The trillion-peso Davao economy Part 2: Challenges



In last week’s column, we discussed that the Davao regional economy is now at  achieved ₱1.02 trillion in value. This week I dive into what else can be done to boost this growth further. The significance of the Davao region’s economy is that it is Mindanao’s largest.

The previous week’s column cited a general challenge besetting the Davao regional economy:

“We will need to broaden growth further by encouraging investments in key sectors that impact the lives of a good number of citizens. Offhand, this includes agriculture, fishery, forestry (AFF) where many Davao residents, particularly those living outside its urban centers are directly and indirectly engaged.”

The role of the AFF sector, currently at 14.5 percent  of the Davao economy in both taming inflation and driving growth needs to be explored further.

Based on the Annual Regional Economic Situationer (ARES) of the NEDA Region 11 for 2023 and 2022, the Davao region's inflation rate hovered at around 6.3 percent, down from 2022’s 7.4 percent.  Inflation control measures can lower this further. This can, in turn,  help raise and broaden growth, since it enables more residents, especially those in lower income brackets to purchase more of what they need since goods are cheaper. This, in turn, helps businesses, especially MSMEs to gain more income, expanding the economic multiplier that pushes overall growth up.

Inflation can be tamed partly by boosting the performance of the AFF sector, since this is where food, a big portion of what people spend for, is produced. More food can lower its price for consumers and can help lower inflation. At the same time, the AFF sector is where many residents especially from the provinces outside of Davao City derive their livelihood, contributing about a third or a fourth of the GDP of these provinces. Improving productivity, increasing production volume, and more efficient farm to customer logistics will help improve farm incomes, and provide cheaper food for families living in the cities who are not engaged in agriculture.

The challenge, however, is that intermittent weather affects crop productivity. The 2023 NEDA ARES notes this to be the cause of the lowered performance of major crops such as mango, cacao, and cavendish banana, which is a major export crop of the region and contributes significantly to the overall national exports. The good news is that rice, corn, livestock and poultry all reported increases in production despite challenges such as the Asian Swine Flu.   

Expanding production of these major crops and food commodities further will be vital for managing inflation and building economic resilience of the region well into the future.

How can we further strengthen AFF growth? For one, we can invest in climate-resilient agriculture to deal with climatic challenges. The second is to encourage investment in downstream agro-processing and manufacturing industries that absorb and encourage more production of the commodities that grow well in the region. This creates direct factory jobs and builds broader supply chains to create more opportunities for rural residents who farm.

These industries also create ancillary businesses such as canteen and transport concessions that employ locals. Around such factories, eateries, and bakeries often sprout to serve the food needs of employees. Uniform suppliers and other contractors all combine to multiply the opportunity. Local farms also supply food.

I believe the private sector, government agencies, and civil society groups can collaborate even further through bodies like the Regional Development Council (RDC) to meet these challenges and sustain and broaden inclusive economic growth in the region.