By Manuel Mogato and Rosemarie Francisco
SULTAN KUDARAT, Philippines (Reuters) - At a nondescript two-storey building in the town of Sultan Kudarat, the future of the Philippines' strife-torn southern region of Mindanao is taking shape, one accountancy class at a time.
Dozens of former fighters in Mindanao's decades-old Islamic insurgency are learning new skills - from book-keeping, to computer literacy and law - that are crucial to the long-term success of a landmark peace deal signed in Manila on Monday.
"Every student comes out of this institute as a new person," said Zamin Unti, a 55-year-old former Moro Islamic Liberation Front (MILF) rebel who teaches three-day crash courses at the Bangsamoro Leadership and Management Institute.
Turning fighters into laptop-wielding administrators of the new autonomous Bangsamoro region is one of the challenges facing Mindanao as it moves beyond euphoria over the deal, which ends a four-decade Muslim insurgency that killed 120,000 people in Asia's biggest Catholic nation.
Investors will also need to be convinced that governance will improve in an area scarred by corruption and poverty.
Ravaged by conflict, the southernmost of the main Philippine islands has never been able to capitalise on an estimated $312 billion in mineral wealth or develop abundant agricultural land that already supplies two-fifths of the country's food. It lies near Malaysia and Indonesia and is flanked by the rich fishing grounds of the Sulu Sea and the Celebes Sea, with the Pacific Ocean to its east.
Businesses are eager to enter Mindanao as the Philippines savours its biggest investment boom since the 1997 Asian financial crisis with President Benigno Aquino riding a strong economy and lofty popularity ratings. But many are holding back until prospects for a sustainable peace become clearer.
What also makes investors cautious is a series of past agreements between the government in Manila and rebels from the Moro tribes that rapidly fell apart, including a 2008 deal struck down by the Supreme Court and which led to a surge in violence. A peace deal in 1996 looked good on paper but failed due to weak implementation.
"I don't think they are going to rush in," said Gregory Edwards, managing director of Australia's RED 5 Limited, which operates the Siana gold mine in Mindanao's Surigao del Norte province.
"The security angle alone is not going to do it, there's going to be other elements, but it certainly helps," he said, adding investors would look at issues such as regulation and corruption before committing to projects in Mindanao.
LESSONS FROM NORTHERN IRELAND
Aside from a lack of competent administrators, the transition to a new autonomous government is likely to be threatened by "spoilers" ranging from reluctant politicians in Manila to breakaway groups of radical Islamic fighters.
Both sides must also overcome decades of mistrust that have built up in the region between Muslims and minority Christians and the likely unwillingness of rebels to give up their weapons while peace remains fragile.
"Until all interested parties have time to digest the Mindanao settlement issue, it is hard to assess its long term consequences," said Scott Harrison, managing director of Pacific Strategies and Assessments.
Government negotiators say the peace process in Northern Ireland was a model for ending the Mindanao conflict. If so, they will know that persuading the Irish Republican Army to lay down its guns was one of the thorniest barriers to peace.
It could be an even harder proposition in Mindanao, which is saturated with guns held by breakaway Islamic factions, feuding clans and Communist rebels waging their own insurgency.
"We are not ready yet to surrender our guns because there are too many weapons out there in the hands of even ordinary farmers," Commander Abdul, a 50-year-old guerrilla, told Reuters while manning a checkpoint leading to a rebel base.
While a "transition commission" has until 2015 to present a final law to Congress, the two sides only have until December to iron out details such as the new administration's fiscal and legal powers, and the decommissioning of the MILF's weapons.
Much rests on Aquino's ability to control Congress, where his allies now dominate both houses, but mid-term elections next May could upset the favourable political balance.
Posters and placards supporting the peace deal have sprouted all over Cotabato City, the region's economic hub where nearly half of the residents are non-Muslims, including ethnic Chinese Filipinos. Even sceptics here say they want to give the MILF a chance, but some are nervous.
"Maybe in the beginning we will not have any trouble with them, but some could become unreasonable later," a canteen operator who only gave his name as Ernesto said, saying he had heard rumours of Muslims trying to take back farmland they claim belonged to their ancestors.
"Some of my ethnic Chinese-Filipino friends have actually left town," he added.
