MANILA, Philippines – Philippine President Rodrigo Duterte's bloody anti-drug war and his foul-mouthed outbursts in defense of the campaign have unnerved foreign investors in one of Asia's fastest-growing economies.
Analysts and businessmen point to uncertainties about Duterte's policies and flip-flopping pronouncements as largely to blame for foreign selling in the stock market and the peso's plunge to a seven-year low, reversing the initial optimism after his June 30 inauguration.
Some experts say unpredictability is slowing longer-term foreign investment in the Philippines. Photos and reports in the media of killings of suspected drug dealers and users — more than 3,000 since July 1 — have contributed to sagging confidence.
"We can all deal with risks. We can put measures in place to provide for risks," said Guenter Taus, the head of the European Chamber of Commerce in the Philippines. "But uncertainty is a factor that we do not like in business, and that is exactly what we're experiencing right now because we don't know where we are heading."
Taus said several companies that had intended to establish operations to the Philippines now prefer to wait and see what happens under Duterte. He declined to say which companies had changed their plans.
He said investors unsure about the Philippines may choose to look at other Southeast Asian countries to gain access to the region's common market of more than 600 million people.
The American Chamber of Commerce of the Philippines said this month that while the country's economic fundamentals are strong and its potential high, there is growing concern that Duterte's policies and behavior could affect long-standing optimism by American businesses in the Philippines.
The chamber said that the large number of deaths in the anti-drug campaign is harming the Philippines' image, and that some investors are asking if the drug war "reduces the rule of law."
"In addition, traditionally excellent bilateral relations between the U.S. and the Philippines have recently been strained by language from Philippine leaders," the chamber said.
Earlier this month, before heading to a regional summit in Laos where he had been scheduled to meet with President Barack Obama, Duterte used the Tagalog phrase for "son of a bitch" as he told Philippine reporters he wouldn't accept questions from Obama about extrajudicial killings that have occurred during the drug crackdown. Obama cancelled the meeting.
After the European Parliament recently called for an end to the drug killings and expressed concern over the scale of deaths, Duterte hit back with a profane insult and raised a fist with his middle finger thrust out. And this week Duterte said U.S.-Philippine joint military exercises end this year, though his foreign minister said later that they will continue until 2017 as previously agreed.
On several fronts, Duterte has had an uneasy relationship with Western countries, including the United States, an important treaty ally. He has said he's charting a foreign policy that is not dependent on the U.S., and has taken steps to bolster relations with Russia and revive ties with China that had been strained under his predecessor, Benigno Aquino III, over territorial conflicts.
He said he won't allow government forces to conduct joint patrols of disputed waters near the South China Sea with foreign powers, apparently scrapping a deal Aquino reached with the U.S. military earlier this year. Duterte has also said he wants U.S. forces out of the southern Philippines, saying minority Muslims there resent the presence of American troops.
All of this has raised concerns about a Philippine economy that grew 7 percent in the second quarter and 6.9 percent over the first half of the year compared to the same periods last year — among the fastest rates in the region.
The credit-rating agency S&P Global warned last week that the stability and predictability of policymaking in the Philippines "has diminished somewhat under the new presidency." It kept the country's credit rating at investment grade, with a stable outlook, but said that rating was unlikely to rise over the next two years.
Last Monday, the peso hit its lowest level against the dollar since September 2009. It fell further Friday, closing at 48.50 pesos per U.S. dollar.
Central bank Deputy Gov. Diwa Guinigundo said foreign direct investment continues to grow. It stood at $4 billion for January to June this year compared to $2.2 billion for the same period a year ago. He noted that while Duterte became president June 30, his election victory came nearly two months earlier.
"As far as fundamentals are concerned I think they are outstanding fundamentals, but then the sentiment is something else," he told reporters late Wednesday on the sidelines of an economic forum. Sentiment is driven by both external and domestic factors and it's difficult to attribute negative sentiment to a specific factor like Duterte's statements, he added.
Guinigundo said the government's economic program follows the broad strokes that have produced 70 quarters of economic growth, low and stable inflation and a healthy banking system. "And yet the stock market is dropping and the exchange rate is moving consecutively down such as we are now the worst-performing currency in the region," he said.
Budget Secretary Benjamin Diokno said Wednesday that the depreciation of the peso is a result of the strengthening of the dollar more than the weakening of the local currency, and should not be a cause for concern.
But Joey Cuyegkeng, ING Bank's senior economist in Manila, said the peso was the only Asian currency that slid last week from a week earlier, despite favorable economic reports, including an increased balance of payment surplus in August.
Presidential spokesman Martin Andanar said that the fundamentals of the economy are solid and strong, and that the anti-drug campaign will enhance the Philippines' image to attract more foreign investment.
In a speech to troops the day after the S&P Global warning was released, Duterte shrugged off the agency's remarks. He said if business and the economy are affected, "so be it."
"Get out, then we start on our own," he said, apparently referring to Western investors. "I can go to China. I can go to Russia. I had a talk with them. They are waiting for me. So what the hell."