Gloria Macapagal-Arroyo

President of the Republic of the Philippines 2001 - 2010

The Super Regions: A New Paradigm for Philippine Economic Development

Since the 1960s, the Philippines' standing as the second largest economy in Asia, next to Japan, has slipped tremendously. The country tumbled past its Southeast Asian neighbors after lagging behind Asian economic powerhouses like Japan, China and South Korea, which had anchored their development strategies on agricultural modernization, technology and a strong R&D.

Asian countries' development patterns seem to conform to so-called structural growth models from economic development theory, by choosing to modernize their agricultural sector before concentrating on enhancing the productive capacity of their industrial sector.

The Philippines, however, seems to have deviated from this trend, gearing its strategies mostly towards a buoyant services sector to compensate for the underperforming manufacturing and underinvested agriculture sectors.

Economic Structure of the Philippines

Over the decades, the Philippines' economic structure has shifted from an agriculture-based to a service-based economy, with the latter accounting for 55.15 percent of the Gross Domestic Product and employing 51 percent of employed persons in the country as of 2009. On the other hand, industry contributes 29.9 percent to the GDP while agriculture constitutes 14.9 percent of the economy.

The belated emphasis on services is an offshoot of protective economic policies which have prevented domestic industries from becoming globally-competitive. This trend traces its roots to the 1950s when the country first adopted its Import Substitution Industrialization strategy, continuing well into the 1960s.

At the same time, the Philippine economy continues to display the maladies of being a former colony, with wealth and authority concentrated on an elite few whose business and political interests have become, thru the years, inextricably linked. In the agricultural sector, inequitable ownership of vast tracts of land has resulted in "huge political, social and economic inequalities".

Although there have been earnest attempts to redistribute land through the government's various land reform programs, these efforts have fallen short in addressing land ownership concentration due to "evasion tactics" . At the heart of land reform woes is the self-preservation bias of the landed elite who understandably find it hard to legislate against their own economic interests.

Moreover, the Philippines is also characterized by interlocking directorates with many businesses being controlled by a handful of families. Despite changes in political administrations, the landed elite have managed to keep their hold on their assets by capitalizing on their closeness with the administration in power and used the "kinship network" to perpetuate themselves in public office or to avail of "behest" transactions.

As well, the country's development has been stymied by rent-seeking activities as economic returns have become susceptible to political capture. This has, in turn, dampened investor appetite as market incentives become distorted. Analysts point out some of the salient manifestations of rent-seeking in the Philippines such as widespread poverty, highly inequitable income distribution and narrow markets, propensity of domestic elites to sell to external markets due to relative abundance in exportable natural resources, stagnant production technologies which stimulate monopoly and dissuade competition, high degree of external dependence, and "rule-prone" and weak pork barrel state.

Through much of the postwar era, the Philippine economy has exhibited a boom-bust cycle typified by low growth, low tax collection, chronic poverty, and sustained unemployment. Overlapping economic strategies anchored on International Monetary Fund-prescribed structural reforms have subdued attempts for recovery.

Philippine Institute Development Studies Development Research News Vol. 35, No.2, p..1 Such as registration of excess landholding to their legal or even dummy relatives, selling or mortgaging of excess lands to defer land reform enforcements, firing out of tenants since owner-cultivated lands are exempted from land reform and abuse in the use of voluntary land transfer where the landlord may opt for a direct payment in cash or in kind with the farmer-beneficiary based on a contract prepared by government.

The Super-Regions as an Impetus for Growth

Under the administration of President Arroyo, one of the more innovative economic strategies of the government has been the creation of the "Super Regions" – regional groupings based on the natural advantages of five distinct sub-economic regions in the country. The President Arroyo issued Executive Order 561 which served as the primary policy vehicle that would facilitate the operationalization and implementation of the projects under the Super Regions program.

The Super-Regions concept was intended for long-term investment planning and was borne out of the need to decentralize growth while capitalizing on the competitive advantages of the natural geographic features of the regions. It was envisioned to promote domestic and global integration, strengthen rural-urban linkages and facilitate the exchange of goods and resources. The strategy would end up costing the government around P372 billion, with half of the funding to be sourced from the annual budgets for 2007 to 2010.

The Super Regions as a development strategy deviates from previous piecemeal approaches to development by creating synergies among the regions. For more than five decades, economic strategies were always within the context of regional development, with each region prioritizing their respective industries and services. But with the "Super Regions," the approach to development has become more integrative, with each regional cluster complementing or supporting the services and products offered by other regions.

