Private sector backs martial law in Mindanao

Business sector leaders and analysts remained supportive of actions taken by President Duterte, who declared martial rule on the island of Mindanao in response to a Muslim extremist attack in Marawi City, Lanao del Sur.

The issue is polarizing given the painful role martial law played in the country’s history when it was wielded by the administration of the late strongman Ferdinand Marcos.

Fault lines emerged on whether Mr. Duterte’s response in Mindanao had gone too far—at least one market expert called it “overkill” —but overwhelmingly, the business community agreed that action was needed.

“This is terrorism. There are no ifs ands or buts about it,” said Perry Pe, Management Association of the Philippines chair of the national issues committee. “The moment you act on it decisively, that kills it right away. Obviously, what the President did was very good because the market reacted to it very positively.”

Mr. Duterte cut short his state visit to Russia as government forces battled extremists linked to the Islamic State. Reports emerged that hostages were taken, civilian facilities were occupied and buildings, including a Catholic Church, were burned down.
Filipino investors mostly shrugged off the news yesterday as the government claimed the situation had been contained. The benchmark Philippine Stock Exchange index (PSEi) recovered early morning losses to end the session up 0.33 percent to 7,837.82. The peso weakened against the dollar, closing at 49.995:$1 yesterday from 49.82 a day before.

“It’s a bold decision, imposing marital law,” Jonathan Ravelas, chief strategist at BDO Unibank Inc., said in an interview. “It puts a cap on potential risk.”

Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. said the move was “decisive” and would help spur confidence moving forward.

“There may be some transitory or temporary cautiousness, but in the end I think it will lead to a positive impact on sentiment,” Tetangco told reporters on the sidelines of the special testimonial luncheon in his honor that was hosted by seven local and foreign business groups.

Meanwhile, ING Bank Manila senior economist Joey Cuyegkeng said the decision was “overkill.”

In a note to clients, Cuyegkeng said a declaration of a state of emergency would have been “more appropriate” as the declaration of martial law “implies that the government has lost control of the situation in Mindanao when in fact the incident is isolated.”

Nevertheless, he acknowledged that Mr. Duterte’s decision allowed him more “leeway to address the overall peace and order situation on the island, including activities of not only extremist groups but likely also to address activity of the armed wings of the communist party.”

Duterte called for a nationwide state of emergency in September last year when a bomb exploded in a public market in Davao. The Maute group has been reported to be responsible for both attacks in Mindanao.

“Whenever martial law is used, there is negative effect,” said Philippine Chamber of Commerce and Industries (PCCI) honorary chair Sergio Ortiz-Luis Jr.

“On the other hand, you would want to correct it [terrorism] once and for all. Either way, we are already having a bad coverage in the international news, so we should end the [Maute group] and IS now,” he added.

Other business groups were likewise supportive, but called for more transparency on the issue.

Guenter Taus, president of the European Chamber of Commerce of the Philippines, emphasized the need to explain why martial law was declared in the entire Mindanao when the issue only affected one city.

He said the lack of communication with the business community would have repercussions in luring investments.

“The longer the business community is kept in the dark about the situation’s progress or the longer that there are no signs of the situation improving, we fear that this will negatively affect the country’s attractiveness as an investment destination, not only from the European point of view, but globally,” Taus said in an e-mail.

John Forbes, senior adviser of the American Chamber of Commerce of the Philippines, said that security concerns would be part of any investor’s due diligence.

“We have not discussed the martial law declaration. The current security situation appears highly localized. Investors know that local security anywhere is part of their due diligence,” he said in a text message.

Ortiz-Luis, asked about the effect of martial law on Mindanao’s business environment, said a lot of trust at this stage was being placed on the government to resolve the issue.

“I’m not in Mindanao so I cannot speak for it. I’m sure some businessmen there are worried. But in the long run, in order for the problem to end, I think they would tolerate it,” he said.

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