Tag Archives: construction materials

Bullish sentiments Downsouth —

By Hernani De Leon
BusinessWorld Online
November 16, 2010

DAVAO CITY — Feedback from regions in Mindanao indicates a bullish sentiment in past months. New shops and offices are opening and property developers are aggressive in marketing campaigns. These are positive signs after a slight economic slowdown that started in 2008 and a power crisis that crippled the island’s industrial areas in the first semester.

Expansion moves, however, are anticipatory and not hinged on higher demand. Power consumption, a solid indicator of growth, is short of projection. A couple of years ago, it was estimated that power demand this year will outstrip supply, currently at 1,300 megawatts (MW).

Latest power demand figures from the National Grid Corporation of the Philippines show roughly 1,200 MW at peak level. Lower-than-expected demand could be traced to the mining industry’s delayed takeoff. Capacity utilization of steel plants in Iligan City, estimated to require at least 100 MW, apparently did not meet expectations.

There are no surges in prices of construction materials, another proof that housing demand is not as high yet, even as some sectors complain of lower revenues given the strengthening of the peso’s value against the US dollar. While wage adjustments took effect three months ago, proceeds from overseas worker remittance went significantly lower, taking its toll on consumption during the Yuletide season.

Mindanao’s exporters, meanwhile, are in a crisis. The banana industry, which posts as high as $700 million in export receipts annually, is anticipating losses to reach over a billion pesos. A volatile exchange rate will have a significant effect on annual supply contracts. Take note that an annualized P1 loss in foreign exchange rate will automatically mean P700 million in losses from the industry this year.

That could mean less food on the table of plantation worker families this Christmas. At four dependents per worker, the crisis can affect half-a-million individuals in Davao Region as well as thousands in nearby south-central Mindanao which host some plantations.

Local government units, not only the regional offices of the Department of Trade and Industry, should also be concerned with substandard products sold on sidewalks and in retail establishments. Often, only Trade and Industry personnel are looking into this issue and there were cases when erring entrepreneurs would even drop names of their city hall protectors.

Cheap substandard products could bring disaster during the holidays. Consumers who lack the technical background sometimes decide based on deceptive product packaging. For electrical appliances or gadgets, one should be wary of the wire’s thickness since a thin wire gauge could cause fire when the line is overloaded, or when the appliance is left operating overnight.

Checking if the wire is safe enough for hours of use is easy. Simply feel it after a few hours while the appliance or gadget is operating.

If it is hot, better unplug the appliance immediately, or take it to a technician to have the wire replaced. That would cost less than a hundred pesos, a small amount to keep your home safe.

Believing there is no other way but up, private sector leaders are driving the economy in the last few months. The same entrepreneurs, however, are at a loss justifying high expectations. Many admit the administration’s Mindanao agenda is so far vague, with rhetoric on achieving peace and security and speeding up economic development as priorities in the island.

One challenge is to harness local government institutions in achieving economic objectives, which has yet to get attention from national leaders. The Mindanao Development Authority (MinDA) was created by the previous administration early this year but it has yet to harmonize local government policies with national objectives and integrate regional efforts into a strategy that could bring in results.

As previously pointed out in this column, MinDA could be another redundant unit — an excess baggage, if you may — in the bureaucracy that the administration wants streamlined. A recent report that the authority’s chairman will coordinate with regional development councils to integrate plans only means the agency is redundant.

Integrating development plans is a function of the National Economic and Development Authority (NEDA). Another agency doing the same work implies inefficiency unless that agency takes the role of a bigger regional unit of NEDA. Its chief goal is to have a NEDA undersecretary for Mindanao.

That should have been the setup for its predecessor, the Mindanao Economic Development Council, but politicians in Congress passed a law creating MinDA instead. Despite limitations, MinDA should perform well as the country’s counterpart BIMP-EAGA (Brunei, Indonesia, Malaysia, the Philippines-East ASEAN Growth Area.

It should also be an effective overseer of small projects related to the peace process. Ideally, NEDA should confine itself into development planning and should turn over small projects to MinDA.