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Holding on to an Empty Promise

Caraga’s flat-line economic activity has lately been showing signs of life, triggered mainly by mining operations.

The Supreme Court’s ruling declaring large-scale mining unconstitutional was like a death sentence to the region, which boasts of a rich history and tradition in mining. In fact, Surigao City in Surigao del Norte is said to have evolved from the operations of two mining companies—the still-active Pacific Cement and the now-closed Nonoc nickel mining.

For four years, Caraga registered a negative growth rate—until the tribunal reversed itself in December 2004.
With the resurgence of mining, the region’s economy is experiencing a renaissance of sorts, notes Carmencita Cochingco, the National Economic and Development Authority’s regional executive director for Caraga. The production value last year from mining hit P6.8 billion, up from P2.1 billion in 2006, representing a sales value of P19.8 billion in 2007 from P1.3 billion in 2006.

The region has been a favorite destination of this extractive industry, hosting at present 15 large-scale mining companies from China, Japan, Hong Kong, and Australia, with eight more in the pipeline. All in all, at least 62 mining companies maintain offices in the region.

Second Poorest

But growth fueled by mining is only one side of the coin, and the variables in the other equation present a different picture. The total outlook on Caraga is not as rosy as it seems.

Caraga is a microcosm of what the Philippines is: abundant in natural resources but also in poverty. Almost half of its two million people live below the poverty line, way above the 33 percent incidence nationwide.

Created through Republic Act 7901 in 1995, the 13-year-old region has yet to realize its full potential. Its Human Development Index ranges from low to very low, indicating that it would not meet its Millennium Development Goals target by 2015, according to its MDG status report.

Based on its regional development plan, Caraga by 2010 is targeted to hit a steady growth rate of 6.74 percent from the present 6 percent. Aside from mining, major industries like tourism, agro-forestry, and fisheries are expected to contribute to its Gross Domestic Regional Product. As of 2006, its GDRP represented only 1.28 percent of the national GDP and 7.24 percent of the Mindanao GDP.

Caraga is the second poorest region in the country, already an improvement from the 2003 poverty survey by the National Statistical Coordination Board which it topped.
Most Peaceful

In most sectors—agri-fishery, industry, manufacturing, construction, trade, and services—its percentage share is either second lowest or lowest among the Mindanao regions. The only bright spots are the mining sector, which is second highest in Mindanao, and forestry, which is highest in the country.

Its macroeconomic forecast for 2010 paints a vibrant picture, with the robust mining activity creating a ripple effect on construction, manufacturing and services sectors, and the trade sub-sector. The industry sector is expected to grow by an average of 11 percent from 2008-2010, by the “recovery of mining, construction and manufacturing.”

It appears, however, that the fundamentals are not in place to support such an optimistic forecast.

Unlike other regions in Mindanao troubled by insurgency and terrorism, Caraga probably has the lowest risk of investment in terms of peace and order and criminality problems. Criminality is low in the region while insurgency and secessionist problems is almost non-existent.

“Caraga is one of the most, peaceful regions in Mindanao, maybe even in the entire Philippines,” says Supt. Nestor Fajura, chief of the regional operations and plans division in Caraga.

No Conflict Spillover

Statistics support this claim. From January to July, Caraga registered a crime volume 62 percent lower than the national average. Most of the cases were non-index crimes involving illegal gambling, logging, and drugs.

The generally peaceful environment however got a jarring jolt last July when a band of communist rebels attacked the municipal police stations of Dapa and General Luna towns in the Siargao Islands, the region’s jewel tourist destination.

Fajura says the incident was an “isolated one” and reports reaching the National Police showed that it was prompted by a landgrabbing case involving a local official and that the perpetrators were from provinces in nearby regions. While there are small pockets of rebels in the region, these are mostly New People’s Army members from the Compostela Valley.

As for threats from the Moro Islamic Liberation Front, Fajura says the group could not gain ground in the region because of the presence of indigenous peoples. “They would have problems with the IPs,” Fajura says.

The threat of a possible spillover of hostilities in the ARMM is also implausible as mountain ranges and the provinces of Misamis Oriental, Bukidnon, and Davao border the region, Fajura adds. Caraga is perched on the northeastern portion of Mindanao.
High Unemployment

But security is only one of the variables for development and, in the case of Caraga, is no assurance for development. As investors continue to favor other regions, employment generation has been sluggish, and exports have been low with the exception of mineral commodities.

Neda’s Conchingco told Newsbreak that, for the entire region, there are only about 25 big business establishments employing 10 or more persons. The Regional Development Council has identified and registered with the Philippine Economic Zone Authority at least five economic zones in Caraga but, so far, there have been no interested locators.“There are no takers,” says Caraga trade and industry regional director Brielgo Pagaran.

