Booklet.Policy Paper 5.Transportation and Logistics ...braintrustinc.org/wp-content/uploads/2014/04/Mindanao-Policy-Paper... · Mindanao Economic Policy Papers TRANSPORTATION AND

Mindanao Economic Policy Papers 5Transportation and Logistics Facilities in Mindanao: Issues, Challenges and Imperativesby Cielito F Habito Ella S. Antonio

Mindanao Economic Policy PapersTRANSPORTATION AND LOGISTICS FACILITIES IN MINDANAO:ISSUES, CHALLENGES AND IMPERATIVES

By Cielito F. Habito Professor, Department of Economics, Ateneo de Manila University

Ella S. Antonio President, Brain Trust: Knowledge and Options for Sustainable Development, Inc.

This paper draws liberally from the Mindanao 2020 Peace and Develop-ment Framework Plan, whose relevant portions were also written by the authors based on extensive consultations and participatory planning ap-proach undertaken in the formulation of Mindanao 2020.

Copyright 2012 by Brain Trust: Knowledge and Options for Sustainable Development, Inc.. All rights reserved. No part of this book may be repro-duced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information and retrieval system, without permission from the publishers. Inquiries should be ad-dressed to the author c/o Brain Trust Inc., Unit 810 Medical Plaza Building, San Miguel Avenue, Ortigas Center, Pasig City 1605 (E-mail: [email protected]) .

This publication was made possible through the support of AusAID. The opinions expressed herein are those of the author and do not necessarily refl ect the views of AusAID.

The Mindanao Economic Policy Papers were prepared as part of the work led by Dr. Cielito F. Habito, AusAID Adviser for Mindanao Economic Development to examine constraints to investment and economic development in Mindanao, especially in Muslim Mind-anao, and determine appropriate ways to address them. Conduct and preparation of the studies were administered by Brain Trust: Knowledge and Options for Sustainable Development Inc., and undertaken between August 2011 and July 2012. Hence, any recent developments and changes subsequent to that period would not be refl ected in the policy papers.

Mindanao Economic Policy Papers

TRANSPORTATION AND LOGISTICS FACILITIES IN MINDANAO: ISSUES,

CHALLENGES AND IMPERATIVES

byCielito F. HabitoElla S. Antonio

A publication of:

Australian Agency for International Development

Edited by Ma. Salve I. Duplito

iv

Table Of Contents

Situation and Background 1 Land Transport 2 Table 1: National Roads Development by Major Island by Region, 2009 2 Table 2: Road Conditions in 2009 3 Figure 1: Motor Vehicle Registration, 2008 3 Water Transport 4 Figure 2: Ship Calls In Mindanao, 2001-2009 5 Figure 3: Passenger Traffic, 2001-2009 5 Figure 4: Cargo Throughput, 2001-2009 6 Figure 5: Container Traffic, 2001-2009 6 Air Transport 7 Figure 6: Strong Republic Nautical Highways 8 Table 3: Vehicles Carried by RoRo in Mindanao 8 Figure 7: Vehicles Carried by RoRo, By Share of Major Island Groups 9 Table 4: Categories of Mindanao Airports By Region 9 Table 5: Busiest Philippine Airports, 2009 and 2010 11 Table 6: Regional Shares and Growth Rates in Air Passenger Traffic 12 Logistics 12 Table 7: Logistics Performance Index (LPI), 2007 and 2010 13 ARMM Challenges 13

Blueprint for a Mindanao Transport and Logistics Network 14 Figure 8: Mindanao Integrated Inter-modal Transport Infrastructure 15

Chapter I

Chapter II

1

I. Situation and Background

The key to (an integrated) economic development in Mindanao is the interaction of leading and lagging areas… the important policy challenge is to unify all places with well-functioning institutions and infrastructure that connects places to others.

– Behind the Veil of Conflict: Moving Towards Economic Integration for Sustained Development in Mindanao (WB/AusAID, 2010)

Inadequate or poor quality infrastructure and linkages to market outlets, and inefficient logistics remain among the most formidable constraints to reaching Mindanao’s full economic potentials, given its favorable natural endowments.

