Part Two
There are three broad, closely related vehicles of development, as emphasized by development economist Yujiro Hayami. First is the state or government institutions’ mechanisms of coordination, directional command and guidance of the economic livelihood and activities of the population.
Second, the voluntary and entrepreneurial incentive mechanisms of the free market where people freely engage to sell and buy to earn profits and satisfy wants and needs. Third, is the cooperation of communities where citizens adhere to general formal rules of lawful existence, contributing to peaceful pursuit of economic activities, and largely avoiding conflict. Most of us, particularly the poorer sections of the population, probably believe in the role and responsibility of the government to help create jobs and livelihood and steer the economy to growth and development. The role of private businesses, big and small down to micro enterprises, is also seen as crucial in creating jobs and economic opportunities. Finally, the role of communities is seen as only passive, but they are crucial in recognizing peoples’ economic activities and contribution to the economy, creating optimism towards economic progress.
Imagine places in the absence of strong government. People and communities will continue to live and pursue their livelihood and engage in the buying and selling of goods and services. Who sets the rules of what are legal practices? In the absence of government imposition, people will rely on informal rules seen from past community practices, norms, beliefs, and traditions. Before the advent of the modern nation-states, the rules and standard of engagements in the markets were set by local community practices.
A notable development challenge in Mindanao is the informal nature of economic activities. An example is the informal barter trade in the Sulu archipelago, which takes precedence from maritime trade dating back several centuries ago. The maritime zone that separates Southern Philippines from Sabah has been a space of largely unregulated economic activity in the trade and exchange of goods that traditionally characterize the region’s (Sulu) economy. The region is a place of constant competitional dynamics between the formal regulatory institutions of the central government, and the informal but indigenous structures that govern the maritime border anchored on the norms, practices, and local culture of the place. By implication, maritime traders, over the course of their trading activities, continually navigate between the formal and informal institutions that mediate and enforce the rules of market exchanges in the maritime border. This is also true in the larger context of Muslim Mindanao. Families, clans, and tribes of Muslim Mindanao communities are upheld by informal institutions that follow social norms, unwritten rules, and beliefs.
In the case of Muslim Mindanao, intermittent conflict has historically been present even in informal institutions of extended families and clans that are upheld by local culture and were shaped during the reign of the sultanates. This array of informal institutions is pitted against the formal institutions of governance of the central government, which is supposedly the third party that sets the rules of impersonal exchanges in the market. This mirrors Muslim societies in Mindanao. They are navigating in between personal trust in the informal institutions formed by local culture and practices, and the impersonal trust (and distrust) in formal state institutions imposed by Manila. The maritime trade in the Sulu archipelago sits in this grey area between what is acceptable in local culture, and what is illegal and unacceptable under the formal rules of the central institutions of the state.
Nobel prize winner Douglass North said that societies are usually stuck with habits or norms of the past, resulting in a path-dependent setting towards the future. This is true, but it is more complicated in the case of Muslim Mindanao, where central government structures are trying to impose rules but are continually contested and challenged. The Muslim Mindanao societies struggle between following informal vs. formal rules; the communal vs. impersonal entities of the state; and the traditional social norms vs. market norms. This process of transitioning is complex and may be far from being completed in a lifetime. The economic implication of these are higher market transaction costs and unpredictable changes of economic rules discouraging long-term investments. This has long-term implications to achieving economic growth and development.
The establishment of the new Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) offers a renewed opportunity to enact a legal security regime that accommodates both informal and formal institutions into the governance structure of economic activities, including trade. In doing so, it aims to create an initially fragile but peaceful climate that will pave the way towards expanding activities that promote economic development of Muslim Mindanao in particular, and the whole of Mindanao in general.
Mr. Joselito T. Sescon is Assistant Professor at the Department of Economics of Ateneo de Manila University.