PROSPECTS FOR MINDANAO ECONOMY

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No Free Lunch

Braving it and making it

By Cielito F. Habito
Philippine Daily Inquirer

9:53 pm | Monday, December 10th, 2012

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I LIKE to describe Muslim Mindanao as a gem in the rough. I’ve already written on the region’s key assets as a prime investment area: superior agro-climatic conditions, abundant primary resources, large tracts of idle lands, and wage rates lower than elsewhere in the country. And with the Muslim majority population in Southeast Asia, the region possesses a natural edge in meeting demands for goods and services in the wider Asean market.

But we all know why the region, soon to be known as Bangsamoro under the widely anticipated peace agreement, has missed out on cashing in on its assets. Recurrent conflict and violence, poor infrastructure, weak governance and other issues have perpetuated a vicious cycle of low investment and persistent poverty that the region simply must find a way to break out of. The clear imperative is to raise the level of investments in the region, as attracting greater investments from both locals and outsiders into Muslim Mindanao is the only way out of its poverty trap.

Unfortunately, almost everyone thinks it is too dangerous to do business in Muslim Mindanao. Yet there have been a brave few who for many years have been reaping the benefits of doing business in the troubled region. La Frutera Inc. (LFI), a well-known success story in the town of Datu Paglas, Maguindanao for over 15 years now, is described by Unifrutti Philippines chief John Perrine as their most successful investment in Mindanao. Agumil’s palm oil mill in Buluan (also in Maguindanao) has already expanded capacity by 50 percent since it started operations five years ago, and plans to expand even more. Matling Industrial and Commercial Corp., operating in Malabang, Lanao del Sur for decades now, along with a number of other similar firms, has managed—even thrived—through peace and conflict in Mindanao.

This tells me that first-time investors need not wait too long to place their stakes in the region, even as we all await the completion of the peace agreement still being hammered out by negotiators in Malaysia. There are lessons to be learned from the stories of first-movers such as the above-mentioned firms who already dared invest and operate in Muslim Mindanao even through its troubled times. Their experiences clearly show that investors bringing in jobs and increased incomes for the local populace are embraced and even protected by their hosts, for as long as they “do things right.” Some such lessons for success are described in the newly released booklet “Braving It and Making It: Insights from Successful Investors in Muslim Mindanao,” published by AusAID in partnership with the Autonomous Region in Muslim Mindanao (ARMM) Regional Board of Investments, ARMM Business Council, and Management Association of the Philippines.

How does an investor “do things right” in Muslim Mindanao? The evidence from the firms featured in the booklet points to three key principles that underpin successful investments in the region. First, partnership with an influential and enlightened local leader can be crucial. Beyond the benefit of working with someone who “knows the terrain,” such a local partner can be essential in gaining secure access to needed land, and effectively managing the locally hired workforce. Second, an outside investor must put time and effort in building trust and confidence with local partners, workers and host communities, through confidence-building initiatives and sincere personal gestures. Third, the investor must respect and work within local cultural norms and practices, even find ways to creatively turn them into a positive factor for the enterprise. For example, successful firms respect and adopt Islamic practices (including adjusting work hours during the Ramadan fast) in the workplace. It also pays to employ as supervisors individuals who inherently command the respect and obedience of their subordinates by virtue of social status vested by historical/cultural tradition or royalty.

Specific good practices of the featured firms that are worthy of emulation include (1) effective incentive mechanisms to foster higher productivity and loyalty; (2) deliberate measures to promote workforce motivation, discipline and harmony; (3) harnessing of complementary businesses to reduce costs and optimize utilization of company resources; and (4) providing for own source of electric power, especially via renewable energy facilities that tap local resources. The book is sprinkled with anecdotal illustrations of these various principles and good practices.

In an effort to help accelerate economic development in this area soon to be known officially as Bangsamoro, a luncheon forum on the region’s investment opportunities, spearheaded by the Eisenhower Fellows Association of the Philippines (EFAP) in partnership with the ARMM regional government and think tank Brain Trust Inc., will be held this Thursday in Makati City (see http://braintrustinc.org/?p=478). The forum will address questions potential investors are likely to ask, and will feature EFAP honorary chair Jaime Augusto Zobel de Ayala, ARMM Gov. Mujiv Hataman, World Bank country director Motoo Konishi, and other key resource persons. Free print copies of AusAID’s “Braving It and Making It” book will also be distributed. (Readers may e-mail me for a free soft copy of the publication, which will soon be available through the websites of the copublishers and the Mindanao Development Authority.)

With all concerned sectors working together, hopes run high for Bangsamoro to be, as Finance Secretary Cesar Purisima recently put it, an “extra gear” for propelling Philippine economic growth in the years ahead.

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E-mail: cielito.habito@gmail.com