UK think tank tells Duterte: Rough talk will turn off investors

Incoming President Rodrigo R. Duterte’s plan to change the form of government may not sit well with investors, UK-based think tank Oxford Economics said Monday.

The think tank also warned “foreign and trade relations could be at risk if Duterte does not check his own behavior.”

In a report on the Philippines titled “Short-term fears alleviated, long-term uncertain”, Oxford Economics said, “Duterte initially incited fear in investors because he campaigned without a clear economic agenda.”

In the report penned by economist Beatrice Tanjangco, the think tank said the recent release of Duterte’s eight-point economic agenda tempered fears among investors since it contained traces of the Aquino administration’s much trumpeted economic blueprint.

Under the eight-point agenda, the Duterte administration planned to accelerate infrastructure spending, address land administration and management, attract more foreign direct investment flows, expand and improve the conditional cash transfer program, shore up government revenue collection, make tax administration more progressive, modernize the agriculture sector and strengthen the basic education system.

Moving forward, “the long-term outlook appeared contingent on the success of the President-elect’s mission to rid the country of criminal activity and the proposed changes to the Constitution to shift it toward a federalist form of government,” Oxford Economics said.

It warned, however, “the manner in which Duterte tries to achieve greater peace and order may be controversial and could discourage investors.” For Oxford Economics, the shift to a federal form of government, as espoused by the long time Davao mayor, would cause “uncertainty.”

“A constitutional convention would need to be called in order to fulfill the promise. Moreover, the change in the form of government would be expensive, though if successful it would help promote a more inclusive growth path for the economy. However, based on international experience, the chances of successfully implementing far-reaching changes to the constitution are decidedly mixed,” the think tank noted.

It also made issue with the behavior of the tough-talking mayor.

“While his electoral agenda resonated well with the people, his inappropriate comments in the media have irked some key trade partners. And the latter could affect the development of trade and economic links if he was not careful,” Oxford Economics said.

Duterte’s stance on the West Philippine Sea issue also “conflicted with the strategy of the previous administration and could be a considerable risk,” Oxford Economics added.

“Duterte has said he was willing to engage in bilateral talks with China regarding the South China Sea. While this would improve the country’s relationship with China, it could potentially shatter the united front of claimant countries against China, and threaten to undo the Aquino approach just as the UN arbitration tribunal in The Hague was poised to rule in favor of the Philippines,” it said.

During the “honeymoon period” as President, “Duterte would have the challenge of maintaining investor confidence while turning his campaign words into action,” Oxford Economics said.