From the political offensive to the defensive

Calixto V. Chikiamco

Posted on May 01, 2017

As he moves into his second year in office, I predict that President Rodrigo Duterte will go from the political offensive to the defensive.

Sure, the bluster and the bravado will still be there, but these will not hide the fact of growing political problems for his administration. Many of these problems are self-inflicted. These are magnified by a lack of competence in various levels of his government and President Duterte’s ignorance of the political dynamics of governing from the national center rather than from a city.

Firstly, there are the internal conflicts in his administration, both within his own faction and his own coalition. The vicious infighting within his own faction is evident with the dismissal of his own campaign spokesman, Peter Laviña, in the National Irrigation Administration, the ignominious sacking of former DILG Secretary Mike Sueño, the abrupt firing of Cabinet Secretary Jun Evasco’s deputy, Undersecretary Maia Chiara Halmen Valdez, at the instigation of the National Food Authority head Jason Aquino and Agriculture Secretary Manny Piñol, and the fight over PhilHealth between Health Secretary Pauleen Ubial and some close confidantes of President Duterte.

The public humiliation of Mike Sueño, an original loyalist, could rankle Duterte’s own followers and probably scare away any other qualified future government appointee.

Secondly, his Cabinet, instead of moving in unison, is divided. Finance Secretary Carlos Dominguez is in conflict with DENR Secretary Gina Lopez and her anti-mining stance. Worse, Cabinet officials are busily undermining each other. For example, DSWD Secretary Judy Taguiwalo has publicly criticized the Finance Department’s key legislation, the tax reform bill, before congressmen.

President Duterte supposedly listens to his economic team, but he has been deaf to the economic team’s advice on mining, rice import liberalization, and the two-year moratorium on land conversions, which the leftist DAR Secretary Rafael Mariano implements anyway.

Thirdly, there are rifts within his own coalition. House Speaker Pantaleon Alvarez is at odds with the Secretary of Transportation, Art Tugade, who has the hardest job of delivering on President Duterte’s promises on traffic and transport infrastructure. The messy fight between Speaker Alvarez and Duterte’s biggest financial contributor, Davao Congressman Antonio “Tonyboy” Floriendo, involving their respective paramours is well-known. Speaker Alvarez has also chosen to act antagonistically toward another powerful Duterte ally, former President and Pampanga Congresswoman Gloria Macapagal-Arroyo whom he removed as deputy speaker. These rifts will certainly affect Duterte’s legislative agenda.

Fourthly, in addition to conflicts within his faction and his coalition, President Duterte has chosen to antagonize Philippine powers-that-be, which can only be described as reckless. He takes great delight in alienating the Catholic Church both with his profanity and his “anti-life” stance. However the Catholic Church remains politically powerful, especially when aroused. It may not be able to elect presidents but it can certainly bring them down, as it had with former Presidents Marcos and Estrada.

Surprisingly, Duterte has also named traditional big media as an enemy. He has cursed and lambasted media powers the Philippine Daily Inquirer and ABS-CBN, and even accused the owners of Philippine Daily Inquirer as tax cheats. He even openly named and lambasted their respective owners -- a big no-no in Philippine politics -- but who remain politically connected and powerful.

Furthermore, no matter what happens to the confirmation of DENR Secretary Gina Lopez, President Duterte will suffer politically big time. President Duterte still openly supports her and even echoes her derogatory remarks on mining’s contribution to the economy. However, just about any political pooh-bah or kingmaker is into mining -- Manny Zamora, Paul Dominguez, Philip Romualdez, Manny Pangilinan, Manny Villar, etc. -- so supporting Gina Lopez will cost President Duterte politically. These political bigwigs are apart from the local government executives who will see a reduction in their revenue from Gina Lopez’s closure of mines.

President Duterte is still riding on the economic momentum provided by the previous administration. However, the yellow warning signals are already flashing. Inflation at 3.4% per annum is at its highest in the last 28 months and is threatening to surge. For some reason, joblessness is also up in the last quarter (the highest in two years) despite the high economic growth. I suspect that President Duterte’s own populist policies -- ending endo, raising SSS contributions, stopping mining operations, etc. -- have created a negative environment for employment.

Perhaps President Duterte remains smug on the basis of surveys, which show him to still be popular, especially among the affluent AB crowd. This popularity among the rich may be due to his drug war which projects peace and order. The rich may be indifferent to the victims of extrajudicial killings, who are poor.

