3

Chapter 2: The Macroeconomy

A. Assessment
a. Gross Regional Domestic Product
Amid continuing global challenges and facing difficulties brought by natural calamities especially for
its major growth drivers, the regional economy still managed to grow by 1.0 percent in 2012 slower than the 1.3
percent recorded in 2011. Growth in the services and agriculture sectors kept the economy afloat with the
dismal performance of the industry sector. Total regional gross output amounted to Php122.968 billion in 2012
from Php121.728 billion in 2011.

Industrial output contracted by 3.6 percent in 2012 from an already low growth of 0.3 percent in 2011.
This was largely due to the contraction in regional manufacturing output, along with mining and quarrying
output that was more than halved in 2012 from the previous years level. The positive growth of construction
(11.1%) and electricity, gas and water supply (6.9%) were not enough to offset the losses in the manufacturing
and mining and quarrying sectors. Regional industrial gross output in 2012 amounted to Php61.325 billion
compared to Php63.627 billion in 2011.

Gross output of the manufacturing sector contracted by 2.1 percent in 2012 compared to the 3.2
percent growth in 2011. This was significantly affected by the big drop in total merchandise exports of the
Baguio Ecozone. Total merchandise exports at the Ecozone that excludes revenues of IT companies located in
the zone dropped 18.5 percent with weaker earnings from electronics due to the continuing weak global demand
for the countrys electronics exports from Japan and the United States. In fact, electronics revenues dropped
21.0 percent in 2012 from year-ago levels.

The disruption in the operations of Philex Mining Corporation, the countrys biggest gold and copper
producer, in the second half of 2011 significantly pulled down regional mining and quarrying output in 2012.
Already reeling from a 9.3 percent contraction in 2011, the sectors gross valued-added further dropped to
Php1.740 billion in 2012 from Php3.850 billion in 2011 or a 54.8 percent contraction.

Meanwhile, the regions agriculture sector posted a 1.5 percent growth in 2012, better than the 0.4
percent posted the previous year. The sectors gross value-added amounted to Php13.291 billion in 2012 from
Php13.093 billion in 2011. Production increases for palay (5.7%) and corn (2.9%), along with modest increases
in output from the regions major and minor vegetables crops and a strong showing of the fisheries sector lifted
the agriculture sectors performance.

The services sector again performed remarkably well in 2012. Taking off from a 3.1 percent growth in
2011, the sector grew by an impressive 7.4 percent in 2012. Services gross output amounted to Php48.352
billion as against Php45.009 billion in 2011. All services sub-sectors posted increases in gross output led by
financial intermediation (11.4%); transport, storage and communication (9.6%); and trade and repair of motor
vehicles, motorcycles, personnel and household goods (9.0%).

Still, the major contributors to growth of output in the services sector were Other Services (5.9%
increase); Real estate, renting and business activities (6.9% increase); and Public administration and defense;
compulsory social security (5.9% increase). Reforms in the budgeting system that allowed the speedy release of
public funds and thus public expenditures may have contributed to the hefty output of the public administration
and defense sub-sector amounting to Php8.783 billion in 2012 compared to Php8.295 billion in 2011. The low
and stable regime of prices in the region may have also spurred personal consumption expenditures lifting gross
output for Other Services.

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Table 2.1
Macroeconomic Performance, CAR: 2010-2012

Indicator Baseline 2011 2011 2012 2012 Percent Percent Change/

(2010) Target Actual Target Actual Accomplishment Point Difference
(Actual vs.
Target)
2011 2012 2010- 2011-
2011 2012

