There are three broad, interrelated development vehicles, as development economist Yujiro Hayami has pointed out. First, there are the mechanisms for coordinating state or government institutions, directing and directing the livelihoods and economic activities of the people.
Second, the voluntary and entrepreneurial incentive mechanisms of the free market where people freely engage in buying and selling in order to earn profits and satisfy their wants and needs. Third, there is the cooperation of communities where citizens adhere to the formal general rules of legal existence, contributing to the peaceful pursuit of economic activities and largely avoiding conflict. Most of us, especially the poorest segments of the population, probably believe in the role and responsibility of government to help create jobs and livelihoods and steer the economy towards growth and development. . The role of private enterprises, large and small up to microenterprises, is also seen as crucial in creating jobs and economic opportunities. Finally, the role of communities is seen only as passive, but they are crucial in recognizing people’s economic activities and their contribution to the economy, thus creating optimism for economic progress.
Imagine places without a strong government. People and communities will continue to live and earn a living and engage in the buying and selling of goods and services. Who sets the rules for what are legal practices? In the absence of government taxation, people will rely on informal rules derived from past community practices, norms, beliefs and traditions. Before the advent of modern nation states, the rules and standards of engagement in markets were set by local community practices.
A notable development challenge in Mindanao is the informal nature of economic activities. One example is informal bartering in the Sulu Archipelago, which takes precedence over maritime trade dating back centuries ago. The maritime area that separates the southern Philippines from Sabah has been an area of ââlargely unregulated economic activity in trade and exchange of goods that has traditionally characterized the region’s economy (Sulu). The region is a place of constant competitive dynamics between the formal regulatory institutions of central government and the informal but indigenous structures that govern the maritime border anchored in the local norms, practices and culture of the place. By implication, maritime traders, in the course of their commercial activities, continuously navigate between formal and informal institutions that mediate and enforce trade rules at the maritime border. This is also true in the larger context of Muslim Mindanao. The families, clans and tribes of Muslim communities in Mindanao are supported by informal institutions that follow social norms, unwritten rules and beliefs.
In the case of Muslim Mindanao, intermittent conflicts have historically been present even in informal institutions of extended families and clans which are supported by the local culture and were shaped during the reign of the sultanates. This panoply of informal institutions is opposed to the formal institutions of governance of the central government, which is supposed to be the third party that sets the rules for impersonal exchanges in the market. This reflects the Muslim societies of Mindanao. They navigate between personal trust in informal institutions shaped by local culture and practices, and impersonal trust (and mistrust) in formal state institutions imposed by Manila. Maritime commerce in the Sulu Archipelago falls in this gray area between what is acceptable in the local culture, and what is illegal and unacceptable under the formal rules of central state institutions.
Nobel laureate Douglass North said societies are usually stuck with habits or standards from the past, resulting in a framework dependent on the path to the future. This is true, but it is more complicated in the case of Muslim Mindanao, where central government structures attempt to impose rules but are continually challenged and contested. Muslim societies in Mindanao struggle between following informal and formal rules; municipal entities against impersonal state entities; and traditional social norms versus market norms. This transition process is complex and can be far from complete in a lifetime. The economic implications of these are higher transaction costs in the market and unpredictable changes in economic rules discouraging long-term investments. This has long-term implications for economic growth and development.
The creation of the new autonomous region of Bangsamoro in Muslim Mindanao (BARMM) offers a new opportunity to enact a legal certainty regime that integrates 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 which will pave the way for the expansion of activities promoting the economic development of Muslim Mindanao in particular, and of all of Mindanao in general.
Mr. Joselito T. Sescon is Assistant Professor in the Department of Economics at Ateneo de Manila University.