Island Economies: Mindanao and Sri Lanka

 

The following essay is contributed exclusively to Resurgent by Dr. Rolando Dy of the University of Asia and the Pacific. It was earlier emailed by Dy’s colleague, Dr. Fermin Adriano, to their common academic contacts, after which Resurgent obtained exclusive right to publication.

In the attached note to his email, Adriano wrote that the essay “compares the development performance of Mindanao and Sri Lanka.  Mindanao, in terms of land size, is bigger than Sri Lanka.  It has a population of around 24 million now compared to Sri Lanka’s 21.  They both lie at the same latitude and thus, they produce practically the same agricultural products.  Both countries suffer from the devastating effects of conflict.

“However, the similarities end there.  Sri Lanka’s annual export of more than US$10 billion is double that of Mindanao’s hovering around US$5 billion. Across agricultural crops except for bananas and pineapples, Mindanao’s productivity lags behind that of Sri Lanka.   More importantly, Sri Lanka’s poverty incidence is 6.7% while that of Mindanao is a whopping 41%!

“What are we doing wrong and Sri Lanka is doing right?  That is the question that policy makers must answer to find the sustainable path to development in our beloved island of Mindanao.”

 

Island Economies: Mindanao and Sri Lanka
Rolando Dy

 

Some 5,000 kilometers to the west of Mindanao is Sri Lanka. Mindanao has a similar latitude with Sri Lanka at about seven degrees north of the equator.  Mindanao’s population in 2015 was about 24 million (M); Sri Lanka’s 21 M. Sri Lanka's land area is 63 percent of Mindanao’s 10.2 M hectares (ha).

Both suffered from internal strifes: Mindanao under various shades of insurgency; Sri Lanka under the Tamil Tigers.  However, Mindanao’s 41 percent poverty incidence at national headcount in 2012 was very high compared to Sri Lanka’s poverty incidence of 6.7 percent in 2015.

Economic Dimensions, circa 2013/14

Item Mindanao Sri Lanka
(SL)
Ratio
Mindanao/SL
x-times
Gross domestic product (GDP)
$ B current
41.3 82.3 0.50
Population (M) 24 21 1.14
GDP per capita,  current $ 1,700 3,800 0.45
Total exports $ billion 5.2 (2013) 10.4 (2015) 0.50
Export per capita 220 495 0.44
Poverty at national headcount, percent 41
(2012)
6.7
(2013)
6.12

Source:  World Bank

  The objective of this brief is to compare Mindanao’s economy with Sri Lanka’s.  Some lessons can be learned to move forward Mindanao’s development.

Agriculture. Mindanao’s main crops by harvest area were: coconut, 1.8 M ha; corn, 1.4 M ha; rice 1.2 M ha; banana, 247,400 ha; rubber 214,300 ha; sugarcane 92,500 ha, mango 76,800 ha; pineapple 51,200 ha; and oil palm, 42,700 ha in 2014. Three crops dominate agriculture: coconut 36 percent, corn 28 percent, and rice 23 percent.

By contrast, Sri Lanka had 881,000 ha of rice; 395,000 ha of coconut; 222,000 ha of tea; 136,000 ha of rubber; 67,000 ha of maize; 53,000 ha of plantain; 40,000 ha of pepper; 30,000 ha of cinnamon; 24,000 ha of cassava; and 21,000 ha of sugarcane.  Only rice is dominant with 32 percent of agriculture land, coconut had 15 percent and rubber six percent in 2014.

Comparative Farm Yield.  Mindanao lags in most crops, especially corn, coconut and rubber.   It is far ahead in bananas, and slightly up in sugarcane and cassava.

Farm Productivity
tons/ha , 2014 (comparable years)

Crop Mindanao Sri Lanka (SL) Ratio
Mindanao/SL
x-times
Rice 3.77 3.84 0.98
Corn 1.87 3.59 0.52
Coconut 5.10 5.52 0.92
Rubber 0.60 (a) 0.96 0.63
Sugarcane 48.50 46.10 1.05
Cassava 14.00 12.70 1.10
Banana 29.80 12.10 2.46

(a) Private sector estimates
Source: Food and Agriculture Organization (FAO), Philippine Statistics Authority (PSA)

Export. Mindanao’s total export of $5.2 billion in 2013 was only half of Sri Lanka’s $10.4 billion in 2015.   Mindanao’s agri exports are bigger than Sri Lanka’s: about $4 billion versus $3.3 billion. But in terms of agri-export intensity, i.e., export to agri land, Mindanao is doing only half of Sri Lanka ($800 per ha vs. $1,200 per ha).

Mindanao's principal products in 2013 were banana $911 M, coconut oil $774M, nickel ore concentrates $640M, prepared fish, mainly canned tuna $614M, preserved fruits $284M, pineapples $159M, oleo-chemical $141M, copra cake $124M, desiccated coconut $115M, and manufactured exports $113M.  The rest included: sinter ore, activated carbon, natural rubber, banana chips, palm oil, seafood, and coconut products,

Sri Lankan exports are highly diversified. In 2015, the top products were: apparels $4,548M, tea $1,666M, rubber products $790M, precious stones $240M, electronic equipment $211M, optical and medical apparatus $189M, fruits $211M, mineral fuels $184M, fish $181M, and machinery $108M.  Other products above $50M were vegetable oils, vegetable and fruit preparations, tobacco products, animal feed ingredients, chemical products, vegetable textile fibers, man-made staple fibers, knitted fabrics, toys and games, and aircraft parts.  Apparels accounted for about 45 percent.

Agricultural Dimensions

Item Mindanao Sri Lanka Ratio Mindanao/SL
x-times
Agri-food exports $ B,(a) ~4.0 3.3 1.21
Land area (M ha) 10.2 6.27 1.63
Agriculture land (M ha 2013) 5.0 2.7 1.85
Agri to GDP, percent, 2014
Current prices
27.3 9.4 2.90
Agri export to farm land $ 800 1,220 0.66

(a) Mindanao, 2013; Sri Lanka 2015
Source:  World Bank, Author’s estimates

Tourism. Mindanao’s tourism is still in its “infancy” due to perceived security problems.  But it has great potential. By contrast, Sri Lanka had over 1.5 million foreign tourists generating $2 billion a year in 2015.

Benchmarking.  Mindanao has much to do.  Compared to Sri Lanka, its poverty incidence is six times higher, export at half the level; and agri-export to farm land ratio is only at 66 percent. These weaknesses can be source of strength with better institutions and social cohesion.  Mindanao policy researchers need to go deeper into the Sri Lanka poverty alleviation success. The Sri Lanka Poverty Assessment  found that the fall in poverty stems mostly from increasing labor incomes as the economy has shifted from less productive agriculture towards the industry and service sectors, more urbanization, and rising domestic demand (World Bank 2016).

Mindanao must diversify its economy in order to create jobs and reduce mass poverty. It must bring investors in agriculture, aquaculture, food manufacturing and non-agri manufacturing, and promote tourism.

A noted political economist, Fermin Adriano, traces Mindanao’s underdevelopment to “imperial Manila,” that is the highly centralized allocation of resources and decision-making.  The region has better prospects now under the Duterte presidency.

(Dr. Rolando Dy is a Full Professor and Executive Director of the UA&P Center for Food and Agribusiness. He has managed projects covering the benchmarking of investment codes for LGUs, and has advised the creation of food industry roadmaps in conjunction with USAID, the Department of Trade and Industry, and the Department of Agriculture. --CRC-UA&P website)

Photo: mindanaomaps.com CTTO