Even as much progress in infrastructure has been achieved in the last 15 years, much remains to be done. The tri-modal transport and logistics network needs to be integrated to foster intra-regional complementation and move products more efficiently to the rest of the country and the world, as well as ease access to the island region’s tourist destinations. Land, water and air transport facilities continue to need substantial improvement and conscious integration into a seamless logistics system that would move people and goods efficiently and inexpensively.

Poor road conditions, a limited supply of transport services, and high fuel costs lead to high transportation costs, particularly beyond the main municipal centers. The high requirement for transport services coupled with poor road conditions lead to supply pressures that further push up the cost of transport services. These conditions ultimately translate into lower farm incomes, and persistent poverty in the rural areas of Mindanao.

“

2 Situation and Background

Land Transport

While it has the shortest road network among the three main islands, Mindanao continues to have the highest percentage (30% in 2011) of unpaved national roads.

Socksargen Region now has the highest proportion of unpaved national roads, which was estimated at 35%. The other Mindanao regions have proportions of unpaved roads ranging from ARMM’s 18% to Region XI’s 32%, which except for ARMM, are much higher than Luzon’s 19% and Visayas’ 13%.

The situation is worse at the barangay level where 95% or about 44,891 kilometers of roads were unpaved in 2007. About 39.2% of roads are in bad condition (Table 2) and paved roads have been deteriorating fast due to deficiencies in design and construction; damage from large and overloaded trucks (JICA, 2009); and inadequacies in resources and regular road maintenance capabilities on the part of the DPWH and LGUs.

Road use has been increasing as evidenced by the 8% average annual growth rate in motor vehicle registrations. In 2008, 897,735 motor vehicles were registered in Mindanao, the bulk (64%) of which was accounted for by motorcycles and tricycles (Figure 1). These vehicles have become popular means of passenger transportation because of their affordability, energy efficiency and ability to navigate bad and sloping roads that are generally not passable to four-wheeled vehicles. From 2008 to 2009, motorcycle and tricycle registrations grew 3.8% to 573,362 units.

Table 1. National Roads Development by REPLACE WITH NEW TABLE

Major Island by Region, 2011

Area/Region Paved Paved % Unpaved Unpaved % Total

Luzon 12,794 81 3,011 19 15,805Visayas 6,631 87 1,029 13 7,660Mindanao 6,222 70 2,664 30 8,886

Region IX 988 71 411 29 1,398

Region X 1,324 70 574 30 1,898

Region XI 1,118 68 531 32 1,650

Region XII 978 65 537 35 1,515

Region XIII 1,002 70 431 30 1,432

ARMM* 813 82 180 18 993 Source: DPWH Central Office & DPWH ARMM * 2012 data

“

Situation and Background 3

Table 2. Road Conditions in 2009

ConditionsPhilippines (%) Mindanao (%)

Fair-Good Poor-Bad Fair-Good Poor-Bad

Paved Roads 60.5 39.3 61.1 38.9

Unpaved Roads 65.8 34.2 60.5 39.5

Total Roads 62.1 37.9 60.8 39.2

Source: JICA, 2009

Figure 1Motor Vehicle Registration, 2008

Source: Land Transportation Office

Utility vehicle registration also grew rapidly but came as a far second (23%) in share of total registrations. Meanwhile, the number of buses and trailers declined by 7.3% in 2009. These trends are consistent with observed shifts in people’s transportation preferences, favoring light vehicles over big ones such as buses and trailers. Many of those who do not take motorcycles prefer utility vehicles because these can take non-regular routes and provide faster service. These have also become popular means of transporting goods and produce.

Local roads are an important element of the transport network. Based on data from the Department of Public Works and Highways, total length of local roads are about six times that of national roads. The bulk of Philippine roads consist of barangay roads of around 100,000 to 122,000 kilometers, which are mostly unpaved roads in poor or bad condition.


In terms of road quality, 69% of national roads are paved in contrast to 14% of paved local roads. Almost all (98%) roads in the NCR are paved while only 35% of roads in Central Luzon, the next best-off region based on road quality, are paved. The Autonomous Region of Muslim Mindanao (ARMM) has the lowest paved road ratio. Barangays, especially those in the remote rural and upland areas, simply do not have the resources to improve road surface and conditions. The bulk of funding for barangay roads come from congressional pork barrel or insertions made by legislators to the General Appropriations Act.

The law allows central government agencies to continue to implement devolved public works and infrastructure projects and other facilities, programs, and services subject to certain conditions.

