Mindanao peace pact to push region’s growth

MANILA, Philippines - The comprehensive peace deal reached between the Philippine government and the Moro Islamic Liberation Front (MILF) is expected to accelerate economic growth in the whole of Mindanao in the next five years, a study from Standard Chartered Bank said.

StanChart, in its latest global research, said: “We believe that a complete peace deal will accelerate economic growth in the ARMM over five years, and that this will spill over to the larger Mindanao island group. We estimate that the Philippines’ GDP (gross domestic product) growth will increase by 0.1 percentage point in the first year following the peace deal, and by up to 0.3 ppt by the fifth year.

StanChart noted that the peace deal could narrow regional disparities and place the Mindanao island group on a faster growth trajectory.

“We calculate how much additional growth can be created if the economic gap between the rural Mindanao island and the more urbanized Metro Manila region narrows over the next five years,” the British bank said.

StanChart estimates that the ARMM’s GDP per capita would jump to P50,000 in 2017 from the existing P26,000, while the rest of the Mindanao region’s GDP per capita is seen to increase to P60,000-P130,000 from P45,000-P90,000.

The same study also noted that ARMM remains a chief agricultural producer.

“We expect the agriculture and fishing sectors to benefit the most in the initial years, with the industry and services sectors picking up subsequently. This is in line with the government’s target to prioritize investment in the power, palm oil and tourism sectors,” StanChart said.

The lack of adequate power, however, could derail economic growth in the region, the bank said, noting that power supply in Mindanao remains inadequate.

Amid this scenario, StanChart said it still anticipates a pick-up in domestic and foreign investment as confidence in the region improves.

“This will facilitate improvement in infrastructure and cost-competitiveness to develop industrial activity,” it said.

StanChart is also expecting some challenges along the way to meet the goal of regional equality. “Economic growth may not be linear, and inequalities do not correct automatically. Structural rigidities may slow progress, and both external and supply shocks can dent long-term plans and growth cycles,” it said.

If the Philippines can improve its distribution of economic growth, we believe the country will be able to meet the government’s long-term growth target (under the Philippine Development Plan 2011-16) of 7-8 percent a year,” it said.