Second Quarter National Economic and Development Authority

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Second Quarter National Economic and Development Authority Powered By Docstoc

                       Quarterly Regional Economic Situationer 
                                  Eastern Visayas Region
                                   Second Quarter 2000


        Several factors influenced the performance of the economy this period. These
include: (a) the marked improvement in road network, (b) the recovery of the
agriculture sector, (c) stable prices of basic commodities, (d) increased lending by
commercial banks, (e) the decline of the peso against the dollar, (f) fuel price
increases, (g) the conflict in Mindanao, (h) government funds and (i) the drastic drop in
the price of copra.

        Production-wise, the regional economy performed better this quarter compared
to the same quarter of 1999. Profit-wise, however, it was better a year ago for those in
the agriculture and industry sectors. For the industry sector, the factors that affected
profit were the increases in the prices of imported inputs due to the peso depreciation
and the increases in fuel price, which increased the cost of operations. As for those in
the agriculture sector, the drastic decrease in copra price and the high cost of imported
inputs diminished profit.

      Inflation rate was contained at 4.1%. Employment rate stood at 91.0%, two-
percentage points lower compared to the second quarter of 1999.

       A.      Agricultural Production

       Total palay production stood at 105,807 metric tons, an increase of 2.7%
compared to the same quarter last year. All provinces posted production increases
compared to last year due to the absence of natural calamities and the slight increase
in area harvested. Southern Leyte posted the highest production increase of 25.5%
due to increase in irrigated areas contributed by privately constructed irrigation
systems. For farmers in the Biliran province, the facilitating factors also include
government assistance in terms of seeds, improvement in irrigation systems, soft
loans on farm equipment like hand tractors and rice threshers, and good peace and
order condition in their area. The production in the Leyte province posted an increase
of only one percent (1%) due to pest infestation (e.g. “Tungro”), lack of irrigation water
during the vegetative stage and heavy rains during the flowering stage.

     Copra production this quarter stood at 153,614 metric tons, an increase of
48.8% compared to the same quarter a year ago due to favorable weather and the

  Report prepared by NEDA through the Regional Statistical Coordination Committee with data obtained
from government agencies and RARE survey results; validated during the Roundtable Discussion on
August 30, 2000.

This report and back issues can be downloaded at:
effect of fertilization on farms. Compared to last year, the province of Biliran posted
the highest production increase of 131% followed by Samar at 90%. However, copra
price in the region dropped drastically, from as high as P14.50 per kilo, down to as low
as P5.50 per kilo. This was due to low demand for copra oil in the international
market, resulting from increased competition with palm oil and soy bean oil from other
countries. Farmers were affected by the situation. According to some copra traders in
Northern Samar, they too were affected, .i.e, suffered big losses from the abrupt
decrease in copra price. The loans they got from banks eased the situation.

      Sugarcane production was estimated at 273,646 metric tons, an increase of
62.9% compared to last year. The significant contribution came from Ormoc City. In
Kananga, Leyte producers reported low cane yield.

        Production of abaca fiber increased by 3.7%, from 7,344 metric tons a year ago
to 7,615 metric tons this quarter. Some of these fibers were sold to Bicol, Mindanao
and to foreign countries. In Taft, Eastern Samar, there was an initial harvest of the
pilot 2-hectare abaca plantation from the total 30-hectare plantation.

       Production of sweet potato (camote) regionwide was recorded at 27,058 metric
tons or an increase of 8.7% compared to last year. Most of these were sold in the
domestic market. Some were processed into sweet potato flour which was exported
to South Korea.

        Total fish production stood at 18,972 metric tons, a 4.3% increment compared
to last year. Fifty-two percent (52%) of this quarter’s production came from municipal
waters, i.e. within 15 kilometers from the shoreline. Forty-three percent (43%) were
commercial fish catch (i.e., beyond 15 kilometers). Commercial fish catch increased
by 6.0% compared to last year due to favorable weather, reduced illegal fishing in
Leyte due to Bantay Dagat, seasonal abundance in Southern Leyte and increased
fishing trips in Eastern Samar and Western Samar. Municipal fish catch increased by
3.1% compared to last year due to the municipal ordinance in Eastern Samar against
illegal fishing, Bantay Dagat in Leyte and more fishing trips in Western Samar.
Northern Samar fishers reported less fish catch due to the repair of fishing gears.