Gross Regional Domestic Product by Major Sector (In billion pesos at 2000 prices)1/
GRDP 120.136 120.0- 121.728 127.0- 122.968 100.32/ 96.12/ 1.3 1.0
122.0 128.0
Agriculture, Hunting, 13.043 12.686- 13.093 13.257- 13.291 101.02/ 98.42/ 0.4 1.5
Forestry and Fishing GVA 12.809 13.513
a. Agriculture & Forestry 12.847 12.892 13.083 0.3 1.5
b. Fishing 0.195 0.202 0.208 3.2 3.1
2/ 2/
Industry GVA 63.447 65.835- 63.627 68.139- 61.325 97.6 88.3 0.3 (3.6)
66.471 69.463
a. Mining & Quarrying 4.2.43 3.850 1.740 (9.3) (54.8)
b. Manufacturing 49.509 51.078 50.011 3.2 (2.1)
c. Construction 7.589 6.525 7.251 (14.0) 11.1
d. Electricity, Gas & Water 2.107 2.173 2.323 3.2 6.9
Supply
Services GVA 43.646 45.299- 45.009 47.337- 48.352 97.62/ 100.22/ 3.1 7.4
45.732 48.247
a. Transport, Storage & 5.998 6.121 6.711 2.0 9.6
Communication
b. Trade & Repair of Motor 5.291 5.491 5.987 3.8 9.0
Vehicles, Motorcycles,
Personal & Household Goods
c. Financial Intermediation 3.868 3.570 3.977 (7.7) 11.4
d. Real Estate, Renting & 8.820 9.304 9.948 5.5 6.9
Business Activities
e. Public Administration & 8.417 8.295 8.783 (1.5) 5.9
Defense; Compulsory Social
Security
f. Other Services 11.251 12.228 12.946 8.7 5.9
CAR Contribution to GDP 2.1 2.1 1.9
GRDP and Sectoral GVA Growth Rate (In percent)
GRDP 6.5 3.5-4.5 1.3 3.5-4.5 1.0 (3.2) 2/ (3.5) 2/
AHFF GVA (1.6) 4.5-5.5 0.4 4.5-5.5 1.5 (5.1) 2/ (4.0) 2/
Industry GVA 8.3 3.5-4.5 0.3 3.5-4.5 (3.6) (4.2) 2/ (8.1) 2/
2/ 2/
Services GVA 6.5 4.5-5.5 3.1 4.5-5.5 7.4 (2.4) 1.9
GRDP and Sectoral GVA Growth Rate (In percent)
GRDP 6.5 3.5-4.5 1.3 3.5-4.5 1.0 (3.2) 2/ (3.5) 2/
AHFF GVA (1.6) 4.5-5.5 0.4 4.5-5.5 1.5 (5.1) 2/ (4.0) 2/
Industry GVA 8.3 3.5-4.5 0.3 3.5-4.5 (3.6) (4.2) 2/ (8.1) 2/
Services GVA 6.5 4.5-5.5 3.1 4.5-5.5 7.4 (2.4) 2/ 1.92/
Employment 3/
Employment by Major Sector
AHFF 375 379 366 387 350 96.6 90.4 (2.5) (4.3)
Industry 78 72 86 76 90 119.4 118.4 9.9 4.7
Services 255 265 277 275 286 104.5 104.0 8.8 3.2
Total 707 715 730 738 726 102.1 98.4 3.2 (0.3)
Job Generation 28 22 23 23 (4)
Employment by Class of
Worker
Wage & salary workers 274 285 317 4.0 11.2
Own account workers 250 270 246 7.9 (8.7)
Unpaid family Workers 183 175 164 (4.4) (6.3)

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Indicator Baseline 2011 2011 2012 2012 Percent Percent Change/

(2010 or Target Actual Target Actual Accomplishment Point Difference
other) (Actual vs. Target)
2011 2012 2010- 2011-
2011 2012

Employment 3/
Employment by Major Sector
AHFF 375 379 366 387 350 96.6 90.4 (2.5) (4.3)
Industry 78 72 86 76 90 119.4 118.4 9.9 4.7
Services 255 265 277 275 286 104.5 104.0 8.8 3.2
Total 707 715 730 738 726 102.1 98.4 3.2 (0.3)
Job Generation 28 22 23 23 (4)
Employment by Class of
Worker
Wage & salary workers 274 285 317 4.0 11.2
Own account workers 250 270 246 7.9 (8.7)
Unpaid family Workers 183 175 164 (4.4) (6.3)

Labor Force Statistics

Labor Force 768 3.1 0.6
Labor Force Participation Rate 67.4 65.5 68.5 66.0 68.2 1.1 (0.3)
(%)

Employed 707 715 730 738 726 3.2 0.1

Employment Rate (%) 94.9 94.8 95.0 95.0 94.5 0.1 (0.4)

Unemployed 38 39 42 2.6 10.3

Unemployment Rate (%) 5.1 5.3 5.0 5.0 5.5 (0.1) 0.6

Underemployed 111 107 109 (3.6) 5.6

Underemployment Rate (%) 15.7 16.5 14.6 15.0 15.5 (1.1) 0.9
Gross Capital Formation1/
Level (In billion pesos at 2000 35.313 49.840 21.062 41.1 (57.7)
prices)
% Share to GRDP (High 29.4 20.7 40.9 20.5 17.1 20.2 (3.4)
Growth)
Exports (In billion US$)
PEZA Exports 3.445 4.113 2.763 4.935 2.276 67.2 46.1 (19.8) (17.6)
Inflation Rate (In percent)
All Items 4.6 3.3 3.6 (1.3) 0.3
Food and Non-Alcoholic 5.4 4.6 4.0 (0.8) (0.6)
Beverages
Food 5.5 4.7 4.0 (0.8) (0.7)
Alcoholic Beverages, Tobacco 2.8 4.2 5.2 1.4 1.0
Non-Food 4.0 2.1 3.4 (1.9) 1.3
Clothing & Footwear 4.1 1.6 2.8 (2.5) 1.2
Housing, Water, Electricity, 4.0 1.3 5.8 (2.7) 4.5
Gas & Other Fuels
Furnishings, Household 2.8 2.0 2.7 (0.8) 0.7
Equipment & Routine
Maintenance
Health 4.4 2.5 1.5 (1.9) (1.0)
Transport 6.6 4.5 1.2 (2.1) (3.3)
Communication (0.2) (0.2) (0.3) - 0.1
Recreation & Culture 0.6 0.8 1.2 0.2 0.4
Education 3.9 4.0 2.9 0.1 (1.1)
Restaurant & Miscellaneous 3.9 1.1 1.7 (2.8) 0.6
Goods & Services

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Indicator Baseline 2011 2011 2012 2012 Percent Percent Change/

(2010 or Target Actual Target Actual Accomplishment Point Difference
other) (Actual vs. Target)
2011 2012 2010- 2011-
2011 2012

