Marawi rehab: The economic side

Last week, President Duterte unequivocally declared that Marawi City is liberated. As expected, critics and advocates of that all-out offensive had their thoughts known. Advocates, as usual, made it clear, that with such condition, the government’s approach was entirely right and appropriate. Critics, on the other hand, were harping about the military’s lapses resulting to deaths of civilians and destructions of infrastructures and homes.

In all these debates, a British philosopher, Bertrand Russell, may have something to say.  Having witnessed both World War I and II, he once said, “War does not determine who is right – only who is left.” Indeed, in any war or fight, when the smoke clears, the one left standing is the victor. That’s the only thing certain. More often, it doesn’t matter anymore as to who is right or wrong. However, like in Marawi, what should concern us the most now are those who are left in the war.

So that, henceforth, as we struggle to gather whatever are still considered useful from the rubbles left in the war in Marawi City, let us set aside these unpalatable experiences and ponder a bit on the economic well-being of the city and its people. Clearly, losses are in billions of pesos, no doubt about that. However, as has always been the case even in the most advanced countries, these figures are inaccurate and are normally overstated. To better understand it, let’s identify where losses could be without even attempting of quantifying it.

For one, in terms of losses (on businesses), the decline in values may be measurable but lost income is quite difficult. For instance, the losses on agriculture, are harder to quantify.  Either one may determine the amount spent so far in raising the crops and consider all accumulated costs as losses or peg the losses on the potential income of said crops upon harvest.  Whatever the methods shall be, the fact remains that losses are incurred.

On the other hand, the decline in the value of the structures of the department stores, factories, etc. maybe figured out but the amount that should have been earned out of profits had business remained uninterrupted is harder to determine.

In both instances, losses are definite. So that, income tax payments (for national) and local business taxes will be put to a screeching halt for the time being. Moreover, whether properties are residential or used in business, the local government units suffers the most. With the decline in values of these real properties, collection of real property taxes (a major source of LGU revenues) will certainly plummet. Worst, it may even be brought down to zero as the supposed taxpayers are still reeling from the current devastation.

Nationally though, the effect on the economy is very minimal. In 2015, for instance, according to the National Statistics Authority, the ARMM’s contribution to the country’s Gross Domestic Product is just .7 percent or less than 1 percent. Clearly, therefore, even if we lose everything in Marawi City,it cannot significantly influence at all the country’s GDP.

Yet, as in most tragedies, after the search, rescue and retrieval operations, rebuilding follows.  Again, analyzing the country’s GDP on the spending side, the main drivers are the government’s infrastructure spending and consumer spending. Certainly, these two main drivers will heavily figure out in the next couple of months or years. For one, with hundreds of bridges, kilometers of roads and countless of public schools, hospitals and other publicly owned buildings destroyed, the government will set aside huge amounts for their reconstruction.

Therefore, expect that as we start rebuilding, we shall see a lot of opportunities we've never seen in normal times. However, this is the tricky and most sensitive part. Yes, amid heaps of debris, clearing operations present countless of chances even to those lacking in skills or inadequately educated. Construction workers will be in demand as the government speeds up the restoration of school buildings as well as stretches of roads and bridges.

However, if the government awards these money-making activities to contractors outside of the region, the recovery efforts might be dented a bit.  For one, the non-resident contractors already have their own workers and might just bring them to the ravaged region, thus, denying the locals the opportunity to earn a living. Moreover, the income it generates from the contract shall go out of the region, thus, siphoning the amount from it and denying the place the much needed multiplier effect of such money.

Thus, despite all the criticisms on inefficiencies and insufficiencies this government has so far endured, they can clearly do things right in Marawi City if they’ll try to make way for the ARMM or, at the most, Mindanao-based contractors to undertake the reconstruction activities.  In doing so, not only shall they be able to rehabilitate their place, they shall also be able to rebuild themselves.