       Despite high demand for chicken meat during the period, chicken inventory was
higher by 3.4% compared to last year due to the efficient chick hatchery by producers
who possessed good quality chicken eggs. Some of the chicks produced here were
sold to Cebu City. Inventory of cattle, hog and goat declined compared to last year.
The factors that affected production were the high cost of feeds and imported raw
material inputs. Up to now, the region depends on Davao for its supply of swine. The
region is also getting cattle from Mindanao. Meanwhile, big producers of chicken cut
back on production to give way to the minimum access volume requirement under the

B.     Power

        Power sold to industries, cooperatives and utilities in Region 8 totaled to
169,403 MWHs, a decline of 5.4% compared to the same quarter last year. The
decrease is due to the fact that some companies now have their own generating units.
However, revenue stood at P443 million, an increase of 7.1% compared to last year.
The increase can be attributed to minimum users, i.e., consumers having to pay a
certain minimum without consuming their minimum energy contract.
       Frequency of power failure was highest in areas covered by Southern Leyte
Cooperative and LEYECO V with 186 and 118 incidents of interruptions, respectively.
The reason is that these are relatively wider coverage areas and are located far from
the power source, i.e. NPC. The lowest incidence of power interruptions was
experienced in areas covered by DORELCO with only 29 interruptions followed by
NORSAMELCO with 52 interruptions. In terms of duration, the lowest was recorded in
LEYECO IV with a combined total of only 18 hours followed by LEYECO II with 29
hours. The highest duration was recorded in Eastern Samar Cooperative with a
combined total of 188 hours.

       Compared to last year, more cooperatives recorded a decrease in frequency
and duration of power interruptions. It was also reported that some power
interruptions are due to existing rehabilitation/replacement of wooden poles.

C.    Investments

        Despite the fall of the peso, business confidence was not shaken evidenced by
the significant increase in the number of business registration and the value of DTI-
directly impacted investments. Among the positive factors were the availability of
loans from banks, stable lending rates and granting of agricultural loans in support to
the Food Security Program of the present administration.

      The province of Samar recorded the highest increase in the value of DTI-
impacted investments. It reported an increase of 250%, from P29.2 million a year
ago to P50.7 million this quarter. Likewise, Biliran reported a significant increase of
214.7%, from P1.5 million a year ago to P4.7 this quarter.

        Tacloban City reported ten (10) new businesses with capitalization of at least
P500,000 and 232 businesses with capitalization below P500,000. Among the big
businesses were: Leyte JAL Corporation, Tacloban ATO Realty Dev’t Corporation,
Air Material Wing Savings and Loan Association, FILCAB and Philip Moris Phils.,
Inc. On the government side, there has been a massive implementation of
infrastructure projects specifically roads, bridges, pavements and pathways in the
different barangays of the city.

     Ormoc City reported the opening of 26 new businesses with an estimated
number of 60 employees.

        For the whole province of Leyte, which includes Tacloban City and Ormoc
City, there were 955 new businesses cited. Of this number, 12% has capitalization
of half-million pesos and above. Most of the relatively bigger businesses reported
are located in the two cities.

       The province of Southern Leyte reported the opening of 120 new businesses,
of which 17 had capitalization above P500,000. These were estimated to employ
385 people. The relatively bigger businesses that opened include First Interstate
Bank, Mercury Drug branch and construction firms.

       Northern Samar province reported the opening of 92 establishments, two (2)
of which had capitalization of P500,000 and up. This opened about 247 jobs.

      In Eastern Samar, 73 new businesses were reported to have opened with an
estimate of 396 employees. The bigger ones include M.R.G Construction and
Mitsumi Pearl, Inc.


        The Department of Public Works and Highways reported a 56.1% increase in
public construction expenditure, from P272.9 million in Q2-1999 to P426 million this
quarter. Significant expenditures were recorded in the Biliran District Office (P96.3
million), followed by Leyte III (P46.2 million) and Northern Samar (P36.2 million).
Expenditure in district offices consisted of projects below P15 million. The Regional
Office, which implements projects valued at P15 million and above, disbursed a total
of P107.5 million this quarter, an increase of 177.6% compared to last year. Projects
implemented by the Regional Office included foreign-assisted ones.

       With regard to private construction, the decline in copra price and the low
purchasing power of ordinary households affected the demand for construction
materials. Private contractors were also affected by delayed payment by government
for completed contracts. On the positive side, the favorable weather facilitated the
purchases of materials by construction firms. Also, new investments in small and
medium enterprises kept the construction sector going. Compared to last year,
however, the real property sector performed less favorably this period compared to
last year, evidenced by many properties for sale with no takers.

       A positive development in the real property sector was the implementation by
PAG-IBIG effective this quarter, of the old interest rates, i.e, 9%, 12% and 16%
depending on loan value, compared to the fixed 16% rate regardless of loan amount.
The effect of the policy was evidenced by the slight increase during the past few
months, in the number of residential buildings constructed through PAG-IBIG
financing, from 66 units in the first quarter of 2000 to 82 units this quarter. However,
this quarter’s production is still lower compared to last year’s.

