Development and Distress in Mindanao

A Political Economy Overview

Eduardo Climaco Tadem, Ph.D. Professor of Asian Studies University of the Philippines Diliman
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Introduction
• For casual observers
– Economic growth & development have bypassed southern regions – Central government has not initiated enough development projects

• Studying its development gives a different picture
– It is a major performer & contributor in Philippine economy – Large-scale government projects improved communications, transportation, irrigation & power facilities

• Local & foreign businesses invested capital & technology and generated enormous profits • Wealth & income created by exploitation of its resources have not benefited a great majority of its people
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Location of Mindanao and its Administrative Regions

Land area: 10.2 M hectares or 102,000 km 2 (Including Mindanao Island and Sulu archipelago), slightly more than 1/3 of country’s total (30 M ha)
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Major Categories of Mindanao Population
Percent I. Indigenous Population A. Muslims/Islamized
B. Lumads C. Visayans (pre-colonial settlers, inc in II below) II. Settlers (incl. I.C above)

Est. Number millions (2000) 20.00
5.00 --75.00 100.00

3,626,925
906,731 ---13,600,968 18,134,624

Total

Source of basic data: B.R. Rodil, Story of Mindanao and Sulu, 2003 and National Statistics Office
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Natural Resources
• Half of Mindanao is forest land (41% of the country’s vegetative cover and 56% of Philippine commercial forest land) • Agricultural area (3.73 million hectares, 38% of the country’s total farm area) • Commercial and export crops are planted in about 51% of farm area (coconut, tobacco, rubber, sugar, export bananas, palm oil, coffee, abaca, and fruits) • Mineral deposits: copper, gold, laterite iron ore, nickel, lead, zinc, magnesite, chromite, coal, manganese, limestone and marble
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Mindanao in the National Economy
• • • • • • 73% of the national value added in forestry 43% of the Philippines’ agricultural output 32% of fishery products Rice harvests account for 1/4 of national total Corn’s share is about 60 percent It supplies 40% of country’s food requirements & 30% of national food trade • Comprises 1/4 of the country’s total export receipts
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Regional Resources and Economies
• Region IX: Zamboanga Peninsula
– Mineral deposits: gold, chromite, coal, iron, lead and manganese – Its coastline gives it easy access to some of the country’s richest fishing grounds (Sulu Sea, Moro Gulf, Sindangan Bay, and Celebes sea) – Farming and fishing are the main economic activities of the region

• Region X: Northern Mindanao
– Country’s third largest producer of corn and banana – Two of the three Area Development Zones (ADZ)
• Cagayan de Oro –Iligan Industrial Corridor and the Panguil Bay – Mt. Malindang ADZ. • The Cagayan – Iligan Industrial Corridor will be the center for heavy industry

– The northern coast is highly industrialized with an iron ore sintering plant, cement plants, and coconut oil mill
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Regional Resources and Economies
• Region XI: Davao Region
– Mineral resources: chromite, iron, nickel, and manganese, gold, copper and other non-metallic minerals – Five of the major fishing grounds of the Philippines are located here – Competitive advantage is in agri-industry as its products, bananas, pineapples, fresh asparagus, and fish products are exported abroad

• Region XII: Soccsksargen Region
– Rich mineral resources (e.g. gold, copper, iron, chromium, silver, zinc, limestone and phosphate) – Major earners are fishing, agriculture and forest- related products – Steel, cement and coconut oil are some of the important products – Coconut, pineapple, rubber, sugarcane, rice, corn, banana and other fruits are the main agricultural produce
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Regional Resources and Economies
• Region XIII: Caraga Region
– Noted for its wood based economy, extensive water resources and rich mineral deposits (iron, gold, silver, nickel, chromite, manganese, copper). – Major agricultural products are palay, corn, coconut, gold, banana, rubber, oil palm, calamansi, prawns, milkfish, crabs, seaweeds and mango as well as fisheries and aquatic products