Mindanao does not have a railway system. A railway system interconnecting the island’s growth centers has been a long-expressed dream for many Mindanawons. However, the substantial investment requirement for such a system puts to question its economic viability.

Nonetheless, short run railways in high traffic areas are being seriously considered. A feasibility study for an 82.5 km railway from Cagayan de Oro to Iligan has been completed and has been undergoing review for possible external financing. The Department of Finance has ruled out the use of internal budgetary resources to finance the staggering cost, estimated at PhP66.5 billion for a 100-kilometer stretch.1

Water Transport

The Philippines’ archipelagic nature partly explains the highly unequal development of its parts. Connecting the islands and developing the soft (e.g., governance and policy) and hard (e.g., ports and feeder roads) infrastructure is thus a critical strategy. Such connection, however, must maximize the use of waterways since water transportation, especially of cargo, is cheapest on a per unit weight basis. It is also worth noting that Filipinos, especially those from Mindanao are traditional ship builders, seafarers and maritime experts.

...high shipping and handling costs, manifested in how the cost of freight per nautical mile from Manila to Davao is three times that of Manila to Hongkong

There are currently 12 base ports, 15 terminal ports, 47 other national or municipal ports and 64 private ports in Mindanao. The major ports for cargo are Davao, General Santos, Cagayan de Oro and Zamboanga. As of 2008, all major base ports are already International Ship and Port Facility Security compliant. Despite the large number of ports and international standards of some of them, ship calls have been on the decline in recent years (Figure 2). There are a number of reasons for this trend, many of which reinforce each other,

1 “Mindanao railway project ‘too expensive’,” Sun Star Daily (Cagayan de Oro) Online Edition, November 4, 2011.

“


such as (a) inappropriate policies (e.g., cabotage law); (b) high shipping and handling costs, manifested in how the cost of freight per nautical mile from Manila to Davao is three times that of Manila to Hongkong. (Llanto and Basilio; 2005); and (c) perceived lack of safety due to aging vessels and numerous maritime accidents as industry protection (again under the cabotage law) dampens impetus for modernization and better services. Meanwhile, there has been a significant shift to the use of the RO-RO system, which offers faster and cheaper transportation services.

Figure 2Ship Calls in Mindanao

2004-2011 (in thousands)

Source: DOTC

Figure 3Passenger Traffic

2004-2011 (in millions)

Source: DOTC


Except during the period affected by the world financial crisis, cargo traffic has been robust. It was steadily increasing at an annual rate of 2.5% from 1999-2007 (Figure 4), twice the rate for the whole country in the same period (JICA, 2009). Foreign cargo traffic has been driving the trend due to increased trade with foreign countries that are generally located north of Mindanao (e.g., USA, Japan, China, South Korea). Domestic cargo movement through the use of traditional shipping has been on the downtrend, despite growing trade with Luzon and Visayas, due to heightened use of the RO-RO.

Trends in containerized cargos are likewise steadily moving up, seemingly unaffected by the financial crisis (Figure 5). These trends may be attributed to economic development and containerization improvements in Mindanao Container Terminal (MCT) in Cagayan de Oro and Davao/General Santos ports (JICA, 2009).

Figure 4Cargo Throughput

2001-2009 (million MT)

Source: Philippine Ports Authority

Figure 5Container Traffic

2001-2009 (‘000 TEU)

Source: Philippine Ports Authority


The JICA study forecast cargo traffic to grow annually between a conservative 35.4 million metric tons (2.5% growth rate) to an optimistic 101.6 million metric tons (10%) in 2030. Containerization is projected to reach 71% by then. All these have a bearing on the appropriate transportation and logistics infrastructure for Mindanao over the next 20 years.

The completion of the Strong Republic Nautical Highway (SRNH) largely contributed to the decline in the use of regular ships for passengers and cargo. The SRNH allows continuous travel through land and water, and makes it possible for private and public land vehicles to travel cheaper and more conveniently in and out of Mindanao through the use of “Roll-On, Roll-Off” (RO-RO) facilities. Figure 6 shows the routes covered by the three nautical highways (Eastern, Central and Western).

The policy environment for RO-RO was improved by deregulating fare rates, lifting distance limitations, and maximizing private sector participation. The new policy regime sped up the development of the nautical highways, which in turn spurred many economic activities that boosted growth and development especially in ports along the highways. The use of RO-RO benefited industries and people through faster and cheaper transportation service.

