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Fiscal Year 2016 Overseas Expansion Base Development Project

Project for Promoting High-quality Infrastructure System Overseas

Study on Infrastructure Development in

Mindanao, Philippines

Final Report

March, 2017

Ministry of Economy, Trade and Industry

Commissioned to: Ernst & Young ShinNihon LLC

i

Table of Contents

Introduction ............................................................................................................................. 1

Chapter 1 Basic Information on Mindanao ............................................................................. 2

1.1 Recent History and Future Prospects ...................................................................... 2

1.1.1 Basic country information and Mindanao location ........................................... 2

1.1.2 Recent History of Mindanao ................................................................................... 7

1.1.3 Details of Japan-Philippines Bilateral Summits ..................................................... 8

1.2 Trends in Trade, Investment, and Industry Sectors, and Industries with Potential ...... 9

1.2.1 Characteristics and Comparative Advantages in Mindanao .................................. 9

1.2.2 Trends in Mindanao Trade and Investment ......................................................... 15

1.2.3 Trends in Trade and Investment by Region ......................................................... 17

1.2.4 Current Major Industries and Industries with Future Potential by Region ........... 18

1.3 Related Industries and Anticipated Infrastructural Needs for Industry Sectors with

Potential ............................................................................................................................ 19

1.3.1 Related Industry Groups for Industry Sectors with Potential ............................... 19

1.3.2 Infrastructural Needs for Companies in Industries with Potential ........................ 20

1.4 Japanese Company Trends and Regions/Cities for Potential Entry .......................... 20

1.4.1 Japanese Company Trends for Entering Mindanao ............................................ 20

1.4.2 Regions/Cities with Potential for Japanese Company Entry ............................... 21

1.4.3 Issues for Japanese Company Expansion .......................................................... 22

Chapter 2 Status and Future Plans on Mindanao infrastructure development ................. 26

2.1 Mindanao Infrastructural Development Plans and Development Status ................... 26

2.1.1 Overview of inftastructure related plans .............................................................. 26

2.1.2 Summary of development plans and master plans ............................................. 27

2.2 Governmental Organization, Personnel Structures, and Budgets ............................. 32

2.2.1 Relevant government agency structures ............................................................. 32

2.2.2 Personnel structure and budget for main relevant organizations ........................ 34

2.3 Related Laws and Regulations, Policy, and Institutions ............................................. 40

2.3.1 Institutions, regulations, etc. for infrastructure development (general) ............... 40

2.3.2 Institutions, regulations, etc. for infrastructure development (by sector) ............. 43

2.4 PPP System and its operational status ...................................................................... 45

2.4.1 Summary of PPP system ..................................................................................... 45

2.4.2 PPP-applicable sectors ........................................................................................ 46

2.4.3 Implementation status and pipeline for PPP projects .......................................... 47

2.4.4 Issues with PPP in the Philippines ....................................................................... 49

2.5 Candidate Local Partner Companies ......................................................................... 49

ii

2.6 Project Development Status for Other Countries ....................................................... 50

Chapter 3 Current Status, Issues, and Priority Projects for Infrastructural Development ... 52

3.1 Status by City .............................................................................................................. 52

3.1.1 Davao City ............................................................................................................ 52

3.1.2 Cagayan de Oro ................................................................................................... 55

3.1.3 General Santos City ............................................................................................. 62

3.1.4 Butuan and Surigao City (Caraga Region) .......................................................... 66

3.2 Major planned and implemented projects in Mindanao ........................................... 80

3.3 List of Priority Projects ................................................................................................ 82

3.3.1 Basic Approach .................................................................................................... 82

3.3.2 Development Strategy.......................................................................................... 82

3.3.3 List of Priority Projects .................................................................................... 84

Chapter 4 Basic Information, Status, and Issues for the Power Sector in the Philippines and

Mindanao .............................................................................................................................. 88

4.1 Current Status and Issues for the Power Sector ........................................................ 88

4.1.1 The Philippines ..................................................................................................... 88

4.1.2 Mindanao .............................................................................................................. 93

4.2 Future Projects.......................................................................................................... 104

4.2.1 The Philippines ................................................................................................... 104

4.2.2 Mindanao ............................................................................................................ 106

4.3 Power Sector Infrastructural Needs in the Philippines and Mindanao ..................... 107

4.3.1 Power Sector Needs in the Philippines and Mindanao ..................................... 107

4.3.2 Roadmap for the Philippine Power Sector ......................................................... 109

4.3.3 List of Priority Projects ........................................................................................ 112

Chapter 5 Using Japanese Technology to Solve Issues with Philippine and Mindanao

Infrastructure ....................................................................................................................... 114

5.1 Transport .................................................................................................................... 114

5.1.1 Japanese Technology Compatible with Local Needs ......................................... 114

5.1.2 Short List for Promising Mindanao Projects ....................................................... 115

5.2 Electricity .................................................................................................................... 118

5.2.1 Japanese Technology Compatible with Local Needs ......................................... 118

5.2.2 Short List for Promising Projects in the Philippines ............................................ 119

5.3 Action Plan for Solving Issues .................................................................................. 120

Chapter 6 Overview of Seminar ......................................................................................... 122

6.1 Objective and Overview of Seminar ......................................................................... 122

6.2 Seminar Agenda ....................................................................................................... 123

6.3 Summary of Seminar Discussions............................................................................ 124

iii

List of Figures

Figure 1-1 Three island regions of the Philippines ......................................................... 2

Figure 1-2 The 3 regions, 18 administrative regions, and 81 provinces of the Philippines

................................................................................................................................. 3

Figure 1-3 Geography of Mindanao ................................................................................ 4

Figure 1-4 Mindanao administrative divisions ................................................................. 4

Figure 1-5 Climate map of the Philippines ...................................................................... 5

Figure 1-6 Population distribution by region ................................................................... 6

Figure 1-7 GDP per capita by region (2015) ................................................................... 7

Figure 1-8 Mindanao GRDP ......................................................................................... 10

Figure 1-9 Breakdown of 2015 Mindanao GRDP by industry ...................................... 10

Figure 1-10 Figure 1-10 Breakdown of 2015 Mindanao GRDP by sector ..................... 11

Figure 1-11 Percentage share of Mindanao agricultural production to Philippine totals

................................................................................................................................ 11

Figure 1-12 Active mines in the Philippines .................................................................. 12

Figure 1-13 Available ore production for Mindanao (2015 performance) ..................... 13

Figure 1-14 List of main exploration projects ................................................................ 13

Figure 1-15 Summary of coal reserves ......................................................................... 14

Figure 1-16 BIMP-EAGA economic corridor ................................................................. 15

Figure 1-17 Itemized import/export trends for Mindanao.............................................. 16

Figure 1-18 Mindanao investment trends (by industry) ................................................ 16

Figure 1-19 Cumulative percentages for foreign direct investment (by industry) ......... 16

Figure 1-20 Import/export trends for Mindanao (by administrative region) .................. 17

Figure 1-21 Top 10 countries for imports/exports (2013) .............................................. 17

Figure 1-22 Mindanao investment trends by administrative region .............................. 18

Figure 1-23 Major industries by region ......................................................................... 18

Figure 1-24 Foreign companies active in industries with potential (not exhaustive) .... 20

Figure 1-25 Infrastructural needs by sector .................................................................. 20

Figure 1-26 Presence of Japanese companies ............................................................ 21

Figure 1-27 Cities with high potential for Japanese company expansion .................... 22

Figure 1-28 International comparison of electricity rates .............................................. 23

Figure 1-29 Local procurement rates for raw materials and components .................... 24

Figure 2-1 Structure of infrastructural development plans in Mindanao ....................... 26

Figure 2-2 Relation of Philippine LGUs ........................................................................ 33

Figure 2-3 Relation of Philippine central government agencies ................................... 33

Figure 2-4 NEDA organization chart ............................................................................. 35

Figure 2-5 MinDA organization chart ............................................................................ 38

iv

Figure 2-6 Philippines Infrastructure Budget ................................................................ 39

Figure 2-7 Distribution of the budget by region ............................................................ 39

Figure 2-8 NEDA budgets for FY 2017 ......................................................................... 40

Figure 2-9 Laws, regulations, institutions for infrastructure development (general) .... 41

Figure 2-10 Laws, regulations, institutions for infrastructure development .................. 42

Figure 2-11 Laws, regulations, institutions for infrastructure development (environment)

............................................................................................................................... 42

Figure 2-12 Laws, regulations, institutions for infrastructure development (land) ........ 43

Figure 2-13 Laws, regulations, institutions for infrastructure development (by sector) 44

Figure 2-14 Overview of PPP system in the Philippines .............................................. 46

Figure 2-15 Infrastructure and project sectors allowing private involvement ............... 47

Figure 2-16 Completed and Operational Projects ........................................................ 47

Figure 2-17 Projects under Construction ...................................................................... 48

Figure 2-18 Projects under Pre-Construction (approved by NEDA Board) .................. 48

Figure 2-19 Candidate Local Partner Companies for Japanese Infrastructure Companies

............................................................................................................................... 50

Figure 2-20 Status of infrastructure development projects by other countries in Mindanao

............................................................................................................................... 51

Figure 3-1 Industries in Davao Region (Region XI) ...................................................... 53

Figure 3-2 Projects planned in Davao .......................................................................... 55

Figure 3-3 Transport & Road Situation in Cagayan de Oro .......................................... 56

Figure 3-4 Industries in Misamis Oriental (RegionX) .................................................... 58

Figure 3-5 Projects planned in Cagayan de Oro .......................................................... 59

Figure 3-6 Development of Transport Infrastructure Facilities in General Santos ....... 63

Figure 3-7 Projects planned in General Santos City .................................................... 66

Figure 3-8 State of logistical infrastructure in Mindanao .............................................. 67

Figure 3-9 ODA loan assistance for infrastructural development in the Caraga Region

............................................................................................................................... 68

Figure 3-10 GRDP for Mindanao by region (2014) ....................................................... 68

Figure 3-11 Per capita GRDP for Mindanao by region (2014)...................................... 69

Figure 3-12 Breakdown of 2014 Caraga GRDP by industry......................................... 69

Figure 3-13 Philippine lumber production by region (2014) ......................................... 70

Figure 3-14 2014 Caraga agricultural production and producing regions by crop ....... 71

Figure 3-15 2014 Caraga agricultural production by province ..................................... 71

Figure 3-16 2014 Caraga aquaculture production by type ........................................... 72

Figure 3-17 2014 Caraga aquaculture production by province .................................... 72

Figure 3-18 Mining in Caraga ....................................................................................... 73

Figure 3-19 Philippine processed woodworking production by region (2014) ............. 74

v

Figure 3-20 Butuan City Development Plan (2017-2022) ............................................ 76

Figure 3-21 Masao Port expansion plan ....................................................................... 77

Figure 3-22 Current state of Masao Port expansion plan area .................................... 77

Figure 3-23 Master plan for development of Nasipit Port ............................................. 78

Figure 3-24 Current state of Nasipit Port ...................................................................... 78

Figure 3-25 Major Projects in Mindanao ....................................................................... 80

Figure 3-26 Major Pripority Projects in Mindanao ........................................................ 81

Figure 3-27 Proposed PPP Projects in Mindanao ........................................................ 81

Figure 3-28 Potential projects for bilateral cooperation (transport sector) ................... 86

Figure 3-29 Potential projects for bilateral cooperation (transport sector): Project

locations ................................................................................................................. 87

Figure 4-1 Philippine power consumption by sector ..................................................... 89

Figure 4-2 Total Philippine power generation (2002-2014) .......................................... 89

Figure 4-3 Power source weights for the Philippines (2014) ........................................ 90

Figure 4-4 Philippines electrification rates (2014) ........................................................ 90

Figure 4-5 International comparison of power rates (indexed) ..................................... 91

Figure 4-6 Average rates for Meralco (PHP/kWh) ........................................................ 92

Figure 4-7 Difference in power generation efficiency between coal-fired power plants in

Japan and the Philippines ...................................................................................... 92

Figure 4-8 World Risk Report (2016): Inadequate Infrastructure Pushes Up the Risk of

Disaster .................................................................................................................. 93

Figure 4-9 Mindanao power consumption by sector ..................................................... 94

Figure 4-10 Philippine power generation by region ...................................................... 94

Figure 4-11 Total Mindanao power generation (2002-2014) ......................................... 95

Figure 4-12 Mindanao power generation weights by source (2015 and 2017) ............ 96

Figure 4-13 Location map of existing hydropower plants ............................................. 99

Figure 4-14 Location map of existing coal-fired plants and future scheduled projects

............................................................................................................................. 100

Figure 4-15 Location map of existing geothermal plants and plants in pre-development

or development .................................................................................................... 101

Figure 4-16 List of future scheduled projects .............................................................. 102

Figure 4-17 Mindanao electrification rates (2014) ...................................................... 103

Figure 4-18 Philippine GDP Growth (2016-2030) ....................................................... 104

Figure 4-19 GDP and Eectric power consumption (2016-2030) ................................ 104

Figure 4-20 Power supply and demand forecasts for the Philippines (2016-2030) ... 105

Figure 4-21 Required power supply capacity for the Philippines ............................... 105

Figure 4-22 Power supply and demand forecasts for Mindanao (2016-2030) ........... 106

Figure 4-23 Required power supply capacity by grid ................................................. 106

vi

Figure 4-24 Strategic Directions ................................................................................. 108

Figure 4-25 Tentative priority projects for the power and energy sectors ................... 113

Figure 5-1 Japanese technology compatible with local needs in the transport sector

.............................................................................................................................. 114

Figure 5-2 Japanese technology compatible with local needs in the power and energy

sectors ................................................................................................................... 118


sectors ................................................................................................................... 119

Figure 6-1 Seminar Venue .......................................................................................... 123

Figure 6-2 Remarks by METI and MinDA ................................................................... 125

vii

List of Abbreviations

Abbreviation Proper Name

ADB Asian Development Bank

AFTA ASEAN Free Trade Area

ARMM Autonomous Region In Muslim Mindanao

ASEAN Association of South East Asian Nations

BIMP-EAGA Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area

BOT Build, Operate and Transfer

BPO Business Process Outsourcing

BRT Bus Rapid Transit

CCGT Combined Cycle Gas Turbine

CEPT Common Effective Preferential Tariff

CIAP Construction Industry Authority of the Philippines

DBM Department of Budget and Management

DepEd Department of Education

DOE Department of Energy

DOTr Department of Transportation

DPWH Department of Public Works and Highways

DTI Department of Trade and Industry

EPIRA Electric Power Industry Restructuring Act, 2001

ERC Energy Regulatory Commission

FIT Feed-in Tariff

FMB Forest Management Bureau

F/S Feasibility Study

FSRU Floating Storage and Re-gasification Unit

GDP Gross Domestic Product

GRDP Gross Regional Domestic Product

ICT Information and Communication Technology

IEC Information,Education and Communication

IOT Internet of Things

IPP Independent Power Producer

IT-BPO Information Technology Business Process Outsourcing

JCPC Joint Congressional Power Commission

JETRO Japan External Trade Organization

JICA Japan International Cooperation Agency

JOGMEC Japan Oil, Gas and Metals National Corporation

viii


LCC Life Cycle Cost

LGU Local Government Unit

LNG Liquefied Natural Gas

MBTP Mindanao Backbone Transmission Project

MCT Mindanao Container Terminal

METI Ministry of Economy, Trade and Industry

MILF Moro Islamic Liberation Front

MinDA Mindanao Development Authority

MNLF Moro National Liberation Front

M/P Master Plan

MRT Mass Rapid Transit

MW Megawatt

NAIA Ninoy Aquino International Airport

NEA National Electrification Administration

NEDA National Economic And Development Authority

NGCP National Grid Corporation of the Philippines

NPC National Power Corporation

NPC-SPUG National Power Corporation - Small Power Utilities Group

OD Origin-Destination

ODA Official Development Assistance

OLA-MCTAP Operation of Laguindingan Airport-Mindanao Container Terminal

Allied Projects

O&M Operation and Maintenance

PCAB Philippine Contractors Accreditation Board

PAGASA Philippine Atmospheric, Geophysical and Astronomical Services

Administration

PEZA Philippine Economic Zone Authority

PNOC Philippine National Oil Company

PPA Power Purchase Agreement

PPA Philippine Port Authority

PPP Public Private Partnership

PSA Philippine Statistics Authority

PSALM Power Sector Assets and Liability Management Corporation

RCOA Retail Competition and Open Access

SDG Sustainable Development Goals

ix


SEZ Special Economic Zone

SPC Special Purpose Company

STEP Special Terms for Economic Partnership

TEU Twenty foot Equivalent Unit

TLA Timber License Agreement

USAID United States Agency for International Development

VAT Value Added Tax

VGF Viability Gap Funding

WESM Wholesale Electricity Spot Market

1

Introduction

The Republic of the Philippines (hereinafter “the Philippines”) lies in a key position on sea

lanes, making it important both geopolitically and in terms of maintaining regional security.

Thus, sustainable growth in the Philippines will contribute to the future stability and growth of

East Asia. The Philippine GDP continued its strong growth in 2015 at 5.9 percent. Further,

with more than 80 percent of its population under 50, the country’s demographic window

should be open for at least another 30 years.

Hoisting infrastructural development as its economic policy, this is the Philippines that the

Duterte Administration inherited when coming to power in July 2016. Formerly acting as the

longstanding Mayor of Davao City, President Duterte is expected to leverage his recent

election as an opportunity to push for infrastructural development in his home of Davao and

the rest of Mindanao.

Long mired in conflict, Mindanao has to date not developed its economy to the extent of

other Philippine regions. With the peace accord finally reached between the Philippine

government and the Moro Islamic Liberation Front (MILF) in 2014, Mindanao is now waking

to its high potential for infrastructural development as it continues the peace process toward

establishment of an autonomous government.

This project serves to study the high potential for infrastructural development in Mindanao

and specify in detail the issues to proceeding with development. Further, it shows through a

dialogue with the Philippine government that the technology and expertise of Japanese

companies can effectively deal with these issues, and that Japan’s quality infrastructure can

make a meaningful contribution to growth in the Philippine economy and society.

2

Chapter 1 Basic Information on Mindanao

1.1 Recent History and Future Prospects

1.1.1 Basic country information and Mindanao location

(1) Administrative regions of the Philippines and Mindanao

The Philippines is an island nation comprising more than 7,100 islands and covering a land

area of roughly 300,000 km2, or approximately 80 percent the area of Japan. The Philippines

is largely divided into three main regions: the Luzon Region, which includes Metro Manila;

the Visayas Region, which includes Cebu; and the Mindanao Region. In all, there are 18

administrative regions1 within these regions, further subdivided into 81 provinces.

Figure 1-1 Three island regions of the Philippines

Source: Embassy of the Philippines

1 These 18 regions are broken down into 15 administrative regions, Metro Manila, the Autonomous

Region in Muslim Mindanao (ARMM), and the Cordillera Administrative Region (CAR).

3

The Mindanao Region (hereinafter “Mindanao”) lies in the southern part of the Philippines

and comprises six regions, which are further subdivided into 26 provinces. Four of these 26

provinces are on outlying islands. Note that the eponymous Mindanao Island, the largest in

the region, is the second largest island in the Philippines after Luzon.

Figure 1-2 The 3 regions, 18 administrative regions, and 81 provinces of the Philippines

Source: Philippine Statistics Authority

Mindanao’s most populous region is Davao, followed in descending order by Northern

Mindanao, Soccsksargen, the Autonomous Region in Muslim Mindanao (ARMM),

Zamboanga Peninsula, and Caraga.

Maps illustrating the geography and administrative divisions of Mindanao are given below.

Region Administrative Region Province Region Administrative Region Province

NCR NCR Aklan

Apayao AntiqueKalinga CapizAbra GuimarasMountain Province Iloilo

Ifugao Bohol Benguet Cebu

Ilocos Norte Siquijor

Ilocos Sur Biliran La Union Eastern SamarPangasinan Leyte

Batanes Northern SamarCagayan SamarIsabela Southern Leyte

Nueva Vizcaya Negros OrientalQuirino Negros Occidental

Aurora Zamboanga Del NorteBataan Zamboanga Del SurBulacan Zamboanga Sibugay

Nueva Ecija Misamis OrientalPampanga Misamis OccidentalTarlac CamiguinZambales Lanao Del Norte

Rizal Bukidnon

Cavite Davao Del NorteLaguna Davao Del SurBatangas Compostela Valley Quezon Davao Oriental

Occidental Mindoro South CotabatoOriental Mindoro CotabatoMarinduque Sultan KudaratRomblon Sarangani

Palawan Agusan Del Norte

Camarines Norte Agusan Del SurCamarines Sur Surigao Del NorteAlbay Surigao Del SurCatanduanes Dinagat Islands

Masbate BasilanSorsogon Lanao Del Sur

MaguindanaoSuluTawi-Tawi

Ⅸ-Zamboanga Peninsula

Ⅹ-Northern Mindanao

Ⅳ-A CalabarzonXI-Davao

Ⅳ-B MimaropaXII-Soccsksargen

XIII-Caraga

Ⅴ-Bicol

Autonomous Region In MuslimMindanao (ARMM)

Ⅵ-Western Visayas

CAR-Cordillera

Ⅶ-Central Visayas

I-Ilocos

Ⅷ-Eastern Visayas

Ⅱ-Cagayan Valley

XⅧ-Negros Island

Luzon

Visayas

Ⅲ-Central Luzon

Mindanao

4

Figure 1-3 Geography of Mindanao

Source: Prepared by the Study Team

Figure 1-4 Mindanao administrative divisions

Source: Prepared by the Study Team based on Philippine Statistics Authority data

Region Provinces Population (2015) Major Cities (pop.)

Region IX Zamboanga

Peninsula Region

・Zamboanga del Norte

・Zamboanga del Sur

・Zamboanga Sibugay

3,629,783 Zamboanga (861,799)

Region X Northern

Mindanao Region

・Misamis Oriental

・Misamis Occidental

・Camiguin

・Lanao del Norte

・Bukidnon

4,689,302 Cagayan de Oro

(675,950)

Region XI Davao Region

・Compostela Valley

・Davao City

・Davao del Norte

・Davao del Sur

・Davao Oriental

4,893,318 Davao City (1,632,991)

Region XII Soccsksargen

Region

・Cotabato del Sur

・Cotabato

・Sultan Kudarat

・Sarangani

4,545,276

General Santos City (594,446)

Cotabato City

(299,438)

Region XIII Caraga Region

・Agusan del Norte

・Agusan del Sur

・Surigao del Norte

・Surigao del Sur

・Dinagat Islands

2,596,709

Butuan (337,063)

Surigao City

(154,137)

Autonomous Region in Muslim

Mindanao (ARMM)

・Basilan

・Lanao del Sur

・Maguindanao

・Sulu

・Tawi-Tawi

3,781,387 -

Region IX

Region XIII

Region XI

Region XII

Region X

ARMM

5

(2) Climate

The Philippines is divided into four climate types:

Type I: Has two distinct seasons: a dry season from November to April, and a

monsoon season from May to October.

Type II: Wet all year with no dry season, with particularly heavy rains from November

to April.

Type III: Has indistinct seasons; November to April is relatively dry, and the rest of

the year is wet.

Type IV: Relatively rainy throughout the year.

According to the Philippine Atmospheric Geophysical and Astronomical Services

Administration (PAGASA), Mindanao weather differs by region. By region, Zamboanga

Peninsula has Types II-IV and Northern Mindanao Types II and III, while Davao is Type IV

throughout, Soccsksargen is Type IV, Caraga is Type II, and ARMM is Type III.

Figure 1-5 Climate map of the Philippines

Source: PAGASA

In the average year, many typhoons will hit the northern Philippine islands from June to

October. While relatively fewer typhoons have struck Mindanao compared to the northern

regions in the past, typhoon damage has increased in the Mindanao regions of Davao and

Northern Mindanao in recent years.

6

(3) Religion

According to basic data from the Philippine Department of Foreign Affairs (DFA), 83

percent of Filipinos are Catholic, 10 percent other Christian denominations, and 5 percent

Muslim. While the majority of Filipinos are Catholic, more than 20 percent of the population

in Mindanao is Muslim.

(4) Philippine economic conditions by region

By regional composition, Luzon has the largest population at 56.2 percent, while

Mindanao’s population is roughly a quarter of the Philippine population at 24.4 percent. Within

Mindanao, the population distribution by administrative region is relatively uniform compared

to the other regions, ranging from two to four million for each administrative region.

Figure 1-6 Population distribution by region

Administrative Region Population

(2015; thousands)

Population Composition (2015)

Philippines (Country)

Philippines (Country) 101,562 100.0% 100.0%

Luzon Region

Metro Manila 12,652 12.5%

56.5%

CAR 1,784 1.8%

Region I-Ilocos 5,136 5.1%

Region II-Cagayan Valley 3,498 3.4%

Region III-Central Luzon 11,099 10.9%

Region IV-A CALABARZON 14,127 13.9%

Region IV-B MIMAROPA 3,089 3.0%

Region V-Bicol 6,032 5.9%

Visayas Region

Region VI-Western Visayas 7,704 7.6%

19.4% Region VII-Central Visayas 7,447 7.3%

Region VIII-Eastern Visayas 4,537 4.5%

Mindanao Region

Region IX-Zamboanga Peninsula 3,765 3.7%

24.1%

Region X-Northern Mindanao 4,707 4.6%

Region XI-Davao 4,963 4.9%

Region XII-SOCCSKSARGEN 4,599 4.5%

Region XIII-Caraga 2,717 2.7%

Autonomous Region in Muslim Mindanao (ARMM)

3,707 3.6%


Next, looking at GDP per capita, the differences are stark between Metro Manila and the

other regions. Within Mindanao, GDP per capita is relatively higher in Davao and Northern

Mindanao and prominently lower in ARMM.

