies grapple with the increasing environmental awareness of the people. Heritage Mining Corporation in Eastern Samar, a producer of metallurgical chromite and one of several mining companies that have valid mining concessions in Samar Island is still waiting its Environmental Clearance Certificate (ECC) from the Department of Environment and Natural Resources (DENR). NEDA expects the ECC to be released soon. This ECC however, if it is ever released, is expected to be strongly opposed by the people of Samar Island who have seen and suffered from the degradation of their natural resource base by several unscrupulous mining and logging firms in the 1970's and 1980's. Pheschem, a producer of hydrated lime and limestone, continues to operate in Palompon, Leyte.

The DENR has newly approved three mineral production sharing agreements: Alberta Resources Development Corporation which will mine gold, copper and silver in Liloan, Southern Leyte; Alcorn Petroleum and Minerals Corporation to mine limestone in Isabel, Merida and Palompon, Leyte; and Poreschore and Company, Inc. which will mine limestone in Matalom, Maasin, Macrohon and Malitbog in Southern Leyte. Said companies are not expected to start mining operations for the next two years.

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Investments

Total value of DTI (Department of Trade and Industry)-directly impacted investments declined by 26.8% compared to last year. This is attributed to the high cost of capital and the political uncertainties accompanying the elections. Limited loans were available to small-scale businesses only a fraction of which were actually released.

Small and medium-scale businesses were mostly left to fend for themselves. Despite the worsening economic climate and apparent lack of support from the government and financial institutions, Southern Leyte managed to put up 57 enterprises generating some 154 new jobs in the area. In Leyte, six establishments were put up employing some 20 people.

The construction sector, betting on increased spending by politicians during the election period, suffered a severe blow as those contracted by the national government agencies were not paid for completed projects due to budgetary cuts and the increasing scarcity of funds. Although the total number of affected construction outfits is not known, NEDA believes that this non-payment, coupled by the meteoric rise of bank interest rates, have pushed many outfits into bankruptcy.

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Prices

As predicted, prices significantly rose during this period. General price levels rose by 7.9% compared to the same period last year.

Lack of supply of agricultural products due to the weather compounded by the artificial demand due to the increase of money in circulation brought about by the elections jacked up prices of both essential and non-essential commodities in the region. Fruits and vegetables, the prices of which are already higher compared to other regions in the country, shot up by 19% in May compared to last year. Here are some of the more significant price increases recorded for the period (as recorded by NEDA):

Fish up 10 to 15%
Pork up 10%
Chicken P67/k to P80/k
Rice P7.00-8.00/k to P7.43 to 10.42/k
Construction materials up 15%

It is interesting to note that most people view these figures as very conservative. Immediately after elections, housewives doing their regular marketing were shocked to find out that a kilo of onions, which just the day before were selling at P35-45 per kilo, were being peddled at more than P100 per kilo -- a more than 100 percent increase! The bloat in price was not limited to onions however. Almost all commodities were up with essential commodities registering the highest increases. The situation improved somewhat over time but current prices have not returned, or even approximate, that which prevailed before the elections.

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Practical Indicators (Service Sector Indicators)

Telecommunications Service

Due to the expansion programs of two of the bigger telecommunication companies in the country, the number of installed telephone lines in the whole region more than tripled compared to last year. As of June, some 102,852 lines were already installed with more waiting in the pipeline.

Commensurate to this, the number of subscribed land lines more than doubled compared to the same period last year totaling some 55,608 most of which are in Leyte province. This is reflective of the volume of business transactions and the economic condition in the area. Lately, there has been a significant increase in the demand for telephone lines in Samar. From 2,321 lines in the second quarter of last year, there are now 13,650 subscribed lines in Samar and growing. It is interesting to note though that the number of subscribers in Northern Samar actually decreased by 22%. NEDA attributes this to disconnection traced to the "tight budget of families coupled with poor services by some local exchange carriers." In Biliran, some 2,300 installed lines have yet to be subscribed.

