Poverty in Mindanao

With Mindanao again roiling in strife, the meat of broadsheet reporting has spotlighted the conflict’s headline-making aspects: the sprays of bullets, the casualties, the political players. This essay adds an economic dimension to the coverage by investigating the violent conflict-chronic poverty link in the region.

Despite compelling anecdotal evidence of conflict causing poverty,
there has been a critical lack of empirical inquiry into this causal
relationship. (Goodhand, 2001). Specifically, research attention
increasingly focused on chronic poverty has not resulted in empirical
tests of whether violent conflict makes chronic poverty more likely.
This paper attempts to be one of the first steps in filling the
research gap.

Who are the chronic poor?

Discerning between chronic and transient poverty has vital policy
implications. In the context of conflict, interventions needed by the
chronic poor may differ from those required by the transient poor
(Reyes, 2002b). Moreover, a refinement of targeting criteria for both
groups has budget implications, increasing spending efficiency on
anti-poverty programs.

The chronic poor are those who experience significant deprivations over
a long period of time. Their deprivation is passed onto the next
generation (Hulme, 2002). They are also least able to benefit from the
“trickle-down” effect of economic growth (Reyes, 2002b; Hulme, 2002).
Thus, growth-enhancing strategies are insufficient; active anti-poverty
interventions are also necessary to allow these groups to extricate
themselves from poverty and participate in economic growth.

Defining conflict

Following the Correlates of War (COW) datasets (Sarkees and Singer,
2001) and Gleditsch et al (2002), violent conflict in this paper is
identified as civil war where there is sustained combat between the
armed forces of the government and forces of at least another entity.
The result of the armed conflict is at least 25 battle-related deaths.

Evidence shows that Mindanao is wracked both by conflict as well as
chronic poverty. Reyes (2002b) reports that out of the five
administrative regions in Mindanao, ARMM, Central Mindanao and Northern
Mindanao have the highest prevalence of chronic poverty in the country.
In addition, seven out of the ten bottom-ranked provinces on the Human
Development Index (HDI) and six out of the ten worst performers on the
Quality of Life Index (QLI) are Mindanao provinces. The HDI is a
composite index of life expectancy, functional literacy, and real per
capita income. The QLI is a composite index of number of births
attended by a medical professional, under-five nutrition, and
elementary cohort survival rate.

Framework

In identifying the cost of the ongoing Mindanao conflict on human
deprivation, the key variable of interest is individual or household
welfare. Welfare indices such as the HDI and the QLI attempt to
quantify welfare outcomes directly.

Alternatively, welfare may be measured indirectly by analyzing
consumption levels. This assumes that well-being results from
consumption of goods and services. Poverty is typically measured by
comparing actual consumption levels to a standard poverty line.
Aggregate poverty is defined as the sum of two components: the
transient and the chronic components (Jalan and Ravallion 1998).
Transient poverty results from variations in consumption, while chronic
poverty results from low average consumption over a period. Chronic
poverty may be analyzed within the framework of prolonged material
deprivation or consumption inadequacy.

We interpret violent conflict as a shock resulting in a drain on
provincial resources such as the labor force, infrastructure and
communications facilities (Collier 1999). Restoring such assets may
entail higher transactions costs due to insecure property rights and
difficult contract enforcement. Public expenditures may be diverted
from output-enhancing activities to military spending. Private agents
may transfer assets out of the region, causing an exodus of factor
endowments.

This negative shock causes consumption variability as households adjust
their consumption levels. The initial change in consumption will cause
some households to fall below the poverty line. This increase in
aggregate poverty may be interpreted as due to the rise in its
transient component. However, once adjustment is complete, consumption
levels may be permanently lower as expected resources spread over
remaining lifetimes drop due to the negative shock. Thus, after
adjustment, only the impact on the chronic component of aggregate
poverty remains.

Methodology

Using a simple difference of means test, we compare provinces with and
without conflict using various measures of resources and welfare from
1988 to 2000. Following Barandiaran (2002), the groupings are as
follows. Peaceful provinces are: Bukidnon, Camiguin, Misamis
Occidental, Misamis Oriental, Compostela Valley, Davao del Norte, Davao
Oriental, Agusan del Norte, Agusan del Sur, Surigao del Norte, and
Surigao del Sur. The assumed conflict areas are: Basilan, Zamboanga del
Norte, Zamboanga del Sur, Davao del Sur, Sarangani, South Cotabato,
Sultan Kudarat, Lanao del Norte, North Cotabato, Sulu, Tawi-tawi, Lanao
del Sur, and Maguindanao.

The key variables of interest are the HDI and the QLI, which we use as
proxy variables for chronic poverty. We also include resource variables
relating to human capital and access to social services: access to
potable water, access to sanitary toilets, number of rural health units
per 100,000 population, total hospital bed capacity per 100,000
population, elementary cohort survival rate, and functional literacy.

How have conflict provinces fared?

Pooled results reveal significant differences for HDI and QLI between
provincial groups, with the conflict group faring worse than the
non-conflict group. The differences in HDI were significant for all
years, while the differences in QLI followed the same pattern of
results as other health and education indicators: pooled results are
generally significant, while yearly tests are not always significant.
As key determinants of chronic poverty (Jalan and Ravallion, 1998),
significant differences for health and education outcomes between
conflict and non-conflict provinces imply that provinces in conflict
are likely to experience higher rates of chronic poverty than provinces
at peace.

Massive public investments in infrastructure and social services in
Mindanao between 1993-97 may explain the significance of pooled results
(Barandiaran, 2002). This could have partially reversed the impact of
the long-standing conflict on resource and welfare indicators during
this period. The difference of means test does not allow us to control
for these effects.

1 Regional breakdown of Mindanao in the study by Reyes
(2002) does not include Region 13, the CARAGA Administrative Region,
which was officially created in 1995. Provinces under CARAGA were
previously from Regions 10 and 11.

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