Jumpstarting the ARMM economy

Movers and shakers in the economy of the Autonomous Region in Muslim Mindanao (ARMM) are gathering today in Cotabato City to bring together their collective experience and wisdom and forge an agenda to invigorate the ARMM economy.  Interim Regional Gov. Mujiv Hataman saw it fit to have this ARMM Economic Summit within his first 100 days in office, as he faces the unenviable challenge of bringing this erstwhile basket case of a regional economy into a path of inclusive growth and economic dynamism.

An economically dynamic ARMM, for many of us who have witnessed the region sink deeper into poverty over the past decade, almost sounds like an oxymoron.  Consider this: Even though the four poorest provinces in the country are outside of ARMM (namely, Zamboanga del Norte, Agusan del Sur, Surigao del Norte and Eastern Samar), the fifth poorest, Maguindanao, along with the four other ARMM provinces of Lanao del Sur, Basilan, Sulu and Tawi-Tawi, saw their poverty rates rise faster than those of the rest of the country within the past decade (yes, poverty went up nationwide between 2003 and 2009).  Worst among them was Lanao del Sur, whose recorded poverty rate nearly tripled from 13.7 percent in 2003 to 36.8 percent in 2009.

And yet, the region has so much in innate attributes that would normally be magnets for investment, even more than other parts of Mindanao, let alone the rest of the country.  Like the rest of Mindanao, ARMM has excellent agro-climatic conditions conducive to production of a wide range of agricultural crops.  Soils are so fertile that yields of certain crops, like cassava, white corn and coffee are superior to those attained elsewhere. Unlike neighboring regions whose lands are now extensively farmed, there remain large tracts of land available for farming in ARMM. Labor costs are also lower: wages are 20 percent less than in Davao, 26 percent less than in Central Luzon, and 43 percent less than in Metro Manila.

In spite of these seeming advantages, ARMM has not only failed to attract the investments it needs to bring more jobs and incomes to its people; it has also sunk into deeper poverty.  How, then, do we reverse this slide? What fixes could the summit participants possibly offer Hataman and his officials to jumpstart the economy?

It is useful to note that there are a number of companies that have dared to invest in ARMM and have actually done well. La Frutera (a banana export venture in Datu Paglas, Maguindanao, by multinational firm Unifrutti) and Agumil (a Malaysian-owned palm oil processing company in Buluan, Maguindanao) have shown the way. Matling Industrial and Commercial Corp. has been processing cassava into flour in Malabang, Lanao del Sur, since 1928 and is the largest cassava processor in Mindanao.  Lamsan Inc. has been manufacturing cornstarch and other products from corn in Sultan Kudarat, Maguindanao, for four decades now.  Philippine Trade Center Inc. is another cornstarch manufacturer in the same municipality.  EA Trilink Corp. registered a P1.5 billion investment in ARMM last year to upgrade the region’s information and communications technology capabilities to world standards.  BJ Coconut Oil Mill in Jolo was the only coconut oil processor in ARMM until the world market slump forced its temporary closure in 2009. These various companies’ first-hand experiences should provide useful lessons for would-be ARMM investors, and their executives who are attending today’s summit are well placed to advise the regional government on how to make the investment environment more attractive, especially to newcomers.

To be sure, there are certain basic impediments that must be overcome if ARMM is to see greater economic activity in the years ahead.  For one, the whole of Mindanao is again experiencing power shortages leading to rotating outages of two to four hours.  Such power inadequacies have made it worthwhile for Matling, Lamsan and Philippine Trade Center to invest in their own biomass power plants to provide for their requirements—a creative and effective solution given that their businesses, by nature, generate substantial biomass waste that is now put to good use.  This suggests that investments in similar agro-processing facilities need not wait for the long-term solutions to Mindanao’s power problems to be put in place.  They may actually find it economic to bring their own power with them (as had also been done by BJ Coconut Oil Mill in Sulu).

Inadequate transport and logistics facilities likewise get in the way of greater economic activity in ARMM.  The region has the lowest road density in the country, and I find it surprising that a number of obvious vital road links from production areas to market centers and ports have remained unattended to, for one reason or another.  Polloc Port in Parang, Maguindanao, was built in 1978 and had been envisaged as the trading hub for Muslim Mindanao when it was devolved to ARMM in 1998.  But access to the port remains difficult from some major production areas in Lanao del Sur and environs, due to non-completion of crucial road stretches leading to it.  Hence, products are shipped out of Cagayan de Oro instead, even with much longer distances traveled inland.  It is high time, then, that strategic road and other facilities with the potential to unleash commodity flows from ARMM production areas to domestic and international markets be identified and attended to with dispatch.

More often than not, it is people running the farms and firms who know exactly where these choke points are.  Those in government may yet learn a thing or two by listening to them in today’s economic summit.

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