Investors look past Duterte’s tough talk

POLITICAL NOISE generated by President Rodrigo R. Duterte’s unconventional leadership style has stoked uncertainty especially for this year, though not to the extent of eclipsing the Philippines’ “solid macroeconomic fundamentals,” according to an Asian business survey that also showed respondents in the Philippines who planned to raise investments outnumbered those planning cuts.

“In the Philippines, the erratic policies of the president, Rodrigo Duterte, will cause some uncertainty, but we do not expect this to undermine the country’s solid macroeconomic fundamentals,” read the Asia Business Outlook Survey 2017, titled: “Navigating Asia’s risks and rewards,” that was released yesterday by the Economist Corporate Network (ECN’s) — the advisory, briefing and executive dialogue service of The Economist Group.

The survey, which had 223 respondents across Asia, was conducted in November last year. Executives surveyed were operating in 21 industries in Australia, China, India, Japan, New Zealand, South Korea, Southeast Asia and New Zealand. Nearly a quarter of respondents managed operations at East Asia-headquartered companies, while the rest were at firms headquartered in Western economies.

“Respondents viewed government responses to political and economic risks in Indonesia, Myanmar, Vietnam and India as most likely to positively impact business prospects in 2017,” the survey report read.

“Conversely, government policies in China, Hong Kong, Malaysia and the Philippines in the face of rising geopolitical and economic risks were seen as more likely to negatively affect business conditions.”

Asked how they perceived the government’s response to political and economic risks in terms of “likely impact” to business this year, 5.3% of respondents in the Philippines said they expected “significant improvement in business,” 28% said they anticipated “slight improvement,” another 28% said they expected “no real change”, while 33.3% saw a “slight worsening in business” and 5.3%

said they were bracing for “significant worsening”.

“[C]ountries that stood out for responding in ways that will result in some degree of worsening conditions for business were Thailand, China, Hong Kong, Malaysia and the Philippines,” ECN noted in its study.

“These countries were cited by 30-40% of respondents as having reacted to risks in ways that bode less positively for 2017.”

Asked for their views on government response to risks in terms of likely impact on business in the next three years, 2.8% of respondents in the Philippines expected “significant improvement in business” and 37.5% anticipated “slight improvement”, while 33.3% saw “no real change”, 22.2% expected “slight worsening in business” and 4.2% believed there would be “significant worsening in business”.

“The degree of expectations for negative fallout from risks is… lower for 2017-19,” ECN noted.

“Whereas some 30- 40% of respondents expected worsening conditions in Thailand, China, Hong Kong, Malaysia and the Philippines during 2017, when looking out to 2019, most of these countries were cited by only around 20-30% of respondents as likely worsening.”

Asked then how they expected their firms’ investments in the Philippines to change, 39.4% of respondents said they will increase against just 4.3% who said they will reduce levels. Another 31.9% said they were “in the market, but will not invest more”, while 24.5% said they “have no plans to invest”.

“Based on the survey results,” ECN said, “any negative fallout from the Philippines’ tough- talking, nationalistic president, Rodrigo Duterte, on investor appetite is limited.”

The same survey noted that Southeast Asia topped all other areas in revenue growth expectations for 2017, overtaking India which held the top spot last year. —