Manila-centric mentality

The labor unions have been telling us for the longest time that the cost of living in Metro Manila has been steadily rising.

Now, Mercer, an international human resources consultancy firm, has concluded in its 2019 Cost of Living Survey that Metro Manila showed the fourth sharpest climb in the world… up 29 places.

Manila is now ranked 109th most expensive city for expatriates out of 210 localities on this year’s list — the 25th edition of the survey. At halfway in the list, it may not seem too alarming, but going up 29 places is definitely a cause for concern.

The study measures the comparative cost of more than 200 items in each location, including housing, transportation, food, clothing, household goods, and entertainment. Cost of living and rental accommodation cost comparisons were derived from a survey conducted in March.

“Cost of living is an important component of a city’s attractiveness for businesses,” Yvonne Traber, global mobility product solutions leader at Mercer said in a press release.

Mario Ferraro, Mercer’s mobility leader for Asia, Middle East, Africa and Turkey, observed that “while the Philippines’ robust economic growth continues to attract talent, business, and investments from all over the world, the findings of Mercer’s 2019 Cost of Living study should signal its public and private sectors to take a deeper look and start a conversation on which factors are behind the dramatic increase in its cost of living from 2018 to 2019, and how they can be addressed or mitigated to ensure the country’s continued competitiveness.”

Mercer said the government should consider addressing the cause of the upward trend since it could affect the attractiveness of Manila to foreign workers.

One of the factors that contributed significantly to rising costs is housing. The arrival of POGO has been blamed for much of the stiff climb in property values. Even the BPO industry that employs more Filipinos than POGOs is feeling the pinch as rentals increase beyond normal projections.

This should be one more reason why the President’s order to stop granting PEZA tax incentives in Metro Manila makes sense. It will force BPOs to look outside Metro Manila where costs are more reasonable and tax incentives are available.

But my friend John Forbes of the American Chamber insists a transition period is necessary. I realize change is difficult. But a transition period of 90 days or even six months would probably do nothing much. Cold turkey is likely to deliver faster and better.

Rey Untal, who speaks for the BPO industry association, wrote to say they are not against the administrative order. On the plus side, he said, multi agencies (DICT, DTI, DOTr, DPWH, TESDA, PEZA) have been tasked to hasten human capital and infra development in the countryside. 

“As you know, where the critical parameters are present, IT-BPM is already there, with scale — e.g. Cebu, Clark, Davao, Bacolod, Iloilo, CDO, Naga, Legazpi, Bataan, etc. That’s precisely why we currently have 270,000 plus direct employment in these locations.”

But he pointed out, they “have near to medium term challenges to deal with given the moratorium.  On the supply side, we currently have 200,000 sq. meters of available PEZA-certified space in MM vs a forecasted demand of 450,000 sq. meters for our industry. 

“It is critical that approval of pending PEZA proclamations be accelerated.  Longer term, this will artificially result to real estate cost inflation in MM (particularly amongst PEZA-certified facilities). This will drive up cost of doing business as facilities cost easily account for 15 to 20 percent of the cost stack.”

Hmm… rising rental costs in MManila is a good reason to go regional.

Rey is also not convinced that enough talent is available in the countryside for their future needs.

“While we had been relatively successful in growing in the countryside, these had primarily been voice-support in nature.  For the mid-to-high complexity work, talent has predominantly only been in MM (and Cebu to a certain extent).  With new global contracts now having a bias towards higher complexity work, the situation simply gets aggravated.”

I think they are not looking hard enough. Look at the recent Bar and other professional examinations. Graduates of provincial colleges and universities have been displacing Manila graduates in the top 10. Also, if interesting jobs are created in the regions, enough talent from Metro Manila may just follow.

John laments that “most cities would welcome large numbers of workers and developments such as we have seen in these MM areas and not try to restrict them. These cities put in place efficient urban transport networks that can handle increasing volumes of commuters.”

That’s precisely it. The Metro area’s infrastructure is stretched a bit much. While we are starting to see construction of MRT-7, the North-/South Commuter Rail, the subway, the extension for LRT-1, and Skyway Phase 3 under the administration’s Build Build Build program, all these will take time.

In the meantime, costs of doing business will continue to escalate fast and the BPOs will probably find it more cost effective to go out of the country. Before that happens, let us offer the potentials of our outlaying regions.

Indeed, we need to cure this Metro Manila centric mentality. That’s also putting most of our eggs in a geologically unstable area that’s in danger of splitting into four parts if the Big One from the West Valley fault line happens.

Even if the rail network materializes, it may just perpetuate this Manila-centric bias with all its negatives.

The Japanese city of Nagoya is now finding out that a new rail line using the maglev (that will cut the 350 km trip to Tokyo to just 40 minutes) has its problems. It will drain financial and human resources from Nagoya and its prefecture.

The last thing we want to happen when our rail network gets going is to drain people and resources from surrounding provinces to Metro Manila even faster.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco