In the first few days of his presidency, President Duterte gained favorable response from the business community after his announcements that he would give emphasis to infrastructure development and making transactions easy for businessmen. With just a few hundreds killed in Duterte’s drug war, they were willing to look the other way.
But as the death toll from the brutal drug war breached 1,000 and the administration started labelling politicians and businessmen as drug lords or accomplices without solid evidence, those from the business community began being concerned about the government’s regard for the rule of law. And while the end objective of the drug war is to bring back peace and order, investors are getting worried that the culture of violence that the drug war has cultivated and the disregard for the rule of law might eventually affect how they live and conduct business in the country.
This concern or fear, if you may, plus the uncertainties in both domestic and foreign policies are beginning to show its toll on the country’s economy.
Last week, data from the Philippine Stock Exchange showed net foreign transactions on the benchmark index have fallen over the past month. A CNBC report said, “Many investors have been turned off by threatening remarks made by Duterte against the US and China, casting doubt on the future of Manila’s foreign policies and his handling of the economy.”
The Economist, on the other hand, said that since Duterte took office, investors have demanded higher risk premiums to hold Philippine assets. “A lot of people are hesitant to put their money into the Philippines at this point,” according to Guenter Taus, who heads the European Chamber of Commerce in the Philippines.
After Duterte tagged business mogul Roberto Ongpin as an oligarch he wanted to destroy, and Ongpin was forced to resign after the shares of his company fell 50%, the fear among businessmen and investors was raised another level.
Recently, Standard and Poor expressed concern that the Duterte administration’s campaign against illegal drugs might hurt local economic growth. The credit reporting agency also said the Philippines is unlikely to get a credit rating upgrade in the next two years due to Duterte’s unpredictability in domestic and foreign policies.
And how did Duterte react to all these?
The tough-talking President said investors are free to leave the country; he’s not a believer of the stock market anyway. Duterte said foreign businessmen who cannot stand his foul mouth could pack up and leave the country if they want. Duterte said he could always go to other allies such as China and Russia to seek trade and investments for the country.
He used the China and Russia cards again. As he continues to hint at bearing away from longtime and reliable ally the United States, Duterte in the past few weeks have said that he would seek new alliances with China and Russia to cushion the fallout from possible withdrawal by the US.
On Tuesday, Duterte said he had “crossed the Rubicon” in his ties with the US and that he would pursue partnerships with its rival countries or what he called countries on the “other side of the ideological barrier.” In a speech on Tuesday at the Navy headquarters, Duterte asked the Marines to give him time so “we can get out of this ambit” of the Americans “who have pushed us around, insulted us.” On Monday, he announced his plan to meet Chinese President Xi Jinping and Russian Prime Minister Dmitry Medvedev after flying to Vietnam and Japan. He also said the country plans to purchase arms from Russia.
He also said in the past few days, in quick succession, that the US Special Forces should leave Mindanao, that the Philippines would no longer conduct joint patrols with the US in the South China Sea, and that the last joint US-Philippine military exercises would be the last.
And yet, earlier, the President said the Philippines needs the US for the South China Sea, where it remains locked in a territorial dispute with China. Foreign Secretary Perfecto Yasay Jr. again went on clarifying mode as he said the President has no plans of cutting ties with the US and that the “crossing the Rubicon” remark was just his dramatics aimed at bolstering relations with US rivals China and Russia.
Yasay slipped. It would appear that Duterte is trying to play the US on one side and Russia and China on the other in an effort to gain benefits from both sides. For example, he has been sending signals to China that he would welcome financial assistance for his railway projects and to Russia for cheaper weapons. But by playing both sides – just as he is playing both the communist rebels and the military, wooing both of them with promises – Duterte may be playing with fire and may be putting himself in a position where he could antagonize both sides in the long term.
Also, this has caused a perception of uncertainty in both his domestic and foreign policies. Where is he really taking the country? Does he want the country to be a socialist state that is allied with communist powers Russia and China? Or does he want the country to remain a democracy with strong ties to longtime ally US? Duterte seems inclined to the first, but the people, I’m sure, favor the second.
Perhaps, Duterte wants the country somewhere in between, enjoying the benefits of sleeping with both sides. But then, we all know that considering the strategic location and importance of the Philippines to this part of the world, this is just not possible. It could burn him, and scorch the entire country with him.
Duterte’s dramatics and derring-do may be good for his popularity ratings in the short-term, but these will eventually have adverse effects on the economy as local and foreign investors begin to wonder if it’s worth staying in the country under a cloud of uncertainty.
While 16 million Filipinos voted for Duterte mostly on his promise of eradicating drug addiction and other crimes, and gave him a 91-percent approval rating in July, those numbers could dwindle and disappear fast if he fails to improve the economy and bring food and job to the people. Threatening a longtime ally and cavorting with its enemies certainly won’t make it happen.