Moreover, the strategy again brought to the forefront the importance of agriculture by creating two agribusiness hubs: one catering to Luzon and some parts of Visayas and the other catering to the southern parts of Visayas, Mindanao and countries contiguous to the southern Philippines. This particular strategy also has more focus from a development standpoint, with the programs and projects directed at pivotal sectors such as agriculture and fisheries, mining, technology and tourism.

This plan also addressed the perennial lack of resources that tended to stymie economic reform efforts. Unlike previous development plans, the Super Regions went beyond agriculture, infrastructure and industrial development by factoring in technology and communications in the entire loop, making it a crucial tool that would link the regions. It likewise harnessed the so-called sunrise industries such as tourism, which possesses the greatest potential to generate livelihood and employment.

Each geographical unit under the Super Regions would have its respective development themes, concentrating mainly on critical services and sectors.

1. North Luzon Agribusiness Quadrangle (NLAQ)

Comprised of Regions I, II, Cordillera Administrative Region (CAR) and the northern part of the provinces of Aurora (north of Baler), Tarlac (north of Tarlac City), Nueva Ecija (north of Cabanatuan City), and Zambales (north of Subic). This region has a total land area of 73,263.25 square kilometres and has a coastline measuring 1,870 kilometers. Out of the total land area, about 2,640 hectares are devoted to primary crops (such as rice, corn, vegetables and fruits) and is considered largely as the food basket of Luzon.

The development theme for North Luzon Agribusiness Quadrangle (NLAQ) is basically directed towards productivity, food security and export competitiveness. The North is endowed with favorable climatic and topographic characteristics ideal for crops and livestock production. Furthermore, the rivers and coastal areas are very much suitable for mariculture.

The NLAQ produces most of the country's vegetables and more than a quarter of the country's rice and corn. Compared to regional demand, it even has a surplus production of rice, corn, root crops, vegetables, fruits, poultry, livestock and fishes.

Despite the area's competitive advantage, the incidence of poverty has remained considerably high particularly in the Cordilleras and coastal areas. Of the six Cordilleras provinces, three (Abra, Kalinga and Mt. Province) belong to the top 20 poorest provinces of the Philippines. Isabela, Aurora and two provinces (La Union and Pangasinan) of Region I, have poverty incidence higher than the national level of 30%.

The high persistence of poverty in Northern Luzon can be attributed to the following: poor access to economic and livelihood opportunities; inadequate infrastructure support; and inability to compete in the global agribusiness industry.

The enhancement of farm and fishery products did not improve the level of poverty and hunger prevalent in the area. It was soon realized that infrastructure support, putting value added on raw farm products, and addressing socio-economic concerns are very crucial in increasing people's income and enhancing international competitiveness in the global agribusiness industry.

The main idea behind the projects for the region is to bring development closer to the people by bridging the gaps between production areas and markets through major road projects and farm-to-market roads. This way, farm produce would be more readily available for consumers. Irrigation and flood mitigation infrastructures and agricultural post-harvest and processing facilities are also being developed to support agribusiness. Specifically, an intervention program called "Fertilizers-Irrigation-Extension-Loans-Dryers-Seeds (FIELDS) Program" was being implemented.

Likewise, technology, like investment in human resource and capital accumulation, is a big contributor to economic development. Ventures in modern technology augmented farm produce and added value to agricultural products. Investments in Research and Development (R&D) led to the development of biofuels, innovations in banana packaging and meat processing, and utilization of engineered-bamboo and selected vines and trees for furniture and handicrafts.

Comparing the 2000 and 2008 Gross Regional Domestic Product (GRDP), the Super Region has recorded growth of 32%. The Gross Value Added (GVA) of NLAQ in agriculture, fishery, and forestry (AFF) went up by 38%. In 2008, 15% of the country's GDP came from NLAQ. The growth of the agriculture sector of the Super Region has gone hand-in-hand with the growth of the economy of NLAQ.

The data on the 2005 and 2007 Board of Investments-Philippine Economic Zone Authority (BOI-PEZA) in NLAQ shows that investments increased by 91%.

Exports of agribusiness products, which include manufactured food products from Baguio Export Processing Zone and marine products from Claveria and Masinloc Ports of the Super Region, expanded from US$93,345 in 2000 to US$7.33 million in 2008.

2. Urban Luzon Beltway.

Composed of the National Capital Region (NCR), Region IV-A. the provinces of Bulacan, Bataan, Pampanga, Mindoro, Marinduque, and the southern parts of the provinces of Tarlac, Zambales, Aurora and Nueva Ecija. This Region envisions Metro Luzon to be a globally competitive urban, industrial and service center with a high quality of life for its people. Each area in the Super Region would have a strategic role in the Plan.

