Philip­pine Elec­tion Spe­cial: Don’t Fear the Reaper

Norway-Asia Business Review - - Contents -

Im­me­di­ately be­fore the vote, por­tray­als of the next pres­i­dent had been over­whelm­ingly neg­a­tive, fea­tur­ing pic­tures of a gun-tot­ing Duterte and fo­cus­ing on his un-states­man­like delight in killing crim­i­nals. The nar­ra­tive – shaped by Philip­pine ty­coons who it turned out had mostly backed sev­eral wrong horses – was one of de­scend­ing dan­ger and doom. Those ty­coons had plumped for can­di­dates who could be de­pended on for high-level po­lit­i­cal ac­cess and gen­er­ally pref­er­en­tial reg­u­la­tion, in con­trast to the un­known quan­tity of Duterte. The Aquino ad­min­is­tra­tion and the busi­ness elite un­der­es­ti­mated Duterte’s mo­men­tum. Too late they cried, how can a vi­o­lent tyrant be fit to lead? Now he has won and there is busi­ness to be done, their doom­mon­ger­ing has soft­ened some­what.

Duterte him­self flicks be­tween par­o­dies, from ec­cen­tric un­cle who says what he thinks and cares not of the con­se­quences, to movie tough guy rid­ing to the res­cue to sweep the scourge of drugs and crim­i­nals from the streets. This self-de­pic­tion was, fore­most, part of the cam­paign show, a highly ef­fec­tive vote- win­ner as well as a mask for his pre­sumed lack of depth on pol­icy is­sues. The elec­torate, with different views to for­eign in­vestors of the out­go­ing gov­ern­ment and the coun­try’s po­lit­i­cal tra­jec­tory in gen­eral, wanted a po­lit­i­cal wreck­ing ball. Duterte could yet sat­isfy both busi­ness and such vot­ers. He could also, if things do not go to plan, please no­body, and, un­der pres­sure, lapse back into defiant car­i­ca­ture.

The un­ease at Duterte’s rise is un­der­stand­able given the Philip­pines’ tra­di­tional vul­ner­a­bil­ity to po­lit­i­cal up­heaval, and the broader trends of in­creas­ingly au­thor­i­tar­ian and in­ef­fec­tive gov­er­nance in South-east Asia of late. His term will no doubt be tainted by of­fen­sive com­ments and reck­less diplo­matic gaffes, but ac­tual im­ple­men­ta­tion of un­reg­u­lated vi­o­lent crime-sup­pres­sion tac­tics na­tion­ally is un­likely. His gov­ern­ment will not ‘kill 10,000 crim­i­nals’ and the fish in Manila Bay will not be fat­ter for hav­ing gorged on dis­carded corpses of drug deal­ers. But even if he does re­sort to vig­i­lan­tism to tackle crime, this alone would not desta­bilise the coun­try or im­pact heav­ily upon the eco­nomic and busi­ness spheres.

Where Duterte di­verges from other re­gional lead­ers that have at time pur­sued such poli­cies – Thai­land’s for­mer prime min­is­ter Thaksin Shi­nawa­tra’s 2003 war on ‘dark in­flu­ences’ springs to mind – is that he is a pure politi­cian, not a busi­ness­man lever­ag­ing his po­lit­i­cal sta­tus. His record in Davao shows that Duterte is not go­ing to be in­ter­ven­tion­ist in busi­ness sec­tors, and that he does not di­rect poli­cies to in­dulge cronies and rel­a­tives. His mu­nic­i­pal ad­min­is­tra­tion’s ac­tions sug­gest a sur­pris­ingly tol­er­ant and in­clu­sive fig­ure, and not a re­pres­sor of crit­ics, de­spite the crude pub­lic rant­ing. Lastly, Duterte has shown signs of be­ing mea­sured when ques­tioned on eco­nomic is­sues, ask­ing for pa­tience while his ex­perts de­velop such poli­cies. He has gen­er­ally avoided pop­ulist prom­ises, with the ex­cep­tion of the vow made by all can­di­dates to end labour con­trac­tu­al­i­sa­tion.

Fur­ther, the ac­tions of his pre­de­ces­sors stand him in good stead eco­nom­i­cally. Duterte stands to in­herit a rel­a­tively healthy and grow­ing econ­omy. Over the last 5 years, eco­nomic growth in the Philip­pines has av­er­aged a ro­bust 5.9% per year, mak­ing it one of the

best per­form­ers in the re­gion. Much of this re­cent suc­cess can be at­trib­uted to poli­cies pur­sued by the out­go­ing Aquino ad­min­is­tra­tion, and be­fore that, pres­i­dent Glo­ria Ar­royo, who brought the coun­try back from the brink of eco­nomic cri­sis in the early 2000s. Duterte’s lack of eco­nomic pol­icy ex­pe­ri­ence and propen­sity to ‘flipflop’ on his state­ments raised con­cerns that his pres­i­dency could see all this good work un­done, es­pe­cially fol­low­ing a rather drama-fu­elled cam­paign which con­tained very lit­tle sub­stance on the econ­omy.

