Economy and Livelihood

The protracted conflict in the Bangsamoro combined with its accumulated neglect and geographical remoteness has resulted in a vicious cycle of insecurity, poverty, marginalization, deprivation and underdevelopment. This chapter discusses the state of the economy and livelihood opportunities in the Bangsamoro, using data from the ARMM as proxy. Proposes a strategic approach to development in the Bangsamoro based on leveraging its agricultural potential to spur investment and move production up the value chain. Section 1 assesses the performance of the Bangsamoro economy accross its sectoral composition and describes the impact on labor force participation, povert incidence and food security. Another section provides a strategic framework for improving economic performance and developing livelihood opportunities for sustainable growth in the Bangsamoro. Some section outlines a program, including expected impact and estimated budget requirements.

A. Contest - Economic Performance, Poverty and Livelihoods in the Bangsamoro

A.1. Overall economic performance

Despite recent improvements, economic output in ARMM continues to lag significantly behind the rest of Mindanao and the Philippines. Though ARMM represents approximately 3.5% of the Philippines population, it only contributed 1% of national GDP in 2012. With average annual growth in Gross Regional Domestic Product (GRDP) of 3.1% (1996-2008) and 2.5% (2009-2012), and a population growing at approximately 2.3% (2010), the regional economy is barely able to keep up with the expanding needs of its residents. As a result, at PHP 29,608 per person, ARMM had the lowest regional per capita output in the Philippines in 2013 - barely a quarter of the national average and, adjusted for 2000 prices, lower than 2010.

Beyond the official results of the ARMM economy, a well-developed and active informal economy provides critical livelihood and employment opportunities to marginalized and vulnerable communities operating in a highly imperfect market. Data suggests that close to 60% of workers in Mindanao are involved in the informal sector, with the share in ARMM considerably higher. Though this informal economy is an essential survival tool for poor communities, there is a "shadow economy" that operates within that engages in illicit transaction of weapons, drugs, land and credit, which are significant drivers of violence.

Recent governance and policy reforms have led to an increase in growth, from an everage of _% within the period of _, reaching 3.6% in 2013, that must be capitalized on to build a sustainable growth and development in the Bangsamoro.

A.2. Composition of the ARMM economy

Agriculture, Fishery and Forestry (AFF) contributed more than two thirds of GRDP (63.5%) over the period 2009-2012. Services meanwhile accounted for 31.4% of output with manufacturing contributing the remaining 5.1%.

Source : NCSB

Though AFF is the dominant sector in the ARMM economy, its performance is highly uneven and, on average, has registered a decline in recent years, including a 1.1% contraction in 2012. Further, as a result of low investment, the agricultural sector is specialized in low-value crops such as cassava, corn, coconut and rice grains. Similarly, though armm benefits from abundant waters and contributes a significant proportion of national catch (around of total fish catch), with limited processing facilities, the return in ARMM is low.



The service sector has been growing in recent years, from 31.4% in 2009 to 32.8% in 2012. However, most jobs can be accounted for by the public sector and in the other sectors are low paying. The tourism sector, which has the potential to provide significantly higher revenues to the region and offer higher compensation for workers, is constrained by security concerns and poor infrastructure despite the natural beauties and amenities that the region can offer.

Manufacturing only comprises 5.1% of the regional economy and is dominated by micro and small-scale industries (JICA 2010). The uncertainty fueled by the security situation discourages entrepreneurs from investing in the region, keeping their ventures small so that they can easily be scaled down in case of need. Though they are part of the coping mechanism of the region's residents, most of these even comprise the illegal "shadow economy" in the area.

Very few medium and large-scale enterprises, able to generate a significant number of jobs, have been successful and rely heavily on localized security arrangements. The development of an industrial base is further limited by unreliable power supply, the availability of skilled labor, access to finance, and cultural factors (i.e., enforcement of industrial discipline among the workers presents a challenge of existing social hierarchy).

A.3 Finance and Credit

Limited access to capital and credits is one of the binding constraints to higher productivity and growth in ARMM. Because of inherent market failures in rural areas, combined with the conflict risks, the extent of financial inclusion in ARMM is minimal. With only 7% of municipalities and cities in ARMM serviced by banks, compared to 48% and 63% in Mindanao and the Philippines respectively, very few residents have access to saving and credit institutions.

Further access to Islamic Finance and credit in the region is very limited given the heavy debt burden and limited outreach at the community level of the AI Amanah Islamic Investment Bank of the Philippines, the only bank in the Philippines legally authorized to engage in Islamic financing and credit. Operations of micro-finance institutions are also limited In a survey conducted on the credit source of residents in the conflict areas, the vast majority of respondents reported family networks as their main source of credit.