On the 11th of October 2017, The Central Bank of the Philippines announced a massive reduction of foreign equity inflows to the Philippines by 90 percent for the first half of 2017, while net foreign direct investment have dropped 14 percent to US$3.6 billion.[1] This should not come as a surprise to many people in the region, as the Philippines have been a centre of attention in Southeast Asia. Since the current president Rodrigo Duterte took office in June 2016, both his controversial approach to the war on drugs and management style have created division within the country. Massive protests in Manila and other main cities across the Philippines have taken place numerous times over 2017. Duterte’s recent baseless comments threatening to expel all EU officials in the country within a 24 hour period do not help to attract foreign investors.[2]
Moreover, in the summer of this year, the Maute and Abu Sayyaf group have clashed with the Filipino government over the allegation that its commander, Isnilon Hapsilon, is in the city of Marawi, a predominantly Muslim city in the southernmost main island of Mindanao. This on-going armed conflict has caused more than 1000 casualties.[3] This clearly is a challenge that the Duterte government needs to overcome, especially if they want to attract foreign direct investment (FDI) into the country. This is crucial as the US$7.9 billion in FDI received by the Philippines is dwarfed by that received by Malaysia (US$13.5 billion) and Vietnam (US$12.6 billion).[4]
The Philippines is ranked the worst country in terms of infrastructure among ASEAN countries. The declining conditions of overall infrastructure and cancellation of several projects, including the construction of five regional airports within the country, has resulted in the country to be ranked 97th out of 137 countries in the World Economic Forum Competitive Index, placing the country at the same level as Rwanda. Although Duterte has an ambitious plan to improve the infrastructure, there is a risk the government will be unable to finance the project package, estimated at US$167 billion.[5] Duterte has wanted to secure funds from the Chinese government,[6] but the territorial issue of the South China Sea could put more pressure on banks within the country in financing these spending measures. He has, however, secured other significant projects such as the Metro Manila subway trains, financed with US$8.8 billion with aid from Japan.[7]
Although the Philippines is one of the fastest growing countries in Southeast Asia,[8] terrorist attacks, poor infrastructure in comparison to other countries in the region, and the hostile comments and unique style of governance threaten to hinder its economic growth. Duterte has managed to retain relationships with the ASEAN countries and improve relations with China and Russia; however, rebuilding partnership is a more important step to attract foreign investors.
[1] Lorenciana, C.S. (2017, 19 OCT). Philippine economy to accelerate if government pulls off infrastructure plan. The Freeman Website. http://www.philstar.com:8080/cebu-business/2017/10/19/1750177/philippine-economy-accelerate-if-government-pulls-infrastructure
[2] Villamor, F. (2017, 12 OCT). Duterte Threatens To Expel E.U. Diplomats From Philippines. The New York Times Website. https://www.nytimes.com/2017/10/12/world/asia/rodrigo-duterte-philippines-eu.html
[3] Regencia, T. (2017, 16 OCT). Marawi Siege: Army kills Abu Sayyaf, maute commanders. Al Jazeera Website. http://www.aljazeera.com/news/2017/10/marawi-siege-army-kills-abu-sayyaf-maute-commanders-171016072551985.html
[4] Lema, K. (2017, 14 SEP). Philippines must give foreign investors far more room: planning minister. Reuters Online.. https://www.reuters.com/article/us-philippines-economy-investment/philippines-must-give-foreign-investors-far-more-room-planning-minister-idUSKCN1BP12P
[5] Chazan, Y. (2017, 5 AUG). Can the Philippines Afford Duterte’s Infrastructure Spree?. The Diplomat Website. https://thediplomat.com/2017/08/can-the-philippines-afford-dutertes-infrastructure-spending-spree/
[6] Jennings, R. (2017, 9 OCT). China Ramping Up Aid To The Philippines as Both Pursue Deeper Relationship. Web. https://www.voanews.com/a/china-ups-aid-to-philippines-to-strengthen-relationship/4062262.html
[7] Petty, M. (2017, 12 JAN). Bearing aid gift, Japan’s Abe visits Philippines as Duterte’s top first guest. Reuters Online. https://www.reuters.com/article/uk-philippines-japan/bearing-aid-gift-japans-abe-visits-philippines-as-dutertes-first-top-guest-idUKKBN14W0XS
[8] Cheok, M. (2017, 6 AUG). Fifty Years On, Southeast Asia Emerges as Global Growth Leader. Bloomberg Online. https://www.bloomberg.com/news/articles/2017-08-06/fifty-years-on-southeast-asia-emerges-as-global-growth-leader
Edited by Marcus Huels (MSc International Health Policy)
