From a local standpoint, had America voted wisely?
I covered President Rodrigo Duterte’s recent state visit to China and it was during the business forum at the Great Hall of the People in Beijing when he jolted everyone by announcing his “separation” from the United States. We’re all used to hearing about Duterte’s bad blood against the US. But many of us were unprepared for what’s so far the strongest anti-US rhetoric coming from the unorthodox president.
In a way, the state visit to China became all about the Philippines’ bittersweet relations with the US as much as it was about the rekindling of ties with China, but the $24 billion investment and concessional funding commitments secured by the Philippine team were overshadowed by separation anxieties.
When asked whom he preferred to be the new US president, Duterte picked no one, only saying that his favorite hero is Russian president Vladimir Putin. Last month, the odds seemed to favor a Clinton presidency, and Duterte’s budget czar Ben Diokno thought she would be the “safer” choice. “I think there's too much uncertainty with Trump,” he had said at the Philippines Investment Conference 2016.
Many have likened Duterte to Trump, and vice versa, not just in terms of their devil-may-care language but also because of their perceived hostility to traditional allies. They are also both seen to be good for business. In Duterte’s case, his vow to bring forth a “golden age of infrastructure” in the Philippines is indisputably captivating. Meanwhile Trump, whose battle cry is to “make America great again,” plans a significant reduction in individual income taxes and corporate taxes and the elimination of the estate tax.
It will be an interesting verbal war if Trump and Duterte were to trade insults, both being masters in this craft, but then again, Duterte may not risk blurting out expletives against someone who could not only match his fiery language but also has the temerity to get back at him in a way that could hurt the Philippine economy.
According to American banking giant Citigroup, in the case of a Trump presidency, a rise in protectionism would be a major threat to emerging markets like the Philippines. Trump had talked about the need for isolationist and protectionist US policies, for instance, threatening to impose steep tariffs on Chinese and Mexican imports. Imagine what he could do if he gets pissed at the Philippines.
In August, Citi issued a research note that scored countries based on overall vulnerability to a prospective rise in protectionism post-US elections. A score of 1 was deemed as “average,” above 1 was “good,” and below 1 was deemed “bad.” The overall score was based on the ratio of the metrics where each country performed positively to those where it performed negatively. Based on the Citi index, the Philippines scored 0.6 overall.
Philippine exports account for 19.7 percent of total gross domestic product (GDP) while exports to the US accounted for 2.9 percent of total GDP—both of which are below average equity multiplier ( EM) ratios. However, our exports to the US account for 14.7 percent of total export receipts, slightly higher than the average among our peers.
On foreign exchange vulnerability, Citi estimated the US dollardenominated debt of the Philippine corporate sector at 31 percent of total, in line with the 31.8 percent EM average. However, the country’s current account surplus of 2.3 percent of GDP is lower than the 3.1 percent EM average. Average debt to equity of 65.9 percent is also higher than the 43.4 percent EM average.
Seen from all angles, it’s not to the Philippines’ interest to sever ties with the US, and even Duterte recognizes it. Moving forward, especially with a new US president, everyone hopes that the Philippine president will be more circumspect about discussing foreign policy without consulting his cabinet first, which expectedly has to engage in perennial damage control. Many Filipinos agree with Duterte’s bid to get more out of its long-time alliance with the US, to gain recognition as an equal sovereign state, but they wouldn’t want to see the country turn into an international pariah in the process. Will the end justify the means? Only time will tell.