Bangsamoro Peace Deal to Attract More Investments in Mindanao
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BUSINESSBUBUSINESSSINESS 31 Bangsamoro peace deal to attract more investments in Mindanao The signing of the peace deal promises lasting peace in the region and is expected to foster inclusive growth by attracting investments that will generate more jobs and livelihood. redit rating fi rm Moody’s said that the signing of the Comprehensive Agreement on the Bangsamoro (CAB) Cis a “credit positive” for the Philippines noting that Bangsamoro has a greater chance of success than previous attempts given its greater fi scal autonomy. Moody’s projects that the peace deal will allow for the development of different industries especially agri-business given the region’s vast tracts of arable land estimated at 34,000 square kilometers. Bangsamoro hosts the 2 biggest irrigation systems (Kabulnan and Maridagao- Malitubog) in Mindanao capable of supporting 45,000 hectares of farms. In terms of power supply, it hosts the National Power Corporation’s Agus River Power Complex which is the major source of electricity (730 megawatts) for the Mindanao grid. According to the ARMM Business Council (ARMM-BC), the region has vast potential for palm oil, rubber, coconut, and hopes that investments will further increase as the region gains aquaculture, fi sheries and many other agri-business activities. more confi dence from investors. In 2013, Iron Blaze, a Malaysian It is ideal for businesses to position themselves early in the oil company invested P90 million for the construction of an oil Bangsamoro economy considering that there is still no signifi cant depot in Maguindanao. La Frutera, a banana exporting fi rm also market competition. The Department of Trade and Industry located in Maguindanao, spent P300 million for the expansion is eyeing to meet global demand for rubber so it is currently of its 1,000 hectare plantation farm to 1,300 hectares. Recently, developing the rubber industry in the region. ARMM has 30,000 Al Mujahidun Agro Resources and Development, Inc. signed an hectares of fertile land for rubber and is among the country’s top agreement with the provincial government of Maguindanao to producers. Oil palm farming and coconut plantations are also convert the 2009 Ampatuan massacre site into a 1,500 hectare gaining ground in the region with 12,550 hectares identifi ed for banana plantation farm that could employ at least 2,000 residents. plantation. ARMM is also home to rich fi shing grounds and is Furthermore, the government considers the Bangsamoro the top source of up to 70% of the country’s seaweed production. as a unique investment hub because of its Islamic roots. In 2013, the ARMM-Regional Board of Investments said that According to ARMM-BC, Bangsamoro is strategically placed actual investments in the region rose from P569 million in 2012 to for various ventures under the Brunei, Indonesia, Malaysia, and P1.5 billion in 2013. It generated about 2,000 jobs. ARMM-BOI Philippines-East ASEAN Growth Area. These areas share the attributed the signifi cant increase to the Bangsamoro peace process same culture and could easily link with each other. The growing Philippine ANALYST March 2014 32 BUSINESS It is ideal for businesses to position themselves early in the Bangsamoro economy considering that there is still no signifi cant market competition. global industry for “halal” food and lifestyle products — ones HOG MEAT PRODUCTION, 2003-2013 that meet Islamic law standards of manufacture – is a huge (IN ‘000 METRIC TONS) opportunity for investors. Banks that offers Islamic banking 2,100 and fi nance will also be needed as Islamic religion does not 2,000 allow Muslims to access fi nancial support based on interest. Meanwhile, the Bangsamoro Development Agency has 1,900 just started formulating a 6-year Bangsamoro Development Plan (2014 – 2019) which identifi es necessary investments and 1,800 programs to promote inclusive growth in the region. The BDP is 1,700 funded by a grant from the Mindanao Trust Fund administered by the World Bank. It is composed of 2 phases. The 1st phase 1,600 (2014-2015), the Transitional Development Plan, will lay the 1,500 direction for existing and immediate programs starting this year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 until 2016 to ensure the smooth transition of the Bangsamoro. Source: Bureau of Agricultural Statistics. The 2nd phase (2016-2019), the Medium-Term Development Plan, will focus on strategic interventions and investments that HOG INVENTORY,2000-2013 promote inclusive growth to ensure security, stability and job (NUMBER OF HOGS RAISED IN FARMS) creation. The BDP is expected to be completed by end-May. 14,500 14,000 13,500 13,000 Local hog industry must fi rm up for AEC 2015 12,500 12,000 The local hog industry needs to prepare itself for the 11,500 incoming Association of Southeast Asian Nation (ASEAN) 11,000 economic community 2015 as trade liberalization could 10,500 disrupt domestic competitiveness. 