The number of vehicles carried by RO-RO in Mindanao has increased annually by 7.2% from 2007 to 2010 largely due to the highly robust operations of the RO-RO system and improved economic situation. The growth has been phenomenal in Southern Mindanao having registered double-digit growth rates with a spike of 290.7% in 2009 for an annual average of 108.6% (Table 3).

Mindanao moved far more vehicles than both Luzon and Visayas, even if the latter have far more islands (Figure 7) and RO-RO ports (37 against Mindanao’s 21). This is likely due to significantly lowered transport costs (by 40% for passengers and 30% for cargo), and travel time reduction by 10 hours from Mindanao to Luzon through the Visayas. These indicate that Mindanao is the primary beneficiary of the RO-RO system, which better connected it with the rest of the Philippines at least cost. The RO-RO system must thus figure significantly in the long-term development framework for Mindanao.

Mindanao is the primary beneficiary of the RO-RO system, which better connected it with the rest of the Philippines at least cost.

Air Transport

Mindanao has 27 airports (Table 4) classified according to international (three existing and one under construction), Principal Class 1 (3), Principal Class 2 (9), and Community (11). The Laguindingan International Airport located in Misamis Oriental was expected to be completed in early 2012. Twenty-one airports were recently improved under the Super Regions program of the Arroyo Administration. These included the establishment of M’lang Airport in North Cotabato.

“


Figure 6Strong Republic Nautical Highways

Table 3. Vehicles Carried by RoRo in Mindanao

2007 2008 2009 2010

Northern Mindanao 913,575 962,657 1,011,678 1,070,180

GR (%) 5.4 5.1 5.8

Southern Mindanao 13,464 16,663 65,105 72,368

GR(%) 23.8 290.7 11.2

Total Mindanao 927,039 979,320 1,076,783 1,142,548

GR(%) 5.6 10 6.1 Source: Philippine Ports Authority


Most of these airports are located along or very close to Mindanao coastlines. Only three (Malaybalay, M’lang and Surallah) airports, all of which are small community airports, are located inland. This confi guration implies two things: (a) Mindanao development is largely coastal; and (b) Mindanao airports may be exposed to risks posed by oceanographic (sea-level rise) and geologic (tsunamis) phenomena. Due to the absence of principal airports inland, many passengers need to travel up to four hours overland to take regular and cheaper fl ights.

Figure 7Vehicles Carried by RoRo

By Share of Major Island Groups (In Thousand)By Share of Major Island Groups (In Thousand)

Source: Computed from PPA data

Table 4. Categories of Mindanao Airports By Region

Airport Name Airport Category

Region IX Zamboanga Peninsula

Zamboanga International Airport* International

Dipolog Airport* Principal; Class 2

Pagadian Airport* Principal; Class 2

Ipil Airport* Community

Liloy Airport* Community

Siocon Airport* Community


Region X Northern Mindanao

Lumbia Airport, Cagayan de Oro City* Principal; Class 1

Camiguin Airport* Principal; Class 2

Labo Airport, Ozamis City* Principal; Class 2

Maria Cristina Airport, Iligan City* Community

Malaybalay Airport, Bukidnon Community

Laguindingan International Airport, Misamis Oriental* International (Under construction)

Region XI Davao Region

Francisco Bangoy International Airport, Davao City* International

Imelda R Marcos Airport, Mati City* Community

Region XII SOCCSKSARGEN

Tambler International Airport, General Santos City* International

Awang Airport, Cotabato City* Principal; Class 1

Allah Valley Airport, Surallah, South Cotabato Community

M’lang Airport, North Cotabato Community

Region XIII Caraga

Bancasi Airport, Butuan City* Principal; Class 1

Surigao Airport, Surigao City* Principal; Class 2

Tandag Airport, Surigao del Sur* Principal; Class 2

Siargao Airport, Surigao del Norte* Principal; Class 2

Bislig Airport* Community

ARMM

Sanga-Sanga Airport* Principal; Class 2

Jolo Airport* Principal; Class 2

Malabang Airport* Community

Cagayan de Sulu Airport* Community

*Located along or close to coastlinesInternational: Airports with border facility used for international flightsPrincipal: Airports for scheduled domestic flights using Jet (Class 1) and Prop (Class 2) servicesCommunity: Airports used for general aviation aircrafts

Source: Civil Aviation Authority of the Philippines, DOTC


Three Mindanao airports are among the 10 busiest in the Philippines in 2010 in terms of passenger traffic: Davao City (3rd), Cagayan de Oro City (4th) and Zamboanga City (10th) as shown in Table 5. Volumes of passenger traffic in these airports have been growing at double-digit levels, with Davao city even doubling its growth rate to 35.4% in 2010, when it moved 2.7 million passengers.

