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  • Action for Economic Reforms

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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