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The Philippines “BRIC” Effort

Politics / Asian Economies Jan 31, 2017 - 04:23 PM GMT

By: Dan_Steinbock


From Regime Change Ploys to Accelerated Economic Development
While the Obama White House prepared plans for regime change in the Philippines, President Trump is working on an assertive strategy in Asia. Meanwhile, President Duterte is accelerating the country’s economic growth – dramatically.

After the election triumph of President Rodrigo Duterte, the Philippines has initiated a series of economic reforms to accelerate development, decentralise governance and a tough but controversial struggle against corruption and drugs.

The early economic signals are promising. Recently, Finance Secretary Carlos Dominguez III announced that the government is set to sustain growth at close to 7% in 2017, despite “political noise”, by banking on higher infrastructure spending, tax and other reforms, improved peace and order.

The big question is President Trump’s strategy for the region. With his keen interest in history, Duterte knows only too well that, while the US is a powerful regional ally, American security state and imperial dreams, including torture, originate historically from the Philippines. Yet, few expected the Obama State Department to respond as palpably as it reportedly did.

Regime Change Plan

After the controversial US Ambassador Philip Goldberg left the Philippines, he wrote a “blueprint to undermine Duterte within 18 months”. According to the document, which was leaked to The Manila Times early in the year, Goldberg advocates fostering public discontent with Duterte by isolating the Philippines through military assistance and economic “blackmail” relative to other ASEAN member countries.

While Goldberg thinks that “(deposing Duterte) would be a challenge for the opposition”, his goal is imperial “rule and divide” among Philippine congressmen and senators; the ASEAN states; and international multilateral organisations. Moreover, the pro-US opposition should be strengthened through aids and grants. The plan calls on Washington to deploy economic, political and military strategies against Duterte “to bring him to his knees and eventually remove him from office”.

According to Daniel Russel, State Department’s assistance secretary for East Asian affairs, the allegations of a blueprint are false. However, Russel himself is a key figure in the US pivot towards Asia. US-based sources have also tried to discredit the blueprint as coming from China’s Philippine Ambassador Zhao, which the executive editor of The Manila Times Dr. Dante Ang calls a “fantasy”.

It is not the first time Goldberg is associated with regime change efforts. In 2008 President Evo Morales and the Bolivian government gave him 3 days to leave the country after declaring him persona non grata – following efforts to fund the opposition leaders, separatists and think-tanks with millions of dollars.

Yet, President Obama rewarded Goldberg by appointing him assistant secretary of state for Intelligence and Research; one of the 16 elements of the US Intelligence Community. That made Goldberg the middleman between US intelligence and US diplomacy. Thereafter he was sent to the Philippines, which he left in less than three years after efforts to intervene with the election outcome.

Exploiting Opposition, Human Rights and Ngos

The regime plan ensued after election last May, when President Aquino’s designated successor – former interior minister Manuel Roxas, an ex-investment banker and Liberal Party leader – failed to deliver a democratic victory. Known as “Mr. Market”, Roxas appealed to elites in Manila and Washington but Duterte got almost 40% of the national vote, nearly twice as much as Roxas.

Since elections, there remain nagging questions about the rise of a “narco state” and “drugs generals” during Roxas’ watch as interior minister. One of them is a vocal Roxas supporter, retired national police chief general Marcelo Garbo Jr., a “protector of drug syndicates”. To set such perceptions aside, Goldberg’s plan argues that the political opposition “would need all the political weapons in their arsenal to replace Duterte”. The plan advises “restraint in expressing public support for former President Fidel Valdez Ramos and Vice President Leni Robredo, and other opposition leaders “so as not to alarm the Duterte administration of an impending destabilization or a coup”.

These plans rely on the center-right Philippine Liberal party, which is known for its market-friendly neoliberal policies and firm support of the US pivot to Asia. Ramos was trained at US West Point in 1960. In the 1980s, he was in President Marcos’s inner circle of national police and military. Following the fall of Marcos, he served as President Corazon Aquino’s military chief. In turn, Leni Robredo is a lawyer and social activist, who the Duterte administration sees more loyal to opposition and possibly the Goldberg plan. Her relationship with the Cabinet fell apart in December, when she was informed “to desist from attending all Cabinet meetings”.