Demand for cellular phones continued to grow especially in the city and town centers of Tacloban, Ormoc, Catbalogan and Calbayog. As of June, there were 15,681 subscribed cellular phone lines in these areas compared to 14,132 in the previous quarter.

By the end of the quarter, there were 59 cable TV operators regionwide with a combined total of 19,553 subscribers. Leyte topped the subscription list with 7,529 followed by Samar with 5,415 and Northern Samar with 4,935. NEDA sees this as an indication of "the amount of disposable income and quality of life of the people."

It should be noted that the installed lines, especially by Islacom, were of laudable quality being optic-fiber based lines. The company painstakingly laid out an optic-fiber line from Catbalogan, Samar to Tacloban City, Leyte. Furthermore, telephone services by the two biggest providers (Bayantel and Islacom) could be considered above-average compared to the chaotic jumble of interconnections in Metro Manila.

bullet1d.gif (167 bytes) Also, Internet Service Providers continued to enjoy brisk business at least in Leyte. There are at least three major ISPs in the region (Moscom, Fapenet and Weblink). Internet cafes have cropped up like mushrooms in the cities of Tacloban and Ormoc. More and more households are getting online. Also, awareness of the Web is constantly and dramatically increasing among the populace.

Air Transport Service

As with the rest of the country, the industry remained in crisis. By the end of June, only Tacloban City remained to have regular flights to and from Manila. And these flights were further reduced in frequency.

Two regular flights by Asian Spirit to Catarman and Calbayog from Manila were scrapped. On June 5, PAL stopped flights to Catarman and Calbayog. Samareņos found a hard time travelling to Luzon as they were left with the choice of either a land trip via Allen or San Isidro in Northern Samar or catch one of the regular flights in Tacloban City.

Despite the setback of the airline industry in the region, passenger volume to and from Tacloban actually increased by 4.8% during the period.

Sea Transport Service

Perhaps for the first time in many months, sea passenger volume experienced an increase of a conservative two percent. This is attributed to the troubles experienced by the airline and inter-provincial transport industries (see below).

The Hilongos Port, a transshipment point to Cebu City, reported a 139% increase in passenger volume. Ormoc City, the region's main link to Cebu, also posted significant volume increases especially after the regular flights from Tacloban to Cebu were scrapped. Liloan (a major transshipment point to Mindanao) had a 14% decrease in volume of passengers. Passenger vessels plying the Manila-Tacloban route, except for one, continued to shy off citing unprofitability of the route. A pending pullout of the remaining passenger vessel servicing this route was staved off.

There were no details presented by NEDA regarding sea-borne cargo volume in the region.

Tacloban continues to lose its popularity as the port of choice for inter-island shipping in the country. This may be attributed to the narrow and shallow approach to the Tacloban port (ships have to pass the San Juanico strait described as one of the narrowest straits in the world). Because of these limitations, ships visiting the port have been restricted to small tonnage vessels visiting the port. Although there are no official records available, there is an increasing perception that the economy of the region (at least in the more "developed" and industrialized areas of Leyte Island which comprise a large slice of the regional economy) is more and more linked to Cebu City because of its accessibility and proximity. If true, this fact could have significant impact on economic development planning not only in the the region, but moreso in the national level.

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Concerns

NEDA lists the following as needing immediate attention:

  • Fast tracking implementation of projects to improve power supply reliability; fast tracking of house bills affecting power pricing in Region 8.
  • Measures to reduce interest rates of credit
  • Oil price regulations
  • Review of GATT measures affecting livestock and poultry industry
  • More strict enforcement of laws against graft and corruption in government.
  • Preparations for the La Niņa.
  • More incentives for the business sector (e.g. tax holidays)
  • Resolution of unclear policies in providing electric service to commercial/industrial users
  • Delayed or non-payment by government of completed construction projects to the private sector.

1Condensed from the official report of the Regional VIII office of the National Economic and Development Authority. Lines in Serif (such as this line) are comments by the author. They are not part of the official report and are included mainly to serve as points of interest to which the reader is enjoined to further look into. The author maintains however that these comments are based on FACTS as far as the limited consciousness of this homo sapien can digest and understand.

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