So far, the dividends from Duterte’s China strategic reboot have been superficial but they show huge potential: participation in the Belt and Road Forum, use of a Chinese rifle to kill the Philippines’ most wanted terrorist, infra buildup in Marawi, importation of Filipino English teachers, 50 scholarship grants, 10,000 tons of rice for Ompong victims, to name some.

Looking at the year about to end, I consider the following events or developments as the biggest stories of 2018: 1) Duterte’s China pivot; 2) the Philippines’ Catriona Magnayon Gray wins the Miss Universe title; 3) inflation hits a 10-year high and TRAIN is derailed; 4) the return of the Balangiga bells; 5) Duterte’s total war against the New People’s Army.

1.  The flowering of President Duterte’s pivot to China, a revolutionary foreign policy, will change the future of the Philippines forever. 

So far, the dividends from Duterte’s strategic reboot have been superficial but they show huge potential: participation in the Belt and Road Forum, use of a Chinese rifle to kill the Philippines’ most wanted terrorist, infra buildup in Marawi, importation of Filipino English teachers, 50 scholarship grants, 10,000 tons of rice for Ompong victims, to name some.

The biggest Chinese investors are in the wrong business – online gaming which has attracted easily 500,000 transient (some say illegal) Chinese workers and created the largest demand for real estate along Manila Bay, Makati, and Fort Bonifacio.  Online gaming is growing by one million square meters a year. 

The Chinese have yet to fulfill their promise to build three new bridges across the Pasig River to ease traffic, and to start any billion-peso plus infrastructure project.

Tourist arrivals from China more than doubled in three years to one million a year (968,000 in 2017 from 491,000 in 2015; 973,000 in 9 months of 2018) making the Chinese the country’s No. 1 tourists, growing by a frenetic 35% year-on-year, and displacing the Koreans.

Duterte has also copied China’s growth playbook.  China grew big largely because of government spending.  Accordingly, Duterte’s P9-trillion Build, Build, Build program is built on that premise.

China’s power

The strong-willed Filipino leader’s China pivot coincided with China becoming the world’s largest economy in purchasing power parity for the third year in a row, with $23.1 trillion GDP in 2017, following 30 years of unprecedented growth. 

By 2018, China had completely dominated strategic military presence in the South China Sea where the Philippines has sovereign rights to more than two million square kms of what could be resource-rich and hugely strategic waters and where a third of global maritime trade passes.

According to the New York Times, China’s militarization of the South China Sea is a done deal, “short of war with the US”.

“China is now capable of controlling the South China Sea in all scenarios short of war with the United States,” says Admiral Philip S. Davidson, commander of the US Indo-Pacific Command.

According to Justin Yifu Lin, a former World Bank senior economist, this is what happened to China in the last 40 years of opening up: per capita GDP rose from $155 in 1978 to $8,836 in 2017, higher than the global average; China surpassed Japan to become the second largest economy in 2009, overtook Germany as the world’s biggest exporter in 2010, and replaced the United States as the biggest trading nation in 2013.  More than 700 million Chinese rose out of poverty.

Fortunately for Duterte, China President Xi Jinping believes in the wisdom that “all creatures may grow together without harming each other or roads may run parallel without interfering with one another.” 

Visiting Manila last November, Xi announced that “the President (Duterte) and I both agreed to elevate our relationship into one of comprehensive, strategic cooperation. This vision charts a clear course for China-Philippines relations and it sends a strong message to the world that our two countries are partners in seeking common development.”

2.  Filipino-Australian Miss Philippines Catriona Gray lava-walking to the 2018 Miss Universe title, the Philippines’ fourth in 66 years brought cheers and tears of joy to a nation buffeted by record-high inflation, high prices of prime goods, crippling traffic, and massive government corruption in nearly every agency, on top of colossal red tape for such things are getting a driver’s license, getting a car plate, securing or renewing a passport, and worst of all, getting a business permit. 

Out of 190 countries, the Philippines ranks 124th in Ease of  Doing Business, in the bottom 15%, the worst ranking in ASEAN, and the worst ranking for the country in four years.

Inflation Highest in 10 years

3.  Inflation hit a 10-year high to 6.7% in September and October 2018 amid the most severe rice shortage in a generation and a massive backlash against taxes, especially on fuel and sugar drinks, imposed by TRAIN – the Tax Reform for Acceleration and Inclusion, especially after the government imposed a tax on diesel, from zero in 2017 to P4.50 this January 2019. LPG tax is tripled from P1 per kilo in 2018 to P3 per kg in 2020.  The tax on coal, which provides most of Philippine energy, is tripled, from P50 in 2018 to P150 in 2020.

Lesson from Macron

The backlash against TRAIN virtually cripples government’s ability to impose new and higher taxes.  That inability in turn hampers government’s ability to shoulder the salaries of state workers, especially teachers, policemen and soldiers whose pay Duterte promised to double immediately.

Perhaps, Duterte’s economic managers should learn a lesson from Emmanuel Macron of France.  The JFK of France imposed a tax on fuel (in the name of climate change) and hundreds of thousands of nameless French spilled out into the streets  for three weeks to demand the ouster of what they perceive as a pro-rich and arrogant president.

4.  The return of the three Balangiga bells on Dec. 11, 2018 symbolizes a massive rewriting of Philippine-American history (it is an admission of defeat) and shows to what extend the Americans will go to accommodate a Philippine leader bent on severing Manila’s longstanding ties from America and pivoting towards its old neighbor, China which up to the early 1970s was supporting communist guerillas in the Philippines.

The Americans, of course, are not legendary for their patience.  They had previously removed two Philippines presidents not of their liking – Ferdinand Marcos in 1986 and Joseph Estrada in 2001.

5.  Duterte’s total war against the communist New People’s Army is a new direction in the Philippine military’s vision to end the world’s longest running communist insurgency.  This is on top of the President’s total war against the terrorists, many of whom are Muslim fundamentalists.

— Tony Lopez

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