Challenges and Opportunities ONE ASEAN COMMUNITY FORUM

Challenges and Opportunities ONE ASEAN COMMUNITY FORUM
ASEAN Integration: Challenges and Opportunities ONE ASEAN COMMUNITY FORUM AVR 1, 2nd Floor, BA Bldg, University of Mindanao Bolton March 6, 2015 A presentation by Dir. Romeo M. Montenegro, Head of International Relations, Investment Promotion and Public Affairs, Mindanao Development Authority (MinDA)

Economic Integration Structure
WTO A PEC Overarching institution A S E A N Regional level Subregional level

So what is economic integration all about?
In the context of ASEAN… Narrowing development gap Achieving inclusive growth Sustainable development

ASEAN: ONE VISION, ONE IDENTITY, ONE COMMUNITY
Hua Hin Declaration LAOS MYANMAR INDONESIA MALAYSIA PHILIPPINES SINGAPORE THAILAND Master Plan of ASEAN Connectivity (MPAC) Cebu Declaration 1st ASEAN Summit BRUNEI 1995 1999 2008 2011 1967 1976 1984 1997 2009 2010 2007 Treaty of Amity and Cooperation (TAC) Bali Concord III On 8 August 1967, five leaders sat down together in the main hall of the DFA building in Bangkok, Thailand and signed a document. By virtue of that document, ASEAN was born. The 5 foreign ministers who signed it—Adam Malik of Indonesia, Narciso R. Ramos of the Philippines, Tun Abdul Razak of Malaysia, R. Rajaratnam of Singapore, and Thanat Khoman of Thailand—would subsequently be hailed as the Founding Fathers of probably the most successful inter-governmental organization in the developing world today. And the document that they signed would be known as the ASEAN Declaration. It was short, simply-worded document containing just 5 articles. It declared the establishment of an Association of Regional Cooperation among the Countries of Southeast Asia to be known as ASEAN and spelled out the aims and purposes of that Association. These aims and purposes were about cooperation in the economic, social, cultural, technical, educational and other fields, and in the promotion of regional peace and stability through abiding respect for justice and the rule of law and adherence to the principles of the UN Charter. It stipulated that the Association would be open for participation by all States in the Southeast Asian region subscribing to its aims, principles and purposes. It proclaimed ASEAN as representing “the collective will of the nations of Southeast Asia to bind themselves together in friendship and cooperation and, through joint efforts and sacrifices, secure for their peoples and for posterity the blessings of peace, freedom and prosperity.” Cebu Declaration on the Acceleration of the Establishment of an ASEAN Community by 2015 WE, the Heads of State/Government of Brunei Darussalam, the Kingdom of Cambodia, the Republic of Indonesia, the Lao People's Democratic Republic, Malaysia, the Union of Myanmar, the Republic of the Philippines, the Republic of Singapore, the Kingdom of Thailand and the Socialist Republic of Viet Nam, Member Countries of ASEAN, on the occasion of the 12th ASEAN Summit in Cebu; ACKNOWLEDGING the prescience of ASEAN Vision 2020 and the significant and important progress that ASEAN has made towards the goals of that visionary declaration Intergovernmental organization with legal personality Its aims and purposes include: accelerate economic growth, social progress and cultural development in the region promote regional peace and stability Adheres to consultation and consensus as basis of decision making With the adoption of the ASEAN Charter in 2008, ASEAN intends to build a solid institutional framework that will facilitate a more focused and coordinated agenda CAMBODIA VIET NAM ASEAN COMMUNITY 2015

ASEAN: Fast Facts A very big and fast growing market
10 member states at varying economic development 610 million people, which is 8.8% of the world's population Combined GDP of US$ 2.34 Trillion with an average GDP per capita of US$ 3,787 As a single entity, it ranks as 8th largest economy in the world

ASEAN: Fast Facts The ASEAN six major countries (values in US$):

ASEAN: Fast Facts Human Development Index (HDI) Performance:

ASEAN Dialogue and Development Partners
ASEAN – Australia ASEAN – Canada ASEAN – China ASEAN – European Union ASEAN – India ASEAN – Japan ASEAN – New Zealand ASEAN – Republic of Korea ASEAN – Russia ASEAN – United States Means greater leveraging and market access

FDI Inflows to ASEAN, 1995-2011 (US$ Million)
FDI inflows to ASEAN have been expanding 2011 ushered in an all-time high level of FDI inflows into the region at $114.1 billion -- a 24% increase over the level in 2010 (figure 1.1). FDI inflows in 2010 rose by 97%, as compared with a year earlier. The 2011 level exceeded the peak of 1997 by 2.2 times and 36% from the peak of the pre-global financial crisis in 2007. These two consecutive years of increase ( ), and the high absolute level of inflows, suggest a growing confidence of investors in ASEAN as an investment destination of choice. New investment and expansion of existing operations by TNCs continued to surge to a level not witnessed before. The solid FDI performance in 2011 was also contributed to by strong M&A sales, a record increase in intra-ASEAN investments and a rise in FDI from emerging sources, in particular China. FDI to the three economic sectors, namely the tertiary, primary and manufacturing rose, which also helped push up inflows in 2011. This increase is significant in four respects that suggest the emergence of a new period of sustained high FDI inflows at levels exceeding those in the preceding period. First, FDI inflows maintained the strong growth momentum of Second, the significant increase took place against the backdrop of a global economic slowdown and fiscal crises in some major economies. Third, reinvestment1 remained high, which suggests 1 Measured by reinvested earnings.4 ASEAN INVESTMENT REPoRT 2012: The Changing FDI Landscape a favourable experience by existing investors, deeper TNC engagement with the region and that ASEAN is increasingly regarded as a competitive place to do business and invest. A number of business surveys have found that firms have recently increased or plan to increase their investments and operations in ASEAN (AmCham-Singapore and US Chamber of Commerce 2012, Wong and Wirjo 2012, and UOB 2012). Fourth, the rise in M&As and the increase in the number of mega deals imply the growing maturity of the region’s M&A environment. High inflows contributed to a rapid growth in the FDI stock to more than $1.1 trillion in 2011, as compared with only $266 billion in FDI stock in the region has quadrupled in little more than a decade, contributing to strong FDI growth and a rapidly changing regional investment landscape