7

Figure 1-7 GDP per capita by region (2015)


1.1.2 Recent History of Mindanao

Mired in a state of conflict for many long years until the signing of a comprehensive peace

accord between the Philippine government and the Moro National Liberation Front (MNLF)

in 2014, Mindanao has historically lagged behind Luzon and Visayas in terms of development

for infrastructure and other areas. Private businesses in Mindanao have also not progressed

as expected.

Following the death of MNLF Vice Chairman Hashim Salamat in 2003, Leader Murad

Ibrahim petitioned the Philippine government for peace, declaring that the group would not

push for complete independence from the Philippine government. For the good of the Islamic

population in the southern Philippines as a whole, Ibrahim's demands were to improve

economic conditions and transfer authority for mining resources and security. Meanwhile,

Commander Ameril Umbra Kato of the MILF extremist faction withdrew from the MNLF in

2011 in opposition of the peace talks, instead organizing the Bangsamoro Islamic Freedom

Fighters (BIFF) to independently continue the armed conflict.

In March 2014, Philippine President Aquino and MILF Chairman Murad signed the

Comprehensive Agreement on the Bangsamoro (CAB) under the witness of Malaysia Prime

Minister Najib, who served as intermediary for the peace negotiations. The CAB outlined the

formation of a new Bangsamoro Autonomous Region in 2016 and the basic framework for

the region.

Then, the administration of President Rodrigo Duterte, longstanding Mayor of Davao City

in Mindanao, took power in July 2016.

In the speech “Japanese presence in the Philippines and Philippine investment and

Units: USD

Philippines (Country)

Metro Manila

CAR

I-Ilocos

II-Cagayan Valley

III-Central Luzon

IV-A CALABARZON

IV-B MIMALOPA

V-Bicol

VI-Western Visayas

VII-Central Visayas

VIII-Eastern Visayas

IX-Zamboanga Peninsula

X-Northern Mindanao

XI-Davao

XII-SOCCSKSARGEN

XIII-Caraga

ARMM

8

business opportunities” at JETRO’s 2016 Philippine Economic Forum, the key policy points

for the Duterte Administration are as follows:

Maintain current macroeconomic policy

Accelerate contributions for infrastructure: lift the bottleneck on PPPs, targeting

5% of GDP

Amend the Constitution and revise legislation to attract foreign capital and

strengthen competitiveness

Agricultural development through support of smaller farmers

Revise land management system

Strengthen base education levels

Revise taxation for effective tax collection

Expand the Conditional Cash Transfer (CCT) Program for impoverished

households

Promote science, technology, and the arts

Intensify enforcement of the Responsible Parenthood and Reproductive Health

Act

In terms of the future prospects for Mindanao, given the CAB and the infrastructural

development the Duterte Administration is promoting as its economic policy, there are

opportunities for future growth in socioeconomic and infrastructural development.

Furthermore, with President Duterte being from Southern Mindanao (currently Davao

Region) himself and longstanding Mayor of Davao City, the administration is expected to

promote infrastructural development in Davao City and Mindanao as a whole.

1.1.3 Details of Japan-Philippines Bilateral Summits

Since the inauguration of Duterte administration in 2016, two Japan-Philippines summit

meetings have been held—one in October 2016 and another in January 2017. In the two

summits, Japan Prime Minister Shinzo Abe has spoken much of assistance for Mindanao.

First, in the summit on President Duterte’s initial visit to Japan in October 2016, the

following was discussed regarding Mindanao:

Contribute to developing human resources and bridging disparity gaps to build peace

in Mindanao.

Welcomed the signing of an exchange of notes on promotion of agribusiness.

Wants to make a decision on support for the energy sector in Bangsamoro quickly.

Wants to build up the nation based on long-term development plans; will formulate

Master Plans for power, transport, and other sectors in Davao City and other regional

9

cities in addition to Metro Manila.

Welcomed Japan-Philippines industrial cooperation initiatives and the signing of a

memorandum of understanding for the ICT sector.

Then, in the summit on Minister Abe’s January 2017 visit to the Philippines, discussions

on Mindanao touched on the following:

Japan will provide on the order of 1 trillion JPY to the Philippines in the next five years,

including ODA and private investments. A joint committee on economic cooperation

and infrastructure will be established for this purpose to conduct PPPs and other

cooperation in national development. Japan will also dispatch experts to NEDA.

Discussions in the joint committee on economic cooperation and infrastructure will

continuously contribute to the peace and development in Mindanao.

Japan wishes to help the Philippines develop its infrastructure using Japan’s

technology and expertise. In terms of specific plans, Japan decided to help the

Philippines formulate a national highway master plan and expressed the desire to wrap

up an energy sector action plan by March 2017.

Decided to commence studies on assistance for urban development and flood

measures for Davao City.

Will make a decision soon on a study for Bangsamoro irrigation and road development,

power distribution grid development, and assistance in improving sanitation and

education.

1.2 Trends in Trade, Investment, and Industry Sectors, and Industries with

Potential

1.2.1 Characteristics and Comparative Advantages in Mindanao

The gross regional domestic products (GRDP) for Mindanao by administrative region are

given in the figure below. The Davao and Northern Mindanao regions have higher GRDP

shares, collectively comprising more than half the Mindanao GRDP. Meanwhile, GRDP is

much lower for ARMM and the Caraga Region.

10

Figure 1-8 Mindanao GRDP

Administrative Region Nominal GDP

(millions PHP)

(2014)

Nominal GDP

(millions PHP)

(2015)

GDP

Growth

Rate (%)

% of

GDP

IX-Zamboanga Peninsula 256,854 275,835 7.4% 14.0%

X-Northern Mindanao 485,625 516,254 6.3% 26.2%

XI-Davao 518,810 563,793 8.7% 28.6%

XII-SOCCSKSARGEN 351,031 355,963 1.4% 18.1%

XIII-Caraga 153,936 158,380 2.9% 8.0%

ARMM 104,773 99,185 -5.3% 5.0%

Total 1,871,029 1,969,410 100.0%


A breakdown of the 2015 Mindanao GRDP by industry sector follows in the next figure.

By industry, agriculture and forestry has the highest share of GRDP, followed by

manufacturing, and automotive and motorcycle sales and repair.

In terms of noteworthy properties in Mindanao industry, the island has a booming

agriculture with rich soil well suited to cultivating many agricultural products, including

bananas, pineapples, cacao, coffee, and corn. Also, Mindanao has rich resources for major

industrial crops such as palm oil and natural rubber.

Figure 1-9 Breakdown of 2015 Mindanao GRDP by industry


Sorting the above data for Mindanao GRDP by primary (agriculture, forestry, fishing),

secondary (mining), and tertiary (service industry) sectors yields the figure below.

Whereas the primary sector comprises 11.3 percent of the national GDP for the Philippines,

27,674,185

57,354,607

70,369,931

73,252,587

100,914,269

132,932,722

137,131,036

165,175,960

178,012,369

278,694,414

326,085,516

421,813,997

鉱業および採石

電気、ガスおよび水道

漁業

公務および防衛、必須社会保障

金融仲介

不動産、賃貸

輸送、倉庫および通信

その他サービス

建設

自動車、二輪車等販売および修理

製造業

農業および林業

（千ペソ）(Units: thousands PHP)

Agriculture and forestry

Manufacturing

Automotive and motorcycle sales and repair

Construction

Other services

Transport, storage, and communications

Real estate and leasing

Financial intermediation

Public service and defense, required social protection Fishing and aquaculture

Electricity, gas, and water supply

Mining and quarrying

11

these industries comprise 25 percent in Mindanao, or double the national average for primary

sector industries.

Figure 1-10 Figure 1-10 Breakdown of 2015 Mindanao GRDP by sector


As mentioned above, agriculture and forestry comprise a particularly high percentage

within the primary sector. Even in terms of itemized percentage shares for Mindanao for

national figures, agricultural production in Mindanao is generally high, as seen below:

Figure 1-11 Percentage share of Mindanao agricultural production to Philippine totals

Source: MinDA

The highest Mindanao product in terms of its share of the Philippine total is natural rubber,

an astoundingly high 99.97 percent of which is produced in Mindanao. Other crops with at

(1,000s PHP)

Primary sector Secondary sector Tertiary sector

Primary sector total

Secondary sector total

Tertiary sector total

Agriculture

and forestry

Fishing and

aquaculture


Manufacturing

Secondary

sector

Electricity, gas,

and water supply

Transport,

storage, and

communications

Automotive and

motorcycle sales

and repair

Financial

intermediation

Real estate

and leasing

Public service and

defense, required

social protection

Other services

12

least 70 percent produced in Mindanao are palm oil at 90 percent, cacao at 89 percent,

pineapple at 89 percent, banana at 82 percent, coffee at 75 percent, and aquaculture at 74

percent.

Further, while currently a lower percentage of the GRDP, minerals and metals are another

major export besides agricultural products expected to grow in the future. Given speculations

on the abundance of Mindanao reserves of mineral resources, mining could become a major

industry moving forward.

A map of active Philippine mines is given below. For Mindanao, the map shows plentiful

mines, centralized around the nickel mines near Surigao.

Figure 1-12 Active mines in the Philippines

Source: Mines and Geosciences Bureau (2016)

The following chart gives the available ore production for Mindanao mines. The figures

show that Mindanao production is high for saprolite and limonite, two nickel oxide ores, as

well as nickel itself, with smaller amounts of gold and silver.

13

Figure 1-13 Available ore production for Mindanao (2015 performance)

Source: JOGMEC (2016)

In addition, there are multiple exploration projects, mostly for gold and copper, being run

in Mindanao by American, Philippine, and Australian companies. If these mines are

successfully developed, mining in Mindanao could grow even further in the future.

The main exploration projects currently underway are listed in the figure below.

Figure 1-14 List of main exploration projects

Source: JOGMEC (2016)

Furthermore, Mindanao is thought to have abundant coal reserves. There are also

expectations for coal development for domestic use in power generation and other industries.

Mine Name Location (Province) Mineral Ore Production

MACO Compostela Valley Gold Silver

1,450 kg 7,947 kg

Taganito Surigao del Norte Saprolite Limonite

2,656,788 t 4,369,754 t

Cagdianao Dinagat Islands Saprolite Limonite

1,212,3881 t 880,126 t

Cagdianao Dinagat Islands Nickel (in ore) 54,483 t

Agata North Surigao del Norte Nickel (in ore) 14,833 t

Cantilan Surigao del Sur Nickel (in ore) 19,426 t

Tubay Agusan del Norte Nickel (in ore) 34,130 t

Dinagat Dinagat Islands Chromium ore 3,033 dmt

Project Company (Country) Mineral

Ore Location (Province)

King King St Augustine Gold and Copper

Ltd (US) Copper, gold

Compostela Valley

Tampakan Sagittarius Mines, Inc (PHL) Copper South Cotabato

Silangan Philex Mining Corp (PHL) Copper, gold

Surigao del Norte

Sibutad Philex Mining Corp (PHL) Copper Zamboanga del Norte

Tambis Medusa Mining Ltd. (AUS) Gold Surigao del Norte

Saugon Medusa Mining Ltd. (AUS) Gold Surigao del Norte

Lingig Medusa Mining Ltd. (AUS) Copper Surigao del Norte

Kamarangan Medusa Mining Ltd. (AUS) Copper Surigao del Norte

14

Figure 1-15 Summary of coal reserves

Source: DOE (2016)

Besides those presented in the mining sector, another comparative advantage of Mindanao

is its geographical proximity to Malaysia and Indonesia. Both countries are members of

ASEAN and BIMP-EAGA,2 a sub-regional framework, and are active in coordinating the

regional economy. The figure below depicts a map of the BIMP-EAGA economic corridor.

2 The initials of BIMP stand for Brunei, Indonesia, Malaysia, and the Philippines. EAGA is an abbreviation

for the East ASEAN Growth Area.

15

Figure 1-16 BIMP-EAGA economic corridor

Source: MinDA (2016)

A BIMP-EAGA Senior Officials Meeting was convened in the Philippines over November

27-29, 2016. According to MinDA Chair Abul Khayr Alonto, themes included developing a

new framework for expanding trade, with discussions touching on increasing sustainability in

the transport sector, expanded services for facilitating trade and investment, and more. With

ties between these countries strengthening in the future, trade is expected to increase within

BIMP-EAGA.

1.2.2 Trends in Mindanao Trade and Investment

Agriproducts top the ranks for Mindanao exports. Exports by value for banana (9.11 million

USD) and copra and palm kernel (7.73 million USD) constitute roughly 32 percent of all

Mindanao exports. At 6.39 million USD, nickel ore is another major export, comprising

another 12 percent of Mindanao exports.

An itemized table of Mindanao import/export trends is given in the figure below.

16

Figure 1-17 Itemized import/export trends for Mindanao

Source: Prepared by the Study Team based on MinDA data

Next, the following figure shows investment trends for Mindanao by industry.

Figure 1-18 Mindanao investment trends (by industry)


Figure 1-19 Cumulative percentages for foreign direct investment (by industry)


Looking at Mindanao investment trends by industry, the industry group with the highest

foreign direct investment (FDI) cumulative from 2011 to 2014 was electricity, gas and A/C. In

34%

30%

15%

13%

5%

2% 1%

電気、ガスおよび水道

鉱業および採石

農業、林業および漁業

不動産

製造業

宿泊、サービス業

運送および倉庫

Export Item Exported Value

Banana (incl. cooking bananas, fresh bananas, and dried bananas) 911.38

Coconut (copra), palm kernel, babassu oil 773.81

Nickel ore and concentrate 639.50

Cooking fish, canned/bottled fish; caviar and caviar alternatives manufactured from fish roe 614.14

Other fruits, nuts, and edible plant products 284.26

Dates, figs, pineapple, avocado, guava, mango, mangosteen (incl. fresh and dried) 159.02

Acyclic alcohols and their halogenated, sulfonated, nitrated, or nitrosated derivatives 140.71

Oil cakes and other solid residues (incl. pulverized and pellet forms from extraction of vegetable oils)

124.16

Coconut, Brazil nuts, cashew nuts (incl. fresh or dried) 114.67

Export of finished goods manufactured from raw materials imported on consignment basis 113.49

Industry 2011 2012 2013 2014 Total

Electricity, gas and A/C - - 3.64 2,089.70 2093.34

Mining and quarrying 63.56 0.07 1,774.82 - 1838.45

Agriculture, forestry, and fisheries

- 62.38 - 880.65 943.03

Real estate 393.91 255.07 0 168.22 817.2

Manufacturing 8 0.68 329.46 - 338.14

Hotels and service industries - - 38.00 55.28 93.28

Transport and storage - 39.14 - - 39.14

Electricity, gas and water supply


Agriculture, forestry, and fisheries

Real estate

Manufacturing

Hotels and service industries

Transport and storage

(millions PHP)

(millions USD)

17

order, this was followed by mining and quarrying; agriculture, forestry, and fisheries; real

estate; manufacturing; hotels and service industries; and transport and storage.

Note here that a total of 1.774 billion PHP was invested in mining and quarrying in 2013.

Also, the Sumitomo Metal Mining Company is working jointly on a nickel refining project in

the Taganito mine area in Surigao del Norte with Mitsui & Co. and Nickel Asia Corporation.

They will complete an HPAL smelting plant in June.

In contrast, cumulative FDI was low in the manufacturing and hotels and services

categories, coming in at 338.14 million PHP (5 percent) and 93 million PHP (1 percent),

respectively. Comparatively, these industries are not as developed in Mindanao.

1.2.3 Trends in Trade and Investment by Region

Looking by the administrative regions in Mindanao, export trends are highest in Davao,

Northern Mindanao, Soccsksargen, and Caraga, in descending order. In terms of imports by

region, the figures are the highest for Northern Mindanao, Davao, and Soccsksargen.

Figure 1-20 Import/export trends for Mindanao (by administrative region)


The figure below shows the highest ten exporting and importing nations for 2013. By value,

the biggest exporters were the US, China, and Japan. Meanwhile, the biggest importers by

value were Taiwan, China, and the US.

Figure 1-21 Top 10 countries for imports/exports (2013)


Administrative Region Exports by Value Imports by Value

2012 2013 2012 2013

Zamboanga Peninsula 226.56 45.72 27.57 32.8

Northern Mindanao 1,132.98 1,250.42 1,052.90 1,126.72

Davao 1,516.57 1,988.27 1,096.68 996.51

Soccsksargen 913.11 1,186.65 227.89 232.24

Caraga 397.08 736.97 18.43 4.76

Total 1.44 0.17 0.98 -

Rank Exporting Country Exports by Value Importing Country Imports by Value

1 United States 1,113.87 Taiwan 401.79

2 China 910.78 China 336.90

3 Japan 895.20 United States 310.68

4 Netherlands 361.20 S. Korea 149.07

5 S. Korea 299.94 Indonesia 148.21

6 Germany 166.23 Vietnam 128.89

7 Singapore 146.46 Japan 126.77

8 Malaysia 137.02 Malaysia 92.92

9 United Kingdom 108.06 New Zealand 86.27

10 UAE 95.62 Singapore 84.62

(millions USD)

(millions USD)

18

Looking by administrative region in Mindanao, the highest FDI cumulative from 2011 to

2014 was in Caraga, which contains Butuan and Surigao City. Caraga was followed in

descending order by Soccsksargen, Davao, Northern Mindanao, and Zamboanga Peninsula.

Figure 1-22 Mindanao investment trends by administrative region


1.2.4 Current Major Industries and Industries with Future Potential by Region

The following figure shows the current major industries for the regions of Mindanao.

Figure 1-23 Major industries by region


カラガ地域・農業、狩猟、林業・漁業・宿泊、飲食・人を雇用している個人世帯・運輸、倉庫、通信

ダバオ地域・農業、狩猟、林業・漁業・公務、防衛・教育・宿泊、飲食

ソクサージュン地域・漁業・建設・宿泊、飲食・公務、防衛・教育

サンボアンガ半島地域・宿泊、飲食・製造・その他のサービス・運輸、倉庫、通信・人を雇用している個人世帯

北部ミンダナオ地域・健康、社会福祉事業・農業、狩猟、林業・建設・運輸、倉庫、通信・製造

イスラム教徒ミンダナオ自治地域・卸売業、小売業・教育・製造・建設・公務、防衛

Admin. Region (Major City) 2011 2012 2013 2014 Total

Zamboanga Peninsula (Zamboanga City)

68.78 11.87 - - 80.65

Northern Mindanao (Cagayan de Oro)

0.76 62.67 325.3 301.26 689.99

Davao (Davao City)

325.13 203.57 45.8 270.16 844.66

Soccsksargen (General Santos City)

8 0.68 - 986.79 995.47

Caraga (Butuan, Surigao City)

63.56 67.64 1,774.82 1,648.63 3,554.65

(millions USD)

Northern Mindanao Region ・Health and social welfare ・ Agriculture, hunting, and forestry ・Construction ・ Transport, storage, and communications ・Manufacturing

Caraga Region ・Agriculture, hunting, and forestry ・Fishing ・Hotels and restaurants ・Individual household employers ・Transport, storage, and communications

Davao Region ・Agriculture, hunting, and forestry ・Fishing ・Public service, defense ・Education ・Hotels and restaurants

Soccsksargen Region ・Fishing ・Construction ・Hotels and restaurants ・Public service, defense ・Education

ARMM ・Wholesale and retail ・Education ・Manufacturing ・Construction ・Public service, defense

Zamboanga Peninsula Region ・Hotels and restaurants ・Manufacturing ・Other services ・ Transport, storage, and communications ・Individual household employers

19

In Davao, centered on Mindanao’s largest city, Davao City, the IT-BPO (business process

outsourcing) industry, which includes call centers, is on the rise in addition to agriculture and

fisheries.

Centered on Butuan and Surigao City, the major industries in Caraga are agriculture,

fisheries, and forestry due to soil fit for agriculture and forestry and high rainfall resulting in

fast growth for crops. Mining is also a major industry in the Surigao City area given its multiple

mines.

Soccsksargen, centered on General Santos City, has gold and copper mines with great

potential, but new mine development is currently not tenable. Given its fishing port, General

Santos City also has fishing and marine product processing as major industries, including an

expanding array of tuna can manufacturing companies.

Much like Davao, Northern Mindanao, centered on Cagayan de Oro City, has focused on

education and is developing call centers and IT-BPO as a major industry.

As rich producers of natural rubber, Zamboanga Peninsula and ARMM list agriculture and

rubber manufacturing as their major industries.

Thus, agriproducts are the main export industries of Mindanao. If the regions can develop

agricultural processing to produce value-added agriproducts, it could have promise in terms

of economic growth by growing regional exports.

1.3 Related Industries and Anticipated Infrastructural Needs for Industry

Sectors with Potential

1.3.1 Related Industry Groups for Industry Sectors with Potential

As presented in the previous section, agriculture, forestry, and fisheries, as well as the

derivative agricultural processing, are industries in Mindanao with potential. Specifically,

processing for dry fruits and marine products present business opportunities. Here again,

mining, manufacturing, and IT-BPO are the industries besides agricultural processing that

have potential and are expected to grow.

A sampling of foreign companies already active in Mindanao in these industries with

potential is given in the following table.

20

Figure 1-24 Foreign companies active in industries with potential (not exhaustive)

Industry (Sector) Company Name

Agriculture/agricultural processing

Marine product processing

・Sumifru (Philippine) Corporation

・Dole Philippines, Inc.

・Fresh Del Monte Produce Incorporated

・Nissey Delica Corporation

Mining

・Sumitomo Metal Mining Co., Ltd.

・St Augustine Gold and Copper Ltd (gold, copper)

・Medusa Mining Ltd. (gold, copper)

Manufacturing

・Davao Central Chemical Corporation (activated carbon)

・Philippine-Japan Active Carbon Corporation (activated carbon)

・Nakayama Technology Corporation (construction materials)

BPO (call centers)

・Teleperformance

・Sutherland Global Services

・Convergys

Source: Prepared by the Study Team based on various data

1.3.2 Infrastructural Needs for Companies in Industries with Potential

While the infrastructure needed for a company to break into a market will vary by industry,

electricity and water are two basic infrastructures of common need. On the other hand,

developing the logistics network, consisting of roads and ports, is essential to companies

entering the market in manufacturing and mining. Given that the Philippines is an island

nation, in addition to roads, ports play a large role as part of the logistics network for domestic

areas as well as exporting.

Below is a chart arranging the general infrastructural needs by sector as gleaned from

company hearings and other sources.

Figure 1-25 Infrastructural needs by sector

Sector Required Infrastructure

Agriculture, forestry, and fisheries Electricity, water, roads, ports

Agricultural processing Electricity, water, roads, ports

Mining Electricity, roads, ports

IT-BPO (call centers) Electricity, ICT

Source: Prepared by the Study Team based on interview of Japanese companies, etc.

1.4 Japanese Company Trends and Regions/Cities for Potential Entry

1.4.1 Japanese Company Trends for Entering Mindanao

According to the Japanese MOFA’s Statistics on Japanese Nationals Residing Overseas,

a total of 1,448 Japanese companies had a presence in the Philippines as of 2016. Of these,

33 Japanese companies had a presence in Mindanao. By industry sector, two of these were

21

in agriculture and forestry, five in fishing, three in mining and quarrying, one in construction,

11 in manufacturing, three in electricity, gas, heat provision, and water supply, two in transport

and postal services, two in wholesaling and retail, and one in another industry. By region, 16

of these companies had a presence in Davao del Sur, four in Misamis Oriental, four in

Cotabato del Sur, two in Surigao del Norte, two in Agusan del Norte, two in Zamboanga del

Sur, one in Bukidnon, one in Lanao del Norte, and one in Surigao del Sur.

Japanese corporate presence by region is arranged in the following table:

Figure 1-26 Presence of Japanese companies

Administrative Region

Company Names (Sector)

Davao del Sur Dole Philippines, Inc. (Bananas) Sumifru (Philippines) Corporation (Bananas) Diamond Star Agro Products, Inc. (Fruits & Vegetables) Nakashin Davao International Inc. (Frozen fruits processing) Davao Central Chemical Corporation (Activated Charcoal) Nakayama Technology Corporation (Building Materials) Creative Connections & Commons, Inc. (IT-BPO) Japan Philippine Volunteer Association Inc. (Education)

Misamis Oriental Nissey Delica Corporation (Agriculture) Philippine Sinter Corporation (Steel) Pilipinas Kao, Inc. (Chemical)

Caraga Region Sumitomo Metal Mining Co., Ltd (Mining)

Soccsksargen Region

Tenpoint Manufacturing Corporation (Fisheries)

Source: Prepared by the Study Team based on the interview of Japanese companies

1.4.2 Regions/Cities with Potential for Japanese Company Entry

When discussing expansion into Mindanao, all Japanese companies at our hearings

indicated that they place the utmost importance on confirming safety information, with

particular weight given to MOFA safety information in their decisions. Specifically, whereas

many companies were willing to conduct visits or expand into cities graded by MOFA as Level

1 or lower, few were willing to be active in Level 2 cities. No companies at the hearings for

this study expressed a willingness to be active in Level 3 cities.

Considering where Japanese companies have an actual established presence, many

prefer the larger cities in terms of market access, securing manpower, residential

environment, and other factors.3

Thus, in looking for areas with high potential for Japanese companies to establish a

presence, the cities of Mindanao were evaluated based on these two points: having a MOFA

safety level of 2 or lower, and being a major city with an airport. This analysis produced five

3 For example, Japanese companies with a presence in Davao City gave a MOFA security level of 1, rich

yet low-cost land, proximity to the harbor, prevalence of English-speaking workers, and relatively good work ethic as their reasons for expanding into the city.