• ARMM: Autonomous Region in Muslim Mindanao
– It has one of the richest fishing grounds in the country (Sulu Sea) – Plantations growing rubber, coconut, and pepper are found in Basilan

– Years of armed conflict and exploitation of resources by non-residents have made ARMM also one of the most poverty-stricken areas – Per capita GRDP in 2005 is the country’s lowest
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Selected Industry Profiles
• Coconut products are the Philippines’ most important agricultural export commodity. More than half of Philippine coconut area is in Mindanao • Mindanao is the Philippines’ most important producer of wood and wood products • Fruit industry
– Composed almost exclusively of banana and pineapple production – 100% per cent of banana and pineapple exports come from Mindanao plantations
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Selected Industry Profiles
• Fish Industry
– It is estimated that over half of the country’s total commercial fish catch comes from Mindanao – Tuna companies include TNCs like Del Monte, Dole

• Grains
– Mindanao palay (unhusked rice) harvests are 23% of the Philippine total – Corn production is almost 60%
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Capital Formation and Transnational Corporations
• Capital Formation in Mindanao
– 3,954 SEC registered corporations between 2002-2008 (3.46% of the country’s total) – Paid-up capital: P2.81 billion (2.61% of total) – 40 BOI registered projects for 2008 (MEDCO)
• PHP 13.709 billion investment value ; 11,546 employment opportunities • Investment growth of 72% from 2007-2008 (PHP 7.958 B to PHP 13.709 billion) • A 218% increase in employment generation (3,632 opportunities in 2007 to 11,546 in 2008)

Transnational Corporations
– PHP 1.704 billion BOI-registered FDIs for 2008 – 60% of the FDI’s are from the Japanese investors (power generation, marine and petroleum products), followed by the Canadians with 21% stake (mining business) – Del Monte subsidiary, Philippine Packing Corporation (PPC) – Dole/Stanfilco (production of bananas, pineapples, fish products and rice) – San Miguel Corporation (coffee, cacao, and hybrid corn seeds)
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Infrastructure Development
• Based on PGMA’s 2009 SONA
• 882-meter Diosdado Macapagal Bridge (P2.1 billion, completed May 2007) • Cagayan de Oro Port (P572.87-million completed in January 2009) • Davao Port (P420.22-million completed in December 2008) • Completed airport projects include
1. Butuan Airport Upgrading Project (P700-million) 2. Cotabato Airport Rehabilitation Project (P600-million) 3. Dipolog Airport Improvement Project (P478-million) 4. Pagadian Airport Development Project (P545-million)

• Four major road projects are still under construction:
1. P688-million lligan City Circumferential Road 2. P2.24-billion Lebak–Maguindanao Road 3. P3.94-billion Zamboanga West Coast Road 4. P500-million Dinagat Island Road

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Cotabato-Agusan River Basin Development Project
• • • • • • P15.7 billion projected cost, 1975-2000 33 individual water and land resource projects in 11 provinces Mostly funded from foreign loans Budgetary allotments: PhP173 billion in 1998 and 1999 alone Total project assets reached P331 billion by 1999 Lower Agusan Development Project (PhP2.18 billion):
– Phase One (1991-1999, loans from the 14th Overseas Economic Cooperation Fund) – Phase Two began in 1998 with a loan from the JBIC 1. Agusan River Improvement at the east bank 2. Reinforcement of the Magsaysay Bridge 3. Improvement of the Banza River through dredging 4. Dredging of the Masao River
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Official Development Assistance
Island Group/Region
Commitment ($ million)

2001
% Share Commitment ($ million)

2002
% Share

Luzon NCR VISAYAS Mindanao Region IX Region X Region XI Region XII Caraga Region ARMM Mindanao-wide GRAND TOTAL

2,557.92 2,773.19 1,284.32 904.94 25.1 119.0 101.9 85.1 ----122.3 307.3 13,174.35

