THE Comprehensive Agreement on the Bangsamoro (CAB) between the Philippine government and the Moro Islamic Liberation Front (MILF) should be credit-positive for the country as peace should bring about greater stability necessary for sustaining economic growth, ratings agency Moody’s Investors Service said.
Moody’s said the peace deal itself will encourage investment in the region and provide scope for the development of more profitable industries, such as mining and agribusiness.
Moody’s expects the economy to grow by 6.5 percent this year.
Signed on March 28, the peace deal between the government and the MILF seeks to establish a self-governed entity in Mindanao that would replace the existing Autonomous Region in Muslim Mindanao (ARMM).
The pact covers security, revenue sharing, implementation of governmental powers and a road map for a smooth transition to the new arrangements. It also aims to establish, by the next general election in 2016, the Autonomous Government of Bangsamoro which will become the new political entity that will govern the region.
Moody’s said the signing of the peace deal ends several decades of armed insurgency in the region and promises to boost growth and investment in what is one of the poorest—although resource-rich—parts of the country.
According to Moody’s, the region is rich in natural resources, particularly mineral deposits such as lead, zinc, iron, copper and gold. These mineral deposits are valued by the government at $312 billion, providing plenty of scope for a pickup in economic activity.
“The island already supplies 35 percent of the country’s food output, but its rich arable lands and fishing grounds mean there’s potential to increase that further.
Greater stability would also allow tourism to develop,” Moody’s said.
It said the agreement should facilitate greater investor interest across the island of Mindanao, which has fallen behind in terms of human and economic development and has not benefited from the Philippines’ robust growth over the past few years.
In 2012, regional gross domestic product (GDP) in the ARMM grew by a meager 1.2 percent in real terms against 8.2 percent for Mindanao and 6.8 percent for the country as a whole, Moody’s said.
Per capita GDP was at P27,800 ($620), just a fraction of the P68,700 ($1,530) recorded for Mindanao and the P110,300 ($2,460) recorded for the country as a whole, it said.
National government spending in the ARMM is disproportionate to its contribution to the economy, Moody’s said. “Although the ARMM comprised only 0.9 percent of the country’s total output in 2012, it accounted for 2.1 percent of the national government’s budgeted expenses that year,” it said.
“Although many peace deals with Muslim separatists have fallen through over past decades, the latest agreement has a better chance of success owing to the more favorable terms it affords the Bangsamoro, including greater fiscal autonomy,” Moody’s said.