In terms of cargo traffic, four Mindanao airports were listed in the top 10: Davao (3rd), Cagayan de Oro City (4th), General Santos (7th) and Zamboanga City (8th). General Santos, which only ranked 14th in passenger traffic, figured prominently in this category, owing to the large (11.8 million kilograms) carriage of fish and fish products.

Table 5. Busiest Philippine Airports, 2009 and 2010

Airport

Passenger Traffic Cargo Traffic

Rank2009 GR

(%) Rank2010 GR

(%) Rank2010

(‘000) (‘000) (Million kg)

Ninoy Aquino 1 24,108 8.3 1 27,120 12.5 1 353.10

Mactan, Cebu 2 4,395 20.6 2 5,791 31.8 2 49.95

F.Bangoy,Davao 3 1,968 16.2 3 2,664 35.4 3 40.78

Iloilo City 4 1,324 23.3 6 1,581 19.4 6 11.82

Lumbia, CDO City 5 1,111 23.1 4 1,302 17.2 4 22.24

Silay, Bacolod 6 1,020 21 5 1,224 20.0 5 12.50

Tacloban City 7 832 32.6 7 860 3.4 10 6.33

Kalibo, Aklan 8 640 59.9 8 1,006 57.2 NA NA

Puerto Princesa 9 588 22 9 728 23.8 9 8.28

Zamboanga City 10 583 24.1 10 624 7.0 8 8.96

General Santos 14 405 33.7 14 478 18.0 7 11.81Source: Civil Aviation Authority of the Philippines

In terms of regional performance on passenger traffic, Mindanao airports registered growth rates higher than the already very high national average of 14.1% in 2009 (Table 6). Altogether, Mindanao airports moved 5.1 million passengers in 2009, registering a growth rate of 24.6% from 2008. Region XII grew the fastest at 48.2%. As a result, Region XII also increased its contribution to passenger movements from 10% in 2008 to 12% in 2009. The biggest contributor is Region XI at 39% due to the big volumes of passengers using the Davao City Airport, followed by Region X (24.5%) due to the Cagayan de Oro Airport.

Passenger and cargo traffic are expected to further speed up over both the medium and long term. The projected operation of Laguindingan airport in 2012 will help meet the growing demand for aviation services, particularly in Northern Mindanao. However, at the


rate passenger and cargo movements are expected to grow, the expansion, rehabilitation and modernization of Mindanao airports have become imperative. And to address the risks posed by natural phenomena and accessibility of principal airports to people inland, plans and feasibility studies for undertaking these expansions or actually building new airports inland, must already be undertaken.

Table 6. Regional Shares and Growth Rates in Air Passenger Traffic

Area 2008 (‘000)

Share(%)

2009(‘000)

Share(%)

GR (%)

Region IX 638 15.7 781 15.5 22.5

Region X 984 24.3 1,236 24.5 25.7

Region XI 1,693 41.7 1,968 39.0 16.2

Region XII 407 10.0 604 12.0 48.2

CARAGA 332 8.2 460 9.1 38.5

Mindanao 4,056 11.2 5,052 12.2 24.6

Philippines 36,163 - 41,258 - 14.1

Source: Civil Aviation Authority of the Philippines

Logistics

The Philippines’ performance in terms of trade logistics lags behind some of its regional competitors (Table 7). In the World Bank’s Logistics Performance Index (LPI), the Philippines was ranked 44th worldwide in 2010 in terms of logistics efficiency, and 5th among a group of seven countries from the region.

Performance has apparently been improving, as the country had an LPI ranking of 65 in 2007, placing it last of the seven countries above but has since then passed Vietnam and Indonesia. Notwithstanding such improvement, there is great scope for improvement.

