Newly Installed Philippines President Rodrigo Duterte

An assessment of Political and Socioeconomic risk to the ASEAN trajectory 07.14.2016

Overview

On 30 June, former Davao Mayor and criminal prosecutor Rodrigo Duterte was installed as the 16th President of the Philippines, sparking a global stir of emotions about the new directions he may take the Phillippines, and the implications it will have on regional alliances, and political and socioeconomic stability in the region. 

The 71 year old Duterte has made a name for himself throughout his campaign and mayorship with his bold and controversial comments, often inciting violence and brutal methods to achieve an impressive anti-crime record. His rise and popularity are reminiscent of a global trend toward populist, antiestablishment and nationalist leaders, and his support has recently gained traction on economic fronts, including with local business leaders and even Wall Street analysts.

Duterte’s foreign policy raises the most concern for the ASEAN future as he has stated direct opposition to Chinese territorial claims of the Scarborough Shoal in the South China Sea. In the wake of the UN arbitral decision on 12 July, which ruled in favor of the Philippines, dismissing Chinese claims under the nine-dash line, resolution of these territorial claims (peaceful or through military force) will largely dictate the future of Philippine-Chinese relations, as well as stability in the region. These shifts in the regional balance of power will be critical in defining the future of the Philippine-US alliance and US-ASEAN involvement across the South China Sea.

Social Implications

“The Punisher”

Duterte has long been known to champion brutal tactics to accomplish an aggressive anti-crime agenda. His presidential campaign featured a slew of boldly brutal statements such as “forget the laws of human rights” and “kill all of them [criminals]”.[1]

Post-inauguration, he has continued on this trajectory, publicly urging citizens to kill drug dealers and addicts, even offering medals to people who shoot and kill drug dealers.  Over 18 suspects were killed in a single weekend, with 950 more turning themselves into the authorities out of fear.

-        While viewed as a strong anti-crime success by the populist electorate, international concerns remain increasingly high over human rights, lack of due process, and violence.

-        Such brutal methods are sure to evoke Human Rights condemnation from the international community, the UN, the US and other international bodies, which will likely impact the ability of the Duterte administration to court international support for its foreign policy and economic agenda. 

Anti-Free Press:

Duterte is also famous for his distaste for media criticism, a big cause for concern in a country which already sees the highest murder rates for journalists in the world. He has been quoted expressing furthering of these anti-press statements with such statements as “just because you’re a journalist you are not exempted from assassination, if you’re a son of a b---.”[2] His comments are reminiscent (although much more violent) of U.S. Presidential Candidate Donald Trump.

Economic Implications

Demographics

The Philippine economy has shown strong continued growth of 6% during recent years, although income inequality is vast with slightly more than 10% of the population considered middle class. Poor public security and Duterte’s record of turning around crime and security in Davao, which was once considered the most dangerous city in the Philippines, has led voters to believe he can replicate these successes nationally, helping to boost economic growth by reversing decades of muslim and communist insurgencies believed to have slowed the economy.  

Economic Policy

Responding to a perceived lack of economic policy focus during his campaign, Duterte published a 10-point economic plan which has been met with an increasingly positive response. He has gained further support by asking for feedback and input in revising his plan. During a meeting with business leaders in June, he was presented with a wish list from business leaders, to which he replied “I assure you, we will study and review [them]...these are doable.”

-        10-point plan:

-        Continuing the current administration’s economic and trade policies

-        Reforming the tax system

-        Easing business processes

-        Boosting infrastructure spending

-        Promoting rural development

-        Implementing land reform

-        Investing in human capital

-        Promoting innovation

-        Improving the social protection program

-        Strengthening the family planning program

 

-        Business Leaders’ wish list to Duterte

-        Comprehensive review of the tax system

-        Easier business procedures

-        Better transportation infrastructure

-        Improved telecommunications and internet quality

“Cautious Optimism”

In a reversal of opinions since April, business leaders across the Philippines have begun openly supporting Duterte’s prospects as a catalyst for economic growth. While the volatile nature of Duterte’s rhetoric remains unchanged, the publishing of Duterte’s 10-point economic policy, in addition to his openness to input, even solicitation of input,  has impressed business leaders and inspired confidence in his strategy. In particular, Duterte’s solicitation of ways to improve his plan is a gesture not previously seen from Presidential candidates and only furthers his image as an antiestablishment man of the people. Further, since his election, the Philippine Stock Exchange has made a full recovery from its pre-election lows, jumping 12% and inspiring companies to to project continuation of the increased earnings and consumption of recent years. Additionally, his policies have gained votes of confidence by way of bullish comments from large Wall Street banks JP Morgan and Goldman Sachs. If his economic success continues, he will likely see further domestic escalation of his popularity and increasingly loyal support.  

Geopolitical Implications

Duterte’s administration represents a significant foreign policy shift focused on sovereign claims of the Scarborough Shoals area of the South China Sea. His brazenly volatile and violent rhetoric is being closely followed with concern that his policies could directly or indirectly lead to war in the South China Sea. By some estimates, the South China Sea is home to $5 trillion in annual global trade, as well as 7-130 billion barrels of oil reserves, and 900 trillion cubic feet of natural gas.

