Philippines Set to Sign Peace Deal with Rebels, Attract Investment Inflows in Mindanao Region

The Philippine government is set to sign a long-awaited peace deal with the Moro Islamic Liberation Front (MILF) next week that will end more than 30 years of conflict in the country’s southern Mindanao region.

The landmark political settlement between Manila and the MILF is expected to bring a sustainable end to one of Asia’s deadliest protracted civil wars – estimated to have claimed more than 150,000 lives since hostilities began in the mid-1970s.

Muslim Mindanao, also commonly referred to as the Autonomous Region of Muslim Mindanao (ARMM), is simultaneously the most resource-rich and impoverished region in the Philippines.

Resting atop vast deposits of gold, oil, bauxite, copper and chromite valued in the trillions of U.S. Dollars, protracted conflict in the Southern Philippines has effectively stunted Mindanao’s development by deterring foreign investment in the region.

Despite producing the vast majority of the Philippines’ agriculture output and possessing most of the country’s mineral deposits, Muslim Mindanao currently contributes less than one percent of the Philippines’ gross regional domestic product (GRDP). Encompassing the second-largest land mass in the country, Mindanao’s contribution is dwarfed by Metro Manila’s nearly 36 percent GRDP.

According to the World Bank, “One reason for the persistence of low growth in conflict-affected countries may be the difficulty of reassuring investors, both domestic and foreign. Although there is often a post-violence surge in economic activity, it is unlikely to be investment-based activity that reflects renewed investor confidence. [Trade loss] can persist even 25 years after the onset of conflict. While effects are smaller for less severe conflicts, it still takes on average 20 years for trade to recover to pre-conflict levels.”

Some believe, however, that Mindanao’s economic recovery can be expedited by the planned economic integration of the Philippines into the ASEAN Economic Community (AEC) next year.

After the peace deal is signed next week, analysts expect the Mindanao region to serve as a springboard for the forging of closer economic ties between the Philippines and other members of ASEAN and the Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA).

Namely, Muslim Mindanao provinces’ close proximity to Malaysia, Indonesia and Brunei should enable rapid investment inflows and the export of goods once a sustainable and lasting peace has been reached.

The political settlement expected to be signed next week will require the MILF to disband its 12,000-member guerrilla force and share political power with the central government in the country’s Muslim south. According to sources close to the peace process, negotiations are being carried out with the expectation that the Philippines’ parliament will additionally pass a law later this year that will create a self-ruling Muslim entity in the ARMM called the Bangsamoro with the power to police, legislate and levy taxes.

The establishment of a Muslim-affiliated government should subsequently expedite the development of an Islamic banking sector in Mindanao, and attract increased FDI inflows from predominantly Muslim nations such as Indonesia, Malaysia and the Gulf states.

The Muslim Mindanao region has been relatively peaceful for several months after negotiations intensified last year, but several splinter Islamist militant groups remain – some with links to Al-Qaeda. Despite this, a political settlement with the MILF will be the first step towards lasting peace and sustainable development in the region.

If a law creating the Bangsamoro is approved, the Mindanao region will elect its own parliament in May 2016 to coincide with the nation’s next presidential election for Aqino’s successor.

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