Marcos, Jr. pivots to the US; faces tough economic challenges

In just two months, President Ferdinand R. Marcos, Jr. took a reverse gear in foreign policy from pledging to promote an “independent foreign policy” in July to a pivot shift to the United States. In his first State of the Nation Address (SONA) on July 25, the new president vowed to chart an independent foreign policy calling the country as a "friend to all and an enemy to none". “We will not waver, we will stand firm in our independent foreign policy, with the national interest as our primordial guide. We commit to maintaining good relations with the rest of the world,” he added. Paradoxically, such bold statement made in July was in truth lame since two months later he would virtually place his country’s destiny and international relations to a close security relationship with the US.

Nonetheless, for all the early indications of a shift in Philippine foreign policy by Marcos, Jr. this analysis shall be considered as preliminary until actions become clear as regards the direction of bilateral relations with China, considered by the US as an existential threat.

Meeting US President Joe Biden on the sidelines of his UNGA address on Sept. 21,
Marcos, Jr. spoke about the Philippine government’s strong defense commitments with the US including an increase in joint war exercises. This can be viewed as the Philippine president’s re-pivot to the US - a reverse gear to former President Rodrigo R. Duterte’s pivot to China in 2017 where he also promised to pursue a comprehensive strategic relationship with Beijing. Toward the end of his term, however, Duterte took two steps backward as he reneged on an earlier threat to abrogate the country’s Visiting Forces Agreement (VFA, 1999) with the US.

Before the president’s flight to the US, Malacaňang (the presidential office) announced that Marcos, Jr.’s high-level and business meetings in Indonesia and Singapore yielded 10 Letters of Intent and 12 MoUs including an Agreement on Cooperative Activities in the Field of Defense and Security (Indonesia); and MoU for Collaboration on the Development of New Clark City between the Bases Conversion and Development Authority (BCDA) and Enterprise Singapore (Singapore). The commitments, the presidential office also said, amounted to PhP804.78 billion indicating the Marcos government’s investment pitch in Indonesia, the region’s largest economy, and Singapore, Asia’s richest country in GDP per capita.

It was a coincidence that Marcos, Jr.’s speech at the UNGA fell on the 50th anniversary of his father’s declaration of martial law (Sept. 21, 1972) which was marked by activist street protests in the Philippines as well as overseas including NYC where the Marcos entourage was stalked by Filipino-Americans with militant protests. His run-of-the-mill UN speech mentioned the Philippines as a “friend to all and an enemy to none” as he called on UN members to resolve disputes by “reason and right.” International media noted, however, that the Philippine head of state was mum about the July 2016 ruling at The Hague which upheld the country’s maritime rights in the West Philippine Sea / South China Sea.

Meeting Biden, Marcos, Jr., the country’s chief architect of foreign policy, said that he cannot imagine the Philippines without the support of the United States and that he considers his country’s traditional alliance with the US an important policy. Keen observers were quick to infer that his remarks showed a deviation away from Duterte’s China-friendly foreign policy track toward a re-pivot to the former colonial master and decades-old defense ally. On the side, top Filipino businessmen who accompanied Marcos, Jr.’s state visits met some of the US’ biggest private equity investors in the world in aviation, large infrastructure, energy, fintech and payments, e-commerce, and digital infrastructure.

The Biden-Marcos, Jr. bilateral meeting appeared to have been scripted to include concrete, follow-through steps. Soon after the talks, the defense chiefs of both countries sat down for a defense strategic meeting in Honolulu. On Sept. 29, US Secretary of Defense Lloyd J. Austin III and Jose C. Faustino Jr., the officer in charge of the Philippines’ department of national defense, held joint operational planning at the US Indo-Pacific Command in Honolulu, Hawaii, to bolster their decades-old alliance. With the Philippine president’s positive signals of new strategic orientation and his dire remarks in his SONA address on the South China Sea issue with Beijing (1), Washington began to double down on its defense alliance with Manila, particularly in light of the rising tensions with China in the Taiwan Strait and the SCS. The defense chiefs’ joint planning called for increasing joint military drills from 300 in 2022 to as many as 500 next year, with the US deploying 16,000 troops for the annual Balikatan (shoulder-to-shoulder) wargames. The joint maneuvers, which in 2019 simulated warfighting including an amphibious seizure of an island in the SCS, have alerted China. This year’s war games were expected to be expanded to involve amphibious and island protection drills in tandem with Australia and Japan, both strong US allies.