ASEAN Integration Aligned with the three (3) main pillars:
1. ASEAN Political Security Blueprint 2. ASEAN Economic Blueprint 3. ASEAN Socio-Cultural Blueprint

ASEAN Economic Community
Single Market and Production Base Competitive Economic Region Equitable Economic Development Integration into the Global Economy Free flow of goods Free flow of services Free flow of investment Free flow of capital Free flow of skilled labor Priority integration sectors Food, Agri and Forestry Competition Policy Consumer Protection Intellectual Property Rights Infrastructure Development Taxation E-commerce SME Development Initiative for ASEAN Integration Coherent approach towards external economic relations Enhanced participation in global supply networks

Dr. Cielito Habito; Philippine Business and the ASEAN Economic Community: Opportunities and Challenges; AEC Forum, April 2014

Tariff Reduction/Elimination with AFTA
Member Sensitive List Highly Sensitive List Indonesia None Rice and Sugar Malaysia Swine, poultry, orchids, cabbages, bananas, pineapples, guavas, mangoes, and mangosteens, melons (including watermelons), papayas, durians, rambutan, langsat, starfruits, jackfruits, coffee, bamboos, rattans, tobacco and cigarettes Rice Myanmar Philippines Swine, poultry, manioc (cassava), sweet potatoes, maize (corn), grain sorghum, and sugar Singapore none Tariffs on products classified under the Sensitive List have not been eliminated and will instead have end rates of 5% Longer timeframe for tariff reduction/elimination on rice and sugar

Priority Integration Sectors
PIS Services Sectors PIS Goods Sectors Air Transport E-ASEAN Health Care Services Logistics Services Tourism Agro-based goods Automotive products Electronic and electrical goods Fisheries Rubber-based goods Textiles and clothing Wood-based products

Free Flow of Services Provides for greater mobility of ASEAN professionals to provide their services in the region Seven Mutual Recognition Arrangements (MRAs) concluded Engineering Services Nursing Services Architectural Services Surveyors Medical Practitioners Dental Practitioners Accountancy Services In 2009, MRA on Tourism Professionals was adopted

Business Implications
Expect increased competitive pressure Need to increase efficiency Master the rules Safety nets? Forum arbitrage Pressure for better governance: margins for policy mistakes narrower

KEY INITIATIVES IN PREPARATION FOR ASEAN INTEGRATION
Supportive Government Policies Funding Assistance/ Access to Financing Capacity Building provided by govt and private sector Seminars on doing business in Free Trade Areas Set up of National Competitiveness Council Industry Clustering approach Promotion of sustainable food production and strengthening of networks for R&D, techno transfers and farmers coops

Now, the question is…Are we ready?
Now, when it comes the ASEAN Economic Community, it begs the question…Are we ready?

We should be. We must be. We should be. We must be.

Here’s why… Here’s why…

Philippines Shifting to High Gears…
received investment grade ratings from: 1st - Fitch (March 2013) 2nd - S&P (May 2013) 3rd - Moody’s (Oct 2013) World Economic Forum: Ranked 59th from 152 countries in the Global Competitiveness Index (GDI) HSBC: PH will be the 16th largest economy in the world by 2050 World Bank: PH dubbed as the “rising tiger of Asia.”… Institute of Chartered Accountants in England and Wales: PH adjudged as one of the “brightest sparks in the ASEAN region.”… Bloomberg: PH is the 2nd fastest growing economy next to China” The Philippines is gearing up for sturdy growth, posting one of the best economic performances in recent years and validated no less by the world’s leading credit ratings agencies. New tags as “the rising tiger of Asia”…”one of the brightest sparks in ASEAN”… are strong votes of confidence in the country’s strong macro-economic fundamentals coupled with strategic government reforms of the Aquino administration. Source: Mid-Year Philippine Economic Briefing 2013

