3 Competitiveness of Siquijor

Siquijor represents a rich diversity of biological resources yet limited economic options that is common among small islands. According to a study prepared by SIRMAP for the province of Siquijor, the island lacks the proper structure and mechanisms in developing its potential to efficiently sustain its resources at both public and private sector levels.

Economic opportunities in the island have to be assessed considering the environmental threats inherent in ongoing activities such as mining, coastal tourism development, furniture making, and upland farming. Environmental conditions include low agricultural productivity, pervasive soil erosion, denudation, indiscriminate land use, coastal resource degradation, and other issues are issues that have been consistently raised by the stakeholders.

The symptoms of poverty in Siquijor are more intangible than visible. There are no squatter settlements or beggars in the street, but poverty thrives in the form of resource mismanagement at both the public and private levels. Comparing poverty levels based on food menu, non-food consumption and consumption patterns, a study presented by Dr. Balisacan to the ADB reranked Siquijor among the 6 provinces with highest poverty incidence nationwide. This finding differs significantly from the GDP-based official approach. Even according to provincional income statistics, 5080 families are considered poor (29.2 % of total). Only about 34,000 (42%) of Siquijor's population is employed, a rate below other small provinces (e.g., Apayao 57%, Batanes 60%).

Siquijor was very competitive in exporting cheap workforce. Because there are no big industries or businesses, many of the Island people venture outside. During the American period, many Siquijodnons were recruited as farm laborers in Hawaii and California. Out-migration drains the island of valuable manpower, today even towards the Middle East and Europe.

The educational system as base for labor export is eroding. Siquijor has the least number of students attending elementary school in relation to its population at 15.68%. Educational facilities abound but dropout rates are exceptionally high. Education goals focus on a higher degree suitable to work abroad. Overseas work is officially facilitated by the yearly manpower trade fair, where graduates meet recruiters and then get a passport for overseas work.

Siquijor depends on two financial sources: the Internal Revenue Allotment (IRA) and the remittances from the Diaspora workers. The Province and the Municipalities received approximately 137 million Pesos from the IRA in 2003 (238 mn in 2002), this is 89% of the budget of the province.

More than 9 out of 10 families depend on remittances from household members or relatives who were permanent residents or contractual workers, mostly in the United States of America. Among these families, 25% were fully dependent on remittances; 50% relied on these to "a considerable extent," while the rest (25%) considered remittances as complementary income. The SIRMAP appraisal report also ranged annual remittances to Siquijor from at least PHP 50 million to even higher than PHP 100 million. The Siquijor branch of the international financial service provider Western Union reportedly has the second largest turnover in the Philippines. Some families obviously can afford a relatively high standard of living by remittances. Electricity, water, gasoline, and even food are more expensive in Siquijor than in surrounding islands. The poor part of the population lacks access to affordable basic infrastructure.

Behind the obvious economic gains for the island, the overseas Filipinos are a marginalized sector of the society. As a tradition though, most Siquijodnons return for a homecoming visit during the Easter season. Recently there are visible signs for strong investment by emigrants in private housing. A certain number of labor emigrants will return to Siquijor for retirement or maybe opening a new business.

Michael Porter's Diamond of Advantage: A Tool for Economic Analysis

For analyzing the Competitiveness of Siquijor, the diamond of advantage model was adapted. The diamond of advantage model was developed by Harvard Business School Professor Michael Porter and it discusses economic development in a different way than policy makers have thought of in the past.

In his book, The Competitive Advantages of Nations, Porter argues that economic vitality is a direct product of the competitiveness of local industries. Industry clusters are geographic concentrations of competitive firms in related industries that do business with each other and that share needs for common talent, technology, and infrastructure. These regional clusters are the source of jobs, income, and export growth within a region. Porter used a diamond shaped diagram as the basis of a framework to illustrate the determinants of national advantage Innovations are based on the following four key elements:

1. Factor conditions, such as a specialized labor pool, specialized infrastructure, and sometimes selective disadvantages that drive innovation;
2. Home demand, or local customers who push companies to innovate, especially if their needs or tastes anticipate global or local demand;
3. Related and supporting industries, nationally competitive local supplier industries who create business infrastructure and spur innovation and spin off industries;
4. Industry strategy, structure and rivalry, intense rivalry among local industries that is more motivating than foreign competition and a local "culture" that influences individual industries' attitudes toward innovation and competition.In addition to these areas, the Porter approach includes the roles of the government and chance.

