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Cablegate: Mindanao: An Economic Overview

VZCZCXYZ0001
OO RUEHWEB

DE RUEHML #1610/01 1900911
ZNR UUUUU ZZH
O 080911Z JUL 08
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1196
INFO RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
RUCPDOC/USDOC WASHDC IMMEDIATE
RHHMUNA/CDR USPACOM HONOLULU HI//FPA//

UNCLAS MANILA 001610

SIPDIS, SENSITIVE

STATE FOR EAP/MTS, EAP/EP, EEB/IFD/OMA
STATE PASS EXIM, OPIC, AND USTR
STATE PASS USAID FOR AA/ANE, AA/EGAT, DAA/ANE
TREASURY FOR OASIA
USDOC FOR 4430/ITA/MAC/ASIA & PAC/KOREA & SE ASIA/ASEAN

E.O. 12958: N/A
TAGS: ECON EFIN ETRD EINV PGOV RP
SUBJECT: Mindanao: An Economic Overview

Ref: Manila 1050

1. (SBU) Introduction and Summary: Misconceptions abound, both
inside and outside the Philippines, about the large southern
Philippine island of Mindanao, where the USG focuses its development
and counterterrorism activities in the Philippines. In particular,
it is easy to over-generalize about a region this large and diverse.
This is the first in a series of reports on Mindanao that will
highlight the diversity of the economic circumstances of different
regions in order to provide a more textured understanding. In this
cable we attempt to make an initial approximation to understanding
the economic situation of Mindanao as a whole. Following cables
will focus on specific regions and issues. Mindanao includes some
regions afflicted by political disorder and poverty, and others that
are relatively stable and prosperous. Some parts of Mindanao are
growing rapidly while others are among the poorest places in the
Philippines. End summary.

Both Rich and Poor
------------------

2. (U) Mindanao, the Philippines' southernmost region, is one of
the richest areas of the country in terms of natural resources. The
region is the country's top producer of fruits, grains, minerals,
and forest and marine products. Nonetheless, the people of Mindanao
suffer some of the most oppressive poverty in the Philippines. In
Tawi-Tawi province, for example, close to 40% of the population are
unable to afford even basic food requirements. According to United
Nations data, the human development index of some of Mindanao's most
depressed provinces approximate the world's poorest countries such
as Ghana, Sudan, and Zimbabwe.

Administration of Mindanao
--------------------------

3. (U) Mindanao, including the Sulu archipelago, consists of the
Autonomous Region of Muslim Mindanao (ARMM) and five other
administrative regions, each with quite different economic
characteristics. Mindanao has about 39 percent of the Philippines'
total land area, and contains a quarter of its population, but
produces only about 18 percent of the country's gross domestic
product. The latest population census (2007) reveals that the
population growth rate of Mindanao remains high (2.5 percent),
stretching available resources among more people. The population of
Mindanao consists of descendents of Christian settlers from other
parts of the Philippines (72 percent), Islamized indigenous people
(20 percent, but a majority in Muslim Mindanao) and non-Islamized
indigenous people (eight percent).

Overview of the Mindanao Economy
--------------------------------

4. (U) Mindanao contributes about a fifth to the Philippines' total
Gross Domestic Product. It produces about 34 percent of the total
agricultural production of the Philippines, 15 percent of industrial
production, and 13 percent of services. Mindanao's economy is about
evenly distributed among the agriculture (35 percent), services (35
percent), and industrial sectors (30 percent). Before 1995,
Mindanao was predominantly an agricultural-based economy. In recent
years, Mindanao has been able to attract investments in mining and
quarrying, telecommunications, business process outsourcing, trade,
and tourism. These investments have resulted in the significant
growth of the service sector and the mining industry.

5. (U) Mindanao's top five exports in 2007 by value were coconut
(copra), bananas, nickel ores, tuna, and iron ore; while its top
five export markets were Japan, the United States, China, the
Netherlands, and South Korea. Exports from Mindanao increased
nearly 25 percent in 2007. In addition to the most productive
agriculture and fisheries grounds in the Philippines, Mindanao is
rich in mineral resources, including coal, nickel, iron, chromites,
and gold. It has nearly half of the country's gold reserves and 83
percent of the nickel reserves in the country, which are the largest
in Asia.

Mindanao and the rest of the Philippines
----------------------------------------

6. (U) The latest National Statistic Coordination Board report on
poverty issued in April 2008 (reftel) identified Mindanao, on
average, as by far the poorest part of the Philippines. The report
indicates that 62 percent of families in Mindanao live below the
government-established poverty threshold. The ten richest provinces
during 2006 were all on the northern Philippine island of Luzon,
where Manila is located, while six of the ten poorest provinces were
in Mindanao - three of them in the ARMM. The highest incidence of
poverty in the country, at nearly 80 percent of the population, was
for Tawi-Tawi, part of the ARMM. Parts of Mindanao also lag the
rest of the Philippines on human development indicators such as per
capita income, literacy rates, life expectancy, and access to health
services. In 2000, eight out of the ten worst-off Philippine
provinces in terms of the United Nations Development Program's Human
Development Index were in Mindanao.

