ANALYSIS: Can Mindanao lead the Philippines’ future growth? 1

ANALYSIS: Can Mindanao lead the Philippines’ future growth?

Jose Galang — Your Business

Posted at Apr 10 2018 07:42 PM

Armed conflict and poor governance have connived to prevent Mindanao’s economy to keep in step with growth in the rest of the Philippine archipelago over the past several decades.

Home to about 24 percent of the country’s population, Mindanao also accounts for over 40 percent of the poor. Its share of the national budget, which has ranged from 13 percent to 15 percent, is now up to 17.9 percent.

Despite gains in recent years, Mindanao’s economic output per capita of about $1,800 still stands at around half of the national level. One of its regions, the Autonomous Region in Muslim Mindanao (ARMM), even has the lowest per capita GDP among all regions in the country.

Once boasting personal incomes almost equal to those in Luzon and three times levels in the Visayas, Mindanao’s economy sputtered starting in the late 1970s as its growth drivers failed to generate high-quality jobs. Mindanao’s economy has been driven mainly by plantation crops, import-substituting manufacturing industries, and forestry and mining.

With its abundant natural resources and a pool of dynamic agribusiness entrepreneurs, Mindanao, according to a newly released World Bank study, “has what it takes to be among the most dynamic places in the Philippines.”

“It’s only a matter of unlocking its great potential,” says the study titled “Philippines Mindanao Jobs Report: A Strategy of Mindanao Regional Development”. The study, dated June 2017, was made public at a forum in Davao City last weekend.

An ‘anomalous’ growth pattern

Analyzing Mindanao’s development record, the World Bank says that instead of rising agricultural productivity paving the way for a vibrant manufacturing and services sector linked to the agriculture value chain, the opposite has taken place.

“Agriculture is not very productive except for a few export crops, manufacturing is constrained by inadequate infrastructure, and the low productivity, low-skill services sector has become the catch basin for excess agriculture workers who cannot find jobs in cities,” the study says of the Mindanao record.

It notes further that lack of competition in key sectors, insecure property rights, complex regulations, and severe under-investment in infrastructure, education and health—all exacerbated by the deficient institutions.

These led to what the study describes as an “anomalous growth pattern”, which has left the majority of the Mindanawons without good jobs and has led to the departure of “many talented people” to greener pastures.

The economists and development specialists who teamed up in drafting the World Bank report propose a “comprehensive strategy” for Mindanao. This strategy has three main components: raise agricultural productivity and improve farm-to-market connectivity, boost human development, and address drivers of conflict and fragility and build up institutions.

Apart from economic initiatives aimed at boosting job creation, the program also calls for a political solution to address the causes of violence in Mindanao. The latter strategy targets a whole bundle of challenges that include “injustice, weak governance, land dispossession, discrimination, and sociocultural marginalization”.

The World Bank study, which had the support of the Australia-World Bank Philippines Development Trust Fund and the Korea Trust Fund for Economic and Peace-Building Transitions, focuses primarily on the economic dimensions of peace and development in Mindanao and does not lay out a roadmap for peace with Moro groups and the Communist Party of the Philippines-New People’s Army-National Democratic Front.

‘Growth corridors’ strategy

The study’s key points jibe with priorities pursued by the local Mindanao Development Authority (MinDA), a government agency set up in 2010 to promote socioeconomic development in Mindanao.

For instance, the MinDA strategy is to bring down poverty through “growth corridors” aimed at speeding up economic growth that creates more jobs. The growth corridor strategy seeks to improve infrastructure networks to enhance connectivity between growing and lagging areas.

Specifically, the corridor strategy will spread development among Mindanao’s northern, southern, western, and the Bangsamoro sectors. A total of 35 projects consisting of ports and airports improvement, inter-regional and intermodal roads, bridges, and roll-on/roll-off shipping facilities are lined up for this program.

Through an improved connectivity, entrepreneurs and traders on the island group can benefit from reduced transportation costs and thereby raise the competitiveness of small farmers and other producers, MinDa officials say.

Skills deficit

The World Bank study points out that a “skills deficit” partly led to Mindanao’s slow development. Over 80 percent of Mindanao’s farmers and fishermen are “poor or near-poor and lack scale and skills to compete”, the study says.

A number of interventions are planning to address gaps in the inter-locking areas of basic education and skills and job creation, with the World Bank pointing to a need for special attention to youth in conflict-affected areas.

“Security, justice, and economic stresses are linked. To ensure the success of violence prevention and recovery, a specialized suite of interventions is planned for fragile environments, combining elements of security, justice, institution-building, and economic transformation,” says the World Bank study.

Practical recommendations to address the jobs problem in Mindanao are listed in the report. One of these recommendations is increasing agricultural productivity by improving extension and irrigation services, along with price reforms.

The study also calls for building up logistics and transport connectivity by improving road networks and the efficiency of shipping services to reduce trade costs. Further, improvements are recommended in the supply of reliable power and the speed, affordability and quality of information and communications technology.

No easy ride

Then again, most of these recommendations have been put forward many times in the past by other groups that included international institutions and governments that also provided low-cost financing and grants, not to mention private investments, reaching hundreds of millions of dollars.

It’s time to get things right for the sake of not just the people of Mindanao but of the rest of the Philippine economy. After all, as the World Bank study argues, “unless there is development in Mindanao, it is hard to see how the Philippines can achieve sustained and inclusive growth”.

To be sure, the World Bank study says “it will not be easy” for Mindanao to achieve rapid and sustainable growth. There will be a lot on the table of the development managers that will steer Mindanao’s economy in the coming years.

The development managers will need to reverse the current low productivity in agriculture, weak infrastructure support for manufacturing, low skills quality, lack of competition in key sectors, weak institutions, and low investment in health and education.

Furthermore, it is crucial to finally end that decades-long conflict that has caused “untold human suffering and severely constrained growth”—about 60 percent of Mindanao’s cities and municipalities are directly affected by conflict—while reducing confidence and discouraging investment throughout Mindanao.

GDP growth rates in Mindanao between 1960 and 1980 were high, but they created few jobs and in effect did little to reduce poverty. Mindanao, like the rest of the Philippine archipelago, was back in the 1970s as rich as Thailand and richer than Indonesia and Vietnam. The martial law regime of Ferdinand Marcos presided over the decline.

Disclaimer: The views in this blog are those of the blogger and do not necessarily reflect the views of ABS-CBN Corp.