Attracting Investments in Mindanao: The IDC Edge

Cielito F. Habito
Mindanao Economic Adviser

Whos Afraid of Mindanao?

Unstable peace and order Poor/inadequate infrastructure Uncertain land access and security Tight electric power situation Governance & institutional issues (graft & corruption, weak capacity) Inadequate budgetary support for critical needs Highly unskilled labor force

Why Mindanao?

The Mindanao Edge

Superior agro-climatic conditions Abundant primary resources Lower wage rates (both official and de facto) Lower power cost (but supply reliability a problem) Vast opportunities for growth and diversification: BIMP-EAGA connection Growing faster than rest of country

Why Muslim Mindanao?

Not Just Charity

Second poorest region in country Need to break the vicious cycle of
Low Investment Poverty & Conflict

Has large areas of fertile but unused land Wage rates among lowest in country Risks/dangers tend to be exaggerated Large potential gains for first movers

Crops of Choice
Coconut needs massive revival

(fertilization, replanting); higher-value products other than copra/oil for new investments; steady cash flow for farmers easy to grow, steady cash flow (ATM machine); need more processors

Oil Palm great potential, much scope

Rubber attractive to smallholders,

Crops of Choice
Coffee, Cacao much scope for import

substitution; Nestle buys bulk of production; good intercrop Cassava San Miguel Corp. reportedly prepared buy all production; existing processing capacity Banana time-tested $ earner Seaweeds large market, but credit now a constraint

Business Models:

How to Do It?

hinges on enlightened leader Contract farming (Agumil) monopsony (?); polevaulting risk Central management approaches (Develop-Manage-Transfer) e.g. Malaysias FELDA (public lands) and FELCRA (private lands) Cluster farming (NGO/PO-facilitated) (Kasanyangan Foundation, Normin Veggies)

Corporate farm (La Frutera Model)

Documenting Successful Investments in ARMM

Braving It and Making It:

Insights from Successful Investors in Muslim Mindanao

Highlights

Firms Who Braved It and Made It

La Frutera Inc. Cavendish Bananas Agumil Philippines Inc. Palm Oil BJ Coconut Oil Mill - Coconut Oil Matling Industrial & Commercial Corp. Cassava Processing, etc. EA Trilink Corporation ICT and Telecoms Air21 Marawi City Logistics

General Insights/Lessons
Value of partnership with influential local leader: Land access & security, HR management Trust & confidence building are key Work within cultural norms of work force and community Creativity & resourcefulness Think out of the box Government support is important Invest in own power supply, especially in short to medium term

Imperatives
Omnibus Investment Code for ARMM Financing facilities for agribusiness tree crops to match gestation periods Need for investment insurance facilities Beyond promotion: Investment facilitation Wanted: Enlightened LGU governance LGU clustering to permit scale economies

Why IDC? Clusters of the Willing

LGU Clusters demonstrate clear commitment to development Pooling of resources & efforts brings greater efficiency Can collectively offer scale economies not possible with individual LGUs IDC has invested in a knowledge base that helps facilitate business Other peculiar advantages

Other LGU Clusters

SLAM (Southern Liguasan Alliance of Municipalities)
Datu Paglas Paglat Sultan sa Barongis Salipada K. Pendatun

Wao & Bumbaran Lanao del Sur PALMA North Cotabato More

The IDC way is the way of the future toward a progressive and self-reliant selfMindanao. Thank You!