South China Sea

China currently claims possession of a vast region of territory in the South China Sea, as detailed in a comprehensive claim drawn out and known as the nine-dash line. Included in its claims is the Scarborough Shoals area, which is also claimed by the Phillippines. Hardening its stance on the 9 dash line claim, China has built and occupied artificial islands in the Spratlys, setting up military bases in the area. The move has drawn international concern as a provocative measure for claiming legitimacy over the region.

-        Security implications: Scarborough Shoal is close to former U.S. Bases in Subic Bay and Clark, with the ability to monitor the facilities and launch direct missile attacks.

In recent years, China has called for discussion and peaceful resolution of claims in the South China Sea, although talks fell apart with the previous Benigno Aquino Philippine administration. Aquino began instead to develop defensive maneuvering in coordination with Japan and the U.S. and initiated arbitration against China under the UN Convention on the Law of the Sea.

-        The UN Arbitral decision on 12 July ruled unanimously in favor of the Philippines, dismissing Chinese historical claims under the nine-dash line. China did not participated in the tribunal and immediately stated that it will not accept the ruling.

Philippine-China Relations

While Chinese land reclamation has not yet expanded to Scarborough Shoal, analysts believe a Chinese response to the unfavorable ruling by the tribunal could involve immediate initiation of reclamation in the area.

-         During the campaign, Duterte spewed sovereign rhetoric saying that if China did not abide by the UN ruling, he would “ride a jet ski to Scarborough Shoal and plant the Philippine flag.” However, he more recently has shown willingness to take a different tact if China would offer an attractive economic incentive package.

-        Post-election, Duterte has focused on sovereign rights to the disputed territorial claims, however he has also made progress improving relations with China, even receiving an offer from Zhao Jianhua for help constructing a rail line to ease traffic congestion in Manila.

On Friday, the Chinese Navy held live-fire war games in the South China Sea. Although claimed by the Chinese government as routine exercises, the location in the South China Sea and timing just before the UN tribunal ruling further hardens the Chinese stance in the South China Sea and its intentions to disregard the ruling.

-        Despite the power politics at play, there is strong incentive for China to cultivate back-channel relations with the Duterte administration to avoid a large-scale conflict and inevitable global criticism.

US-Philippine Relations

US Secretary of Defense Ash Carter has stated that if the Phillippines allows China to build islands and military posts on the Scarborough Shoals, it will make it difficult for America to protect Scarborough Shoal and maintain peace and stability throughout the South China Sea, putting a major strain on the US-Philippine alliance (along with other regional alliances).

Further complicating US-Philippine relations is the prospect of Donald Trump winning the U.S. Presidency. Trump’s lack of strong support for the U.S. Philippine Alliance could lead to a collapse in cooperation, pushing all the power into the hands of the Chinese. Duterte has also expressed a level of distrust for the U.S. and its military support against China.

-        Duterte has publicly stated his openness to deal with China rather than the U.S: “We have this pact with the west, but I want everybody to know that we will be charting a course of our own,” he said. “It will not be dependent on America. And it will be a line that is not intended to please anybody but the Filipino interest.” “Can you [the US] match the offer? Because if you cannot match the offer, I will accept the goodwill of China”[3]

The Duterte administration has managed to keep good ties with Japan, maintaining the Shinzo Abe government as a peaceful, stabilizing, lawful alternative to Chinese power.

-        Analysts have also pointed out that Duterte’s meeting with the Japanese Ambassador first, and the Chinese Ambassador second, breaking with tradition to meet with the U.S. Ambassador, may indicate his diplomatic priorities. 

Regional Implications:

Aside from the prospect of outright war in the South China Sea, cooperation of the Duterte administration with China would also help legitimize other Chinese claims within the nine-dash line. Such cooperation could weaken the power of the UN in the region if the tribunal ruling goes largely ignored. Vietnam, Taiwan, Malaysia and Brunei who all claim resource-rich territory on the Spratly Islands will all be affected by the playing out of Chinese-Philippine, US-Philippine and US-Chinese relations in the South China Sea.

Sources:

Nikkei Asian Review:

http://asia.nikkei.com/magazine/20160707-Deciphering-Duterte/On-the-Cover/Philippine-companies-warm-up-to-the-Punisher

http://asia.nikkei.com/magazine/20160707-Deciphering-Duterte?n_cid=NARAN185&utm_source=facebook&utm_medium=infeed&utm_content=0707Dutertealttext&utm_campaign=NL+V30%2B180

The Diplomat:

http://thediplomat.com/2016/07/regional-implications-of-the-duterte-presidency/?utm_content=buffer64118&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer

Chiang Rai Times:

http://www.chiangraitimes.com/chinas-navy-holds-live-fire-drills-in-south-china-sea.html

Asian Correspondent:

https://asiancorrespondent.com/2016/07/philippines-duterte-drug-addicts/

Business Insider:

http://www.businessinsider.com/the-new-philippine-president-is-violent-2016-6