How cheap is Manila?

Very, according to a survey by UBS published last week. The UBS price comparison was based on a standard basket of goods “based on Western European consumer preferences” (see note below).

On this basis, the 10 most expensive cities in the world were as follows (the first figure excludes rent, the second includes rent—for both New York = 100).

Oslo 121.5 / 94.6
London 110.6 / 105.5
Copenhagen 109.2 / 86.3
Zurich 107.4 / 87.3
Tokyo 106.8 / 93.4
Geneva 102.9 / 85.8
New York 100.0 / 100.0
Dublin 98.3 / 84.3
Stockholm 98.1 / 75.8
Helsinki 97.0 77.3

And the 10 cheapest were:

Beijing 49.6 / 39.6
Vilnius 49.4 / 37.7
Lima 49.1 / 35.9
Nairobi 48.4 / 39.7
Kiev 47.8 / 40.6
Manila 46.7 / 35.2
Delhi 42.8 / 34.6
Buenos Aires 41.9 / 32.1
Mumbai 38.5 / 41.5
Kuala Lumpur 36.8 / 28.2

The methodology is everything in a survey of this kind, and account has to be taken of exchange rates (particularly with regard to countries like China, which have artificially low exchange rates), price differences between parts of the same city, and a host of other variables. The report makes a lot of interesting points about our search for the filthy lucre and I thought this one was particularly relevant to Manila and other cities with large poor populations.

There is more than one price level – this applies to most cities. Our shopping basket reflects the average consumption patterns of an average family living in the West. The effective cost of living in one city may vary considerable depending on the area, lifestyle or life cycle.

More than one price level, you’re not kidding. In Manila there are at least 20 separate economies co-existing in time and (almost) in space, and when they coincide the effects can be jarring. Here is what a friend of mine felt when his driver discovered the price of an espresso.

My part-time driver put me to shame last week. I asked him to drop me off at Starbucks on UN Avenue in Manila. He asked, out of curiosity:

-- How much is a coffee at Starbucks?

I tried to remember. I had actually never paid it much attention till now. I answered with my best guess:

-- Around, I think, 60 or 65 pesos (US$ 1.25)

He was clearly shocked. He exclaimed aloud and was visibly upset for a moment. We spoke no more about it. We were both embarrassed, he at having so obviously shown surprise and disapproval, I at what I saw as my extravagance in his eyes. Later, I was even more embarrassed when I discovered that my guess for the price was way below the real cost: 80 pesos for a single shot (around USD 1.57).

My friend was even encouraged to propose an “espresso ratio” based on his experience. Perhaps someone should suggest it to UBS.

Source: UBS. 2006. Prices and Earnings: A comparison of purchasing power around the globe

Note: The basket of goods comprised:

Food/groceries 18%
Beverages/tobacco products 5%
Hygiene and healthcare 7%
Clothing 6%
Household and electronic devices 7%
Home 18%
Heating/lighting 5%
Transportation 14%
Miscellaneous services 20%

Comments

[urbanodelacruz]

torn,

there is also the long-standing "Big Mac Index" run by the Economist. It rates economies based on the relative price of a big mac.

[Gauden]

Thanks, Torn, for this reference.

I was inspired by the Big Mac Index when I concocted the Espresso Ratio (ER), and the name is itself a tribute to the original, but the Ratio is intended to illustrate a different point.

The Big Mac Index compares countries; the ER is intended to look inside a country and to examine how different products are made available (or denied to) people with low incomes. Thus, for instance, poor persons in the Philippines can easily afford strong alcohol or cigarettes, but are unable to purchase certain essential medicines.

The ER hopes to illustrate these differences. It also makes the point that the risks of chronic disease are not confined to the "affluent" but that there is a systematic effort to market them to the poorer segments of society.

Espress Ratio: http://tinyurl.com/h4xfv
Alcohol (GSM Round): http://tinyurl.com/k2j3n
Cigarettes (Philip Morris 100s): http://tinyurl.com/hlb6c
Essential Drug (Blood Pressure): http://tinyurl.com/gda4o

(Apologies for the long comment -- hope you're OK with this.)

[urbanodelacruz]

gauden,

that’s a pretty cool approach to showing income disparities! price ratio = relative buying power. shall we re-label our economic classes?

a. caramel machiato = upper class
b. grande latte =middle class
c. kapeng barako =lower middle class
d. tubig lang = below poverty level

You might also be interested in this: the public health and epidemiology units of Harvard and USC have done extensive studies on the health effects of poverty: (some summaries here).

Being poor really makes you sicker.

urbano

[Jon Limjap]

That's why I turned to brewing my own barako.

[lockex]

60 or 65 pesos? lol

Everybody knows Starbucks coffee is overpriced. Hey driver, welcome to the real ugly capitalist world.

[ERin]

The Economist a few years ago added a Starbucks latte index to the Big Mac one... can't remember which month it comes out in but it's pretty instructive to discover that Manila's lattes are very cheap on the global standard. This makes sense if you assume that the biggest input cost to a latte is real estate (we're not counting hype, here, which is of course impossible too quantify). My daily latte in Shanghai was twice the price of Manila! Hello bubble economy!!

[guanacaste costa rica real estate]

The methodology is everything in a survey of this kind, and account has to be taken of exchange rates (particularly with regard to countries like China, which have artificially low exchange rates), price differences between parts of the same city, and a host of other variables.

[Philippines properties]

I guess that was right. there are some positive points regarding this cheapest issue, but of course the negative factor was always there.

Mitch

[free shed plans & ideas]

It's the reality of the capitalist world, almost everything is overpriced, but I'm still having fun living in one, with my Starbucks coffee or kapeng barako, it's doesn't matter.

[Ayala Land]

Maybe the term cheap can be referred to as something that can be afforded by the average Filipino working-class.

Based from personal experience, It's cheaper in Thailand and Vietnam compared no Manila, Philippines.

[property philippines]

The equivalent of a shopping basket in Europe would be a shopping cart or two in third-world countries.

Nina