Confident about the Philippines’ support for US maneuvers in the region, Austin told Faustino, Jr., “Our countries share a vision of an open, secure, and prosperous Indo-Pacific, free from coercion or bullying.” “The United States remains unwavering in our support for a strong and independent Philippines that can defend its sovereignty, ensure prosperity for its people and strengthen security in the region,” he added.

US military strategists appear to be preparing their treaty ally for an important role amid the rising tensions including a war scenario in the Taiwan Strait where US forces can be easily mobilized from military bases in the Philippines. In the past few months, the two treaty allies have pressed ahead with full implementation of the Enhanced Defense Cooperation Agreement (EDCA, 2014), which grants the American military sweeping access to about five vital military bases across the Philippines. EDCA’s full implementation will increase the Pentagon’s capability for a forward deployment force, especially in a war scenario over Taiwan, US military strategists said.

US Indo-Pacific strategy

So far, the US seems to be on the right track. The recent military talks and agreements have evolved in the context of the Biden administration’s intent on fortifying the Philippines’ position in its “integrated deterrence” strategy for the Indo-Pacific, drawing on a wide net of bases and alliances across the first and second island chains, stretching from Japan in the north to Australia in the south, with the Philippines along with Singapore and Vietnam serving as key Southeast Asian partners in between. Aside from being America’s oldest ally in Asia, the Philippines has been geo-strategically seen as vital to the Pentagon’s operational priorities in the region. A caveat however is that although both Singapore and Vietnam have military cooperation agreements with the US the two countries join other ASEAN member-countries who loath being dragged into any situation that forces them to pick sides between China and the US.

A preview of the Philippines going all the way in support of the US is scanned by Gregory B. Poling, Fellow of the neo-con Center for Strategic and International Studies (CSIS): “What would it do to the US-Philippine alliance if Americans were dying 50 miles from the shores of the Philippines and the Philippine government refused (to assist)”. “Allies cannot be neutral,” and the Philippines “has responsibility to Americans just like Americans have responsibility to Filipinos,” he added.

A chip off the block?

A rumination of Marcos, Jr.’s unassailable pivot to the US policy brings to mind Marcos, Sr.’s all-out support to US strategic interests in the Philippines and the region throughout his 20-year-long rule, 14 years of it under martial law (1966-1986). Serving as the Philippines’ own authoritarian ruler at a time when the US propped up dictatorial regimes in Indonesia, Thailand, South Korea, South Vietnam, and other Asian countries as well as in Latin America, Marcos supported America’s armed intervention in the Indochina War by sending a military contingent in South Vietnam and allowing the use of US military bases in the Philippines for relentless bombings in those war zones – an imprudent policy that made the country vulnerable to retaliatory attacks from America’s enemies. Meantime, Marcos’s military rule left more than 3,200 people killed, 35,000 tortured, and 70,000 detained, according to Amnesty International.

Ferdinand, Jr. was 9 years old when his father became president and 28 when the latter was ousted from power by a people’s uprising in February 1986. September is a significant month for father and son: both were born 40 years apart in September - 11th and 13th, respectively. It was in this month also when Ferdinand, Sr. declared martial law on Sept. 21 - 50 years ago - placing the Philippines under dictatorship. Martial law extended Ferdinand Sr.’s rule for another 14 years. Many Filipinos who remember the horrors of martial law marked Sept. 21, 2022 with massive protests across the country and abroad. Marcos, Jr. was conspicuously silent during that day – conveniently, he was in New York City to address the UNGA.