22

candidates: Davao City, Cagayan de Oro, General Santos City, Butuan and Surigao City.

Note that all five of these cities are in regions with high export and FDI figures, as well as

active economies.

Figure 1-27 Cities with high potential for Japanese company expansion

Source: Prepared by the Study Team based on MOFA data

1.4.3 Issues for Japanese Company Expansion

(1) Issues with expansion to the Philippines

There are several issues particular to investment in the Philippines. These issues are

outlined below.

A. High electricity costs

Electricity rates in the Philippines are one of the highest in Asia and one factor that raises

the costs of expanding companies. Further, given the sometimes instable power supply, in-

house generation equipment is often needed for plants, driving down investment efficiency.

【スリガオ市】人口：154,137人（2015）面積：245.34km2

人口密度：628.2人/km2

主な産業：鉱業、農業、漁業平均世帯収入：126,000PHP/年主な宗教：カトリック教（79％)

【ブトゥアン市】人口：337,063人（2015）面積：817.28km2


主な産業：農業、漁業（ｴﾋﾞ､ﾐﾙｸﾌｨｯｼｭ）、林業（木材加工）平均世帯収入：126,000PHP/年主な宗教：カトリック教（79％)

【ダバオ市】人口：1,632,991人（2015）面積：2,444km2


主な産業：農業関連産業及び工業、情報技術産業平均世帯収入：143,000PHP/年主な宗教：カトリック教

【カガヤンデオロ市】人口：675,950人（2015）面積：488.86km2


主な産業：教育平均世帯収入：137,000PHP/年

【イリガン市】人口：342,618人（2015）面積：775.76km2


主な産業：工業平均世帯収入：137,000PHP/年

【ザンボアンガ市】人口：861,799人（2015）面積：1,483.38km2


主な産業：農業、漁業平均世帯収入：119,000PHP/年

【コタバト市】人口：299,438人（2015）面積：176.0km2

人口密度：1,701.3人/km2

主な産業：稲作、農業平均世帯収入：119,000PHP/年

【ジェネラルサントス市】人口：594,446人（2015）面積：492.86km2

人口密度：1,206.1人/km2

主な産業：農業、漁業平均世帯収入：119,000PHP/年

Mindanao, Philippines

MOFA Safety Level 3

Level 1

Level 2

Level 2

Level 3

Level 3

Level 3

Level 3

Level 1

[Surigao City]

Pop.: 154,137 (2015)

Area: 245.34 km2

Pop. density: 628.2/km2

Main industries: Mining, agriculture, fishing

Avg. household income: 126,000 PHP/yr.

Main religion: Catholic (79%)

[Butuan]

Pop.: 337,063 (2015)

Area: 817.28 km2


Main industries: Agriculture, fishing (prawn,

milkfish), forestry (wood processing)


Main religion: Catholic (79%)

[Davao City]

Pop.: 1,632,991 (2015)

Area: 2,444 km2


Main industries: Agriculture-related industry and

manufacturing, ICT


Main religion: Catholic

[General Santos City]

Pop.: 594,446 (2015)

Area: 492.86 km2

Pop. density: 1,206.1/km2

Main industries: Agriculture and fishing


[Cotabato City]

Pop.: 299,438 (2015)

Area: 176.0 km2

Pop. density: 1,701.3/km2

Main industries: Agriculture (rice, etc.)


[Zamboanga City]

Pop.: 861,799 (2015)

Area: 1,483.38 km2


Main industries: Agriculture and fishing


[Iligan City]

Pop.: 342,618 (2015)

Area: 775.76 km2


Main industry: Manufacturing


[Cagayan de Oro]

Pop.: 675,950 (2015)

Area: 488.86 km2


Main industry: Education


23

Figure 1-28 International comparison of electricity rates

Source: Prepared by the Study Team based on JETRO data

* Relative to the value of the Philippines in 2015 as 1.

B. Weak logistics infrastructure

Given the chronic traffic plaguing downtown Manila and other large cities, the low

percentage of roads paved, and other issues, distribution infrastructure is reportedly weak

as a whole. Also, as trade grows in the Philippines, inadequate handling capacity in Manila

Port and other ports are becoming a particular problem area, with freight piled up at port

(shipment delays of up to a month). The production schedule delays, sales inventory

shortages, and other ripple effects of port issues are a bottleneck to Japanese

manufacturing companies in terms of using the Philippines as a production base.

C. Low rates of local procurement

The supporting industries to manufacturing are less advanced in the Philippines than in

other neighboring Asian countries. Japanese companies will often be unable to find local

suppliers from which to procure components locally, forcing them to import their materials.

For industries where materials are a large part of costs, this can reduce the cost benefits

to expansion.

According to JETRO’s 2016 Survey of Japanese Companies in Asia and Oceania, local

procurement rates in the Philippines are the lowest in the ASEAN at 31.6 percent.

Index(Price/GDP per Capita PPP)

As of 2015

0

0.2

0.4

0.6

0.8

1

1.2

Se

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l

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ijing

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an

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ai

Gu

ang

zho

u

Sin

ga

pore

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kok

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ala

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mpu

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a

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tam

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nd

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nila

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oi

Ho C

hi M

inh

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ang

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24

Figure 1-29 Local procurement rates for raw materials and components

Source: JETRO (2016)

D. Issues with refunding for VAT

In terms of value-added tax (VAT), the Philippines will refund the difference if output VAT

paid when purchasing products and services exceeds input VAT collected when selling

products and services to customers. Export companies tend to have particularly high VAT

refunds as they do not collect any VAT when selling to customers. However, of major

concern given all the export-oriented manufacturing in the Philippines is the number of

years required for VAT refunds.

E. Difficulties with withdrawal

The Philippines has a reputation internationally for being a difficult country for companies

to liquidate or file for bankruptcy. The lengthiest part in the corporate liquidation process is

the tax audit, which covers the past three years of taxes. Up through completion of the

withdrawal process, this takes an average of two years and up to three years.

(2) Mindanao

Many Japanese companies will face the common issues listed in the previous section

when expanding into the Philippines, and Mindanao is no exception.4

4 That being said, conditions are better in Mindanao than in other regions for certain items. For example,

the roads in Mindanao cities are in relatively better condition than the roads in Manila, and Mindanao ports are not as busy as Manila ports. Also, electricity fees in Mindanao are on average lower than those in

Breakdown of raw material and component suppliers by country/region (responses

add to 100%) Local Japan China Other

NOTE: countries/regions where n ≧ 10

Total

China

Thailand

New Zealand

India

Australia

S. Korea

Taiwan

Indonesia

Malaysia

Vietnam

Myanmar

Philippines

Pakistan

Sri Lanka

Bangladesh

Singapore

H-K/Macao

Cambodia

25

However, Mindanao does have its own particular issues, such as safety, which make

expansion into Mindanao different from expansion into Luzon or Visayas. These Mindanao-

specific issues are listed below.

A. Safety concerns

The majority of Mindanao has a MOFA safety level of 2 or higher, with safety level 1 areas

being limited to Davao City, Cagayan de Oro, and General Santos City. As many Japanese

companies are reluctant to enter areas of safety level 2 or higher, those who do enter

Mindanao tend to concentrate in Davao City, Cagayan de Oro, and other level 1 cit ies.

A sampling of the comments given by Japanese companies in our hearings follows below.

・The Home Office will not approve applications for business trips to Level 2 areas.

・Staying overnight is prohibited for trips to Level 2 areas, meaning any trips require

returning home that same day.

・Overland movement to non-Level 1 areas is restricted by company rules, meaning any

movement has to be by air.

・It would likely be difficult to receive internal approval for infrastructural projects involving

longer roads and railroads due to the difficulties in ensuring safety. The likelihood would

be higher for seaports, airports, or other projects in which operations are contained to a

limited scope.

As illustrated by these comments, safety is a huge bottleneck keeping companies in

general—Japanese or otherwise—from expanding into Mindanao and is a situation that

should be improved as quickly as possible.

B. Weak communication infrastructure

Mindanao has only two major telecom service providers: Globe Telecom and PLDT.

Connections are slow and unstable, with phone calls and internet connections being severed

frequently. There are even times where internet service will shut down citywide for a half day

or full day at a time.

Recently, call centers and other IT-BPO sector companies have started popping up in

Mindanao, with activity centered on the bigger cities such as Davao City and Cagayan de

Oro. Thus, in order to spur on the IT-BPO industry moving forward, enhancing the

communication infrastructure in Mindanao will be increasingly more important in the future.

Luzon and Visayas.

26

Philippine Development Plan 2011-2016

（フィリピン全体の開発計画）

Mindanao 2020 Peace and Development Framework

Plan (2011–2030)

（ミンダナオ島全体の開発計画）

【Region XIII】Revised Caraga Regional Development Plan 2013-2016

【Region X】Northern Mindanao Regional Development Plan Midterm Update 2013-2016

【Region XII】Updated Soccsksargen Regional Development Plan 2013-2016

【Region XI】Davao Regional Development Plan 2014-2016 Update

（ミンダナオ島内の各地域開発計画）

【Region IX】Zamboanga Peninsula Regional Development Plan 2014-2016

【ARMM】ARMM Regional Development Plan 2011-2016

Chapter 2 Status and Future Plans on Mindanao infrastructure

development

2.1 Mindanao Infrastructural Development Plans and Development Status

2.1.1 Overview of inftastructure related plans

This chapter will provide an overview and the related drawings for all projects related to

infrastructural development in the Philippines and regions of Mindanao5.

Figure 2-1 Structure of infrastructural development plans in Mindanao

Source: Prepared by the Study Team, based on NEDA regional office websites, etc.

As illustrated in the above figure, the Philippine Development Plan (PDP) 2011-2016 is the

top level plan for infrastructural development plans nationwide throughout the Philippines. As

devised by the National Economic and Development Authority (NEDA), this plan stipulates

accelerated infrastructural development in order to spur economic growth and eradicate

poverty. Further, the plan illustrates that the Philippine government promotes safe, effective,

reliable, and sustainable development of infrastructure at a high cost performance.

NEDA has regional offices in each region of the Philippines. These NEDA regional offices

organize a Regional Development Council (RDC), comprised of local government

5 Note that information for this section is based on the latest versions as of the writing of this report in

January 2017. Each region is scheduled to update their Regional Development Plans in 2017. Also, as of report writing, the Philippine government has published drafts for some of the chapters of the Philippine Development Plan 2017-2022 and are soliciting public comments.

(Mindanao Regional Development Plans) (Mindanao overall development plan)

(Philippine National Development Plan)

27

representatives, regional departments of national-level agencies, and the private sector, and

formulate Regional Development Plans (RDP) encompassing various aspects, such as

regional vision, industrial growth, infrastructural development, legislation, and social

development.

Separate from the NEDA-formulated national and Regional Development Plans mentioned

above, the Mindanao Development Authority (MinDA) formulates a Mindanao-wide

development plan for infrastructural development and industrial growth. Regional

Development Plans formulated by NEDA and its regional offices focus mainly on target

figures and projects. On the other hand, the Mindanao 2020 Peace and Development

Framework Plan (2011-2030) (hereinafter “Mindanao 2020”) formulated by MinDA focuses

mainly on visions, goals, and strategies. MinDA is a government body for making strategic

decisions for peace and development on Mindanao, responsible for coordinating policy and

projects for the regions of the island.6

As outlined above, Mindanao 2020, PDP formulated by NEDA, and RDPs formulated by

the NEDA regional offices, are the three types of plans related to participation in

infrastructural projects on Mindanao.

2.1.2 Summary of development plans and master plans

2.1.2.1 MinDA medium-term plans

MinDA has formulated Mindanao 2020 as its medium-term plan for Mindanao. In order to

improve the quality of life for residents through peace and sustainable growth in Mindanao,

this plan aims to deal with any election fraud and clan conflict, build up the business

environment in terms of infrastructure and finance, and grow industry in an environmentally

responsible manner.

This section contains a summary of the current status and plan objectives regarding

industry and infrastructure.

(1) Current status and objectives for Mindanao industry

Mindanao 2020 has the following to say about industry in Mindanao:

Historically, Mindanao has exported large amounts of coconut, banana, pineapple,

and other agricultural products. Mindanao has a large world share of these agricultural

products and will continue striving to expand their export production.

Mindanao is rich in tourism resources, with much latent potential for tourism growth.

Muslim-based markets such as halal foods and Islamic finance are expanding in Asia,

offering a business chance for Mindanao-based Muslims.

6 More detail on MinDA given in 2.2.2 “Personnel Structure and Budget for Major Relevant Organizations”.

28

With recent advances in ICT infrastructure development in Mindanao, investments

both private and public are anticipated for the business process outsourcing (BPO)

industry.

Given the rich mineral resources in Mindanao, there is great growth potential in the

mining industry. Foreign investors have also expressed interest in Mindanao mining

resources. Points to consider in development are: (i) it is environmentally responsible,

(ii) local government is properly compensated for the mining resources, and (iii) local

economy produces sufficient added value and benefit from mining.

(2) Current status and objectives for Mindanao infrastructure

Mindanao 2020 indicates the following issues regarding infrastructure in Mindanao:

Infrastructure development plans are not consistent. (Ex.: integrated roads, bridges,

distribution, water resource management, etc.)

Government resources for infrastructure development and maintenance are

insufficient.

Private sector investments are insufficient due to the weak public environment for

enacting PPP development projects.

There are issues of theft, destruction, and other criminal acts upon public

infrastructure, as well as security issues in select areas of Mindatao.

Mindanao 2020 also lists the following issues and opportunities regarding the current state

of infrastructure in Mindanao:

While serious power shortages in Mindanao have been abated in the short term,

another 1,000 MW or more by 2020 and another 1,500 MW by 2030 is needed in new

power generation capacity. The outlook for cheap hydroelectric power is compromised

by siltation of river systems and dams tracing to deforestation, compounded by climate

change impacts. The share of fossil fuel-based power generation is increasing,

resulting in an outflow of foreign currency and distancing the country from its

environmental cost reduction targets. Meanwhile, needs are great in terms of

managing the increases in power consumption and reducing losses in the

transmission and distribution systems, theft, and energy waste.

A full 34.8 percent of national roads and 95 percent of locally-maintained barangay

roads are unpaved. Further, 39.2 percent of paved roads are in a state of disrepair.

Residents greatly desire urban rail, but the ROI of rail continues to be disputed from

the feasibility study results. A railway development project for an 82.5-km line

connecting Cagayan de Oro to Iligan is scheduled to receive foreign funding.

While annual freight transport by volume has steadily increased at a rate of 2.5 percent,

the number of port calls to Mindanao’s 128 ports is decreasing. Possible causes for

29

the decline include inadequate coastal trade laws, unreasonably high transport and

handling tariffs, and safety concerns over aging facilities.

Roll-on/roll-off (RORO) ships have increased, promoting economic activity and

benefitting the island by reducing transport time from Luzon and reducing transport

costs.

The existing airports need repairs, with proper handling of the short-term and long-

term risks to the natural environment. Further, airports on the outlying islands need to

be located such that residents can access them by land within four hours.

Access to ICT infrastructure is too expensive for low income households and schools.

This is limiting opportunities in the development of ICT sector human resources.

Mindanao 2020 also lists strategies for infrastructure by sub-sector. The strategies

concerning power generation and transport are excerpted below:

[Power Generation]

Draft a long-term plan for power generation and sustainability for Mindanao.

Reform power rate policy and reduce the issues limiting investment in power

development in Mindanao.

Carefully handle the issues regarding power loss in power generation, transmission,

and distribution systems.

Strengthen schemes for urging private investment and public involvement in the power

sector.

Increase the shares of renewable energies and Philippine-sourced energy to diversify

the energy mix.

In order to reduce environmental load, raise priority for construction of smaller

hydropower plants over larger hydropower plants.

Raise priority for development of renewable energy facilities. Establish funds

earmarked for research and development of renewable energy.

Open the Mindanao Wholesale Electricity Spot Market (WESM) in 2014 to increase

competition in the power market.

Comprehensively strengthen regional electricity cooperatives.

Provide more information and increase educational campaigns on how to save

electricity and power policy.

[Transport]

Expand the roles of water transport in the inland, coastal, and inter-island transport

and distribution systems for Mindanao.

Work with the related industries to reform the policies and regulations which make

30

transport and distribution systems inefficient and costly. (Ex.: coastal trading law, high

import duties on steel products)

Integrate land, air, and water transport systems to develop a consistent,

interdependent transportation network.

Upgrade the main trunk roads to world-class all-weather highways, building new roads

as necessary. (Ex.: Mindanao East-West Lateral Road)

Enhance the alliance between local government bodies and the community,

developing legislation and leveraging subsidy systems to promote road construction

by the local government.

In order to complement a consistent super-highway for transport and distribution, other

infrastructural plans are to be coordinated in detail, developing a long-term plan for a

railway system.

Upgrading, expanding, and modernizing existing airports is to be given increased

priority. In addition, special priority is to be given to construction of airports on outlying

islands and cutting-edge airports planned in the core region of Mindanao.

Policies on user charges are to be improved so that the infrastructural resources will

be used effectively.

2.1.2.2 Regional Development Plans

A summary of the infrastructural development portions of RDPs for those areas of

Mindanao with cities targeted in this study follows below.

Revised Caraga Regional Development Plan 2013-20167

[Land Transport]

The 1,477.925km national road network of the Caraga Region was scheduled to be fully

paved, with DPWH contributing 20.1 billion PHP through 2016. Also, another 4.4 billion PHP

was contributed to build or improve a total of 179.61 km in access roads for prominent tourist

attractions.

[Marine Transport]

Four terminals connecting Mindanao and Siargao for RORO ships (harbors mainly for

freight ships with decks for vehicle transport) will be built to bolster ports in the region, which

are unable to keep pace with increasing usage.

[Power Generation]

All projects listed in the plan for the power sector were private sector projects. The four

projects mentioned are the 30 MW Puyo Hydropower Project, 25 MW Lake

7 This study includes the Caraga Region cities of Butuan and Surigao City.

31

Mainit Hydropower Project, 25 MW Wawa Hydropower Project, and 9.75 MW Cabadbaran

Hydropower Project.

Revised Davao Regional Development Plan 2014-20168

[Land Transport]

High-priority projects include the following: paving for trunk roads; improvement of intercity

national roads; expansion of the Davao-Agusan Highway, Davao-Cotabato Highway, and

other trunk roads; bridge improvements and construction; construction of roads to connect

farms and markets in Davao Oriental and Compostela Valley; construction of urban rail in

Davao City and a railway connecting the major Mindanao cities; introduction of traffic demand

management; development for sidewalks, bike lanes, and bypass roads in urban areas; and

a feasibility study for a bridge between Davao City and the Island Garden City of Samal.

[Marine Transport]

High-priority projects include a feasibility study for construction of a RORO ship terminal in

Panabo or Tagum and expansion of Davao (Sasa) Port.

[Airport]

High-priority projects include construction of radar equipment and IT system improvements

at Davao International Airport.

[Power Generation]

High-priority projects include the following: construction of a power plant on Talikud Island,

introduction of biomass and solar power generation, construction of the privately-funded

Therma South coal power plant (300 MW), construction of the EEI diesel power plant (15

MW), and construction of the Tudaya Hydropower Plant (Unit 1: 6.7 MW, Unit 2: 7 MW).

Northern Mindanao Regional Development Plan Midterm Update 2013-20169

[Transport]

The infrastructural items of highest priority in the Northern Mindanao Region are starting

commercial service at Laguindingan International Airport (airport opened on June 15, 2013)

and expanding the Mindanao Container Terminal (MCT). The Operation of Laguindingan

Airport-Mindanao Container Terminal Allied Projects (OLA-MCTAP) was designed to

combine these two for increased convenience and efficiency. Both Laguindingan Airport and

the MCT are located on the Cagayan-Iligan corridor and would have an economic ripple effect

within Northern Mindanao Region.

Also, a highway and the Mindanao Railway System (MRS) are planned for development

in order to support growth in the Cagayan-Iligan industrial trade corridor.

8 This study includes the Davao Region city of Davao. 9 This study includes the Northern Mindanao Region city of Cagayan de Oro.

32

[Power Generation]

The National Power Corporation (NPC) power plants located in Northern Mindanao

generate 67 percent of all power generated on Mindanao.

One of the main projects for new power plant construction is the Agus 6 Hydropower Plant

(Units 1 and 2) Improvement Project (budget: 2.6 billion PHP), which will extend plant life by

30 years.

The National Grid Corporation of the Philippines (NGCP) is also working on its 9.5 billion

PHP Mindanao Transmission Backbone Project.

Updated Soccsksargen Regional Development Plan 2013-201610

[Land Transport]

Land transport projects include a project for road construction to improve access to the

industrial area, schools, hospitals, and tourist attractions, as well as projects for the GenSan

Circumferential Road (budget of 100 million PHP) and the Surallah-Lake Sebu-Maitum Road

(budget of 170 million PHP).

[Power Generation]

In efforts to increase power self-sufficiency for the region, a number of renewable energy

projects are planned, including geothermal generation on Mt. Zion and four hydropower

projects in the Sultan Kudarat and Sarangani Provinces. Additionally, the Southern Mindanao

power station (two 100 MW reactors) is under construction in Maasim, Sarangani. Lastly, the

power distribution network is under expansion to reduce the number of households without

power.

2.2 Governmental Organization, Personnel Structures, and Budgets

2.2.1 Relevant government agency structures

The Philippines can broadly be divided into three areas: Luzon (incl. Metro Manila),

Visayas, and Mindanao. These are divided into 18 regions and sub-divided into 81 provinces

acting as local governmental units (LGUs). The provinces in turn are comprised with cities

and municipalities, both of which are further sub-divided into barangays, the smallest

governmental units.

10 This study includes the Soccsksargen Region city of General Santos.

33

Figure 2-2 Relation of Philippine LGUs


Next, for reference, the relation between central government agencies in the Philippines is

as given below.

Figure 2-3 Relation of Philippine central government agencies

Source: Prepared by the Study Team based on Philippine government website

Central government

Region

Province

City Municipality

Barangay Barangay

Philippine President

Vice President Executive Office

Cabinet

Secretary

Executive

Secretary

Presidential Special

Advisors/Aides

Ombudsman

Commission on Human

Rights

Dept. of Foreign Affairs

(DFA)

Dept. of Finance (DOF)

Dept. of Budgets and Management (DBM)

Dept. of Interior and Local Government (DILG)

Department of National

Defense (DND)

Dept. of Justice (DOJ)

Dept. of Education

(DepEd)

Dept. of Agrarian Reform

(DAR)

Dept. of Agriculture (DA)

Dept. of Environment and

Natural Resources (DENR)

Dept. of Tourism (DOT)

Dept. of Trade and Industry

(DTI)

Dept. of Transportation and Communication (DOTC)

Dept. of Science and Technology (DOST)

Dept. of Public Works and Highways (DPWH)

Dept. of Energy (DOE)

Dept. of Social Welfare and Development (DSWD)

Dept. of Health (DOH)

Dept. of Labor and

Employment (DOLE)

National Economic and Development Authority

(NEDA)

Metropolitan Manila Development Authority

(MMDA)

34

2.2.2 Personnel structure and budget for main relevant organizations

The main relevant organizations in infrastructural development for Mindanao are the two

responsible for the development plans overviewed in the previous section: NEDA and MinDA.

This chapter gives summaries of these organizations as shown below.

(1) NEDA

A. Establishment, governing law, and history

Established on January 24, 1973 based on Presidential Decree (PD) No. 107 of

President Ferdinand Marcos.

Current organizational structure, authority, and responsibilities set out by Executive Order

(EO) No. 230 of President Corazon Aquino on July 22, 1987.

B. Roles

Acts as the government agency responsible for drafting top-level socioeconomic plans,

macroeconomic forecasting, policy analysis, and surveying.

Provides high-level advice to policymakers in Congress and administrative departments.

C. Authority and roles

Drafts policy, development plans, and development programs and coordinates all related

activity in order to efficiently set numerous parameters at the national and regional levels

(for regional and local development).

Reviews, evaluates, and monitors all infrastructural development projects listed in the

development plans in line with year-on-year increases in demand for quality

infrastructural facilities and efforts to increase public infrastructural investments.

Reviews short-term policies to provide government decision-makers with critical analysis

for any issues with development and policy alternatives.

D. Personnel structure

Composed of a board and secretariat.

The NEDA Board is chaired by the President, with the NEDA Director-General as Vice

Chair and 20 members in total, rounded out by the various Ministers and heads of

development companies.

According to the DBM budget for FY2017, NEDA personnel for FY2016 totaled 1,074.

Below is the NEDA organization chart:

35

Figure 2-4 NEDA organization chart

Source: NEDA

E. Regional offices

NEDA has 15 regional offices spread across the regions of the Philippines. The four NEDA

regional offices with jurisdiction over the cities included in this study are given below:

NEDA Region X (Northern Mindanao NEDA Regional Office)

NEDA Region XI (Davao NEDA Regional Office)

NEDA Region XII (Soccsksargen NEDA Regional Office)

NEDA CARAGA (Caraga NEDA Regional Office)

(2) MinDA

A. Establishment, governing law, and history

Established by Republic Act (RA) No. 9996, approved by President Corazon Aquino on

February 17, 2010.

Not belonging to any specific ministry or executive department, annual reports of MinDA

actions are submitted to the Philippine President and Congress (RA No. 9996).

