Moody’s: Peace pact ‘credit positive’ for Philippines

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Monday, March 31, 2014

MANILA -- Moody’s Investors Service has dubbed as “credit positive” last week’s signing of the Comprehensive Agreement on the Bangsamoro (CAB) between the Government of the Philippines (GPH) and the Moro Islamic Liberation Front (MILF).

In a research note, the debt watcher said the agreement will not only ensure political stability but economic growth in what is currently called Autonomous Region in Muslim Mindanao (ARMM), but will be called Autonomous Government of Bangsamoro once the new political entity is in place in 2016.

“The pact also promises to boost growth and investment in what is one of the poorest – although resource-rich – parts of the country,” it said.

Under the agreement, the government and the MILF will have to share the revenues from the resource-rich region as well as on governmental power in the area.

“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,” the debt watcher said.

Moody’s said that although the agreement did not get the nod of all Muslim groups in the ARMM, it added that “the greater stability that it will bring will likely encourage investment in the region and provide scope for the development of more profitable industries, such as mining and agribusiness.”

“In addition, the truce should facilitate greater investor interest across the several provinces in the island of Mindanao,” Moody’s said.

The credit rating agency cited that ARMM has lagged behind the growth of the whole country.

When the Philippine economy grew by 6.8 percent in 2012, Mindanao, as a whole, expanded by 8.2 percent but ARMM’s output is only 1.2 percent.

On the other hand, the government allocated 2.1 percent of its expenses in the ARMM in 2012, but its share in total domestic expansion is only 0.9 percent during that year.

Contribution of ARMM’s share in total output of the country is expected to go up if investments in mining, among others, would pick up, Moody’s said, noting that the region is rich in mineral deposits like lead, zinc, iron, copper, and gold.

The government currently places the value of these resources to about USD 312 billion, a small amount compared to its potential, thus, it has “plenty of scope for a pickup in economic activity.”

The region’s contribution to agricultural output is also expected to grow from the current 35 percent share since it has “rich arable lands and fishing grounds.”

”Greater stability would also allow tourism to develop,” it said.

“The peace deal supports the robust economic outlook for the Philippines, which already has one of the fastest growth rates in the Asia-Pacific region,” it added.

Moody’s projects a 6.5 percents growth for the Philippine economy for 2014, the lower end of the government’s 6.5-7.5 percent target. (PNA)

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