by Ellinor Häggebrink, Engagement Manager at GES
The Philippines have been making headlines in the international press more than usual in the past months. Since President Duterte took office in the end of June 2016, his war on drugs has led to the police killing more than 2,300 people. More than 1,600 of these come from police operations, while there are also a lot of unconfirmed assassinations taking place. The bloodshed is causing an international outcry for its brutality and what seems to be deliberate executions performed by the police and unknown groups. President Duterte has been very vocal in his warnings to dealers and people addicted to drugs and very clear that he wishes to kill them all.
Besides this violent crack-down on drugs, Duterte has in public broken bonds to some old-time allies, in particularly the US and the UN. Now, he is turning to China and Russia for new partnerships.
The controversies around President Duterte increase investor concerns about political development within the country and his ability to steer one of Asia’s most promising economies, which has been ‘the new black’ from an investor perspective in recent years. Financial markets reflect investor’s trust in the economy and political leadership of a country; political instability can be a major hurdle for investors, and the financial implications of Duterte’s controversial actions and statements for the Philippine economy are starting to show as foreign investors have been pulling out of the Philippine stock market. In October 2016, the US credit ratings agency Standard and Poor’s threatened to downgrade the Philippine’s credit rating due to weakened stability and Duterte’s unpredictability. At the same time, the Philippine peso plunged to a seven-year low against the US dollar.
On the other hand, the local companies that I met with during my engagement tour to the Philippines in November 2016 did not seem too concerned about the current political situation. Duterte does not appear unpopular within the country; on the contrary, he is actually gaining popularity among the business community for vows to combat corruption and prioritise large infrastructure projects that can unleash growth and fuel an economic boom. This was confirmed in a recent survey showing that Duterte had a trust rating of 91 per cent, the highest of the six presidents since the Marcos dictatorship.
The impression that I came away with during my days in Manila was that it is business as usual, despite the international criticism against Duterte’s controversial methods. Driving around the city between company meetings gives the feeling that a lot of things are happening; it is like a big construction site with constant development going on. While this development is positive, I would, however, prefer to see a stronger commitment to environmental and social issues from the companies’ side. Most currently focus is on corporate governance as this is regulated by the stock exchange, and it will be interesting to see if Duterte’s anti-corruption efforts will strengthen this even further. Environmental and social issues are still lagging behind, but with solid corporate governance in place companies are better fit to manage these issues as well. Compared to my previous trip to the Philippines a year earlier, more companies have now started looking into environmental issues. This is, however, happening at a slow pace and primarily driven by cost-saving ambitions rather than looking for sustainability opportunities. However, mapping out figures and setting goals is always positive and more efficient environmental management is beneficial for costs as well as sustainability.
According to HSBC, the Philippines will be the 16th largest economy in the world by 2050. It is essential that this development is sustainable from an ESG perspective, and it is yet to be seen what legacy Duterte will leave on the Philippines. Judging by his first months of presidency, I would say there is no doubt he has given himself a spot in the history books at least.