But wait, let’s take another closer look…

Official AEC Scorecard (As of July 2013)
Implementation of AEC Scorecard Deliverables under Phase I – III (2008 – 13) ASEAN Member State Implemented Not Ahead Ongoing Total Measures* Implementation Rate** Brunei 297 48 18 71 434 86.8% Cambodia 290 56 17 72 435 84.6% Indonesia 289 58 437 84.1% Laos 287 57 16 74 84.2% Malaysia 307 44 20 69 440 88.1% Myanmar 294 51 85.9% Philippines 302 47 19 439 87.2% Singapore 304 38 430 89.5% Thailand 43 88.4% Vietnam 41 73 88.7% The AEC Scorecard is the mechanism developed to track the implementation of the various measures under the AEC Blueprint and its strategic schedules to ensure that the timelines and targets of AEC are met. The AEC Blueprint is monitored in four phases: ; ; ; Overall, the Philippines has demonstrated its commitment to the AEC and the AEC Blueprint, as indicated in the measures that have been implemented over 5th Source: ASEAN Secretariat 24

Assessing Competitiveness: Philippines vs ASEAN
How are we faring? 6th in per capita GDP 6th in Global Competitiveness 6th in Ease of Doing Business 6th in Enforcing Contracts 6th in Logistics Performance 7th in Starting a Business According to the National Competitiveness Council of the Philippines

How are we faring? 7th in Information Technology 7th in Global Innovation Index 8th in Cost of Business 8th in Dealing with Construction 8th in Registering a Property 8th in Ease of Paying Taxes According to the National Competitiveness Council of the Philippines

Creating Productivity Index
How are we faring? Laos (9th) Singapore (10th) Indonesia (12th) Malaysia (13th) Thailand (15th) Vietnam (16th) Philippines (18th) Myanmar (22nd) Cambodia (24th) Out of 24 Asian Countries Creative Productivity Index: Analyzing Creativity and Innovation in Asia by ADB

Areas we fared better: 2nd in Population 2nd in Adult Literacy 4th in Corruption Perception Index According to the National Competitiveness Council of the Philippines

Why does it matter? Ensuring the country’s readiness and competitiveness increases our chances of drawing FDIs: FDIs that are expected to bring in capital to ramp up infrastructure and logistics, set-up manufacturing, processing and value adding centers, establishment of more service facilities--- which all translate to creation of more jobs, and improvement of quality of lives for the people.

FDIs net inflows, intra- and extra-ASEAN
2013 Total Net Inflow per Country (in US million dollars) However, while there has been noted jump from 2012 figures in last year’s FDIs to the Philippines, this obviously pales in contrast to the other economies in the region. At 3.8 billions dollars of FDIs, we only manage to get seize 3.2 percent, compared to double digit percentage shares of our neighbors Indonesia and Malaysia. ASEAN Statistics

Critical Business Expansion Enablers in South East Asia
(% of businesses) A study on South East Asia business expansion in 2011 a global management consulting firm Accenture, has pointed to “improve business environment” as the most critical enabler for business expansion, thereby stressing that if we want to take advantage and seize the opportunities of AEC, we need to do a lot of work in this department. Source: Accenture SEA Business Expansion Survey, 2011

In terms of expansion by industry, the same study cited what is obviously in our midst, and therefore should give us a hint in terms of how economic integration in ASEAN is likely to proceed in terms of business expansion. For instance, you have banking on ‘top of mind’ for many of the players in ASEAN, therefore, it should not come us a surprise to us that Maybank, Malaysia’s largest bank and financial group has a significant presence in 8 ASEAN countries, with plans for further expansion in the Philippines, including Mindanao and the future Bangsamoro region to particularly cater to Islamic banking services… And so with transport, manufacturing and energy industries.

Where is Mindanao economy in the context of ASEAN and global trade?
So how is Mindanao gearing up for this, moving forward?

Mindanao in the context of AEC 2015: The New Narrative
Some years ago, we had a different picture of Mindanao: one characterized by fragmented economy, poor and inadequate infrastructure, plain raw material supplier, dismal growth driven only by extractive industries, and besieged by armed conflict and hostilities that drive poverty to sustained highs. Fast forward some four decades after, welcome to a new Mindanao! Today, we endeavour to write a new narrative to Mindanao, as an island-region playing a significant role for the Philippines, in the ASEAN integration.

Mindanao... worth taking another serious look
next viable investment destination where investments yield high returns for peace Mindanao has long been regarded as the Land of Promise on account of its significant contribution to national development and its continuing quest for progress and transformation. In fact, the way to move forward as a nation would necessarily take the route of Mindanao. We need to strive to advance efforts towards peace and development by advocating for the review and enactment of policies, and promoting investment and trade opportunities and its broader work of accelerating socioeconomic development. Today, we are worth taking another serious look, as being the next trade and investment destination, where every peso investment, yields higher ROI for peace, progress and transformation.

8 of the 18 major River Basins in the Philippines are in Mindanao
Mindanao in Figures… Second largest Island in the Philippines (10.2 Million hectares) Population of around 22 Million Consists of 6 Regions, 26 Provinces, 33 Cities, 422 Municipalities, 10, 084 Barangays 80% of the country’s total deposits of copper, nickel and gold are in Mindanao 8 of the 18 major River Basins in the Philippines are in Mindanao 41% of Mindanao’s total land area is certified Alienable and Disposable land As the second largest island in the country, Mindanao has a total land area of 10.2 million hectares, and 41 percent of it is certified Alienable and Disposable; It has eight of the country’s 18 major river basins that can serve as source for irrigation, hydro power and even water transport connectivity; it remains as holder of among Asia’s largest deposits of copper, nickel and gold. And it draw’s strength from its relatively young population of 22 million from across 6 six regions. So, when happen to have read front page stories from national dailies screaming “War in Mindanao” --- oftentimes it happened only in about 10 out 10,000 barangays. That’s how we’ve been unfairly labeled, and it’s time to write a new Mindanao narrative.

