DONALD TRUMP IS NO RODRIGO DUTERTE
The Recently Elected Philippine President Has a Track Record and Point of View that Provide Key Insights to Investors and Those that Care About Economic Growth in the Philippines
By Martin Yupangco and Paul Gary Bograd
Philippine President Rodrigo Roa Duterte delivers a speech during the turnover rites of the Armed Forces of the Philippines at Camp Aguinaldo. Photo by Marcelino Pascua/ Presidential Communications Operations Office
Knowledgeable observers of the Philippine business and political environment are already bored with the oft-repeated comparison between Donald Trump and newly elected Philippine President Rodrigo Duterte.
To be sure both are prone to outrageous rhetoric, seemingly arbitrary decision-making process and a highly aggressive and confrontational approach to managing events, people and issues.
But where Donald Trump built his public image and practiced these behaviors in the highly synthetic, controlled and contrived world of Reality TV, Rodrigo Duterte has a real life track record and point of view that offer investors, businessmen and governments key insights into what to expect from a Duterte led Philippines.
Campaign Poster Made By Independent Supporters
The Recently-elected President’s Rhetoric and Vocabulary
The three cornerstones of investment friendly environments: “Level Playing Field”, “Rule of Law” and “Consistency of Public Policy” are severely challenged, that is if one were to listen only to the President Elect’s bombastic and sometimes shocking public statements. It would be a mistake to judge a Duterte presidency and investment climate only by his outlandish pronouncements, seemingly conflicting positions and highly controversial behavior. Instead, let’s look at the context.
Philippine election campaigns are historically over the top events rooted in the belief that entertainment value is a mandatory part of allowing voters to see who the candidates really are as people. Songs written by and sung by candidates are as common as speeches, and celebrity performances interspersed with candidate presentations are the norm for national campaigns. For some this explains part of the attraction of the colorful, provocative and shocking pronouncements of candidate Duterte. During the past campaign he publically cursed the Pope, regularly bragged about womanizing and notoriously appeared to make light of an Australian missionary raped by prisoners during a prison hostage standoff many years ago in Davao. And controversy continues even in the days beyond the election. Certainly there was an entertainment quality and notoriety in these statements but more powerfully these statements are the “anti-establishment” seal of approval for those voters so alienated by grinding and intractable poverty or even others, better educated who are alienated by the degradation of daily life in the high costs and questionable service quality of the Philippine Telecom “Duopoly”, torturous traffic or the daily outrage at the mass transportation failure.
And the now President Elect Duterte shows no signs of letting up. In a recent live press conference an exasperated Duterte warned his shocked journalist audience “Don’t F**K with me”. He later declared that he will give no more press interviews and threatened to distribute any information from government only through government TV and Radio. But most seasoned observers believe that this too shall pass. He has in fact promised that his outrageous behavior will end when he is sworn in as President.
The Davao Track Record
Even his harshest critics will acknowledge an extraordinary achievement in Davao’s transformation under Duterte’s leadership from a lawless outpost on the edge of violent criminality, separatist violence and oligarchical capitalism. He established a mutual self- interest of acceptance inside the city boundaries with ideological and religious groups that were and continue to create a violent and destructive presence in other parts of the country. Businesspeople big and small, foreign and Filipino, universally give Duterte and Davao credit as being largely free from mayoral corruption and shakedowns from the top. Even day to day ministerial activities such as licensing and permitting operate under a Duterte imposed 72-hour maximum for approvals. City streets are for the most part free of street crime and of an overt drug culture that plagues Mega Manila and other Philippine urban areas. Of course there are some who suggest that this all came about as the result of extra judicial executions, arbitrary law enforcement and the existence of the alleged vigilante empowered “DDS” (Davao Death Squads). And Duterte himself encourages this imagery while dancing the “yin and yang” of both acknowledging and denying the reality of this imagery.
The Duterte Presidency: Expectations and Personalities
One can get very good insight about any prospective Presidency by examining two indicative dynamics:
1. What are the expectations of the voters who formed the administration’s electoral victory?
2. Who are the personalities who form an Administration?
What are the expectations of the voters who formed the administration’s electoral victory?
As complex and iconoclastic as President Elect Rodrigo Duterte is, he is also in one sense very predictable. He will do everything within his power to meet the expectations of those who elected him. For the international business community this offers key insights. Let’s examine a few:
There are of course other expectations and priorities for the incoming administration but these are likely to be the expectations by which he will be judged.
Who are the personalities who form the Duterte Administration?
President elect Duterte has named almost all of those who will form his first cabinet. They are in general male, older, political, and have personal loyalty to the incoming President. Loyalty a quality the in- coming President him- self has determined to be a high priority. And while not a particularly exciting or creative group they are a low key and uncontroversial counter- weight to a purposely controversial and establishment rattling Chief Executive.
The Human Services Group
In general terms the “human services, education and poverty” departments were given to the ideological left. This was of concern to some, but to others this is a part of Duterte’s plan to come to a universally welcome settlement and reintegration of the Communist Party of the Philippines (CPP) and its military wing, The New People’s Army (NPA). NPA violence and “revolutionary taxes” remain a significant obstacle to investment and development in the most undeveloped and excluded parts of the country. A settlement would open the door toward a genuine inclusive growth for the most alienated Filipinos, and enormous, secure investment opportunities in infrastructure and agribusiness. But this is no easy task. Both the CPP and NPA remain terrorist organizations in the eyes of the United States. But this is a task that the incoming President is committed to and has the credibility and track record to make some believe he can succeed.