Poverty Incidence
Poverty Incidence Rate 19.24/ 17.54/ (1.7)
(Families)(%) (2009)
Magnitude of Families Below 66,1114/ 65,5164/ (0.9)
Poverty Threshold
1/
Estimates as of July 2013. Totals may not add up due to rounding. 2/High growth scenario. 3/Totals may not add up due to rounding.
4/
Estimates as of December 2013; 2009 data are revised estimates.
Sources of Data: NSCB, NSO

The continuing robust performance of the emerging IT and BPO sector was also expected to lift
services gross output, particularly the Real estate, renting and business activities (RERBA) sub-sector. RERBA
gross output increased by 6.9 percent in 2012 , a further acceleration of the 5.5 percent growth in 2011. This
was aided by the 9.4 percent increase in combined revenues of PEZA-registered IT companies reaching
US$58.064 million in 2012 from US$53.053 million in 2011.

b. Employment
The regions unemployment rate was at 5.5 percent in 2012, higher than the 5.0 percent registered in
2011. However, this is lower than the national 7.0 percent average recorded for the same year. Meanwhile, the
regions underemployment rate was 15.5 percent, higher than the 14.6 percent recorded in 2011. But this is
again lower than the national 20.0 percent average for the same year.

In terms of levels, the region employed 726,000 persons in 2012 from 730,000 in 2011 or an overall
loss of 4,000 jobs. Most of the jobs lost were in agriculture (16,000) while there were gains in industry (4,000)
and services (9,000) indicating a transfer of labor to the more productive sectors and remunerative employment.
In 2012, industries that registered increases in employment include mining and quarrying, construction,
accommodation and food services activities, and public administration and defense. Moreover, the quality of
employment in 2012 appears to also have improved with an 11.2 percent increase in the number of wage and
salary workers mostly working for private households and establishments while there were declines in own
account workers (-8.7%) and unpaid family workers (-6.3%).

c. Gross Capital Formation and Exports

Despite increased construction spending from the private sector, capital formation dropped to
Php21.062 with the national governments more cautious spending approach in 2012 reducing the investments-
to-GRDP ratio at 17.1 percent. This is in sharp contrast to the hefty 41.1 percent increase in capital formation
the previous year. Amounting to Php49.84 billion, the share of capital formation to GRDP reached 40.9 percent
in 2011 which is above the ideal 20.0 percent ratio.

Continuing uncertainties in the global market including the slow recovery in the United States and
Japan affected the regions total exports. PEZA exports continued its decline from 2010 levels and further
contracted by 3.4 percent in 2012 with revenues amounting to just US$2.276 billion. This is lower than the
US$2.763 billion in 2011 and US$3.445 billion in 2010. Lower earnings from the electronics industry
significantly affected total revenue exports despite increased earnings from BPO companies located at the
Baguio Ecozone.

d. Inflation
Prices of commodities remained relatively stable in 2012 with the regional inflation rate recorded at
3.6 percent, slightly higher than the 3.2 percent in 2011. The up-tick in overall prices was due to the 4.0 percent
average increase in food prices, the 5.2 percent average increase in alcoholic beverages and tobacco and the 3.4

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percent average increase in non-food prices. Ifugao registered the highest inflation rate among the provinces at
7.0 percent as it was the worst affected by the seasonal weather disturbances in the third quarter of 2012 when
the province was isolated due to damages to its infrastructure. Benguet was the only other province that
recorded an increase in overall prices at 3.6 percent from 2.7 percent in 2011. The rest of the provinces
recorded contractions in overall prices.

e. Poverty Incidence
The 2012 poverty estimates released by the National Statistical Coordination Board (NSCB) show an
improvement in the regions poverty situation. The region had a poverty incidence rate for families at 17.5
percent with about 65,516 families living below the poverty threshold. This is lower than the 19.2 percent
recorded in 2009 with about 66,111 families living below the poverty threshold.

For local area poverty estimates, results of the 2009 city and municipal-level Small-Area Poverty
Estimates also released by the NSCB continue to show the disparity across provinces in the region. The results
show that the Baguio-Benguet area, specifically the BLISTT area (Baguio-La Trinidad-Itogon-Sablan-Tuba-
Tublay) retained its primacy as the least poor while three municipalities are among the top 20 poorest
municipalities nationwide. Two municipalities of Abra - Bucloc and Lacub were among the top 20 poorest
municipalities in the country in 2009 with Bucloc considred the second poorest while Lacub ranked 19th. Also,
the municipality of Kibungan ranked as the 15th poorest municipality in the country.

The same estimates show that nine municipalities mostly in Abra have more than half of their
population considered as poor including: Bucloc (77.2%); Kibungan (67.9%); Lacub (67.2%); Sallapadan
(62.0%); Kabayan (58.6%); Tubo (56.4%); Malibcong (55.6%); Bakun (53.7%); and Boliney (50.6%).

f. Regional Millennium Development Goals

Even as the region is likely to achieve many of its MDG targets by 2015, it is greatly challenged in
meeting critical targets related to child education and child and maternal health. Focus must be directed
towards encouraging women, especially expectant mothers to improve their health-seeking behavior to increase
child and mother survival and achieve the critical targets on maternal mortality ratio, the proportion of 1 year
old children immunized against measles, the proportion of fully immunized children under 1 year old, and the
proportion of births attended by skilled health personnel. Also, focus must be directed towards improving the
nutrition and health of children to keep them in school to achieve the critical targets on net enrolment ratio in
primary education, the proportion of pupils starting grade 1 who reach grade 6, the primary completion rate, the
ratio of girls to boys in primary education, and the ratio of girls to boys in tertiary education.

