Strongman in the Palace

BusinessWorld Introspective
June 25,2018
Romeo L. Bernardo

I am pleased to share with you the political section of our latest quarterly report, (“Of Deficits and Rising Risks,” May 20, 2018) for GlobalSource Partners, a New York-based network of independent analysts (globalsourcepartners.com). Our subscribers are principally global asset managers and banks who are mostly focused on the more quantitative economic sections of our reports. Christine Tang and I are their Philippine Advisors.


“President Rodrigo Duterte has emerged as the country’s most powerful leader since the return of democracy in 1986. He has the support of a supermajority in both houses of congress and, with the removal of a vocal critic in the person of the former Chief Justice, an even friendlier Supreme Court. He will moreover have opportunities in the coming months to further consolidate power through his appointing authority. Most immediate are replacements for the ousted chief justice as well as the country’s chief watchdog, the Ombudsman, another critic who will retire in July. Additionally, those monitoring the retirement dates of current Supreme Court justices have counted 8 additional posts to be filled by the President this year and next, plus another 3 before he steps down in 2022.


Separately, the President’s enormous power may be gleaned from (a) his continuing high popularity, which (b) also gives his endorsement considerable weight in next year’s national and local elections, (c) media reportedly practicing self-censorship to avoid his verbal attacks, and (d) the attention he is getting internationally, not only in connection with a bloody drug war but also in upending the regional balance of power between the US and China.


Indeed, with the system of institutional checks and balances essentially out the window, many more are worrying that the President’s pragmatism in courting Chinese infrastructure support and other investment, aid, and trade cooperation may have extended too far. Not only are criticisms about his refusal to assert the country’s victory in the UN-backed arbitral ruling recognizing the Philippines’ territorial claims in the West Philippine Sea (South China Sea) continuing, but observers are pointing out the risk of the Philippines falling into what they call “China’s debt trap diplomacy.”


This comes in the wake of revelations elsewhere (e.g., Sri Lanka, Pakistan) that China’s generously extended loans for infrastructure have benefited it more than the borrowing government with the latter ending up saddled with huge debts and under China’s control.

The President appears unperturbed by all this, reminding critics that the Philippines does not have the military might to enforce its claims in the disputed waters, arbitral ruling or not, and that China is an important ingredient in his administration’s infrastructure program.

This leaves the job of policing China-funded projects to the President’s economic team, who has announced the setting up of separate guidelines exclusively for assessing China-assisted projects.
In the meantime, some are wondering what Mahathir Mohamad’s reentry in Asia’s political scene would mean for President Duterte’s strongman image. The Prime Minister, at 92, appears to be standing up to China by putting all China projects in Malaysia under review.

Aside from China, a second concern is the President’s push for a federal form of government that majority of Filipinos are not in favor of.

In our last outlook report, we concluded that the task, which involves changing the Constitution primarily to adopt federalism and possibly also open up nationality restrictions, faces an uphill climb and despite aggressive attempts in the [House of Representatives], is unlikely to happen anytime soon. Although some of the hurdles we cited have become less daunting, we still think our conclusion the right one given time constraints.

Rather, the immediate priority appears to be the Bangsamoro Basic Law (BBL), a proposed ingredient to the peace process that will set up an autonomous Muslim Mindanao which President Duterte has promised his Muslim supporters. The BBL has become much more urgent following the fighting in Marawi last year that razed the city to the ground and left over two hundred thousand homeless. The plan calls for congress to pass the proposal and submit it to a referendum in next year’s elections. Expectations are that with the President championing it, Filipinos will vote for it precisely to prevent the radicalization of young Muslims by ISIS elements that precipitated the Marawi crisis.

But that does not mean that federalism is no longer in the cards.

After all, the President had early this year formed a 19-member consultative committee headed by a former chief justice, who is a known federalism advocate, to review the Constitution and recommend changes within the year.

Members of Congress have their own ideas too although the finance secretary has been heard to privately worry about the fiscal nightmare that the emerging federalism bill in the [House of Representatives] will usher.

The thinking now among the President’s economic managers is to use the BBL as a pilot project of sorts for policy makers to learn more about federalism. Learnings from that experience can then inform charter change initiatives, which may still happen before the President’s term ends.
While a reasonable proposition, it remains to be seen whether the President would be willing to take this slower but perhaps, more prudent route.”

Romeo L. Bernardo is a Fellow of the Foundation for Economic Freedom and a Governor of the Management Association of the Philippines. He was Finance Undersecretary during the Corazon Aquino and Fidel Ramos administrations.

romeo.lopez.bernardo@gmail.com