Is the country moving in the right direction? Consider:
• President Duterte abrogated the Visiting Forces Agreement with the United States due to his pique over the United States’ cancellation of the US visa of Senator Bato dela Rosa. He has made a strategic shift away from the United States with deep consequences to our economy and our national security over a trivial matter. However, the cancellation of the visa of his friend and political supporter, Senator Bato dela Rosa, may have been just a pretext on his real intention to isolate the Philippines from its traditional allies in favor of China.
However, where is the strategic calculation? The Philippines would be without a potent ally in its conflict with China over the South China Sea. The Philippines would be without any leverage, even a psychological one, in its relationship with China.
Moreover, the capability of the Philippine military will be degraded without the training and intelligence that the US is providing under the Visiting Forces Agreement. The US provided crucial intelligence in the siege in Marawi and continues to provide intelligence in the fight against terrorism and the Abu Sayyaf bandits.
The negative consequences will spill over into the economy. Western investors will weigh the security considerations of the Philippines moving away from its US alliance.
At a time when China is reeling from a succession of shocks — the trade war with the US, protests in Hong Kong, the re-election of pro-independence President Tsai Ing-Wen in Taiwan, and the still spreading COVID-19 virus epidemic whose epicenter is in Hubei, China – President Duterte has chosen to cast the fate of the Philippines to China.
In fact, China hasn’t delivered much in the form of investments in the Philippines, except for the POGOs (Philippine Offshore Gaming Operators), which are considered illegal by the Chinese government.
• President Duterte has cursed the water concessionaires, refused to pay the arbitral award in arbitration proceedings the government submitted itself to, threatened to unilaterally cancel the water concessionaire’s contracts over allegedly “onerous provisions,” and to top it off, swore at the Ayalas and Manny Pangilinan and told them that he will send them to jail.
President Duterte may yet get what he wants, but the government’s commitments in PPP (Public-Private Partnerships) contracts have become suspect and will result in “adverse selection” — only the politically connected who can mitigate regulatory and political risk will dare invest. This will also result in a chilling effect on investors, particularly Japanese ones since Marubeni is a 25% stockholder in Maynilad.
The government’s BBB (Build-Build-Build) program, based on a shift toward Chinese and Japanese ODA (Official Development Assistance) has been a dismal failure (only two out of 75 projects will be finished during Duterte’s term), but will a shift back toward PPP even seem possible? Perhaps only cronies need apply.
Furthermore, the administration is obscuring a bigger problem (perhaps that’s the intention all along) — government has failed to develop new sources of bulk water. For sure, water consumers, the interests of which the President is allegedly fighting for, will experience water shortages this summer and the next summer, and the summer after that and not because of the water concessionaires as their mandate is only distribution.
It is the administration’s fault that the country is facing a water crisis. In its eagerness to pivot away from PPP toward Chinese ODA, the administration cancelled the PPP bidding for the Kaliwa bulk water source project when it assumed office in 2017 and awarded it to a Chinese contractor. (Former Associate Justice Antonio Carpio calls it the “mother of all onerous contracts.”) That project has yet to start.
Indeed, the most expensive water is no water at all. In a bit of irony, the Department of Health keeps telling us to wash our hands to prevent the spread of COVID-19 but where’s the water? No water, thanks to the government.
• Under President Duterte, POGOs have mushroomed. True, they have brought in foreign exchange, lifted property prices, and increased patronage of high-end Chinese restaurants.
However, they have also brought with them crime, money laundering, prostitution, human trafficking, and, possibly but hopefully not, COVID-19. Not even the Chinese government wants POGOs, as they are seen as controlled by criminal gangs and triads.
These POGOs don’t pay their share of taxes. The Bureau of Internal Revenue estimates that these POGOs haven’t paid P50 billion which they owe to the government. The administration seems to have the energy to go after conglomerates but not after POGO operators.
What’s scary is that Lai Yu Cian, a Taiwanese victim of human trafficking by a POGO operator, testified before Congress that her employers boasted that they enjoy powerful protectors in government.
Also, Senator Risa Hontiveros exposed that about P10 billion in bribes in a so-called “pastillas scheme” have gone to the Bureau of Immigration to facilitate the visa entry of about a million POGO workers.
In the light of these, perhaps the Philippines hasn’t become a narco-state, but has it become a POGO-state?
• Solicitor General Jose Calida filed a quo warranto petition in the Supreme Court seeking to nullify the legislative franchises of ABS-CBN and its subsidiary, ABS-CBN Convergence Inc. It’s no secret that President Duterte has no love lost for ABS-CBN and called on Congress not to renew its franchise.
The evil purpose of the quo warranto petition is not only to prevent ABS-CBN from broadcasting but also to cripple its entire media platform, from the iWantTV! streaming app to the TVplus digital channels.
However, no less than Socioeconomic Planning Secretary Ernesto Pernia admitted that such a move will shake investor confidence in the Philippines.
While South Korea is basking in its soft power, the Oscar win of the South Korean film Parasite, our own government is intent on kneecapping a Filipino media firm which is one of the few trying to export Filipino films and telenovelas.
• The Department of Health was late in recommending banning of Chinese visitors to the country to prevent the spread of COVID-19, which started in Hubei, China. Department of Health Secretary Francisco Duque rationalized then that a ban would ruffle relations with China. Therefore, a planeload of tourists from Hubei, China was even allowed to land in Boracay.
However, after the World Health Organization declared an emergency, again to appease China, the Philippine government banned visitors not only from Hong Kong and Macao, but after awhile and without due notice, Taiwan as well. Politics, not science, was behind the ban. Taiwan has fewer cases than Singapore, yet the government banned Taiwan. The Department of Health reasoned that it is merely following the government’s One-China policy, where China claims that Taiwan is a renegade province.
The government reversed its position only after pressure from 160,000 OFWs in Taiwan and threats of retaliation by the Taiwanese government. It seems that the government has a “China first, Filipinos, second” policy.
In sum, the Philippine government has pushed away the United States, pissed off Taiwan, and even alienated Western Europe with its bloody drug war. It has poisoned the PPP investment climate with its actions to unilaterally rip out contracts but without delivering on its promised Build-Build-Build program. Its threats to shut down ABS-CBN are alarming not only foreign investors, but Western democracies and defenders of press freedom.
Furthermore, the administration hasn’t done anything to solve the looming water shortages this summer except to threaten and curse the water concessionaires. It looks the other way at corruption in the Department of Information and Technology even as the latter has failed to provide better mobile and broadband service to Filipino consumers. It has cast its lot with China, which faces many growing internal and external problems. It has made friends with POGO operators, who bring crime, prostitution, tax evasion, human trafficking, and money laundering into the country.
The country may be enjoying better credit ratings, but is it moving in the right direction?
Calixto V. Chikiamco is a board director of the Institute for Development and Econometric Analysis.