B. Challenges

Unsustained regional economic growth and low employment

generation
In 2012, CARs economy slowed down growing by just 1.0 percent compared to the 6.8 percent
growth of the national economy. CAR also registered the slowest growth among the regions nationwide,
excluding the Eastern Visayas Region which registered a contraction. Our contribution to national gross output
has also dropped to just 1.9 percent compared to 2.1 percent in 2009-2011.

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Table 2.2
Regional Millenium Development Goals

Goal/Target/Indicator Baseline Target Latest Probability

Goal 1: Eradicate extreme poverty and hunger

Target 1 Halve between 1990s and 2015, the proportion of people whose income is less than one dollar a day.

Indicator 1a Proportion of population below national 42.7 21.3 22.8 High

poverty threshold 1991 2015 2012
Indicator 1b Proportion of population below the food 25.5 12.7 10.0 High
threshold 1991 2015 2012
Indicator 2 Poverty gap ratio 4.1 2.1 4.7 Low
2003 2015 2012
Target 2 Halve, between 1990 and 2015, the proportion of people who suffer from hunger.
Indicator 4 Prevalence of underweight pre-school children 17.3 8.7 6.1 High
1990 2015 2011
Indicator 5 Percent of household with per capita energy 58.3 29.2 51.3 Medium
less than 100% adequacy 1993 2015 2003
Goal 2: Achieve universal primary education
Target 3 Ensure that by 2015, children everywhere, boys and girls alike will be able to complete a full course of
primary schooling.
Indicator 6 Net enrolment ratio in primary education 90.3 100.0 75.3 Low
1990 2015 2009
Indicator 7a Proportion of pupils starting grade 1 who 60.5 100.0 64.0 Low
reach grade 6 1990 2015 2010
Indicator 7b Primary completion rate 77.8 100.0 62.8 Low
1991 2015 2010
Indicator 8 Literacy rate of 15 to 24 years old 88.8 100.0 94.8 Medium
1994 2015 2008
Goal 3: Promote gender equality and empower women
Target 4 Eliminate gender disparity in primary and secondary education preferably by 2005 and to all levels of
education no later than 2015.
Indicator 9a Ratio of girls to boys in primary education 0.9 1.0 0.9 Low
1993 2015 2010
Indicator 9b Ratio of girls to boys in secondary education 1.1 1.0 1.0 Medium
1992 2015 2010
Indicator 9c Ratio of girls to boys in tertiary education 1.3 1.0 1.4 Low
2003 2015 2009
Indicator 10 Ratio of literate females to males of 15-24 0.9 1.0 0.9 High
year-olds 1994 2015 2003
Indicator 11 Share of women in wage employment in the 69.2 50.0 64.6 Low
non-agricultural sector 2003 2015 2004
Goal 4: Reduce child mortality
Target 5 Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate.
Indicator 13 Under-five mortality 90.0 30.0 31.0 High
1990 2015 2008
Indicator 14 Infant mortality rate 13.7 4.6 9.0 Medium
1990 2015 2010
Indicator 15a Proportion of 1 year-old children immunized 74.0 100.0 69.4 Low
against measles 990 2015 2010
Indicator 15b Proportion of fully immunized children under 1 82.5 100.0 68.3 Low
year old 2000 2015 2010

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Goal/Target/Indicator Baseline Target Latest Probability

Goal 5: Improve maternal health

Target 6 Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio.
Indicator 16 Maternal mortality ratio 99.0 24.8 0.7 High
1990 2015 2010
Indicator 17 Proportion of births attended by skilled health 80.3 100.0 86.6 Low
personnel 1990 2015 2010
Goal 6: Combat HIV/AIDS, malaria and other diseases
Target 7 Have halted by 2015 and begun to reverse the spread of HIV/AIDS.
Indicator 19 Condom use rate of the contraceptive 38.5 100.0 54.9 Low
prevalence rate 1990 2015 2008
Target 8 Have halted by 2015 and begun to reverse
the incidence of malaria and other major
diseases.
Indicator 21a Prevalence associated with malaria 337.3 0.0 41.0 High
1991 2015 2010
Indicator 21b Death rate associated with malaria 7.6 0.0 0.0 High
1991 2015 2010
Indicator 23b Death rate associated with tuberculosis 15.6 0.0 5.2 Medium
1991 2015 2009
Indicator 24b Proportion of tuberculosis cases cured under 77.0 85.0 79.0 Low
directly observed treatment short course 1999 2015 2008
(DOTS)
Goal 7: Ensure environmental sustainability.
Target 9 Integrate the principles of sustainable development into country policies and programmes to reverse the
loss of environmental resources.
Indicator 25 Proportion of land area covered by forest 4.2 Inc 7.6 Inc
1990 2015 2009
Indicator 26 Ratio of area protected to maintain biological 7.7 Inc 10.5 Inc
diversity to surface area 1990 2015 2010
Indicator 29 Proportion of households using solid fuels for 62.5 Dec 38.3 Dec
cooking 1990 2015 2000
Target 10 Halve, by 2015, the proportion of the
population without sustainable access to
safe water and improved sanitation.
Indicator 30 Proportion of households with access to safe 75.0 87.5 87.9 High
water supply 1996 2015 2010
Indicator 31 Proportion of households with sanitary toilet 75.5 87.8 78.4 Medium
facility 1992 2015 2010
Goal 8: Develop a global partnership for development.
Target 16 In cooperation with developing countries, develop and implement strategies for decent and productive work
for youth.
Indicator 45 Unemployment rate of 15-24 year olds 6.4 Dec 4.6 Dec
1990 2015 2009
Target 18 In cooperation with the private sector, make available the benefits of new technologies, especially
information and communications.
Indicator 47a Telephone lines subscribers per 100 2.0 Inc 2.8 Inc
population 1997 2015 2009
Probability of Achieving the Goal: Low: Pace of Progress is less than 0.5; Medium: Pace of Progress is between 0.5 and 0.9;
High: Pace of Progress is greater than 0.9
Source: NSCB. Data as of November 2012.