Trade facilitation costs in the Philippines are higher than those in neighboring economies. Customs processes are lengthy and cumbersome and businesses complain about a lack of transparency. About 40 different government agencies are involved in issuing regulations or permits on exporting and importing goods.

The Bureau of Customs (BOC) has tried to address this by designing a national single window (NSW) that will allow exporters and importers to track containers and the permit approval process. It has been piloting the NSW at the port of Batangas since March 2009, which needs to be rolled out to all major ports.


The high logistics costs in the Philippines traces primarily to the poor and dilapidated transport network, particularly in rural areas, and relatively inefficient ports and shipping, especially given its archipelagic geography. The same is reflected in Mindanao, where the state of infrastructure is relatively inferior due to decades of underinvestment. Logistics and supply chain efficiency are generally hampered by insufficient investments and lack of competition.

High shipping costs have been attributed to a number of reasons. Licenses to operate on any given route are granted by MARINA on the basis of traffic volumes with no transparency in the award process. Shipping rates are set by negotiation between the shipping company and the cargo owner, and not regulated by MARINA even if there is only one operator on the route.

The Cabotage Law, which prohibits international liners from inter-island shipping in the Philippines, has long been blamed as a major contributor to the high shipping costs. It is more expensive, for example, to transport goods from Mindanao to Manila than Mindanao to China. However, efficiency gains on transport have been made in recent years with the introduction of the roll-on- roll-off (RO-RO) shipping system. It is estimated that RO-RO has led to economies of between 23% to 67% of the cost of traditional shipping (expressed in terms of savings on a 10-wheeler truck), depending on the kind of goods. (World Bank 2010)

ARMM Challenges

Within ARMM, the binding nature of the transport and logistic infrastructure constraint to greater economic activity is particularly pronounced. The correlation is unmistakable between road densities, for which ARMM has the lowest in the country, and poverty incidence, the worst of which could also be found in the region.

Table 7. Logistics Performance Index (LPI), 2007 and 2010

14 Blueprint for a Mindanao Transport and Logistics Network

Telecommunication facilities also lag behind, with the region having been omitted from the installation of the fiber optic network by the Philippine Long Distance Telephone Co. (PLDT).2 The lag is particularly ironic given that Cotabato City, located in the heart of ARMM, was reportedly the first city in Mindanao to have a modern (direct dial) telephone system in the 1960s.

Polloc Port in Parang, Maguindanao has been envisaged to be a catalyst for invigorating the mainland ARMM economy, by providing the region’s link to shipping traffic to other parts of the country and the region. It was envisaged to be the hub for trade and logistics in Muslim Mindanao, serving an active agro-industrial economic zone. However, the port has been highly underutilized, and the promise of increased industrial activity and wider trade in agricultural products from Muslim production areas has remained elusive.

The bulk of agricultural production in the general vicinity is shipped not out of Polloc Port, but from Davao City and General Santos City in the south, and Cagayan de Oro in the north. According to Port Administrator Moharrim Mohammad, lack of refrigeration facilities makes the port unattractive for shipping bananas for export; thus, nearby La Frutera in Datu Paglas, Maguindanao ships out of Davao City.

Meanwhile, agricultural products from Lanao del Sur are transported to the Cagayan de Oro port rather than Polloc Port due to the difficulty of road access to the latter. Certain road links to the port from key production areas have remained poor and undeveloped through the years, reportedly not having been prioritized enough by DPWH. Recently, major shipping companies decided to bypass the port after it raised docking charges from P650 to P13,000 late in 2011. The various problems getting in the way of better utilization of Polloc Port underscore the need to plan the transport infrastructure system wholistically and integratively.

Blueprint for a Mindanao Transport and Logistics Network

As asserted in the Mindanao 2020 Peace and Development Framework Plan, public investments must provide a comprehensive and integrated transport and logistics network that would integrate the Mindanao economy in various dimensions. External integration pertains to Mindanao’s relationship with the rest of the Philippine economy, with the need to widen and deepen traditionally vertical and lopsided economic linkages with Luzon and the Visayas through Metro Manila and Cebu. This also pertains to Mindanao’s integration with the Southeast and East Asian regional economies.