Progress on the Peace Process
Peace agreement signed in March 2014 Bill on Bangasamoro Basic Law now in Congress Bangsamoro political entity to be established by 2016 After concluding nearly four decades of armed conflict with a historic peace agreement, today, we are at a crossroad in governance for the autonomous region and now is the opportunity for Mindanao to pioneer a unique form of a new “Bangsamoro government” that can lead toward a distinctive governance of self-reliance and self-determination. As the new Bangsamoro entity wields the authority to decide the fate of the Bangsamoro people, there is greater opportunity for Bangsamoro economy playing pivotal role into the larger Mindanao economic arena, and in the greater context of ASEAN integration.

Structure of the Mindanao Economy
The Mindanao economy is pegged at P B in 2013, or equal to % of the Philippine Economy. Growth Rate (%) 0.99 9.6 Mindanao’s competitiveness plays a critical role in its contribution to the national economy. The island-region’s economy grew by 6.3% last year, pegged at over 900,000 billion and accounted for 14.32% of the total Philippine economy. What is interesting to note is Mindanao’s transition from principally agri-oriented economy some 40 years ago, to a regional economy now dominated by the labor-intensive services sector. 7.08 6.3% GRDP INCREASE in 2013

Contribution to Philippines (in %)
Mindanao: The Philippines Food basket and Source of Major Industrial Crops Poultry Mindanao Priority Commodities Contribution to Philippines (in %) Aquaculture 74 Cacao 89 Coconut 58 Coffee 75 Pineapple Banana 82 Corn 50 Poultry 19 Rubber 99.97 Palm Oil 90 Aquaculture Cacao Rubber We are the country’s and the ASEAN’s food basket (Mindanao is the major supplier of fruits, cereals and poultry) and primary source of industrial crops, producing mass volumes of essential raw materials and industrial crops necessary for processing into more valuable products. Combined with the focus areas of Indonesia and Malaysia in the BIMP-EAGA, it is a global center for the production and processing of major marine products, with tuna and seaweeds as well as pineapple and banana. It hosts the country’s largest coconut, coffee, cacao, rubber and oil palm which, if combined with BIMP-EAGA, it totals over 12 million hectares. Here’s why Mindanao should seize the opportunity: Dr. Rolly Dy, Director, Center for Food and Agribusiness, University of Asia and the Pacific noted during a BIMP-EAGA Conference here in Davao last October, that Cocoa demand will continue to grow. The International Cocoa Organization projects additional demand for one million tons by Prices jumped 22% this year amid signs of rising chocolate consumption in Asia and North America. World demand for the confections and cocoa products has doubled in the past 20 years, and farmers are struggling to keep up. Meanwhile, Dr. Dy added that coffee prices shoot up this year due to a historic drought that hit Brazil. Over the long-run, coffee prices will rise as more people in developing countries such as Brazil, China and India are acquiring taste for it. The International Coffee Organization notes that the demand growth of coffee exporters (Brazil, Colombia and Vietnam) is growing at twice the rate of importers, and will even restrict future exports. Banana Palm Oil Pineapple Coffee Corn Source of Raw Data: PSA-BAS Processed by: MinDA

Mindanao: The Philippines Food basket and Source of Major Industrial Crops
Exports vs Imports Mindanao Oil Palm: 60,000 hectares Agumil Kenram Filipinas Palmoil Carmen Univanich ABERDI Zanorte Bali Palm Oil Mindanao has been able to post a healthy trade balance. Our total foreign trade last year improved by about 15%, increasing our exports and incurring less imports, making Mindanao a net exporter. East Malaysia and Eastern Indonesia: 6.5 million hectares; 35 million tons palm oil to 150 countries

STRENGTHEN MINDANAO’S ROLE AS FOOD BASKET a major source of globally competitive agri-based products
One-third of Mindanao’s land area is devoted to agriculture One-third of the labor force is employed in the agriculture, fishery and forestry sectors. Contributes more than 30% of the national food requirements oil palm pineapple canned sardines seaweed banana tuna For bananas, Mindanao accounts for over 12% the world exports (at over $800 mllion in 2013) and ranks second in the world after Ecuador. Meanwhile, Mindanao and the BIMP-EAGA focus areas of Indonesia and Malaysia, contribute sone 32% of world canned pineapple products. On a sub-region scale, BIMP-EAGA is a major player in the world tuna industry, with main processing centers in Bitung North Sulawesi, Indonesia and General Santos City, Philippines. Source of Raw Data: NSCB Processed by: MinDA

Mindanao’s total foreign trade increased by 14.96% in 2013
Exports vs Imports Mindanao’s total foreign trade increased by 14.96% in 2013 Trade Surplus increased by 59.65% Increased Export earnings by 24.37% EXPORT Mindanao has been able to post a healthy trade balance. Our total foreign trade last year improved by about 15%, increasing our exports and incurring less imports, making Mindanao a net exporter. IMPORT Imports Decreased by 1.3%