The continuing challenge of broadening the economic base of the region to diversify economic
activities and sources of growth and employment remains. Specifically, there is the need to improve or
increase the productivity of strategic industries that will complement the vulnerability of the electronics, mining
and BPO industries. With the region highlighting itself as the Watershed Cradle of North Philippines, it must
continue to promote and develop homegrown industries and enterprises that will use the regions natural
resources in a sustainable manner that are anchored on its rich and diverse indigenous culture. While pursuing
its areas of comparative advantage and specialization, the region will align these to national priorities that are
consistent and that will complement and help realize the regions sustainable development agenda.

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Support must also be given towards supplying the skills requirements and skills availability of key and
emerging industries in the region until 2020. As identified by the Department of Labor and Employment in
updating its Project JobsFit 2020, the identified key industries are agribusiness, tourism, mining, electronics and
infrastructure while the identified emerging industries are BPO/IT (Cyberservices) and metals. This will
require effective labor market information and career guidance counseling, as well as responsive skills training
programs to address if not avoid job-skills mismatch.

The looming integration of ASEAN countries by 2015 also presents challenges as well as opportunities
for local enterprises and industries. The gains as well as threats from open trading through ASEAN integration
must be dealt with. A case in point would be to identify the necessary logistical support and incentives for local
enterprises to consider exporting their products to ASEAN partner countries instead of only producing for the
local economy given the prospects of open trade agreements. Likewise, safety nets that will protect local
industries especially agriculture and manufacturing must be identified given the expected entry of foreign firms
or imported products that will likely compete with locals. Another may be the need to upgrade standards of
local skilled labor and professions to allow locals to compete in the open ASEAN labor market with integration.

Low competitiveness of CAR as investment destination

The region and its component local government units need to continue improving on their
competitiveness to improve the business climate and attract investments to the region. With not one local
government unit in the region making it in the recently released regional competitiveness survey, the challenge
to lessen the cost of doing business remains.

Foremost among these requirements is to improve regional connectivity through a completed

infrastructure backbone including an efficient transport and communications network. This will not only
improve access to production areas to markets that will help develop and make profitable homegrown
enterprises. It will also help in the effective and efficient delivery of social services that will facilitate
inclusiveness of growth. As one of the most vulnerable to disasters both natural and man-made, the region
will also need to continue integrating disaster risk reduction/climate change adaptation (DRR/CCA) strategies
in development plans and programs/projects.

Low probability of achieving critical regional MDG targets

A critical element in the achievement of inclusive growth is that growth must reduce poverty and
facilitate achievement of the Millenium Development Goals. Even as the region is on track to achieving many
of its regional MDG targets, it remains greatly challenged in meeting critical targets related to child education
and child and maternal health. The region will have to provide measures that will ensure equal access to
development opportunities. Foremost among these will be the equal access to employment opportunities, or
access to services including education and training services that will enable Cordillerans to hone and improve
their skills and talents for eventual employment. Social protection measures shall also be expanded and
enhanced to ensure that vulnerable sectors also enjoy and share in the benefits of national and regional
economic growth.

Reversing the deterioration of CARs watersheds

CAR is home to 13 major watersheds and plays a key role in maintaining ecological balance in
Northern Philippines. But with increasing population and the growing demand for socio-economic
development, conflicting demands on the use of land has put a stress on the regions land and other natural
resources. This has been through the conversion of forest land to other uses including agricultural, industrial,
residential and other economic uses. As of 2010, the regions forest cover was estimated at 46 percent which is
below the ideal 60-40 forest to non-forest land use ratio.

The conversion of forest lands to other uses has been identified as a major cause of soil degradation
and soil erosion resulting to forest denudation. This is further complicated by CARs topography
predominantly characterized by steep mountains and high elevation terrain with almost three-fourths of the

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regions land area having slopes of 30 percent and above. This makes the region highly vulnerable to disasters
both natural and man-made. Furthermore, the regions slope and elevation characteristics pose limits to the type
of land development, and consequently the type of economic activities to be developed that are appropriate for
the region. The Cordilleras response is to implement a development agenda that will spur economic growth
that will maintain environmental quality by preserving, protecting and maintaining the quality of the regions
watersheds. The challenge is to restore CARs watersheds and to develop homegrown industries that will use
the regions natural resources in a sustainable manner alongside the protection of its rich and diverse indigenous
culture.

