Manila’s “Duterte Harry”: Should investors be worried?

Manila’s “Duterte Harry”: Should investors be worried?

Against the backdrop of growing violence in the Philippines, questions are being asked about the meaning, and implications, of a ‘state of lawlessness’. Immediate signs show that investors remain confident in President Rodrigo Duterte’s national political project. But this article asks how, or if, Duterte’s drugs vendetta could affect the Philippines’ economic prospects over the longer term.

“Duterte Harry”: a boon to the economy?

An opinion poll conducted in July showed that public trust in Duterte was at 91%;  a national record for public officials. Duterte is popular not in spite, but perhaps because, of his crusade against drug culture – particularly amongst the educated citizenry. His war against drugs and crime is arguably even creating a safer climate for tourism, a major contributor to national GDP. For investors, a society free of crime provides a more secure environment in which to conduct their business operations.

Goldman Sachs believes Duterte will be a boon to the economy. He has pledged to boost infrastructure spending, relax FDI restrictions (believed to be a cause of inadequate investment and job creation) and invest in agriculture. In this regard it seems that Duterte has not made a radical break from his predecessor, Benigno Aquino.

According to Budget Secretary Benjamin Diokno, Duterte’s state of lawlessness declaration demonstrated his decisiveness to the business sector. The declaration was made following the bomb attack on Davao City by Abu Sayyaf, which killed 14 civilians, early in September. Albeit prompting a knee-jerk reaction from investors, it is unlikely to influence them to become more risk-averse. They have entered the Duterte era with their eyes wide open – which explains why economic confidence has not wavered despite his apparent endorsement of vigilantism.

Under Aquino, the Philippines became one of the best performing economies in the world, and he left office in June with quarterly GDP growth at 7%. The Philippines remains one of the brightest emerging markets, but the question remains whether the country will make its full-fledged economic ‘breakout’ under Rodrigo Duterte.

The intervention of Abu Sayyaf

The timing of the Abu Sayyaf bomb attack is crucial, having cast critical light on other aspects of Duterte’s governance. It will remind investors that Duterte rose to stardom on a platform of bombastic political rhetoric – and not of fiscally-sound economic policies. The attack in Davao is likely to reduce Duterte’s interest in holding peace talks with separatist groups in Mindanao. Aggressive and retaliatory measures are now the more likely possibility.

In fact, the general escalation of Islamist violence could collide dramatically with the drugs war to create a volatile, unstable political climate. Duterte’s rants at the United Nations and at President Obama show what a volatile and unpredictable figure he is. They also expose the anti-American rhetoric that clouds his political judgment.

Political turbulence risks economic future

Arguably, under Duterte’s leadership, Davao City was turned from a city of crime into a relatively safe place. But Duterte is now operating on a much bigger scale, and it is clear – if it was not already – that this model comes with substantial political risks.

As the novelty of Duterte begins to wear off, disquiet over his cavalier methods will continue to grow. There is already discussion of a climate of fear that has been ingrained in, and used to silence, civil society groups. Whatever we make of Duterte’s reign, it is clear he is making enemies, both in political circles and among the general public. If this political unrest spills over into the Philippines’ investment climate, the progress of one of Asia’s star economies will begin to be undone.

Furthermore, we should ask what Duterte’s motives are regarding his ‘state of lawlessness’ declaration. This declaration allows Duterte to call upon military force to suppress the terror threat, which is not a far cry from martial law. It is hard to see economic confidence being maintained in the region if this situation continues to escalate. In the collective Filipino memory there are still raw memories of the Ferdinand Marcos military dictatorship, and the steps backward that were taken as a nation during that era.

Duterte, safe to say, is a political wild card. He is more a man of action than one of guile and diplomacy. Although his iron fist may convey political certainty and instill economic confidence, it may also represent a democratic regression in its embryonic stages. Optimism in the Filipino economy was firmly grounded in the policies of Duterte’s predecessor, Benigno Aquino, widely regarded as one of the political stars of Asia. ‘Duterte Harry’, in contrast, has shown that he is unwilling to abide by conventional political norms. Certainly, while investors have entered the Duterte era with their eyes wide open, not to take heed of these early warning signs would be a foolhardy endeavour.

Categories: Asia Pacific, Politics

About Author

Alexander Macleod

Alex is a Manchester-based Analyst specializing in Southeast Asian political and security risk. He holds a PhD in Politics and Geography from the University of Newcastle, where he examined the role that online media play in promoting and sustaining Malaysia's racialized political landscape during general elections. Alex also freelances as a social media manager for a digital marketing consultancy. He blogs at