MinDA predecessor Mindanao Economic Development Council (MEDCo) was

established on March 19, 1992, also by President Aquino.

B. Roles

Coordinates between the regions of Mindanao, coordinating policy and projects for

Mindanao regions and municipalities, as well as holding seminars. Is not authorized to

make any structural decisions regarding infrastructural development (NEDA controls

NEDA Board

Office of the Director-General

Internal Audit Services

Financial, Planning and Management Staff

Legal Staff

Administrative Staff

Information and Communications Technology Staff

Development Information Staff

Regional Offices (15)

Regional Development Staff

Governance Staff

National Policy and Planning Staff

Agriculture National Resources and

Environment Staff

Trade, Services and Industry Staff

Social Development Staff

Monitoring and Evaluation Staff

Infrastructure Staff

Public Investment Staff

36

decisions and budgets).

Also coordinates between donors (World Bank, ADB, JICA, etc.)

C. Chairman

Currently Datu Abul Khayr Dangcal Alonto, the first Muslim Chairman of MinDA. Alonto

studied Political Science at Cairo University in Egypt. Immediately following the Jabidah

Massacre in 1968, he organized the LAM ALIF, a Muslim Youth Group whose members

went on to form the core leaders of the Moro National Liberation Front (MNLF).

Subsequently, Alonto was elected Vice Mayor of Marawi in 1972, being the youngest city

executive at the time.

In 1979, Alonto participated in the institutionalization of the Autonomous Region in

Muslim Mindanao. He established the Muslim Federal Party in 1982 and was chosen as

Nacionalista Party Vice President for Mindanao. In 2014, he became MNLF Chairman.

D. Authority and roles (detailed)

According to RA No. 9996, MinDA has the following authorities and functions in

implementing activity for projects at the Mindanao level and between Mindanao regions:

i. To the extent feasible, determines an integrated development framework for Mindanao

to be consistent with central government peace and development initiatives.

ii. Integrates, prioritizes, plans, and executes Mindanao-level, inter-regional, and regional

programs, as well as projects with impact on Mindanao as a whole (including ODA

projects).

iii. As necessary, requests action from the appropriate agencies on programs for technical

and physical support, agriculture (generally given priority), industry, commerce,

infrastructure, environment, and technology, as well as projects for which direct or indirect

governmental assistance is requested.

iv. Maintains national policy to promote integrated, balanced growth in Mindanao and

supports Mindanao shareholders and representatives selected by Congress and the

central government.

v. Promotes monetary and capital investments in all sectors leading to the socioeconomic

growth of Mindanao and works closely with agencies responsible for improving living

standards and related social and governmental initiatives.

vi. Plans and prioritizes financing for programs and projects at the Mindanao level and

between Mindanao regions.

vii. Provides complementary assistance for agencies coordinating and recommending

planning, managing, and technical support in need of investors.

viii. Has established a comprehensive, integrated database for Mindanao and the East

37

ASEAN Growth Area (BIMP-EAGA).

ix. Monitors, evaluates, and provides recommendations on development programs,

initiatives and projects at the Mindanao-wide and inter-regional levels.

x. Indicates strategic direction for Mindanao.

xi. Establishes appropriate frameworks to ensure timely implementation of projects at the

Mindanao-wide and inter-regional levels.

xii. Discusses and recommends NEDA Board-approved projects at the Mindanao-wide and

Mindanao inter-regional levels, as well as plans by the national government and donor

agencies.

xiii. Coordinates policy and program formation and implementation as the Philippine

coordinating agency for BIMP-EAGA and lead government agency.

xiv. Accepts and manages all donations and grants for development in Mindanao from foreign

governments, international organizations, and private groups, including ODA.

xv. Handles contracting, acquisitions, purchasing, ownership, lending, relocation, and

disposal for the various properties as required to accomplish the objectives of this

legislation.

E. Personnel structure

The personnel structure for MinDA is given in the organizational chart below. Currently,

there are 16 members on the MinDA Board and another 21 members as MinDA Secretariats.

38

Figure 2-5 MinDA organization chart

Source: MinDA

(3) Infrastructure Budget and Mindanao Regional Budgets

A. Infrastructure budget

As shown in the figure below, the Philippines Infrastructure Budget was 756.4 billion PHP

for FY2016 and is 860.7 billion PHP for FY2017, accounting for roughly 5 percent of the

Philippine GDP. By agency, the DPWH budget for FY2017 was more than half of the overall

infrastructure budget, accounting for 458.6 billion.

MinDA Chairman

RDC IX Chairperson

RDC X Chairperson

RDC XI Chairperson

RDC XII Chairperson

RDC XIII Chair

ARMM Governor

Senate of the Philippines

House Committee on Mindanao Affairs

Chairperson

House Committee on BIMP-EAGA Affairs

Chairperson

ULAP President

CONFED President

SPDA Administrator

NCMF Secretary

Mindanao Business Council Chairperson

PS/NGO Rep

MinDA Board

Executive Director

IPPAO

Deputy Exec. Dir.

PPPDO OFAS OACPM

MinDA Secretariat

39

Figure 2-6 Philippines Infrastructure Budget

Source: MinDA

B. Budget distributions by region for Mindanao

By region, the FY2017 budget will be distributed as follows:

Figure 2-7 Distribution of the budget by region

Source: MinDA

40

Of the total 360.9 billion PHP distributed for infrastructure, 151.7 billion is allocated for

Mindanao regions, accounting for nearly half of the entire budget (Northern Luzon: 67.2

billion; Southern Luzon: 60.1 billion; Visayas: 58.5 billion; NCR: 23.4 billion). Within Mindanao

itself, the largest distribution of 38.7 billion goes to the Northern Mindanao Region (Region

X), followed closely with 38.1 billion for the Davao Region (Region XI). This is followed by

23.2 billion for the Caraga Region (Region XIII), 18.6 billion for ARMM, 16.6 billion for

Zamboanga Peninsula (Region IX), and 16.5 billion for Soccsksargen (Region XII).

C. Distributions for NEDA budget

According to the National Expenditure Program for FY2017 as published by DBM, total

NEDA expenditures are 1.576 billion PHP. The amounts allocated for the NEDA Central

Office budget and regional budgets are given in the figure below.

Figure 2-8 NEDA budgets for FY 2017 (Units: Thousands PHP)

Region FY 2017 Budget

NEDA Central Office 999,790

Region I Ilocos 36,619

Cordillera Administrative Region 48,206

Region II Cagayan Valley 29,442

Region III Central Luzon 36,508

Region IV A CALABARZON 31,259

Region IV B MIMAROPA 26,847

Region V Bicol 38,348

Region VI Western Visayas 33,396

Region VII Central Visayas 39,496

Region VIII Eastern Visayas 34,864

Region IX Zamboanga Peninsula 36,831

Region X Northern Mindanao 38,321

Region XI Davao 43,475

Region XII SOCCSKSARGEN 66,539

Region XIII Caraga 36,071

Total 1,576,012 Source: DBM

As given in the figure above, nearly two thirds of the total NEDA budget is for the central

office, and the remaining third (576.2 million PHP) is distributed between the NEDA regional

offices. In total, 221.2 million is distributed to Mindanao regions, accounting for nearly 40

percent of all distributions for the regional offices.

2.3 Related Laws and Regulations, Policy, and Institutions

2.3.1 Institutions, regulations, etc. for infrastructure development (general)

41

The main laws, regulations, institutions, etc. in the Philippines relating to infrastructure

development follow below, listed by type (general, investment, environment, and land).

Figure 2-9 Laws, regulations, institutions for infrastructure development (general)

Name Overview

Civil Code (RA No. 386)

Gives detail on various rights and relationships. Of note in terms of relevance to foreign capital, the Civil Code makes a hard distinction between landowners and building owners, allowing for foreign building owners. Also provides for partnership with local companies.

Corporation Code (BP 68)

Of interest in establishing corporations. Note that Omnibus Investment Act and Foreign Investments Act provisions must be followed if foreign capital for the company to be established is to exceed 40 percent.

Labor Code (PD 442 of 1974)

The base Labor Code was enacted in 1974 by PD 442, “Labor Code of the Philippines.” Further provisions for employment conditions, welfare benefits, labor relations, dismissal, retirement ages and more are stipulated in the implementation regulations and related notices.

Internal Revenue Code (RA 8424)

A 1997 code and related laws which stipulate taxes including personal income taxes, graduated taxation maxing at 32 percent, corporate tax rate of 30 percent, minimum corporate income tax of 2 percent, improperly accumulated earnings tax of 10 percent, VAT of 12 percent, liquor tax, and tobacco tax.

Philippines-Japan Tax Treaty

A bilateral treaty convened in 1980 to prevent double taxation. New tax rates applied in a revision from January 1, 2009. Stipulates that only the local country can tax business income through permanent facilities only, etc.

Intellectual Property Code (RA 8293)

The central Philippine law protecting IP, enacted in 1997. Stipulates constituent requirements of infringement, penalties, and damages.

Japan-Philippines Economic Partnership Agreement

Convened in 2006 to expand trade and investment between Japan and the Philippines, developing a legal framework for a deeper interdependence.

AFTA and CEPT Agreement

Implements Common Effective Preferential Tariffs (CEPT) as an element of ASEAN Free Trade Agreement (AFTA) for most items. Items excluded are those pertaining to national defense, protection of life and health, and historic and archaeological protection.

Contractors’ License Law

Provides for acquisition of permits issued by the Philippine Contractors Accreditation Board (PCAB). Local companies with foreign capital of 40 percent or lower can acquire a general license.

National Building Code

Provides the rules and regulations for general construction, as well as the licenses and approvals required before construction.

Uniform General Conditions of Contract for Private Construction

Construction Industry Authority of the Philippines (CIAP) stipulations for agreements and contract performance.

42

Figure 2-10 Laws, regulations, institutions for infrastructure development

Name Overview

Omnibus Investment Act (EO 226 of 1987)

Enacted in 1987 to incentivize investment in the Philippines by expanding tax and other incentives. In order to receive incentives, businesses must register with and gain approval from the Board of Investment (BOI). Registered businesses earn corporate tax exemptions for a set period, as well as exemption from customs for raw materials and select goods, additional deductions for labor costs, and other incentives.

Foreign Investments Act (RA 7042)

Enacted in 1991 to replace provisions concerning "non-incentivized investments" as originally included in the Omnibus Investment Act. This act details provisions for foreign shareholder ratios on business activities given in Foreign Investment Negative Lists (FINLs).

Anti-Dummy Law (Commonwealth Act No. 108)

Meant to restrict businesses which manufacture Filipinos formal shareholders with Filipino capital to avoid foreign investment restrictions but are in fact run by foreign parties.

Special Economic Zone Act (RA 7916)

Enacted in 1995 to incentivize businesses to enter designated economic zones such as the Philippine Economic Zone Authority (PEZA), Subic Bay, Clark SEZ, and the Aurora SEZ. Provides incentives for registered exporting companies in economic zones exporting at least 70 percent of products and services, exempting them from corporate tax for either four (for non-pioneer companies) or six years (for pioneer companies) following registration and imposing a 5 percent gross income tax after the exempt period.

Bases Conversion and Development Act (RA 7227; amended in RA 9400)

Established the Bases Conversion Development Authority (BCDA) with 100 billion PHP in capital as the managing authority for converting Clark Air Force Base, Subic Naval Base, and their related bases to production centers, also establishing the Subic Bay Metropolitan Authority (SBMA) and Clark Development Corporation (CDC) as BCDA subsidiaries. Also grants qualifying exporting companies registered with SBMA or CDC the corporate tax exemptions as provided for in RA 7916.

Figure 2-11 Laws, regulations, institutions for infrastructure development (environment)

Name Overview

Basic environmental laws

Stipulate national environmental policy, environmental targets, rights to a sound environment, the implementing and executing bodies for environmental impact assessments (EIAs), and guidelines. Also establish systems for managing air quality, water quality, land usage, natural resources, and waste.

Law Establishing an Environmental Impact Statement System (PD 1586 of 1978)

Provides procedures for performing EIAs.

Philippine Environmental Policy (PD 1151 of 1977)

Requires government agencies, commercial enterprises, and other parties to prepare Environmental Impact Statements (EIS) when performing any business activity with significant impact on the environment.

Revised guidelines for review of EIAs

Guidelines for preparing an EIS as based on the environmental protection guidelines.

43

Name Overview

Clean Air Act Prohibits incineration of any municipal waste emitting harmful gases, medical waste, and hazardous waste.

Biofuels Act Mandates that liquid fuel as used in automobiles and other vehicles include biofuel.

Figure 2-12 Laws, regulations, institutions for infrastructure development (land)

Name Overview

Investors’ Lease Act (RA 7652)

Permits foreign investors to lease lands for general industrial use for up to 75 years. Lease periods for non-industrial use are capped at 50 years in accordance with PD 471.

Condominium Act (RA 4726)

Foreign parties are permitted to own up to 40 percent of condominium buildings, which are defined as buildings with combined land usage rights for the owned area and common areas.

National Integrated Protected Areas System Act

Protects the rights to ancestral land to guarantee the economic, social and cultural well-being, welfare, and health of indigenous cultures. Also provides for the establishment and management of protected areas within the Philippines with the aim of protecting remarkable habitats for rare and endangered species of flora and fauna, as well as public lands of biological importance.

The Rules and Regulations for the Identification, Delineation and Recognition of Ancestral Land and Domain Claims

An ordinance for granting Certificates of Ancestral Domain Claims (CADC) and Certificates of Ancestral Land Claims (CALC) to indigenous peoples.

The Indigenous Peoples’ Rights Act

Recognizes, protects, and promotes the rights of indigenous communities and peoples, establishing and funding a national committee and implementing organization for indigenous issues.

National Strategy to Achieve Sustainable Forest Management and Social Justice

Conserves afforestation areas and existing forest to improve life for mountain residents. It strategically promotes sustainable forest management by providing the framework to organize residents and to grant the resident organizations authority over forest resources. The resident organizations are made responsible for usage, development, and conservation of forest resources so that the forest and coastal areas are managed effectively and sustainably. The policy grants the resident organizations a 25-year contract on forest usage rights, prompting the residents to manage the natural resources. The basic principles are: 1) sustainable management of forest resources and 2) social justice and community welfare, with DENR working closely together with the communities.

2.3.2 Institutions, regulations, etc. for infrastructure development (by sector)

The main laws, regulations, institutions, etc. in the Philippines relating to infrastructure development as listed by sector follow below.

44

Figure 2-13 Laws, regulations, institutions for infrastructure development (by sector)

Sector Name Overview

Railways, maritime shipping, electricity, water supply

Public Service Act Businesses entrusted as common carriers such as railways and marine transport, or to provide public services such as electricity or water supply, are strictly monitored by the government based on this act.

Railways Act creating the Philippine National Railways (RA 4156)

Provides financing for Philippine National Railways (PNR) to build and manage the railways, as well as the authorities and functions of PNR.

Roads Philippine Highway Act (RA 917)

Outlines the construction, management, and financing for highways.

Electricity Electric Power Industry Reform Act (EPIRA)

Enacted in 2001 to promote the liberalization of power producers. As of the end of 2012, roughly 91 percent of NPC plants were privatized, and NPC has also sold independent power producers (IPPs) the rights to purchase and sell its power to the public through power purchasing agreements (PPAs). Privatization in the power sector is lagging for Mindanao compared to other areas, however.

Electricity Renewable Energy Act (RA 9513)

The Philippines has been promoting policies and legislative measures to develop domestic energy resources as not to rely on imported oil for more than the past 30 years. Within this policy, renewable energy providers rank as supplying stable power at superior cost and durability; tax incentives for geothermal, micro hydropower, wave, solar, and wind power are all provided for by their own Executive Orders. In December 2008 the enactment of the Renewable Energy Act introduced a feed-in tariff (FIT) system and new incentives to encourage further private-led development of renewable energy.

Electricity Act to Promote the Exploration and Development of Geothermal Resources (PD 1442 of 1972)

Provides tax and accounting incentives which have spurred the Philippines to have the world's second largest geothermal power equipment capacity behind the United States.

Electricity Private Sector Participation for Ocean, Solar and Wind Energy Resources (EO 462 of 1997), amended in EO 232 of 2000

Permits and incentivizes private operators to research and develop the means to use ocean waves, solar, and wind power to generate power, and to use these energies for commercial activity.

Electricity Mini-hydroelectric Power Incentive Act (RA 7156)

Enacted in 1991 to grant various tax incentives for small hydropower generation, although foreign investment ratios are limited to 40 percent.

Electricity Energy Regulations Nos. 1-94 (Benefits to LGUs)

Laws providing for contribution of a fixed amount of power sales per kWh to each of three funds for rural electrification, development, and environmental conservation in order to help improve area living standards.

45

Sector Name Overview

Water supply

Program for promoting water supply improvements (RA 6716)

Promotes water supply improvement projects in aims to develop rural areas and improve quality of life.

2.4 PPP System and its operational status

2.4.1 Summary of PPP system

Since the days of the Aquino administration, diplomacy has been focused on actively

working to attract foreign direct investment. Meanwhile, PPP-based infrastructure

development projects have been a major theme for national policy, promoting projects for

highways and airport access roads, airports, railways, schools, and other infrastructure. In

September 2010, the BOT Center was reorganized and renamed the PPP Center,

transferring hands from the DPWH to the NEDA. Wanting to eradicate corruption, President

Aquino stressed transparency in projects, but was criticized by some for slow progress.

Larger projects in particular were revised several times over through this process, and bid

dates were frequently postponed. In the interest of selecting implementing bodies with higher

transparency for projects, solicited projects (government plans) are given more weight than

unsolicited projects (private proposals). To this end, the revised BOT Law in July 2012

(originally enacted in 1994) stipulates that unsolicited projects cannot be granted Viability

Gap Funding (VGF).

Policy has not wavered in its focus on PPP with the incoming Duterte Administration in

2016. With national finances being tight, the Philippine government at its base under the

current administration looks to conduct infrastructure projects with PPPs. However, the

majority of government-led infrastructural development projects are concentrated on Luzon

and are required to be of a certain project scale. Accordingly, there are no PPPs led by the

national government in Mindanao. 11 Given the island’s issues with power deficiencies,

however, Mindanao depends on privately-run unsolicited energy development for its power

in lieu of solicited projects.

An overview of the PPP system in the Philippines is given in the following chart.

11 Numerous LGU-run water supply projects utilize private resources, e.g. bulk water supply.

46

Figure 2-14 Overview of PPP system in the Philippines

Item Overview

Major legislation RA 7718 (revised BOT Law) Implementing Rules and Regulations for the BOT Law (BOT-IRR) EO 8 of 2010 (Sept. 2010): BOT Center reorganized into PPP Center JV Guidelines (Enacted 1989; revised 2008 and 2012)

Promoting agencies

PPP Center: Established under NEDA by EO 8 of 2010 (transferred from DTI control) PPP Governing Board: Established in EO 136 of 2013. Projects exceeding 500 million PHP require Cabinet approval (economic cabinet comprising NEDA Board, with President as Chair and members from DOF, NEDA, and DBM)

Budgetary provisions on VGF, etc.

Financing: Projects can be financed from either domestic or foreign sources. Budgets can be approved with up to 50 percent of total project financing coming from either the Philippine government budget or a foreign government (ODA). Government assistance: For government-run solicited projects, indirect and direct assistance available, including cost sharing, creditworthiness (government guarantee), direct government subsidy, government investment, shared responsibility, legal support, and security support. For unsolicited projects, government guarantee, direct government subsidy, and government investments will not be approved.

Foreign investment regulations

From the Negative List, foreign capital is restricted to at most 40 percent for proposal and facility operations of BOT projects requiring a public utility project license.

Source: Prepared by the Study Team based on METI surveys, JICA reports, etc.

2.4.2 PPP-applicable sectors

According to the BOT Law and the BOT-IRR, private involvement through the PPP system

in the Philippines is allowed in the transport, power and communications, and social

infrastructure sectors. The applicable sectors and projects are listed in detail in the figure

below.

47

Figure 2-15 Infrastructure and project sectors allowing private involvement

Transport sector ・ Main roads (highways road projects, bridges, etc.) ・Rail and related commercial development facilities ・Non-rail mass transport facilities, inland navigation canals, etc. ・ Ports and harbors (docks, piers, and related facilities) ・Airports, air traffic controllers, and other related facilities Electricity and ICT sectors ・Power generation, transmission, and other related facilities ・ICT network facilities, land and satellite communication services and facilities ・ICT and database infrastructure

Social infrastructure sector, etc. ・Irrigation and related facilities ・Water supply, sewerage, and drainage facilities ・Education and medical infrastructure ・ Landfills, dredging, and other related facilities ・ Industrial parks, tourist attractions, and their related facilities and public facilities ・ Government buildings and residential projects ・ Marketplaces, slaughterhouses, and related facilities ・Storage, post-harvest facilities ・Public fishing ports and aquaculture areas, incl. storage and processing facilities ・ Environmental facilities, solid waste treatment facilities


As mentioned above, however, the BOT Law was originally enacted back in 1994. While

revised slightly in 2012, the law does not always align with modern PPPs in practice. For

example, given the reforms in the power sector with EPIRA in 2001, no new power plant

projects are conducted through a PPP or BOT. Thus, in effect, there are no PPP power

projects in the Philippines.

2.4.3 Implementation status and pipeline for PPP projects

The PPP Center updates a listing of the implementation status and plans for PPP projects

in the Philippines on their website on an irregular basis.

Figure 2-16 Completed and Operational Projects

Sector Awarded projects Project cost Agency

Road Daang Hari-SLEX Link Road (Muntinlupa-Cavite Expressway) Project

2.23 billion PHP DPWH

Education PPP for School Infrastructure Project (PSIP) Phase I

9.89 billion PHP DepEd

Railway Automatic Fare Collection System (AFCS)

1.72 billion PHP DOTr

Road NAIA Expressway (Phase II) Project 17.93 billion PHP DPWH

Source: Prepared by Status of PPP projects (as of 15 December 2016) issued by Philippines PPP center

48

Figure 2-17 Projects under Construction


Education PPP for School Infrastructure Project (PSIP) Phase II

3.86 billion PHP DepEd

Airport Mactan-Cebu International Airport Passenger Terminal Building


Road Metro Manila Skyway (MMS) Stage 3 Project

37.43 billion PHP Toll Regulatory Board

Transport South Integrated Transport System Project


Railway MRT Line 7 Project 69.30 billion PHP DOTr


Figure 2-18 Projects under Pre-Construction (approved by NEDA Board)


Railway LRT Line 1 Cavite Extension and O&M 64.9 billion PHP DOTr

Road Cavite – Laguna (CALA) Expressway 35.43 billion PHP DPWH

Transport South Integrated Transport System Project


Water Bulacan Bulk Water Supply Project 24.41 billion PHP MWSS

ICT Civil Registry System Information Technology Project (Phase II)

1.59 billion PHP PSA

Road NLEx-SLEx Connector Road 23.20 billion PHP DPWH

Airport New Bohol (Panglao) Airport Operations, Maintenance & Development Project

4.57 billion PHP DOTr & CAAP

Airport Laguindingan Airport Operations, Maintenance & Development Project


Airport Davao Airport Operations, Maintenance & Development Project


Airport Bacolod Airport Operations, Maintenance & Development Project


Airport Iloilo Airport Operations, Maintenance & Development Project


Railway Operation & Maintenance of LRT Line-2 No CAPEX DOTr & LRTA

Port Davao Sasa Port Modernization Project 18.99 billion PHP DOTr

Road Road Transport IT Infrastructure Project (Phase II)

0.298 billion PHP DOTr & LTFRB

Water New Centennial Water Source-Kaliwa Dam Project

18.72 billion PHP MWSS & DPWH

Justice Regional Prison Facilities through PPP 50.20 billion PHP DOJ & BuCor

Railway LRT Line 6 Project 65.09 billion PHP DOTr

Road NAIA PPP Project 74.56 billion PHP DOTr & MIAA

Urban development

New Nayong Pilipino at Entertainment City Project

1.47 billion PHP DOT


49

2.4.4 Issues with PPP in the Philippines

As seen above, PPPs are actively utilized and steadily building up a track record in the

Philippines to prominent levels, even when compared to neighboring countries. Still, the

issues outlined below remain outstanding.

First, being enacted in 1994 and revised in 2012, the BOT Law does not mesh with

current PPP practices. The content of the law remains largely unchanged from its 1994

state and needs to be reformed in terms of applicable scope, PPP modalities, government

assistance measures, and other facets. The Philippine government has talked about

establishing a new PPP Law (tentative title) to replace the BOT Law since about 2010, but

little progress has been made in congressional debates.

Second, the regions and agencies for which PPPs can be applied are limited. Many of

the PPP projects implemented are on Luzon. Further, almost all “official” government-run

PPP projects are implemented by the national government; very few are run by LGUs. In

addition to the aforementioned deficiencies in the BOT Law, PPP use tends to be

concentrated in larger central projects. Note that there are still no “official” PPP projects

running on Mindanao.

Third, the market is dominated by local conglomerates. In practice, 100-percent foreign

investment groups are not allowed to bid on PPP projects in the Philippines, and the

majority of SPC shares are held by local companies. Participation of one of the

conglomerates Ayala, San Miguel, or Metro Pacific is virtually essential in PPP projects,

resulting in an oligopoly of sorts. Diversifying the players in PPP projects to allow foreign

companies and local SMEs to participate is another important issue in PPP policy in the

Philippines.

2.5 Candidate Local Partner Companies

The following companies are candidate partners in the Philippines for Japanese

infrastructure companies.

