MANILA -- The Philippine island of Mindanao appears to be leaving decades of violence behind, opening up new business prospects.
The island has been mired in conflict since the 1970s, pitting Islamic separatist insurgents against the Christian population and Philippine government. Like all wars, the origins are complicated, but there is resentment among Mindanao Muslims over what they see as Christian encroachment on their territory. Muslims had been living on the island before the Spanish arrived in the 16th century.
In 2012, however, the national government agreed on a preliminary peace deal with the Moro Islamic Liberation Front, an armed group with a lot of influence on the southern island. That pact was followed by more than a year of intense negotiations between the two sides. On Jan. 25, they concluded the process with an agreement that includes disarmament by the rebels.
Presidential spokesman Edwin Lacierda marked the occasion with a statement. "Let us continue to work together, and to each do what we can to contribute to the realization of our shared aspirations for the Philippines: a country where what was once impossible is now, indeed, possible." The task now will be to set up an autonomous administration on Mindanao, with 2016 as the target date.
The threat of violence has not entirely vanished. But as order is restored on the 100,000 sq. km island, development will accelerate as foreign companies scurry to take advantage of the calm.
Mindanao is rich in natural resources, such as gold and nickel, but the security situation has left the place seriously underdeveloped. Sixty percent of the island's 20 million residents live in poverty.
Power shortages are a big problem. The island has only 2 million kilowatts of generating capacity -- less than one-sixth of the island of Luzon, where Manila is located.
Moreover, Mindanao's power output is susceptible to the weather, since hydropower accounts for 50%. More reliable power plants will be needed before the island's economy can really take off.
Enter Mitsubishi Corp., which on Jan. 30 accepted an order from Minergy Coal to build two coal-fired thermal plants on Mindanao. The order's value: roughly $300 million. Minergy Coal is a wholly owned unit of Mindanao Energy Systems, a power generation company established by Cagayan Electric Power & Light.
For the major Japanese trading house, this will be the first power plant project in 15 yearsin the Philippines.
The power plant deal is a milestone for both the Philippines and Japan.
The Philippines used to be described as the "sick man of Asia" due to its economic struggles and chaotic politics. The conflict in Mindanao was one factor holding the economy back, since it frightened off foreign businesses. Meanwhile, neighbors such as Thailand and Indonesia flourished.
Since President Benigno Aquino came to power in 2010, businesses have been giving the Philippines another look. A sense of political stability, initiatives against corruption and financial reforms have all been helpful. And the top priority for the Malacanang Palace -- the president's office -- has been to make peace on Mindanao, believing this would be a catalyst for further national growth.
The deal with Mitsubishi represents a significant step in that direction. For Japan, it is a culmination of considerable effort to assist the peace process.
Japan is one of only a few nations that has built trust with both the Philippine government and the Moro Islamic Liberation Front. In addition to dispatching staff from the Japan International Cooperation Agency to the country, Tokyo invited top members of the rebel group to Japan for training on administrative practices and police procedures.
A number of Japanese companies are hoping to get involved in developing other types of infrastructure on Mindanao. Construction consultancy Chodai is pushing ahead with an industrial park project on the northern part of the island.
Toyota Motor Philippines, the Japanese automaker's unit in the country, is planning to add to existing dealerships on the island. Assuming peace brings prosperity to more residents, other companies will surely look to cultivate Mindanao's consumer market, too.