Our export destinations
European Union: Coconut, Banana, Animal or vegetables oil , Fruits , Fish, seaweeds, Acyclic alcohols, Prepared or preserved fish Russia: Fruits, Wood charcoal, Acyclic alcohol Canada: Fruits, prepared or preserved fish Japan: Banana, Wood charcoal, Fish, Fruits Korea: Coconut, Banana, Fruits USA: Banana, Coconut, fruits, Palm oil, live fish, animal or vegetables oil, Acyclic alcohols China: Nickel ores, Live Fish, Crustaceans, Animal or vegetable fats , Banana, Fruits, seaweeds Switzerland: Gold, Fish , Coconut Africa: Coconut, Fruits, Bananas, nuts, Fish Mindanao Middle East: Coco water, Banana, Fruits, animal vegetables ASEAN: Coconut, Fruits, Fish, Acyclic Alcohol, Coco Water Our coconut oils, fruits, charcoal, minerals, marine products and other world-class exports are found in North America, Europe, Asia, Australia, and the Middle East. And where we find certain degree of challenges owing to volatility of some traditional markets, Mindanao exporters are always on the lookout for diversification of market destinations. Australia: Coconut, fruits, water, Nickel ore, prepared or preserved fish Source: NSO, 2012

BOI-APPROVED INVESTMENTS IN MINDANAO (In million Pesos)
Location 2010 2011 2012 2013 Region IX 2, Nda Region X 2, 2, 3, 48,123.32 Region XI 4, 38, 5, 31,664.25 Region XII 65.00 1, 6,530.70 Caraga 2, 49, 11, 8,638.26 Total Mindanao Project Cost (Php in Million) 11,148.89 91,429.27 25,040.35 *94,956.53 In 2013, the BOI-Registered Investment Projects in Mindanao posted a remarkable increase of 279%, translating to 95 billion pesos from only 25 billion in 2012. Source: Bureau of Investments (BOI) Processed by: MinDA

BOI-Registered Investment Projects in Mindanao
CARAGA FirstGen Mindanao Hydro Power Corp., Mindanao Mineral Processing and Refining Corp. Region X Argusland Inc., Maharlika Agro-Marine Ventures Corp. Total Mindanao Project Cost: Php 94.96B* Region XI Azdevelopers Corp., Communities Davao, Inc., DMC Urban Property Developers, Francisco M. Soriano & Co., Franklin Baker, Hedcor Sibulan Inc., Hedcor Tudaya, Inc., Nakayama, PNX-Chelsea Shipping, San Miguel Consolidated Ppower Corp., Seaoil Philippines, Simmons Leather Goods. Vifel Ice Plant andC old Sotrage Spread across key regions in Mindanao, these investments are focused on the power sector, mineral industry development, real estate, and agribusiness. Region XII Communities General Santos, Inc., First Gen Mindanao Hydro Power Corp., Gensan FeedMill Inc., Kenram Palmoil Industries Inc., Phil. Best Canning Corp., Safi Agro-Industries Inc., Saranggani Agriventures. Please note, in 2013, RBOI-ARMM reported Php 1.46 Billion registered investments in ARMM (four projects, 157% higher than than the Php 569 Million registered investments in 2012.

MINDANAO 19 of them are EMPLOYED
94.88% of Mindanao’s Labor Force are employed Of the 20 people aged 15 to 64 in MINDANAO 19 of them are EMPLOYED At the moment, employment data shows that 19 out of 20 Mindanawons aged are employed, but 5 out of those 19 employed are underemployed. And with the projected half million new graduates (based on CHED projections) that will join our job-seekers by March or April next year, we need to double time on our effort to grow more enterprising and business opportunities for our growing labor force. But, of the 19, 5 of them are UNDEREMPLOYED Source: NSO 46

Labor Productivity of Mindanao vs Luzon, per GVA share, FY2013
Our young population is giving us a competitive advantage in the labor sector, thereby showing the potential to increase further our production base with our competitive labor force. Aside from having a relatively lower labor cost (thanks to lower cost of living –cheaper food, cheaper transportation), compared to Luzon, Mindanao labor also yields higher productivity: For instance, per unit of labor force of Mindanao in AHFF sector produces an average of 17 thousand pesos worth of output, or productivity of 21% more. Latest Minimum Wage Rate Levels in Mindanao (Php) Non-Agri Agriculture Retail Services Handicrafts National Capital Region (NCR) 466.00 429.00 - Mindanao 312.00 235.00

Tourist Arrivals in Mindanao is growing…
Despite negative image reinforced by lacking in context labeling as a conflict area, Mindanao’s tourism industry is thriving, accounting for over 21 percent of the country’s tourist arrivals in 2012 and is projected to go up further with the tourism gains momentum, especially with its bio-diversity and eco-tourism sites gaining global recognition, and also with many Filipinos or the domestic market, also realizing—that there is so much fun in Mindanao. Source of Raw Data: DOT-CO Processed by: MinDA

More competitive electricity rates*
Luzon: Php 10.10/kWh Visayas: Php 10.27/kWh Mindanao has the most affordable electricity in the country, owing to our renewable energy sources. With more power plant projects to come online by end of 2015, Mindanao is projected to have excess power supply including contingency reserves for the first time since 2009. Mindanao: Php 8.24/kWh *Electricity prices are the average of electricity price of all distribution units belonging to the same island group