19.4 21.0 9.7 6.9 0.2 0.9 0.8 0.6 ----0.9 2.3 100.0

3,366 1,518 1,037 856 18 109 98 35 125 121 351 11,856

31.2 14.1 9.6 7.9 0.2 1.0 0.9 0.3 1.2 1.1 3.3 100.0

• Increased attention after September 11 attacks • USAID assistance almost tripled from US$90.6 M (1996-2001) to US$242 M (2002-2006)
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Human Development Indicators
• Using UNDP’s HDI, Mindanao fared badly
– Average HDI was 0.635 in 2003, or 15% lower than the national HDI of 0.747 – 17 of 24 Mindanao provinces were in the bottom half of the national list – 9 of the bottom 10 provinces were in Mindanao

• Per capita income of US$1,546 or 41% of national’s US$2,609 • Average poverty incidence of 42.4% in 2003 is 40% higher than the national average of 25.7%
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Human Development Indicators
• Gini indices: Average of 36.4 points in 2000 to 40.8 in 2003
– Only Davao Oriental, Siquijor, and Maguindanao improved. All the other 21 provinces declined – The least unequal provinces were found in the ARMM region (Sulu, Tawi Tawi, Basilan, and Maguindanao)

• Subsistence incidence
– All Mindanao regions registered lower capacities than the national average (13.8%, NSCB 2003) – Zamboanga & Caraga had the worst with 32.8 (17th) and 31.8 (16th) – The subsistence incidence of the six Mindanao regions was 24.88, or 11.1 points higher than the national figure – This is an ironic situation since Mindanao supplies 40% of the country’s food requirements and 30% of the national food trade
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Issues of Development
• Infrastructure Development Issues
– Massive infrastructure projects have generated social costs that have erupted into conflicts – Land acquisition for large-scale irrigation projects, such as in Agusan and Davao, cause small farmers to lose substantial areas of their already small holdings to make way for roads, canals, ditches and drainage

• More often than not, compensation for the loss of lands is not given. But how does one compensate for the loss of cultural heritage?
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Issues of Development
• Forests & fishing grounds’ depletion rate is alarming • Agricultural chemicals extensively used in agribusiness also pose health hazards • Export Market Dependence
– – – – – Dependent on the vagaries of international trade Local producers have no control Products are of low value added and thus do not fetch premium prices It is the importing country which dictates prices Price instability and uncertainty surround Mindanao products

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Issues of Development
• Wealth and Income Transfers
– Industries take a considerably larger share of the surplus than the workers – Mindanao regions are also being drained of precious incomes by more developed areas such as Metro Manila – Wealth and resource transfers also occur in the direction of the developed economies of the world (repatriation of profits, interest charges on loans, technical advisory and consultancy fees, and salaries of foreign managers and executives, etc.)

• Big corporations control production and distribution processes • Dominance of foreign investments, loans and technology has impaired our national sovereignty

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Issues of Development
• Workers are always at a disadvantage in their relations with management and corporate owners
– Periodic industry declines result in forced lay-offs or drastic reductions in their take-home pay – Shifting of workers from permanent to non-permanent status reduce expenditures for benefits and allowances – In a number of banana plantations, piece-rates and subcontracting arrangements are preferred by the corporate farm owners over regular daily wages

• The drive for Mindanao autonomy is rooted in
– Economic deprivation of the people – Perception that the interests of the central government and big business lie only in siphoning wealth out of the six southern regions
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Internal Colonialism
• Regional transfers of wealth from less developed areas to national centers of political and economic power
– Case of fishing industry: 78 per cent of fish landed in Iloilo and Metro Manila was caught in Mindanao-Sulu waters. The officially reported share of Mindanao fish production in the national total is grossly underreported at only 15 per cent.

• This would largely explain why the Mindanao regions remain poor, deprived, and marginalized • The oft-repeated line that Mindanao has been left out of government and private development efforts does not have any basis in reality
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