On December 10, 2020, the Caraga project was selected as one of three initiatives to be showcased for global impact at an international conference hosted by the Institute for Strategy and Competitiveness, Harvard Business School. The report outlined a framework for a new model of economic, social, and environmental development that offers an alternative to past approaches, which historically have resulted in development failure and environmental degradation.

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Initiating economic development in undeveloped regions rich in natural assets but lacking investment and prior business operations has historically been an occasion for exploitation and development failure.  External investments and the introduction of advanced business interests in such regions have historically not improved the economic and social conditions of the local population or preserved environmental quality and long-term sustainability of natural assets.  

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The new development model presented at HBS integrates shared value, cluster strategy, international investments, and blockchain technologies to create a practical alternative to the models of the past. The development plan starts with international investment and business development in three sustainable agricultural sectors--forestry, fiber, sugar, and coconut. These sectors were selected because the raw materials are plentiful and renewable; the workforce skills for these operations are close to the existing skills of the local indigenous people; and capital inputs are relatively small; and the ROI is quick and substantial.

In particular, the presentation focused on the launch of a sustainable forestry/timber business cluster in the Caraga Region of the Philippines.

General Opportunities and Challenges in Caraga

According to the World Bank, the Caraga region of the Philippines represents one of the largest growth markets for international development in the fast-growing Asia-Pacific region. World Bank recommendations for unlocking the potential of Mindanao centers around three areas, namely:

• Raising the productivity of Mindanao’s farm, forestry, and fisheries sector and improving its connectivity and access to local and global markets;
• Investing in health, education, skills training, and social protection for the poor; and
• Addressing the drivers of conflict and strengthening institutions in conflict-affected areas.

The Caraga indigenous timber cluster formation addresses these three targets by increasing forestry productivity, investing in workforce education, and training, and creating conflict-resolution frameworks and legal structures in the region among the indigenous tribes and leaders.

History of Forests and Local Raw Material Supply in the Region

The primary rainforests of the Philippines have been denuded by 97%.  Of the remaining 3%, 97% of the remaining primal forests are in the indigenous areas.  

With the shift from logging in the primary forests to ITPs, the Philippine government invested in the creation of tree plantations across Caraga, including some investments in the indigenous areas.  The majority of the indigenous ITPs timber is now mature; however, the plantations have not given rise to an industry cluster in the ancestral domains due to a lack of capital, lack of timber expertise, and lack of fair-trade pricing and sales operations.

The computation of volume of trees from plantation areas is based on the following formula:

Volume = Area/10(rotation/cutting cycle)multiplied by 60 (average volume per hectare then multiplied by 0.70 (recovery factor)

Using that formula, the region’s overall capacity to supply logs annually on existing, non-indigenous plantations is estimated at261,998.00 cubic meters. The province of Davao Oriental contributes the highest production in the Region at 113,494.00 cubic meters with large volume coming from the Private Tree Farms (PTPOC) covering 39,205.00 cubic meters.

As of 2020, Indigi has executed formal concession agreements for exclusive development of an initial 44,000 cu m of softwood on two CADTs.  This timber is geotagged, inventoried, purchase price set, and POs with timber companies are in place.  Total estimated timber in the1.2M acres of timber currently under treaty with GPSS is still difficult to estimate, but the volume and value are significant.  

Emerging Caraga Indigenous Timber Industry

The opening of the indigenous lands of Caraga to the formation of a timber cluster with domestic and global markets aligns with both the national and regional cluster strategies of the Philippines and the Caraga region. As noted in the section above, the exact scale of operations and the volume of timber available is currently not calculated, but based on sample inventories and the extent of the area forests and plantations, the potential of the cluster to become a source of sustainable shared value economic growth is significant.  

The emerging timber cluster in the indigenous lands of Caraga consists of three principal operations—cultivation  of stock on tree plantations (ITPs); inventorying/geotagging, harvesting and transporting certified timber/logs for sales; and the timber exchange where timber products are purchased from indigenous suppliers, entered into blockchain ledges, sorted and stored, and sold to domestic and international buyers.  

The cluster is fed by global capital sourced by Indigi, business development and marketing services provided by GPSS and Indigi, and domestic and global timber companies who purchase the supply.  These global timber companies are sourced by GPSS Global Services.

Government agencies, education/training, and the new indigenous union and tribal councils provide policy and governing frameworks and support for the cluster.  As the cluster grows, local retail, transportation and financial services will also grow and development.

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For a copy of the complete presentation and case study, please make your request to stmassey@globalactionplatform.org.

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