D.     Exports/Manufacturing

       Total exports receipts recorded with the Bureau of Customs was estimated at
US$ 77.1 million, an increase of 52.8% compared to the second quarter last year. The
PHILPHOS Corporation contributed significantly to the increase. Its exports receipts
this period increased by 37% compared to the same quarter last year due to stronger
demand in the ASEAN market. As the firm increased its exposure to the international
market, it’s sales in the domestic market increased by only 3.2% compared to last

       The Go-Sung Foods continued to manufacture sweet potato flour, which it
exported to South Korea. However, it reported low production due to lack of raw
materials (sweet potato) and the increase in fuel price, which increased the cost of
operating the machines. The crop is sensitive to rain, which caused the delay in
       The HIDECO Sugar Milling Company continued to produce molasses, but
these were sold only in the local market. Molasses is one of the region’s export
products. The company’s milled sugar, both raw (80,529 kg) and refined (113,699 kg),
was also sold in the local market.

       The New Leyte Edible Oil continued to manufacture and export copra oil and
copra cake.

       Soft drink manufacturers had lower production as they felt the effect of the
increasing cost of the dollar since some raw materials are imported. Also, the decline
in copra price diminished the buying capacity of the people.

E.     Tourism

        This quarter’s preliminary report on tourist arrivals (9% of tourism-oriented
establishments have not yet submitted reports) showed a decline particularly in foreign
tourist arrival compared to last year. This is largely explained by the fact that the
second quarter of 1999 was marked by a special event, the international “Elf Authentic
Adventure” hosted by Region 8 which caused an influx of visitors. The conflict in
Mindanao also had an indirect effect on tourism. However, hotels and accommodation
establishments continued to enjoy high occupancy rates this quarter because of
promotional efforts of the government and the private sector. These promotions
include the Balikbayan Program, the Pintados/Kasadyaan Festival of Festivals in Leyte
and the promotion of tour-packages in the European Market. Hotels that house
foreign technical experts of on-going projects in Region 8 also enjoyed high occupancy

       Southern Leyte already has a website. This move, coupled with the write-ups of
foreign correspondents about the world class dive sites in the province and the oral
testimonies of those who had come to Southern Leyte, also helped bring in tourists.

        Lately, the Guiuan Tourism Council was re-organized to promote the tourist
attractions in the Municipality of Guiuan in Eastern Samar.

      A negative factor on the tourism industry was the absence again of a flight from
Cebu City to Tacloban City toward the end of the quarter.

II.    Prices

       Despite the oil price increases and the depreciation of the peso, prices of basic
commodities did not escalate. Inflation rate was contained at 4.1%. Among the
commodity groups, services posted the highest inflation rate at 10% attributed
primarily to the significant increase in tuition fees.

        Although prices did not increase much compared to last year, key informants
feel that the purchasing power of the peso has lowered.

III.   Practical Indicators (Service Sector Indicators)

       Telecommunications Service

      There is a growing awareness of the importance of telecommunications for
personal and business transactions. There were 139,775 subscribed landlines
recorded during the second quarter, an increase of 113.5% compared to the same
quarter last year. The number of subscribed cellular mobile phones stood at 26,319
an increase of 17.3% compared to the same quarter last year. The value added
services for cell phone users (e.g. text messaging) contribute to the steady increase in
subscription these months. The number of cable TV subscribers increased in some
provinces due to additional cable channel programs.

       There has been an observable proliferation of Internet Café in various parts of
the region. Also this year, several Internet Service Providers entered the business.
These include the PHILWORLD and ASI-LINK in Tacloban City, the ICTUS in
Catarman, Northern Samar and PLDT in Calbayog City.

     Meanwhile, the Globe telephone company has put up a cellsite in Northern

       Land Transport Service

        Total number of registered motor vehicles during the second quarter stood at
19,525 units, an increase of 7.3% compared to the same quarter last year. The
increase came from renewal rather than new registration. The increases in renewal
registrants was due to extensive saturation drives/enforcement activities and public
information dissemination concerning registration of vehicles.

       Due to the continued improvement of major road network, air-conditioned light
vehicles, e.g. megataxis, continue to gain popularity as a mode of transport for long
distance travels within Region 8. Operators of non-airconditioned vehicles have started
to experience this threat. Meanwhile, operators of inter-regional buses reported less
passenger traffic this period.

       Sea Transport Service

     This quarter’s total volume of sea passengers regionwide increased by 7.4%
compared to Q2-1999.

        The Tacloban Port reported a decline in passenger volume by 29.9% due to
non-operation of the Tacloban Princess plying the Tacloban-Manila route. Likewise,
trips of the MV Guadalupe plying the Tacloban-Cebu route was very irregular.

