Will Duterte derail the Philippines?

An  battle between Islamic militants aligned to Islamic State and the Philippines army poses a threat to President Rodrigo Duterte’s “self-styled image as both hard man and peacemaker”, say Michael Peel and Grace Ramos in the Financial Times. Troops have been fighting to regain control of Marawi, a city on the island of Mindanao, for over a week, after two militant groups joined forces in response to efforts to recapture one of their leaders.

The incident has underscored “how the southern islands of the Philippine archipelago have become a magnet and launching pad for violent south-east Asian Islamist groups”, say Peel and Ramos. Analysts are warning that more trouble “is likely to spring from a region plagued by long-running Islamist and Communist insurgencies”. 

“While Duterte has been focusing all his attention on killing drug lords, a bigger problem has been growing under the noses of the authorities,” Sidney Jones, a Southeast Asia terrorism expert, tells the newspaper.

The worsening security situation isn’t the only concern over Duterte’s ability to lead one of Asia’s fastest-growing economies. “The killing of over 8,000 people without trial [in his extrajudicial attack on suspected drug dealers], calling the president of the United States a ‘son of a whore’ and statements in which he appeared to praise Hitler have contributed to the marked underperformance of the country’s financial markets in recent months,” noted Capital Economics at the end of March.

At that time, the Philippines stockmarket was down more than 10% from its peak, set in July 2016. Since then, however, markets have recovered some of their losses, up by around 8% at the end of May. Around $200m has flowed into Philippines equities, with buyers encouraged by tax reforms that aim to raise more than $3bn per year to fund infrastructure spending. These measures should boost stocks, Wilfred Wee of Investec tells Bloomberg: the reforms will be “positive for equity flows and domestic resident flows as it’ll improve efficiency within the economy.”

The lower house of Congress has voted through the reforms, but the measures still require approval from the Senate, where Duterte has a smaller majority. The final bill is expected to be “a leaner version of an initial draft that drew opposition from some lawmakers to measures deemed to burden low-income families,” reports Reuters.