For projects on Mindanao, a local general contractor would likely make a powerful partner.

In fact, there are several cases of companies successfully entering Mindanao to participate

in various infrastructure projects by partnering with a local Mindanao general contractor or

infrastructure company.

50

Figure 2-19 Candidate Local Partner Companies for Japanese Infrastructure Companies

Company Name Location Sector Overview

Ayala Corporation Manila Water, energy, etc.

Philippines’ largest conglomerate. Develops projects in various fields, including retail, education, real estate, banking, communications, water supply infrastructure, renewable energy, electronics, ICT, automotive, and health care.

Aboitiz Power Manila Energy Conglomerate involved in power generation, transmission, and distribution. A new company, Aboitiz Holdings, is the biggest player in domestic marine transport.

Alcantara Group Manila Energy, real estate, etc.

An equal player with Aboitiz in terms of Mindanao infrastructure development, although mainly active in electricity. Has close relationships with Japanese businesses due to cement work and other work.

Metro Pacific Investment Corporation

Manila Real estate, infrastructure, hospitals

An investment trust holding company which invests in water supply, sewerage, real estate, infrastructure projects, and hospital projects.

San Miguel Corporation Manila Foodstuffs, roads, electricity, real estate

A conglomerate which invests in foodstuffs, toll roads, power providers, oil refineries, real estate, and more.

Anflo Management and Investment Corporation

Davao Agriculture, foodstuffs, airports, real estate

A conglomerate which invests in agriculture, terminal operations, real estate, resort development, foodstuffs, and more.

Engineering Equipment Inc.

Davao Electricity An engineering firm listed on the Philippine stock exchange involved in construction of thermal, solar, wind, and other power plants in the Philippines and abroad.

DM Consunji Inc. Davao Ports, water supply

An engineering firm listed on the Philippine stock exchange involved in the Zamboanga water treatment plant and Davao pier extension project, among others.

Dizon Farms Davao Agriculture While not connected to infrastructure, may be good to ask for information on promising partner companies and other issues given their status in the Davao Chamber of Commerce. A local business which involves local communities in the Davao area to add fruit trees (coffee, cacao, etc.), fruits, vegetables, etc. A key member in the Davao Chamber of Commerce and in good standing with the current President.

Equiparco Construction Company

Butuan Roads, bridges, seaports, airports, dams

Mindanao’s largest general contractor. Involved in design and construction for roads, highways, bridges, seaports, airports, dams, irrigation, and more.

Twinpeak Hydro Resources Corporation

Butuan Investment An operating company located in Butuan which invests in project plans and development.

Source: Data prepared by the Study Team

2.6 Project Development Status for Other Countries

A summary of the status of project development by other countries in infrastructure-related sectors in Mindanao is given in the chart below.

51

Figure 2-20 Status of infrastructure development projects by other countries in Mindanao

No. Country Sector Location Companies Involved

Budget Scale Remarks

1 S. Korea Solar power Southern Mindanao

Hanwha Q Cells Unknown 28.6 MW scale

2 S. Korea Coal power Surigao del Sur, Mindanao

Korea Electric Power Corp. (KEPC)

2 billion PHP 200 MW scale

3 S. Korea Bridge Tangub, Misamis Occidental and Tubod, Lanao del Norte

Export-Import Bank of Korea (KEXIM)

4,858,890,000 PHP

4 S. Korea Waste treatment

Bukidnon and Misamis Occidental

Sudokwon Landfill Site Management Dohwa Consulting Engineers

Unknown Buried landfill waste treatment

5 China Elevated railway

Mindanao CNR Dalian 3,759,350,000 PHP

6 Singapore Solar power Surallah, South Cotabato, Mindanao

nv vogt Philippines

1 billion PHP 5 MW scale

7 Thailand Hydropower Visayas and Mindanao

Conal Holdings Corp. (CHC)

Unknown 99 MW scale

8 UK Biomass power

Visayas and Mindanao

Global Green Power PLC Corp. (GGP)

Unknown 87.5 MW scale

9 Germany Solar power Luzon and Mindanao, Visayas

Conergy Asia Pacific, etc.

Unknown 454 MW scale

10 Spain Geothermal Oriental Mindoro

Tamoin Industrial Services Corporation (TISCO), Nickel Asia Corporation (NAC), Emerging Power, Inc. (EPI), etc.

Unknown 40 MW scale. Will supply 250,000 homes.

11 Belgium Solar power Digos, Davao del Sur, Mindanao

Enfinity Group 2 billion PHP (Phase I)

286 MW scale

12 Mexico Cement Solid cement plant, Antipolo, Rizal/Naga, Cebu

CEMEX 300 million USD / 80 million USD

Production capacity of 3 million tons / 5.25 million tons

Source: Data prepared by the Study Team

52

Chapter 3 Current Status, Issues, and Priority Projects for

Infrastructural Development

3.1 Status by City

3.1.1 Davao City

3.1.1.1 Current Status of Infrastructure

As topographical constraints have driven Davao City’s 1.63 million12 residents into the

limited flatter area, road network development is also concentrated around these densely

populated flatlands. However, the road network has not been developed in any kind of

systematic fashion, leaving it a chaotically intertwined complex of roads lacking any continuity.

Chronic congestion has plagued downtown Davao City in recent years given a sudden

increase in car traffic. Moreover, limited parking space downtown encourage drivers to park

on the streets, making it another delimiting factor reducing road capacity. Also, in the field

study, Davao City streets appeared dark at night due to insufficient street lighting.

In terms of public transportation, Davao City is in urgent need of a mass transit system

given the serious traffic issues downtown. As with other Philippine cities, Davao City has no

organized public transportation system in operation, instead relying only on shared transport

services, such as Jeepneys, minivans, and taxis. ADB is providing assistance for a bus rapid

transit (BRT) line development project, and NEDA is conducting a feasibility study for

development of a Tagum-Davao City-Digos rail line.

3.1.1.2 Existing Industry

The main industries in the Davao City area are farming and livestock, mining, IT-BPO,

tourism, and real estate. According to the DTI Davao Regional Office, they felt it important to

promote manufacture of high value-added agriproducts and mine development. Also note

here that Davao City is planning to build a food terminal modeled after Tsukiji market in Tokyo,

with the Toril neighborhood as a prospective candidate.

By the data, GRDP for Region XI, which includes Davao City, has grown approximately 11

percent per year since 2013. Finally, within agriculture, production by tonnage is particularly

high for for bananas and coconut.

12 Exact figures are 1,632,991 residents according to the 2015 Census.

53

Figure 3-1 Industries in Davao Region (Region XI)

GRDP (Region XI) Major Region XI crop yields

Source: Philippine Statistical Yearbook 2015, Philippine Statistics Office

3.1.1.3 Project Needs

(1) Future planned projects

The major projects currently planned in Davao City are as follows:

・Construction for a Davao City bypass road (work on south and central sections

underway with a Japanese ODA loan, including tunnel section)

・Construction for another bypass road closer to town than the above bypass road

・Davao City-Samal Island connection road (Construction could be a bridge or tunnel.

Only the bridge plan has been studied by METI.)

・Bus rapid transit (BRT) development

・Railway development (Tagum-Davao City-Digos line)

(2) Project needs

A. Private sector needs

During the hearings conducted at the Davao Chamber of Commerce and Industries

(DCCI), the 80 member companies stated that the DCCI was a very independent-minded

group and politically distinct from the Philippine Chamber of Commerce and Industries

(PCCI) with regards to their infrastructural development needs. They cited personnel

issues: officials with no previous direct business connections to Davao were put in charge

over the Davao Region. DCCI members conduct most of their business to the south of

Davao City,13 and thus intend to invest and develop mostly in the Davao-Digos-General

Santos corridor.

13 Between Davao City and Cagayan de Oro, the cities of Valencia, Malaybalay, and Bukidnon have each

established their own independent chambers of commerce and have built up busiensses on their local agricultures. Members of the Cagayan de Oro Chamber of Commerce hold plantations, lumber production companies, and other businesses in this area. Meanwhile, DCCI members base their businesses outside of this area, on both ends of the road from Davao to General Santos City.

94 105 107

129 150 168

237 264 289

0

100

200

300

400

500

600

2013 2014 2015

In P

hp

Bill

ions

AFF Industry Service

459 518

563 11% CAGR

0.45 0.28

2.33

0.34 0.03

3.37

0.05 0.01 -

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Region XI (Davao Region)

In M

illio

n M

etr

ic T

ons

Palay Corn Coconut Sugarcane Pineapple Banana Mango Coffee

54

Therefore, the business sector is also more interested in strengthening the Davao City-

Digos-General Santos City route than it is in developing within the borders of Diversion

Road in Davao City. Strengthening the road network of this route could potentially promote

development in the following industries:

・The peninsula east of General Santos City has potential for mining and tourism

development.

・ In Bangsamoro to the west of General Santos, investments are heating up for

production of corn, cassava, and other feed crops. (An Indian company has committed

to invest.)

・Potential for adding value for fish landed in General Santos Fish Port Complex.

・Relieving traffic along the Pan-Philippine Highway (Route 1) south of Davao would

stimulate distribution.

B. Public sector needs

In January 2017, JICA commenced the Davao City Infrastructure Development Plan and

Capacity Building Project. The project aims to efficiently and effectively develop local

infrastructure, consisting of plans for developing urban infrastructure (land usage, roads,

urban transport, water supply and sewerage, waste management, etc.) and a project to

build up the implementing capacity of Philippine bodies. The public sector in Davao has

high expectations for this master plan.

Meanwhile, according to interviews with the NEDA Region XI office, DTI Region XI office,

and DPWH, the Davao public sector is in search of more efficient means for transporting

locally grown produce and fish to Cagayan de Oro Port. Currently, transport by boat to

Cagayan de Oro takes roughly three days, whereas land transport takes a half day. Thus,

business owners hope the shift in strategy will shorten time in transport, in turn improving

freshness and reducing damage.

Also, it being the home of President Duterte, Davao is expected to receive additional

investment moving forward, and the population and employment are expected to increase.

Local officials also look to push for improvements to the road between Davao and Cagayan

de Oro in order to facilitate transport of incoming construction materials, daily goods and

other products from Cagayan de Oro Port.

55

Figure 3-2 Projects planned in Davao


3.1.2 Cagayan de Oro


(1) Roads

The Cagayan de Oro area is building up, with growth mainly in the areas with gentler

terrains, around the trunk roads. However, traffic at major intersections and the downtown

area is starting to worsen. The road system is underdeveloped, failing to function as a

network, and is unequipped to handle the rapid increases in traffic volume of recent years.

Further, the lacking road network structure almost invariable forces through traffic to other

destinations to go through downtown Cagayan de Oro. The downtown traffic congestion is

exacerbated by rampant street parking due to insufficient parking space downtown.

The road network deficiencies are likely caused by development being limited to smaller,

demand-driven projects in reaction to bottlenecks as they occur. The government

maintenance budget is insufficient and uncertain, being allocated on a single-year basis, and

no master plan or other top-level plan exists for urban planning or road maintenance.

The trunk intercity road around Cagayan de Oro, National Highway 10, is on a bad lie,

56

passing through hills and mountains. Also, the hills encroach into the port’s hinterland. This

causes congestion from trucks reducing speed on the steep inclines as well as sharp turns

difficult for trucks hauling 40-foot ISO containers to navigate.

Currently, DPWH is working on widening the trunk road and installing climbing lanes for

the steep inclines. As mentioned above, however, meager budging allocations have

necessitated that improvements advance on a patchwork basis. Also, given the steeply cut

slopes and shoulders endangered by instable slopes, future road stability is of concern due

to erosion from rainfall and flooding.

Figure 3-3 Transport & Road Situation in Cagayan de Oro

Traffic on NH Rt. 9, running east-west through

downtown

Cut slope with bare ground on NH Rt. 10

Source: Photographed by the Study Team

(2) Public transportation

As with other Philippine cities, Cagayan de Oro has no organized public transportation

system in operation, instead relying mainly on shared transport services, such as Jeepneys,

minivans, and taxis. Thus, traffic is chaotic; vehicles haphazardly stop to let passengers on

and off, and drivers do not follow traffic rules, all contributing to slow down traffic. Given the

compactness of the limited flatlands downtown, an organized public transportation system

downtown should alleviate traffic conditions if established. Still, none is confirmed to be

planned at present.

(3) Airport

Laguindiangan Airport in Cagayan de Oro is designated by the Philippine government as one

of five city airports (in Bacolod, Iloilo, Bolod, Cagayan de Oro, and Davao City) for

enhancement. As of January 2017, potential operating contractors are submitting tenders for

a PPP for the enhancements. In addition, as MinDA has relocated its headquarters to

Bukidnon and looks to establish the city as the center of Mindanao development, there is talk

57

of building a new airport in Bukidnon. While NEDA headquarters wishes to focus on

enhancing the airports in the major five cities first, there may be some movement on the

Bukidnon airport construction in the future.

(4) Ports and harbors

Cagayan de Oro has two port areas: the PPA Container Terminal and the Mindanao

Container Terminal. There is no fishing port. Given the geographical advantage Cagayan de

Oro port facilities offer over other Mindanao ports in terms of transport to Luzon, Cebu, and

other destinations, the surrounding areas hope that Cagayan de Oro Port is enhanced as

part of strategic development to function as a hub and improve port access to surrounding

Mindanao areas. From local interviews, the Study Team found that Cagayan de Oro Port is

currently at 83 percent of its freight handling capacity and will likely exceed its capacity in the

near future. Thus, Cagayan de Oro Port must be expanded with enhanced functionality over

the longer term in order to keep pace with steadily increasing freight demands.


Misamis Oriental, the region where Cagayan de Oro is located, has all the right conditions

for agricultural development; the soil is rich, and typhoons are few and far between. To the

south of Cagayan de Oro, Bukidnon has a booming agriculture, earning it the name of food

basket of Mindanao. Dole, Del Monte, and other major plantations produce crops including

bananas, pineapple, and coconut, and smaller farmers raise and harvest high value-added

crops such as broccoli, lanzones, pepper, coffee, and tomato. While to date, crops have been

exclusively for export off the island, capacity for processing in Mindanao would stimulate local

industry.

In terms of mining, full JFE Steel subsidiary Philippine Sinter manufactures and sells

sintered ore (the main raw material for blast furnaces, fired from iron ore) out of Cagayan de

Oro. With the Philippines lying on the transport route to Japan for Brazil and Australia, the

area can efficiently manufacture sintered ore from iron ore and transport the product.

By the data, GRDP for Region X, which includes Cagayan de Oro, has grown

approximately 9 percent per year since 2013. Within agriculture, production by tonnage is

particularly high for sugar cane.

58

Figure 3-4 Industries in Misamis Oriental (RegionX)

GRDP (Region X) Major Region X crop yields

Source: Philippine Statistical Yearbook 2015, Philippine Statistics Office


(1) Future planned projects

NEDA Regional Office X gives the following priority projects:

Road Inland Alignment (Expressway System) Project

・CDO-Malaybalay-Valencia-Davao route

・Dipolog-Ozamiz-Pagadian route

・Pagadian-Tubod (Lanao del Norte)-Iligan-CDO-Gingoog-Butuan route

・Expected to reduce business costs for Davao and GenSan businesses.

・Reduced transport times and damage in transport will increase value for

agriproducts and marine products.

Bukidnon Airport Development Project

Ozamiz City Airport Development Project

Mindanao Railway Project

・Iligan-CDO-Butuan line

・Butuan-Davao line (feasibility study for Tagum-Davao-Digos line in progress)

・Davao-Iligan line

Laguindingan Seaport Development Project

Improvement/upgrading of road leading to Laguindingan Airport (airport access)

Other projects given in JICA logistics studies

In addition, the DPWH Regional Office is discussing the following road development

projects:

Development for elevated highway between Opol and Villanueva

Construction of superhighway connecting Iligan, CDO, and Butuan

・Future plans are for a six-lane highway, but due to budget constraints, a two-lane

road will first be developed.

112 123 127

138 156 165

186 207 224

0

100

200

300

400

500

600

2013 2014 2015

In P

hp

Bill

ions

AFF Industry Service

436 486

516

9% CAGR

0.71

1.20

1.84

3.44

1.39

1.78

0.05 0.01 -

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Region X (Northern Mindanao)

In M

illio

n M

etr

ic T

ons

Palay Corn Coconut Sugarcane Pineapple Banna Mango Coffee

59

Construction of bypass road between Bukidnon and Gingoog

・Scheduled to break ground in 2017. As above, the road will be built in stages due

to budgetary constraints. The complete road is expected to take 10 years to

complete.

Construction of bypass road between Bukidnon and Davao

・DPWH is discussing construction of the bypass with tunnels for the poorly-aligned

mountain section. As the profile figures will not work for the route in the materials

received from DPWH, an alternative route must be discussed.

Figure 3-5 Projects planned in Cagayan de Oro


(2) Project needs

A. Private sector needs

The Cagayan de Oro Chamber of Commerce (Oro Chamber) is smaller than its Davao

counterpart with 50 member companies. The member companies base their businesses

mainly on agriculture and plantations between Bukidnon and Cagayan de Oro, centering

around Malaybalay. Thus, the members naturally have a high need for roads from

Malaybalay to both the port and airport facilities in Cagayan de Oro. Their needs are lower

for improvement of the roads from Malaybalay and further south to Davao.

Oro Chamber member companies mainly deal with palm, corn, and pineapple products,

60

shipping as canned and fresh produce as well as raw feed materials to Luzon and Hong

Kong from Cagayan de Oro Port. Thus, these companies need improved access for freight

transport between Malaybalay and Cagayan de Oro Port. More than improvements to the

existing mountain route between Malaybalay and Cagayan de Oro, they require a new,

high-standard bypass road from Malaybalay to Cagayan de Oro Port. A direct link from

production area to port facilities will enable greater utilization of inland agricultural

resources. While the Bukidnon highlands are reknowned for their vegetables and the

Malaybalay area for its cattle, little ties these local industries to the larger Cagayan de Oro

businesses. They are no doubt categorized in people’s mind as small local farmers and

businesses for their respective local chambers of commerce.

According to the Oro Chamber, traffic over the bridge for the Cagayan River on National

Highway 9 to the east of Cagayan de Oro Port is restricted to a weight of 10 tons. Thus, in

its current state, the bridge cannot be used to transport the heavy components for

construction of Mindanao power plants and other projects. As part of its corporate

responsibility activities, Philippine Sinter is privately supplying its own deep barge for

landing of the plant components between eastern Cagayan de Oro and Butuan. Without

this barge, construction of the Mindanao power plant is currently not feasible.

The Port of Gingoog shows promise as an alternative site east of Cagayan de Oro for

port development. Another proposal has multiple private sector harbors being repaired and

enhanced through PPP schemes.

Much construction material and raw material will be transported between 2017 and 2022,

a period when Mindanao will be producing a surplus of power. In general, the current bridge

is a hindrance to goods distribution due to its weight restriction and needs to be reinforced

for heavy traffic, along with all the trunk roads.

Additionally, Japanese companies on the east side of Cagayan de Oro greatly need road

network to be improved on the coastal route in town (National Highway 9). Specifically,

they speak of developing mass transit running east to west over an approximately 25-km

area. There is manufacturing and a power plant along the Cagayan de Oro coast, and the

city has multiple larger universities. Further, unlike Davao City, Cagayan de Oro is laid out

in a straight line with many subdivisions along the coast. These conditions would make

mass transit profitable and easy to implement in the city.

B. Public sector needs

Both the public and private sectors in Cagayan de Oro very much see Davao City as their

rivals, and JICA’s Davao City Infrastructure Development Plan and Capacity Building Project

has kindled a strong desire in them to conduct a similar project in Cagayan de Oro. According

to both the NEDA and DTI regional offices, RDC members have discussed various plans for

61

development in the Cagayan de Oro area with several parties; still, the Cagayan de Oro

government, who would be the implementing body, has yet to rank these projects in terms of

development priority. Lots of Philippine people stresses that a master plan is necessary to

set priorities and ensure technical links between the projects. Thus, Cagayan de Oro greatly

needs to create a master plan like that for Davao and define its development priorities.

Given these circumstances, the national ministries each have different priorities in terms

of infrastructural development. DPWH and NEDA see development for a Malaybalay airport

and a Malaybalay-Gingoog bypass road as high priorities, whereas DTI told us that they felt

it was still too early for railway development and that development for Gingoog Port should

be prioritized.

C. Direction for transport infrastructure development

When looking to drastically improve traffic in an urban setting, it is essential to develop a

top-level plan that decentralizes traffic demands and provides appropriate guidance for urban

development. Striking a balance between development for roads and public transportation is

also key. Thus, the following are our recommendations on the ideal for future development

of downtown and intercity roads in Cagayan de Oro.

i. Downtown roads

Enhance the downtown road network and develop roads which allow distribution and

other throughtraffic to bypass the downtown area.

ii. Intercity roads

Upgrading the intercity roads to high-standard roads will improve drivability, stimulate

Mindanao industry, and promote interregional interaction. In particular, connecting

Cagayan de Oro, Davao City, and General Santos City along the north-south axis with

highway or high-standard roads should be a priority. Such roads should help to serve as a

backbone for promoting Mindanao industry. Considering Mindanao as a whole, with

excellent international gateways in both the north and south, establishing organic

connections between these gateways and the potential for Mindanao industry could mean

redundancy for local distribution and compound growth.

iii. Public transportation

As of 2015, Cagayan de Oro had a population of 680,000. For cities of this scale, the

most economical and effective option is to develop a bus-centric public transportation

network. This system needs to be organized and systematic in operation, not like the

62

current system in which independent drivers with Jeepneys and other vehicles drive for

profit. Possible solutions include establishing a new bus company, and/or improving the

business model by unionizing the existing Jeepneys and other shared transport, and

introducing a uniform charge collection system.

3.1.3 General Santos City


General Santos City, or GenSan, serves as a gateway on the open ocean in the

Soccsksargen Region.14 The catchment area for the airport and ports in GenSan extends

through a wide portion of southern Mindanao. In terms of the Mindanao transport sector,

Makar Wharf, the general port in GenSan, is recognized as part of the RO-RO ship network

connecting to Indonesia’s Bitung Port for BIMP-EAGA. 15 Meanwhile, General Santos

International Airport is the sole gateway in the region.

The intercity trunk road connecting inland areas to these gateways is the Pan-Philippine

Highway, also connecting to Davao City and Cotabato. The Pan-Philippine Highway was

rehabilitated with Japanese assistance and dubbed the Philippine-Japan Friendship Highway.

The Davao-GenSan section of the highway was expanded on the Philippine budget, and the

200-km section to Cotobato is a multi-lane section in well-maintained condition.

The roads in GenSan itself are gradually becoming more congested, although not as bad

as in some other Mindanao cities. Still, the GenSan transport sector is expected to see more

activity as the southern regions of Mindanao grow in the future.

GenSan is servicing both inbound and outbound directions of its Circumferential Road and

other key roads in anticipation of this growth, and the road infrastructure development plan

appears to be proceeding appropriately. In terms of downtown traffic management, however,

there are still not enough traffic signals in place to handle future increasing traffic levels.

GenSan also lacks the basic information needed to discuss regional infrastructure

development. They do not have clear figures on current intercity movement in terms of human

and goods logistics.

14 Name used for Region XII in Mindanao. The name is a combination of the names of the four provinces

and city (General Santos) in the region. The central cities are Koronadal and Cotabato. 15 The Master Plan and Feasibility Study on the Establishment of an ASEAN RO-RO Shipping Network

and Short Sea Shipping, JICA, 2013

63

Figure 3-6 Development of Transport Infrastructure Facilities in General Santos

Six-lane trunk road from GenSan to Koronadal Makar Wharf expansion in progress (piledriving)

Source: Photograped by the Study Team


The Soccsksargen Region produces pineapple (Dole has a major plantation in the region),

coffee, coconut, banana, rice, corn, asparagus, and other crops, operating as a main supply

base both domestically and internationally. Further, GenSan is one of Mindanao’s more

prominent cities in terms of fisheries and marine products, with plenty of fishing and marine

product-related industry.

In terms of mining resources, an exploration feasibility study for gold and copper mines is

underway in Tampakan, located to the north of GenSan. Development is scheduled to

proceed through the Financial and Technical Assistance Agreement (FTAA), but the

Cotobato del Sur government has a legal ban in place on open-pit mining. The project has

already obtained an Environmental Compliance Certificate (ECC), but as of January 2017,

no development permit has yet been issued.

GenSan has multiple special economic zones (SEZs) with many companies. The only SEZ

which could be considered an industrial park, the Gensan Economic Zone, is being

developed near the airport and is anticipated to attract demand from marine product

processing and other industries.

As its growth model, GenSan seeks for development to spread regionwide. They wish to

move away from the current pattern of fishing and marine industry only concentrated in the

city and toward growth for agriculture, mining, tourism, and other industries to spread

throughout the region.


According to the Soccsksargen Area Development Project Office, the airports, ports, and

other main logistical infrastructure was constructed in the 1990s with JICA and USAID

assistance, and much of it is aging with no repairs. They have requested the central

Philippine government for rehabilitation projects.

64

As determined on site, the infrastructural development needs in terms of transport facilities,

as well as the projects currently planned or underway in GenSan and the surrounding areas,

are outlined in the following sections.

(1) Future planned projects and project needs

A. Port and harbor infrastructure

・GenSan is working to expand the handling capacity of its main port, Makar Wharf. Makar

Wharf is currently at full capacity, causing delays; in interviews, the Study Team was told

that ships were left waiting in the bay for up to a month. To alleviate this, the wharf is

currently under expansion, paid for on the Philippine governmental budget and based

on a port master plan drafted by the South Korean government.

