"Both concern one of the country’s principal sources of economic assistance—the European Union."
Discussions regarding the development of economics usually end with the asking of the question “What policies should a country pursue in order to achieve economic development in the shortest possible time?”
The better question to ask is “What policies should a country refrain from pursuing in order to achieve economic development?” After all, of what good is doing good economic things with one hand if with the other hand a country is doing bad economic things?
Two economic policy decisions of the administration of President Rodrigo Duterte of the last few years fall under the bad-economic-decision category. Both are direct offshoots of what one of the country’s principal sources of economic assistance – the European Union – refers to as unacceptable Philippine government policies on human rights.
The first of the two decisions, made in 2016, relates to the financial assistance from the 27-nation economic group. The second, which relates to the Philippine trade with EU, is in the process of being made.
Shortly after he assumed office, a very confident Rodrigo Duterte responded to the EU’s threat to suspend preferential financial assistance to the Philippines – chiefly Official Development Assistance – by instructing this country’s economic managers to immediately stop processing project loan proposals involving ODA from the EU. ODA loans are among the most concessional financing sources to be found on Planet Earth: Loans of up to 40 years’ maturity, with a 10-year grace period on interest payments, and bearing annual interest rates of 0.4 percent.
No more ODA from those who infringe on the sovereignty of the Philippines, Mr. Duterte thundered. One can only imagine the reactions of the economic managers most closely affected by the presidential decision, to wit, the officials responsible for obtaining financing for this country’s development projects.
Recently, possibly as a result of further bilateral discussions on the matter, Malacañang has instructed the Department of Finance and the National Economic and Development Authority to reopen discussions with the EU on ODA-financed projects. Better a late admission of a mistake than stubborn non-admission.
The second bad economic policy decision made by the present government, which is in process, relates to this country’s contrived acceptance of trade preferences under GSP+ (Generalized Scheme of Preferences Plus) of the EU. Recently, for the third time, the first two declarations were made in 2017 and 2018 – the Parliament of EU declared that it was considering discontinuing GSP+ benefits to the Philippines if the Philippine government did not immediately improve its human rights accord. Incensed by the EU Parliament’s threat, the Duterte administration has apparently decided to adopt a do-what-you-want-to-do attitude toward the 27-nation bloc.
This attitude is a terrible mistake, arguably worse than the decision regarding EU preferential financing. Under GSP+, approximately 6,000 products of Philippine interest are able to enter EU on a tariff-free basis. Since its inception a few decades ago, GSP has enormously aided the development of numerous developing countries; those that have extensively availed themselves of the Scheme’s benefits are among today’s fastest-growing countries. Taiwan was one of these countries.
One of the Philippine industries that will be hard-hit by the Duterte administration’s GSP+ position is the tuna industry, which, ironically, is centered on Duterte country, i.e., Southern Mindanao. Because of GSP+, the Philippine tuna industry now supplies around 7 percent of EU’s tuna requirements.
The decisions on ODA and GSP+ are a pair of very bad economic policy decisions. The Duterte administration has found the good sense and the courage to correct the ODA decision; it should now do everything it can to correct the GSP+ decision.
