No Free Lunch

The price of fragmentation

Of the five original Asean states, the Philippines and Indonesia have been the two worst performing economies. Ours is a country of around 7,100 islands (plus a few more during low tide, as the joke goes); Indonesia is a country of around 13,600 islands. Could these two countries’ archipelagic nature be the primary reason?

Obviously, a country broken up into numerous islands calls for a different approach to development than one with a contiguous land area, like Thailand and the other mainland Asean states. For one thing, the cost and efficiency of interisland versus land transport can differ widely. Opportunities for economies of scale in the provision of energy infrastructure, particularly electrification, are limited in a territory that is geographically fragmented. The communication network would likewise be more expensive and probably less efficient. And because direct people-to-people contacts are hampered by physical geography, building a sense of nationhood built on social, political and cultural cohesion is a more formidable challenge than in a country whose land is contiguous.


Beyond the difficulty of linking physically disparate areas, our country and Indonesia may have also been held back by a failure to appreciate the unique circumstances of an archipelagic economy, including in development planning. For economies whose territories feature large areas of internal waters, the significance of the maritime economy ought to be substantial, and yet may tend to be overlooked and neglected. That is, development planning may devote disproportionate attention to land-based assets and economic (and even social, cultural and political) activities, to the neglect of the vast potential contributions of the maritime economy.

Indeed, the seas in between our islands and along our coasts are immensely rich in natural resources and economic value. These arise not only from the value of the fishery and other marine resources therein, but also from the value of potential tourism and other services (e.g., tidal energy) they could provide. It is even likely that a square kilometer of sea contains higher potential economic value than a corresponding square kilometer of undeveloped land. For one thing, our marine biodiversity could well be richer than the diversity of life on our lands. The challenge is in sustainably harnessing the wealth embodied in the seas—i.e., without depleting marine resources or destroying marine habitats through pollution or destructive exploitation (such as through dynamite fishing).


How important is the maritime economy to the overall economy? A 2010 paper by Dr. Romulo Virola and his associates at the National Statistical Coordination Board (NSCB) cited the widespread economic significance of the maritime sector in terms of employment, foreign exchange earnings, investments and linkages with other sectors. For instance, growth and development in the shipping industry alone would induce substantial investments in port construction/facilities and services associated with it, manufacturing of maritime-related products, and so on. The benefits would further permeate the numerous downstream industries using maritime products and services. At the same time, income generated by the maritime sector will stimulate demand for consumer goods and services in general. All these yield tremendous income multiplier effects.

Apart from shipping and its related activities, the maritime economy encompasses fisheries and aquaculture, recreational activities and tourism, offshore energy exploration and extraction, and a large number of other related economic services. Part of the neglect described earlier may be traced to inadequacy of statistical data on these economic activities, which tend to be generally incomplete and untimely, if not outright unavailable. A key challenge, then, is to develop a systematic framework for tracking the maritime economy and fully account for its contribution to gross domestic product—something Virola and his NSCB associates sought to do.

All these suggest some peculiar elements that need to be addressed in development planning for an archipelago. First, islands must be well interconnected with efficient air and sea transport facilities. The “nautical highway” based on roll-on-roll-off shipping facilities that could span from Aparri to Tawi-Tawi seeks to address this need. In the 1990s, the government crafted a blueprint for an efficient nationwide multimodal transport network to provide a seamless system whereby passengers and cargo could easily move between and across land (road and rail), sea and air transport modes. It remains largely a blueprint.

With the peculiar archipelagic nature of our country, we also need strong institutional support for fisheries and our maritime economy. As it is, fisheries are relegated to a line bureau under the Department of Agriculture, which has had enough difficulty catering effectively to the needs of the crop and livestock sectors, let alone fisheries. We should also have a separate strong body dedicated to strengthening the maritime sector covering shipping, shipbuilding and ship repair, among other things—things in which an archipelagic country like ours would normally be expected to be inherently strong.

We need to have a clear vision for the country built on strong recognition that our territory is composed of four-fifths water and only one-fifth land. That outside forces are now developing significant parts of that territory under our very noses may partly be blamed on this traditional failure to fully consider the potentials and requirements of being an archipelagic economy.

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TAGS: archipelago, Asean, Indonesia, maritime economy, Philippines
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