Duterte economic agenda soothes business anxieties

The eight-point economic agenda presented by the camp of presumptive President Rodrigo Duterte, and the names of the personalities who would be part of his Cabinet, appear to have quickly soothed anxieties in the business sector. 

Business groups earlier expressed apprehensions over Duterte’s lack of a coherent economic plan, and fears that his administration would be limited to fighting illegal drugs and crime. Critics had even described Duterte as a one-trick pony.

Duterte mentioned a few names deemed to be among his closest friends and allies as initial members of his Cabinet. They included government veterans Jesus Dureza and Carlos Dominguez III.

Dureza was a press secretary of former President Fidel V. Ramos and peace adviser to former President Gloria Arroyo.

Dominguez, a Davao City businessman, was agriculture secretary of Ramos and the late President Corazon Aquino.

Dominguez is being given a choice to head either the transportation or finance department.

The top post at the Department of Foreign Affairs appears to have been reserved for his running mate, Sen. Alan Peter Cayetano. But he will only be able assume that post after the one-year ban from holding a government post for those who lost in the last elections. It is not know who will “warm up” Cayetano’s Foreign Office seat.

Other names floated were those of former Trade and Industry Undersecretary Tomas Alcantara, and Maribojoc, Bohol Mayor Leoncio Evasco Jr., who could be the executive secretary.

Evasco is a former priest and member of the New People’s Army (NPA), indicating the close links of Duterte to the underground communist movement.

Also cited was Davao City Rep. Isidro Ungab, a former banker (Northern Mindanao Development Bank) and consultant at the Asian Development Bank; he is being groomed as budget secretary.

Other names mentioned were former presidential aspirant Gilbert “Gibo” Teodoro, who handled the defense portfolio under President Arroyo; he is a cousin of President Aquino.

Gen. Hermogenes Esperon Jr., retired Armed Forces chief of staff, and Paul Dominguez were also mentioned as possible Cabinet members.

It was Dominguez who bared the eight-point economic program of the Duterte administration. He said that among the top priorities of the program was to improve the government’s revenue-collection efforts through reforms at the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) by reducing corruption; accelerate infrastructure spending by maintaining a spending ratio of 5 percent of gross domestic product (GDP); attract foreign direct investments (FDI) by easing the foreign-ownership limit; adopt Davao City’s model on ease of doing business; reduce criminality and improve security for people and business; modernize the agriculture sector through better irrigation and a push for agriculture-processing technology; address land administration and management through improved land titling and by ensuring land-security tenure, especially in rural areas to make them attractive sites for foreign direct investment; make tax administration more progressive by updating income-tax brackets and indexing tax collection to inflation; expand and improve the conditional-cash transfer program and also indexing the program to inflation; and strengthen the basic education system by improving training in communication, logical thinking, and mathematical skills in the basic and primary education system and by expanding the scholarship program.

The economic policy outline is acceptable to the global financial community, according to financial service firm J.P. Morgan.

“However, given the broad pronouncements, the appointment of a capable and experienced Cabinet and economic team, and eventually, the ability to execute, are the next milestones to watch for,” J.P. Morgan noted in a statement.

“We believe that financial markets will welcome the explicit commitment of the incoming administration in keeping the current macroeconomic policies, particularly its focus on infrastructure,” it said.

“He’s retaining a lot from the previous administration, so this will be great for continuity,” said Nicholas Mapa, an economist at the Bank of the Philippine Islands.

“If Duterte can implement where the previous administration struggled, this will definitely instill confidence in the economy,” he added. “We think this should assuage concerns about Duterte’s lack of clarity on his economic platform.”

Last Friday the Philippine Stock Exchange index (PSEi) pierced the 7,500-point mark on mid-trade, but closed at 7,436.79, up 111.75 points or 1.53 percent higher, than the previous day’s close of 7,325.04.

The closing level was the highest for the index since August 13, 2015, when it closed at 7,439.80.

Former World Bank consultant Frederic Neumann, who is now co-head of the Asian Economic Research of Hongkong and Shanghai Banking Corp. (HSBC), said what the market is looking for in the Philippines is the continuation of past policies, which is keeping the macroeconomy fairly balanced and allowing the private sector to fill in the void and allow the economy to grow.

“There’s a hope of a fresh wind, since Duterte came from the south and he’s bringing in his own advisers who may lead to a change that would be good for security and the prospects for growth. It will also be good for the southern Philippines, since Duterte came from Mindanao, which has huge potentials for growth, particularly in agriculture and mining,” he said.

He added that the new emphasis on security and graft “will be good for the economy.”

“The economy would grow [about] 6 percent or a little below 6 percent, but it will outperform others in the region. The country is doing better than everybody else in the region, with exports rising faster. The next president should, however, be careful not to allow the economy to overheat,” he said.

Even the Makati Business Club (MBC), which earlier expressed worries over Duterte’s brash character and the absence of convincing pronouncements on economic policies, has taken a more favorable view on Duterte, citing his record in Davao City.

“They [Davao City residents] have nothing but positive words about this mayor,” MBC Chairman Ramon del Rosario said. “They were among those reassuring people that a lot of the tough talk he was giving was just that, tough talk, and that at the core he is a responsible man and he will weigh his actions.”

Growth in Davao reached 9.4 percent in 2014 from a year ago that was far above the 6.1 percent expansion in the country.

Economists also welcomed the names floated as members of Duterte’s economic team.

“These are experienced politicians who have been in the government for some time,” Eugenia Victorino at ANZ Research said. “They are not necessarily traditional politicians, but people who have delivered.”

Duterte would likely pursue the pro-business policies of Aquino and had said that he would not hesitate to copy the programs of Aquino.

Duterte’s spokesman, Peter Lavina, said radical plans will be introduced, such as curfews for children and wide regulation on alcohol sales and amending the Constitution to allow a federal form of government.

Lavina, however, said the proposals will be undertaken only after public consultations and deliberations in Congress.

Malcolm Cook, a senior fellow at the Singapore-based Institute of Southeast Asian Studies, explains that even Duterte’s most draconian policy plans do not pose an immediate threat to stability.

“The presidency is a much more constrained political environment, with many more demands on him and much more critical coverage of what he’s doing,” he said.

Not all, however, are convinced of Duterte’s initial moves. The research firm Ibon said Duterte’s initial choices for his economic team show him treading the same Aquino administration path of elitist economics.

It added that Duterte’s early pronouncement on Charter change also strongly indicates continuity with the neoliberal economic policies that have kept Filipinos poor and the economy underdeveloped.

Ibon noted that Duterte’s first major economic policy pronouncement, made by his spokesman the day after the elections, was a “major rewriting” of the 1987 Constitution, including easing foreign-ownership restrictions. This is a long-standing demand by foreign investors and domestic big business to expand their opportunities for profit making in the country,” Ibon said, adding that this surrenders sovereignty and compromises long-term national development.

Declaring a policy that directly and immediately benefits millions of poor Filipinos rather than a handful of wealthy elites would have been more welcome in signaling real change, Ibon said.

Farmers, workers and poor Filipinos, for instance, have long demanded free land distribution, meaningful wage increases, and fulfillment of their right to education, health and housing, it added.