Central Luzon is seen to be a global competitive Human Resource Transshipment and logistics hub in the Asia-Pacific Region with developed industrial heartlands and seamless and integrated physical access. NCR would become a major business and transaction center in the Asia Pacific Region. MIMAROPA on the other hand serves as a gateway to Southern Philippines and food basket of Metro Manila and CALABARZON, while Region IV-A would be a liveable industrial region with well planned town clusters supported by modern intermodal transportation and Digital Infrastructure.

Urban Luzon Beltway comprises several strategic themes to attain the global competitive industry. First, the globally-competitive region intends to have reasonable power cost, high labor productivity as well as industrial peace, seamless access and efficient movement of goods and people, cost-effective supply chain management and efficient telecommunications. Second, managed population growth and decongestion of city centers and improving the quality of life priorities through resolving the problem of informal settlements, reduced air and water pollution, improved quality of basic social services and minimized high ambient temperature due to conversion of residential gardens into concrete jungles.

Third, ensuring adequate supply of food and potable water to industrial centers. Fourth, manage water flows and preventing watershed degradation, encroachment of water ways, lahar siltation, improper waste disposal and land subsistence. Lastly, opening up of the Pacific Coast and enhancing the role of LGUs and supporting infrastructure.

The Region's success would be due largely to the following additional projects:

Roads interconnecting the industrial, commercial and transport hubs of the Super Region amounting to P 51.13 billion, b) Railways investment that will speed up travel between North and South Luzon and close LRT and MRT loop, totaling P 86.28 billion, c) Ports that speed up and promote cheaper and faster transport of goods with P 7.91 billion, d) Airports to boost Urban Luzon Beltway accessibility to foreign travelers and cargo, e) Energy reliability – an additional energy capacity of 150 megawatts (MW), (f) Environment Projects in ensuring sustainability of ULB's development and environmental protection, promoting continuous water supply and preventing floods.

3. Tourism Central Philippines

Made up of Regions V, VI, VII and VIII, and the provinces of Romblon, Palawan and Camiguin and the island of Siargao. The Central Philippines Regional Cluster focuses on the lucrative business of tourism. The Region is primed to be the country's premier tourist destination with its variety of unique natural resources found within the super region.

Its unique natural wonders, rich cultural heritage, and warm hospitality of its people are the main drivers of this super region towards becoming a world class tourist destination. It has land area of 91,599 square kilometers or 30.5 percent of the Philippines' land area with a total coastline of 14,219 kilometers. The Region has seven of the ten most visited beaches in the country along with 73 National Integrated Protected Areas System (watershed forest reserve, wilderness area, game refuge and wildlife sanctuary, national park). Environment programs would also be implemented in the Central Philippines to ensure sustainable development in the region alongside increased tourism activities and marine and agribusiness productivity (e.g. delineation of municipal waters, establishment of fish sanctuaries, massive mangrove planting/coral reefs rehabilitation and the like) Outside tourism, the Region accounts for 37 percent of the country's total fish production and contributes 20 percent of the national output of minerals. In fact, it has at least 16 major mining projects with a number of corporations undertaking development and exploration in the Region. Likewise, the ICT, shipbuilding and export industries possess high potential for growth.

Power plants situated in Central Philippines generate 2,362.93 Megawatts of power, representing 15.12 percent of total power generating capacity of the country. A total of P1.8 billion projects are underway to expand the energy capacity of the region to meet the projected rise in power demand in the Visayas Grid. These include privatization of geothermal power plants and the creation of an ethanol corridor.

Using sustainable development as the main development thrust, the government introduced major programs and infrastructure projects to harness the potential of Central Philippines. These included the expansion of the nautical highways through the rehabilitation and extension of Roll-on-Roll-off (RORO) ports, which cost the government some P1.033 billion.

Apart from the nautical highways, projects for the Region totaling P10.492 billion entail the construction and rehabilitation of road networks to ensure safe and reliable travel from various entry points to tourist destinations. It would be complemented by the extension of the Southrail project that will ease travel time from Manila to Bicol and connect the capital thru Calamba, Laguna and Matnog, Sorsogon to the tourism sites of the Region.

4. Agribusiness Mindanao.

Covers Regions IX, X, except Camiguin, XI, XII, Caraga except Siargao, and the Autonomous Region of Muslim Mindanao. This region's competitive advantage lies in its fertile lands, typhoon-free climate and extensive river systems. Mindanao has the potential to become the country's primary exporter of agri-fishery products. Fruits and vegetables, meat processing, snack foods, crab and prawn cultivation, seaweed farming and processing are some of the production areas in the region.

