Mindanao is emerging as Asean economic hub

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SURIGAO CITY: With the shift in the pattern of world trade and investment destinations to Asian countries, the Mindanao Development Authority (MinDA) sees Mindanao’s strategic position as an advantage to become the next hub in Southeast Asia.

This was emphasized by Undersecretary Janet Lopoz, executive director of MinDA, as the 25th Mindanao Business Conference (MBC) formally opened its plenary on Thursday at the Gateway Hotel in Surigao City.

“The trajectory of business expansions are geared towards this region especially in the banking, transport, storage and logistics, manufacturing, oil and gas,” Lopoz said, citing the 2011 result of the survey of the Southeast Asia Business Expansion.

Lopoz said the Asean Integration that opened up the national borders of member nations to allow freer movement of people, goods and services to create a single regional market can be a key to fully utilize the trends of business expansions to the region.

“If Asean were one economy, it would be the seventh largest economy in the world with 2.4 trillion US dollars combined Gross Domestic Product (GDP) in 2013. It could be the fourth largest by 2050 if growth trends continue,” she added.

Since the late 70’s, she said, ASEAN has already outpaced the rest of the world in terms of per capita income growth.

The region’s potential market is also considered larger compared to Europe and North America considering the number of its population that now counts to over 600 million people, Lopoz said.

Strengthened integration

The various aspects of Asean Integration are now gaining ground as the member-countries work hard to integrate as a single economy.

In terms of tariffs, Lopoz said the Common Effective Preferential Tariff rates are virtually zero for Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand while more than 70 percent of the intra-Asean trade is now tariff-free, with less than 5 percent subject to tariffs above 10 percent.

On the other hand, the banking sector in Asean “is a key sector to watch as consolidation and network externalities are now taking place.”

Lopoz cited the expansionary strategies being pursued banks in Thailand to Asean-member countries like Cambodia, Laos, Myanman and Vietnam.

“Many of these banks join the DBS Holdings, a Singaporean bank trying to acquire the Indonesian PT Bank Danamon, and the Affin Holdings Bhd, a Malaysian banking group trying to acquire majority share of Indonesian PT Bank Ina Perdana, in expanding in Indonesia, the largest ASEAN member country,” Lopoz said.

She added that Maybank and CIMB of Malaysia have also started to penetrate the Philippine banking market with plans to increase branches in the country by 100 in 2014 to 200 by 2018.

In the field of manufacturing, the country’s Universal Robina Corporation is now mulling on spending USD20 to 30 million to set up food manufacturing facilities in Myanmar while the Asiawide Refreshment Corporation, the exclusive manufacturer and distributor of RC Cola in the Philippines is also set to establish manufacturing facilities in the same country.

The air transports in Asean countries are also finalizing their expansion plans to widen their services and areas of destination.

Lopoz said the Lion Group ordered 230 Boeing 737 jets in a deal worth USD22.4 billion in 2011 and 234 Airbus medium haul aircrafts in a deal worth USD23.8 billion in 2013.

The Air Asia Group, she added, also purchased an additional 100 Airbus planes worth USD9.4 billion in line with its expansion goals in Asean.

The country’s Cebu Pacific also took a bold move in strengthening its position in air transport industry by acquiring a 40 percent stake in TigerAir Philippines while the Air Asia Philippines also acquired a 49 percent stake in Zest Air, Lopoz added.

In utilities and infrastructure, Lopoz also cited the acquisitions made by Philippine companies and corporations that further strengthened their position in the Asean market.

In 2011, the San Miguel Corporation (SMC) acquired 65 percent of Esso Malaysia for USD1.8 billion that made all Esso stations in Malaysia rebranded to Petron.

SMC also established a consortium with Citra group that is involved in the construction of toll ways and roads in the country and Indonesia.

“Further, Manila Water, which has a 49 percent stake in one of the main suppliers of water in northern part of Ho Chi Minh City has acquired 51percent equity share of the water concessionaire in charge of the Western Zone of Jakarta. In addition, Meralco engaged in a joint venture with First Pacific Corporation acquiring 70 percent stake on an 800 MW Liquefied Natural Gas project on Jurong Island in Singapore,” Lopez said.

Mindanao as Asean’s economic hub

Lopoz emphasized that Mindanao can take advantage on the on-going trends in the international market, particularly in the Asean because of its strategic location in the region.

“Our country remains to be one of the fastest growing economies in Asia. And if our country is growing in that pace, Mindanao is not far behind,” Lopoz said, adding that Mindanao can take advantage of what the Asean has to offer as the island-region is very well positioned to become the next wave of strategic growth hub in the region.

Citing Mindanao’s demographic dividend, the island-region have a relatively young workforce with an average median age of 23 to 24 years old, she said.

“In the case of Singapore, Malaysia and even Thailand, they are practically at full employment, needing extra labor capacity to grow,” Lopoz said.

She also reported that the main distributor of Toyota in the Middle East has recently visited Mindanao three times to look for possible plant sites for their car parts.

The company, she said, have already visited the areas in Surigao, Davao Oriental, Misamis Oriental and General Santos City.

They are also looking for a skills training institute partner which can supply their required manpower, Lopoz added.

She also took note of the highly literate and competitive pool of human resource of Mindanao, as the island-region hosts a number of academic institutions which have been internationally recognized for its expertise and exemplary performance in honing highly competitive graduates.

“We have 438 universities and colleges in Mindanao, some of which have been internationally recognized as one of the top 300 best universities in Asia in various fields,” Lopoz said.

Further, Lopoz said Mindanao still has so much room for expanding business and adding value to industries as the island-region is still into primary resource-based industries with high potential in hydropower and biomass resources.

Other considerations that Lopoz presented that will push Mindanao to become the next economic hub in Asean are connectivity, infrastructure, logistics, power, telecommunications and policy environment.

She also lauded the political will and current efforts of the Duterte administration to draw and finalize peace agreements in Mindanao.

Lopoz also cited President Duterte’s directive on streamlining the permitting processes in government, saying that the move “is one big important step towards improving our competitiveness.”

“We need to work on improving our competitiveness. It is clear that trade and investments opportunities are favoring the ASEAN region and we cannot simply sit back and watch things happen or pass us by,” Lopoz said.

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