Dominguez: Duterte to Marcos admin transition already started
MANILA, Philippines — The outgoing Duterte and incoming Marcos Jr. administrations have jump-started their transition talks, Finance Secretary Carlos Dominguez III said on Tuesday, just a day after the presidential elections.
“The briefing has begun,” said Dominguez, who’s President Rodrigo Duterte’s chief economic manager. “So far, so good,” was his reply when asked how the talks were progressing.
Dominguez declined to identify who composed the economic team of Ferdinand Marcos Jr., who will assume the presidency on July 1. “Let’s await their disclosure,” Dominguez said.
In a May 9 report, London-based think tank Capital Economics said the Marcos Jr. presidency was expected to sustain the ambitious “Build, Build, Build” infrastructure program as well as closer ties with China, which his predecessor initiated.
“Spending on infrastructure would be welcome and could provide an important boost to the country’s prospects. In contrast, the potential economic benefits from closer ties with China are likely to be quite small, especially given the risk that a pivot towards Beijing could jeopardize the country’s more important economic relationship with the US,” Capital Economics senior Asia economist Gareth Leather and Asia economist Alex Holmes said.
Capital Economics said that his win in this year’s presidential elections “puts Marcos in a powerful position.”
“Given his family background and his chequered political career to date, there are concerns among investors that his election will fuel corruption, nepotism and poor governance,” Capital Economics warned.
As for managing the economy recovering from its pandemic-slump, Capital Economics said that “Marcos would do well to follow in Duterte’s footsteps by delegating the management of the economy to competent bureaucrats.”
“Marcos gave away a few policy details on the campaign trail. But one thing he is keen to do is resume the ‘Build, Build, Build’ infrastructure program of President Duterte, which he hopes to ‘expand and improve.’ There is little doubt that the Philippines would benefit from upgrading its infrastructure, which is rated as among the worst in Asia,” Capital Economics said.
“Extra spending on infrastructure would probably increase government debt. The country is well-placed to deal with higher debt. While public debt has risen sharply during the pandemic (from 37 percent of gross domestic product in 2019, to 58 percent last year), it is still much lower than it was for much of the 2000s. What’s more, spending on debt interest is far lower than in the past,” Capital Economics added.
Also, Capital Economics said that “low-interest rate loans from China could help limit the fiscal impact of the infrastructure push,” although “finance has often come with conditions of relying heavily on Chinese contractors, which limits the positive spill-overs to the local economy.”
Marcos Jr.’s plans to seek closer Philippine-China relations, however, won’t be easy.
“In any case, Chinese investment is much less likely to be forthcoming than when Duterte attempted a similar pivot. China has reined in overseas investment and lending (outside of pandemic assistance) in recent years. Meanwhile, the potential to export more to China is limited by the fact that the Philippines exports few of the kinds of products that China buys. The Philippines is a very small oil producer and sells few other commodities. Neither does it produce any of the high-tech components that China currently imports from countries such as Taiwan and South Korea. One area where there could have been potential to expand links is tourism, but this is unlikely anytime soon given China’s strict COVID-19 border controls,” Capital Economics said.
“What’s more, courting China would likely involve a trade-off in relations with the Philippines’ traditional ally, the US. There seems little economic rationale for turning away from a country that accounts for a greater share of export demand than China, has invested heavily in the large business process outsourcing sector and is a huge source of remittances,” Capital Economics added.
Last Monday, the think tank Economist Intelligence Unit (EIU) flagged incompetence and corruption as the biggest risks to be wrought by a Marcos Jr. administration.
“Having established a convincing lead early in the campaign, Marcos has mostly avoided media engagements and debates, and has disclosed little of his vision for the country in substantive policy terms. Based on his previous record as a senator and his political alignment with Duterte for much of the latter’s presidency, Marcos is likely to pursue a broadly similar policy course, albeit with his own touch,” said the EIU, The Economist Group’s research and analysis division and a sister-firm of the publication “The Economist,” in a May 6 report released to the media on May 9.
“Effectively running as a continuity candidate in the ongoing campaign, Marcos’s abiding conservative views and previous defense of some of Duterte’s more controversial policies suggest that things will not change drastically under his presidency. While the previously cordial relationship between Marcos and Duterte has cooled in recent months, Marcos remains ideologically close to Duterte, as made evident by the fact that Sara Duterte, the daughter of the incumbent president, has opted to contest the vice presidency as Marcos’s running mate,” the EIU said.
But for the EIU, “the biggest risk to a Marcos presidency (and the country’s political stability) lies not in the policy agenda but in the competence of the incoming administration to execute it.”
“While parts of this conservative-leaning policy program — particularly the violent war on drugs — will remain controversial, Duterte’s enduring popularity and Marcos’s strong polling ratings suggest that his agenda will face few domestic headwinds. However, Marcos’s lack of executive experience and ties with political families associated with cronyism could prevent him from replicating Duterte’s political recipe,” the EIU said.