OVER- ALL COMPETITIVENESS
CITIES AND MUNICIPALITIES COMPETITIVE INDEX, 2014 OVER- ALL COMPETITIVENESS RANK CITIES 1 Makati 2 Cagayan De Oro 3 Naga City 4 Davao City 5 Marikina City 6 Iloilo City 7 Cebu City 8 Manila City 9 Valenzuela City 10 Paranaque City RANK MUNICIPALITIES 1 Daet, Camarines Norte 2 General Trias, Cavite 3 Kalibo, Aklan 4 Carmona, Cavite 5 Nabunturan, Compostella Valley 6 Lubao, Pampanga 7 Isulan, Sultan Kudarat 8 Polomolok, South Cotabato 9 Manolo Fortich, Bukidnon 10 Taytay, Rizal Mindanao also continues to pursue economic dynamism, improve government efficiency, and undertake infrastructure development, making six of our cities and municipalities among the country’s top 10 most competitive. This indicates that socioeconomic reforms are happening in the region while its infrastructure sector is steadily increasing to enhance connectivity and logistical support. Source : National Competitiveness Council

What steps are being taken to strengthen Mindanao’s enabling environment?

BIMP-EAGA : Mindanao’s Platform to the ASEAN
World Trade Organization Mindanao’s platform to the ASEAN, the BIMP-EAGA, underscores the crucial role of connectivity in achieving its goals of increased trade, investment, and tourism. Improved infrastructure contributes to the enhancement of air, land and sea transport systems, enabling the seamless movement of goods and people within and among the EAGA countries, and placing Mindanao in a position of strength as it moves towards integration to the ASEAN and to the rest of the world. Notes: The Brunei Darussalam-Indonesia-Malaysia-the Philippines East ASEAN Growth Area (BIMP-EAGA) has been envisioned to be the test-bed of ASEAN protocols. The proximity of the ASEAN Economic Community (AEC) target date of 2015 has put EAGA, as a sub-set of ASEAN, in a strategic position of directly contributing toward the AEC goal of transforming the region into an integrated market of freely flowing products by establishing closer linkages between the initiatives of BIMP-EAGA within ASEAN. Along this line, a BIMP-EAGA Implementation Blueprint (IB) for has been crafted within the framework of the AEC Blueprint. The EAGA IB streamlined the strategic areas of EAGA into four pillars to give focus and further consolidate various sectoral initiatives, namely: (1) Enhancing connectivity; (2) Food Basket Strategy (FBS); (3) Tourism Development; and (4) Environment.

BIMP-EAGA A test-bed for ASEAN protocols and agreements
A building-block towards achieving ASEAN Integration 2015

Strategic Pillars Enhanced Connectivity Food Basket Strategy (Agri)
Tourism Development Environment Socio-Cultural and Education (newest pillar adopted at 19th BIMP-EAGA MM on November 19, 2014 in Brunei Darussalam)

BIMP EAGA Economic Growth Corridors & Transport Connectivity
Mindanao Growth Corridors: Tropical Fruits (Banana, Pineapple & Mango) Rice Poultry Coconut Mariculture Sabah Development Corridor (SDC): Agro-based Industry Sarawak Corridor of Renewable Energy (SCORE): Palm Oil Fish and Aquaculture Livestock Globally, regionally, or even within the country and within Mindanao, there is now a strong recognition and emphasis on complementation and industry integration. Commodities flow from one region to another. Industry supply chain knows no political boundaries. In Mindanao, there is an observed pattern of commodity flows that, when supported with the right infrastructure and logistics, can increase the viability and competitiveness of industries. This is one of the bases for the Mindanao Development Corridors. Indonesia Growth Corridor Corn Fertilizer Cement

MINDANAO TRANSPORT & LOGISTICS NETWORK SUPPORTING MINDANAO DEVELOPMENT CORRIDORS
Existing National Road Proposed ADB-PPTA Proposed MTPIP III Proposed JICA Logistics NORTHER MINDANAO GROWTH CORRIDOR Identified Projects under Mindanao Growth Corridors International Airport Principal Airport WESTERN MINDANAO GROWTH CORRIDOR Sea Port BIMP-EAGA Proposed Sea Linkage BIMP-EAGA Proposed Air Linkage RORO Shipping Network SOUTHERN MINDANAO GROWTH CORRIDOR Connectivity plays a key role in Mindanao’s bid to escalate its contribution to the national economy, and its participation to the ASEAN Economic Community. Bolstering our infrastructure is the Mindanao Development Corridors, an initiative of MinDA that will improve transport and logistics support to tourism, industry, and agriculture through infrastructure development. T he goal is to create a connected and globally competitive Mindanao, enabling it to position itself as a single, integrated economy that is able to leverage and participate in the EAGA, ASEAN, and the global economic community. International Gateway Strategic Tourism Destinations Zamboanga – Muara Davao- Manado Zamboanga- Sandakan Davao – GenSan – Bitung Davao- Kota Kinabalu