But, days before he left for the US, Marcos, Jr. feebly argued in a staged interview that his father was not a dictator, because he consulted others before issuing orders, ignoring the fact that Marcos Sr. alone made unilateral decisions after abolishing Congress and martial law allowed him to issue decrees. Moreover, even after promulgating a new constitution, he legislated through a rubber-stamp Interim Batasang Pambansa (Interim National Assembly, 1978-1984), a unicameral legislature dominated by his party monopoly – Kilusang Bagong Lipunan (New Society Movement). He justified the imposition of martial law on the grounds that he had to save the country from oligarchs – i.e., his political foes - and fight a war on two fronts, the communist-led guerilla war and the Moro secessionist rebellion. He also talked about his vision to build “a New Society” based on “constitutional authoritarianism”. Such monopoly of power enabled economic plunder by the dictator along with his political and business cronies.

Insolently in the past 50 years, Ferdinand Jr. has not apologized or even acknowledged the excesses and human rights violations perpetrated during his father’s one-man rule. While Amnesty International pointed to the heinous crimes perpetrated by the Marcos regime under martial law, economic think tank Ibon Foundation said the dictatorship dealt the Philippines in its history its “worst economic collapse (7% and 6.9% GDP contraction in 1984 and 1985); worst unemployment (12.6% in 1985); worst inflation (49.8% in 1984); worst decline in real wages (43% for farm workers and 71% for workers); worst poverty (59% in 1985). From being 6th highest in Asia when Marcos took power in 1965 the Philippines’ GDP fell to 11th in 1986 when he was overthrown.

Till now, Marcos Jr. and his family continue to resist legal actions by the government to further recover billions of dollars of hidden wealth. The Supreme Court (SC) ruled on July 15, 2003, that over PhP25 billion worth of Marcos’s assets were ill-gotten wealth. The Marcoses also refuse to pay the PhP203 billion tax and penalties on the estate of the deceased former president despite the overwhelming legal opinion that the SC’s decision on the case is final and executory. Last Sept. 1 the Marcos family refused to attend the hearing called by the anti-graft court Sandiganbayan on a civil case filed by the Presidential Commission on Good Government (PCGG) in 1987 to recover funds illegally channeled through business associates and cronies of the late president and his wife. Restored to power after 36 years, the Marcoses continue to act as if dictatorship remains in place.

International rights probe

In his July 25 SONA, Marcos, Jr. was tight-lipped on the deep-seated issue of human rights where violations have been nurtured by a culture of impunity from the Marcos years until today. So recurring are human rights abuses committed by the state’s police and military apparatuses that these have grown to include extra-judicial killings committed against suspected users of prohibited drugs in Davao City where Duterte was mayor for 20 years until he became president in 2016-2022. Charges over crimes against humanity had been filed with the International Criminal Court (ICC) by victims’ families along with lawyers and human rights groups prompting Duterte to order the Philippines’ withdrawal from the international body believing the move would save his neck and his alleged co-perpetrators. Recently, however, ICC prosecutor Karim Khan urged that the probe into the murders committed during the drug war by the former president should continue. Article 127 of the 2002 Rome Statute which created the ICC provides that all actions conducted previous to the withdrawal remain legitimate. Khan asked the ICC's pre-trial chamber in June 2022 to reopen his investigation into killings committed under Duterte.

But Marcos, Jr. refused to cooperate saying when asked by the media, that he will not rejoin the ICC. His solicitor general, Menardo Guevarra, Duterte’s former justice secretary, asked the ICC pre-trial chamber to deny the ICC prosecutor’s request to resume the probe into Duterte’s drug war and the killings in Davao.

Duterte’s successor, Marcos, Jr., may as well be held into account over reports of continued killings in the drugs war under his presidency. Reporting before the UN Human Rights Council (UNHRC), Human Rights Watch (HRW) said on Sept. 8 that rights violations in connection with the Philippines’ anti-illegal drug campaign continue under the new president. “UN member states should not be fooled by the baseless claims from the new Philippine government that the rights situation has suddenly improved,” HRW Geneva Director Lucy McKernan said. “Continued UN scrutiny of the Philippines is vitally important because ‘drug war’ killings are still common and police impunity for rights violations remains the norm,” she added. HRW cited a report by the University of the Philippines’ Third World Studies Center showing 72 drug-related killings since August 1.

Marcos, Jr.’s refusal to rejoin the ICC and the solicitor-general’s rebuff to the request of the ICC prosecutor underscores a motive to shield the former president from his culpability to the alleged crimes against humanity. Duterte backed Marcos, Jr.’s presidential bid in the last elections while his daughter, former Davao City Mayor Inday Sara, is the vice president. More than this, Marcos, Jr.’s contumacious attitude on universal human rights is in the DNA of the Marcoses.

