D-Day in the Philippines
Presidential election could shake up rising tiger’s economy. By Bloomberg News reporters in Manila
The Philippines is heading to a presidential election today that is likely to shape geopolitics in the region and determine whether one of Asia’s oldest democracies can sustain its economic turnaround.
Once Asia’s “sick man”, the country of 101 million has earned World Bank praise as the continent’s “rising tiger” under outgoing leader Benigno Aquino III, posting average six-year gross domestic product growth of 6.2%, the fastest since the 1970s. Aquino can’t run again because of the country’s six-year term limit.
Today’s vote appears to be the biggest wild card, and investors are asking whether Aquino’s successor can build on his accomplishments and rise above his shortcomings.
Will the next president continue government efforts to curb corruption and counter China’s island-building in the South China Sea? Will he or she tackle Manila’s longstanding problem of traffic and strained infrastructure?
Philippine stocks fell last week as final opinion polls showed the tough-talking Davao City Mayor Rodrigo Duterte maintaining a comfortable lead over his rivals. The Philippine Stock Exchange Index lost almost 4% in the seven trading days to last Thursday.
The peso has also weakened the most among Asian currencies over the past month because of uncertainty about Duterte’s economic agenda. He ranked third, behind Mar Roxas and Grace Poe, in a Bloomberg survey of analysts who were asked who was the best candidate to run the economy.
“Election jitters have taken over,” said Rafael Palma Gil, a Manila-based trader at Rizal Commercial Banking Corp. “This election-related weakness will continue until investors know who is the next chief executive and what is the plan for the economy.”
Foreign investors were net sellers of US$34 million on the Philippine Stock Exchange last month, after adding $204 million to their holdings in March.
In a year of global anti-establishment politics, Philippine voters appear ready for a renegade president in Duterte. A 71-year-old self-confessed killer and Viagra-chomping womaniser has touched a nerve with promises of a “bloody war” on crime.
Duterte has been mayor of Davao City on the southern island of Mindanao for two decades, where his strongman swagger and endorsement of the execution of criminals earned him the nicknames “Duterte Harry” and “The Punisher”.
He’s been likened to US presidential candidate Donald Trump, using populist rhetoric to reach Filipinos who feel the mainstream political parties are out of touch.
“Duterte’s main asset is that rightly or wrongly, many people see him as having led a ‘Filipino life,’ with all the frustrations and hardships that entails,” said Stephen Norris, senior Southeast Asia analyst at Control Risks in Singapore. “To voters, it’s conceivable that he would actually make a difference on traffic, crime and corruption from the top down, because he has done so locally.”
Malcolm Cook, senior fellow of the Institute of Southeast Asian Studies, describes Duterte’s style as a mix of former New York City mayor “Rudy Giuliani, Donald Trump and Mad Max.”
The leadership in the Philippines has for decades been the realm of powerful families whose main assets are their wealth and dynastic connections.
While Benigno Aquino, whose mother also served as president, delivered average growth above 6% — one of the fastest rates in the world — and nearly 4 million jobs in his six-year term, the stronger economy has also spurred frustration. Record car sales have clogged the already-gridlocked capital Manila, while infrastructure spending hasn’t improved public transport.
Graft, illegal drugs and crime are concerns of voters nationally, according to the opinion pollster Pulse Asia, and poverty rates remain stubbornly high.
While Duterte’s tough talk resonates with voters, investors are voicing concern over his lack of economic experience, plus suggestions that he might trade Aquino’s fiscal discipline for spending on populist programmes.
“I hope when he does become president he’ll be more grounded and less controversial,” said Soo Hai Lim, a Hong Kong-based money manager at Baring Asset Management. “His platform to reduce crime is good but at the end of the day investors need somebody who could implement policies that are generally good for the investment climate.”
Duterte has sought to reassure business leaders, but he’s also been unpredictable on the campaign trail and avoided specifics. He’s pledged to keep spending on public transport and cash handouts to the poor, while identifying education and agriculture as priorities.
“Our best case scenario is that Duterte will be pragmatic in choosing his policies,” said Euben Paracuelles, an economist at Nomura Holdings in Singapore. That would aid an economy underpinned by consumer spending, remittances and a booming business process outsourcing sector.
On the diplomatic front, Duterte has vowed to ride a jet ski to the nearest disputed island occupied by China in the South China Sea to personally stake the Philippines’ claim if its neighbour fails to accept the result of a pending international arbitration ruling in the dispute.
His tough-guy rhetoric on other subjects has pushed the boundaries. When he declared his candidacy last year, he advised “people to put up several funeral parlour businesses” to deal with a looming pile of dead drug traffickers. He later pledged to kill 100,000 criminals and feed their bodies to the fish in Manila Bay.
In a radio interview in December he admitted to helping kill at least three suspected rapist-kidnappers during a rescue operation in Davao in 1988. “I said ‘Put your hands up’. No one did, so I attacked.” Duterte said he fired two magazines from his gun but denied committing a crime, saying he was trying to stop it as a “person in authority”.
Having portrayed himself as a man who lives modestly, Duterte has also faced accusations over his wealth. Senator Antonio Trillanes, a vice-presidential aspirant supporting Grace Poe, accused Duterte of failing to declare assets of 2.41 billion pesos ($51 million) in 17 bank accounts.
Much of that money, it is alleged, came from “ghost workers” on the Davao City payroll. “I am not a rich man,” Duterte countered. “I have never stolen. Don’t believe what others are saying. That’s pure garbage.”
He has also unnerved other countries, spurring criticism from Australia after he told supporters at an event he should have been first in line for a turn when an Australian missionary was gang-raped in 1989. He said later that’s just the way he speaks, though his camp issued an apology.
While Duterte appeared to have a comfortable lead heading up to the vote, no one is ruling out an upset. Here is a look at the rest of the pack:
Grace Poe: The first-term senator, an adopted daughter of a famous local actor, was left on the steps of a church in central Philippines while still an infant. The 47-year-old Poe, who won a legal battle questioning her citizenship, has vowed to lower corporate income taxes and encourage companies to end labour contractualisation — the practice of terminating workers every five months. She has also promised to lift constitutional restrictions on foreign ownership in some sectors to encourage investment. She has consistently ranked second behind Duterte in opinion polls.
Jejomar Binay: The vice president, 73, is trying to win votes by portraying himself as a champion of the poor. Allies of Aquino in the Senate have investigated Binay over claims of corruption, which he denies. He has vowed to defend Philippine sovereignty over the Spratly Islands while improving economic ties with China. Binay, whose family has ruled the financial district of Makati City in Manila for three decades, has also promised free medical services and education for the poor. He has ranked third or fourth in most opinion polls.
Mar Roxas: Born wealthy and educated overseas, Aquino’s anointed successor has trailed in public opinion polls. The 58-yearold Roxas, who gave up a presidential bid in 2010 to make way for Aquino, wants to continue peace talks with Muslim rebels and build more roads and bridges in the Mindanao region. He has pledged to sustain economic growth and create more jobs while offering incentives to Filipino migrants to stay home.
Miriam Defensor Santiago: The veteran senator is a 70-year-old former judge who has said she eats death threats for breakfast. Santiago, who is making a third bid for the presidency, said she has been undergoing treatment for lung cancer. She made a name for herself as a young trial judge during the dictatorship of Ferdinand Marcos when she allowed student activists protesting against the late dictator to post bail. Santiago, who has consistently ranked last in opinion polls, has pledged to build an alternative capital north of Manila.