National economies, and the investors involved in them, generally do well when public safety and rule of law can be assured.
But amid the Philippines' bloody crackdown on the drug trade and criminality, led by President Rodrigo Duterte, it appears investors and businesspeople inside and outside the country have lost faith that those conditions can be assured.
Since taking office in July, Duterte has exhorted civilians to take the law into their own hands and voiced his support for extrajudicial killings.
The body count has since grown to about 3,800 people, many of whom have been killed by unknown assailants. Duterte has also taken positions hostile to the US, a longtime ally and major economic supporter, and made overtures to China, which has clashed with countries in the region regarding the South China Sea.
As a consequence, the Philippines' economic footing, recently quite strong, seems less assured. "Official data from the Philippine stock exchange shows net foreign transactions on the benchmark index have fallen over the past month," CNBC reported on Tuesday.
"Many investors have been turned off by threatening remarks made by Duterte against the US and China, casting doubt on the future of Manila’s foreign policies and his handling of the economy," the CNBC report noted.
According to The Economist, since Duterte took office, investors have demanded higher risk premiums to hold Philippine assets. "A lot of people are hesitant to put their money into the Philippines at this point," Guenter Taus, who heads the European Chamber of Commerce in the Philippines, told the magazine.
Duterte has lashed out at international critics, including the UN as well as the US and President Barack Obama (though Philippine officials have said that deals between the country and the US will remain in place).
His most recent outburst was directed at the EU, which urged his government to curb extrajudicial killings and violence. "F--- you," Duterte replied on Tuesday, adding a raised middle finger for good measure.
In addition to his words, Duterte's deeds have caused worry about his engagement with the international community.
Earlier in September, Duterte skipped several meetings at a summit in Laos, including one on ASEAN and the UN, which, according Prashanth Parameswaran, an associate editor at The Diplomat, has raised concerns about his commitment to multilateralism, which is important not only to the economic relationships in the region, but also to multinational cooperation on security issues in the South China Sea.
While Duterte's stated focus on macroeconomic stability, infrastructure development, and workers' rights was welcomed at the outset of his term, it seems the Philippine president's harsh rhetoric, which has helped drive his popularity sky-high, has more recently stoked worry among businesses and investors.
Duterte has repeatedly made accusations against public figures without substantiation. This month, he said he had a list of at least 1,000 police, local community leaders, politicians, and other officials suspected of links to the drug trade. In August he accused 159 public officials of colluding with the drug trade without presenting evidence.
Duterte's brash pronouncements since taking office may be part of an effort to shore up his base as he finds his footing on the national political stage.
"His tactic of calling out allegedly corrupt officials and business leaders is a way to help him build public support and keep potential rivals at bay," geopolitical analysis firm Stratfor wrote in late August.
As mayor of Davao City, home to 1.5 million people in the southern Philippines, Duterte's brash attitude and harsh anticrime measures won him popularity, and he held high office there for nearly 30 years.
And as president, Stratfor argued, "Over the long term, he thinks voters and foreign investors alike will reward his focus on law and order, even if it brings with it a temporary spike in bloodshed and is enforced with extralegal means."
But Duterte's administration's public denunciations have affected locals and foreigners alike.
Philippine officials have admitted that organized-crime groups have seized on Duterte's call to arms for their own violent purposes, and impunity for police violence has some in the country worried about reprisal killings. A longtime Manila resident told The Economist that some expatriates were thinking of leaving.
In August, just a few days after he was publicly accused of being a drug trafficker by the national-police chief, a Philippine businessman and his wife were gunned down. This month, the daughter of a British baron was killed when she was out on bail after being charged with drug possession, with her body left on a Manila street, adorned with a sign accusing her of being a "drug pusher for celebrities," according to AFP.
Recently, one online-gambling executive saw his company's shares fall 50% after Duterte publicly criticized him for having outsize political influence — the executive resigned the next day.
"Everyone is scared,” a corporate leader told The Economist. "None of the big business groups will stand up to him. They’re all afraid their businesses will be taken away."
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