The current Autonomous Region in Muslim Mindanao (ARMM) - with a population of about 4 million -- is a glaring example of how the region's hopes for peace have been dashed in the past.
Put in place in 1989, the autonomous government never lived up to its promise. Graft flourished, development stagnated and its leaders complained of a lack of resources and political backing from Manila as the MILF kept up its separatist fight.
Around two-fifths of Mindanao's population lives on about a dollar a day and the ARMM is home to several of the country's poorest provinces.
"We have learned enough lessons from the old ARMM government," said Ghadzali Jaafar, MILF vice chairman for political affairs.
"We are determined to change that by putting in leaders who are dedicated to serve the people and accountable to Allah."
A potential security risk comes from a 500-strong rogue MILF faction that opposed the deal and vowed to continue fighting for a separate Islamic state. Its guerrillas attacked army positions in August, taking over a key highway to Cotabato City.
Jaafar said the MILF is not worried about the group, the Bangsamoro Islamic Freedom Movement, and may persuade them to join the peace process once the agreement is implemented.
Some leaders of the divided Moro National Liberation Front (MNLF), which signed the 1996 peace pact with the government, have rejected the new deal.
The MNLF never gave up its weapons and could lure disaffected fighters from the MILF and return to war.
The MILF is "signing its death sentence," MNLF founder Nur Misuari told radio this week.
TENTATIVE INVESTOR INTEREST
Mindanao has no lack of economic potential. Besides farmland, its mineral reserves account for about two-fifths of total reserves in the Philippines, and includes gold, copper, nickel, iron, chromite and manganese.
Companies with operations there such as miners and food processor Del Monte Pacific Limited say they are considering expanding after the peace deal.
Del Monte's 700,000-tonne, 85-year-old pineapple processing facility in Bukidnon province supplies about a fifth of the world's processed pineapple. The company also owns a port and a nearby 23,000-hectare (56,800 acres) plantation.
Global miner Xstrata Plc plans to develop Southeast Asia's largest gold and copper prospect at the $5.9 billion Tampakan project in South Cotabato. But its investment plans are held up by a local government ban on open-pit mining.
Perth-based RED 5 wants to more than double its $120 million investment in the Siana gold mine, which started commercial operations in April after about a decade of exploration and development work, said Edwards.
At an auction earlier this year for state contracts to explore oil and gas in the south, only a handful of investors submitted bids for the Sulu Sea and Cotabato Basin service area, both within the conflict zone. Officials said the poor response was mainly due to security concerns.
The two areas have combined reserves of 411 million barrels of crude oil, equivalent to more than three times the country's annual consumption, and 2.3 billion cubic feet of gas.
France's Total is exploring for oil and gas in the Sulu Sea off Mindanao and has entered into a 75:25 venture with Malaysia's Mitra Energy Ltd in the offshore block covering around 4,300 sq km (1,660 sq miles).
The world's largest crude palm oil producer, Malaysia's Felda Global Ventures, has said it is interested in investing in at least 10,000 hectares for palm oil, just a speck of the 1 million hectares of grasslands on Mindanao.
Mujiv Hataman, acting governor of the existing autonomous region, said Malaysian conglomerate Berjaya Corp also wants to invest in palm oil and develop 10,000 hectares within the ARMM. Berjaya did not respond to requests for comment.
Trade Secretary Gregory Domingo has identified several industries for Mindanao -- from information-technology to outsourcing, utilities, mining and agriculture. He declined to name possible companies or whether deals were in the works.
The Bangsamoro Leadership and Management Institute, set up in 2006, provides a reason for hope, teaching rebels the skills to become civil servants or run small busineses.
But it also shows the scale of the task ahead. Until March, it was housed in a rented building in Cotabato City before Japanese aid money financed its new center in Sultan Kudarat, not far from the MILF's main base. The new building boasts broadband Internet, computers and projectors, but only has a single training room and remains reliant on foreign aid money.
"We're here not only to teach but brainwash them to change their old mind-set," said Unti, the rebel-turned-lecturer.
(Rosemarie Francisco reported from Manila. Additional reporting by Erik dela Cruz and Michaela Cabrera in Manila and Sonali Paul in Sydney; Editing by Stuart Grudgings and Raju Gopalakrishnan)
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