The Marawi effect

PRESIDENT Rodrigo Duterte declared martial law in Mindanao last May 23. The declaration was announced in a press conference in Russia at 10pm (Manila time) by Presidential Spokesperson Ernesto Abella.

Martial law will be in effect for 60 days. This is in response to clashes between the government forces and the Maute group/ISIS and other similar groups, and to suppress lawless violence and rebellion and for the public safety, as well.

The Philippine Constitution, particularly Article VII Section 18, lists the reasons or circumstances when martial law may be declared. As a result, the privilege of the writ of habeas corpus was also suspended. The Congress and the Judiciary should affirm and review this declaration, respectively.

With these events, what would be the possible effects on the economy of Mindanao and the Philippines as a whole?

The conflict in Marawi and the declaration of Martial Law have already caused the economy to slow down. The Peso weakened beyond the P50 against the US Dollar during the day’s trading, but closed slightly higher barely breaking the P50 barrier.

ING Bank Manila Senior Economist noted that the declaration of a state of emergency would have been more appropriate than that of a Martial rule because it would imply that the government has lost control of the situation in Mindanao. This were the same sentiments of Jon Fasman, the Southeast Asia Bureau chief of The Economist.

However, in terms of the domestic financial markets, the impact of the declaration of Martial Law would be limited and would likely calm down after the initial reaction.

Several countries have already released statements reminding their citizens to avoid the Philippines, Mindanao in particular. This would have a great effect on the local economy where their main source of income is from tourism and tourism-related activities and products.

On the other hand, the chief of the country’s macroeconomic manager, Bangko Sentral ng Pilipinas (BSP), Amado Tetangco, Jr. explained that there may be transitory or temporary cautiousness at first but may result to a positive impact in the end because the declaration of Martial Law aims to improve the security and peace and order situation in Mindanao and the Philippines, as a whole.

The secretary of the Department of Budget and Management, Ben Diokno also views this declaration to have a positive impact to the country’s economic growth. Furthermore, the disruption of business in Mindanao would unlikely have a big effect in the country’s overall economic performance.

There seems to be conflicting views on what the impact/s of the declaration of Martial Law in Mindanao. The government economic managers are downplaying and even positing that there will be positive effects of the conflict in Marawi and the declaration of Martial Law. Foreign and expat (bank) economists are saying otherwise. I have yet to hear from liberal local economists regarding their stand on this issue.

Personally, I believe that Martial Law, despite its negative political implications on its constitutionality and proneness to abuse of power, would calm down the volatile situation in Mindanao. If the aim is to restore political and social stability, it would have a positive effect as the government economists are claiming.

However, my fear is that if there are underlying agenda other than what the objective of stabilizing Marawi and Mindanao, there will definitely be negative effects.

First, if this will go beyond the 60-day period limitation. Even if this is confirmed by Congress, it will still have very negative implications. This would mean that the government cannot stabilize the situation, requiring extension of the given period of time.

Second, if the scope of Martial Law will reach Visayas and/or Luzon. This would even have greater negative impact on the economy, as there will be flight of capital from the country because investors would feel that the conflict is not only isolated in one area but has spread throughout the country.

I know I am being ambivalent on this issue. I believe the conflict in Mindanao has caused the indigenous people to be displaced, and those that are left behind to be in poverty. If the declaration of Martial Law can somehow put a kind of stability, then I am all for it. However, if this privilege of the President is abused, I am afraid that it will do more harm than good.