Based on 2007 data, of the four major provinces, Agusan del Norte and Surigao del Norte hold the biggest share of investments. However, at the same time, these two provinces registered the biggest decrease in investment generation. In all, there was a 14.8-percent shrinkage in investment, mirrored by a decline in new businesses registered from 5,151 in 2006 to 3,446 in 2007.

The low investment easily translates to low employment figures in the formal sector—that is, those with regular pay. As of January 2008, Caraga had a high employment rate of 95.4 percent, but the figures could be misleading as almost one-fourth of the labor force are underemployed.

Regional director for labor Chona Mantilla says that more than half of Caraga’s labor force is in the informal sector—those who are self-employed or entrepreneurs. “Caraga is still basically an agri-business region,” she noted.

Mismatched Jobs, Skills

Mantilla says the resurgence of mining has perked up employment. In Surigao del Norte, for instance, the center of mining in the region, the industry has created 5,000 jobs, says the province’s planning and development office chief Arturo Cruje.

But Pagaran does not share this rosy view. “Mining is not labor-intensive and the trickle-down effect to employment generation is minimal,” he argues.

Also troubling is the disconnect between labor demand and supply. Residents could not take advantage of the high-paying employment opportunities in mining because of a shortage of skills. “The skills do not match the demand,” Conchingco says.

For instance, the Platinum Groups Metals Corp. operating in Surigao del Norte has announced vacancies for senior mechanics, auto-electricians, licensed civil engineers, communication and development and education officers. But then, non-Caraga residents usually fill up such vacancies, Pagaran says.

The skills mismatch is not confined to technical jobs. Call centers have launched job fairs but could not find right candidates for the job openings, Cochingco says.

Mantilla says they are aware of the skills mismatch and the regional labor office has initiated tie-ups with local colleges and universities and the Technical Education and Skills Development Authority to address the situation. Schools are now offering tourism courses and are encouraged to offer technical and vocational courses to meet the expected labor demand in local tourism and mining. With the lack of employment opportunities, there is also little migration from other regions, which may be good in a way, as the limited resources of local government units are not spread thinly.

Infrastructure Problems

One major factor for the lukewarm investment interest in Caraga that emerged in our interviews was the lack of infrastructure and an efficient logistics system. Interested businessmen we interviewed also cited inadequate infrastructure as a major turn-off.

There are major public works projects, for sure, such as the completed P2.1-billion Diosdado Macapagal Bridge in Butuan City, the P100-million Dinagat Island road, and the P6.3-billion Surigao-Davao Coastal Road that would connect the the two Surigao provinces to Region 11.

But within the region, provinces are still isolated from one other and from neighboring regions, hampering economic integration. For instance, no major road network connects Agusan del Norte and Agusan del Sur to Surigao del Sur. There is also no major road network connecting the two provinces of Agusan to neighboring Bukidnon.

A former member of the Regional Development Council (RDC) told Newsbreak that a proposal to link the Agusan provinces to Surigao del Sur was rejected by local officials there, fearing it could affect the port business in Surigao del Sur (Caraga has two major ports: Nasipit and Surigao). They felt that traders might transport their cargo to Nasipit port in Butuan, which is geographically nearer to Cebu and other provinces in the Visayas.

Protectionist LGUs

“Local officials have yet to shed their protectionist notion. They don’t realize that the purpose of the road network is to interconnect the provinces. We are connected in a roundabout way,” the former RDC official said.

Aside from major road networks, the region also lacks farm-to-market roads, hampering the agri-business industry. Regional director for agriculture Ricardo Regis says this is being addressed.

The underdeveloped transport infrastructure, says Pagaran, slows down the development of Caraga’s agro-business sector, which is concentrated in Agusan del Norte and Agusan del Sur. The two provinces of Agusan have the largest farmlands and forest areas, accounting for the bulk of the region’s agricultural and forest products. (In the RDP plan for Caraga, Surigao del Norte has been identified as the center for mining, tourism, and agri-fishery and Surigao del Sur for mining and agri-forestry.)

A draft economic situationer for Caraga obtained by Newsbreak also identified the lack of transport infrastructure as one major dampener on Caraga’s tourism prospects. “What drives away tourists… is not the peace and order condition. The lack of road networks and facilities tops the list of factors why the region cannot get the big pie of [the tourism] market,” the report said.
Second Nature

Given its limitations and challenges on human resources and its shaky economic fundamentals, what is the prospect for Caraga of transforming into a “super-region” and a major contributor in the country’s economic growth?

The answer is tentative, even doubtful, despite the promise of mining.