In geopolitics, human rights and non-governmental organisations (NGOs) have only too often been used as geopolitical instruments. The Philippines is no exception. In the Benigno Aquino III era until mid-2016, complacency with drug lords and narco politicians went hand in hand with the rise of 3.7 million addicts. International media was quiet about both. However, when Duterte started his war against drugs and corruption, which has cost over 6,000 lives, international concern escalated rapidly.

In the public debate, the point person has been Senator Leila de Lima, Aquino’s former Secretary of Justice, who chaired a senate inquiry into the extrajudicial killings of drug suspects. She has been glorified by the BBC as “the woman who dares to defy Philippine president Duterte” and as an outspoken advocate of “justice”. For the same reason de Lima was invited to and awarded in the US as one of the “leading 100 global thinkers” by the Democrats’ Foreign Policy. In the Philippines, many see her awards as perversions of justice, however.

Last August, de Lima was found to have a 7-year affair with her lucratively-rewarded driver Ronnie Dayan who served as her money collector for drug protection and campaign financing. When she was still Justice Secretary, the Discovery Channel presented an unsettling documentary Inside the Gangster’s codeon ruthless gangs exerting control over the notorious New Bilibid Prisons, while being coddled by the Aquino administration. Oddly enough, de Lima was removed from the Senate committee last September, but her international accolades ensued after the disclosure of her activities. International media has largely ignored her abuse of public office and public funds.

Non-governmental organisations (NGOs) also play a role in US-Philippines geopolitics, along with wealthy US Filipinos linked with the Aquino circles, such as billionaire philanthropist Loida Nicolas-Lewis, who served as an attorney for the US Immigration and Naturalization Services in 1979-90. Her sister is former chairwoman of Commission on Filipinos Overseas, Imelda Nicolas. Both are Robredo supporters.

A more influential source of funds is billionaire George Soros, who Duterte says has bankrolled local NGOs against him as he has been portrayed as a “mass murderer” in the West. International media has relied on these NGOs and think-tanks in their demonisation of Duterte.

Last November, the US-based Millennium Challenge Corporation (MCC) did not renew its $430 million aid grant to the Philippines. While the Duterte’s criticism about “aid conditions” was reported as “tirades against America” in the West, the MCC is hardly independent. It is chaired by State Secretary John Kerry and Treasury Secretary Jacob Lew. It also deploys indicators that precondition aid on neoliberal policies.

The MCC debacle is overshadowed by the economic implications of US-Philippine military ties. Until 2010, the country’s military expenditures decreased two decades from 1.6% to 0.8% of GDP. During the Aquino era, which coincides with the US pivot to Asia, the expenditures soared to almost 1.4% of GDP, according to SIPRI – which in dollar terms is over five times the proposed aid package in just one year.

Ambitious, Transformational Economic Efforts

Under Duterte’s leadership, Manila’s economic development has been dramatically accelerated. Again, international media has largely ignored the story. According to Ernesto Pernia, director general of the National Economic and Development Authority (NEDA), the Philippines must ramp up its total investment spending to some 30% of GDP to achieve its development goal.

The effort is to become an upper middle-income economy by the end of Duterte’s term in 2022, which would pave the way for a high-income economy by 2040. If peaceful conditions prevail in Southeast Asia and the Philippines remains united, such ambitious objectives could be viable.

Last July, I argued in the Philippines Foreign Service Institute (FSI) that, in order to accelerate growth, the country should drastically increase both its domestic and foreign investment, seek funds not just from the Asian Development Bank (ADB) but from the Asian Infrastructure Investment Bank (AIIB); and not just from US and European multinationals but from Chinese companies. Nor can the Philippines any longer afford to export its people, I added. Although some 10% of the GDP can be attributed to remittances, no BRIC-like emerging economy can misallocate its human capital in such a manner. Even the most favourable demographics will be wasted, if there are not enough jobs.