This description of factors and policies affecting competitiveness can partly be adapted to the island of Siquijor as shown here.

Only about 34,000 (42%),of Siquijors population of 80,835 is employed, a rate below other small provinces (e.g., Apayao 57% and then Batanes 60%). Official statistics define the visible underemployment rate by 22.9. More than 31 500 people are younger that 18 years and will enter the labor market in the next years. Average daily wages range from 81 to 115 PHP, which is slightly above poverty level.

Persons who can not get hired outside the island or at the government have few choices. They can plant or fish something, drive a tricycle or sell things of daily consumption to their neighbors. This is what most remaining islanders do. When starting their ventures, most business starters are driven rather by unemployment that by entrepreneurial spirit.

Agriculture is still the predominant activity in the province. Some 13 600 hectares (39,6%) are under agriculture cultivation and about 18 000 hectares (54,2%) are forest lands. The rest have been developed for mining, quarrying, and inland fishery. The fertile plains and valleys support coconut, rice, cassava, peanuts, abaca, and tobacco.

Census information shown that 5156 families depend mainly on income from entrepreneurial activities, about 71% of them in agriculture. An even higher number lives from "other sources", mainly remittances.

Small and medium scale enterprises have a potential for more employment generation and economic growth. The SIRMAP business mapping in September showed the visible predominance of small retailers ("Sari-Sari Stores"). They are mostly runned by women. No statistics were found on the visible employment of man as tricycle drivers. The official statistic from 2000 counts 1 fisherman, while there are obviously hundreds of them. "Employment" in the local terms means having a job within the public sector, that has more than 2000 employees on the island.

The Provincial Department of Trade and Industry (DTI) re-registers businesses every five years. The incentive to be on this register is small, so that many enterprises escape from the register. Disadvantages are taxation and controls, while the only benefit is the protection of the business's name. The following table resumes this official registration of businesses and employment.

The 493 small retail stores count for about 40% of the official employment in enterprises. Given the estimated high number of retail and transport service units not registered, manufacturing, processing and producing have a very marginal role for employment until now.

Most retailers are estimated to have a very low margin of income. This employment is often chosen because of lack of other opportunities. However, small retailers that offer specific products can be more profitable that the majority, e.g. the telephone card vendors.

In the near future, most employment is likely to be created again in the retail sector. This is based on the experience that poor business starters tend to sectors that allow easy access regarding to capital and skill level. According to the SIRMAP tourism sample, business people believe that manufacturing employment will remain relatively low. Tourism is expected to be the main future source of employment on the island.

Official registration of small enterprises is increasing, due to the formalization of small units as "Barangay Microenterprises". Through Republic Act No. 9178, otherwise known as the Barangay Micro Business Enterprise (BMBE) Act of 2002 (see Annex A.4), the Philippine government has set a policy to promote the establishment of BMBEs by providing various incentives and benefits to entrepreneurs.

The municipality of Maria was pioneer this year in registering BMBE, the other municipalities follow. The BMBE is critized for too may requirements. The business community requested the President to issue a directive to clarify the nine requirements and set a deadline for all LGUs to implement the law.

The local SME representatives expressed great need for training and business development services and expect assistance from the public institutions in a planning workshop.

The main reason for the dominance of employment in the retail and services sector is simple: many start-up entrepreneurs do not have enough capital and technical skills to enter into manufacturing, production or processing. The later sectors require significant investment in capital. The number of manufacturing and processing enterprises is so small that even official studies list them by name.

A general restraint for business is the relatively high cost for power and water supply of the island. Prosielco and the Local Water Administration charge service fees beyond the average household's capacity to pay. (See 3.4)

Manufacturing

Strong sectors in the manufacturing industry in the province are furniture making, ceramics and Gift, Toys and Houseware. Here we can identify local value chains.

The furniture sector is considered as one of the most important industries in terms of employment and income. Being labor intensive, it has provided a bigger share of the total manufacturing employment statistics and has undoubtedly contributed much to economic development. The United Siquijor Furniture Maker Association is representing this industry at province level.

The furniture industry referred to covers 28 firms which have business name registration with the DTI or with the CDA. These firms reportedly employ 98 workers and have total capital of 1.3 mn PHP. The majority are microenterprises, only 2 firms have 10 or more workers. The business mapping showed a strong wood industry cluster around the border of the Municipalities of Siquijor and Larena.

