Good prospects for Mindanao


  • Business
  • Saturday, 20 Oct 2012

Streamers and banners lined the dusty road to MILF camp Darapanan on the eve of the historic peace pact signing ceremony. Both Sabah and Mindanao will reap the peace dividend in the long-term as stability returns to the border areas and development takes place, benefiting both sides of the border.

THE pictures splashed over the newspapers says it all, the weary people of the Autonomous Region in Muslim Mindanao (ARMM), were in jubilant mood as representatives of the Philippine government and the largest of the separatist movements, the Moro Islamic Liberation Front (MILF), signed a peace framework agreement earlier in the week in Manila to end 40 years of conflict.

The agreement is by no means the end of the process, which has seen several false dawns before. According to reports, a comprehensive agreement will be signed at the end of the year.

The process will culminate in 2016 in the election of a regional parliament and the replacement of the ARMM with a Bangsamoro region encompassing the current four provinces.

Between now and the future, the process will likely hit a few bumps, which is why expectations must be tempered by a large dose of pragmatism.

According to regional political analysts, all sides must acknowledge that factions among the Bangsamoro may try to scuttle the process and that the constitutional process to form the autonomous region may stall in the Philippines Congress.

For Sabah, there must be acknowledgement that the refugee problem will not go away overnight since many of the refugees have settled in the state for decades and some may find it difficult to uproot themselves and return.

But both Sabah and Mindanao will reap the peace dividend in the long-term as stability returns to the border areas and development takes place, benefiting both sides of the border.

Nevertheless, observers view the framework agreement, which consists of 10 points including a defined autonomous region, rights to raise revenue besides other defined powers, positively but cautiously.

Manila-based Citigroup Inc economist Jun Trinidad says in an Oct 11 report that the local economy will only start to develop when the peace process has successfully transitioned to a more stable regional government.

“Over time, we expect MILF leaders to seek to transition into mainstream' politics with more political autonomy, while disavowing the use of violence and terrorism in pursuit of their quest for self-determination. We believe that only after such a transition will Mindanao be able to improve its reputation amongst investors,” he says.

Trinidad says the Bangsamoro region could eventually be an attractive destination for local and foreign investors in support of infrastructure and capacity building.

“If the peace agreement leads to stability, we expect the Philippine government, foreign governments involved in brokering the peace agreement, and multilateral/bilateral agencies to begin planning, implementing and eventually committing financial resources in support of basic rural infrastructure from farm to market roads, irrigation facilities, bridges and ports,” he says.

Analysts at Fitch Ratings, in an Oct 9 report, says a lasting peace deal will be supportive of both public and private sector investment in the area, and may boost the investment rate for the economy as a whole, supporting economic growth.

“Stability in the region would help ease foreign investor concerns regarding political risk, and may bolster domestic confidence,” they say, adding that gross domestic product per capita in the ARMM is one quarter of the level in the Philippines as a whole.

However, they say a permanent deal is not a certain outcome, and other constraints on investment growth still need to be addressed such as a weak overall investment climate and low fiscal revenue base.

“The ramifications of a possible Mindanao settlement for investment cannot be looked at in isolation,” they say, pointing out that sustained increase in the investment rate may require improvements in the business environment beyond those already achieved by the Benigno Aquino administration, as well as a greater focus on more substantial economic and fiscal reform.

Positive first step

For the people of Sabah and its political establishment, the agreement will herald the beginning of another process, the repatriation of the thousands of Filipino refugees who have streamed across the porous borders between Malaysia's easternmost state and Mindanao, as conditions improve.

United Pasokmomogun Kadazandusun Murut Organisation (Upko) secretary-general Datuk Wilfred Tangau tells StarBizweek that the signing of the framework agreement is a major step towards a lasting peace.

“Yes, there are factions within the Bangsamoro community, this is expected and normal but what is crucial is how the peace will be maintained as this time the region will be policing themselves,” he says.

Tangau says the peace process may encounter obstacles along the way but that stakeholders will be convinced when momentum is built up via how fast positive results can be seen on the ground.

“When investors see that things are becoming more settled and there is law and order, I'm sure there will be development,” he says, adding that this in turn will persuade the refugees who have been in the state, some of them since the 1970s, to move back.

Sabah Progressive Party's (SAPP) state representative for Luyang Melanie Chia, a former state assistant finance minister, is cautious of the outlook for peace since other factions were not part of the deal.

“Ideally, we will want to see peace in Mindanao, but if the different Moro factions are not united, then the situation will not have changed much,” she says.

Chia says Malaysia's “prosper thy neighbour” policy in regards to the Mindanao conflict was adopted in the hope that peace will subsequently bring development, which then will lure Filipino refugees back.

“It is our hope that the refugees will return when the situation improves,” she says.

Rule of law

Understandably, investors will be concerned about security, especially when the waters between Sabah and Mindanao have seen quite a few cases of piracy while “rido” or clan feuds, is still practised among certain sections of the Bangsamoro community, with the Maguindanao massacre of November 2009 being one of the deadliest.

Tangau says a lasting peace will help to improve business sentiments, not just in the conflict areas of southern and western Mindanao, but also Sabah. “Once peace is certain, shipping between the two areas will boom and there will be more connecting flights,” he predicts.

Right now, there is already a considerable amount of trade going on, both formally and informally, across the borders, as the people who have lived and fished the waters off Sabah's and Mindanao's coasts share historic and cultural roots.

“There are no official data on such trade, but there is quite a bit of barter trade going on in Kudat (on Sabah's northern coast) and as the security situation improves, we expect Sabah's tourism industry to grow further while we also expect that as jobs are created in the Bangsamoro region, the refugees will eventually return,” Tangau says.

Malaysian investors may be the first to flock to the Bangsamoro region owing to the Malaysian government's role since 2001 as a facilitator in the process. Felda Global Ventures Holdings Bhd group president and chief executive officer Datuk Sabri Ahmad was quoted by Reuters as saying that the company is interested in oil palm cultivation.

A joint panel which has also been set up to assist the region via socio-economic measures and projects focusing on madrasah education, the halal industry, a pilgrimage fund, Islamic banking as well as education programmes.

Furthermore, Prime Minister Datuk Seri Najib Tun Razak, who was in Manila to witness the signing of the framework agreement, has reaffirmed the support of Malaysia for Philippine efforts to create more jobs and other economic opportunities in Mindanao.

The opportunities include those in the palm oil and rubber industries while as economic activity picks up, there will be need to upgrade existing infrastructure and build new ones.

While it is still early days, Sabahan investors who will be more familiar with Mindanao, will likely be at the forefront of Malaysians looking for opportunities in the Muslim autonomous region, its surrounding islands and elsewhere in Mindanao.

SAPP's Chia says the Brunei-Indonesia-Malaysia-Philippines East Asia Growth Area (BIMP-EAGA), of which the state is an integral part, will certainly see a spurt of development should the region become stable.

Launched in 1994, BIMP-EAGA's key industries include food, fisheries, tourism, transport and shipping and, energy.

“Mindanao remains largely unexploited, the opportunities are there, but it has to be weighed against the circumstances,” Chia says.

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