Changes Down South

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A series of plans announced over the past few weeks promise to reshape Mindanao's economy in important ways, with the aim of developing transport infrastructure and energy resources.

Mindanao, which is the Philippines' second-largest island, occupies one-third of the Philippines' total land area and has a quarter of the country's population. While less developed economically, Mindanao accounts for over 40% of the Philippines' food requirements and contributes more than 30% to the national food trade. It grows most of the Philippines' major crops such as rubber (100% of national production), pineapple (91%) and cacao (90%), as well as bananas, coffee, corn and coconut (over 50%). The island also has in its favour an abundance of natural mineral resources, with gold mined in Mindanao accounting for nearly half of the national gold reserves.

The agriculture sector's double-digit growth over the past few years has strained the island's aging road network and underdeveloped ports. Consequently the ports and roads that are vital to the shipment of the island's agricultural goods have been stretched to capacity. As a result, shipping meat products and other agricultural goods from Mindanao to Manila is, in many cases, more expensive than shipping from Australia.

To address this issue, the Regional Development Council announced on March 17 that it would endorse P15.6bn ($376m) of capital investment over 2009, the bulk of which would go to infrastructure developments and improvements in public services.

These projects call for P4.5bn ($108m) of federal investment in the funding of road projects while P3bn ($72m) will be channeled to develop the island power supply. Additionally, P1.4bn ($33m) will be directed to the funding of port upgrades, P1.4bn ($33m) to medical and hospital improvements, and P1.3bn ($31m) will be dedicated to the department of education.

The government anticipates that investments in these areas will serve to shorten delivery time between the farm and the grocery shelf. Of particular hope is an island-wide farm-to-market road network, which will allow lorries to move about the island more quickly.

Another area which will see large investments is sea and air infrastructure. Both are part of a broader plan to integrate the island's economy into the wider Brunei Darussalam-Indonesia-Malaysia-Philippines - East Asian Growth Area (BIMP-EAGA), underscoring its potential to be a major transshipment point and centre of trade in the region.

Sea links will allow mining and agricultural goods to move between these areas more easily while airports will foster more open labour markets, tourism and greater economic integration.

It is also expected that the importance the government is placing on this area will attract investment to the island's logistics industry, which has endeavoured to keep pace with changing technology. The sector currently lacks sufficient capacity in key areas such as refrigerated trucks and other "cold-chain" technologies that are vital to the shipment of meat products and other agricultural goods.

Meanwhile, developing energy resources is part of a broader plan to attract new industries to the island's shores. Among these are manufacturing, real estate and the business process outsourcing (BPO) industry in Davao, the island's capital.

The BPO industry has been flourishing in places like India and the Philippines as Western firms, seeking to cut costs, began outsourcing call centres several years ago. The industry is expected to expand to $310bn by 2010, with the Philippines taking about an estimated 10% of the global market.

The Davao City Investment and Promotion Centre (DCIPC) believes that Davao's lower wages, lower real estate costs and educated labour force could attract many of the new investments expected in this sector over the next several years. To aid the fledgling industry, the DCIPC recently announced that it would make 20,000 sq metres of city space available for call centre operations in the coming months.

These initiatives are just examples of the upcoming development in Mindanao. Projects in bio-fuels, real estate, and hydroelectric power generation have all been announced since the beginning of the year. These projects, will almost certainly not solve the island's largest dilemma - an ongoing struggle with Islamic separatists. However, they will bring economic stability and prosperity to many more of the island's residents, which may convince many of those taking up arms that being part of the broader nation is in their interest.

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