       The San Isidro Ferry Terminal, a municipal port, registered a decrease of
passenger volume by 4.2% compared to last year as it stopped operation starting
June 18. The reason was the dry-docking of the lone ferry, the Maharlika I due to
engine problems. The needed parts/machine has still to be procured from Japan.
However, commuters were not very much affected because of the presence of the
private port of Alpha (“Dapdap Ferry Terminal”) and the Allen Ferry Terminal, both in
Allen, Northern Samar which served the needs for ferry services. The Allen Ferry
Terminal registered a 32.8% increase in passenger volume during this quarter
compared to Q2-1999.

       The improvement in road network had a direct impact on people’s transport
preferences. In Guiuan and nearby areas, those who used to transport their goods by
boat now prefer to go to Tacloban by land, hence the decline in passengers by 12.8%.
Those in Isabel, Leyte and nearby towns who used to go to Manila via the Ormoc Port
now go via the Palompon Port because it is easier and closer for them to go via this
route. Hence, the significant increase in passenger volume this quarter by 27%
compared to the second quarter last year.

Air Transport Service

      The combined number of airline passengers in the Region’s three airports
stood at 102,096 passengers, a decrease of 12% compared to Q2-1999. The
decrease in foreign tourist arrivals partly explains the decrease.

       The operation of the different airline companies remained normal, except for
the Asian Spirit, which stopped operating the Tacloban-Cebu-Tacloban route on June


       Banks are now recovering from the financial crisis, evidenced by the increase in
their volume of loans granted. To recall, banks have been very selective in their
lending during the past several quarters.

       Most Land Bank branches reported good deposit standing and high collection
rate on loans. Some of the big commercial banks and rural banks shared the same
experience. However, some banks felt the effect of foreign exchange fluctuations and
believe that business slowed down. Lending cooperatives in the rural areas reported
low collection rate and high volume of lending due to fiestas, school opening and

       National government agencies were in a tight financial condition this period
characterized by delayed and/or insufficient releases of funds for government


        The holding of the Agro-Trade Fair and the Pintados Festivals helped promote
trade in the region.

        Food traders reported a favorable performance this period.

II.        Development Outlook

Positive Prospects:

       Cityhood of Maasin
       Leyte Gulf Landings
       Provision of solar electricity under the MSIP Project in Southern Leyte for areas
        which could not be energized by SOLECO in the next 10 to 20 years.
       Leyte San Jose Ice Plant and Marketing Corporation soon in Calbayog City
       Abaca plantation project in Taft, Eastern Samar will generate employment in the
        area and promises development for the whole abaca industry
       Giporlos Coco Mill (village level) in Eastern Samar this year
       BAHANDI 2000 at SM Mega Mall
       Kahura-an 2000 Agri-Trade Fair on October 18-22 at the People’s Center
       Regional Tourism Councils Assembly and Fairs to be hosted by Calbayog City
        from October 13-15
       Hotel D’Angelo, soon to open in Tacloban City
       Intensive tourism promotion by the private sector in the European Market
       More liberalized credit program of government through EO 138

Possible Constraints:

        Fuel price increases
        Depreciation of the peso
        Low copra price
        Financial difficulty of the government sector
        Production of synthetic “sinamay” in China and Korea which is 50% cheaper
         than abaca; plantation in hundreds of hectares of abaca in Indonesia and
         Malaysia with seedlings allegedly smuggled from the Philippines
        Non-milling months for sugar.

III.       Policy Concerns/Recommendations

National Concerns:

1.         Mindanao conflict
2.         Stability of the peso
3.         Escalating price of car spare parts and crude oil
4.         Absence of flight in the Tacloban-Cebu route
5.         Payment by government to private contractors: This should be done
           immediately after completion of project

Local Concerns:

1. Measures to stabilize copra price and improve coconut productivity
      Maximize use of coconut areas, i.e., diversification, livestock
      Development of downstream coconut products at the local level

2. Measures to encourage tourism
      building first class entertainment facilities
      maintaining clean and green environment
      counteracting the misperception regarding the peace and order situation in
       Region 8
      qualified promotion of Region 8 to the rest of the country and the world
      preparing the people in Region 8 (skills, attitude) for future expansion of the
       tourism industry

3. Support to sugar industry

      Reduce importation of sugar/eliminate smuggling
      Soft loans to sugar farmers
      Defer CARP for sugar farmers

4. Improvement of irrigation systems to expand rice production areas

5. Inadequate supply of good quality chicken eggs (for hatchery business)

6. Gambling incidents and drug addiction in some parts of Region 8

7. Traffic in Tacloban City


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