The EIU noted that “for all his bombastic rhetoric and inability to overhaul the country’s anti-graft regime, Duterte and his close allies have managed to steer clear of corruption scandals, and he became President following a long and generally successful tenure as mayor of the country’s third-largest city.”
As for Marcos Jr., the EIU said that he “can boast only a relatively unproductive stint as a senator, and remains closely associated with the record of his namesake father, who was overthrown as president amid allegations of endemic corruption in 1986.”
“Failure to navigate the oft-fractious parliament and adequately deliver progress on major business-friendly reform and infrastructure upgrade amid an ongoing pandemic, which will require consummate political and communication skills,could jeopardize the country’s hitherto impressive recent growth trajectory and trigger an sudden reversal of fortune and ensuing political volatility in 2023,” the EIU warned.
The EIU said that while Marcos can adopt the stance of President Duterte who maintained “enduring popularity” among most Filipinos despite the COVID-19 pandemic and international criticism, especially of his “war on drugs” at the start of this administration, the presidential front-runner “will be his own person and will not give sway to Duterte, despite his daughter’s likely election as vice president.”
“Hopes for the strengthening of liberal democratic norms and less confrontational domestic security policy are likely to be dashed under Marcos. As a conservative on security issues, he has defended Duterte’s controversial ‘war on drugs’ against allegations of widespread human-rights abuses and expressed strong support for fighting the communist insurgency. He, like Duterte, has been the target of scathing criticism from the liberal-leaning media, which has faced an increasingly hostile landscape in recent years amid threats of lawsuits and violence. The country’s poor ranking for media freedom is unlikely to improve in the foreseeable future,” the EIU also warned.
The EIU nonetheless expects Marcos to never be like tough-talking Duterte. “The most noticeable difference under a Marcos presidency in the coming months will probably be an absence of bombastic and belligerent rhetoric, which Duterte has frequently employed against his perceived domestic and international critics. While not changing much of the substance of the policy agenda, a more civil oratorical style could help to cool the temperature over controversial aspects of the government’s program, such as the war on drugs.”
As for the economy, the EIU mostly expects a continuation of President Duterte’s policies under a Marcos Jr. administration.
“Beyond the immediate priority of responding to the pandemic and rising inflationary pressure, through the continued implementation of relief measures, an administration led by Marcos will maintain the broadly pro‑market policy agenda set by his predecessor. The Philippines has been able to register consistently healthy economic growth on average for over a decade as a result of this ongoing and gradual liberalization,” the EIU said. President Duterte recently signed three economic liberalization bills — amendments to the antiquated foreign investments, public service, and retail trade liberalization laws — which the Department of Finance (DOF) had said could generate $10 billion in foreign direct investment (FDI) yearly and no longer be Asean’s laggard in attracting FDI.
“In concrete terms, this means that Marcos will continue to embrace the three key pillars of infrastructure upgrade, tax incentives for businesses and the removal of investment barriers. However, there could be a subtle shift in the focus or scope for some of these initiatives, based on the new President’s preferences. This could include the attachment of increased importance to digital and nuclear energy infrastructure, compared with conventional transport projects under Mr Duterte’s ‘Build, Build, Build’ initiative,” the EIU said. The younger Marcos had expressed interest to reopen the mothballed Bataan nuclear power plant controversially built during the rule of his father, dictator Ferdinand Marcos.
In terms of international relations, the EIU said that “against the background of deteriorating US‑China relations and increasing geopolitical competition between the two powers in the region, Marcos’s handling of these two sets of bilateral relationships will remain at center stage as the foremost foreign policy issue.”
“Under Marcos, the Philippine position will, on balance, continue to trend towards the US, although the incoming administration will also strive to keep ties with China cordial. In essence, this represents continuity with policy under Duterte in the latter stages of his presidency, when he began to oversee a pivot back to the US following years of harsh verbal attacks and flirtation with not renewing vital military agreements,” the EIU said.
“Marcos’s calmer decorum will help to relieve a significant recurring irritation in US‑Philippines relations. More fundamentally, amid ongoing incursion by Chinese vessels into the disputed South China Sea and activity aimed at asserting China’s expansive territorial claims, the US government’s status as the Philippines’ primary military ally will remain a powerful anchor for closer US‑Philippines ties. That said, Marcos has indicated — unlike his more liberal opponents — that he will maintain his predecessor’s relatively restrained approach in handling the territorial dispute with China, with the goal of not allowing it to dominate overall bilateral relations,” the EIU added.
“While political ties between the two Asian countries will remain shallow, owing to the South China Sea issue and the Philippines’ traditional status as the US’s foremost ally in Southeast Asia, building on the strong commercial ties achieved with China in recent years will remain a key priority in the Philippine’s management of the bilateral relationship. This also means that EIU maintains its view that major military hostilities between China and the Philippines remain unlikely in 2022 to 2026, despite the simmering tensions,” the think tank said.
Subscribe to INQUIRER PLUS to get access to The Philippine Daily Inquirer & other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4am & share articles on social media. Call 896 6000.