The Economic Team
The appointees to the economic team have been largely uncontroversial and mainstream. A mix of largely older, former cabinet officials and personal friends and schoolmates. The key departments of Taxation, National Economic Development Authority, Budget and Management and even Customs, were given to solid if unexciting individuals with very little indication so far of what, if any, specific initiatives they want to pursue in their early days.
The exceptions to this are President Elect Duterte’s appointment of Carlos Dominguez as his Secretary of Finance and Arthur Tugade as Secretary of Transportation and Communications (DOTC).
Dominguez is the de-facto leader of the economic team and along with his brother Paul are informally seen as one of the small group of advisors the President Elect relies upon. Dominguez was a long time Davao schoolmate of Duterte and a highly respected businessman and close confidant of former Presidents Cory Aquino, Fidel Ramos and Gloria Arroyo. He has had several stints in government and business success in agribusiness, retail and the hospitality and hotel industries. For those who were concerned that the “older generational” characterization of the Economic team would be uninspiring, the internationalist Dominguez has discussed the fast tracking of government spending, significant tax reductions and reforms, economic policy and regulatory consistency, new econometrics to measure economic inclusion, including a millennial inspired sin tax on unhealthy junk food. Dominquez will likely be the economic “go to” guy in the first year of the administration.
Tugade, also personally close to Duterte is a “rags to riches” businessman who previously served in the Aquino government as President and Chief Executive Officer of the state-owned Clark Development Corporation (CDC). For those interested in the development and financing of infrastructure projects, Tugade’s appointment to DOTC is key. DOTC has been an often criticized agency during the Aquino years for the slow pace of Public-Private Partnership (PPP) infrastructure projects and controversial shortcomings in airport management and mass transit. There will be a lot of pressure on DOTC to fast track current and future infrastructure projects and to correct the Aquino administration’s perceived shortcomings in airports and mass transit. Tugade’s trackrecord in the private sector and his experience at CDC are encouraging to most observers of the business sector.
But more telling in terms of Economic Policy, the incoming President himself has given indications and direction that his economic policies will be both investor friendly and intended to shake up the long protected industries of what some may call the elite oligarchies. He has pledged to change the constitution to allow foreign investment and participation in previously protected industries. He has publically called to account the telecom duopoly and power sectors by threatening to empower competitive foreign and domestic alternatives if improved service and fair pricing are not forthcoming. His team has been committed to tax reform and not only in reduced rates, but in simplifying “Kafka like” tax regimens. And with his now customary public flourish and emphasis the President Elect has gone so far as to call for the elimination of the Bureau of Internal Revenue and Customs agencies. One common understanding is that government and infrastructure spending will be turbo charged and while a number of the appointees were very public critics of the current administration, in general terms there appears to be a common commitment to preserve the macroeconomic policies and fiscal space at the foundation of the Aquino administration’s record GDP growth and international financial ratings.
National Security and Foreign Relations Group
The National Security and Foreign Relations Group will have to confront three immediate challenges for the incoming President:
1. He is committed to using both the Military and the National Police Force to achieve his 6-month deadline of significant progress in fighting illegal drug use and street crimes. His choices to lead these institutions are distant from those of his predecessor but even before taking office both institutions seem to be moving to help meet this 6-month deadline.
2. Of bigger consequence for the international business community are the campaign pronouncements of the President Elect, as well as early tangible indicators of a less confrontational relationship with China and more neutral relationship with the United States. This is a very precarious tightrope the new President will have to walk; and he has made it more complex by (in true Duterte style) rhetorically taking both sides of the argument. Leading this tightrope walk will be his designated Secretary of Foreign Affairs, Perfecto Yasay Jr.—a law school classmate of Duterte with little formal diplomatic experience. Success on this tightrope will bring enormous economic reward, but failure could seriously handicap the Philippine economic future.
3. Lastly the incoming Duterte administration will have to pick up the pieces of the torturous-ly formed Bangsamoro Basic Law (BBL). This is the statutory basis for the creation of the Bangsamoro Autonomous Region crafted by President Aquino that promised to create a stable and prospering autonomous region in the Muslim Mindanao. President Elect Duterte has a strong relationship with the Muslim communities and, while he is committed to the process, his commitment to the proposed BBL is unclear. Fortunately, he has named an experienced, practical and trusted confidant Jesus Dureza to once again assume the post of Presidential Adviser on the Peace Process. Although complicated by the commitment to Federalism, there is reason to be optimistic that a long sought after formal understanding with the Muslim community is achievable.
What is the verdict on the incoming Duterte Administration for International Business?
Well, trying to predict President Elect Duterte is not for the fainthearted. But investment in the incredible, yet largely untapped human resources and possibilities of the Filipino people has always been a complexity. But as complex as President Elect Duterte’s candidacy and public style is, he has a real track record and offers insights to the investment opportunities. Follow the track record and the insights, and be guided by them.
A previous version of this article was published prior to Philippine President Rodrigo Duterte’s inauguration on June 30, 2016. It has since been revised for clarity.
Martin Yupangco is the Founder & Managing Director of Optima Strategies Limited, an international strategy, government & public affairs, and stakeholder relations firm. Mr. Yupangco is also the Asia Director of Bench Walk Advisors, a litigation funder and legal capital solutions provider.
Paul Bograd is the Chairman of the Board of Evident Communications, a Manila based consultancy providing digital based marketing, content creation, public affairs, community management, and strategic research services.
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