The Philippines: An Island Shaken by Terrorist Fears

In Mindanao, business struggles to survive as tension mounts

From afar, the lush island of Mindanao in the Philippines looks destined to become a new hot spot in the U.S.-led war on terrorism. For 18 months, the Philippine military has been chasing members of Abu Sayyaf ("bearer of the sword"), a kidnapping ring that has had past contacts with Osama bin Laden's terrorist network and that has killed a string of hostages--including a U.S. tourist whose headless remains were identified in early October. The group is still holding an American missionary couple. Members of a larger radical group, the pro-independence Moro Islamic Liberation Front (MILF), fought with Afghanistan mujahideen a decade ago. A team of U.S. military personnel is about to arrive in the Philippines to advise the country's army on how to eradicate the extremists.

On the ground, however, fears that Mindanao is about to erupt in jihad appear very overblown. Rallies in support of bin Laden and the Taliban have been surprisingly small. Philippine and Western security experts say assistance from international terrorist groups has actually dwindled in recent years to groups such as Abu Sayyaf-- whose main interest seems to be extracting ransom from hostages, rather than politics.

LOFTY GOAL. The big news in Mindanao is that the government and Islamic leaders have called a cease-fire and are trying to make peace. On Oct. 16, both sides met in Kuala Lumpur in hopes of negotiating a treaty within a year. Another faction, the Moro National Liberation Front (MNLF), laid down its arms five years ago. Now, the groups are gearing up for landmark elections on Nov. 26 to choose a government for the new Autonomous Region of Muslim Mindanao, comprising four provinces and 7 million of Mindanao's 18 million people. That doesn't mean lawlessness won't remain a problem. But if the peace holds, a decades-long dream of self-rule in one of Southeast Asia's most volatile regions could come true.

It's an ambitious goal. Few places in Asia need peace more desperately than Mindanao, whose deep-rooted malaise makes it a case study of how poverty and political desperation can foster violence. While East Asia boomed from the 1970s to the mid-'90s, Mindanao, 800 km south of Manila, was in upheaval. At the root of the unrest: grinding poverty, especially among the Muslim majority. There are pockets of wealth in major cities, but the money is largely in the hands of old Spanish families or the ethnic Chinese. Overall, 44% of the population lives on less than $400 a year, according to the Asian Development Bank. Of the Philippines' 24 most impoverished provinces, 16 are in Mindanao. "The basic problem is socioeconomic," says Faroq Hussain, a former guerrilla leader and now a candidate for governor of the autonomous region. In Davao City, business consultant Cesar B. Cuyugan Jr. agrees. "As long as there is discontent among Muslims in Mindanao," he says, "there will be Abu Sayyaf or groups like it. The best business in Mindanao will be kidnapping and gun-running."

HAPPIER DAYS. For a period after the 1996 peace accord, forged by former President Fidel V. Ramos, there was optimism: USAID and other development agencies began building highways and airports. Investment in everything from palm-oil plantations to tuna-processing plants rose sharply. Jumbo jets filled with sashimi roared off to Japan. New air routes and high-speed ferries opened to Malaysia and Indonesia.

Then came the Asian financial crisis, which caused a sharp currency devaluation and squelched property investment. El Niño and the worst drought in two decades hit at about the same time. Political tensions boiled over in April, 2000, when Abu Sayyaf kidnapped a group of tourists from a diving resort in nearby Malaysia. Two months later, then-President Joseph Estrada--on bad advice from military hawks--launched a campaign against the MILF, even as the army skirmished with the Abu Sayyaf to free hostages. In May, Abu Sayyaf snatched a group of tourists from the island of Palawan. That savaged the burgeoning convention business in Davao City, even though it is hundreds of kilometers from Abu Sayyaf redoubts and relatively safe.

The instability also has caused investment to plummet. A $26 million banana plantation in Magindanao, a stronghold of the MILF, is a case in point. Owned by Paglas Corp., it is regarded as a model of development, employing 2,000 people, most of them MILF members or sympathizers. It exports $15 million in fruit annually to markets from Japan to the Middle East. Investors include U.S. agribusiness giant Chiquita Brands International Inc. But due to the military attacks on the MILF last year, Paglas postponed plans to double capacity. Because of economic uncertainty, another large banana grower, Lapanday Foods, froze plans to convert a banana plantation into an industrial park.

Fallout from the September 11 attacks on the U.S. has worsened the island's pain. For safety reasons, the Japanese government now prohibits tour operators from selling packages to Mindanao. Occupancy at Davao City's deluxe 245-room Marco Polo Hotel--which had finally begun to recover from the 1999 kidnapping scare--has suddenly dropped from nearly 60% to about 50%. "The problem is the perception that Mindanao is torn by war," says Charles E. Feibel, who runs the USAID-funded Growth with Equity in Mindanao program and has lived on the island for a decade. "Investors won't come and take a look."

GOOD FISH. If peace somehow can be achieved, however, Mindanao's prospects could brighten. The success of the island's tuna industry, the result of steady investments in the 1990s in the city of General Santos, illustrates the potential. The industry employs 80,000 people and generates $1 billion a year in local income. Plans by a Malaysian business group for a $56 million palm-oil plantation and mill that would employ 50,000 are on the drawing boards. A $125 million international airport capable of handling 1.3 million passengers a year will open in Davao City in 2002. Tourism officials are trying to get Japanese and Chinese carriers to start service. "If we can push ahead with economic development, we can solve our problems," says plantation founder Ibrahim P. Paglas III, now a candidate for governor of the autonomous region.

None of this will happen, however, as long as Mindanao is viewed as a hotbed of radical, violent Islam. It's impossible to say how long the recent burst of goodwill will last--especially given the U.S. military assault on Afghanistan. The MILF "will be more sympathetic to the Taliban, especially if thousands of innocent civilians are killed," says a senior Philippine government official. However, the MILF is not pulling out of peace talks. It still is possible to bring stability and prosperity to this troubled island.

By Mark L. Clifford in Davao City

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