A positive future for the Philippines

After a strong performance in the Philippines Presidential election campaign and the election itself on May 9, the winner Mayor of Davao Rodrigo Duterte is beginning to make his plan for the 6 years of his Presidency starting on 1 July.

For the last several years I been coming to the Philippines on business.  I was working in an Australian company which had a joint venture for a development project with a global company, and very supportive Philippines shareholders and partners.  We sold that company to our Philippine partners and they in turn acquired the global companies share in the project.  For the first time, that project is now 100% in Filipino hands and has the best chance in its long history to be developed for the benefit of the Philippines and thousands of local people.  This is a story mirrored in the way ahead for the Philippines under Duterte – under new management and looking positive.

I came to the Philippines a week after the election to get a sense of how the result has been accepted and find out what is likely to happen in the coming Duterte Presidency.  The first thing that is clearly apparent is that life in the Philippines went back to normal the very day after the election.  Such was the scale of the win and its wide acceptance that there are no rallys, no protests and no violence.  A great result in a country where these things certainly have occurred in the past and with occasional terrible consequences.  But not this time.  Whilst some electoral contests remain tight, such as the Vice President and the final Senator, on the other hand quick progress saw the first 12 new Senators proclaimed last week, including Manny “Pacman” Pacquiao.

After meeting with a wide range of people here in Manila, including influential groups such as the Australian and New Zealand Chamber of Commerce in the Philippines (ANZCHAM) and the Philippines Australia Business Council (PABC), my assessment is one of optimism, ranging from guarded to cautious, about the future of the country and the way the incoming President will set his agenda to deal with the major issues here in the Philippines.  And there are many issues remaining, even after the general economic success and improvements in governance under President Aquino.

Duterte has announced an 8-point economic agenda including tax reform, eliminating corruption in the revenue-generating agencies, easing restrictions on investment policies, and strengthening the basic education system.

In a press conference in Davao City on Thursday, May 12, Duterte’s spokesman “Sonny” Dominguez outlined the economic plan for the next six years:

1) Continuing and maintaining current macroeconomic policies.  Maintaining course with the successful Aquino policies and programs makes good economic sense.  Reforms would be instituted at the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) by “eliminating corruption”.  This will be welcomed, especially if it leads to more efficient operations in those key departments, allowing business and government to get on with economic growth, instead of being mired in bureaucracy.

2) Accelerating infrastructure spending by improving processes for the Public-Private Partnership (PPP) program, aiming to maintain a target of 5% of GNP on infrastructure spending - an area which will need considerable effort to improve transport, communications and reliability in energy supply, utilities and related facilities.

3) Improving attractiveness of the Philippines to foreign investment by addressing restrictive economic provisions in the Constitution and the competitiveness of doing business in the Philippines.  This is an idea based on the Davao City model under Duterte as Mayor, where the government provided support new businesses.

4) An agricultural development strategy providing support to small farmers to increase productivity, improve access to markets, and enhance the agricultural value chain by partnering with agri-business firms.  Also, encouraging more agricultural processing in the agricultural areas and promoting tourism in the rural areas as part of the strategy for rural development.  Enhanced use of leading agricultural science, soil analysis, crop variety selections and fertilizers will be essential. 

5) Reducing bottlenecks in land administration and management processes, improving coordination between the land titles agencies (Land Registration Authority (LRA), Department of Environment and Natural Resources (DENR), National Commission on Indigenous Peoples (NCIP) and Department of Agrarian Reform (DAR)) and enhancing security of land tenure, will contribute to new investment in agriculture and rural areas. The size of the smallest farms is an issue preventing higher productivity, but creative thought on local grower cooperatives and smarter use of technology will pay huge dividends.

6) Further investment in the education system and providing scholarships for tertiary education, relevant to the needs of government and the private sector, focusing on communication, mathematics, and logical thinking.  This will aid in addressing the difficult issue of underemployment by giving students access to the knowledge needed in the workforce, government and the private sector.

7) Improving the income tax system to make it progressive, which will provide the lowest paid people with a little extra disposable income, and indexing tax collection to the inflation rate providing additional tax revenue to the government over the long term.  Adjusting the tax rate table is expected to improve fairness in the system. 

8) Expanding and improving the Conditional Cash Transfer Program (CCT) and indexing it to the inflation rate, maintaining the real value being received by the beneficiaries of the program.

This appears to be a solid start to the planning for the 6 year term of the imcoming President.  But its not all that has been said. Many other ideas are taking shape and will continue to, in the lead up to his inauguration in June.  Selection of Cabinet Sectretaries, which in the Philippines are the equivalent of Cabinet Ministers in Australia, is a process simlar to the USA, where the Secretaries are nominated by the President and come from outside the Congress.   Early signs are that Duterte is selecting from his close and long-term network of friends, political and business associates.  Some early suggestions appear very positive. 

 

The note of caution sounded by some in Manila is that whilst Dutuerte himself has great experience as  Mayor in Davao city, it is a regional city far from the demands and extent of the national government portfolio of issues and selection of the right people with broad experience and deep knowledge of their respective portfolio will be essential.  At present there is no shortage of people putting their hand up to be involved, and making the long trip to Davao to meet personally with Duterte and his team.  Trade, foreign relations and external security are all also major issues for the new President and he will need skilled advisers to make solid progress in those fields for delivery of his economic plan.

 

Other crucial issues that will underpin the success of his economic plan include the continued efforts to achieve lasting peace and renewed development in the Autonomous Region of Muslim Mindanao (ARMM) along with possible implementation of the negotiated Bangsomoro agreement, resolution of the 45 year old Communist Party uprising, conducted by its armed wing the New Peoples Army (NPA) and elimination of the kidnap for ransom organisations such as the Abu Sayaf.  Few business people and even fewer tourists venture into places where they feel they feel unsafe.  No-one will tour the beautiful islands of the Philippines if they fear for their life.  Many places in the Philippines are indeed beautiful, idyllic and can be a holiday paradise.  But tourists and business people will only come if they can get there easily, can rely on the infrastructure to accommodate them when they get there and feel safe whenever they do.  It truly wil be even more fun in the Philippines if the goal of lasting peace in achieved across the muslim and communist insurgency areas.  If that is achieved, the people will come In big numbers.  It could be the new Bali or Fiji once these issues are addressed.

 

A significant challenge will be the idea of Federalism being pushed by Duterte.  This is a major change from the current Unitary form of government.  In its curent form, all levels of government are part of the one national government, where the layers of province, municipality and barangay are all subsets of the whole.  Federalism proclaims states, negotiates and settles the roles and powers of the Federal government level and each of the states.  This like in Australia is a constantly evolving form of Government and one which requires patience, good policy and good governance to succeed.  Laws at the yet to be created state level may allow for local control over natural resources among other things such as education and health services, but any change to the process of governing the nation and the form of government will take years to achieve.

 

The new President has the advantage of having won by a very large margin.  However given the number of candidates in the run for the Presidency, it means that he did not win more than 50% of the vote.  In fact, more than 60% of people did not vote for him.  So some of the hard talking, tough sounding comments on policies and actions mentioned during the campaign are unlikely to occur in reality - the people and the congress will have to be brought along, in order to deliver promises focusing on law and order, peace, anti-crime and anti-drugs. 

 

Most here wish him well.  The vast majority want positive change that they can feel and change that they can see – all the way down to the man in the street.  There is a lot to do here but the future is brighter in the Philippines.

 

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