However, two events may shake the faith of the rich. One is the illegal occupation by the leftist Kadamay urban poor group on NHA Housing. Instead of ejecting the illegal occupants, President Duterte surrendered to their demands. This will embolden Kadamay and other groups to illegally occupy more government and private properties. The second event is the Abu Sayyaf armed attempt to seize hostages in high-end resorts in Bohol, and possibly Cebu. The first event will put the fear among the rich over their property while the latter will shake their sense of personal security under the present administration.

So far, the swaggering President Duterte is spouting venom at the European Union and international media for making him account for some 7,000 extrajudicial killings under his watch. Also, he’s pooh-poohing attempts by the political opposition to haul him before the International Criminal Court of Justice.

However, there will be real consequences to the Philippine economy with his growing negative reputation as a violator of human rights. The EU may slap additional tariffs on Philippine exports. Investors from the US and the EU, fearful that their brands will be tarnished, will probably hesitate to invest in a country whose government is labeled as a violator of international norms on justice and human rights.

President Duterte should disabuse himself of his fantasy that China is there to save him. All those Chinese promises of foreign aid are mere press releases until now. Assuming no corruption scandal erupts on ODA contracts as it had in the Chinese ZTE deal, it will still take time for an incompetent bureaucracy to implement those programs.

Furthermore, the Chinese could complicate Duterte’s life if they decide to start building on Scarborough Shoal, a sort of red line both to the Americans and the Philippine military. Surveys already show that Duterte is taking a hit for his accommodating stance to the Chinese, who are viewed by most Filipinos with suspicion. With all his other political problems, continued kowtowing to China may compound his risk of falling popularity.

Given his growing political problems (which he seems unmindful of), I had thought that he only has two options to regain the political initiative. One is to lower the prices of rice by abolishing the NFA monopoly and liberalizing rice imports. He can have his political cover because the country had committed to the WTO to liberalize rice importation by June 2017.

Imagine if the price of rice fell by at least P5 per kilo! This will have the electrifying effect of making food more affordable to 103 million Filipinos. But no, President Duterte has chosen to side with the graft-ridden NFA to retain its monopoly, and to temporarily stop all rice importation upon the advice of Agriculture Secretary Manny Piñol. This could lead to higher rice prices and higher poverty incidence as had happened in 2013 and 2014 when delay in the importation of rice caused a spike in rice prices. As it is, rice inventory at 34 days is way below the ideal 80 day buffer inventory. A bad typhoon could cause rice prices to soar. This is a risky gamble with a huge political downside. As the Chinese saying goes, “He picked up a rock only to drop it at his own feet.”

The other option is to pass the tax reform package without dilution and go on a massive infrastructure spending. However, because of President Duterte’s tepid support, the tax reform is facing rough sailing in Congress. (It was kicked to a technical working group instead of being passed.) It also faces high hurdles in the Senate where half of the senators will be seeking reelection in 2019 and will be mindful of the opposition from affected oil consumers, real estate developers, car manufacturers, and remittance companies.

In my estimation, if rice prices rise and if the tax reform package fails to pass or is diluted, with his growing political problems and the infighting in his coalition, Duterte’s government will suffer a political body blow. Perhaps, not a TKO, but enough to stagger his government and keep it in the ropes. That could lead to a downward spiral with more infighting, more desertions, more policy paralysis, and faltering of the growth rate.

For sure, in the face of his growing political problems, his rabid followers will demand revolutionary powers for President Duterte. Since many of his troubles are self-inflicted, how will that help?

* * *

Agriculture, agriculture, agriculture.

Agricultural development has been my mantra for sustainable, inclusive growth. It is the foundation for an industrial take-off and widespread poverty alleviation.

Therefore, I’m glad that my friend, Dr. Roland Dy, an agribusiness professor at the University of Asia and the Pacific, has authored a book, Agribusiness and Rural Progress, subtitled “Actions For Poverty Reduction.” It contains many nuggets of wisdom about how to increase agricultural productivity and reduce rural poverty. It’s available at the University of Asia and the Pacific. Those interested can contact Natacia Esguerra at natacia.esguerra@uap.asia.

Calixto V. Chikiamco is a board director of the Institute for Development and Econometric Analysis.