Caraga was among the first regions to reembrace large-scale mining. It was as if it had rediscovered the antidote to poverty.

Historically, mining is second nature to Caraga. “People here are very open to mining. Mining has been good to them. They know the economic benefits brought by mining,” said engineer Leonel Santos, the RDC private sector representative.

To be sure, there are those opposed to mining operations but the objections are largely muted. Catholic bishops there, for instance, adopt a less critical view compared with their colleagues in other regions. One bishop was quoted to have said, “If we don’t allow mining, what alternative can you offer to the people?”

In the 1960s and the 1970s, mining, both large-scale and small-scale, was a major source of employment and income for the residents. People recall the time when the Nonoc nickel mining stopped operations in the 1980s, rendering thousands jobless. “Surigao City was like a ghost town,” one resident recalled.

Decline in Investments

Thus, when the SC gave the go-signal to mining, it was like infusing new blood to a dying region. Caraga boasts of US$2 billion worth of gold deposits, and has huge deposits of nickel and chromium ores. Half of Mindanao’s mineral deposits is believed to be in Caraga.

In Surigao del Norte alone, it is estimated that 25,000 new jobs from related sectors like tourism and services were generated by the mining boom, says Cruje. Another positive note is the fact that mining companies are required under the law to apportion at least 1 percent of their operational cost for community-related project and services, Cruje adds.

There is a mirage, however, in the luster of mining. Underneath is a symptom of weak economic fundamentals.

The decline in investments, for instance, shows that Caraga’s economy is heavily reliant on mining and betrays the disparity in the economic performances of the Caraga provinces. It could be argued that mining largely triggered the 6 percent GRDP growth of Caraga in 2006, as other traditional sectors like employment, agriculture, forestry, and fisheries suffered a decline in growth.

In the entire region, income and local taxes generated have broken the P2-billion mark for 2007, mainly because of mining operations. But growth appears to be heavily concentrated in Surigao del Norte, due to the fact that 13 of the 15 the mining companies are found there, with more expected to participate.

Abandoned Dev’t Plan

With the promise of mining, development planners and local government officials are now looking to join the bandwagon and set aside other development programs that are more sustainable, Pagaran warns. One indication of this is the increasing number of exploration permits and mineral-production sharing agreements in the region.

Pagaran recalls that shortly after Caraga was formed, its regional development plan was centered on tapping its agro-business productivity and forestry potential through a sustainable program. Caraga has 800,000 hectares of forest area and 600,000 of potential agricultural lands. “It was estimated that we will generate P200 billion in GDRP, to include the value-added output if we process the products,” Pagaran says.

However, due to some constraints, the ambitious plan was abandoned, Pagaran says. “Unlike mining, which is exhaustible, that RDP was sustainable.”

One area aside from mining where Caraga has a huge potential is palm oil production. The region owns 53 percent of the total palm area in the country. There are two processing plants in Agusan del Norte and Agusan del Sur. The increasing worldwide demand for palm has encouraged more oil palm growers. The regions aims to increase its palm oil plantation from 13,000 hectares to 85,000 hectares in 10 years.

In the mad scramble for mining and with the instant gratification it brings to local income, local government units have not mapped out a long-term development program. Pagaran notes. “Although they say the mining industry will last 25 to 50 years, what happens next once the minerals are already exhausted? Our local officials should look beyond that.”

Blessing in Disguise

Of immediate concern is that right local taxes should be imposed and collected from the mining companies and strict monitoring of environmental regulations, Conchingco and Pagaran say. Conchingco says mining should be pursued without sacrificing the environment. For now, environmental degradation and disasters have spared the region. The only instance of a mining disaster occurred in the 1970s in Placer, Surigao del Norte, when a dike for mine tailings from the operations of Manila Mining Corp. collapsed and spilled tailings into the river.

Pagaran says Caraga has not fully benefited from all the supposed economic benefits brought by mining. As it is, the trickle-down effect, especially in employment, is limited since companies merely transport the minerals to other countries for processing. “It would be better if these companies put up processing plants here so more could be employed.”

Others, however, prefer to look at the bright side. Cruje says the entry of mining, if properly managed, could boost tourism. “It is just a matter of balancing environmental concerns and mining.”

The one major obstacle for mining from going full-blast in the region is the tenurial issue raised by indigenous peoples. Caraga is home to five major IPs, and Conchingco says ancestral claims by the IPs have stalled some large-scale undertakings. The tenurial issue has also hampered the development of lands suitable for industrial and agricultural production because of ancestral domain claims.

From another viewpoint, such an obstacle may be a blessing in disguise. With mining, Caraga may be holding on to an empty promise. (
Aries Rufo in Butuan City/Newsbreak)

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