Marcos cabinet

Three months into the presidency, Marcos, Jr. has not consolidated his cabinet or filled up the remaining key positions. A week after Victor Rodriguez resigned as executive secretary over the sugar importation fiasco, the president appointed former Supreme Court chief justice Lucas Bersamin to the post. Both Marcos, Jr. and his predecessor hold no issue with the new executive secretary. In 2016 when he was an associate justice, Bersamin, a fellow Ilocano of the president, voted for the burial of former President Marcos, Sr. at the Libingan ng mga Bayani (Heroes’ Cemetery). He also voted for the acquittal of former President Gloria Macapagal-Arroyo, a top Marcos, Jr. supporter, over a plunder case, and for the quo warranto petition to remove Maria Lourdes Sereno who was picked by the late President Benigno SA Aquino III as chief justice. Then as chief justice, Bersamin voted in favor of extending Duterte’s martial law in Mindanao for the third time, a high court decision opposed by several progressive and rights groups amid the militarization of the southern island.
Other Cabinet-level and key position appointments in September include those of Atty. Christina G. Frasco, tourism secretary; former Mayor Benjamin “Benhur” Abalos, Jr., interior and local government secretary; and lawyer Norman Garcera Tansingco, immigration commissioner under the justice department. The common thread of the three appointments is their past and present close association with former president, Gloria M. Arroyo (2001-2010), now deputy House speaker. This is an indication of how contending power blocs within the Marcos-Duterte-Arroyo alliance have developed in the executive and legislative branches of government.

Meanwhile, the health department – a critical agency during the Covid pandemic - still awaits a permanent secretary. The department is still headed by an officer-in-charge, Health Undersecretary Maria Rosario Vergeire, a career health officer of 15 years. The delay in the appointment of a health secretary betrays the president’s lack of urgency in dealing with one of the three main pillars of the 2023 National Budget of “reducing vulnerability and mitigating scarring from the Covid-19 pandemic.” The challenge of leading the health department and the public in recovering from the Covid-19 pandemic and preventing more potential epidemics within institutional and fiscal constraints is a daunting one. Selecting a health secretary with the personal – or political - criteria set by the president appears to be hampering the decision-making.

Aside from the imperative of upgrading the public health infrastructure, Marcos, Jr. has adopted ambitious plans to address the weak basic educational system, food security, infrastructure building, poverty reduction, and climate change within the “framework of economic transformation”. In accomplishing these, he came up with the National Government Rightsizing Program (NGRP) which entails the consolidation, splitting, transfer, and even the abolition of government offices. At the executive level, he has abolished the Presidential Anti-Corruption Commission (PACC), the office of the cabinet secretary, and the office of the presidential spokesperson. The Presidential Communications Operations Office (PCOO) and its attached agencies were returned to the press secretary.

Astringent economic issues

The Marcos, Jr. government faced formidable economic challenges in the third quarter of this year. These included record inflation in four years, peso depreciation, ballooning debt, and shortages of basic food items even as the GDP was forecast to grow by 6.5% in 2022. Accelerating for six consecutive months, inflation reached 6.9% in September, the highest in four years.  The peso depreciated to the US dollar with an end-of-period high of PhP58.91 in September. As of September, the outstanding debt of the national government was PhP13 trillion raising the debt-to-GDP ratio to 62%. Supply shortages drove up the prices of sugar, onions, and salt among other basic commodities.

Responding to these challenges, Marcos, Jr. revealed at the Philippine Economic Briefing in New York, Sept. 22, a “comprehensive eight-point socioeconomic agenda that aims to dramatically cut poverty incidence and elevate the country to upper-middle-income status,” as follows:

• Protect purchasing power and mitigate socioeconomic scarring by ensuring food security, reducing transport and logistics costs, and reducing energy costs to families;
• Reduce vulnerability and mitigate scarring from the Covid-19 pandemic by tackling health, strengthening social protections, and addressing learning losses;
• Ensure sound macroeconomic fundamentals by enhancing bureaucratic efficiency and sound fiscal management and ensuring a resilient and innovative financial sector;
• Create more jobs by promoting trade and investments, improving infrastructure, and achieving energy security;
• Create quality jobs by increasing employability, encouraging research and development, and innovation, and enhancing the digital economy;
• Create green jobs by pursuing a green economy and establishing livable and sustainable communities;
• Uphold public order and safety, peace, and security; and
• Ensure a level playing field by strengthening market competition and reducing barriers to entry and limits to entrepreneurship.