・Several items in the aforementioned master plan are already completed: the gantry crane,

berth expansion, the passenger terminal, and more.

・The project will have three phases in all. For Phase I, the pier will be expanded 200 m

on the eastern side; this work is scheduled to complete in December 2017.

・At Makar Wharf, 80 percent of the freight handled is for export, and approximately 80

percent is container freight (Dole pineapples, bananas, etc.). Palm oil from Kenram I&D

accounts for much of the bulk freight handled.

・In terms of imported freight, many bulk freight ships haul construction equipment and

materials, as well as raw materials for processing. Recently, cement importers have

increased from two companies to five.

・With the government investing 7 percent of its annual budget in infrastructure,

development planned in the region will likely mean further diversification in freight.

Cement, steel material, and other construction-related freight should increase.

・While the Philippine Port Authority (PPA) is working on a port development project,

government-run projects take time. Thus, a private port development project is desired.

・Specifically, private port development has potential for bulk freight (soy, rice, wheat), an

area of low priority for the PPA which is often delayed.

・The fish port complex developed in the 1990s with JICA assistance is still in use. The

units are being improved one-by-one with EU assistance but still have issues in terms

of waste water treatment and other areas.

B. Airport infrastructure

・GenSan Airport has not been renovated for 20 years; it is one of the airports the central

government plans to expand and renovate in the next two years. Specifically, the plans

are to expand the two-story airport building and double the airport apron capacity from

65

space for three planes to six. The tender process has already started for part of the

project.

・The government has secured approximately 600 ha of land in the airport vicinity. The

land is expected to be earmarked for industrial and commercial development of an

“Airport City.” With the airport functioning as a gateway for the region, officials see

tourism in particular as an industry with benefit and hope this development will include

tourist welcoming facilities.

C. Road infrastructure

・The coastal road between GenSan and Cotabato is currently being expanded with ADB

assistance.

・Improvements are slow on the GenSan-Davao section of the Pan Philippine Highway

(NH1); heavy traffic, likely including many heavy trucks, has greatly damaged the road

surface, and the road starts to deteriorate immediately upon repair. Further, many

sections require expansion due to the heavy traffic.

・The farm to market connection is also important in the GenSan region; area farmers

greatly need the roads from the trunk roads to be developed.

・GenSan is currently developing a circumferential road in the outskirts of town; the section

connecting the airport and wharf remain incomplete. GenSan expects the circumferential

road to perform the following functions: a) alleviate downtown traffic by allowing freight

traffic to circumvent the downtown area, b) entice new industry by strengthening the

connection between airport and wharf, and c) provide an alternate access road for Makar

Wharf. GenSan also plans to relocate the intercity bus terminal to the circumferential

road. One outstanding issue remains: insufficient street lights make night travel

dangerous.

・As flood control measures, DPWH is currently strengthening the bridges and fixing the

river channels up and downstream of the bridges.

D. Rail infrastructure

・In GenSan, rail is of lower priority for development than other transport infrastructure.

(2) Direction for transport infrastructure development

If city roads are developed and traffic management enhanced with more traffic signals and

other measures, this will alleviate traffic congestion. GenSan needs all development to be

completed in order as planned; the missing airport-to-wharf section of the circumferential

road must be completed, and the coastal roads must be expanded. Preferably, GenSan’s

66

role as a regional gateway should be enhanced now to drive future industrial growth in the

region, and not vice versa. To this end, development for the airport, ports, and other

infrastructure should be strategically planned with sufficient capacity, and the relatively well-

maintained intercity roads need to remain safe and stable. In terms of public transport, a bus-

centered system should be developed, accounting for factors such as population growth,

residential areas, and commuting routes within the city.

Figure 3-7 Projects planned in General Santos City


3.1.4 Butuan and Surigao City (Caraga Region)


(1) Transport

The regions described to this point--Northern Mindanao Region, containing Cagayan

de Oro; Davao, containing Davao City; and Soccsksargen, containing General Santos

City—each have per capita GRDPs at or above the Mindanao average. These regions

claim 11 of the 13 Agro-Industrial Economic Zones present in Mindanao. Further, the ports

of each of these regions handle between 160,000 and 210,000 TEUs of containers per

year, and almost all are connected to industrial parks by four-lane national highway.

67

In contrast, the Caraga Region has not one Agro-Industrial Economic Zone. Caraga’s

central port, Nasipit Port, handles only 30,000 TEUs of containers annually, and none of

the national highways in the port vicinity currently have four lanes.

Figure 3-8 State of logistical infrastructure in Mindanao

Sources: DPWH GIS web apps, PPA, and Philippine Economic Zone Authority (PEZA). Containers handled by Mindanao Container Terminal obtained from Port Call Asia.

(2) Japanese assistance for infrastructural development in the Caraga Region

(ODA loan assistance)

To date, the following infrastructure development projects have been completed in

Caraga with ODA loan assistance:

68

Figure 3-9 ODA loan assistance for infrastructural development in the Caraga Region

Project Name Project Period Project Scale

Second Magsaysay Bridge and Butuan City

Bypass Road Construction

Aug. 2000 –

May 2007

Cost: 5,722MM JPY

(3,506MM JPY in ODA loans)

Philippines-Japan

Friendship Highway

Mindanao Section

Rehabilitation Project

Phase I Mar. 1997 –

Sept. 2006

Cost: 8,303MM JPY


Phase II Dec. 1999 –

Feb. 2008

Cost: 9,639MM JPY


Lower Agusan

Development Project

Phase I (flood

control)

Jan. 1988 –

Feb. 2000

Cost: 3,696MM JPY


Phase II (flood

control)

Mar. 1997 – Apr.

2007

Cost: 10,828MM JPY


Irrigation

component

Aug. 1995 –

Aug. 2006

Cost: 5,765MM JPY


Source: JICA website


(1) Caraga Region population

In 2015, the population of the Caraga Region was 2,469,557, up roughly 147,000

residents (7 percent) from the 2010 population of 2,302,412.

(2) Caraga Region per capita GRDP

The Caraga Region is one of the poorest in the Philippines. In 2014, the per capita GRDP

for the Caraga Region was 59,941 PHP, placing it second lowest in Mindanao behind

conflict-stricken ARMM, where development is greatly lagging.

Figure 3-10 GRDP for Mindanao by region (2014)

Administrative Region

Population

(1,000s

ppl)

GRDP

(millions PHP)

Per capita GRDP

(PHP)

Philippines (Country) 99880.3 12,642,736 126,579

Mindanao 23,748 1,874,849 78,948

Region IX Zamboanga Peninsula 3,668 257,060 70,074

Region X Northern Mindanao 4,659 485,705 104,242

Region XI Davao 4,830 519,069 107,479

Region XII SOCCSKSARGEN 4,524 351,357 77,662

Region XIII Caraga 2,591 155,296 59,941

ARMM 3,476 106,362 30,602

Source: Philippines Statistics Authority (PSA)

69

Figure 3-11 Per capita GRDP for Mindanao by region (2014)

Source: PSA

(3) Industrial composition of the Caraga Region

In order of proportion, GRDP in the Caraga Region is highest for agriculture and forestry

(20.6 percent); primary industry as a whole comprises 23.7 percent, including agriculture,

hunting, forestry, and fisheries. Whereas the primary sector comprises 11.3 percent of the

national GDP for the Philippines, these industries comprise double the national average

for primary sector industries in Caraga.

Figure 3-12 Breakdown of 2014 Caraga GRDP by industry

Sector Item Production

(1,000s PHP) Percentage

Primary sector (agriculture,

hunting, forestry, and

fishing)

Agriculture and forestry 31,931,859 20.6%

Fishing 4,875,675 3.1%

Secondary sector (heavy

industry)

Mining and quarrying 21,958,338 14.1%

Manufacturing 4,013,888 2.6%

Construction 16,239,692 10.5%

Electricity, gas and water supply 2,282,444 1.5%

Tertiary sector (services) Transport, storage, and

communications 25,511,652 16.4%

Automotive and motorcycle sales

and repair 6,940,380 4.5%

Financial intermediation 7,749,738 5.0%

Real estate, rentals 10,419,511 6.7%

Public service, defense, and needed

social security 8,486,361 5.5%

Other services 14,886,470 9.6%

Total 155,296,007 100.0%

Source: PSA

70

(4) Major Caraga industries

A. Forestry

Caraga is the largest Philippine producer of lumber. In 2014, the region produced

765,725 tons (69 percent) of the total 1,102,365 tons of lumber produced in the country.

Mindanao production was 967,670 tons, or 88 percent of the national total.

Figure 3-13 Philippine lumber production by region (2014)

Source: Forest Management Bureau (FMB)

Logging exports flourished in Caraga in the 1950s, but were outlawed in 1986.

Logging is now strictly regulated; most wood production is performed by afforestation

operations in secondary forests.

Currently, 1,331,491 ha (70 percent) of the 1,913,842 ha in Caraga is classified as

forest area. Furthermore, 939,685 ha (71 percent) of this forest area is managed or

business-operated based on a Timber License Agreement, Integrated Forest

Management Agreement (IFMA), Socialized Forest Management Agreement (SFMA),

Community Based Forest Management Agreement (CBFMA), or other agreement.

71

B. Agriculture

In 2014, Caraga agriculture produced 2,027,066 tons in crops, with the key crops

being coconut, rice, banana, oil palm, and corn.

In order, coconut production is highest in Surigao del Sur, followed by Surigao del

Norte and Agusan del Norte. Rice production is highest in Agusan del Sur.

Figure 3-14 2014 Caraga agricultural production and producing regions by crop

Source: PSA

Figure 3-15 2014 Caraga agricultural production by province

Source: PSA

72

C. Aquaculture

By value, Caraga aquaculture produced 719,867,000 PHP of product. In order of

value, milkfish was the highest, followed by black tiger prawn, and various forms of

algae. In the 1990s, Agusan del Norte farmers intensively cultivated black tiger prawn,

but then slowed their pace when illness spread through the prawn colonies. Currently,

aquafarms are shifting to milkfish, tilapia, and other fish.

Aquaculture production is highest in Surigao del Sur and Agusan del Norte, which

comprise 48 and 40 percent of Caraga sales, respectively.

Figure 3-16 2014 Caraga aquaculture production by type

Source: PSA

Figure 3-17 2014 Caraga aquaculture production by province

Source: PSA

73

D. Heavy industry

Caraga is rich in mining resources, including gold, copper, iron, and nickel. In 2013,

mining production in Caraga earned 29.8 billion PHP. In 2013, the industry paid 1.8

billion PHP in mining usage fees and excise taxes, and directly employed just over

20,000 workers. Of note here, the Taganito HPAL Nickel Corporation, operating in

Surigao del Norte, is run by Sumitomo Metal Mining Philippine Holdings Corporation.

Figure 3-18 Mining in Caraga

2012 2013 YoY Change (%)

Shipments 608 618 1.64

Value (millions PHP) 33,150 29,840 -9.98

Mine usage fees (millions PHP) 1,350 1,200 -11.11

Excise tax (millions PHP) 663.04 596.88 -9.98

Direct employment 18,828 20,363 8.15

Source: Department of Trade and Industry (DTI)

E. Wood processing

While Caraga accounts for 69 percent of overall Philippine lumber production, the

region only manufacture 28 percent of processed wood products nationally. Meanwhile,

neighboring regions Northern Mindanao and Davao manufacture nearly equivalent

shares of processed wood products as Caraga at 30 and 27 percent, respectively,

despite their low shares of lumber production at 7 and 4 percent, respectively.

74

Figure 3-19 Philippine processed woodworking production by region (2014)

Source: FMB

NOTE: Total of lumber, plywood, and cosmetic woodworks


(1) Logistical infrastructure development projects to support regional development (1):

Coastal road

DPWH is planning a coastal road connecting Taguibo Industrial Park, which is developed

in Butuan with support from Japanese companies, to the logistical centers in Masao Port

and Nasipit Port. DPWH sees developing the 14.15-km Taguibo-Masao Port section

(Section 1-1) as the priority; they plan to construct a new bridge, tentatively named the

“Third Magsaysay Bridge,” about 5 km downstream from Magsaysay Bridge across a more

than 200 m river span. While already underway with expansion work on sections of the

existing road, DPWH is hoping for yen loans for development of the bridge. They feel that

Japanese ODA loans and technical cooperation are needed moving forward.

Development of this road will greatly improve access between the industrial park and

Masao Port. It will shorten travel time when passing through the downtown area, reduce

downtown congestion, and reduce traffic accidents. Further, the road is hoped to help

develop the coastal areas currently used mainly as rice paddies.

75

■ Overview of Taguibo Industrial Park

The development site for Taguibo Industrial Park lies in a key point of convergence for the

national highways connecting Davao City, Cagayan de Oro, and Surigao City. The area is

designated as an industrial zone in Butuan land-use plans. Approximately 60 percent of the

planned 141 ha is already acquired. A rice milling plant has already been built in one corner

of the park development site and started operations.

■ Industrial Park Features

Taguibo is planned as a base for processing the wealth of agricultural and marine

products in Caraga. It is meant to drive economic development by adding value to

competitive primary sector products. Taguibo will receive incentives with PEZA

designation as an Agro-Industrial Economic Zone and should provide quality utilities

and services which help to draw in Japanese companies. Taguibo is planned as a low-

carbon industrial park using locally-produced energy. It will utilize small hydropower,

biomass, solar, wind, and other renewable energies, as well as receive a park-wide system

for curtailing power consumption.

■ Tenant companies (planned)

Taguibo tenant companies are expected to be mainly Japanese companies from the

following industries: processing and packaging for primary products (lumber,

agriproducts, marine products, etc.), drinking water bottling (mineral water, etc.),

agricultural equipment and material manufacturing (agricultural machinery, parts,

packing materials, etc.), and logistics.

■ Business scheme

Investors Equi-Parco Construction Company (Equi-Parco), Twin Peak Hydro Resources

Corporation (Twin Peak), and the Chodai Group signed a memorandum to jointly

develop Taguibo Industrial Park. The consortium plans to establish a special purpose

company (SPC) for park development and management by April 2017 and is discussing

use of overseas investment loans from Japanese government financial institutions.

■ Local mayoral intentions, etc.

Former COO of Equi-Parco and Butuan Mayor Ronnie Lagnada is a key figure in driving local

development through PPPs. He is actively involved in a model promoting local development

through PPP based on Taguibo Industrial Park. The model in the Butuan development plan

envisions the industrial park connected by industrial roads to Masao Port, expanded to be the

international port, and Nasipit Port, acting as the domestic logistics base. As the former COO of

a construction company, Mayor Lagnada has long worked with Japanese construction

companies on Japanese ODA projects and actively incorporates Japanese products,

technology, and management from the perspective of a low cost country.

76

Figure 3-20 Butuan City Development Plan (2017-2022)

Source: Butuan City

(2) Logistical infrastructure development projects to support regional development (2):

Port expansions (Masao Port and Nasipit Port)

In response to increased freight demand, the Philippine Port Authority (PPA) is

discussing using ODA loans for future port development, with expansion of Masao Port

positioned as a key in the development. Of the short-term expansion plans in Masao Port,

2,800 m2 of land has already been reclaimed for the yard, and the wharf is currently being

expanded by an additional 51 m. In the future, a breakwater is also scheduled for

construction. Subsequently, medium-term plans have approximately 4.0 ha of landfill for

the yard and 724 m for new berths.

77

Figure 3-21 Masao Port expansion plan

Source: Master plan (PPA)

Figure 3-22 Current state of Masao Port expansion plan area


F U T U R E E X P A N S I O N

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Legend

Existing port facilities

Short-term development plan

Medium-term development plan

Long-term development plan

Land

78

Meanwhile, long-term plans for Nasipit Port are to reclaim the south end of the inlet.

Figure 3-23 Master plan for development of Nasipit Port

Source: PPA

Figure 3-24 Current state of Nasipit Port


79

Given Nasipit Port’s position on an inlet, the PPA deems large-scale expansion

unrealistic. Thus, in order to meet future increases in freight demand, they will focus

development on the Port of Masao and are considering use of ODA loans for the

development. Still, neither of the current plans for either port accounted for

development of an industrial park. A port expansion project is needed, including

revision of these plans.

80

3.2 Major planned and implemented projects in Mindanao

To date, development of Mindanao infrastructure has lagged behind that in other Philippine

regions. However, development in Mindanao has received assistance from agencies

including JICA, ADB, and USAID.

According to Minda, the main projects conducted in Mindanao by each donor to date, are

given in the following figure.

Figure 3-25 Major Projects in Mindanao

Source: MinDA

Further, MinDA has shared the projects in the following figure as being the projects of

highest priority and prpopsed PPP projects.

81

Figure 3-26 Major Pripority Projects in Mindanao

Source: MinDA

Figure 3-27 Proposed PPP Projects in Mindanao

Source: MinDA

82

3.3 List of Priority Projects

3.3.1 Basic Approach

To date, Mindanao has lagged behind Luzon and Visayas in terms of investment, making

it one of the Philippines’ poorer areas; statistically speaking, Mindanao’s per capita GRDP

averages just 60 percent of the national per capita GDP. In particular, Caraga in eastern

Mindanao and the Autonomous Region in Muslim Mindanao (ARMM) in the west are some

of the poorest regions in the Philippines, with per capita GRDPs of approximately 47 percent

and 24 percent, respectively. The Mindanao provinces with bigger cities, such as Davao City

and Cagayan de Oro, fair relatively better.

Infrastructural development is the natural vessel for growing industry to create jobs and

building the capacity for sustainable economic growth across the region. Overconcentration

of people, goods, and money in areas such as Manila or Cebu only widens their gap with

surrounding regions and overpopulates the cities, which could potentially hinder balanced

nationwide growth. Thus, it is important for the Philippine government to actively invest in the

Mindanao region to correct its developmental lag. There could be great significance in the

Japanese government assisting the Philippines in this endeavor.

“Peace and development in Mindanao” is listed as a point of priority in the Japanese

government’s announced assistance policy for the Philippines for 2017. Mindanao needs

infrastructural development that drives demand and harnesses regional strengths, not the

demand-driven, overcentralizing development of the past. We should clarify what form this

infrastructure should take and prioritize projects based on this.

3.3.2 Development Strategy

As illustrated to this point, upon both broad and close examination of the current state of

infrastructure and local needs, a possible strategy for development is outlined below.

First up is strategically building a logistical network in anticipation of local industry

development. It is important to shed the demand-driven, incremental development mindset

of the past and strive for proactive development, with a top-level plan modeling the form

development should take. From there, development will ideally proceed in sequence, starting

with core infrastructure strategically developed according to a region-wide Mindanao

development strategy.

In terms of road infrastructure, roads must be made more functional for travel and transport,

first by developing new roads and expanding old ones between and within the major cities,

as well as access roads connecting inland industrial bases to trunk roads. In concrete terms,

roads could be developed along the following stages:

83

・Stage 1: Develop a high-standard road network connecting the major cities

・Stage 2: Regional development to appropriately disperse traffic demand within major

cities

・Stage 3: Enhance access from inland industry bases to trunk roads, i.e. farm to market

roads

With the roads developed, enhancing the function and capacity for ports with potential for

further development, such as Cagayan de Oro Port, Masao Port in Butuan, and Nasipit Port,

will help to streamline and stimulate land transport both on the island and beyond.

Meanwhile, in the long term, demand may surface for development of rail networks on the

island. Serving this demand may have merit in terms of transporting people and goods more

efficiently, but in the short term, expanding the road network should be prioritized to fulfill the

the urgent needs for basic infrastructure for industrial growth. Also, note that railway

development will require comprehensive planning to clearly delineate the roles of roads and

rail in order to prevent overlapping investments in roads and railways.

The second proposed development strategy is to ease traffic congestion in the cities.

Traffic has progressively worsened in Davao City and Cagayan de Oro and is hindering

economic development. These cities require traffic systems designed to mitigate this

obstacle: they must strike a balance between roads and public transportation in order to

appropriately control urban traffic demands.

With the exception of Davao City, no other cities in Mindanao have a population greater

than one million. Furthermore, many of these cities have limited lands flat enough for

residential development, making for compact downtown areas. Thus, no massive

infrastructural investments are needed for mass transit such as MRT or monorails; an

efficiently-operated bus system should suffice to improve public transportation and

consequently ease traffic congestion.

It is important, however, that bus service be optimized; the bus system should not merely

expand upon the current Jeepney system, in which the individual drivers drive for profit.

Rather, a public or private company should be established to manage service routes and

schedules in orderly fashion. Preferably, these buses should also be clean and safe so that

all will want to use them. These changes will help cities pivot from transportation systems

dependent on private vehicles to ones built upon use of public transportation.

Another alternative for making service more systematic and efficient could be to unionize

the owners and drivers of the Jeepneys and establish a centralized fare collection system

with electronic fare payments.

The third proposal for development strategy is to encourage private investment. Given the

budgetary limitations of the Philippine government and local governments of Mindanao in

making public investments, private investment is needed for the Mindanao economy to grow.

84

To spur this private investment along, the national and local governments must take various

measures to encourage companies both domestic and foreign to actively invest. For public

infrastructure in particular, the Philippine government must include PPPs in its approach now

more than ever.

In targeting Japanese companies, there are two possible approaches to enticing them to

invest in and expand exports to the Philippines: 1) Involve them in infrastructural projects

directly, and/or 2) use infrastructure to help them expand their business in the Philippines.

Possible strategies for 1) are to request infrastructure of specifications advanced enough to

warrant outside help, or to promote assistance focused on infrastructure projects requiring

advanced technology. For 2), it is extremely important to work with strategically-selected

partners to develop basic infrastructure for power, water, transport, and beyond in strategic

areas.

With this in mind, the following will be the strategic policy for assisting development of

transportation infrastructure.

3.3.3 List of Priority Projects

(1) Mindanao

In specific terms, ideally, projects should proceed in the order recommended in top-level

plans, such as the Davao City Infrastructure Development Plan and Capacity Building

Project (JICA) or the Master Plan on High Standard Highway Network Development in the

Republic of the Philippines (JICA). Listed below are the transport sector projects

considered to be important at present time.

A. Roads

As mentioned above, roads must be made more functional for travel and transport by

developing new roads and expanding old roads between and within the major cities, as

well as access roads connecting inland industrial bases to trunk roads. The following are

possible projects with high priority.

・Develop a high standard highway network connecting Cagayan de Oro, Davao City, and

General Santos City to act as the backbone of the Mindanao Region

・Enhance the intercity network based on the top-level plans for the Asian Highway

network and the ASEAN maritime economic corridor concept: Enhance Route AH26 into

a high standard highway (main route connecting Surigao, Ampayon, Davao City,

General Santos City, Cotabato, and Zamboanga; secondary route between Davao City

and Cagayan de Oro)

85

・Improve and enhance the northern Mindanao corridor (Butuan, Cagayan de Oro, Iligan,

Ozamiz, and Dipolog)

・Assist in developing logistical roads for Mindanao (Butuan to Malaybalay)

・Develop downtown road networks in the major cities to diffuse traffic demands (Davao

City bypass, Cagayan de Oro bypass, GenSan Circumferential Road, Butuan logistic

road)

B. Ports and harbors

In the interest of improving logistical functionality (particularly for exports from Mindanao),

the existing ports should be expanded to extract their latent potential. Looking across the

region, there are major ports in Davao City, Cagayan de Oro, GenSan, and Butuan, among

others. The ports to the north are of particular interest in terms of development potential

and needs. The following are possible projects with high priority:

・Expand the Mindanao Container Terminal in Cagayan de Oro

・Extract potential from developing Masao Port in Butuan and Nasipit Port

So that freight being transported between cities does not get routed through downtown

traffic, it is also important to build bypass roads that improve access between the trunk roads

and hub ports.

C. Urban transportation

The public transportation network can cover the majority of passenger demand downtown

by doing the following: 1) introducing a public transportation system organized to cover urban

travel demands, and 2) promoting development of the infrastructure to support that system

in the form of bus stops, bus only lanes, and bus priority lanes. These changes can be

expected to mitigate downtown congestion and shorten travel times.

Additionally, all traffic signals downtown—even those on national highways—are managed

by city traffic authorities, not DPWH. Individual signals operate on independent systems and

are not networked for efficient citywide control. Introducing the Japanese traffic control

system and assisting city staff to build their capacity would likely be beneficial in dealing with

the ever-increasing traffic demands.

D. Railways

Over the long term, there is merit to discussing development of a Mindanao rail network in

the interest of promoting island-wide growth (efficient transit of people and goods). The

concept of railway development must be kept in mind when developing roads, ports, and

86

other infrastructure. Still, rail network plans have yet to be clearly settled as the matter is still

under discussion by the Philippine government. It would be best to perform a study to confirm

the basic details necessary for the discussion, such as current logistics figures, commodity

analysis, potential, and the development concept and plan.

(2) Summary of priority projects

The list given below shows the priority projects in the transpor sector by city in this study.

Figure 3-28 Potential projects for bilateral cooperation (transport sector)


Next, the projects listed above are mapped out in the following map.

87

Figure 3-29 Potential projects for bilateral cooperation (transport sector): Project locations


88

Chapter 4 Basic Information, Status, and Issues for the Power Sector in the Philippines and Mindanao

4.1 Current Status and Issues for the Power Sector

4.1.1 The Philippines

4.1.1.1 Overview of the National Power Sector

(1) Features of the Philippine power sector

The Electric Power Industry Reform Act of 2001 (EPIRA) was enacted in 2001 to promote

the privatization of power producers in the Philippines.