It is this “BRIC-like” transformation that Manila is now trying to achieve. As a result, the public share of investments would have to climb from 5.4% of GDP in the ongoing year to 7% onward until 2022. As private and public investment is expected to contribute 18.6% and 5.4% of GDP, respectively, that would boost total investment to 24% of GDP. The Duterte administration is intent to restore the kind of growth track that the Philippines enjoyed in the early postwar era when its living standards were still second to those of Singapore in Southeast Asia.

However, even the ambitious infrastructure program will not be enough to eradicate poverty and become a high-income economy by 2040. To achieve its ultimate objective, the Philippines needs to raise total investments from the hoped-for 24% this year to 30% of GDP, of which only 7% would be contributed by the public sector.

Additionally, Manila needs to implement broad and deep reforms in tax policy and administration to raise enough revenue to fund the government’s huge spending plan. According to ASEAN, in 2015 FDI in the Philippines was around $5.7 billion, significantly behind Indonesia, Thailand and Vietnam, which attracted FDI of $16.9 billion, $8.0 billion and $11.8 billion, respectively.

As real GDP growth rate is accelerating, Manila is pushing for legislative reform, which would streamline the regulatory environment, and the pivot to China, which translates to the participation of AIIB in Philippine projects and has already led to $24 billion in aid pledges. At the same time, the longstanding maritime dispute has been set aside. At the same time, Japan, a historical investment partner, is planning to raise its FDI in the Philippines with $1.8 billion in business deals plus a pledge from conglomerate Marubeni to invest $17.2 billion in water, power and infrastructure.

Unlike his predecessors, Duterte has little interest in exporting more people. “We have to improve the economy so you will not come back here”, said Duterte during his recent visit in Japan to migrant workers. “If ever you will return to Japan, it will be for a vacation.”

Finally, in my FSI presentation, I also argued that the Duterte administration’s efforts to negotiate sustained peace deals with its Communist and Islamist insurgents could be seen as part of the new economic strategy. A “no-conflict” approach within and around the country would boost stability and thus increase the potential for prosperity. And that precisely has been Duterte’s objective, particularly in the troubled regions and islands in the south; particularly in Mindanao, whose natural resources hold great potential for future economic development.

From Obama’s Regime Changes to Trump Uncertainty

In the Philippines, the alleged plan of Vice President Robredo’s supporters to create dissent against Duterte has become a national issue. If a Ramos-Robredo scenario were to fail, Golberg advises exploiting possible rifts “among Duterte supporters”, or assisting “Robredo led opposition groups” coupled with the Catholic Church, business sector and NGOs.

Despite the controversial drugs war, Duterte’s approval and trust ratings in the Philippines remains 83%, according to the Pulse Asia survey. Only 5% of the nation disapproves of Duterte. However, the ratings of opposition figures have fallen. At the same time, the legal battle about vice-presidency is heating. Leni Robredo won vice-presidency with a narrow margin against former senator Ferdinand “Bong Bong” Marcos, former President Marcos’s son. In his electoral protest, Marcos says that the Liberal Party rigged the 2016 elections in favour of Robredo. That kind of fraud would no longer be surprising.

The stakes in the Philippines are no longer just domestic. Today the country’s stability is strongly supported by Beijing as well. Amid the news about the “ouster plot”, foreign ministry spokeswoman Hua Chunying said China was confident on Duterte’s leadership and would continue to support his policies.

Soon President Trump’s administration must reassess Goldberg’s regime-change scenarios in light of his own pledge to redefine “America First” policies in Asia and China. Before the US elections, Trump and Duterte had a brief but friendly phone conversation. While Duterte may get better along with Trump than former President Obama, the new White House’s Philippines plans are subject to its broader Asia and China strategy which – as secretary of state Rex Tillerton’s confirmation hearings suggest – could mean greater assertiveness in the region.

In the Philippines, any US-led regime change effort would face firm domestic, regional and international opposition. Only the Philippines can determine its own future. Unipolar regime change plans should have no role in the multipolar 21st century – especially in Asia which is critical to global growth prospects.

Dr Steinbock is the founder of the Difference Group and has served as the research director at the India, China, and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more information, see

The commentary was originally released by The European Financial Review on December 7, 2016

© 2017 Copyright Dan Steinbock - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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