The furniture has diversified its product line, from the very basic to the intricately-designed high quality furniture products. Furniture of international design are being replicated and some are redesigned to use the local tastes and lifestyles. Some Siquijor-made furniture are sold to bigger markets in the Visayas and Mindanao. Molave, mahagony, gemilina, acacia and other species of wood that are commonly used in the production are still abundant in the province. The local furniture industry is competing against the entry of substitute products made of plastic.

The job order productions system is used by the majority of the firms. The prevalent term of sale is cash on delivery. Collecting advance partial payment from customers is also a common practice. In some instances, buyers may enjoy a 30-day credit term. Prices of products are usually set using the cost plus method. Others prices their products based on estimate and past experiences.

The lone producer of ceramic products in Siquijor province is the Tagmanocan Multi-purpose Cooperative (TMPC), an organization composed of 24 active members in Lazi Municipality. The cooperative started when a big deposit of clay soil in Tagmanocan, Lazi, Siquijor was discovered in 1991. During a Rapid Rural Appraisal Survey conducted by Department of Agrarian Reform (DAR) and laboratory analysis done by the Department of Science and Technology (DOST), it was discovered that the clay material is ideal for use in the manufacture of ceramic products such as bricks, tiles, pottery and artwares. From then on, with the support and various kinds of assistance extended by different government agencies of the province, the ceramics project emerged.

The ceramics plant site in the island is located in barangay Tagmanocan, five kilometers from the town proper of Lazi, Siquijor. This location is near the source for raw materials and within immediate vicinity of the production center. The products of the TMPC include earthenware and ceramics fired at low temperatures. Initially, the cooperative produced bricks, unglazed tiles and pottery products.

TMPC sells to contractors of construction firms and directly to end-users.There is great potential for the industry to succeed in the domestic market. This is proven by the fact that requirements of pottery products in Siquijor Province is met through importation from neighboring provinces of Negros Oriental and Misamis Occidental.

The TMPC is highly supported by five (5) different government agencies in the province. Subsidies were used for a motorized roll kneader and expansion of the production center, and technical and management trainings. Business perspectives for the cooperative a good, while public funding continue to sustain this form of rural employment.

The Gift, Toys and Houseware industry shows a variety of products in the province. The production sites, however, are mainly invisible. This is because the GTH industry counts with many women producing informally at home. Thus, this industry has excellent perspectives for employment creation. With relatively small investment and training this industry develops a value-added production.

A significant number of cooperatives have formalized these activities. They mostly have qualified for public subsidies. Among the producer organizations of gift, toys, houseware and garments are the Alang sa Tanan Multi-Pupose Coop., Siquijor Community Livelihood Association, Canlabo Multi-Purpose Coop., Larena Women's Association, Gabayan Farmers Multi Purpose Cooperative, Kalakasan Cooperative, and the Immaculate Concepcion Cooperative. The San Juan Multi Purpose Cooperative is most advanced in candle making, soap production, and paper recycling. Most cooperatives belong to the Siquijor Province Union of Cooperatives, Inc.

Processing

The processed food sector in the province comprised of five (5) sub-sectors, namely: the banana chip making, the processed peanut, the meat processing, the bakery products and other processed food products. Many of the processors operate informally.

Almost all the production in the food processing sector is consumed in the local market. Only the processed peanuts reach the outside market significantly.

The banana chips makers are still home based, four are individual entrepreneurs, one is the women cooperative "Immaculate Conception". They are strategically located to serve their local market.

The six registered peanut processors produce peanut brittle, peanut butter, peanut turon, peanut adobo, sugar coated peanuts and majareal for local consumption. They use peanuts produces from Lazi and Maria, but mostly buy peanuts from outside, due to harvest seasons, quantity and quality of local supply.

The 23 registered bakeries are all operating in commercial scale. The two meat processors are a women organization (Mystique Island Foods) producing longaniza and pork tapa and one individual entrepreneur producing pork tocino and longaniza.

The bakeries are all registered with the Bureau of Food and Drugs, while none of the banana and peanut processors is registered there.

Other processed products in the province are pickled mangoes, mango juices, canning butong meat, mineral water, essential oil, ice cream, and noodles. The Timbaon Rural Improvement Club started the processing of essential oil recently with support from DTI. The San Juan Multi Purpose Cooperative is preparing for cheese making.

