Liberal status quo likely to continue in Philippines
The Aquino administration has been able to grow the resilience of the Liberal Party of the Philippines, making a Liberal Party victory by Manuel “Mar” Roxas in the May 2016 election the most likely scenario. This is based on business support, optimistic relations with the United States, consistent trade relations with China, and a push for a peace agreement with groups in the south of the country.
The most recent numbers released from the Philippines, 1.1% growth since the previous quarter, are slightly less than expected. However, Socioeconomic Planning Secretary Arsenio Balisacan has stated that 2015 GDP growth is still expected to be approximately 6%, following suit with the significant growth of recent years.
As has been previously looked at, the main cause for concern among investors, which explains the slight drop in growth, is the upcoming presidential election in 2016. President Benigno Aquino has led the country since 2010, progressing through positive economic reforms and a mitigation of corruption. Many investors are worried about the potential lack of continuity with the next generation of leadership.
The most likely scenario of the election is a maintenance of the status quo, through a victory of Aquino-sponsored Mar Roxas. With President Aquino’s changes in business regulation, and increasing ease of access to the Filipino market, it is clear that the Liberal Party’s pro-business and pro-investment environment has consolidated this significant group of supporters.
Through Aquino’s presidency, the Liberal Party has also extended relations with the United States, signing the Enhanced Defence Cooperation Agreement (EDCA) in April 2014. The U.S. government is looking to consolidate its power in the South China Sea, signing a similar agreement with Singapore on December 7, 2015.
Trade relations with China have also been maintained at 13% of total exports, even with the recent uncertainty in the South China Sea. The Philippines and China are not willing to give up the positive economic aspects of their relationship, as was shown during the November 2014 APEC Summit.
More recently, President Aquino has focused on the Autonomous Region in Muslim Mindanao, having pushed for the passing of the Bangsamoro Basic Law (BBL) that would create the Bangsamoro Autonomous Region. This is significant for the administration, as a peace agreement would move forward with a conflict that has plagued the Philippines for many years, bringing perhaps more support to the Liberal Party.
Risks to be addressed
The risk environment in the Philippines seems to be headed toward opportunity rather than danger, especially judging from economic growth and the strengthening of institutions.
The focus on increased accountability and transparency is very important, especially considering past problems during elections. This means that risks to be faced by the government will not necessarily be political volatility, but rather they will be geared more towards the country’s inadequate infrastructure and more specific business risks.
The risk situation in the Philippines is characterised by deficient infrastructure, including an inadequate power grid and transportation system. Although these are noteworthy, it can be argued that these risks are short term, as the government needs time to catch up to the massive growth in recent years.
Besides the infrastructure risks, worries of a weak Philippine Peso and ongoing problems of corruption remain in the country. Corruption in the Philippines has improved during Aquino’s tenure in office, but it should be made clear that it is still a significant issue.
Bribery, extortion, and favouritism are common in the Philippines, which not only make it more difficult to run a business, but lacking labour regulations is something to be looked into by foreign businesses. The 2016 election will be a significant factor in showing the world whether or not the country has actually progressed away from corruption.
The technology industry in the country can be used to show growth being engrained into the economy. Projects such as the Department of Information and Communications Technology are being pushed by the government to create long term industrial and research growth, something that can be relied on for lasting growth. Education programs are also being promoted by various businesses, including the Bruce Institute of Technology (BIT), sponsored by BitMicro, a California-based microchip company.
It has been made clear that a maintenance of status quo, in the victory of Liberal Party candidate Mar Roxas, is the most likely outcome of the 2016 Philippine presidential election. This is due to the current administration’s work with business, foreign policy consolidation, and focus on peace agreements with groups in the south, as well as progress in reforming to fight corruption.
The risk situation in the Philippines has been characterised in terms of inadequate infrastructure as well as the pending status of corruption progress, especially due to past troubles during elections.
This article was co-written by the Leadership & Democracy Lab, a student-run research organisation that is based at the University of Western Ontario, in London, Ontario, Canada (http://www.democracylab.uwo.ca/)