Western Mindanao Economic Growth Corridor
Region IX Area: Projects Pulauan Port Alternate Road, Dapitan City Dipolog Airport Improvement Pagadian Airport Improvement Liloy-Labason-Gutalac Road Upgrading Pagadian Port Access road Road Upgrading of Liloy-Lamao Port Tumaga River Structural Improvement Measures Flood Zamboanga Port Improvement New Zamboanga International Airport Development Balinsungay Irrigation project, Zamboanga City Lower Sibugay River Irrigation System, Zambo Sibugay Titay Valley Irrigation Project, Zambo Sibugay BIMP EAGA OSAC Mariculture Processing Complex BIMP EAGA Initiative on Non-Convention Sized Shipping BASILAN-SULU-TAWI TAWI-ZBO CORRIDOR Concreting of Calugusan-Balas-Sengal Road to Lamitan City Port Sanga-Sanga Bangilan Road Section Improvement of the Bongao Port Concreting of Bato-Bato->Lapid-Lapid Road, Panglma Sugala Bongao Port Improvement of Siasi Port

Mindanao Industry & Trade Corridor
Primary Growth Center Secondary Growth Existing Power Plant Proposed/Indicative Power Plant On-going/Committed Airport Seaport Region X Area: Projects Education: ICT and BPO/KPO Related Courses in CDO Education: Agriculture, animal science, and food processing related courses in Bukidnon Education: Technical Vocational Courses Cold storage facilities in Bukidnon Minerals processing in Manticao, Misamis Oriental Mini-Hydro Caraga Area: Projects Education: Minerals development related courses Education: Technical Vocational Courses Coconut processing in Tandag City and Butuan City Minerals processing in Surigao del Norte and Tubay, Agusan del Norte Improvement of strategic roads to processing and business centers ARMM Area: Projects Cassava processing in Parang and Marawi City Aquaculture and aquaculture processing in Parang and Marawi City Hydro Power

Southern Mindanao Economic Growth Corridor
South Caraga Area: Bislig City as Aquamarine Processing Center Agroforestry Hub Projects: Paper mill (Private) Develop PICOP as Agro Industrial Zone Improvement of strategic roads to processing and business centers Cotabato Area: Halal Meat Processing Center in Cotabato City Projects: Rubber Testing Center Improvement of strategic roads to processing and business centers Panabo Port Devt NMEZ 100MW PB118 Tagum-Dvo-GSC High Standard Highways 32MW PB104 100MW Geo 58.69MW Dav light 3.70 MW Talomo WMEZ SOCCSKSARGEN Area: General Santos as the Food Business Center Projects: Improvement of strategic roads to processing and business centers Food Terminal Complex 56MW SPPC Davao Area: Davao City as the Mindanao Business Center and ICT Hub Projects International Airport (service improvement) National Research Development for Banana in Davao City (USEP) Improvement of strategic roads to processing and business centers ASEAN RoRo Study ADB TA on CIQS

Mindanao and EAGA Corridors Link
Heights of Mt. Kinabalu to the depths of PPUR Western Mindanao and Sabah Festivals Mindanao Tourism Loop/Mindanao and North Sulawesi Festivals BIMP-EAGA underscores the crucial role of connectivity in achieving its goals of increased trade, investment and tourism. The improvement in infrastructure facilities will contribute to the enhancement of air, land and sea transport systems within and among the EAGA countries for the seamless movement of goods and people from EAGA and for its integration to ASEAN and the rest of the world. Existing Sea Link Zamboanga – Sandakan (Passenger-Cargo Ferry) Proposed Sea Linkages Davao – GenSan – Bitung Brooke’s Point – Labuan – Muara Zamboanga – Muara Existing Air Linkages Davao-Manado (Sriwijaya) Puerto Princesa – KK (MASwings) KK – BSB (Maswings) Kuching - BSB (MASwings) Kuching – Pontianak (MASwings) Tawau – Tarakan (MASwings) Proposed Air Linkages Zamboanga – Sandakan (Pal Express) Balikpapan – Kuching (MASwings) Balikpapan- KK (MASwings) Pontianak- Miri (Kalstar Air) Tarakan – KK (Kalstar Air) Legend: Existing Proposed

Mindanao Budget Allocation
In Billion Pesos These are the key competitive advantages of Mindanao made possible by government’s strategic policy support. As a result of our consistent representation to national government, Mindanao has been getting its fair share from the national coffers. An average increase of 25% in the Mindanao budget allocation for translates to higher government expenditures for social services, industry support, and other development initiatives. For the past four (4) years, we got the lion’s share of the public works budget—from 24.9% this year to 29.5% in 2015—enabling us to upgrade our infrastructure network (shown in the next slide).

Distribution of FY 2011- 2014 Budget by Region:
Infrastructure Distribution of FY Budget by Region: (Based on GAA-Capital Outlays, Projects) NORTHERN LUZON P90.87 B ($2.07B) (23.1%) CAR, I, II, III MINDANAO P99.12 B ($2.25B) (25.2%) IX, X, XI, XII, XIII NCR P54.27 B ($1.23B) (13.8%) SOUTHERN LUZON P76.84 B ($1.75B) (19.5%) IV-A, IV-B, V VISAYAS P72.23 B ($1.64B) (18.4%) VI, VII, VIII TOTAL : P B $ 8.94 B * Excluding Inter-Regional/Nationwide-P B In an interview, DPWH Secretary Rogelio L. Singson said that Mindanao, which has been lagging behind in investment inflows and trade expansion, will be a key area for logistics development, following the completion of a master plan to upgrade its infrastructure network. As a matter of fact, Mindanao has been getting the biggest chunk of the government’s infrastructure for the past 4 years. Case in point, 24.9% of DPWH 2014 Budget went to Mindanao. For 2015, Mindanao will be getting 29.5%.