As part of EPIRA, roughly 91 percent of the power plants formerly owned by the National

Power Corporation (NPC) were privatized at the end of 2012. Also, the NPC has sold

independent power producers (IPPs) the rights to purchase and sell its power to the public

through power purchasing agreements (PPAs).

As a result of this line of reforms, power is generated by private power producers,

distributed by private distribution utilities (DUs), and supplied by not-for-profit electric

cooperatives (ECs). Meanwhile, due to a concessionary agreement with the Philippine

government, transmission is exclusively the purview of the National Grid Corporation of the

Philippines (NGCP). Finally, The Energy Regulatory Commission (ERC) licenses the power

vendors and approves all fees.

(2) Power demand

Recently, both power consumption and generation in the Philippines continue to trend

upward. By sector, power consumption has increased roughly 30 percent in the past 10 years,

with increases for residential, commercial, and industrial use. With the economy continuing

to grow at nearly 6 percent annually, power demand growth is also high.

Meanwhile, the Philippines generated a total of 77,261 GWh nationally in 2014, an

increase of approximately 40 percent over the past 10 years.

89

Figure 4-1 Philippine power consumption by sector

Source: Prepared by the Study Team based on DOE data

Figure 4-2 Total Philippine power generation (2002-2014)

Source: DOE

In terms of where power is sourced, coal fuels 43 percent of power plants, followed by

natural gas at 25 percent. Nationally, many Philippine plants are aging. The Luzon and

Visayas systems are particularly prone to power outages from failures in generation facilities

and other causes. In Mindanao, the demand situation has improved recently, but power

supply still needs enhancement for the island as a whole. Power self-sufficiency rates may

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

2002年2003年2004年2005年2006年2007年2008年2009年2010年2011年2012年2013年2014年

GW

h

Biomass Solar Wind Hydro

Geothermal Natural Gas Oil-based Coal

90

also decrease in the future; if domestic natural gas production is depleted, the weight will

increase for imported coal used for coal power.

Figure 4-3 Power source weights for the Philippines (2014)

Source: DOE

4.1.1.2 Rural Electrification

At the smallest administrative unit level, the Barangay, nearly 100 percent of the Philippines

has access to electricity. On an individual consumer level, however, there is still room for

improvement; power has not yet reached some small villages and households removed from

the barangay centers.

Consumer-level electrification rates are particularly low in Mindanao: only 71 percent of

Mindanao consumers had power as of 2014, compared to 92 percent in Luzon and 91

percent in Visayas.

Figure 4-4 Philippines electrification rates (2014)

Region

Barangays Connections

Potential

Energized/ Completed % Potential

Energized/ Completed %

To date To date

Total Philippines 36,063 36,053 99% 13,081,400 11,174,080 85%

Luzon 15,516 15,513 99% 5,909,500 5,440,235 92%

Visayas 10,956 10,955 99% 3,242,400 2,939,400 91%

Mindanao 9,591 9,585 99% 3,929,500 2,794,445 71%

Source: National Electrification Administration (NEA)

Coal

43%

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based

8%

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al Gas

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Geoth

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Hydro

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Wind

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Solar

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ss

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91

4.1.1.3 Power Rates

Power rates in the Philippines are extremely high by international standards. While direct

comparison is difficult given how rates are subsidized in many cases, the power rates in

Manila and Cebu are exhorbitantly high compared to other Asian countries, including Japan.

Figure 4-5 International comparison of power rates (indexed)

Source: Prepared by the Study Team based on JETRO data

* Relative to the value of the Philippines in 2015 as 1.

Power generation costs are the component with the highest weight in Philippine power

rates. According to the annual report for Meralco, which supplies power mainly to Metro

Manila, generation costs in 2015 accounted for 54 percent of power rates. Something must

be done about this generation component in order to abate the Philippines’ internationally

high power rates.

Index(Price/GDP per Capita PPP)

As of 2015

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92

Figure 4-6 Average rates for Meralco (PHP/kWh)

Rate component 2011 2012 2013 2014 2015 （Percent）

Generation 5.12 5.61 5.39 5.34 4.49 54％

Transmission 1.06 0.98 0.86 0.92 0.87 11％

Distribution 1.59 1.56 1.66 1.61 1.49 18％

System Loss 0.52 0.52 0.46 0.44 0.37 4％

Taxes/Subsidies/Universal Charge

0.85 0.97 1.08 1.11 1.00 12％

FIT-Allowance －－－－ 0.04 0％

Total 9.14 9.46 9.45 9.42 8.26 －

Source: Meralco

Incidentally, generation costs for 2015 dropped 16 percent from the previous year.

According to Meralco, this reflects the lower fuel costs and lower wholesale prices on the

WESM. Finally, the “FIT – Allowance” portion is collected from power consumers under ERC

direction to cover introduction of renewable energies with the FIT program as introduced by

the Philippine government. The Philippine government introduced the FIT program in 2012,

but the collection of the allowance portion began in 2015. This portion would inclease further

in the future, as the amount of renueable energies incleases.

In order to reduce power generation cost, Inproving power generation efficiency would be

important.

Figure 4-7 Difference in power generation efficiency between coal-fired power plants in

Japan and the Philippines

Source: METI

93

4.1.1.4 Disaster Resiliency

Similar to Japan, the Philippines is one of the disaster-prone countries and reducing

disaster risk is important in power sector too.

Figure 4-8 World Risk Report (2016): Inadequate Infrastructure Pushes Up the Risk of

Disaster

Source: United Nations University

4.1.2 Mindanao

4.1.2.1 Overview of the Power Sector in Mindanao

Power demand in Mindanao is increasing as the local economy awakes. Power

consumption has increased by approximately 40 percent in the past 10 years.

Total power generation for 2014 was 9,481 GWh, a 33 percent 10-year increase. In terms

of recent trends, the demand-supply balance is improving as new coal-fired plants continue

to be built since 2016.

94

Figure 4-9 Mindanao power consumption by sector


Figure 4-10 Philippine power generation by region


95

Figure 4-11 Total Mindanao power generation (2002-2014)

Source: DOE

In 2015, 44 percent of power was generated by hydropower, followed by diesel power at

32 percent. As Mindanao residents depend on hydropower as their main power source, many

power plants on the island have historically been located in the north, where water resources

are plentiful. In contrast, roughly half of Mindanao’s overall demand is concentrated in the

Davao area in the southeast, meaning that power generated in the north must be transmitted

south. Further, hydropower is susceptible to fluctuations in water resources, making it weak

in droughts and similar situations.

Also, note that with the many coal-fired power plants going online in 2016 and beyond, the

energy mix is projected to change greatly. As shown in the figure below, coal will comprise

56 percent of power in 2017.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2002年 2003年 2004年 2005年 2006年 2007年 2008年 2009年 2010年 2011年 2012年 2013年 2014年

GW

h

Biomass Solar Hydro Geothermal Oil-based Coal

96

Figure 4-12 Mindanao power generation weights by source (2015 and 2017)

Source: MinDA

4.1.2.2 Current Status of Study Regions

(1) Davao Region

The Davao Region has four active diesel power plants and two active hydropower plants

generating a cumulative total of 252.8 MW. By energy source, diesel generates 205.7 MW,

and hydropower generates 47.1 MW. Further, three power plants owned by the NPC Small

Power Utilities Group (NPC-SPUG) supply power to off-grid areas. The NPC-SPUG plants,

located in Davao del Norte and Davao del Sur, generate a total of 1.34 MW.

Davao’s ECs and power utilities are as given below.

Electric cooperatives:

• Davao Oriental Electric Cooperative (DORECO)

• Davao del Norte Electric Cooperative (DANECO)

• Davao del Sur Electric Cooperative (DASURECO)

Power utilities:

• Davao Light Power Company, Inc. (DLPC)

(2) Caraga Region

The Caraga Region has no power plants; it depends entirely upon power generated

97

elsewhere in Mindanao for its electricity. Each Caraga province has its own EC. Each

province’s EC purchases power for distribution to the region from Mindanao IPPs through

the power grid, owned by the National Grid Corporation of the Philippines (NGCP).

Caraga’s ECs and power utilities are as given below.


• Surigao del Norte Electric Cooperative

• Surigao del Sur Electric Cooperative

• Agusan del Norte Electric Cooperative

• Agusan del Sur Electric Cooperative

(3) Northern Mindanao Region

Active power plants in Northern Mindanao are as follows: eight hydropower plants,

including micro hydro power; five diesel power plants; one coal-fired plant; one biomass

plant; one solar power array. These power plants generate a combined total of 1,172 MW.

By energy source, hydropower generates 739.9 MW, coal generates 232 MW, diesel

generates 163.2 MW, biomass generates 35.9 MW, and solar generates 1 MW. Northern

Mindanao generates 63 percent of Mindanao’s total hydropower generation, including micro

hydro, and is greatly dependent upon hydropower.

Northern Mindanao’s ECs and power utilities are as given below.


• Misamis Occidental I Electric Cooperative (MOELCI I)

• Misamis Occidental II Electric Cooperative (MOELCI II)

• Misamis Oriental I Electric Cooperative (MORESCO I)

• Misamis Oriental II Electric Cooperative (MORESCO II)

• First Bukidonon Electric Cooperative (FIBECO)

• Bukidnon II Electric Cooperative (BUSECO)

• Camiguin Electric Cooperative (CAMELCO)

• Lanao del Norte Electric Cooperative (LANECO)

Power utilities:

• Cagayan Electric Power and Light Company, Inc. (CEPALCO)

• Iligan Light and Power, Inc. (ILPI)

(4) Soccsksargen Region

The Soccsksargen Region has three active diesel power plants and one active geothermal

plant generating a cumulative total of 189.5 MW. By energy source, diesel generates 81 MW,

98

and geothermal generates 108.5 MW.

Soccsksargen’s ECs and power utilities are as given below.


• Cotabato Electric Cooperative (COTELCO)

• South Cotabato Electric Cooperative I (SOCOTECO I)

• South Cotabato Electric Cooperative II (SOCOTECO II)

• Sultan Kudarat Electric Cooperative (SUKELCO)

Power utilities:

• Cotabato light and Power, Inc. (COLIGHT)

4.1.2.3 Location of Mindanao Power Plants by Power Source

(1) Hydropower

According to the DOE, as of the end of 2016, Mindanao has 14 active hydropower plants,

the majority of which are concentrated in Northern Mindanao. Davao, whose power demand

is highest, has only three hydropower plants: TUDAYA 1 (6.6 MW) and 2 (7 MW), SHIBULAN

HEP (42.6 MW), and TALOMO HEP (4.5 MW).

A location map of existing hydropower plants is given below.

99

Figure 4-13 Location map of existing hydropower plants


(2) Coal-fired power

All of the coal-fired plants in Mindanao are recent additions; only five were active as of the

end of 2016. The existing plants are: Villanueva, Misamis Oriental (since 2006; 232 MW);

Santa Cruz, Davao del Sur (since 2015; 300 MW); Malita, Davao Oriental (since 2016; 150

MW); Maasim, Sarangani (since 2016; 118 MW).

A location map of existing coal-fired plants is given below.

100

Figure 4-14 Location map of existing coal-fired plants and future scheduled projects


(3) Geothermal

The only active geothermal power plant in Mindanao is the Mount Apo geothermal power

plant in Davao del Sur. According to the DOE, there are a 108.48 MW geothermal plant in

development in Cotobato del Norte and seven geothermal plants in the pre-development

stages.

A location map of existing geothermal plants and plants in the pre-development and

development stages is given below.

Plant Name：Mindanao Coal U1&U2

Location ：Villaueva, Misamis Oriental

Capacity ：232MW

Plant Name：Therma South U1&U2

Location ：Santa Cruz, Davao Del Sur

Capacity ：300MW

Plant Name：SEC

Location ：Maasim, Saragani

Capacity ：118MW

Plant Name ：FDC MISAMIC U1&U2


Capacity ：270MW

Plant Name：SMC Malita U1

Location ：Malita, Davao Occidental

Capacity ：150MW

Operating

Future scheduled project

Plant Name：Balingasag Thermal CFBC

Coal-Fired Power Plant

Location ：Balingasag, Misamis Oriental

Capacity ：165MW

Plant Name：GNPower Kauswagan

Clean Coal-Fired Power Plant

Location ：Kauswagan, Lanao del Norte

Capacity ：540MW

Plant Name：Southern Mindanao Coal

Fired Power Station Unit2

Location ：Maasim, Saragani

Capacity ：100MW

Plant Name ：SMC Malita U2

Location ：Malita, Davao Occidental

Capacity ：150MW

Plant Name： FDC MISAMIC U3


Capacity ： 135MW

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Figure 4-15 Location map of existing geothermal plants and plants in pre-development or

development


4.1.2.4 Future Scheduled Projects in Mindanao

The future scheduled projects in Mindanao will generate a combined capacity of 1,687.9

MW. By energy source, 1,510 MW of this capacity will be coal-fired, 29.54 MW will be diesel-

fired, 134.2 MW will be hydropower, and 14.2 MW will be biomass.

The future projects scheduled in Mindanao are listed in the following chart.

Mt. Apo geothermal power plant

Capacity：103.2MWe

North Cotabato geothermal

power plant

Capacity：108.48MWe

Mainit, Surigao del Norte

（30MW)

Operating

Development stage

Pre-development stage

Balingasag, Misamis Oriental

（20MW)

Ampiro, Misamis Occidental

（30MW)

Lakewood, Zamboanga del Sur

（40MW)

Mt.Shibulan-Kapatagan,

Davao del Sur

Mt. Talomo-Tico, North

Cotabato

Mt. Zion, North Cotabato

（20MW）

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Figure 4-16 List of future scheduled projects

Name of the Project Location Rated

Capacity (MW)

Target Commercial Operation

Coal

FDC-Misamis CFB Coal-Fired Power Plant Project

Villanueva, Misamis Oriental 405 Nov-Dec 2016

SMC Davao Power Plant Project Phase I, Unit 1

Malita, Davao del Sur 150 Nov 2016

SMC Davao Power Plant Project Phase I, Unit 2

Malita, Davao del Sur 150 Dec 2016

Balingasag Thermal CFBC Coal-Fired Power Plant

Balingasag, Misamis Oriental 165 Jan-May 2017

GNPower Kauswagan Clean Coal-Fired Power Plant

Kauswagan, Lanao del Norte 540 Mar 2018

Southern Mindanao Coal Fired Power Station Unit 2

Maasim, Sarangani 100 2018

Oil-based

Peakpower Soccsargen, Inc. Bunker Fired Power Plant

General Santos City, South Cotabato

13.94 Dec 2016

Peakpower San Francisco, Inc. Bunker Fired Power Plant

San Francisco, Agusan del Sur 5.2 Mar 2017

Peakpower Budiknon, Inc. Bunker Fired Power Plant

Manolo Fortich, Bukidnon 10.4 Jun 2017

Hydro

New Bataan New Bataan, Compostela Valley

2.4 Jan 2017

Manolo Fortich 1 Santiago, Bukidnon 43.40 Jun 2017

Manolo Fortich 2 Santiago, Bukidnon 25.40 Jun 2017

Lake Mainit Jabonga, Agusan del Norte 25 Dec 2017

Puyo Hydoelectric Power Project Jabonga, Agusan del Norte 30 Jul 2018

Asiga HEPP Santiago, Agusan del Norte 8 Aug 2019

Biomass

PTCI Rice Husk-Fired Biomass Cogeneration Facility

Maguindanao 1.6 Nov 2016

GEEC Biomass Cogeneration System Maguindanao 2.6 Nov 2016

LPC Rice Husk-Fired Biomass Power Plant Project

Maguindanao 10 Nov 2016

Total 1687.9

Source: MinDA

4.1.2.5 Rural Electrification

As in Luzon and Visayas, nearly all Mindanao bangarays have electricity. As illustrated by

the following chart, however, electricity has not yet permeated to the more remote parts of

the bangarays. With policy stressing improvement of local economic disparities in Mindanao,

electrifying these pockets is also important. Electrification rates are particularly low in ARMM;

only 36 percent of ARMM households had electricity as of 2014.

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Figure 4-17 Mindanao electrification rates (2014)

Region

Barangays Connections

Potential

Energized/ Completed % Potential

Energized/ Completed %

To date To date

Total Mindanao 9,591 9,585 99% 3,929,500 2,794,445 71%

Region IX 1,865 1,865 100% 654,000 463,960 71%

Region X 1,843 1,843 100% 750,700 625,762 83%

Region XI 896 896 100% 555,600 425,380 77%

Region XII 1,230 1,230 100% 892,000 558,142 63%

ARMM 2,447 2,441 99% 483,600 171,904 36%

CARAGA 1,310 1,310 100% 593,600 549,297 93%

Source: NEA

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4.2 Future Projects

4.2.1 The Philippines

The Philippine economy has continuously acchived high growth, and the growth rate is

expected to remain around 7% in the future too. Along with this strong economic growth, it is

expected that electricity demand continues to grow at a high rate. In the future

Figure 4-18 Philippine GDP Growth (2016-2030)

Source: IMF

Figure 4-19 GDP and Eectric power consumption (2016-2030)

Source: World Bank

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According to DOE forecasts for power supply and demand, by 2030, the Philippines as a

nation must double its 2016 generation capacity to reach 35,000 MW. With the Philippines

basically dependent on the investment decisions of private providers regarding power plants,

all eyes are on whether enough will be invested moving forward.

Figure 4-20 Power supply and demand forecasts for the Philippines (2016-2030)

(Units: MW)

Source: DOE

As of the end of 2016, private investment commitments for power generation projects fell

well short of what is required. Investments are particularly lower than expected for mid-merit

projects, which include natural gas-fired power plants.

Figure 4-21 Required power supply capacity for the Philippines

2017 2030

Existing Committed Capacity Addition

Existing Committed Capacity Addition

Baseload 11,277 1,383 0 11,277 3,091 8,388

Mid-Merit 0 876 150 0 876 7800

Peaking 2,600 66 2,500 2,600 111 1,150

Source: DOE

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4.2.2 Mindanao

With coal-fired plants going online one after another in the second half of 2016 and first

half of 2017, the power supply and demand balance in Mindanao is forecasted to improve.

Even if the baseload is improved, however, Mindanao will need additional power plant

investments over the medium and long terms. By 2030, Mindanao will need investments for

3,650 MW in total: 2,100 MW of baseload power, 1,500 MW of midmerit power, and 50 MW

of peaking power.

Figure 4-22 Power supply and demand forecasts for Mindanao (2016-2030)

Source: MinDA

Figure 4-23 Required power supply capacity by grid

Units: MW

Luzon Visayas Mindanao Total

Baseload 4,320 1,968 2,100 8,388

Mid-merit 4,800 1,500 1,500 7,800

Peaking 950 150 50 1,150

Grid totals 10,070 3,618 3,650 17,338

Source: DOE

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4.3 Power Sector Infrastructural Needs in the Philippines and Mindanao

4.3.1 Power Sector Needs in the Philippines and Mindanao

In order to keep its economic growth stable and sustainable, the Philippines will need to

create jobs and attract investment in manufacturing and other industry from both domestic

and overseas sources. Stable, low-cost provision of infrastructure is critical to this goal. For

power, this means maintaining a stable supply of power and reducing electricity rates.

Looking at the power sector nationally, the baseload supply-to-demand ratio is improving

for the Mindanao grid but continues to slump for the Luzon grid, where demand is greatest.

Further, the electricity rates of Meralco, the power provider for Metro Manila, are high by

international standards at around 10 PHP/kWh.

All investment decisions on power generation assets are basically left in the hands of

private providers, however; all the central players in the Philippine power sector are private

enterprises, with public contributions limited to roles such as licensing and approval for

electricity rates. Thus, chances are that the ideals will not be met in terms of longer-term

power demands, energy self-sufficiency, electrification, power efficiency, environmental

considerations, and other such factors if left up to the market, e.g. private investor decision.

Some have voiced concerns that, if left up to the market, coal-fired plants relying on imported

coal could come to dominate 80 percent of future power, or no one will pony up the large-

scale capital required for investments in efficient, large-scale plants.

The following local needs were voiced in the local hearings conducted for this study:

Meeting increasing demands

Investment will be needed for power plants with sufficient capacity to meet the growing

power demands in the future. Further, peak, mid-merit, and baseload power will also

need to be rebalanced and expanded, and the existing and aging plants require

overhauling.

Rural electrification

Energy needs to be spread through rural electrification. This will require stronger ECs

and an enhanced distribution grid.

Ensuring energy safety

With natural gas reserves expected to deplete, there are concerns over how to ensure

energy security as the country becomes increasingly dependent upon imported coal for

its power.

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The risks of climate change

With the weight for coal-fired power expected to increase, the risks of climate change

are noteworthy.

Note here that the DOE has given the following nine items as its outline of the direction it

wishes to take as its energy strategy for 2016-2030, including ensuring energy security,

expanding energy access, and promoting a low carbon future. The Philippine government is

thus focusing on how to align the orientations of the market and national policy.

A) Ensure energy security

B) Expand energy access to ensure affordable, reliable, sustainable and modern energy

for all

C) Promote a low carbon future

D) Encourage investment in infrastructure and facilities

E) Pursue development and implementation of local energy plans in support of regional

economic development plans

F) Implement and monitor sectoral roadmaps and action plans

G) Advocate the passage of the department’s legislatie agenda

H) Strengthen consumer welfare and protection through multi-sectoral murtimedia IEC

programs

I) Foster stronger international relations and partnerships

Next, the following chart expounds upon the details of each of the above nine items.

Figure 4-24 Strategic Directions

Strategy Contents

Ensure Energy Security

・ Improve reliability, availability and resiliency of energy infrastructure and facilities Connect the Mindanao grid with the interconnected

Visayas and Luzon Grids

・ Promote indigenous energy development and utilization

・ Promote technology innovation through research, development, demonstration and deployment Clean, efficient and smart technologies

・ Climate proof energy infrastructures and facilities Practice climate change adaptation and disaster

readiness/ preparedness

Expand Energy Access to Ensure Affordable, reliable, sustainable and modern energy for all

・ Update and implement the Power Development Plan and its component plans

・ Achieve 100 percent electrification of targeted households in all the three major islands

・ Accelerate total privatization of PSALM assets

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Strategy Contents

Promote a low carbon future

・ Review fuel mix policy

・ Increase RE Capacity by 2030 (based on 2010 level)

Encourage investment in infrastructure and facilities

・ Plan and build an appropriate portfolio of installed and dependable power capacities for baseload, mid-merit and peaking requirements

・ Build a “common carrier” LNG receiving and distribution infrastructure anchored at a future “Clean Energy City”

Pursue development and implementation of local energy plans in support of regional economic development plans

・ Formulate/ update Philippine Energy Plan and Regional Energy Plans Mindanao Energy plan Visayas Energy Plan Mindoro Island Power Development Plan Palawan Island Power Development Plan

Implement and monitor sectoral roadmaps and action plans

・ Alternative fuels

・ Energy efficiengy and conservation

・ Resource development (oil, gas and coal)

・ Renewable energy

・ Downstream oil, gas and coal

・ Power and electrification

・ ICT for energy

Advocate the passage of the department’s legislative agenda

・ Energy efficiency and Conservation, Natural Gas, Liquified Petroleum Gas (LPG), Energy projects as projects of national significance, Petroleum Upstream Regulation

・ Review of existing laws such as EPIRA, Downstream Oil Industry, Renewable Energy

Strengthen consumer welfare and protection through multi- sectoral multimedia IEC programs

・ Conduct nationwide IEC campaigns on ways to reduce electricity, fuel consumption and safe hundling and usage of petroleum products

・ Promote energy awareness among public school students through conduct of seminars and field visits

Foster strengthen international relations and partnerships

・ Bilateral and multi-lateral energy cooperation

・ Facilitate free trade agreements on energy trade and services

・ UN’s Sustainable Energy for All (SE4All)

Source: DOE

4.3.2 Roadmap for the Philippine Power Sector

The DOE has created roadmaps for each energy sector based on its aforementioned

energy strategy. In the power sector, the DOE aims to focus on improving the following five

items by 2030:

Full restructuring of the electric power industry

Ensure power supply security

Expand access to electricity

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Install enersy-resilient infrastructure

Achieve power market independence

In order to achieve these targets, the DOE has set an energy sector roadmap, which is

broken into roadmaps for power generation, transmission, distribution, and provision; market

development; and a systematic mechanism for assistance. These roadmaps are shown

below.

