This weeks economic news is the record setting US$ 10.1B Foreign Direct Investment (FDI) figure gained in 2017.
It has beaten expectations and begs deeper analysis. After all, the more than 20% increase compared to the US$8B generated in 2016 flies in the face of international media’s criticism of the current government, and is a wrench in the works of local opposition efforts to paint the government’s new economic policies as a failure.
Politics aside, the lower unemployment figures (6.3%), and the sustained high GDP rates (6-6.9%)and investment grade ratings (BBB- BBB+) all point to the success of the government’s Dutertenomics and particularly, its cornerstone Build Build Build program and the TRAIN Law meant to fix the tax system and provide the financial resources to drive accelerated infrastructure while at the same time, temper borrowing.
This strategy reflects the efforts of Malaysia and Thailand in the early 2000s, pushing infrastructure to drive local economic success. Their infrastructure spending boosted the local economy and pushed growth, making it inclusive and robust, generating jobs and investments that enabled it to cut poverty down to single figures and in turn, raise their standard of living.
Thus the increased public spending on infrastructure in the Davao region was felt, given that in 2017, P139.6 billion or 36.5 percent of the public works total budget for the proposed infrastructure programs went to the island. Expecting roughly the same this year, the government has announced a packagae of big ticket infra for the island to turn back decades of unfunded projects and essential neglect.
While nice numbers don’t lie, these may not exactly paint a full picture of the local economy. A better question is: is this growth felt?
Lack of skilled workers
For one, the lower unemployment figures sync in with the reality faced by many small businesses that skilled workers are slowly becoming scarce.
The build build build program that increased public roads has spurred a similar rush to build private sector projects near these new or expanded thoroughfares. To illustrate, the new bypass road from Bunawan to Waan and Maa alone opens up these areas which were once feared enclaves of insurgents.
With this, the announcement of several mixed use development projects such as the Azuela Cove in Lanang and a similar protect in Matina and the Milan-Buhangin area will add value to local properties, giving a windfall for many landowners and increased demand for both skilled and lesser skilled workers.
Higher property prices
Which bring us to the next point. Property prices have been increasing at 15% since 2016, with some residential properties in the Ecoland Matina area already hitting more than 20,000 per square meter, double that of 2010 prices.
Demand for office spaces has also gone up, judging from a popular shared office space in Lanang and a similar one in Matina has run out of slots for short term tenants. Another company interested in setting up retail operations finds it difficult to find suitable areas to build warehouses.
Inflation per se is not bad, which is why it is expressed in terms of a rate and managed as a band that should not be breached. To its credit, despite increased demand, the government’s economic managers have maintained this within the 2-5% level within 2017.
Of course, price increase in certain commodities may have been felt, but these were apparent since the middle of 2017, and could not be attributable to any new tax measures such as the TRAIN which came into effect only in January 2018. Local fuel price increases reflect international oil prices, which for the most part have pushed inflation. The higher prices of commodities may also reflect increased spending for these, as the local stocks may be unable to meet demand.
Correlating this with lower unemployment, it may mean that people have more money in their hands and are spending more, outstripping the capacity of suppliers to provide the commodities they demand. But as with all things about inflation, it goes up then down and up again, just like it did in 2011, then again in 2014, when suppliers of goods like food rebound and regain future harvests that drive prices down.
Connectivity between Davao and major cities has also increased in the last year. Apart from the Davao-Bitung sea link, the past year we witnessed new flights between Davao and Tacoban, Tagbilaran, Dumaguete and a revival of the Davao-Kalibo and Davao-Puerto Princesa flights along with an increase in frequencies between our city and Zamboanga and Cagayan de Oro, Iloilo, Bacolod and Cebu. New flights include direct air service to Siargao and El Nido.
Recent announcements by Qatar airways last week point to the possibility of a Doha-Davao flight, while Air Asia may yet add another regional destination to the Davao-Kuala Lumpur jet service. Last years chartered flights from Xiamen may open the door to a return of the Davao-Hongkong flights.
Curiously, these new linkages indicate that more people are flying and that the increased regional growth rates are reflected in the increased number of times people travel.
Thus, the local economy continues to perform creditably, with growth figures consistent with previous performance. This is the reason why economic forecasts remain just as robust, and credit ratings have not changed. If there is one thing that changed, it is the public’s capacity to read, understand and digest economic news in a manner we have not seen before.
Google is abuzz with references on economic terms. People are using the internet more to learn about these things, as each day brings news about economic facts and figures they are beginning to rediscover.
The next year will see equal or better amounts in public spending for Mindanao, what with the initial implementation of the TRAIN generating even more revenue to be used for the completion of many projects and the commencement of others. These, we all hope, will continue to push our growth.