The following are excerpts from the author's paper "Development Opportunities in the Philippines with the Signing of the CAB: More, Less, or No Impact?" presented at the Forum on Development Opportunities and the Comprehensive Agreement on the Bangsamoro, 23 Sept. 2014, Intercontinetal Hotel, Makati. Fermin D. Adriano, PhD, is council adviser for the World Bank's State and Peacebuilding Project. A consultant in many donor organizations in the Philippines, he also served as policy adviser to the presidential adviser on the peace process, presidential adviser on regional development, and presidential adviser on flagship programs and projects.

 

 

 

Why Bangsamoro development is a necessary and sufficient condition for pro-inclusive and sustainable growth of the country

 

Bangsamoro economies, comprising of Lanao del Sur, Maguindanao, Sulu, Basilan and Tawi-tawi, have long been neglected in the country’s growth path trajectory. Their stunted development partly reflects the country’s spatial bias to growth (favoring Luzon and Metro Manila) and also the underlying belief that growth and development can be done with limited agriculture push to modernization.

 

Consider the following dismal and disconcerting features of the Bangsamoro’s socio-economic performance.

 

Low GRDP share: The Bangsamoro’s combined GRDP for 2011-2013 at constant 2000 prices was PhP1145.2 billion, or just 2% of the GRDP of NCR in 2013. For the years 2011-2013, the average share to GRDP of NCR and Calabarzon areas was more than 53%. In contrast, Bangsamoro economies contributed only 1% for these years. In terms of value added by sector, Bangsamoro’s share in agriculture and service sectors were 4% apiece, but hardly 1% for the industrial sector.

 

 

 

 

 

 

 

 

 

 

High Income and Non-income Poverty: Mindanao provinces had close to 40% of the country’s poor in 2012. The number of poor in Lanao del Sur and Maguindanao combined were three times more than the number of poor in NCR.

 

Among the three island groupings, Mindanao registered the highest poverty incidence between 2006 and 2012. Among the regions, the Bangsamoro provinces recorded the highest (and still rising) poverty and subsistence incidence between 2006 and 2012, about twice the national average. In 2012, poverty incidence for the region was 55.8%. Lanao del Sur and Maguindanao were the poorest at 71.8% and 63.8% of poverty incidence, respectively in 2012. Income gap and severity of poverty of the Bangsamoro provinces were dismally high with severity index being more than twice the national average figure in 2012.

 

The multidimensional features of poverty (income and non-income poverty) are reflected by the human development index (HDI). This index is a composite of income, education, and life expectancy. While HDI showed great variability among provinces in the country generally and decomposed by each index element, the indices achieved by the Bangsamoro provinces spatially and over time revealed disconcerting results:

 

First, there was a big drop in the income index in 3 of the Bangsamoro provinces between 1997 and 2009.

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: HDN and UNDP, 2012/2013. Philippine Human Development Report

 

Further, the real per capita purchasing power of the top 5 provinces (all of which were in Luzon) in 2009 was more than thrice the per capita purchasing of the bottom 5 provinces, 4 of which were Bangsamoro economies. This is most disconcerting as these Bangsamoro provinces had already very low income bases in 1997.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second, in terms of non-income indicators, Bangsamoro economies also lagged behind. They recorded the lowest education index in 1997, which further deteriorated in 2009.

 

Source: 2012/13 Philippine Human Development Report

 

 

 

 

 

 

 

 

Life expectancy of the Bangsamoro provinces also showed downhill trends between 1997 and 2009, relegating them to the bottom among the provinces of the country for both years. The average life expectancy in Sulu in 2009 which was 49.0 years is close to twice less than the life expectancy of Filipinos residing in Pampanga of 76.4 years.

 

Source: 2012/13 Philippine Human Development Report

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

High incidence of tropical diseases tends to concentrate in areas with high poverty incidence. Examples of these diseases that are prevalent in Mindanao and the Bangsamoro economies are displayed below together with their estimated foregone benefits.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The overall HDI index of the Bangsamoro economies showed that Lanao del Sur, Basilan, Maguindanao, and Tawi-tawi registered biggest declines of their 2009 HDI when compared with their 1997 HDI and belong to the bottom 10 among provincial HDI performance. These were largely due to sharp dips in their respective income and education indices.

