As a country, the Philippines has a huge prospect for foreign investors. But, perhaps, the country’s most underrated investment destination is its largest city in terms of area. Davao City has long attracted adventurous entrepreneurs and businesses for its rich natural resources and opportunities for economic growth, and yet, security issues in the southern region of Mindanao have deterred many prospective investors. But, now possibly the situation will improve as there are signs of peace in Mindanao.
Anyone driving through Davao City will see the tell-tale signs of growing metropolis-high-end condos and malls, construction sites and traffic congestion. Philippine President Rodrigo Duterte is credited with bringing progress to the hometown he led as mayor for more than two decades before moving to Malacañang Palace. Today, President Duterte’s children are following in his footsteps: daughter Sara Duterte-Carpio is the current mayor and his son Paolo is a congressman and another son Sebastian is city vice mayor.
In the private sector, wealth and power remain mostly in the hands of the homegrown elite: pioneer families unfazed by global stigma who invested in the city’s agribusiness, real estate, logistics, and infrastructure thought too risky by their counterparts in the north. Meantime, bold foreign investors saw profit potential in this “Wild West” and blazed a trail–like Lars Wittig, country manager of Regus & SPACES by IWG Philippines.
Wittig began seeking new markets in Mindanao some 30 years ago, first for tobacco giant Philip Morris, then Dole’s plantation empire, and now for a leading operator of flexible workspaces. He says one of the biggest indicators that Davao was the place for Regus to invest was the number of gas stations, McDonalds and even the Starbucks he saw in 2012.
“This is really becoming a ground zero for all types of industries to venture into,” Wittig explained, noting the need to alleviate the burden on Metro Manila and shift operations to tier two cities like Davao. “We all know how difficult it is to maintain productivity [in Manila] and meanwhile down here, there’s less competition for a very young and IT-savvy population.”
Last month, local government and business leaders sought to sell an image of openness and security at the 5th biennial investment conference Davao ICON with the theme “Davao: Your Southeast Asian Investment Destination.” It was the first to be co-organized with the Joint Foreign Chambers of Mindanao, with a third of 600+ delegates coming from China, Japan, Singapore, South Korea, Malaysia, Indonesia, Russia, Mexico, and European Union countries, including the Netherlands, Sweden, France, Belgium, Romania, Hungary and Austria, many of which sent their official ambassadors based in Manila.
“We hope they will find investment opportunities here to present to their business councils and business groups,” Mayor Duterte-Carpio said after meeting the ambassadors, reassuring them that she would ask the city council to draft a resolution requesting President Duterte to consider localizing martial law to help ease foreign investors’ concerns. She admitted that martial law may not be needed for the entire region.
Leaders in the private sector say that while foreign nationals view a militarized presence in Mindanao as negative, residents and business owners welcome soldiers as support for local law enforcement, considering the region’s history and culture.
The real challenge will be taking the positive messaging and translating it into actual business deals. Aside from the long-time presence of Japanese and Chinese investors, international investment from western countries is relatively small, ranging from Swedish company Transcom Holdings’ acquisition of local BPO firm Awesome OS to Dutch experts’ work in supporting the local cacao industry.
With President Duterte’s “Mindanao First” policy, more countries are exploring the region’s potential as an economic partner, rather than a beneficiary of funding for conflict resolution. Davao’s business community touted the region’s strong economic growth of 8.6% in 2018, outpacing that of the country’s GDP, which came in at 6.2%.
Mayor Duterte-Carpio pointed to efforts to improve international connections, including direct flights to/from Hong Kong, Jinjiang and Doha, and incentives for investors to inject money into rural communities. City officials touted deals with Austrian companies and Chinese firms like China Telecom and Alibaba, as well as increased official development assistance from entities like the Japan International Cooperation Agency and the Asian Development Bank. The new Bangsamoro Autonomous Region in Muslim Mindanao, or BARMM, is also focusing on economic development to support the peace process.
The message? Davao City is an attractive alternative to overcrowded Manila and Cebu, and hungry for investment partners, particularly in tourism, infrastructure, real estate, information and communication technology, and halal trade and tourism.
“You have to come and see,” says Regus’ Wittig. “You don’t know the Philippines before you have experienced the hospitality, the people, the culture, not least the nature here in Mindanao and specifically in Davao.”