THE ARREST of former President Rodrigo R. Duterte could shake the sentiment of foreign investors, analysts said, though this is unlikely to make a significant dent on the Philippine economy.
“From an economic point of view, I guess this will undoubtedly affect the so-called political risk premium that investors compute and look at when they have to make decisions about their portfolio and direct investments,” ISEAS-Yusof Ishak Institute Senior Fellow Jayant Menon said on Money Talks with Cathy Yang on One News.
Mr. Duterte arrived in the Netherlands on Wednesday evening, after he was “surrendered to the custody of the International Criminal Court (ICC).” He faces allegations of crimes against humanity linked to his war on drugs that has killed thousands.
Mr. Duterte, who led the country from 2016 to 2022, could become the first Asian former head of state to be tried at the ICC.
Mr. Menon said it was still too early to price in the impact of the arrest on Philippine markets and the economy.
“We’ll have to wait and see what kind of domestic response evolves with the midterm elections and so on. But I think at this stage, it’s safe to say economically, it’s unlikely to be a big factor,” he added.
In terms of political risk, Mr. Menon said the country has “endured a lot of political instability in the past.”
“It’s not anything new… I think in the Philippines there is some built-in resilience because of ongoing uncertainties on the political front and the economic front.”
While he expects a small negative impact from the arrest, Mr. Menon noted the Philippines faces other bigger challenges on the investment front.
“You’ve got a lot of mega-trends taking place. There’s climate change effects, technological disruptions, rising protectionism. All of these things, you know, are weighty and much bigger than the type of political changes we’ve just seen.”
GlobalSource Country Analyst Diwa C. Guinigundo said the economic impact from the political turmoil stemming from the arrest “could be insignificant.”
“It will depend on how mass actions in opposition to this arrest and detention of the former President,” he said on the same program.
“In other words, it looks like, yes, there were developments that could upset the financial markets, but not too significant. In other words, we have seen this before.”
He said the market could “simply build this into their political risk premium and over time, the market can recover.”
On the other hand, analysts also noted the potential benefits from the recent development.
“This can sometimes be a plus. You know, investors have already built that in. It’ll be a slight deviation from what they’re usually expecting. And so, the impacts are likely to be muted as a result,” Mr. Menon added.
He noted the country should leverage opportunities that could come from these kinds of disruptions.
“There’s been a lot of reconfiguration of supply chains taking place with the US-China trade war and now rising global uncertainties on protection. So far, the Philippines hasn’t taken too much advantage of this.”
“But I think with the increased investments in infrastructure taking place, reducing costs, that can change. Hopefully, this little political blip won’t cut into that positive scenario. But the economic changes taking place with investments in infrastructure especially, I think, bode well for the immediate future for the Philippines.”
Mr. Guinigundo said the Philippine government’s compliance with the ICC arrest warrant “reflects adherence to accountability.”
“Foreign investors in the Philippines have raised the issue of adherence to law, rule of law, consistency of public policy,” he said,
“The recent development shows that the government is also capable of providing or demonstrating its adherence to the rule of law, accountability, and of course, to conclude that culture of impunity in the Philippines,” he said.
“The Philippines has more to show other than this political issue,” he added.
Mr. Guinigundo also called for a “critical civil society” that has the capacity to “screen out and discern between actual political noise and the noise that can disturb markets and upset economic growth.” — Luisa Maria Jacinta C. Jocson
