The Ukraine-Russia war has upset the world order. It has gone far beyond the borders of those two countries, impinging on some important aspects of our lives. The horrendous increase in oil prices to almost double what it was is just the most immediate outcome. That price may come down, but it will still be well above its previous norm. And will remain volatile.
The war, too, is pushing up the prices of foodstuffs, with wheat being an immediate casualty. Ukraine and Russia combined provide almost 30 percent of the world’s need for wheat. Ukraine also accounts for 16 percent of the global supply of corn. It is also a principal supplier of many commodities the world needs. Admittedly some crops can still be grown as the war doesn’t extend to the farms. But they won’t be able to get the produce out, with the port cities under attack and badly damaged. Transporting that produce by ship and plane will be difficult and costly, with shipping costs seen to rise by as much as 25 percent above the already high price due to surging oil prices, according to the Philippine Liner Shipping Association.
The risk of the war spilling over into a much wider one is increasing. Putin had expected a quick, painless war with an acquiescent, even welcoming Ukrainian populace. He, instead, encountered a fiercely nationalist population willing to fight to the end. The massive support of the Western world with armaments and logistics has given the Ukrainian army what they need to achieve a win. He had expected to take control of Kyiv and some other major cities; instead, his troops are being forced back. It’s only a matter of time, but recent indications are that he has lost the war.
What happens when he realizes that is of very serious concern. Putin is a trapped rat (I hope rats will forgive me for the comparison). Trapped rats lash out uncontrollably. Using chemical weapons raises its ugly head. He’s already threatened to go nuclear. If he does, a third world war is on the cards. This is a totally irrational psychopath. Hopefully, neither of these becomes an outcome. Rather that a negotiated compromise becomes the eventual ending. Whatever it is, it means we have an even more uncertain world in 2022 than the one COVID-19 had already created.
Here at home, that uncertainty is exacerbated by the upcoming national elections on May 9 where the outcome is either a return to the Marcos era, or the emergence of a woman with integrity who served as a lawyer for marginalized groups before becoming a politician.
The polls, where Marcos commands over half the vote, seem to leave no doubt that it will be Marcos. But polls at this point in previous campaigns have not been the outcome although the margin has never been this wide before. So the outcome remains unknown.
When one looks at the policies, plans, and programs released by the presidential candidates, what the campaign tells us of Marcos and Robredo—the only two that matter—is that there’s not a huge amount of difference. What stands out is there are, as would be expected in an election campaign, promises made that will cost—with no indication of where that money will come from. This, at a time, when the country is heavily in debt—over (slightly) its acceptable debt limit—and has less revenue coming in as business struggles to recover. The situation has been worsened by the decision of the Supreme Court on the Mandanas case to share all national government revenues with local government units, not just internal revenue taxes. Many local governments are not yet properly prepared to use those funds.
Encouragingly, most of what they promise is a continuation of what previous governments have achieved. Both will continue the “Build, Build, Build” program albeit with some expected shift in priority. Neither of them has talked of reversing any of the commendable opening–up laws President Duterte introduced. Although what is particularly worrying is Marcos’ threat to return to government control some activities wisely removed by previous presidents who recognized that: 1) the market knows best; and 2) the government has proven it has no competence to impose effective, efficient control. These are to return regulation of the rice industry to the hugely indebted (P140 billion by end-2018) National Food Authority, and revival of the oil price stabilization fund.
Critical will be who they appoint as their economic team, and whether they then listen to that team. Mr. Duterte achieved considerable success on the business/economic front because he had an excellent, technocratic team led by Finance Secretary Sonny Dominguez. And he listened to and went along with their recommendations, pushing them through Congress, or through executive action as needed. If either one appoints cronies, family, or friends, we’re in trouble.
Given these uncertainties, the needed foreign investment won’t happen as investors not only wait for the outcome of the election, but for how that president actually performs. Not on what he/she promises. So 2022 will be a year of great uncertainty.