10,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 The livestock industry, which includes swine production, Note: In 2008, yellow corn wholesale and retail prices surged by almost 15%, the peak price is an important part of Philippine agriculture, comprising growth since 1991. 11% of the sector and growing by 1.8% in 2013 amidst other Source: Bureau of Agricultural Statistics agricultural industries contracting. Hog meat production, in particular, has been increasing by 2% annually for the past decade, with 2 million metric tons (MT) produced in 2013 highlighted ways to bolster competitiveness of the hog industry. compared to 1.7 million MT in 2003 (see chart). Most local One of its points is the importance of innovations that enhance hog raisers cater to the local market compared to food grains the effi ciency of meat production. Since new technologies are such as rice which are normally exported. Hog imports in 2013 provided by multinational companies, the government must create amounted to 185,000 MT, while exports only reached 2,000 MT. a better investment climate and relax certain economic policies. Pork imports in the country have already doubled since Additionally, the government must impose policies that 2010 when the common effective preferential tariff on goods, facilitate the availability of needed feed ingredients to help lower including meat products, was gradually relaxed from 5% to domestic feed prices. In this case, the Philippine government 0% in line with the AEC. The national government has not must take advantage of the AEC to support the import of provided any AEC-related incentives to the hog industry ingredients such as corn, which is a highly protected product. while other ASEAN governments provided subsidies to help The SEARCA study also pointed out the underinvestment their domestic producers compete regionally. Philippine hog of the government in livestock research since the 1990s raisers have had to compete with increased subsidized imports. and the scarcity of fi nance intermediation for the industry. Competitiveness of the local industry is further affected by For their part, local hog producers choose to remain optimistic unfavorable input price changes. A 2008 increase in the price about ASEAN free trade. The Philippine Association of the Meat of corn, an essential ingredient in hog feed, caused some local Processors (PAMPI) said that pork production in the country can farms to close, resulting in a dip in the inventory and production compete with increasing ASEAN imports because of Filipinos’ (see chart). With trade liberalizing and prices rising, the pressure preference for fresh meat, with wet markets present everywhere in on the local hog industry to remain competitive has heightened. the country. The PAMPI added, “Our spirit of ‘Think Filipino and In one of its studies, the Southeast Asian Regional Center Buy Filipino’ will carry us through against the highly subsidized for Graduate Study and Research in Agriculture (SEARCA) agricultural commodities of our neighboring countries.” Philippine ANALYST March 2014 BUSINESS 33 The government must facilitate the transfer of meat production technologies domestically by making a better investment climate and relaxing certain economic and trade policies. MINING, OIL, & GAS Other indices in the survey include the Best Practices Mineral Potential Index (BPMPI), Investment Attractiveness Index (IAI) and Current Practices Mineral Potential Index (CPMPI). The study seeks to identify the provinces, states, PH has world’s 3rd worst mining policy and countries that have the most attractive environment that regime encourages mining investments based on 15 factors (see box). The country ranked 6th in the BPMPI. The index rates a According to Fraser Institute’s 2013 Annual Survey of country’s geological attractiveness regardless of its mining Mining and Exploration Companies, the Philippines has policies. The maximum score possible on this index is 1 and the the 3rd worst mining policy regime. The survey measured Philippines got 0.79. The 3rd index, IAI, is constructed by combing how resource endowments and government policies affect the PPI (40% weight) and BPMPI (60%) scores. The maximum score possible on this index is 100. The Philippines scored mining investments. It involved 690 respondents from 51.4 (61st). The fi nal index, CPMPI is based on respondents’ different exploration, development, and other mining-related answers to a question about whether or not a jurisdiction’s companies around the world. mineral potential under the current policy environment encourages or discourages investments. The highest score is The Philippines ranked 110th out of 112 countries in the 1. Western Australia topped with the score of 0.73, Ecuador survey’s Policy Perception Index (PPI) which measures the at the bottom scoring 0.05 while the Philippines 0.23 at 86th. attractiveness of a country’s mining policies. It is standardized Aside from these indices, respondents were asked how public to a maximum score of 100 with the Philippines only scoring opposition to mining affects the approval process of projects 9.5.