It’s February 9, and Rodrigo Duterte steps on stage in front of a raucous crowd in Manila for his first major speech since announcing his candidacy for president. But as Duterte speaks, a brave soul taps him on the shoulder. Duterte has turned the wrong way, the man points out. The camera is filming his back.
Duterte appears to consider the request, turning briefly to face the cameras and lights. But he soon thinks better of it and continues to speak to a group behind the stage, leaving his back to the camera for 15 minutes.
The moment offers a telling picture of Duterte’s campaign, and of Duterte himself. He was not, as one senior observer put it to FinanceAsia, “a media-hugger”. He was rarely TV-friendly, peppering speeches with profanity, insults, and rambling asides. He was also prone to monumental gaffes. When old video emerged of Duterte joking about the rape of an Australian nun, he refused to apologise, defying the ambassadors of Australia and the United States.
Despite — or perhaps because — of these apparent flaws, Duterte seemed to appeal directly to the people. When Filipinos went to the polls on May 9, Duterte won with around 40% of the vote.
But the nature of Duterte’s win – much bluster, little detail – left bankers and executives uncertain of what his presidency would mean for them. Will they be the crowd he appeals to, or the crowd he turns his back on?
The answer could make a big difference to the Philippines, one of the fastest-growing economies in Asia. It will also be key to a host of foreign corporations and banks trying to play a greater role in the country’s future.
There is little doubt economic policy took a backseat during Duterte’s campaign. He focused almost entirely on his crime-fighting credentials, pointing to a successful — and highly controversial — anti-crime campaign as mayor of Davao City. When asked about economics, Duterte pleaded ignorance. He said he would rely on the advice of ‘the economic minds’ in the country.
He appears to have kept to his word.
Duterte confirmed several key appointments long before taking office on June 30. They include the all-important job of finance secretary, which is going to Carlos ‘Sonny’ Dominguez, a man who market insiders interviewed by FinanceAsia unanimously praised as a steady pair of hands.
“He comes with a good record,” Hans Sicat, president and chief executive of the Philippine Stock Exchange told FinanceAsia. “He’s an ex-banker, a former cabinet man. He’s viewed as a balanced, responsible individual. He’s not a wild right-wing or left-wing type of finance minister.”
Another senior figure in the Philippines said Dominguez was a necessary presence to control “the goons” Duterte may surround himself with: those politicians who might share some of Duterte’s more brazen populism without his policy nuance. “Because the goons are there, [Dominguez] was probably reluctant to join,” he said. “But that’s exactly why he had to join.”
Dominguez has made a strong start. He announced an eight-point economic plan on May 12, several days before finally accepting a job he initially resisted. The first point was perhaps the most important for reassuring investors: Dominguez said the new administration would largely follow the economic policies of outgoing president Benigno Aquino III, albeit with more focus on tax collection. But within the following seven points there were tempting hints Duterte’s government might make the changes foreign investors really want.
The government’s commitment to infrastructure investment was one such point. A public-private partnership programme launched under Aquino has been relatively successful, with 12 projects already awarded. But senior officials working in the sector argue the programme could have led to so much more, blaming serious bottlenecks and not enough private sector involvement. They hope Duterte will be able to tackle these problems, making things easier for those companies that want to help an infrastructure push that is almost unanimously seen as necessary.
This goal could be helped, of course, by bringing in more foreign investors. This is one area where Duterte has made all the right noises. During the election, he said he might remove a 40% ownership cap that applies to foreign companies in several major sectors of the economy, including several ripe for infrastructure investment such as transport, port operations and telecommunications. After the election, Dominguez made this is a key part of the economic plan for the country.
A CHANGE IN TACK
Economists admit lifting the restriction on foreign ownership of local companies will be no panacea. But it speaks to an attitude towards foreign investment that might not be expected of a man who fought such a populist election campaign. The gesture, in itself, might be enough.
“The removal of constitutional restrictions is an important signal to foreign investors,” said Christian de Guzman, a sovereign analyst at Moody’s. “However, I've always thought that the key is infrastructure. For example, China looks to be even more restrictive, but they have no problems with attracting FDI.”
This relatively open approach to business might surprise those whose first experience of Duterte was on the election trail. But it fits with the stories of those who worked on projects in Davao during his time as mayor. Duterte made business permits quicker and cheaper to obtain, and was relatively low-key between elections, said a person with experience in the city.
It is perhaps because of this approach that the Philippine stock market has performed well since Duterte’s victory. The benchmark PSEi stock index stalled in the months leading up to the election, after slowly recovering from a major fall in the second half of 2015. But the index has risen 4.72% since May 10, when Duterte’s victory became clear. That beat smaller rises in Indonesia, Thailand and Singapore during the same period.
That is a good start. Bankers, executives and other senior figures in the Philippines now hope it will be a taste of things to come, believing the bombast and bluster that defined the election campaign is about to make way for a more measured style of management — one that will extend an open arm to foreign companies, and put significant emphasis on infrastructure.
"It's mostly theatre," says a senior official in Manila. "I've talked to people in Davao and they've said the only time he's visible is during elections. Once he goes in to do his work, he's very low-key."
Bankers and foreign executives might not be sure of policy details at this point. But they can at least take some heart from the fact that, now the speeches are over and the election has been won, Duterte will not be so quick to turn his back.