Unfulfilled constitutional provision on the establishment of an

autonomous region in the Cordillera
In reformulating its vision in April 2013, the Regional Development Council reaffirmed its efforts to
reinvent itself, a move spurred when it adopted autonomy as the overarching goal of Cordillera regional
development in 2006. Describing itself as the premier catalyst for achieving autonomy, this declaration
reiterates the RDCs intent to pursue the quest for and the realization of Cordillera regional autonomy as
contained in Article X of the Philippine Constitution.

The region will continue to educate Cordillerans on the bases and ramifications of Cordillera autonomy
towards working out a favorable outcome in a future plebiscite. The region will also continue to capacitate
itself towards assuming the would-be devolved areas of governance under a future autonomous government set-
up. It will also continue to work for the passage of an Organic Act that will be most acceptable to Cordillerans
and that will favorably support the sustainable development agenda of the region.

While waiting for the passage of the Organic Act, the region will sustain its advocacy for changes in
national planning standards of national line agencies that continue to put CAR at a disadvantage in national
budget allocations. It will also continue to increase and facilitate its access to compensation for the use of its
natural resources through its share in national wealth taxes. The region will continue to advocate for and pursue
reforms and amendments to national policies and standards that are clearly unfavorable to the region to bring to
national attention that a one size fits all policy prescription to addressing disparities in regional development
is not compatible with the pursuit of inclusive growth. For growth to be truly inclusive, national government
will have to recognize the peculiarities of indigenous peoples and indigenous cultural communities and
distinctly address these. CAR will continue to take the lead in promoting the important and special role of IPs
and ICCs alongside other cultural groups in the country in the task of nation building.

Likewise, the region will continue to seek measures that will speed up the slow even weak -
implementation of Republic Act 8371 or the IPRA (Indigenous Peoples Rights Act) Law. Seen as a landmark
legislation for all indigenous peoples in the country, the IPRA Law gives recognition to the IPs struggle for
basic human rights. With cultural integrity as the Constitutional and legal framework of the IPRA Law, it is
defined under Rule VI of the IPRA IRR as the holistic and integrated adherence of a particular ICC/IP
community to their customs, religious beliefs, traditions, indigenous knowledge systems and practices and their
right to assert their character and identity as peoples.

C. Strategic Framework
CAR Development Vision

We, the people of the Cordillera, proud of our culture and heritage rooted in
spirituality shall have a truly autonomous region of a unified, enlightened and
empowered citizenry who shall pursue sustainable development where responsibilities
and benefits are shared by all.

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Regional Development Goals

The Updated RDP adopts the same regional development goals of the previous Plan as follows:

a. Social and human development: to ensure that the regions economic growth strategy results to
improved quality of life and total human development of all Cordillerans

b. Sustained economic growth: to diversify the regions sources of economic growth anchored on its
areas of comparative advantage and specialization and gradually increase its contribution to
national growth and development

c. Environmental quality and sustainable use of resources: to protect the regions natural assets
and biodiversity, promote environmental quality and restore ecological balance

d. Cultural integrity and cultural identity: to be a model of IP self-determination and sustainable

development under a social justice, peace and development, and human rights framework

e. Regional integration: to develop an efficient and reliable transportation and communication

network to interconnect provincial capitals and major growth centers and build up the economic
backbone of the region

f. Regional autonomy: to pursue and capitalize on the constitutional provisions embodied in Article
10, sections 15-21 of the 1987 Philippine Constitution for the establishment of an autonomous
region in the Cordilleras as an add-on development edge in advancing, if not fast-tracking regional
socio-economic development

Macroeconomic Targets
The region expects to reverse the slowdown in the growth of its regional gross output during the
remaining Plan period. The Gross Regional Domestic Product is projected to reach between Php149.5 to
Php155.2 billion by 2016 or an average annual growth rate of 5-6 percent from the 2012 level. Growth is
projected to be faster in the agriculture and services sectors even as the industry sector will still contribute the
biggest to gross output. With optimistic forecasts for the services sector, we expect the contribution of services
to increase further up to the end of the Plan period.

Growth in the Agriculture, Hunting, Fishery and Forestry sector will continue to come from the
Agriculture and Forestry sub-sector with the Fishing sub-sector expected to slightly pick up. Specifically, the
projected sources of growth for the sector include the following: (1) increased palay and corn production with
increased irrigation coverage from the repair and rehabilitation of existing irrigation facilities; (2) increased
production of semi-temperate vegetables specifically cabbage, white potato, carrots and Chinese cabbage; (3)
increased organic food production with increased propagation through more farmers practicing organic
agriculture including heirloom rice, other high-value crops such as cutflowers, coffee a nd other agro-
forestry products; (4) harvesting of minor forest products specifically bamboo and rattan as input to wood-
based manufacturing; and (5) improved quality of fish fingerlings and rehabilitation and operation of additional
area cages.

