Free Markets and Fair Competition Under the Duterte Administration?

Atty. Anthony Abad and Atty. Francis Euston Acero of the Abad Alcantara Acero TradeLawyers and TradeAdvisors

We would rather be ruined than changed,
We would rather die in our dread
Than climb the cross of the moment
And let our illusions die.
— W. H. Auden

President Rodrigo Roa Duterte won the 2016 election on the strength of his commitment to bring that new order of things. Part of that commitment was a stated determination to hold everyone, including the members of the Philippine oligarchy, accountable for their share in national development.

What does that mean, exactly?

To me, it means that the Duterte administration marks a sea change in the way business is conducted in the Philippines. Fair competition and free markets will play a significant role moving forward, and for most businesses used to dealing in captive markets and crowding out competitors, it will be a brave new world indeed.

For the rest of us, this is a welcome development. In economies of similar scale, effective competition policies in place means an increase in the survival and growth of small to medium enterprises; policies such as these make fertile ground for these businesses to survive.

Small to medium enterprises are engines of rapid growth and prove to be stable job creators, especially in developing markets, such as the Philippines.

If we can assume then, that the Duterte administration does proceed with a focus on fair competition and free markets, we can assume strong growth in small to medium enterprises. The growth in this sector should also spur our labor force participation rate, and in so doing, also generate a tangible increase in household income among the most marginalized of sectors. We can also expect more people to change attitudes towards their growing incomes – by encouraging fellow Filipinos to make better use of their money in investing in themselves and in others. In other words, the focus on competition should prove to be quite effective in driving down poverty rates for good.

Screen Shot 2016-06-30 at 7.49.39 PMImage Source: Oxford Human Rights Hub

President Duterte has a good start – with the Philippine Competition Act, we now have the legal framework to begin focusing on free markets and fair competition.

Of note, the Philippine Competition Commission has expressed its intention to review in greater detail the sale of San Miguel Corporation’s nascent telecommunications startup to Globe and PLDT, the country’s two largest telecommunications entities. In the past, this deal, valued at ₱69.1 billion, would have only caused a slight stir. Now, the deal is subject to close scrutiny for its anti-competitive effects.

Needless to say, the results of this scrutiny have far-ranging consequences; it will say much on the effectiveness of the Commission to deal with existing market conditions.

Despite this head start, and if this brouhaha over the purchase of San Miguel Corporation’s telecommunications unit is any indication, it is important to note that there is still a need to review the legal and regulatory systems we have in place. In the past, a failure to pay attention to anti-competitive practices and tacit support for monopolies and oligopolies meant that the Philippines was not an attractive place to start a business.

On the other hand, an emphasis on free markets and fair competition necessarily includes policies that make it easier for all Filipinos to engage in business. When more Filipinos own growing businesses, we can expect more Filipinos to reap greater rewards from economic growth, forecast at 6.5%, year on year. As of 2016, the World Bank’s Doing Business 2016 Report measured the Philippines as 103 out of 189 countries, ranked by ease of doing business.

On this matter, President Duterte has a strong track record. In the Doing Business 2011 Report, which measured the ease of doing business across several cities in the Philippines, Davao ranked 2nd in the Philippines in terms of the ease with which businesses can start.

Even with these measures in place, there needs to be a broader review of other policies that affect doing business. Tech startups, for instance, have had little by way of support as compared to other innovation and incubation hubs elsewhere, especially in an integrated ASEAN Economic Community.

Clearly, these times, they are a-changing. The ability to adapt to this changing environment will determine who gets to live in these interesting times.

 

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