 

Largest losses in HDI when inequalities were introduced for each of the HDI component were observed in Sulu, Maguindanao, Tawi-tawi, and Lanao del Sur indicating an urgent need to address both the inadequacy of and disparities in access to income opportunities, education, and health-related factors.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agenda for inclusive growth: agriculture and rural development for Bangsamoro

 

The dismal socio-economic profile of the Bangsamoro economies discussed earlier clearly shows that these economies are trapped in what we would call the low equilibrium stage of underdevelopment. In many ways, it is the combined outcome of the prolonged conflict and the long lopsided growth strategy of the country that favored spatially few centers of growth and sectors. The trickle-down effect of this growth strategy has been sorely inadequate to make a dent on the already entrenched state of underdevelopment of the Bangsamoro economies. To shift into an inclusive high growth rate strategy that can significantly and effectively accelerate the country’s structural transformation from low to upper middle income rank would require a more spatial and differentiated sector focus.

 

In 2013, the Aquino government has taken the first major step toward a more broad-based growth when it revised the Philippine Development Plan of 2011-2016 to integrate the spatial and sector dimensions to its inclusive growth strategy. Specific interventions are targeted in addressing the needs of the people in provinces with the (biggest) number of poor households (Category 1 provinces), provinces where the proportion of poor households is high (Category 2), and provinces exposed to multiple hazards (Category). The main components of the spatial and sector thrust are as follows:

 

In this regard, the signing of the CAB recently is the first milestone event toward opening the opportunities for the Bangsamoro economies to move out of the vicious cycle of underdevelopment and contribute significantly in the attainment of the country’s inclusive growth pathway.

 

Moving out of underdevelopment would require foremost strategic affirmative actions from the government in terms of infrastructure investments as well as policy and institutional measures. With the decades of neglect and unstable peace and order situation, one cannot expect the influx of private sector investments in these economies. Business confidence has to be regained, and the economies’ assets (natural resources, human capital, local governments) have to be reinvigorated. Investing on where the Bangsamoro economies have a comparative edge, while addressing the inadequacy and inequalities in the access to economic opportunities and basic services particularly health and education, would be the key startup costs of the government in enabling the Bangsamoro economies to put themselves on the virtuous track of sustained development.

 

Bangsamoro economies have a comparative edge in agriculture and if given the appropriate boost, have potentials on agriculture-rural related supply chain activities and services. GRDP share of agriculture, fishery, and forestry was more than 63% in 2010-2013. The sector also absorbs the bulk of the economies’ workforce.

 

Agriculture activities are quite diversified. Major food crops include cassava, corn, coconut, and rice. In 2013, the Bangsamoro economies registered a positive growth rate of 12%, the second highest in the country. Aside from coconut production, there has been a rising trend for plantation crops such as rubber and oil palm, banana, mango, and cacao production. Livestock and fisheries are also major business activities particularly goat, cattle, poultry, commercial fisheries, and seaweed. Halal products and services are rising areas for downstream activities.Commodities and their potential ancillary upstream and downstream activities of which the Bangsamoro economies can build their comparative advantage are shown in the table.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

What will be the key areas for government interventions that will improve the business climate in Bangsamoro economies while ensuring effective and efficient linkage of these economies on inter-sector basis (e.g., upstream and downstream activities related to cacao production: upstream would be input services, and downstream would be domestic and foreign markets for chocolate products), rural-urban levels (far flung municipalities with their urban centers like Cotabato City), inter-provincial (Bangsamoro with Mindanao, Luzon and Visayas), and inter-regionally (e.g., BIMP-EAGA, ASEAN)?

 

These are schematically outlined below:

 

Physical productive and market infrastructure

 

Irrigation that is crop neutral: In 2010, the irrigable area of Bangsamoro economies was 156,720 hectares. Of this only 15% was irrigated, the lowest among regions, and mostly for palay production, the bias of national irrigation program.

 

Because of the low-value nature of palay production and there are other high value crops grown in the Bangsamoro (i.e., bananas, corn, cassava, pineapple, rubber, and palm oil), there is a need to expand the irrigation intensity that will most especially encourage crop diversification while ensuring more crop per drop. Mitigation measures will also need to be introduced to ensure that farmers in the region become more resilient to climate change.

