Marcos-Duterte conflict poses huge threat to Philippine economy

The battle between the Philippines’ top political families, the Marcos family and the Duterte family, has entered a stage that poses a major threat to the country’s economy.

Since June 2022, Ferdinand Marcos Jr. has been a surprisingly stable leader. I fully admit that I am one of the long-time Philippine observers who is concerned about the return of the Marcos family to the presidential palace.

After all, it was his father who, from 1965 to 1986, destroyed the economy of an economy destined to become the Japan of Southeast Asia. The exploits of Ferdinand Marcos Sr. left the Philippines heavily in debt, impoverished and a poster child for political corruption.

After Rodrigo Duterte’s wildly chaotic presidency, his son’s victory sent a chill down the spine for many. Yet Marcos surprised us pessimists. He has appointed a cadre of capable technocrats to key government posts, restored some accountability and cheered the global business community.

However, judging by the actions of Marcos and Vice President Sara Duterte, the daughter of the former president, now is the time to worry that dynastic family bickering is once again setting the country back. Or maybe as bad as assassination remarks.

Many would say it never really left. But the discord appears to have run deep underground enough to allow political institutions to continue to improve the country’s economic standards.

After all, that’s what a key member of the third dynasty, the Aquino family, tried to do between 2010 and 2016. He was assassinated while challenging the power of Ferdinand Marcos Sr.

There’s something Shakespearean about an Aquino descendant cleaning up the mess left by the Marcoses, just as his mother, Corazon Aquino, did during her tenure as president from 1986 to 1992. Aquino’s two predecessors, Gloria Macapagal Arroyo (2001-2010) and Joseph Estrada (1998-2001), also did their part to weaken Manila’s reputation for global corruption. Ranking on the leaderboard.

In 2010, Aquino immediately began cracking down on corruption, raising taxes, increasing transparency and strengthening public accountability. Soon, the Philippines received investment grade rankings from the three top credit rating agencies for the first time.

In 2016, when Aquino handed power to Rodrigo Duterte, Manila ranked 101st on Transparency International’s Corruption Perception Index^YingshiThat’s a huge improvement from Nigeria’s ranking of 146 six years ago when Aquino took over.

Duterte appears to be more interested in waging a war on drugs and currying favor with China than in economic reform. Duterte restored much of the opacity Aquino abhorred. He abandoned Aquino’s public-private partnership model, which reduced massive corruption in infrastructure projects. When Duterte left, Manila’s ranking on Transparency International had deteriorated to 116th.

While the alliance between the president and vice president has always been tenuous, things fell apart in part because Marcos rejected the Duterte family’s close ties with China and continued his predecessor’s bloody anti-drug campaign. Marcos quickly turned from China to the United States as a trusted ally.

Now, as Marcos and Vice President Duterte clash in high-profile public fashion, who will ensure that economic reform efforts get back on track? Or at least the economic setback will be limited?

Things quickly turned ugly. On November 23, Duterte said she had negotiated with assassins to kill Marcos if she herself was attacked.

The brazenness of the public threats shocked the political establishment. It lets presidential security forces “coordinate with law enforcement agencies to detect, deter and defend against any and all threats to the President and the First Family.”

It can be said that the Philippines has entered a period of serious uncertainty in the trajectory of political affairs. Anyone who has followed this place over the years knows that there is little context for significant economic upgrades to occur.

In the era of China, Southeast Asian governments have the responsibility to enhance competitiveness, invest heavily in education, and improve the business environment to attract investment. It’s unclear how much bandwidth the Marcos-Duterte team now has to implement such changes. Even in their quietest moments, the primary responsibility of Philippine leaders is to find ways to expand gains in gross domestic product to reduce inequality.

Here, the economy has been growing at about 5%, in line with China, which helps. But as U.S. President-elect Trump signals Asia’s most violent trade war in history, new headwinds are about to hit the Philippines. The impending hit to China’s economic growth has Marcos and other Asian leaders fearing 2025.

The Philippines is also bracing for the way artificial intelligence is about to shake up the economy. Artificial intelligence is threatening the United States’ share of the nearly $300 billion global business process outsourcing industry. China has also invested hundreds of billions of dollars to upgrade the Philippines’ manufacturing industry into high value-added industries, thereby increasing pressure on the Philippines.

Improving the game in the Philippines is challenging even in the best of times. As Manila’s two most powerful officials intensify their war of words, reform will become much more difficult. It’s hard to believe the narrative of economic progress when it happens game of Thrones The sequel is playing out in a country that has seen this story before.