The business environment under President Duterte: Business as usual or unusual for business?
Inside the sprawling, high-ceilinged residence of a prominent businessman in the posh and exclusive Forbes subdivision in Makati, some of the country’s richest tycoons converged to prepare for their very first meeting with President Duterte.
This was months after Duterte became the country’s 16th president in July 2016. This group of businessmen, some of whom represented the Philippines’ richest and most powerful families, wanted to get to know the new boss in Malacañang.
They met to “rehearse” their very first dinner with the Chief Executive.
Former president Gloria Macapagal-Arroyo, who is said to have Duterte’s ears, joined the meeting and shared her inputs on how to make the meeting as productive as possible.
The meeting in Malacañang, held sometime in January 2017, went well and served as a venue where the businessmen were able to raise some of their concerns on the economic front.
Some raised concerns on the absolute removal of “endo” or the practice of contractualization, smuggling and infrastructure, among others.
Duterte, on the other hand, asked for their support to “help alleviate poverty in the country.”
Fast forward to 2018
As Duterte approaches his second year in office, The STAR sought out a number of business executives to assess the business environment under the current administration.
Is it business as usual or unusual for business?
Many industry players lauded the Duterte administration’s focus on infrastructure, saying this would help translate to long-term investments.
On the other hand, others were jittery after the President went after some of the country’s richest for a wide range of issues, including regulatory violations and unpaid taxes.
Survival strategies
Thus, some businessmen found themselves employing a wide range of survival strategies – from staying below the radar and away from Duterte’s eyes; adding new members to the board of their companies to include those who have the President’s ears or removing those who may have had pissed off Duterte or any of his allies in the past and partnering with businessmen perceived to be close to Duterte.
“You have to be below the radar,” said one tycoon who declined to be named.
The tycoon, head of a giant conglomerate, said being on the limelight too much could have repercussions.
He perceives Duterte as the badass gangster who doesn’t want anybody else to be in the spotlight. “Siga sya and ayaw nya na may ibang
siga,” the tycoon noted. “And you never know what it is under his sleeves,” the businessman added.
“The President will shake your hands and give you a warm smile. But don’t be deceived. The next day, he can go after your billions, shut down your business and curse you in public,” the tycoon said.
Joey Concepcion, presidential adviser on entrepreneurship, said in a previous interview that if businesses want to get on the President’s good side, they really have to help the poor.
And many are doing that now, responding immediately whenever there is a call for support from Malacañang such as the redevelopment of Marawi.
Infrastructure
In the meantime, many cited the administration’s heightened focus on infrastructure through the Build Build Build program.
Phinma Group chairman Ramon del Rosario, for instance, noted the government’s infrastructure play.
“Let me accentuate the positive. As you know the flagship program of the Duterte administration is the Build Build Build and I think for that program, he has implemented that quite aggressively,” Del Rosario said.
Metro Pacific Investments Corp. (MPIC) president and CEO Jose Ma. K. Lim shared the same view, saying that the government’s infrastructure program bodes well for the business environment.
“They are on the right track by focusing on infrastructure and increasing tax efficiency. Building up infrastructure is good so foreign direct investments will come in and that they are coming in for the right reasons,” Lim told The STAR.
Phinma’s Del Rosario said the group has decided to re-enter the cement business as its way of supporting the infrastructure buildup.
“As a group we have decided to re-enter the cement business. That’s our way of helping out to make sure there is adequate supply of cement in the country. We are not setting up a plant for the time being. We are importing from Vietnam from a very reputable supplier. Hopefully we will be able to augment the supply of cement in the country,” he said in an interview.
Tax Reform for Acceleration and Inclusion
Del Rosario said the tax reform program, TRAIN, is also a positive step in the right direction but cautioned against removing the tax incentives for foreign investors.
“TRAIN 1 was successfully put in place, which was quite a challenging thing,” he said.
But he quickly added: “TRAIN 2 in my mind, I think, needs to be carefully studied particularly the incentives in PEZA and zones and the other investment incentives. I think the area of investments is a very competitive thing and we have been laggards already. Our numbers are below our competitors. The point I’m making is, it’s a very competitive environment so we have to be really, really careful in tampering with an incentive program, particularly the one being administered by PEZA which has worked very well in our country,” Del Rosario said.
He said it would be risky to remove these perks.
“Don’t kill the goose that lay the golden eggs. We have to be very careful because at the end of the day, what we’re interested in is creating jobs for our people and jobs come from investments and investments come from investors who are confident in the country and who find the environment competitive,” he said.
Reform agenda
But Del Rosario said the reform agenda is a positive step in the right direction.
“In the other areas, they are doing some reforms that are very meaningful,” he said.
“The reform agenda is sound. We have a strong economic team. The infrastructure program, if successful, will sustain the growth. Those are the positive things,” he said.
More taxes
Another tycoon said it remains to be seen how the additional disposable income for consumers brought about by TRAIN 1 would actually be spent.
Businesses involved in sugary drinks and petroleum also expect to take a hit because TRAIN raised the tax on sugary drinks and excise taxes on petroleum products.
Smuggling
The higher taxes on petroleum also gave smugglers their heyday.
“Smuggling is back because petroleum has become very expensive,” said another source.
The average full tank of a 1.3-liter engine displacement vehicle now costs P1,600 from around P1,300 before TRAIN.
Bright spot
Still, some businessmen believe that the business environment under the Duterte administration is good.
“So far, it’s very good. The economy is growing, business is growing and that’s the main aspect that counts,” said ports tycoon Enrique Razon said.
The focus on infrastructure is good,” he added.
“They’ve gotten many things started already such as the Clark Airport,” Razon said.
But he said the Skyway extension is needed.
“The Skyway is the most critical,” he said.
The project is a 14.82-km six-lane elevated toll road and the last of three stages of the Metro Manila Skyway (MMS) System. It is intended to connect South Luzon Expressway (SLEX) Alabang to Balintawak in Quezon City before North Luzon Expressway (NLEX) through Central Metro Manila Area by using predominantly median of Quirino, Araneta and the Bonifacio road networks.
Business community’s wish
Top officials of Ayala Corp., the country’s oldest conglomerate, also said the environment now is positive, adding that the business community hopes growth would continue.
“Consumer demand remains strong. I think the local companies have taken up the slack in the lack of foreign direct investments. I think it’s doing the country well. It would be great to see more. The bottom line is we’re very happy with the business,” Ayala Corp. chairman Jaime Augusto Zobel de Ayala said recently during the company’s annual stockholders’ meeting.
He also said Ayala welcomes the administration’s openness to unsolicited proposals.
Ayala is part of a consortium of seven conglomerates that submitted a proposal to rebuild the Ninoy Aquino International Airport.
Fernando Zobel de Ayala, Ayala president and COO, said given the growth in per capita income in the country, there is tremendous amount of opportunity in terms of business expansion.
“We’re really in a very, very good spot right now in this country. The business community’s wish is for that growth to continue,” Zobel said.
Guarded optimism
In all, many businesses are doing things with guarded optimism but they appreciate the focus on infrastructure and the growing economy.
Still, nobody wants to get on Duterte’s bad side after seeing what he can do to his foes.
Being the businessmen that they are, they always want to get on any sitting president’s good side. This is after all how they’ve survived and thrived with each new administration.
But many admit that Duterte, the Davao mayor-turnedpresident is as unorthodox as he can get, prompting them to be more creative in surviving the business environment.