INTRODUCTION

The Philippines has an impressive record of securing political settlements with non-state armed groups. However, its record for implementing them is disappointing. This is not unusual. Many peace agreements have been signed around the world in the last fifty years and as many as half of them fail. But the Philippines’ inability to move from peacemaking to peacebuilding has left parts of the country stuck in an uncomfortable equilibrium of low-level conflict and poverty.

There are few signs so far that the government of President Duterte has the capacity to build a just and lasting peace that addresses the root causes of the conflict in Mindanao of historical injustice, insecurity, weak governance and lack of economic opportunity. The emergence of violent extremism linked to the so-called Islamic State (IS)—epitomized by the May 2017 attack on Marawi City—demonstrates how violence can evolve in disturbing new directions when these issues are left to fester.

There is still time to turn things around. The Bangsamoro Organic Law (BOL) was finally passed by Congress in July 2018, delivering the core of the 2014 Comprehensive Agreement on the Bangsamoro (CAB). Pursuant to the BOL, a new autonomous political entity will be established in 2019 to replace the existing Autonomous Region in Muslim Mindanao (ARMM). This provides the peace process an anchor and some welcome impetus. A number of the major armed groups have expressed support for the BOL, increasing the prospects of stability in the immediate term. However, delivering on the promise of the BOL to deal once and for all with the “Bangsamoro problem” requires decisive and sustained action to strengthen institutions, counter the threat of violent extremism and tackle entrenched poverty in conflict-affected Mindanao. Failure to do so would see the situation continue to drift into highly dangerous territory for security in the Philippines and Southeast Asia as a whole.

Drawing on nearly ten years of direct participation in most aspects of the peace process in Mindanao, this chapter reviews achievements of the administration of Benigno Aquino III, highlighting successes on peacemaking and critiquing a peacebuilding approach that never moved sufficiently beyond confidence-building measures.

INTRODUCTION

The transition from the second Aquino administration to the Duterte administration is a critical period in Philippine economic history. For most of the current decade, the Philippines has been one of the most dynamic economies in the world, growing at a rate not far short of the Asian giants, China and India, and a good deal faster than its traditional neighbouring comparator, Thailand. The Philippines appears to have discarded its “sick man of Asia” epithet. The record is all the more notable for having occurred in the aftermath of the global financial crisis, and during an era characterized by slow global growth and considerable financial volatility.

However, earlier periods of economic dynamism have not been sustained. The Philippines has a history of boom and bust economic cycles, in which periods of economic growth are followed by a crisis, or at least a major growth slowdown. The question is, will this time be different? The current growth acceleration broadly coincides with the 2010–16 Aquino administration. Yet, in spite of the current political controversies, the economic dynamism continued into the first eighteen months of the Duterte administration.

It is premature to pass judgement on the Duterte administration's economic record. This chapter therefore provides an analytical narrative of the drivers and outcomes of the Philippine's recent economic performance. Some of the key development challenges will be explored, including the importance of maintaining macroeconomic stability—and, by extension, crisis avoidance—and constructing a more inclusive growth path.

Section 2 provides an economic survey, including growth, structural change and macroeconomic management. Section 3 then investigates some key development issues and challenges—including the business process outsourcing (BPO) success story, overseas employment, regional (subnational) dynamics, living standards, and institutional development. Section 4 sums up.

Where relevant, we compare and contrast the recent Philippine economic record with its middle-income neighbours—Indonesia, Thailand and Vietnam. Historically, Thailand was the most frequently used comparator. Around 1960 Philippine per capita income was about double that of Thailand. By the mid-1990s, the relativities had been reversed owing to Thailand's faster growth and the Philippines’ “lost decade” of the 1980s.

INTRODUCTION

The Philippines has experienced one of Southeast Asia's fastest growth rates. Between 2010 and 2015, the Philippines experienced an average GDP growth rate of more than 6 per cent, its highest since the 1970s. The GDP growth in 2017 was 6.69 per cent, more than Indonesia, Malaysia and Thailand, and only marginally behind China and Vietnam. The hope is that the Philippines can sustain this growth rate for the foreseeable future in a way that is inclusive.

The introduction of competition law and policy into the Philippines is believed to be a necessary step towards achieving sustained and inclusive growth. In September 2016, the Chairman of the then newly established Philippines Competition Commission (PCC), Arsenio Balisacan, called the Competition Act a “game-changer for the economy” and “one of the key components of the overall strategy to make economic growth more enduring and more inclusive”.

Whether competition law does in fact contribute to enduring and inclusive growth will depend on a number of outcomes being achieved. The law must be applied in a way that benefits the nation's poor as this is the only way it will achieve inclusive growth. The key to this will be levelling the playing fields so entrepreneurs and micro, small and medium-sized enterprises (MSMEs) can prosper on a national and international scale. The country is dominated by oligarchs and oligopolies, which prevent—or, at the very least, deter—new entrants. The Filipino business and wider communities must understand and accept the benefits of competition law and policy to enable a “culture of compliance”. This will, in turn, lead to sustained growth as Filipino businesses are able to operate in a truly globally competitive way and enable the Philippines to continue to attract foreign direct investment (FDI). Existing government policies which—perhaps inadvertently—impede competition need to be addressed. The actual and perceived success of the regulator, the PCC—in enforcing competition law provisions—will underpin all these outcomes.

