Why foreign retirees love Cebu?

I am sure we all have noticed an increasing number of elderly Caucasian-looking gentlemen in the malls in Cebu City with younger looking Filipina companions. We are also seeing more elderly European, Chinese, Korean, and Japanese elderly couples in the malls and the hotels. Then, there are also some elderly Filipino balikbayans who seem to be overstaying and spending a lot of time in the coffee shops of the malls.

Some of them are tourists, but a lot of them are retirees who are now living in the Philippines, and in Cebu in particular. I was even informed that there is a number of German nationals living in a town in southern Cebu, that there is now a German pub in the area. This did not surprise me, as seven years ago, a good friend who use to frequent Germany told me that in a number of taxis in Berlin, when the drivers knew that he is a Filipino, they would show him a picture of a Cebu beach which was attached on the sun visor of the driver's side. Then these drivers would tell him that when he retires he will go to the Philippines, and maybe retire in Cebu. This was seven years ago, so it seems some of them did retire in Cebu.

Two months ago, some American friends of my children, in their mid-thirties, were in Cebu and in the Philippines for almost a month. They had observed that compared to the US, the prices of most consumer products were really a bargain. He was amazed at the prices of restaurant food and services like a massage and haircut. He ended up buying five shoes and quite a number of pants and shirts. Over dinner, he asked me knowing that I have a finance, banking, or economics background, why and how could this situation happen and can we keep this price disparity stay. I had to explain that it is still a demand-supply equation. Aggregate demand for products and services is low relative to the availability of supply, so prices for certain products are low. The high unemployment rate makes services like massage, haircut, parlor or even househelp less costly since there is abundant supply. But as demand goes up and supply decreases, prices of these services will go up. As an example, the "yaya" that was temporarily taking care of their children are now earning $100 a month when they were only earning $50 four years ago. But on the whole, the "cost of living" in a developing country will always be lower than in a highly developed country, precisely because manpower cost in developing countries will always be cheaper. Some manufactured goods and food products may be cheaper in the developed economies, due to more efficient manufacturing processes and economies of scale, but the "cost of living" composition is weighted towards basic goods and services, and these will always be cheaper in the developing countries.

This is the primary reason retirement communities in the Philippines, Malaysia, Thailand, Indonesia, and some Latin American countries are attracting European and American retirees. A retiree with a $2,000 monthly pension can really live quite comfortably in Cebu, and I understand a Berlin taxi driver gets this as monthly pension.

Over and above the cost of living issue, the Philippines and Cebu in particular has a huge English-speaking population, with a large middle class which makes it easy for foreigners to adapt to the Filipino culture. There are a lot of educational institutions and world class medical facilities in Cebu to assuage the foreigners’ apprehension and the service orientation of Filipinos are even more pronounced among Cebuanos. Information and telecommunications facilities are also more available in Cebu than in the less-developed provinces, and international airport and seaport facilities are located in Cebu. In terms of social and entertainment amenities, Cebu is second to Metro Manila. There is practically nothing that is in Metro Manila that is not also in Cebu, be it the Malls, the shops, and the entertainment. Access to the white sand beaches of Cebu is easier and faster than anywhere else in the Philippines, or even in Indonesia, Malaysia, and Thailand. 

Officially, there are some 29,000 foreign retirees registered in the Philippine Retirement Authority. These are the foreign retirees that need a “special visa” and have deposited the required amount and paid the fees for the special visas. Gauging by the number of elderly foreigners who are seen in Bohol, Dumaguete, Baguio, Tagaytay, Metro Manila, Cebu and many other places in the Philippines, the number must be more than double the official figures of some retirees in the Philippines without the “special visa” as they go back to their home country regularly even if they spend more time in the Philippines.

They do not need to make the $10,000 to $40,000 deposit or investment but still enjoy the retirement in the Philippines. The PRA retirement program, which is meant to attract foreign nationals and former Filipino citizens to invest, reside, and retire in the Philippines is comparable if not better than the retirement programs of other countries. The Special Resident Retirement Visa provides a lot of privileges and services, with a minimum pension requirement of $1,500 a month. The PRA have actually been doing a good job and will continue to attract more retirees in the coming years as the Philippines becomes more politically stable.

The PRA was established in 1985, in the Marcos years, but did not take off until 2010, when the perception of the country under the Aquino government changed for the better.

Hopefully, the next administration in 2016 will continue to project the political stability of the country. I am one with the Berlin taxi drivers and all other retirees in wanting to retire in a tropical island with a loving wife and endless summer.