Philippine President Rodrigo Duterte’s bloody anti-drug war and his foul-mouthed outbursts in defense of the campaign have unnerved foreign investors in one of Asia’s fastest-growing economies.
Analysts and businessmen point to uncertainties about Duterte’s policies and flip-flopping pronouncements as largely to blame for foreign selling in the stock market and the peso’s plunge to a seven-year low, reversing the optimism after his June 30 inauguration.
Some experts say unpredictability is slowing longer-term foreign investment in the Philippines. Photographs and reports in the media of killings of suspected drug dealers and users — more than 3,000 since July 1 — have contributed to sagging confidence.
“We can all deal with risks,” said Guenter Taus, the head of the European Chamber of Commerce in the Philippines. “But uncertainty is a factor that we do not like in business, and that is exactly what we’re experiencing right now because we don’t know where we are heading.”
Taus said several companies that had intended to establish operations to the Philippines now prefer to wait and see what happens under Duterte. He declined to name the companies.
He said investors unsure about the Philippines may choose to look at other Southeast Asian countries to access to the region’s market of more than 600 million people.
The American Chamber of Commerce of the Philippines this month said that while the country’s economic fundamentals are strong and its potential high, there is growing concern that Duterte’s policies and behavior could affect long-standing optimism by US businesses in the Philippines.
The chamber said that the large number of deaths in the anti-drug campaign is harming the Philippines’ image, and that some investors are asking if the drug war “reduces the rule of law.”
After the European Parliament recently called for an end to the drug killings and expressed concern over the scale of deaths, Duterte hit back with a profane insult and raised a fist with his middle finger thrust out.
Duterte last week said US-Philippine joint military exercises end this year, though his foreign minister said later that they will continue until next year as agreed.
On several fronts, Duterte has had an uneasy relationship with Western countries. He has said he is charting a foreign policy that is not dependent on the US and has taken steps to bolster relations with Russia and revive ties with China that had been strained over territorial conflicts.
He said he will not allow government forces to conduct joint patrols of disputed waters near the South China Sea with foreign powers. Duterte has also said he wants US forces out of the southern Philippines, saying minority Muslims there resent the presence of US troops.
All of this has raised concerns about a Philippine economy that grew 7 percent in the second quarter and 6.9 percent over the first half of the year compared to the same periods last year — among the fastest rates in the region.
The credit-rating agency S&P Global warned last week that the stability and predictability of policymaking in the Philippines “has diminished somewhat under the new presidency.”
It kept the country’s credit rating at investment grade, with a stable outlook, but said that rating was unlikely to rise over the next two years.
On Monday, the peso hit its lowest level against the US dollar since September 2009. It fell further Friday, closing at 48.50 pesos per US dollar.
Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said foreign direct investment continues to grow.
“As far as fundamentals are concerned, I think they are outstanding, but the sentiment is something else,” he said late on Wednesday on the sidelines of an economic forum.
Sentiment is driven by both external and domestic factors and it is difficult to attribute negative sentiment to a specific factor like Duterte’s statements, he added.
Guinigundo said the government’s economic program follows the broad strokes that have produced 70 quarters of growth and low and stable inflation.
“And yet the stock market is dropping and the exchange rate is moving consecutively down such as we are now the worst-performing currency in the region,” he said.
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