(1) Generation

Short-Term (2016 – 2017) Mideum-Term (2018 – 2020) Long-Term (2021 – 2030)

・ Declare Power Projects as Project of National Significance Exemption from Real

Property Tax and Local Taxes

Express grant of business permit and licenses to operate

・ Institute fuel mix policy for power generation

・ Provide the portfolio of required additional baseload, mid-merit and peaking power plants to meet 24/7 electricity demand and reserve requirements in Luzon, Visayas and Mindanao grids

・ Encourage private sector investments in power generation

・ Pursue privatization of NPC/ PSALM power generating facilities

・ Continuing efforts to encourage investments in power generation Continue

developing market-driven policies

Improve transparency in policies and regulations

・ Implement national strategy for efficiency in power generation sector

・ Reduce emission levels of fossil-based power plants

・ Pursue the entry of new and emerging technologies for power generation (e.g. ocean, fuel cells, nuclear, etc)

Source: DOE

(2) Transmission


・ Facilitate timely completion of transmission projects to: Connect new power projects

and enable injection of power generated in the grid

Remove congestions presence in the existing transmission facilities

・ Enhance rules and procedures in the conduct of Transmission System Impact Studies (SIS)

・ Provide guide for investors in power generation siting through enhance and ersponsive Transmission Development Plans (TDP)

・ Study or facilitate interconnection of the three major grids – Luzon, Visayas, and Mindanao (Leyte-

・ Continue implement transmission system upgrades and expansion program

・ Adopt Resiliency Program through regrofitting of existing poles and transmission facilities to withstand 300 kph wind velicity

・ Inclease transmission backbones and alternative transmission corridors

・ Complete Interconnection of the Visayas and Mindanao Grids

・ Develop energy-resilient Transmission System

・ Interconnect relatively larve SPUG areas (e.g. Palawan, Mindoro, Siquijor, etc.) to the main grid

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Mindanao Interconnection Projct) and interconnection in the main grids, emergent Island-grids (e.g. Mindoro)

・ Ensure adequate contracted capacities for reserves

Source: DOE

(3) Distribution

Short-Term (2016 – 2017)

Mideum-Term (2018 – 2020)

Long-Term (2021 – 2030)

・ Facilitate timely implementation of necessary Distribution Facilities (e.g. CAPEX provision)

・ Enhance Distribution Development Plan (DPP) towards operational and institutional efficiency

・ Strengthen regulatory support

・ Facilitate economies of scale in the Distrubution Uilities’ Operation (eg, Joint Actions or demand aggregation and supply auctioning)

・ Provide policy and regulatory support to new and emerging needs of the consumers

・ Increase transparency mechanism in rates and charges

・ Ensure adequate power supply contracts to suerve Captive Market through Competitive Selection Process

・ Enhance power supply contracts to include among others replacement power and penalty provisions

・ Continue implement distribution line upgrades and expansion programs for better services at the least cost to consumers

・ Continuing improvement in operational efficiency and good governance in the operations and management of Distribution Utilities

Source: DOE

(4) Supply


・ Mandatory contestability for 1 MW and up electricity end-users

・ Full open access for 750 kW and above Contestable Customers

・ Conduct Market Studies for Retail Aggregation (750 kW and 500 kW)

・ Increase transparency in the retail supply contracting

・ Start Retail Aggregation

・ Open access for 500 kW and below

・ Implement RCOA in Mindanao

Source: DOE

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(5) Market Development


・ Implement WESM Design rovements / NMMS

・ Appoint Independent Market Operator

・ Continuing privatization of NPC assetsin Luzon/Visayas/Mindanao

・ Policy for Embedded Generators

・ Undertake preparatory activities in the implementation of Mindanao Electricity Market

・ Develop Roadmap for Smart Grid

・ Implementation of Mindanao Electricity Market

・ Researve/ Energy Market Co-optimization

・ Operationalize Renewable Energy Market

・ Continuing privatization of NPC assets in Luzon/Visayas/Mindanao

・ Smart Grid Policy for all Sectors

・ Forwards Market/ Financial Transmission Rights/ Day-ahead market/ Derivatives Market

・ Demand Bidding in the WESM

Source: DOE

(6) Institutional and Support Mechanism


・ Intensify Information, Education and Communication (IEC) campaign

・ Continuing Market Operations Audit and Metering Service Provided Review

・ WESM Rules Review

・ Establishment of DOE Electric Power Database Management System

・ DOE Capacity Building

・ Monitoring of Market Operator Performance

・ Monitoring of compliance to WESM Rules

・ Regular submission

・ Supervise/ assist ECs institutional strengthening program

・ Support to enhance power generation planning through procurement of generation planning software and transmission planning tools

Source: DOE

4.3.3 List of Priority Projects

Upon both broad and close examination, priority projects along the lines of those given in

the following chart should align well with the current state of Philippine power infrastructure,

local needs, and the Philippine strategic directions for the power and energy sectors as

outlined to this point.

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Figure 4-25 Tentative priority projects for the power and energy sectors

Local Needs, Stragetic Direction

Tentative Priority Projects Aligned with Local Needs and Strategic Direction

Ensuring energy security: improving energy self-sufficiency

・ Developing/utilizing domestically-produced energy

・ Introducing LNG, building logistical infrastructure

Ensuring energy security: rebalancing power supply and demand

・ Linking the Mindanao grid to the Luzon and Visayas grids

・ Linking larger islands to the main grid

・ Responding to climate change, introducing disaster adaptation technology

・ Enhancing the power grid and alternate routes

・ Building durable energy transmission systems

Investing in power sources for efficiency

・ Introducing smart technology

・ Introducing new technology (marine current power, fuel cells, nuclear power, etc.)

・ Overhauling existing plants

・ Introducing facilities to improve distribution system losses

・ Upgrading power generation operations

・ Upgrading the power grid

Expanding energy access

・ Promoting rural electrification

Promoting a low carbon future

・ Introducing renewable energies

・ Introducing clean coal-firing plants


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Chapter 5 Using Japanese Technology to Solve Issues with Philippine and Mindanao Infrastructure

5.1 Transport

5.1.1 Japanese Technology Compatible with Local Needs

The hilly terrain covering much of Mindanao has to date slowed construction of high-

standard roads. Road construction in such hilly terrain requires tunnels, long bridges, and

other structures and slope protection work in many sections; there are hopes that Japan will

provide technical assistance.

While Special Terms for Economic Partnerships (STEP) have been used for projects using

Japanese technology to date, moving forward, a framework is needed for Japan-tied ODA

loans in which technology transfer is the focus.

Competition in bidding for Philippine infrastructural development has heated up in recent

years: in addition to Philippine construction companies, Chinese, Korean, and Spanish

companies have also submitted bids. Taking pride in their quality control and schedule

management, Japanese companies are extremely unlikely to be competitive in such price-

centered general international bids.

STEP, with its requirement that 30 percent of the materials used be Japanese, is showing

its limitations in terms of project format. Tunnel construction, for example, is a field in which

Japanese companies distinguish themselves with their expert knowledge. The specific

materials used are not important; the key to a good tunnel is to proceed with the work based

on the actual geology, soil conditions, and groundwater status: details which can only be

ascertained after excavation.

Thus, expanding the project format to include training local construction contractors during

the work by providing expert guidance should expand the use of Japanese technology.

Figure 5-1 Japanese technology compatible with local needs in the transport sector

Sector Technologies

Roads ・ Tunnels, tunnel excavation

・ Long bridge construction (all-weather steel material)

・ Slope protection, slope monitoring

Logistics ・ Field surveying for logistics using tracking data

・ Securing disaster logistical routes and transport planning (developing disaster prevention facilities, etc.)


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5.1.2 Short List for Promising Mindanao Projects

Broadly considering the above, we propose the following as the projects in Mindanao

showing promise.

Functionally enhancing the Philippine-Japan Friendship Highway

Since forming the development plan in the late 1960s for a Philippine-Japan Friendship

Highway passing north to south through Surigao, Butuan, Tagum, and Davao City in eastern

Mindanao, the Japanese government has assisted in development and repair for the road.

This section, also acting as Route AH26 of the Asian Highway Network, could help raise the

Mindanao economy to the next level. If made more convenient with four-lane traffic

throughout and climbing lanes, and safer with measures to prevent accidents, the road could

be built into the basic infrastructure for a stronger, high-quality transportation network and

stimulate intercity traffic.

Further, the same mountain sections of this route repeatedly experience the same damage,

resulting in costly repairs. Transferring Japanese disaster response technology would

increase road standards, making it stronger against disaster and more reliable for transport.

Building a high standard highway between Cagayan de Oro and Davao City

Similar to the above, a more drivable route between Cagayan de Oro and Davao City is

another project of high priority. With this section traversing many hills and mountains, a high

proportion of the section will require bridges, tunnels, and other structures. This presents an

opportunity to utilize Japanese technology: long bridges, mountain tunnels, slope protection,

and more.

Enhancing and increasing capacity for Cagayan de Oro ports, and developing access roads

Expanding the Mindanao Container Terminal (MCT) and building a port access road should

strengthen Cagayan de Oro as a gateway to Mindanao. While the MCT expansion plan and

access road development are both currently underway, there are issues: an interchange was

considered for the junction of Route NH9 and the port access road, but the section is being

developed at grade due to owner management and budgetary factors. The interchange is

needed to ensure the port’s function as a gateway.

Developing logistical infrastructure in Butuan (roads and ports)

Butuan is building industry with local products while utilizing Japanese products,

technology, management, and capital under new mayor Ronnie Lagnada, a Japan supporter.

Together with DPWH, projects are underway to expand Masao Port and Nasipit Port into

marine logistical hubs and to develop a logistic road connecting the ports to an industrial

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development. The port expansion projects and development of a road across Agusan River

require Japanese governmental assistance. (The Overseas Construction Association of

Japan (OCAJI) conducted a baseline survey on industrial park development and logistical

infrastructure in 2015.)

Develop the northern Mindanao corridor (Butuan, Cagayan de Oro, Misamis, and Dipolog)

Originally operating as a unified region, Misamis has split into multiple provinces. This

route is extremely important to rekindling the area's sense of unity by strengthening

connections between the gateway cities in Northern Mindanao.

This section is currently not designated as a national highway. The road condition is poor;

alignment is poor, and the pavement is mainly concrete. With fragile product being

transported, the road should preferably be developed to a higher standard.

Develop the Davao City-Samal Island connection road

While the METI study reported that future traffic demand would only be in the range of

10,000 vehicles per day, improving access to Samal Island is expected to develop the region

and increase passenger demand for Davao given the tourist resources on Samal Island.

If a bridge is selected for the access road, structural construction will have strict vertical

space restrictions in light of the clearances needed for both large passing ships and flights

landing and taking off at Davao Airport. Going with a tunnel would eliminate the clearance

considerations, but carry higher construction costs. Whether bridge or tunnel, Japanese

companies could be enlisted to utilize their high skills in this project.

Technical assistance in road asset management/management assistance for pilot road

Pavement on the intercity roads is deteriorating from overloading, and road failures are

constantly occurring at the same locations due to disasters. In this case, a technology transfer

program would be effective means for introducing asset management for a road section as

a pilot project and building an appropriate O&M system. The transfer would be to establish

O&M management to better regulate and control overloading, as well as to help reduce life

cycle costs (LCC) for the road.

Form a master plan for Butuan urban transportation

Butuan is a hub city of approximately 350,000 located in the Caraga Region in northeastern

Mindanao. Increases in the Butuan population and traffic, as well as urban development, are

starting to affect the smoothness of traffic. Having built up an inter-city cooperation with

Toyama, a low-carbon city, Butuan is pushing forward with its urban development utilizing

Toyama knowledge, with convenient mass transit infrastructure at its core.

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Thus, Japanese ODA strategy is to assist the city from the early stages in formulating an

urban transportation master plan which anticipates additional traffic demand in the future and

developing quality infrastructure. This in turn paves the way for Japanese technology,

products, management, and capital to be introduced.

Conduct logistics surveys in Mindanao (incl. passenger survey)

This project would involve conducting an origin-destination survey and a freight transport

survey to determine what has changed since 2004 and collect basic data to be used in

discussing the future needs for transport infrastructure.

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5.2 Electricity

5.2.1 Japanese Technology Compatible with Local Needs

In light of sector needs as summarized in Chapter 4, Japanese companies were

interviewed to select the Japanese technology compatible with local power and energy sector

needs. The findings are summarized in the table below.


sectors

Local Needs, Stragetic Direction

Tentative Priority Projects Aligned with Local Needs and Strategic Direction

Compatible Japanese technology

Ensuring energy security: improving energy self-sufficiency

・ Developing/utilizing domestically-produced energy

・ Introducing LNG, building logistical infrastructure

・ LNG terminals

Ensuring energy security: rebalancing power supply and demand

・ Linking the Mindanao grid to the Luzon and Visayas grids

・ Linking larger islands to the main grid

・ Responding to climate change, introducing disaster adaptation technology

・ Enhancing the power grid and alternate routes

・ Building durable energy transmission systems

・ CCGT-fired power plants

・ Enhanced disaster response for power distribution grids

Investing in power sources for efficiency

・ Introducing smart technology

・ Introducing new technology (marine current power, fuel cells, nuclear power, etc.)


・ Introducing facilities to improve distribution system losses

・ Upgrading power generation operations

・ Upgrading the power grid


・ Upgrading management for power generation (Expanding O&M service with IoT devices)

Expanding energy access

・ Promoting rural electrification ・ Rural electrification (expanding the distribution grid, introducing a system combining diesel generation and renewable energies)

Promoting a low carbon future

・ Introducing renewable energies

・ Introducing clean coal-firing plants

・ Renewable energies (geothermal, wind power, etc.)

・ Clean coal-firing plants


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5.2.2 Short List for Promising Projects in the Philippines

Based on the information arranged in the previous section, listed below are the projects

with promise in the Philippines:

Figure 5-3 Japanese technology compatible with local needs in the power and energy sectors

Project Region Possible Partners Remarks

LNG terminal

Luzon ・ Local private company

・ PNOC

・ Local companies want Japanese technology.

・ Some in the Philippines see potential for the country to be the LNG hub of Asia.

CCGT-fired power plants

Luzon ・ Local private company

・ PNOC

・ Electricity could be sold to Mindanao if the Mindanao grid is connected to the Luzon and Visayas grids.

・ Contingent upon introducing LNG as mentioned above.

Clean coal-firing plants

Mindanao ・ Local private company

・ PNOC

・ Important for Mindanao to link to both the Luzon and Visayas grids (so that electricity can be sold to Luzon)

Overhauling existing coal-firing plants

Nationwide ・ Local private company

・ Japanese companies are experienced in refitting equipment for existing facilities.

・ Could increase efficiency, reducing fuel costs and environmental loads.

Geothermal Nationwide ・ Local private company, etc.

・ Must also consider the risks of prospecting and possibilities for public funding in promoting geothermal resource development.

Rural electrification

Mindanao and outlying islands

・ NEA, NPC-SPUG

・ Also of interest to ADB.

Enhanced disaster response for power distribution grids

Nationwide ・ ECs, etc. ・ JICA baseline study complete.

・ Philippine side interest also high.

Upgrading management for power generation (Expanding O&M service with IoT devices)

Nationwide ・ Local private company, etc.

・ Japanese companies are experienced in installing IoT.


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5.3 Action Plan for Solving Issues

Japan has much to offer the Philippines and Mindanao in terms of solving their

developmental issues. An action plan outlining these solutions follows.

(1) Create power sector action plan and proceed promising projects

As posed in the Philippine-Japan summit meeting held in the Philippines in January 2017,

Japan will assist in formulating power sector action plan and will also assist in solving

issues in the Philippine power sector. For specific projects which show promise, see Figure

5-4 in the preceding section. Note that the government will need to continue to actively

step in for areas of need and use private investments.

(2) Assist in major transport sector projects to develop Mindanao

Transport sector projects, including development of roads, ports, and urban

transportation, contribute greatly to growth in the Mindanao economy. Thus, such major

transport sector projects will require active assistance in their formation and performance.

Those projects showing promise for Japanese technology are given in 5.1.3 Short List for

Promising Mindanao Projects.

(3) Help formulate a “Mega Mindanao Vision” focused on core cities

There would be great meaning in formulating a greater development vision covering the

whole of Mindanao, similar to JICA’s Mega Cebu Vision 2050 for urban development in the

13 municipalities of Metro Cebu. Currently, the Japan side is strengthening its connections

with the 4-5 cities seen as the core for this vision, and these cities see benefit in Japan

assisting formulation of the vision.

(4) Establish Mindanao PPP Center/platform

Promoting investment by PPPs and other private parties is essential to growing the

Mindanao economy and society. A PPP unit or PPP platform specialized for Mindanao

needs to be established to push for development with private and public sectors hand in

hand. Further, the Japanese could provide benefit by helping to establish and operate this

effort, or by helping to conduct a pilot PPP project.

(5) Assist development across Mindanao

Much of Mindanao is slow to develop, especially in ARMM and other the western areas.

Also, improving safety Mindanao-wide is an essential element in attracting new companies

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to invest. JICA has actively supported western Mindanao in the past with the

Comprehensive Capacity Development Project for Bangsamoro and other projects. It is

hoped that they will continue providing similar grant aid in the future to achieve SDGs,

improve resiliency, and build peace.

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Chapter 6 Overview of Seminar

6.1 Objective and Overview of Seminar

As part of this study, METI and MinDA jointly held the Mindanao Power/Energy Seminar in

Davao City of the Philippines.

The seminar first focused on potential for infrastructural development in Mindanao, then

went on to give an overview of the current status for infrastructural development and future

projects focusing mainly on the power sector. Further, the seminar served as a forum to

encourage matching Japanese technology and expertise with local project needs in

Mindanao. The seminar introduced officials with connection to Mindanao infrastructure to the

technologies available from Japanese companies, with the aim of winning yen loan projects

and other projects for Japanese companies. More than anything, the seminar brought

together key players in local infrastructure projects from the public and private sectors of both

countries to interact directly and updated them on infrastructural development in Mindanao.

Among those in attendance were the mayors of cities in the study and chairpersons of the

local chambers of commerce, as well as both MinDA Chair Alonto and Deputy Executive

Director Montenegro, who were on hand to give speeches.

A summary of seminar details follows below:

Seminar title: Mindanao Power/Energy Seminar

Date and time: 9:30-12:30, Feb. 16, 2017

Venue: Marco Polo Davao, Ballroom I&II

Attendees: 120 total

58 Japanese (13 government officials, 45 private business)

44 Philippines and others (24Philippine government officials, 1

international organization, 19 private business)

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Figure 6-1 Seminar Venue


6.2 Seminar Agenda

The seminar agenda was as follows:

Time Agenda Speaker

9:00-9:30 Registration

9:30-9:35 Opening remarks Mr. Shinji Hirai, Director, Financial Cooperation Division, METI

9:35-9:40 Welcome remarks Sec. Datu Abul Khayr D. Alonto Chairman Mindanao Development Authority

1) Mindanao Development Plan

9:40-10:00 Outline and Issues of Mindanao Development Plan

Asec. Romeo M. Montenegro Deputy Executive Director Mindanao Development Authority

2) Japan’s support and action plan for Mindanao Development

10:10-10:20 Mindanao Infrastructure Study Report

Mr. Satoshi Yamada, Executive Director, Ernst & Young ShinNihon LLC

10:20-10:40 Q&A / Coffee break

3) Case Study Presentation

10:40-11:00 Improving Disaster Resiliency of Electric Power Distribution Network

Mr. Kenichi Kuwahara, Shikoku Electric Power co., Inc Mr. Takeshi Kuwabara, SOMPO RISK MANAGEMENT & HEALTH CARE

11:00-11:20 Introduction of Small Size Geothermal Power Plant

Mr. Taiga Todoroki Commercial, Thermal Power Global Sales, Toshiba Corporation

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11:20-11:40 History of Power / GSC Future Aspect

Mr. Hiroshi Fujii Chief Technical Officer Mitsubishi Hitachi Power Systems Asia Pacific Philippines Branch

11:40-12:00 Chodai's Renewable Energy Projects towards Regional Development in Caraga, Mindanao

Mr. Satoshi Kato Head of Manila Representative Office, Chodai co., Ltd.

12:00-12:10 Q&A

4) Actions to be taken by the Philippine Government

12:10-12:30 Philippine Energy Plan - Current Status and Future Plan

Mr. Jesus Tamang Director, DOE

5) Networking Lunch

6.3 Summary of Seminar Discussions

A basic summary of the presentations and discussions at the seminar follows below.

(1) METI opening remarks

Opening Remarks (9:40-9:50)

Mr. Shinji Hirai, Director, Financial Cooperation Division, METI

Mentioned how PM Abe spoke of wanting to draft an action plan for power in Mindanao

on his January 2017 visit to Davao. Thus, METI must deftly construct details to draft

an action plan for power.

Mindanao has room for future growth and is key to Philippine-Japan bilateral relations.

The seminar’s theme—power and energy—is a key element to improving life for

Mindanao residents.

As with the Philippines, Japan is beset with natural disaster, but has compensated for

disasters with technology.

Wants to help grow the Philippine-Japan network with today’s seminar.

(2) MinDA welcoming remarks

Welcome Remarks (9:50-10:00)

Datu Abul Khayr D. Alonto, MinDA Chairman

Mindanao is currently open to investments from various countries.

Optimistic that investments in Mindanao will increase given Mindanao’s rich natural

resources and recent burgeoning of ties with other countries.

The Mindanao economy will grow sustainably through infrastructural investments,

including the ongoing 3,000 MW in power development and port development with

assistance from JICA and other agencies.

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Figure 6-2 Remarks by METI and MinDA

Opening Remarks by Mr. Hirai, Director, METI Welcome Remarks by Sec. Alonto, MinDA


(3) MinDA presentation

Outline and Issues of Mindanao Development Plan (10:00-10:30)

Romeo M. Montenegro, MinDA Deputy Executive Director

Presented on the Mindanao investment situation.

Poverty and low electrification rates in ARMM are particularly concerning. MinDA is

focused on improving the electrification rates.

Power generation rates for hydropower and other renewables has dropped from 95

percent 20 years ago to only 30 percent currently. Coal power generation has risen in

the last five years.

While increasing base load capacity will take time, future plans are to increase

renewables.

PPPs are of special interest for utilizing in the power sector.

(4) Ernst & Young ShinNihon presentation

Mindanao Infrastructure Study Report (10:30-10:40)

Mr. Satoshi Yamada, Executive Director, Office of Global Planning, Ernst & Young

ShinNihon LLC

Presented results on the study of Mindanao infrastructure.

Thinks Japan can assist in improving energy self-sufficiency and electrification rates.

Notes the importance of public sector contributions in attracting investment.

While important to balance power supply and demand, leaving supply solely in the

hands of the private sector could result in bias.

Japanese companies have the technology and want to invest, but sense risks in

investing in Mindanao.

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(5) Japanese company presentations

1) Improving Disaster Resiliency of Electric Power Distribution Network (10:55-11:20)

Mr. Kenichi Kuwahara, Project Manager, Business Planning Dept., International

Business, Shikoku Electric Power Co.; Mr. Takeshi Kuwabara, Vice President and

Executive Officer, General Manager, Global Risk Engineering Services Dept., Sompo

Risk Management & Health Care

Presented on how to reduce the impacts of disaster on the Philippine distribution network.

Both Japan and the Philippines experience frequent typhoon damage.

Damage from natural disasters can never be completely eliminated, but it can be

reasonably mitigated.

Consider the situation in terms of risk management: it may be difficult to secure funding,

but taking preventive measures now will reduce the bottom line for measure costs and

recovery costs from damage.

2) Introduction of Small Size Geothermal Power Plant (11:20-11:40)

Mr. Taiga Todoroki, Global Sales Group 4, Thermal Power Global Sales Dept. 2, Thermal

& Hydro Power Systems & Services Div., Toshiba Corporation

Presented on small geothermal power plants.

Large geothermal power plants require digging many wells, have high development

costs, and must operate for some time to turn a profit.

In contrast, small geothermal power plants can be operational quickly by digging only

a few wells. Further, dormant wells dug in the past can be reused.

There are two types of geothermal power: backpressure and condensation. Decide

which to use based on well size, environmental regulations, and other factors.

3) History of Power / GSC Future Aspect (11:40-12:00)

Mr. Hiroshi Fujii, Chief Technical Officer, Mitsubishi Hitachi Power Systems (MHPS) Asia

Pacific Philippines Branch

Presented on the history of the steam engine and MHPS experience and bases in the

Philippines.

MHPS works with the latest in technology, including the Integrated Coal Gasification

Combined Cycle (IGCC), and has supply from more than 5,000 boilers worldwide.

In the Philippines, MHPS is currently working on a 500MW coal thermal power plant in

San Buenaventura and other projects.

MHPS stresses training and wants to share Japanese technology with Filipinos.

4) Chodai's Renewable Energy Projects towards Regional Development in Caraga,

Mindanao (12:00-12:20)

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Mr. Satoshi Kato, Head of Manila Representative Office, Chodai co., Ltd.

Presented on Chodai initiatives in the renewable energy sector in the Caraga Region.

Reported the status of a PPP project in the Butuan area in Caraga, as well as the

results of the feasibility study Chodai conducted for METI on renewable energy.

Japanese companies see the Philippines’ location as favorable, but more companies

enter the Luzon or Visayas markets than do the Mindanao market. Mindanao presents

three risks: 1) safety, 2) government-related, and 3) local partner-related.

Myanmar may be touted as Asia’s final frontier, but Mindanao is on equal footing.

(6) Q&A (12:20-12:35)

The following questions and their answers came in the subsequent Q&A session:

We’re interest in investing in Mindanao. What is your plan for assuaging investor

concerns on public order and security? (MinDA’s Montenegro) While peace

negotiations have taken long, even within Mindanao, the civil unrest issues are limited

to specific areas. Other areas are not affected. Also, the Philippine government and

MinDA are committed to protecting private foreign company bases and private

company assets in Mindanao.

It seems difficult to gain permissions to invest in hydropower in Mindanao. What are

the government criteria for selecting hydropower projects? (MinDA’s Montenegro) All

development projects for power generation are decided based on the Philippine

national power generation plan and national priorities. Points of emphasis are whether

the project fits environmental regulations and whether the power will sell on the market.

(7) DOE presentation and conclusion

Philippine Energy Plan - Current Status and Future Plan (12:35-12:45)

Mr. Jesus Tamang, Director, Energy Policy and Planning Bureau, DOE

Presented on the Philippine power generation plan.

Capital investments need to be resilient against disaster and must be concentrated for

power generation, distribution, and transmission as a whole in order to ensure that the

required power can be supplied.

Increasing electrification rates is important to the Philippine population as a whole.

As economic growth requires electricity, the government will press for power plants of

the required capacity according to the national plan to be built, whether by issuing

Executive Orders or other means.

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