Overall, the president has prioritized education, public works, health, social welfare, agriculture, and transportation with the overweening goal of attaining the status of a middle-income country by 2024 and reducing the level of poverty to a single-digit 9% by the end of his six-year term.

Upon close scrutiny his agenda reads more like long-term objectives that other presidents in the past 50 years tried to achieve only to end up in dismal failure. Except for the particular reference to the Covid-19 pandemic, old policy objectives were rephrased and some are offshoots of decades-old environmental and social justice concerns as well as market orientation.

A recent Pulse Asia survey conducted in September showed that 66% of Filipinos are most concerned about inflation among all socio-economic classes nationwide. This is based on the perception of shortages and elevated prices of consumer goods such as sugar, onions, garlic, and salt. The above target inflation rate is admittedly due to a combination of peso depreciation, higher oil and commodity prices worldwide, and domestic supply shortages and logjams. To reduce inflationary pressures on the transport and other sectors, there has been a clamor for the suspension of the excise tax on petroleum products that economic managers opposed on the grounds that higher income classes (whose private vehicles use more oil products) would benefit more from such a move. However, this argument fails to consider the overall macroeconomic effects of the excise tax on individual consumers and businesses.

In taming inflation for the short-term, the government has relied on the old monetarist policy of raising interest rates. This year the Monetary Board through the Bangko Sentral ng Pilipinas (BSP or Central Bank of the Philippines) has raised the policy rate five times, and at the latest instance in September the interest rates on the overnight deposit and lending facilities were raised to 3.75% and 4.75%, respectively. Each announcement of a policy rate comes with an admonition for “timely non-monetary government interventions to mitigate the impact of persistent supply-side pressures on commodity prices.” More often than not, this means more importations that add to the foreign trade deficit that aggravates peso depreciation. Still Marcos, Jr.’s economic managers gave assurances that an expected 6.5% to 7.5% GDP growth rate and tempered public borrowing would enable the economy to weather the current crisis.

Not only have Filipinos been heavily burdened by inflation, they are also dissatisfied with how President Marcos is dealing with rising prices. In a more recent survey, 42% expressed dissatisfaction while 31% were satisfied, giving him a net satisfaction rating of minus 11%.

Included in the second of the eight-point socio-economic program of the president is the recovery from the Covid-19 pandemic and prevention from more of the same. Department of Health (DoH) reports on new cases, severe cases, deaths, and hospital occupancies may be encouraging. Meanwhile, DoH data on fully-vaccinated persons nationwide is 73.2 million, but the estimated total number of adults as of 2022 is 73.9 million, suggesting a highly improbable, national vaccination claim of 99%.  It is therefore imperative to determine the actual vaccination rate as the basis for planning a continued vaccination program.

Agriculture and food security as one of his six priorities has become the subject of his grand rhetoric: “ensure that not one more Filipino will go hungry again,” and “slash the price of rice to as low as PhP20 per kilo” from the current average of P40 per kilogram. Marcos, Jr. and National Economic and Development Planning (NEDA) Secretary Arsenio Balisacan called agriculture a “growth driver”. This is disputable considering that the share of agriculture, forestry, and fishing in the GDP steadily declined from 21% in 1986 to 10.1% in 2021. Although the decline follows the same trend worldwide, it is alarming that in the Philippines, the rate of growth of the value added declined in the past 10 years from a high of 3.4% in 2011 to negative 0.3% last year.

The poor performance of agriculture has been attributed to a number of complex problems, namely: decreasing average farm size, conversion of farmlands to industrial and residential uses, low farm mechanization, inadequate irrigation, the declining number of farming households, migration of workers to the manufacturing and service sectors, and the increasing trend of the average age of farmers.