Inclusive Business Program
Uni Frutti – 6,000 ha Del Monte – 10,000 ha Dole Phils. – Pineapple Sumifru – 600 ha Kenram – CPO Mill Agumil Phils. – 10,000 ha PBGEA – Banana Export ICTSI Port Development ANFLOCOR Henry Chua Industrial Mr. Carlos Vargas / Dr. Mazaki Flatwood Solutions Malaysian Investor – 40,000 ha Khodian Holdings – 30,000 ha Jerry Taray Hejem Furigay Nestle Phils. Kennemer Foods Frankiln Baker Bill Ho E-vehicles Project Sites In September this year, we launched the Mindanao Inclusive Agribusiness Program or MIAP in partnership with the PBSP in line with President Benigno Aquino III’s pivotal thrust of inclusive growth. The program supports the global trend that development must be geared towards investment facilitation that is inclusive. The idea is to promote and facilitate the entry of industries who are committed to: implement creative business practices that will empower local communities and will bring productive communities in the production and supply chain. In so doing, we can ensure communities can benefit from capacity development, employment and sustained socio-economic development. We are happy to note that under this Program, several companies are expanding in the ARMM. These include Unifrutti, Del Monte, Franklin Baker, Kenram, Agumil, and Lamsan Power, among many others.

Mindanao Power Development
To address the power deficit in Mindanao, President Aquino issued Executive Order (EO) 81 in July 2012, creating the Mindanao Power Monitoring Committee (MPMC) which is co-chaired by MinDA and DOE. MPMC became the venue for better coordination of all power players to address concerns of the power industry sector. While the government continues to entice private sector to build baseload plants in Mindanao, it has also remained committed to improve the capacities of its power generating assets. Last year, the government has allocated a total of 4.96 billion pesos for the rehabilitation and uprating of the Agus-Pulangi Hydro Electric Power Complex. No administration has ever invested that much to make sure that Mindanao’s major source of electricity becomes reliable again.

Reliability of Power Supply
At the rate committed projects are being built, it looks like Mindanao will have more than enough power after 2015… MW

Committed Private-Sector Initiated Power Projects
Project Location Lake Mainit (25MW) = 2016 Committed Private-Sector Initiated Power Projects Puyo HEP (30MW) = 2015 FDC CFB Coal Fired PP (3x135 MW)=2016 - Wind, Biomass, Solar Peak Power Bunker Diesel Plant (5.2 MW)=Sep 2014 - Hydro Power Limbatong HEP (9MW) = 2017 - Coal Fired Mapalad Diesel Power Plant (15 MW)=Oct2013 - Diesel Fired GN Power PsagCorp Coal fired PP (3x135MW)= 2017 Green Power Bukidnon Biomass (40 MW)=2013 EDC Mindanao Geothermal 3 (50 MW)=June2016 Therm(a South (Aboitiz) Coal Davao (300 MW)=Mar/June 2015 Phil Bio Biomass (1.6 MW)=2017 SMC Davao Power Plant- (Phase 1-300MW)=2015 & 2016 Peak Power Bunker Diesel Plant (20.9 MW)=Sep 2014 DOE List of Power Projects as of May 2014 Southern Mindanao (Sarangani) CFTPP (2x100 MW)= Sep2015 & Nov2016 - Committed Projects = 1,981.7MW

Moving Forward I would like to take this occasion to rally for your support to government’s efforts to accelerate socio-economic development by looking at investment opportunities in Mindanao.

Overcoming Challenges
Connectivity and accessibility difficulties Infrastructure development challenges Security and safety issues Promotion Strategies – Product quality and branding Human resource capacity Source: Dr. Tans Sri YenYen 68

Our Strength: DEMOGRAPHIC DIVIDEND
Turning odds to favor: Philippines has young and growing population Comparing Median Age: Philippines y.o. Vietnam Indonesia Singapore – 31.5 China Japan – 45.4 With right skills and education, Philippines can sustain edge high labor productivity in ASEAN Source: Dr. Bernardo Villegas, University of Asia and the Pacific 69

Our Strength: DEMOGRAPHIC DIVIDEND
We have distint competitive advantage within ASEAN High level of tertiary education Adaptable and multicultural workers Fluent in English Familiar with the culture of the biggest market in the world, the U.S. Low labor cost Labor peace Source: Dr. Bernardo Villegas, University of Asia and the Pacific 70

Alignment to Priority Sectors

Daghang Salamat! www.minda.gov.ph info@minda.gov.ph
Integrating Mindanao. Mindanao’s real progress is hinged on the unity of all its peoples, and only our unified, concerted, and coordinated efforts will we be able to achieve our goal of a better life for all Mindanawons. As Mindanawons, whether Muslims, Christians or Lumads, we hold the welfare of Mindanao in our hearts because this island is our home and our future. Daghang Salamat!

Challenges and Opportunities ONE ASEAN COMMUNITY FORUM

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Challenges and Opportunities ONE ASEAN COMMUNITY FORUM

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