OVERVIEW OF PHILIPPINES’ COMPETITION LAW AND POLICY

Having been introduced into Congress more than twenty-five years before, the Philippine Competition Act (the Act) was finally passed on 21 July 2015. Although the law came into force on 8 August 2015, the two-year transitional period (section 53) gave businesses time to review and revise agreements and practices to avoid sanctions. The merger regime has been operative since 2016.

INTRODUCTION

Under the presidency of Rodrigo Roa Duterte, 2017 could have been the year when the Philippines began a shift from a unitary system of government—which has been in operation under colonial rule and since independence post-1946—to a federal form of government. In point of fact, the administration's mechanism for kick-starting the process, the Consultative Committee, only started work in January 2018 and handed its product (a completely new draft constitution) to the Philippine Congress in July 2018. With less than a year before the May 2019 mid-term elections, quick action by Congress on federalizing the Philippines seems unlikely.

The unitary system often sits uncomfortably on top of considerable political and social localism—elected officials with their own power bases, and ethnic groups who feel different from the dominant elite in Manila. While the 1991 Local Government Code did try to address the need to move power and resources further out to the periphery, impetus for broader change remains. For some twenty years there have been consistent calls to amend various provisions of the 1987 Constitution, and this time the effort is being undertaken in the first part of the term of a popular President—so constitutional revision might materialize.

That constitutional amendment might happen may seem surprising, given the failure of previous attempts and the fact that the “status quo regarding decentralization [under the 1991 Local Government Code] appears to satisfy both sub-national and central elites”.2 However, the status quo does not satisfy President Duterte—the most influential political actor in the Philippines. This chapter traces the advocacy for federalism and concludes that any possibility of federalizing depends on the attitude of the current president regarding constitutional change. President Gloria Macapagal Arroyo, for example, toyed with the idea, but was fundamentally only interested in instituting a parliamentary system. President Benigno S. Aquino III, on the other hand, was opposed to any change in the constitution instituted under his mother's administration. Federalism is currently possible due to the particular advocacy of President Duterte. Many elites are dubious, and public opinion is certainly not driving this prospect. The President, who launched his preliminary campaign by traversing the country talking about federalism, is clear in his insistence for federalism.

INTRODUCTION

On 16 June 2015, more than a year after the signing of the Comprehensive Agreement on the Bangsamoro (CAB), with seventeen years of ceasefire and several decades of on-and-off peace talks, the Moro Islamic Liberation Front (MILF) dared to take a historic step and decommissioned 145 combatants and 75 firearms. This step in the peace process was not only a clear commitment to a political solution by the government to the “Bangsamoro question” but also part of the elaborate pattern of agreements reached between both sides in the last years. To achieve normalization—a return to a peaceful and stable life for communities—is the ultimate goal of the peace agreement.

But Mindanao's woes and worries cannot be isolated from the conflict between the Government of the Philippines (GPH) and the MILF—although many issues are strongly intertwined with this major conflict trajectory. The situation on the ground is often very complicated and different layers of armed violence, armed groups and governance systems will challenge the implementation period of the peace process. Apart from journalistic pieces and a limited number of essays, little has been written about this normalization period initiated after the CAB—or scholarly reviews or assessments of demobilization and disarmament published. The lack of published material is not surprising, considering the initiated formal process of normalization is only recent.

This chapter will look back at the foundations of normalization—in particular security aspects—as well as examine future prospects and trajectories. This is part of the broader scholarship on the Mindanao conflict and also an initial study on demobilization of combatants in a post-conflict situation. Existing literature on Disarmament, Demobilization and Reintegration (DDR) and Mindanao, official documents and peace agreements between GPH and MILF, media articles, press statements and fieldwork—community immersion, interviews, participant observation— undertaken in the southern Philippines between 2012 and 2015, are discussed. The first section outlines the history of conflicts in the southern Philippines, including some notions on the particularities and characteristics of these conflicts. DDR is discussed before the third section outlines the Moro National Liberation Front (MNLF) following the 1996 Final Peace Agreement (FPA)–DDR efforts with other groups in the Philippines.

INTRODUCTION

President Duterte inherited an economy from the Aquino administration that had grown at a yearly average rate of 6.2 per cent over the previous five years—the highest average rate of growth the economy had achieved since the 1970s. By end 2016, the economy had had seventy-one quarters of positive growth, which was remarkable in that it occurred against the backdrop of the Global Financial Crisis in 2008–9. Fiscal and monetary policies were responsibly conducted, increased spending occurred while fiscal space was also being created so the country managed to achieve investment-grade status after a long time of being below this. Inflation was under 2 per cent, well within the Bangko Sentral ng Pilipinas (BSP)'s target of 2–4 per cent.