Internal integration, on the other hand, must be pursued on two fronts. One, Mindanao’s progressive economic growth centers must increasingly shift their focus from a traditional nucleus-satellite linkage to Metro Manila and Cebu, and more towards complementary

2 For this same reason, the Business Process Association of the Philippines does not see much prospect for industry expansion into ARMM in the near future. (Personal communication with Ms. Gillian Virata, BPAP Executive Director, August 2011.)

Blueprint for a Mindanao Transport and Logistics Network 15

interconnections among one another. Two, and more importantly, Mindanao’s leading growth centers must forge more active linkages with depressed lagging areas through their respective complementary roles in the economic value-chain (as argued in the Behind the Veil of Conflict study).

Further development of value chains must seek to mitigate their traditional lopsidedness in favor of the progressive growth centers. This would be served by having more value-adding activities closer to primary production areas and in smaller enterprises, and clustering of producers to achieve economies of scale especially in marketing. But for such value-adding activities to be drawn towards the (usually lagging) primary production areas, adequate transport and communication infrastructure must be put in place to reduce the costs of doing business.

The goal, then, is to have an integrated inter-modal transport and logistics network, with high-standard highways and railways, strategically located, climate-resilient ports, airports and land transport stations that allow faster movement of people, goods and services; reduce logistics costs; promote productivity and international competitiveness; and seamlessly connect Mindanao with the rest of the country and the world. Figure 8 illustrates the key existing as well as planned elements of this integrated transport infrastructure system as envisaged by the governent.

Figure 8Mindanao Integrated Inter-modal Transport Infrastructure

Source of Basic Data: DPWH, CAAP, PPA


Mindanao 2020 outlines the key imperatives for providing an efficient and responsive transport and logistics system in Mindanao, as follows:

Widen and expand the role of inland, coastal and inter-island water-based transport in the Mindanao transport and logistics system. Mindanao’s archipelagic geography and prominent river systems make water-based transport a logical recourse in the transport of people and goods within and across the island-region. Waterways link Mindanao islands to the mainland, the near-shore and riverine population areas to economic centers, and the whole of Mindanao to the rest of the Philippines and other countries.

Key initiatives to make more optimal use of such waterways for transport include:

• Modernize operations and maximize use of major ports. • Further expand RO-RO coverage and develop RO-RO facilities in strategic areas

such as Tawi-Tawi and Jolo to General Santos and Davao City; Zamboanga City and Sultan Kudarat and Maguindanao; and various points connecting Mindanao and Visayas (e.g., Butuan and Bohol, Zamboanga Norte and Cebu).

• Promote passenger and cargo travel through the numerous river systems especially in those that feed into or are closest to economic centers, through encouragement of investments and issuance of a legal basis that provides direction and incentives.

• Provide complementary infrastructure support especially river quays and seaports that possess the features earlier described, and connect these to the logistics network (e.g. stations, roads, airports) and value chains. For example, the Sta. Maria Port in Siocon, Zamboanga del Norte has great potential as a trading hub along the western coast of the Zamboanga Peninsula, if road links across the coastal municipalities from Zamboanga City up to Liloy are developed.

• Improve safety and sea-worthiness of water vessels, and security in water transportation routes by, among others, replacing aging vessels and improving navigation systems.

• Promote the establishment of shipping as well as boat and shipbuilding and repair industries, both for local transport needs and for the export market. There are a number of coastal areas within Mindanao with the needed features that could potentially host shipbuilding activities, such as in Lamitan City in Basilan. In the medium-term, Mindanao can create a niche in the industry (e.g., supply of shipbuilding parts and materials) to strengthen its influence in policy-making for these industries.

Reform policies and regulations that have rendered the transport and logistics system inefficient and costly, along with industries linked to them. Examples are the Cabotage Law and high import tariffs on steel products. Creative incentives and improved systems and procedures must also be put in place.

Integrate land, air and water transport systems into a coherent and interactive array of

Blueprint for a Mindanao Transport and Logistics Network 17

interdependent networks. Creating such an inter-modal transportation and logistics superhighway will increase travel efficiency and reduce costs. Enhancing safety and minimizing negative environmental impacts must be priority concerns in the establishment of such logistics system.

Upgrade main arterial roads into world-class, all-weather highways, and build new ones where necessary (e.g., those that would link Mindanao’s eastern and western portions inland).

Address the following key considerations in designing and building or improving transportation infrastructure:

• Respect, prioritize and consider the natural and cultural integrity of environmentally and culturally critical areas. Protect biodiversity from loss of habitat and influx of people, and consider geological and geomorphological conditions of the project areas and those surrounding them.

