The economy under President Duterte

PRESIDENT DUTERTE is lucky to have inherited an economy in the pink of financial health. It was an economy with tremendous momentum on the back of a vibrant service sector, a resurgent industrial sector, and robust consumer spending. Now that the Duterte administration approaches its first year anniversary, we ask the question: has the economy grown in strength or is it a case of one step forward, two steps back?

The best thing the President has done is to appoint capable technocrats to lead the economic cluster. Enjoying the confidence of the business community are the Departments of Finance, Budget & Management, Trade & Industry, NEDA, and the Bangko Sentral ng Pilipinas. Under their baton, the administration’s 10-point economic agenda was crafted, the intent of which is to replace arcane laws with policies more apt for the times. The business community hailed the inclusion of aggressive infrastructure spending, progressive tax reform, and the amendment of restrictive constitutional laws pertaining to foreign direct investments.

Subsequently, the economic cluster, in collaboration with the Departments of Transportation and Public Works and Highways, launched its ambitious socioeconomic plan dubbed “Dutertenomics.”

At the heart of the plan is the intent to spend eight trillion pesos on big ticket infrastructure projects over six years. Not only is it designed to fire up the economy through massive public spending, it provides the capital formation needed to sustain economic growth for the next decade. This, coupled with responsible fiscal and monetary management spurred business confidence. Such confidence is mirrored in how the stock market inched its way back to the 8,000 level and how foreign direct investment leapfrogged by 41%.

Sure, business confidence took temporary nosedives due to the President’s many radical proclamations, often coming from left field. Fresh in our memories was his proclaimed separation from the United States before the Chinese parliament, no less. His belligerence towards the European Union and the United Nations had many exporters worried over looming trade sanctions and the revocation of our GSPPlus status.

Nevertheless, the President’s men assuaged fears through the systematic “contextualization” of the Chief Executive’s remarks. The frequent backtracks have taught us not to take the President’s words at face value but instead, chalk it up to his penchant for theatrics and love of shock value. For as long as the economic environment remained on an even keel, it was business as usual.

What has been a cause for worry, however, is the President’s lackluster support for economic reform.

With a super- majority in the legislature and massive political equity, the business community hoped that the Palace would use its way to get vital economic reforms passed into law, not the least of which is the tax reform law and emergency powers to expedite infrastructure works. Emergency powers are dead in the water while the first trench of the tax reform law was only approved in principle last week. In contrast, the full force of Malacañang was used to even the score with Senator De Lima, bury the former dictator at the National Heroes’ Cemetery, get the death penalty passed, and have the declaration of martial law in Mindanao rubber-stamped.

All these send the signal that the welfare of the economy sits at the bottom rung of the President’s priorities, below his war on drugs, war against political foes, the pivot to China and the shift to a federal form of government. This is where the discomfort lays. It tells us that the President will not hesitate to put the nation’s economic welfare on the line if that’s what it takes to push his political agenda forward.

He has spoken about his political agenda many times before, albeit never in a single declaration. It consists of shifting the framework of government to a federal- presidential form, assurance of his favored successor, installing an “independent foreign policy” but favoring China ( which is an oxymoron), redistributing wealth from the oligarchs to the masses and defusing power from imperial Manila to the countryside.

This is why the allusion to nationwide martial law is something that cannot be shrugged off as just another statement of bravura. It is, after all, the fast track towards the realization of President’s political agenda. He has hinted at martial law on numerous occasions before and the circumstances today present the opportunity for it.

Martial law has a chilling effect on the business community as it gives the military control over most civilian functions of government. Apart from allowing law enforcers to arrest and/or detain anyone without a warrant, it can also permit the state to seize assets and nullify binding contracts without due process. In addition, legal cases will cease to be tried in civil courts where civil rights are given heavier consideration, but instead, in military tribunals presided by military officers.

Moreover, since the President himself is the commander in chief of the military, nationwide martial law will give him absolute power with nary a semblance of check and balance. His track record of having little to no self-restraint adds to the discomfort.

Days after the President hinted of nationwide martial law, I spoke to at least four foreign commercial consuls all of whom told me that the majority of their investment commitments have either been cancelled or put on hold. Who can blame them? Even local businessmen are worried. We will know the full effect of this when the results of the second semester investment numbers come out. Certainly, there will also be blowback on tourism arrivals and domestic consumption.

So back to the core question: has the economy grown in strength or is it a case of one step forward, two steps back? The answer is neither. The economy is neither better nor worse as it continues to chug along at almost the same pace thanks to inertia and the extra push from increased infrastructure spending. All sectors are posting steady growth except for the manufacturing sector whose growth is decelerating.

It must be said, however, that the even keel in which the economy sits is teetering.

Businessmen are nervous no thanks to unpredictability of Malacañang and its inclination to put its political agenda ahead of the economy’s welfare. The declaration of nationwide martial law, in particular, is seen to break the economy’s back what with the specter of capital flight, industrial flight, investment cancellations and contraction in consumer spending. Martial law will sabotage the economic miracle we worked so hard to achieve.

Business confidence is in a fragile state today and the Palace would do well to reassure the business community that it will be business as usual. Its silence indicates the contrary.

The beauty of our situation is that the economy will continue growing at its heady pace if only the 10-point economic plan and “Dutertenomics” are allowed to take its course without politics getting in the way. In other words, the less interference by Malacañang, in words or policies, the better for us.

What has been a cause for worry, however, is the President’s lackluster support for economic reform.