From ‘Aquinomics’ to ‘Digonomics’

Like every other year, 2016 was marked by both good news and bad. Brexit (or the British vote to leave the European Union) and the surprise election of Donald Trump to the US presidency probably topped the global news of widest interest. An important success was the ratification of the Paris Agreement on Climate Change—a boon for the Philippines, being among the most vulnerable to climate change. The country also saw a big win against China in the favorable decision on the West Philippine Sea issue of the Permanent Court of Arbitration (PCA) based in The Hague.

But surely topping our news was the election of Rodrigo Duterte to the presidency—welcome news to the minority who voted for him, but probably not for the majority who didn’t. For one thing, it has ended up reducing the significance of our PCA victory, now that he has taken a friendly, even subservient, stance toward our erstwhile tormentors. It also paved the way for other developments unwelcome to most: the Marcos burial, needless tirades against the United States, the European Union and even the United Nations, and worrisome extrajudicial killings in the name of the government’s war on drugs.

On the upside, Mr. Duterte brought about certain positive changes most Filipinos welcome. In a move his predecessor promised at the outset but sat on for six years, he mandated freedom of information for all government offices in his second executive order, providing for full public disclosure of all government records involving public interest. One of his first orders also directed all department secretaries and agency heads to reduce requirements and processing time for various applications. In October, he institutionalized the 8888 Citizens’ Complaint Hotline, allowing citizens to report inefficiencies and corruption in government. The largely supportive Congress promptly passed his proposed national budget 11 percent higher than last year’s, incorporating popular but debatable provisions for free tertiary education and free irrigation. The budget also starts to make good on the vow to raise allocations for infrastructure, programmed to reach 7 percent of GDP in six years, from under 3 percent in the past administration.

“Aquinomics,” as I wrote early in Benigno Aquino III’s presidency, was distinguished by business confidence the country hadn’t seen since the 1990s, which showed in sustained double-digit growth in domestic capital formation starting in 2010—after averaging zero annual growth for most of the preceding decade. That confidence was apparently inspired by wide expectations of good governance, which yielded key economic reforms like the Philippine Competition Act and the Customs Modernization and Tariff Act. Aquinomics also stood for fiscal responsibility, even fiscal restraint, to the point of underspending that was eventually seen as the administration’s undoing. But while such underspending could have dragged the economy down, the tremendous boost in private domestic investments that Aquinomics ushered in still managed to yield accelerated and more broad-based economic growth.

Now comes “Digonomics” (the President’s nickname is an easier basis than his last name for a corresponding term), professed at the outset to be built on sustaining Aquino’s successful macroeconomic, fiscal and trade policy directions. But it is poised to be even more aggressive on fiscal policy, prepared to push the budget deficit to its sustainable limits (about 3 percent of GDP) to permit more infrastructure investment.

Digonomics also promises to be even more aggressive on opening up to greater competition, a distinct departure from Aquino’s unwillingness to amend the Constitution that has remained untouched for nearly 30 years. It is also marked by a dramatic turnaround in diplomatic posture toward China, an expected further boon on the economic front. But all these could be compromised by the President’s needless verbal hostility against the US, EU and UN. One hopes that it all remains verbal, but it is beginning to take a toll on our economic prospects. This aspect of Digonomics, along with the specter of growing authoritarianism, makes its prospects highly uncertain at this point.

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