7. (SBU) An official of the Moro Islamic Liberation Front recently
claimed that these statistics confirm the "neo-colonialism of
Mindanao by imperial Manila." Some Philippine economists agree that
the lack of economic development in Mindanao is partly due to
neglect by the central government. The historic lack of central
government spending on infrastructure projects in Mindanao has
resulted in slow, costly, infrequent, and unreliable transportation
links to the rest of the Philippines. Even today, prominent
Mindanao business and political leaders complain that Mindanao does
not receive its "fair share" of central government spending. Not
only Muslim separatists, but also some mainstream politicians and
business leaders in Mindanao strongly endorse proposals for more
regional autonomy and more local control of local resources.

Mindanao's Urban Bright Spots
-----------------------------

8. (U) In sharp contrast to this extreme poverty, Mindanao cities
like Cagayan de Oro, Davao, and General Santos, rank among the most
developed and prosperous cities in the Philippines. The Philippines
National Statistics Office stopped stratifying urban and rural
poverty in the year 2000, due to a lack of funding to conduct the
more extensive surveys required to make this distinction. Thus, it
is difficult to quantify how much poverty is in rural areas versus
in urban areas. However, empirical and anecdotal evidence indicates
that the areas with the most poverty, lowest education levels, and
greatest health problems are primarily rural areas.

9. (U) Cagayan de Oro City in northern Mindanao has the fastest
growth rate and highest per capita GDP of any Philippine city not on
Luzon Island. The factors that make the city relatively prosperous
include unique geographic advantages, its distance from
conflict-affected areas, local economic policies that have attracted
infrastructure, industrial and power generation investment, and
development of relatively inexpensive transportation links to other
parts of the country. It has the largest international and domestic
seaport in Mindanao. Cagayan de Oro City has a new Korean-owned
luxury hotel and golf course, and a rapidly growing container port
(and a second rapidly growing container port nearby). Also nearby
is a new $305 million coal-fired power plant. The city's biggest
coup was landing a commitment by the Korean Hanjin Corporation to
construct a $2 billion shipbuilding facility that promises to bring
many other investments in its wake, potentially providing employment
for tens of thousands of workers, according to Philippine Trade and
Investment officials.

10. (U) Davao, in southern Mindanao, is a relatively prosperous and
progressive city with an economic base quite different from that of
Cagayan de Oro. Davao has relied heavily on exports of agricultural
products, particularly bananas; and it has recently begun developing
new export markets in Russia and the Middle East. An improved road
between southern and northern Mindanao has reduced travel time by
over half and opened new possibilities for trade with other parts of
the Philippines. Overall, the Davao region's exports grew by 10.5
percent in 2007. Region 11, in which Davao is located, has the
lowest poverty incidence among Mindanao regions, and Davao City has
one of the lowest crime rates of any city in the Philippines.

11. (U) General Santos City is another southern Mindanao city that
has achieved a relatively high level of development. U.S.
development assistance in the 1990's helped the Port of General
Santos become one of the country's most modern, and financed an
international airport in the city. The General Santos Fishport
Complex -- funded in part by Japan's Overseas Economic Cooperation
Fund -- is the Philippines' second largest port for fishing boats.
The Complex services fishing boats and processes fish for boats from
several Asian countries. General Santos is the country's leading
producer of sashimi-grade tuna and largest tuna exporter (the
Philippines ranks among the top ten tuna producing countries in the
world.)

Barriers to Economic Growth
---------------------------

12. (SBU) All the regions of Mindanao suffer from the same barriers
to economic growth that afflict the whole country, though in some
cases they are more acute in Mindanao. These include the
concentration of economic and political power in the hands of a few
families resulting in cartelization of key sectors, widespread
corruption, and weak rule of law. Also shared with the country as a
whole are the logistical disadvantages of an archipelagic country.
Some deficiencies in Philippine economic policies have even greater
impact on Mindanao than on other parts of the country. For example,
restricted entry and cartelization of the maritime shipping industry
and the poor record of the Philippine Ports Authority both make
transport of cargo and passengers from Mindanao to the rest of the
country unreasonably expensive.

13. (SBU) Mindanao, however, also has its own challenges. Some
parts of Western Mindanao and the Sulu Archipelago suffer from
frequent bouts of secessionist violence and terrorism, while a
simmering communist insurgency affects other parts of the region and
apolitical banditry affects much of Mindanao. Traditional Mindanao
attitudes are also a challenge. The tradition of "rido" or "blood
feud" across and even within the different ethnic groups of the
region adds to the violence. Some observers assert that the
traditional culture of indigenous peoples in Mindanao supports
authoritarian power structures where a single individual often
exercises control over the resources and people of a district. This
traditional outlook may encourage local leaders to view public
assets as personal property and lead to even more severe governance
problems than found in other parts of the Philippines.
Under-investment in infrastructure, education and health care,
endemic throughout the Philippines, has been particularly severe in
Mindanao.

14. (SBU) Comment: Mindanao is a remote and often misunderstood
region. It is also a key region for U.S. interests, as it is on the
front lines of the war on terror. This series of cables will focus
on its economic complexity with an eye to identifying fundamental
problems and, where possible, potential solutions.

Kenney

© Scoop Media

 
 
 
 
 
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