How­ever, what we do know of his eco­nomic and busi­ness agenda is noth­ing to be afraid of, and what we know of his ad­vi­sory team and likely fu­ture cab­i­net line-up in­di­cates that he will get plenty of sound guid­ance. To mit­i­gate con­cerns, Duterte has sig­nalled a de­sire to hire ex­perts and ap­pears likely to de­fer to ca­pable ad­vi­sors to man­age the econ­omy, while the re­cent re­lease of an 8-point eco­nomic agenda has as­sured peo­ple that the coun­try’s short-term growth is safe by sup­port­ing the con­ti­nu­ity of poli­cies pur­sued un­der the Aquino ad­min­is­tra­tion. The busi­ness com­mu­nity and Team Duterte are aligned on al­most ev­ery ma­jor is­sue. Duterte has re­peat­edly ad­vo­cated amend­ing the con­sti­tu­tion to re­lax re­stric­tions on for­eign own­er­ship of Philip­pine cor­po­ra­tions (but not of land). He has promised to re­tain but ac­cel­er­ate the PPP-based in­fra­struc­ture pro­grammes un­der Aquino that were a cen­tral rea­son for the strong in­vestor sen­ti­ment around his gov­ern­ment. Duterte will likely get a higher num­ber of such projects out the door by stream­lin­ing ten­der pro­cesses and al­low­ing the deals to in­clude more at­trac­tive fi­nan­cial in­cen­tives for bid­ders.

The longer term out­look ap­pears contin­gent on the suc­cess of Duterte’s mis­sion to rid the coun­try of crime as well as his plans to shift to­wards a fed­er­al­ist form of gov­ern­ment. A sta­ble in­vest­ment cli­mate due to peace and or­der should en­sue, though the man­ner in which this will be achieved is con­tro­ver­sial and may have the op­po­site ef­fect. How­ever, the shift in the struc­ture of gov­ern­ment will pro­vide greater un­cer­tainty. Though con­sti­tu­tional changes can take many years to im­ple­ment, any sig­nif­i­cant over­haul of the sta­tus quo can have sig­nif­i­cant reper­cus­sions for the econ­omy. The change in the struc­ture of the gov­ern­ment will nec­es­sar­ily come at con­sid­er­able cost, but if suc­cess­ful, will lead to­wards a more in­clu­sive growth path in the fu­ture.

Another war – a war on red tape – will be grate­fully re­ceived. Gov­ern­ment ap­provals of per­mits and so on are han­dled within 72 hours in Davao City. If this model can be ex­ported across the no­to­ri­ously red tape-af­flicted Philip­pines, the im­pacts would be sig­nif­i­cant. Agri­cul­ture devel­op­ment should open new in­vest­ment op­por­tu­ni­ties, par­tic­u­larly if Duterte is able to rein in the security threat posed by the New Peo­ple’s Army ( NPA) in­sur­gency, not im­pos­si­ble given his re­la­tion­ships with prom­i­nent left­ists. Adding his mus­cle to the new Com­pe­ti­tion Com­mis­sion could also carve out ways into the largely sealed power and tele­coms mar­kets. Bureau­crats ob­struc­tive of re­form or caught in cor­rup­tion will be quickly re­moved, with much less tol­er­ance than un­der Aquino. As a na­tive of Min­danao, his vic­tory may en­able the lead­er­ship of the Moro Is­lamic Lib­er­a­tion Front (MILF) to hold its dis­en­fran­chised fac­tions to­gether long enough to al­low one more round of back and forth with the new gov­ern­ment on their pre­car­i­ously poised peace and au­ton­omy ar­range­ment, the Bang­so­moro Ba­sic Law (BBL). Keep­ing the MILF on­side is an im­por­tant part of con­tain­ing ter­ror­ism risks and Is­lamic State (IS) in­flu­ence.

None­the­less, po­lit­i­cal risk an­a­lysts will have to fac­tor in sce­nar­ios that fea­ture sig­nif­i­cant in­sta­bil­ity or even mil­i­tary in­ter­ven­tion in their anal­y­sis of a Duterte ad­min­is­tra­tion, sce­nar­ios that would not have been ap­pli­ca­ble to his pres­i­den­tial op­po­nents. The route to such out­comes would in­clude sev­eral key land­marks: fail­ure to de­liver on crime and cor­rup­tion prom­ises, and re­sul­tant loss in pub­lic sup­port; an­gry bat­tles with Congress over slow-mov­ing leg­is­la­tion and Duterte’s fed­er­al­ism pro­pos­als; a heavy purge of se­nior fig­ures within the mil­i­tary and po­lice; snarling hos­til­ity to in­ter­na­tional crit­i­cism of his crime poli­cies and hu­man rights record; and re­pres­sive re­tal­i­a­tion to an in­creas­ingly neg­a­tive lo­cal me­dia. All of this could see Duterte veer to­ward a pop­ulis­tau­thor­i­tar­ian style, lead­ing in turn to calls for his im­peach­ment in Congress and leav­ing him atop an un­sta­ble and in­ef­fec­tive gov­ern­ment.

That is the meat of the dooms­day pre­dic­tions that were be­ing touted be­fore the elec­tion. They have – rightly, in our view – be­gun to re­cede, and are less likely than those in­volv­ing the emer­gence of a pro-busi­ness ad­min­is­tra­tion along the lines set out above. Pres­i­dent Duterte will be oc­ca­sion­ally em­bar­rass­ing and of­fen­sive but his rise is un­likely to sig­nal the demise of the po­lit­i­cal sta­bil­ity and strong eco­nomic per­for­mance at­trib­uted to Aquino.

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