In 2003, Mindanao accounted for 99.9 percent of the total output for rubber. In fact, three of the largest rubber plantations could be found in Zamboanga Sibugay, Isabela City and Cotabato province. Moreover, large producers of oil palm are in Sultan Kudarat, Lanao del Sur and Agusan del Sur.

The region also produced 88.8 percent of cacao, 87 percent of pineapple and 74.4 percent of banana. Mindanao is also known for exporting high-quality bananas with its 16 main plantations. Most pineapple plantations could be found in Bukidnon. Mindanao is also known for exporting lanzones, maramag, mangosteen, punan rambutan and pomelo. Mindanao is likewise known for being the center of tuna and sardines industry as it contributes 42 percent of the national output for fish products.

Despite Mindanao's competitive edge in agribusiness, provinces in the Super Region are among the poorest in the country, making it a fertile ground for violence, unrest and hostility. The projects for this Super Region rest on making agribusiness not just a catalyst of growth but also an instrument for peace. With the even and equitable distribution of wealth and the creation of viable economic opportunities, lawless elements would be weakened and armed conflicts reduced.

The government has a four-pronged approach to spur development in Mindanao. First, cultivate resources for production through the building and rehabilitation of support infrastructure to nurture agribusiness, such as ports, highways and bridges, airports and power generation plants. Second, develop the agribusiness supply chain. Third, enhance R&D to provide value added to crops and other produce. Lastly, promote a government-driven business climate which would support growth and development.

From 2001 to 2009, 5 seaports and 1 RORO port were constructed while 33 others were upgraded (including 10 existing RORO ports) which cost the government P5.4 billion. At the same time, 21 airports were upgraded to increase capacity and improve safety standards while 2 major alternative power plants were commissioned to increase the power generating capacity of the island from 7,087 megawatts to 7,971 megawatts.

In addition, the centrepiece FIELDS program was mobilized to boost farm yields and farmers' productivity. At the same time, economic development was complemented by programs dealing with peace and order hinged on the combination of "soft and hard power" through inter-faith dialogues, consultation with communities, disarmament and programmed integration of armed rebel groups, while launching military offensives on strongholds of bandit groups and renegade forces. The Arroyo government provided the necessary funding and policy support to improve basic social services and poverty alleviation programs, including microfinance, awarding of ancestral domain and distribution of land titles to agrarian reform beneficiaries.

5. Cyber Corridor.

Traverses the above "super" regions from Baguio to Cebu to Davao. The Region forms the veritable Information Communication Technology (ICT) services and infrastructure backbone that supports the expansion and further growth of the Business Process Outsourcing (BPO) industry.

The projects lined up for this Region serve as a springboard to facilitate the country's shift from low-value offshore services to high-value outsourcing activities such as Knowledge Process Outsourcing (KPO). While a key element of the other Super Regions is the development of public infrastructure for faster, safer and more efficient movement of goods and services, this Super Region focuses mostly on optimizing the use of the extensive digital infrastructure and ICT companies. These projects would depend primarily on a $10-billion high bandwidth fiber backbone and digital infrastructure.

The Cyber Corridor is made up of the strongest potential locations for ICT investments, services and activities. It starts from Metro Pampanga and goes down to Davao City, spanning 10 cities that are dubbed as the Top 10 Next Wave Cities. These 10, along with Metro Manila and Metro Cebu or the two ICT Centers of Excellence, house 750 call centers and BPO companies which are being served by 3 high-bandwidth fiber backbone and digital networks. These companies primarily ride on the ICT channel that runs over 960 kilometers across the archipelago stretching from Baguio City to Zamboanga.

The New Wave Cities in essence were determined based on their high ranking in the following facets: (1) Talent or the number of graduates or workers within the city and neighboring areas; (2) Relevant Infrastructure such as roads, presence of hotels, type of airport, quality of power infrastructure, capacity of industry-relevant telecommunications technology and availability of real estate; (3) Operating cost; and (4) Business friendliness and degree of business risk.

Notwithstanding the prevalence and continued expansion of these industries, the government likewise channeled its efforts to broadening the use of IT in education. One of these programs is iSchools where public high school teachers are given ICT Literacy skills and provided with access to relevant digital content through an Educational Digital Network. A critical component of this project is the creation of computer laboratories with internet connection in selected public schools.

On the governance aspect, the government launched the Revenue Watch Dashboard which aims to provide real time collection figures from the national level down to the Revenue District Level. It also established Community e-Centers (CeCs) in various municipalities which would act as a portal to facilitate the exchange of information and data on the best practices of Local Government Units.