• Accord due importance to pedestrians in building roads in populated areas by providing ample sidewalk space and safety and directional signs;

• Provide dedicated lanes for motorbikes and bicycles especially in urban areas to promote energy conservation and minimize accidents;

• Protect infrastructure from natural disasters (e.g., tsunami) or climate change impacts through location on higher grounds or away from shorelines and fault lines.

• Build viaducts and tunnels for better vertical and horizontal alignments and only if extremely necessary, comparatively cost-efficient and environmentally sound.

Promote alliances among LGUs and partnerships among government and community, especially in the construction of municipal and barangay roads. The case of the PALMA alliance (for Pigcawayan, Alamada, Libungan, Midsayap, and Aleosan) in North Cotabato is well recognized and cited as a model for LGU cooperation in infrastructure development.

In ARMM, similar initiatives are being pursued in emerging LGU alliances such as the Iranun Development Council or IDC (Barira, Buldon, Datu Blah Sinsuat, Matanog and Parang) ) and the Southwestern Ligawasan Alliance of Municipalities or SLAM (Datu Paglas, Paglat, Salipada K. Pendatun and Sultan sa Barongis) in Maguindanao, and the budding Wao-Bumbaran alliance in Lanao del Sur. An enabling legal environment and a system of incentives to encourage such alliances and partnerships must be provided through a combination of legislation and executive actions.

Prepare a long-term plan for the long-dreamed-of Mindanao railway system that is closely coordinated with the other infrastructure plans mentioned above, to complement the proposed inter-modal transportation and logistics superhighway. The railway plan must create a policy and operational environment that would be conducive for private sector investments in railways and other components of the logistics highway. Feasibility studies on the various major segments of the envisaged Mindanao railway system identified in the plan need to be undertaken without further delay.


Prioritize the upgrading, expansion or modernization of existing airports, particularly the community airports located inland, and pursue construction of a state-of-the-art airport in the Mindanao heartland out of one of such existing inland airports. These strategies aim to catalyze development in less progressive areas, reduce time and cost of accessing airports and air travel, and ensure availability of suitable alternate airports should natural or environmental disasters affect airports near or along the coasts. Strengthen implementation of policies on user payments for infrastructure facilities to

address inefficiencies in resource mobilization and utilization: • Allocate Mindanao collections from motor vehicle user charges to uses within

Mindanao, and ensure these proceeds are used as mandated by law, i.e., for road maintenance and drainage improvement, road safety devices, and air pollution control;

• Establish a corruption-proof system for enforcing load limits on trucks and other heavy motor vehicles;

• Encourage private investments through imposition of reasonable user charges (e.g., toll fees) as warranted; and

• Regularly and routinely report on the amounts and use of all user-fee collections to the paying public.

For the ARMM in particular, there is need to identify the critical road links that have great strategic value in unleashing expanded agricultural and agribusiness activity once traditional geographic obstacles to the markets are overcome. As mentioned above, ease of access to Polloc Port from major production areas needs to be a deliberate objective in prioritizing transport infrastructure investments.

Facilities in Polloc Port and in the ports of Basilan (Isabela City and Lamitan City), Sulu and Tawi-Tawi need substantial improvement to permit more active exchange with domestic and regional markets. Improved air access (e.g., in Lanao del Sur) and airport facilities (i.e., in Cotabato City; Jolo, Sulu and Bongao, Tawi-Tawi) are also key elements in providing a transport and logistics system that would be supportive of an invigorated ARMM economy. Finally, it is important to situate transport and logistics planning for Mindanao within the broader context of the strategic directions for the Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA).

The transport and logistics agenda for Mindanao needs to be proactive and forward-looking, especially given its recognized potentials for meeting growing demands for Halal products and organic farm products within the region and beyond. Thus, international connectivity in transport (sea and air) and communication must be a prominent aspect of such initiatives in the same way that promoting internal integration within Mindanao has been recognized as a long-standing shortcoming that must be satisfactorily addressed.

Documents

Booklet.Policy Paper 5.Transportation and Logistics ...braintrustinc.org/wp-content/uploads/2014/04/Mindanao-Policy-Paper... · Mindanao Economic Policy Papers TRANSPORTATION AND