FOR not the first time since President Rodrigo Duterte took office, an analyst has cautioned that the apparent degradation of human rights under the administration of the Mouth of the South may have significant negative consequences for the Philippine economy.
In the latest opinion of the sort to be publicized, Ramon Casiple of the Institute for Political and Electoral Reform—who has already criticized Duterte on a number of occasions—pointed out that the Philippines could lose more foreign aid because of the conditions Duterte wants to impose on the UN special rapporteur who wishes to visit and investigate the widespread allegations of extrajudicial killings in Duterte’s anti-drug campaign.
This follows a deferment of any new development aid for the Philippines by the US-run Millennium Challenge Corp. (MCC), which cited human rights concerns for its decision. Casiple’s warning was that more aid could be withheld, and the Philippines’ credit rating could even suffer, if Duterte persisted in thwarting the UN inquiry.
What Casiple is talking about is a worry that has been raised even in optimistic conversations about the country’s prospects since Duterte was elected: The risk that political turmoil could spill over into the economy, or to put it another way, that Duterte’s big mouth would someday cause practical problems instead of just interesting news copy.
The risk is real, but understanding its dimensions is difficult because it is either overblown or downplayed according to the sentiment of the analyst describing it. Unlike the colorless Benigno S. Aquino 3rd, Rodrigo Duterte tends to stir strong opinions one way or the other, even among the ordinarily more objective foreign observers. Ramon Casiple, based on what he has said about Duterte so far, is an apparent skeptic; others who have a more favorable view of the president consistently dismiss the possibility that his outrageous comments have any real impact.
Where a negative opinion of the protection of human rights in the Philippines—and that includes the possible resurrection of the death penalty—may have a real impact is on direct aid, as the MCC decision showed, and on market investments. Many institutional and even some private sector investors (particularly from Europe and the US) place conditions tied to social issues on their investments; for example, a state pension fund in the US might have rules that prohibit the investment of any of the fund’s money in countries that have a death penalty, or are rated unfavorably in the US State Department’s annual Trafficking in Persons (TIPS) report.
The key point in that, however, is that any such restrictions are clearly defined; they are not based on unfavorable opinions or a preponderance of negative media reports, but on some clear benchmark. The TIPS report is often used to establish the threshold; other social or environmental indicators are used as guidance as well.
This is what makes the MCC decision alarming. In practical terms, it will not have much of an effect on the economy; the economy has improved enough over the past 10 to 15 years that the Philippines is nearing the point where it can ‘graduate’ from many of the direct aid programs, and in any event, the amount involved, while not without impact, is not large enough to affect the economy’s growth. Whether or not any foreign investment is affected by the MCC deferment—whether “MCC grant eligibility” is a prerequisite for any investments, in other words—is not known, but in all likelihood only affects a small number of investors, if any at all. That may not be the case if other negative judgments against the Duterte government are made; for example, if his refusal to allow the UN special rapporteur access (according to the rules the Philippines already has agreed to follow as a UN member) leads to actual sanctions against the country.
Even if it does come to that, the impact may not be serious. Given the strong dollar, weakening peso, and inflation on a gradual upward trend globally, inbound hot money investment is already cooling, with no discernible effect on the overall economy. The biggest risks to the economy are still external—the very real possibility of weird policies from incoming US president Donald Trump, or an economic downturn in Europe being the most likely. Nevertheless, even if not much is lost, nothing is gained by Duterte’s continued button-pushing. Applying the old rule, “If you don’t have anything nice to say, don’t say anything” a little more often is a suggestion someone he listens to should make to him.