Under the leadership of President Rodrigo Duterte, The Philippines has experienced an upturn in its economic fortunes with both Asian and western investors looking at the potential of a consistently growing ASEAN economy that is both ideally located as well as being home to a young widely English speaking population that is hungry for new opportunities.
Duterte’s foreign partnership model is one that seeks friendship and economic connectivity with all, and hostility with none. As such, Duterte has worked with fellow ASEAN partners towards common regional development goals, whilst also building new bridges to major Asian powers including China, Russia, Turkey and India. All the while, Duterte has strengthened relations with Japan and The Republic of Korea while developing a healthy working relationship with Donald Trump. The success of Duterte’s most recent visit to Japan is a further example of how Duterte’s leadership has allowed The Philippines to “punch about its weight”.
With respect to both the lingering territorial disputes with Malaysia, and the South China Sea issue, Duterte has renounced hostility, opting instead to operate on a model that prioritises cooperative solutions for win-win economic enrichment. Duterte’s confirmed personal attendance of April’s Belt and Road forum in China demonstrates his overall commitment to integrating the Philippine economy into the world’s most dynamic multilateral development initiative.
Duterte has shown a positive attitude to the wider world whilst also helping to make The Philippines a more secure place for international investment. The Philippines however continues to face challenges that are unique when compared to fellow ASEAN states like Singapore and Malaysia.
In spite of provocations from opponents, Duterte has yet again confirmed that he rejects the notion of any hostility against China and that he is committed to peace, dialogue and cooperation in the South China Sea region.
At present, The Philippines has a largely protectionist constitution that limits opportunities for the kind of foreign direct investment which transformed the economies of Singapore, Malaysia, Vietnam and China. Beyond this, the structural problems in Philippine governance that Singapore founder Lee Kuan Yew was never shy about pointing out, remain. This is the case in spite of Duterte’s reformist and modern attitude.
The worry for both Asian, European and American investors is that after 2022 when Duterte will be legally forced out of office, hard-line protectionists and petty nationalists may come back to power. Because of this, long term sustainable investment may well be scared off through a combination of constitutional limits on foreign direct investment and a political system that does not ensure the kind of stability and consistency that is present in ASEAN’s most successful nations.
Fortunately, there are positive signs that The Philippines will move towards a more stable and investment friendly system that will serve to benefit the material condition of the Filipino people. President Duterte has often spoken about the need to modernise foreign direct investment restrictions as well as move towards a parliamentary system that has brought stability to Singapore and Malaysia.
The grass roots Filipino CoRRECT Movement continues to use social media and public events to promote a pro-trade, pro-investment, pro-political stability shift to a new constitutional model that will federalise the country, create a parliamentary system nationwide and abolish constitutional restrictions on foreign direct investment.
In monetary policy, Gresham’s law states that “bad money drives out good”. The same is true in respect of foreign direct investment. In a country that makes it difficult to bring in clean investment, all that will be available are unsound investments. As such, The Philippines and its multiple partners can benefit from embracing an open, modern approach to the rules based economic order that has benefited many ASEAN members and many emerging Asian markets more widely.
A more open approach to foreign direct investment can help multiple partners from all sides of the world bring more prosperity to The Philippines while a less chaotic political system will help to assure investors that their projects in The Philippines will be secure in the long term.