Production

Agricultural production is still the main activity of most Siqijordnons. More that 3650 families depend mainly on income from agricultural activities. Only few are registered as enterprises with DTI.

Agricultural crops include rice and corn, peanut, mango, coconut, cassava, abaca, tobacco, vegetables and other horticultural crops. Livestock products are swine, poultry, cattle, feeds and fishery production. Forest tree plantations produce sufficient wood to maintain the local furniture and construction industry.

Local markets for agricultural products are not developed. Even the supply of bananas or eggs is unstable. Many producers sell their products on the market in Dumaguete. The more remote municipalities have few access to markets at all.

Peanut production in the province lack storage facilities. Producers in Maria have no communication at all and depend on the price offered by the contracted buyers after harvest. Due to technical skills the peanuts of the province are smaller and less tasty than imported ones.

Commerce

Small retailers ("Sari-Sari Stores") dominate the trade in the province. Only two wholesalers are registered. One is a purchase cooperative of about 400 Sari-Sari stores. Most consumers are going to Dumaguete and Cebu for their personal consumption needs.

Only one shop for souvenirs was found in Larena. Tourists get a small offer of items within the resorts or rather buy their souvenirs elsewhere. Few local products are offered in general. Most of local products are directly consumed by the members of the production cooperatives and their relatives.

Services

The service sector is the key to tourism development. This sector hat to improve in terms of quantity and quality. The friendliness of the Siquijordnons is famous, but it can not always compensate poor service.

The service sector mainly runs with low-cost facilities and equipment. Vehicles, installations and tools are often far below standard. Tourists may not accept to take a dangerous ferry boat, get on a corroded tricycle or wait hours for a meal.

Most of the service enterprises are restaurants and bars. They face serious market limitations. The majority show little skill development in terms of quality and hygiene. Foreign tourist complain about the low number of quality restaurants. Local clients hardly spend money to eat out.

The service sector gives access to employment with low investment and skills. Low prices due to strong competition are an obstacle to upgrade investments. The more flexible enterprises are expected to benefit from tourism and thus improve the standards.

Siquijor was declared a marine reserve and tourist zone in 1978 by virtue of Presidential Proclamation No. 1810. As such, the island-province might be developed into a major tourist destination under the supervision of the Philippine Tourism Authority.

The serenity of the province makes it ripe for a perfect getaway. It lures nature lovers to climb up Mount Bandilaan, its highest peak at the center of the island, to dive beside colorful coral reefs, and offers a stretch of white sandy beaches all 102 kilometers of shoreline surrounding the island. Each municipality in Siquijor is home to beach resorts matching in beauty with the country's best.

Siquijor also provides a trip to the past with the old Cangisok house, the St. Francis Assisi Church, the St. Isidore Labrador Parish and Lazi Convent which is reputed to be Asia's largest convent. More tourist oriented facilities are being encouraged for development to absorb an influx of domestic and foreign tourist arrivals.

Despite of this high potential for tourism and the clear priority to develop this sector, not much has been done about it in Siquijor. According to a study by SIRMAP in 2002, tourism development of Siquijor is exclusively seen within the administrative boundaries, with municipalities competing with each others. Assisted by SIRMAP, the following vision has therefore been developed recently among stakeholders.

The main international tourism is concentrated on diving adventures. There is also a small national tourism, mainly going to the historic sites in Lazi. Many divers criticize Siquijor for overfishing. They only use Siquijor as base for diving at surrounded locations. The nearby Apo Island has an attractive marine environment, well preserved and enforced by the government of Negros Oriental. On the other hand, divers have plenty of time outside the water and are generally adventurous and curious people. They would accept island tourism offers, if were convinced by price/quality relations.

There is still very poor integration of the top resorts with local economy. There are no shops for souvenirs, except inside some resorts that mainly sell shells and T-shirts. The only Siquijor picture postcards available are painted and copied by a German artist.

A study realized by the SIRMAP project in September 2003 among 52 tourism-related enterprises showed that the current capacity is very low. Hotels on the island offer only 121 rooms with 229 beds. Thus, the over-the-year booking rate for the successful resorts is between 50 % and 70%, while there are also resorts with a over-the-year booking rate of under 50%. However, the lack of tourists was expressed by only some enterprises as main problem.