Growth in the Industry sector is expected to still come from the manufacturing sub-sector although at a
slower pace. This is due the still expected slow recovery in the demand for electronics even as this is projected
to pick up by the end of the Plan period. Other sources of growth will come from the following: (1) increased
local manufacturing with increased assistance to MSMEs and the increased opportunities for product exports
specifically the ASEAN market with the prospects of integration, as well as increased production from the
emerging metals industry; (2) increased public and private construction spending; (3) upgrading of lines and
facilities of the Ambuklao and Binga hydropower electric plants that will increase volume of electricity
distribution and consumption and the increasing interest for mini, micro and small hydropower development;

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Table 2.3
Macroeconomic Targets, CAR: 2013-2016

Indicator Targets
2013 2014 2015 2016

Gross Regional Domestic Product by Major Sector (In billion pesos at 2000 prices)*
GRDP 128.502- 134.284- 141.670- 149.462-
129.731 136.866 145.763 155.237
GVA in Agriculture, Hunting, Forestry and Fishery 13.756- 14.375- 15.166- 16.000-
13.889 14.653 15.605 16.620
GVA in Industry 63.471- 66.328- 69.312- 73.125-
64.085 67.609 71.328 75.964
GVA in Services 51.011- 54.327- 57.858- 61.619-
51.495 55.357 59.509 63.972
GRDP and Sectoral GVA Growth Rate (In percent)
GRDP 4.5-5.5 4.5-5.5 5.5-6.5 5.5-6.5
GVA in Agriculture, Hunting, Forestry and Fishery 3.5-4.5 4.5-5.5 5.5-6.5 5.5-6.5
GVA in Industry 3.5-4.5 4.5-5.5 4.5-5.5 5.5-6.5
GVA in Services 5.5-6.5 6.5-7.5 6.5-7.5 6.5-7.5
Employment by Major Sector (In thousand persons)
Agriculture, Hunting, Forestry & Fishery 354 360 365 371
Industry 92 93 96 100
Services 292 300 308 314
Total 738 754 769 785
Job Generation 12 16 14 16
Labor Force Participation Rate (%) 68.5 69.0 69.5 70.0
Employment Rate (%) 94.6 95.0 95.2 95.5
Unemployment Rate (%) 5.4 5.0 4.8 4.5
Underemployment Rate (%) 15.0 14.0 13.0 12.0
Poverty Incidence
Poverty Incidence Rate (Families)(%) 18.4**
*GRDP 2013-2016 targets based on estimates as of July 2012 **2015 MDG Target; Target of halving poverty
is based on revised 1991 poverty incidence rate of families of 36.7 percent based on latest 2012 Poverty
Statistics.

and (4) mining and quarrying that is expected to gradually recover from its negative performance in 2012 with
the resumption of normal operations of the Philex Padcal Mines and continued exploration of Teresa and Gold
mines of Lepanto Mining Company that is expected to increase overall gold production in 2013 up to the end of
the Plan period.

The Services sector is expected to remain robust and increasing its share to regional gross output with
growth coming largely from the Real Estate, Renting and Business Activities, Public Administration and Other
Services sub-sectors. Specifically, the following will contribute to the sectors growth in the remaining Plan
period: (1) optimistic forecasts for the business process outsourcing/information technology industry that is
projected to grow by an average 20.0 percent up to 2016; (2) aggressive and expanded tourism promotion and
marketing specifically with the development of Kalinga as a Tourism Development Area (TDA), efforts to
revitalize Baguios tourism industry as well as continuing international promotion of Ifugaos rice terraces; (3)
increased public service expenditures notably social services with the projected expansion of the Conditional
Cash Transfer Program and overall improved fiscal situation of the national government; (4) credit expansion
including micro-finance lending to MSMEs and increasing competition among local banks with the pending

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deregulation of the banking sector; (5) stable prices to encourage services-related expenditures specifically
hotels and restaurants, health-related and other social and personal service expenditures, education and
education-related services, transport and communication.

With the projected faster growth in the services sector, the sectors share to total employment is
projected to increase to 40.0 percent by 2016. The continued growth in industry is also expected to increase its
share to total employment to around 13.0 percent by 2016. Meanwhile, the share of agricultural employment is
projected to drop to around 47.3 percent by 2016 but which will translate to increased labor productivity with
the projected growth in agricultural gross output.

With the economic activities to be generated by the sectors along with increased employment, the
unemployment rate is projected to drop to 4.5 percent by 2016. And with better quality jobs generated
specifically the transfer of agriculture labor to industry and services, the underemployment rate is projected to
drop to 12.0 percent by 2016.

The projected increase in employment together with the implementation of livelihood and social
welfare programs specifically expansion of coverage of the Conditional Cash Transfer Program in the region is
expected to help us achieve our MDG targets for subsistence incidence and poverty incidence by 2015.

Regional Spatial Strategy

The region will continue to adopt strategies such as the area development planning and industry
clustering towards achieving inclusive growth. This is to take advantage of economies of scale in defining and
developing strategic nodes of economic activities or to clearly define the forward and backward linkages of
industries and enterprises to increase multiplier effects to sustain growth and development. Such strategies
hope to reduce the wide divide in investments, employment and delivery of basic social services to address the
persistent disparity in incomes and in the status of social and human development indicators.

As proposed in the Regional Physical Framework Plan (RPFP) 1994-2023, the region adopts a bi-polar
and dispersed spatial development strategy. The bi-polar spatial pattern is represented by two primary growth
centers that will also serve as the primary growth centers in the region namely: (1) Baguio City representing the
BLISTT (Baguio City-La Trinidad-Itogon-Sablan-Tuba-Tublay) metro area and (2) Tabuk in Kalinga
representing the Eastern Central Cordillera Growth Corridor (ECCGC) that also includes Rizal in Kalinga,
Paracelis in Mountain Province, and Alfonso Lista in Ifugao. Meanwhile, the dispersed spatial strategy is
represented by secondary and tertiary growth centers spread across the region that shall act as service centers
and as catalysts of growth for the more remote parts of the Cordillera.