 

Research and development that is not just focused on rice. It was noted that a 1% investment in R&D for agriculture as percentage of GDP results to more than 1% growth rate in GDP and 1% reduction in poverty. In the Philippines however, R&D investments for agriculture hardly reached 0.1% share. More importantly, investments were disproportionately lopsided in favor of rice research (to achieve its elusive goal of self-sufficiency) and away from more agriculture dominated and poverty stricken areas. R&D on producing more crop per water and use of inputs will be vital in addressing the increasing scarcity of water, land and high cost inputs like fertilizers and chemicals. It will also be crucial in addressing health related deficiencies affecting children and other vulnerable groups.

 

Market infrastructure and facilities networks that connect production centers with their input suppliers and urban consumers in Bangsamoro, Mindanao, Visayas, Luzon, and BIMP-EAGA. Aside from farm-to-market roads, small port and river infrastructure facilities (e.g., ro-ro), as well as small airport hubs with clustered collection and warehouse facilities that have appropriate post-harvest facilities and services are needed. According to an empirical study done on rural connectivity of the supply chains for rice, corn, Cavendish bananas in Mindanao, inadequate and poor farm-to-market roads were key to high production and marketing costs of farmers for these commodities (UP Mindanao, 2014). More importantly, it highlighted the need for lowering the domestic freight costs through more appropriate domestic freight policies. As a result of the huge costs entailed in freight, rice and corn supply from Mindanao had significantly been reduced since 2011.

 

Aside from farm-to-market roads, better access to market information through more reliable mobile provision would be important in the networking of supply chain actors as well as their effective links with the consumer market, especially as markets are becoming more urbanized (Readron, et al, 2012).

 

Electricity grids that enable post-harvest development and reduce costs in all supply chain segments will have to be developed. Costs in the supply chain can be significantly affected by high energy cost. Energy development will require different approaches in the Bangsamoro because of the current power-generating structure. While those in the mainland (Maguindanao and Lanao del Sur) are connected to the main Mindanao grid, those in the BaSulTa provinces rely on stand-alone power generators. What is critical is to develop a “payment-for-service” culture among consumers in the region to ensure sustainability and promote public-private partnerships in promoting greater power generation capability using natural assets found in the region (i.e., hydropower, natural gas, etc.)

 

Social infrastructure and facilities

 

Expansion of quality basic and secondary education and addressing high adult illiteracy. Countries which have made significant in-roads in the development race are those which have invested heavily in the improvement of their educational system. Education not only increases levels of productivity of the workforce but also bestows them the ability to achieve major scientific and technological breakthroughs. The Bangsamoro area has a long way to go in the human capital development ladder. But as a start, it has to improve the quality of basic and secondary education to be able to provide a labor force that will be competent enough to respond to the basic skills demand of agriculture and manufacturing production. Moreover, there is urgency in addressing the serious problem of adult illiteracy in the region if the development potentials of its people will be properly tapped. It is a stylized fact that those who are not educated have little chance of improving their socio-economic standing.

 

Short term training and vocational skills that are demand-driven particularly targeting the youth and unemployed will be a major boost in promoting stability in the region. The conflict literature has shown that the presence of a large pool of unemployed youth is a contributory factor to violent conflict. Finding productive employment for this group of people will not only reduce incidence of violent conflict but will also harness their potentials to contribute to the development of the Bangsamoro region.

 

Expansion of health services is an urgent agenda in the Bangsamoro given the dismal situation in the region. Massive infant and child immunization, provision of potable water (Level 2) and sanitary toilets, and school feeding program to address widespread child malnutrition are some of the obvious tasks that should be implemented during the transition period of the Bangsamoro Government. Their provision will not only strengthen stability but more importantly, ensure a healthy people able to address development challenges facing the Bangsamoro.

 

Institutions matter

 

Finally, the institutional arrangement and mechanism that will ensure that services are delivered in an uninterrupted and accelerated fashion will have to be discussed and formulated now even as the Bangsamoro formally takes the reign of government with the installation of the BTA. The transition challenges are humungous and it will require numerous highly qualified Bangsamoro to address them. Capability-building of the Bangsamoro will not be a sufficient response to the transition challenges. It will require capacity-mobilization of qualified Bangsamoro inside and outside the region and the country to address some of the technical problems during the transition period. This calls for greater inclusivity on the part of the Bangsamoro leadership, which the MILF Chairman has repeatedly emphasized as the policy of the Bangsamoro Government. The challenge now is to turn this policy pronouncement into operational terms.