Maritime transport critical to regional development

DESPITE MUCH research and repeated policy pronouncements on the importance of regional development, the country’s spatial growth has actually become more rather than less skewed. With climate-change-induced disasters in addition to increasing sociopolitical restiveness in the regions, the subject of spatial inequalities has assumed renewed relevance (“Skewed regional development,” Opinion, 4/27/15). Indeed, the issue is figuring prominently in the run-up to the May elections.

Regional development continues to be concentrated in Metro Manila (National Capital Region or NCR) as indicated by its 37-percent share of total GDP in 2014, having risen monotonically from 30 percent in 1988. The NCR’s persisting dominance is even more poignantly exemplified by its income per capita that’s nearly threefold the national average, 2.3 times the next highest (Calabarzon’s), and more than 13 times that of the poorest region, the Autonomous Region in Muslim Mindanao. With such obscene interregional inequality, it’s little wonder why there’s deep disaffection and seething frustration particularly in Mindanao vis-à-vis imperial Manila.

Calabarzon’s and Central Luzon’s relatively large shares of GDP can be attributed to their proximity to the NCR. Noteworthy is that if their shares are aggregated with the NCR’s, this mega-industrial region would in effect be owning close to two-thirds of the annual national pie. Being close to the seat of the central government arguably confers a huge advantage in terms of, among others, the national budget for both physical and social infrastructure. It follows that a drastic rebalancing of the national development strategy beyond this mega-urban agglomeration is long overdue.

Basic to such rebalancing is infrastructure, but while there seems so much concern about roads, railways and airports, little is said about maritime transport despite the archipelagic nature of the national economic landscape. The remark that it takes appreciably longer to ship cargo to Manila from Davao than from Bangkok or Singapore has become legendary. The recently amended Cabotage Law (Republic Act No. 10668) is welcome, but for it to matter, improvements in the maritime ports in the Visayas and Mindanao island-regions are required.

There is plenty to ship from these regions for Luzon’s domestic market or for export. Mindanao’s Davao region is reportedly the fastest-growing (9.4 percent in 2013-14) in the country, followed by Northern Mindanao, Caraga, Soccsksargen and Zamboanga Peninsula (due partly to their lower base). Growth was attributable to the buoyant recovery of agriculture following the devastation wrought by Typhoon “Pablo” in 2012. Davao region’s agriculture alone grew 12 percent, with the others’ at slightly lower clips.

While tourism, mining and IT industries are also on the rise, agriculture is the backbone of Mindanao’s economy. As such, it produces 88 percent of the country’s pineapple, 81 percent of banana, 75 percent of coffee, 60 percent of coconut, and 53 percent of corn for domestic consumption and export.

The well-known long neglect of agriculture is virtually synonymous with the neglect of Mindanao. Historically, the government seems to have been ill-advisedly obsessed with self-sufficiency in rice despite the country’s lack of comparative advantage in this crop—at the expense of other high-value crops for which it can reap greater bang per buck.

For instance, solely by dint of private-sector initiatives, the Philippines has been the second largest exporter of Mindanao banana via the ports on the Davao Gulf. This industry has demonstrated remarkable resilience following Pablo and despite pest infestation and the Panama disease. Growers have opened up new areas west of Davao City that is relatively secluded from typhoons.

The World Bank notes that with proper government support by way of better land transport and port infrastructure, among others, the banana export industry can maximize its growth potential while remaining competitive in the world market. To the extent that the infrastructure will also benefit such other export produce as pineapple, coconut and corn, Mindanao’s economy will be given a further boost.

These considerations plus recent developments in the shipping industry make the provision of modern port infrastructure in Mindanao an imperative. This, along with full implementation of the cabotage reform, will significantly cut the exorbitant costs of domestic shipping. Likewise, the cost advantage of foreign shipping derives from the use of more efficient larger ships compared with the smaller vessels currently used by local shipping lines.

At present there are only two modern container ports in Mindanao—the Philvidec Industrial Estate in Misamis Oriental and the Panabo port in Davao del Norte. The Sasa port in Davao City used to be Mindanao’s premier port located on a deep channel protected by Samal Island. But Sasa’s deteriorated facilities and lack of modern ship-to-shore cranes are reportedly causing long ship queues and waiting times of up to three days. This is unfortunate, especially at a time when the new banana plantations west of the city are starting to bear fruit, which would have to be trucked a long distance to Panabo.

The planned modernization of Sasa (besides, perhaps, the port in Tagum) for both cargo and passenger will be timely in the context of the Asean Economic Community, particularly in the nearly 20-year-old framework—known as Brunei-Indonesia-Malaysia-Philippines East Asean Growth Area, or BIMP-EAGA—for which Mindanao is at the forefront. This will be the very first public-private partnership project in Mindanao following the first such project in the Visayas, the modernization of the Mactan-Cebu international airport. One hopes these critical projects to disperse regional development will not be the last.

Ernesto M. Pernia, PhD, is professor emeritus of economics, University of the Philippines, and former lead economist, Asian Development Bank.