In his first month as concurrent agriculture secretary, Marcos, Jr. gave general marching orders to boost the production of rice, corn, vegetables, pork, and poultry, and to “reconstruct” agricultural value chains so farmers and other producers have more income. No details were given on how the price of rice would be retailed at P20 per kilo, but instead on how the cost of rice would be reduced. Furthermore, he directed studies on a master plan of farm-to-market roads to make transportation more efficient; a review of the rice tariffication law for possible import authorizations by the National Food Authority; the proposed “Masagana 150” – a recycled loan program for farmers to purchase high-yielding rice varieties, fertilizers, and pesticides; government-to-government purchase of affordable fertilizers for farmers; and a suggested retail price for sugar. His economic managers are bound to oppose the new and reintroduced government regulations, as well as loose, budget-busting credit programs. They will stick to market-oriented policies such as the rice tariffication law which some politicians hailed as milestone legislation that benefits the general consuming public over inefficient rice farmers.

The controversy over an allegedly spurious sugar importation order again laid bare the problems of the agriculture sector. The order would have authorized the importation of 300,000 metric tons of sugar to augment the anticipated shortage of local sugar supply. Agriculture Undersecretary Leocadio Sebastian reportedly signed the order upon instructions from the Office of the President, but Cabinet Secretary Victor Rodriguez subsequently denied it.

An investigation by the Senate Blue Ribbon Committee failed to determine whether the shortage of sugar was real. It also failed to fix ultimate responsibility for the fake sugar importation order. Nevertheless, Sebastian resigned and several officials of the Sugar Regulatory Administration (SRA) were charged with “serious dishonesty, grave misconduct, gross neglect of duty, conduct prejudicial to the best interest of the service, and gross insubordination under the revised rules on administrative cases in the civil service.”

Senate President Juan Miguel Zubiri, whose father used to head the Bukidnon Sugar Company, opposed the sugar importation on behalf of sugar planters. However, in light of a limited supply, President Marcos Jr. authorized the importation of 150,000 metric tons of refined sugar and directed that all of the nation's crops for 2022-2023 be used only for domestic consumption.

Meantime, many observers were surprised by Marcos, Jr.’s decision to act concurrently as agriculture secretary himself given that the agriculture department is a huge bureaucracy with numerous attached agencies, but the growth rate of its contribution to the GDP has been on a decline over the past 10 years. The performance of the agriculture department and the direction of the agriculture sector in the next few years could make or break the public perception of Marcos, Jr.’s executive ability.

At a briefing by economic managers, Socioeconomic Planning Secretary Balisacan referred to strategic papers for addressing the supply and demand for sugar. He added that government needs to meet with sugar planters and industry players to have a “clear picture” of the gap on the supply and demand of sugar. A year ago, NEDA posted on its website a discussion note entitled “An Assessment of Reform Directions for the Philippine Sugar Industry.” Two of its strategic policy recommendations are to “strengthen the sugar industry's institutional support mechanisms” and to “revisit and affirm clear directions and strategies for the whole sugar industry, taking a holistic perspective to address its multi-dimensional challenges.” It also recommended the “Update (of) the Sugarcane Roadmap 2020 with focus on concrete measures to raise farm and mill productivity, and with its scope extended to include sugar trade and utilization.”

Because of the shortage of sugar and its high prices, there have been proposals to apply the rice tariffication model to sugar as well. The sugar industry with a workforce of 88,000 farmers still contributes P86 billion to the economy. That is why simply liberalizing the sugar trade is not yet on the table. This is one policy issue that Marcos Jr, has to resolve between the sugar industry stakeholders and the economic managers.

Sugar is only a food additive, but it is omnipresent in the Filipino diet. It is only one of the many food products in developing a food-secure Philippines. The president has staked his leadership to a large degree on the attainment of food security. The people should therefore mark on their report cards the base figure for food security. The London-based magazine, The Economist, ranked the Philippines 64th out of 113 countries in its 2021 Global Food Security Index (GFSI). The four dimensions of food security are accessibility, availability, food use, and stability. It also incorporates the concepts of vulnerability and risk management. (2)

___________