Regional Spatial Strategy

The region will continue to adopt strategies such as the area development planning and industry
clustering towards achieving inclusive growth. This is to take advantage of economies of scale in defining and
developing strategic nodes of economic activities or to clearly define the forward and backward linkages of
industries and enterprises to increase multiplier effects to sustain growth and development. Such strategies
hope to reduce the wide divide in investments, employment and delivery of basic social services to address the
persistent disparity in incomes and in the status of social and human development indicators.

As proposed in the Regional Physical Framework Plan (RPFP) 1994-2023, the region adopts a bi-polar
and dispersed spatial development strategy. The bi-polar spatial pattern is represented by two primary growth
centers that will also serve as the primary growth centers in the region namely: (1) Baguio City representing the
BLISTT (Baguio City-La Trinidad-Itogon-Sablan-Tuba-Tublay) metro area and (2) Tabuk in Kalinga
representing the Eastern Central Cordillera Growth Corridor (ECCGC) that is expected to take off as center for

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ecotourism with the declaration of Kalinga as Tourism Development Area, with the area also including Rizal in
Kalinga, Paracelis in Mountain Province, and Alfonso Lista in Ifugao. Meanwhile, the dispersed spatial
strategy is represented by secondary and tertiary growth centers spread across the region that shall act as service
centers and as catalysts of growth for the more remote parts of the Cordillera.

The central part of the region with steep slopes of 50 percent and above shall primarily be a
conservation and protection zone, with minimal or controlled development to be introduced to protect the mossy,
pine, old growth forests and NIPAS (National Integrated Protected Areas System) areas within the zone. This
is in recognition of the regions critical role as the Watershed Cradle of North Philippines. The non-protection
areas, mostly located in the lowland areas of Kalinga, Apayao, Mountain Province and Abra shall be developed
for agriculture and agri-industrial activities or settlements owing to the wide expanse of flat lands and rich
agricultural resources in these areas.

Figure 2.1
Hierarchy of Settlements and Development Planning Clusters

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To increase the regions competitiveness, CAR will continue to pursue sub-regional cluster or area
development planning harnessing the potentials for growth at sub-regional aggrupations as identified by
cooperating provinces and municipalities. Among these clusters are: (1) the BLISTT (Baguio City-La Trinidad-
Itogon-Sablan-Tuba-Tublay) Metro Area that serves as the regions major regional and urban center; (2) the
PALMANABA Cluster consisting of the contiguous municipalities of Paracelis, Alfonso Lista and Mayoyao in
Ifugao and the municipalities of Natonin and Barlig in Mountain Province in the eastern area of CAR bordering
with Isabela in the Cagayan Valley (Region 2) as agro-industrial processing and ecotourism sites; (3) the MIB
Cluster consisting of the Mankayan-Ilocos (Cervantes)-Benguet Tri-boundary Cluster for settlement; and (4)
the Applai Cluster (SABATESA or Sabangan-Bauko-Tadian-Besao-Sagada) for activities such as watershed
protection, ecotourism, agro-processing, hydropower supply, education and trading, forest production, cattle
production, and fruits, vegetables and coffee production.

Table 2.3
Identified Secondary Growth Centers of CAR

Secondary Growth Centers Roles and Preferred Economic Activities

Benguet Urban Centers:
La Trinidad-Tuba-Itogon
Metro Bangued:
Bangued-La Paz-Tayum-
Langiden-San Isidro-Pidigan-
Danglas-Pearubia
Apayao UGC:
Kabugao-Pudtol-Luna-Flora-
Santa Marcela
Ifugao UGC:
Lamut-Lagawe-Banaue-
Alfonso Lista-Kiangan
Mountain Province UGC:
Bontoc-Sagada-Besao-Tadian-
Bauko
Sources: CAR RPFP 2004-2034, PDPFPs
Hosts to BPO outfits, special medical facilities, tertiary
education, tourism facilities, food processing, marketing
and shopping services
Primary center for Benguet
Primary service center for Abra
Secondary, tertiary and vocational education, health and
recreation
Medium-scale agro-processing (canning, rice and feed
milling, food processing)
Handicrafts (bamboo crafts, woodworks)
Primary service center for Apayao
Agro-processing industries (rice milling, canning, food
processing)
Handicrafts (rattan crafts, bamboo crafts, woodworks)
Primary service center for Ifugao
Secondary, tertiary and vocational education, health,
recreation
Ecotourism related ventures
Handicrafts and furniture (wood carving)
Agro-production, processing (coffee milling, fruit, tilapia,
coffee milling) and marketing
Primary service center for Mountain Province
Secondary, tertiary and vocational education, health,
recreation
Conventions, corporate retreats and training activities
Research-based activities
Ecotourism related ventures
Small-scale handicrafts (woodcarving, rattan crafts)
Small-scale agro-processing (canning, coffee milling, food
processing)
Western Mountain Province with the northwestern Benguet
municipality of Mankayan as link to Ilocos Sur of Region 1

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The Macroeconomy Updated Regional Development Plan 2014-2016