Once again it is that time of year when a business columnist looks back at the nearly-ending year to recall the domestic and foreign events, personalities and issues that had the greatest impact on the economy of this country. The following is my selection of the most impactful events, personalities and issues of 2017, arranged as closely as possible as the order of their importance.
In my view, the 2017 issue with the greatest significance for the future political and economic stability of this country was the unrestrained militaristic expansion of the Peoples Republic of China in the body of water that has long been an issue as the South China Sea. In furtherance of his personal antipathy toward the Philippines’ No. 1 diplomatic and economic partner – the US – President Rodrigo Duterte has declared and displayed unwillingness to take any steps to enforce the Philippines’ hard-won arbitration victory in the case it filed against China’s so-called nine-dash line at the Permanent Court of Arbitration (PCA). This, despite satellite evidence clearly showing Chinese militarization of islands covered by the PCA ruling. In the face of warnings that in international law contained inaction on rightful claims can give rise to misinterpretation, Mr. Duterte, a lawyer, has maintained his we-don’t-want-a-war-with-China stance. Realistic observers of the South China Sea/ West Philippine Sea are agreed that the Philippines is likely to rue the Duterte administration’s continuing inaction.
For the first time in 43 years the Armed Forces of the Philippines (AFP) found itself fully engaged in a domestic military campaign. In May hostilities broke out between the AFP – particularly the Army and the Air Force – against the Maute rebels joining with Abu Sayyaf Group (ASG) elements to try and establish an Islamic State enclave in predominantly Muslim Marawi City. Precious resources intended for the development of Mindanao will have to be diverted to the rebuilding of Marawi, which one expert has estimated could take 50 years. President Duterte declared the Marawi campaign over in October.
Because it is the world’s only superpower, US policy toward East Asia – especially changes in that policy – have a broad and deep impact on the development of the economies of East Asia and the Western Pacific. The most important changes in America’s policy toward this part of the world were its withdrawal from the UN-sponsored, 192-nation climate change treaty, its tough-today-soft-tomorrow China Sea and its departure from the Trans-Pacific counterpoise to China’s economic moves in the East Asia/ Western Pacific area.
Realistic observers of the Norway-brokered peace negotiations between the government and the National Democratic-Front-New People’s Army had long believed that the two sides were so far apart on certain issues that the negotiations had little prospect of success. Their collective assessment was proven accurate in November, when President Duterte, who has styled himself a socialist, decided to put an end to the Oslo talks.
The Philippine mining industry and Mr. Duterte’s choice for Secretary of Environment and Natural Resources, Regina Lopez, hogged the headlines and the evening newscasts for many months. Given her declaration that there was no such thing as responsible mining, Ms. Lopez clearly had to go. The Commission on Appointments gave the lady her walking papers by refusing to confirm her appointment. The issue of whether to allow open-pit mining remains an open, contentious issue.
December saw the Congressional approval and Presidential signing of the first package of TRAIN (Tax Reform for Acceleration and Inclusion) tax changes. TRAIN’s critics have doubts about TRAIN’s economic logic, considering that what the program gives out with one hand (freeing receivers of annual incomes ranging up to P250,000 from the need to file income tax returns) it takes back with the other hand (increases in excise taxes on petroleum products, coal, sugar-sweetened beverages, etc.). The critics likewise question the wisdom of foregoing so much reserve in an environment of projected heavy “Build, Build, Build” government spending.
Towards the end of 2017 the peso hit its lowest level against the US dollar in 11 years. The Bangko Sentral ng Pilipinas (BSP) appreciates that a 51.80 rate works wonders for OFW (overseas Filipino worker) remittances, but it is also well aware of the unfavorable effect of a depreciating peso on the cost of imports of fuel and other essentials. The recent rise in US interest rates has been blamed for the peso’s poor market performance, but note has been taken of the better performances of most other regional currencies.
2017 has been a very good year for the stock market, with the Philippine Stock exchange composite index (Phisix) briefly touching 8,500 towards the end of the year. Considering that after almost eighteen months in office the Duterte administration has posted no major economic achievement, the stock market clearly has been operating in total disregard of Mr. Duterte’s controversial policies.
What the monetary authorities’ anti-electronic-fraud experts had hoped would never happen in 2017. Failure of the electronic monitoring system of Rizal Commercial Banking Corporation (RCBC), the nation’s fifth largest commercial bank, allowed Bangladesh Bank funds totaling $81 billion to enter RCBC and exit into casinos and other destinations not regulated by the Anti-Money Laundering Council (AMLC). Only a small part of the Bangladesh Bank funds has been recovered. The bank is planning lawsuits.
A review of the economically important events, personalities and issues of 2017 would not be complete without mention of the seemingly unending woes of MRT-2, one of Metro Manila’s three light railway lines. If ever there was a case of gross corporate mismanagement, this was it.
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