EGALITARIAN| The service sector during crisis

THE MARAWI crisis surely had its economic cost to Davao Region. I did my computation before showing spill-over effects of economic growth happening across regions. The Autonomous Region in Muslim Mindanao where Marawi is located will have spill-over effects to Region 12, Region 9 and Region 10. However, Davao Region is integrated to Region 12 directly, hence, the impact. The basis of the computation follows the gravity logic using population and distance as factors of attraction, as would be in a gravity analysis.

Yes, true, one need not acquire sharp computational competency to know that there is a sure impact. For Davao City as this is true for Davao Region, the first casualty is tourism. Recent report posted a 20 million pesos loss in 3 a day-average mainly coming from cancelled hotel bookings and accommodations. The amount could have generated an additional 8,393,260 million more in the domestic economy as the money could have changed from one hand to the other in what is called as velocity of money. Adding the opportunity loss, total loss for a 3-day-average is 28,393,260.

The taxi drivers, the barbeque vendors and other service-oriented employees can well articulate the loss. I had a chat with a taxi driver whom I asked of the impact of the martial law and the Marawi crisis. The response was quick but lengthy. He said they are losing P500 a day. At 7 o’clock they could hardly find a passenger. More cabs line up at malls for hours.

The same concern was raised by a barbeque vendor at the Roxas night market. Before the martial law, they could earn between P5000 to P6000 per night, now it plummeted to P2000 to P4000.

The list can continue to include the exchange rates, the investors’ confidence evident in the stock market, in a much bigger sense. But let me convince my readers that these are temporary in nature. Let me focus my analysis to Davao City.

The current stream of currency flow is experiencing a reduced current as a matter of expected behavioral response. Consumers withhold marginal propensity to consume and only spend for items that are considerably basic. The marginal propensity to consume is the likelihood of the consumer to spend a portion of an income and sets aside a portion as savings for future use. Under conditions of certainty, savings rate is usually lower than spending. This however is the reverse during conditions of uncertainty.

Consumers become more diligent; however, this does not suggest a sharp decline in the usual expenditure items. They will focus on items that are inelastic or products we call as necessary goods. People start to buy these items more while reducing purchase of luxury goods. This is in anticipation of future price changes on the one hand, and the reduced volume of available goods on the other.

During times of uncertainty, common direct hits are observed in the service industry. No wonder the sharp decline in the tourism receipts for Davao City. Since 2006, the sector able to generate an accumulated economic benefit of 94.67 billion pesos and generated an estimated 50,000 jobs. In Davao City, tourists spend 3 to 4 days and squander an average of 4,000 pesos per day. This is the amount that could have been spent in the taxi services, in the food stalls along Roxas, in the pasalubong centers, and in many attached industries and sub-sectors of tourism industry.

This however will only be true for some time, in a couple of weeks local tourists start to saunter in the streets of Davao. Local economy starts to roll at the speed it used to be. 90% of the tourists are local travelers, though the huge portion of this are participants of conferences and meetings; those events that were already canceled. Yet, there is a spin. The opening of Mt. Apo poses a strong temptation to mountaineers, trekkers and nature lovers. They will be the first group to prove that there is always life in Davao, as life is always been here. It is seldom a case that individuals who have had a wonderful tourism experience won’t come back. They sure will come as they realize that none ever in the world had experienced “no threat of violence and crimes”.  The tourist will come again, at first in trickle, then by volume.  All that happened will come to pass, nothing really lasts forever.

Posted in Opinion