Under President Duterte's watch, growth continued and the economy expanded by 6.6 per cent in the fourth quarter of 2016. Although this was the slowest quarterly growth rate in 2016, it was higher than the 6.3 per cent in the same quarter in 2015. According to Director General Ernesto Pernia of the National Economic and Development Authority (NEDA), “For the full year of 2016, we are so far the fastest growing economy with China at 6.7 per cent and Vietnam's 6.7 per cent”.

Nevertheless, it is clear that daunting challenges remain. Despite growth, poverty remains a long-standing and pervasive problem. By the end of the Aquino administration in 2016, poverty incidence did decline —to 21.6 per cent—from about 25 per cent over several decades.

There is no denying the economy needs to grow robustly in order to significantly reduce poverty. The greater challenge is how to make growth more inclusive and reduce poverty and income inequality. NEDA Director General Pernia has stated “the target of 6.5–7.5 per cent growth for 2017 is highly likely” to be achieved. In the medium term, we expect growth to strengthen further towards 7 or 8 per cent, with the economy expanding by about 50 per cent in real terms and per capita income rising by over 40 per cent over the next six years”. These growth rates would put the Philippines in the upper-middle income category by 2022 and reduce poverty incidence from 21.6 per cent to 14 per cent—lifting about 6 million Filipinos out of poverty

INTRODUCTION

This chapter examines the Philippines’ government policy towards the South China Sea (SCS) dispute since 1995 in the context of bilateral relations with China as well as membership in the Association of Southeast Asian Nations (ASEAN). Specifically, it looks at how the country has managed its maritime dispute with China since the Mischief Reef incident in 1995 and the implications of the international court's ruling in July 2016 for its bilateral ties with China and ASEAN regional diplomacy, as well as its external defence posture. Using a neoclassical realist perspective, I argue that—despite the favourable ruling of the international court—the Philippines under the new administration of President Duterte still faces a number of challenges in managing its maritime conflict with China. These challenges include: difficulties in renormalization of relations with Beijing; the push for a regional Code of Conduct (COC) between China and the ASEAN in the SCS; and the dismal state of the Philippines’ external defence capability. This author also contends that, under new leadership, the Philippines should seriously consider embarking on developing selfreliance or self-help capability as part of its internal balancing strategy, which should have been the country's core defence strategy since 1992, to effectively protect its interests in the West Philippine Sea.

Self-help is fundamentally a principle of action in an anarchical system of states where each state actor is responsible for their own survival or security. Realists do not consider it prudent for states to rely on other states or institutions to ensure their security. While powerful states can pursue military or defence build-up when they feel threatened by other states, this may not be adequate for smaller states especially if they face a more powerful hegemonic state. To compensate, small states may resort to balance of power strategies by aligning with a more powerful state or forming alliances with other states to counter a perceived hegemony. From a neorealist perspective, states can pursue balance of power internally, by mobilizing internal resources to build economic and defence capability, and externally, by forming alliances or bandwagoning with other states. According to Waltz, power is a means to ensure a state's security and the concern of states is ultimately to maximize security.

Democratic practices of the Philippines, Asia's oldest democracy and the second most populous country in the ASEAN region, have been a puzzle to many scholars and observers of democracy. While vibrant in terms of voter turnout, civic engagement, and institutional protections, there are widespread flaws in Philippine democratic processes—illustrated by persistent pernicious elite politics, continued institutional weakness, and widespread abuse of public office.

The country's economic record is as patchy as its democracy. The long-standing description of the Philippines as the “sick man of Asia” has been rebutted by the country's rapid economic growth over the last decade (2007–17). However, with regular boom and bust cycles, and persistent deep-seated poverty and inequality, concerns remain about the equity and sustainability of this type of growth in the Philippines. Built on the legacies of Spanish and United States colonial rule, the Philippine state remains confronted by constant challenges to its legitimacy—including Asia's longest communist rebellion, Muslim separatist insurgencies in Mindanao, and large-scale public protests such as the first and second Epifanio de los Santos Avenue (EDSA 1 and 2), Philippine's People Power Revolution that forced changes in leadership through extra-constitutional processes.

“Change” has therefore been a recurring theme in Philippine political, economic, and social discourses. The discourse of change holds considerable appeal and permeates the everyday lives of ordinary Filipinos with remarkable intensity and frequency. The discourse informs the thinking of political observers who identify competing reformist and populist narratives of change in Philippine politics. Change seems to characterize the transition from the administration of Aquino II (2010–16) to the administration of current president Rodrigo Roa Duterte (2016–). Aquino II was elected on a technocratic “straight path” (daang matuwid) reform platform that challenged the widespread abuse of public office under the presidency of Gloria Macapagal Arroyo (2001–10). Duterte—a maverick former mayor of Davao city in Mindanao—rode high on a campaign promise in the 2016 presidential election of bringing about law and order in a swift and decisive manner, embodied in his slogan “Change Is Coming”.

But how much change has actually taken place? What kind of change is unfolding and for whom? Are we simply witnessing business-as-usual, fragmented Filipino elite politics, as a feature of discordant democracy in the Philippines?