The business community's main problem as expressed was lack of qualified employees and lack of permanent employees. However, trainings provided to employees are limited: About half of the enterprises offer trainings to their employees, but nearly every training focuses on activities like serving, cooking etc. Nearly none of the employees receive trainings related to management skills or similar qualifications.

Second urgent problems stated were insufficient water supply and power interruptions. This failing infrastructure affects tourism business in their opinion even more than lack of capital. Among other problems were insufficient communication facilities (phone/cellphone connection). A number of enterprises complained about frequent corruption and uncooperativeness of the Government, giving exact cases. The Government does not manage to deliver its core services: Currently, roads and transportation are lacking, water and electricity supply is unreliable, and Siquijor Provincial Hospital does not have the basic diagnostic equipment in place.

Supplies are hardly found on the island. Nearly all kinds of goods are purchased outside the Province of Siquijor. Almost every owner buys goods for his business outside the province. Nearly everyone purchases goods in Dumaguete and about every third one buys goods in Cebu. A few even buy goods in Manila.

TESDA runs a 2-years training programme in Lazi for Hotel and Restaurant Management. Some of the graduates serve already in local resorts, while the majority left for other locations. The training plan includes on-the-job-training in resorts, as assisted by the GTZ VET project from Cebu. An agreement with the main resorts exits, but is not implemented due to lack of salary payment and transportation.

Above recommendations by tourism entrepreneurs reflect a representative sample of business people. The private sector is challenged by the deficient government function. The local governments are not successful in installing excellent conditions for business. At the same time, the Provincial government is competing with the private sector by opening state-owned companies. SME promotion structures are in place, but politicians tend to overrun these by giving away subsidies led by their personal taste.

The business community is concerned with the deficient municipal services and economic infrastructure in the province. Currently, roads and transportation are lacking, water and electricity supply is expensive and unreliable, and Siquijor Provincial Hospital does not have the basic diagnostic equipment in place.

Despite competition and all conflicting issues with the Government, the organized business community participates actively in dialogue forums with the government bodies, e.g. the SMED Council. The terms of dialogue in Siquijor are of course peaceful and friendly. However, there are serious problems to be faced.

Significant for the public-private dialogue is the case of the unreliable energy supply. The entire Province of Siquijor's electric power is provided by the National Power Corporation (NPC) power plant at Candanay Siquijor, Siquijor. It is then distributed throughout the province by the Province of Siquijor Electric Cooperative (PROSIELCO). The PROSIELCO as the sole distributor of power in the province has signed a Memorandum of Agreement (MOA) with NPC so as to make the rehabilitation of the NPC-Siquijor power plant a priority project. In recent years, the NPC-Siquijor gen-sets have encountered technical and financial problems resulting in frequent brown-outs and a black-out. They contend that NPC is incurring financial losses in the amount of 15 to 20mn PHP annually and that the needed parts for the rehabilitation of the gen-sets cannot be easily procured.

The Siquijor Provincial Government responding to the need for a more reliable power source, proposed to acquire a 15-year loan of substantial amount to purchase initially a surplus 2.1-megawatt bunker oil-fueled gen-set with the needed infrastructure to house it and operate as an IPP. Subsequently, after a year of co-management with NPC, the Siquijor Provincial Government IPP shall acquire and take over the NPC power plant. The Siquijor Provincial Government foresees a reduction in the power rate and a savings/profit from this endeavor. Private sector experts look at this proposal as a hasty and losing venture especially because the government does not have a track record in managing business operations considering that a savings/profit is already foreseen even before the project is operational. The SCCI has published the following position paper on the energy crisis.

The business community expressed hope in the support from the SIRMAP project to find sound solutions for the energy problem and other aspects of good governance.

The forgotten actors in this scene are the diaspora Siquijordnons, who often frankly address problems on their home island and who want to contribute to the socio-economic development of their original home. An interesting example is the Internet forum siquijor.com, where people around the globe discuss conditions of living and working in Siquijor. The local business community sees returnees as both, allies and competitors.

Siquijordnons in diaspora offer potentially transferable expertise that can fill the human resource gaps of the island. In addition to their varied skills, Siquijordnons abroad have accumulated financial resources that can be invested, thus creating more job opportunities and promoting more trade and investment. Siquijordnons abroad represent an enormous capacity, offering skills critical to economic, social and political development.