1) Duterte campaigned on a platform of tough law and order policies including a bloody "war on drugs", which has led to over 13,000 alleged drug-related killings with little due process. 2) While infrastructure spending under Duterte's "build-build-build" plan may spur growth in the short-term, the administration plans to fund this through large budget deficits and tax increases, threatening long-term fiscal sustainability. 3) The Philippines' strong economic growth in Duterte's first year is partly due to momentum from the previous administration, and growth is projected to slow going forward as this effect dissipates and policy uncertainties increase under Duterte's populism and erosion of

1. Bienvenido “Nonoy” Oplas Jr.
Pres., Minimal Government Thinkers
Columnist, BusinessWorld
Rule of law and fiscal challenges of
the Duterte administration
Forum on “The Duterte Effect: A Review
of the First Year of the Duterte Administration”
DLSU-Dasmarinas, Cavite
November 27, 2017

2. Outline
I. Duterte as Presidential candidate
II. Duterte as President, war on drugs, fiscal plans
III. Build-build-build, tax-tax-tax
IV. Fast GDP growth
V. Conclusions

3. I. Duterte as Presidential candidate
The Fundamental Law Of
Nature... “That every man,
ought to endeavour Peace, as
farre as he has hope of
obtaining it; and when he cannot
obtain it, that he may seek, and
use, all helps, and advantages
of Warre.”
-- Thomas Hobbes, The
Leviathan (1651)
“No, it’s not the actual -- takot ka
mamatay, takot kang pumatay,
wag kang mag Presidente.” (If
you’re afraid to die, afraid to kill,
don’t run for President).
-- Rodrigo Duterte, Presidential
debate, April 24, 2016
Duterte is a dangerous
candidate. He should not win.
-- Me. April 27, 2016
… 5. “Ridicule is man’s most potent
weapon.”
6. “A good tactic is one your people
enjoy.”
9. “The threat is usually more terrifying
than the thing itself.”
-- Saul Allinsky, “Rules for Radicals”
(1971)

4. “The quality of ideas seems to play a minor role
in mass movement leadership. What counts is
the arrogant gesture, the complete disregard of
the opinion of others, the single-handed
defiance of the world.”
“The permanent misfits can find salvation only in
a complete separation from the self; and they
usually find it by losing themselves in the
compact collectivity of a mass movement.”
-- Eric Hoffer, “The True Believer: Thoughts on
the Nature of Mass Movements” (1951).
“I am a dictator? Yes it is true.
If you don’t like it then don’t
vote for me.”
-- Duterte, PDI, Feb. 24, 2016
“Magtatayo ako ng bagong
gobyerno... Magrebolusyon
ako kapag nandoon na ako
kasi hindi na ito para sa tao.
Hindi ito kayang solusyonan ng
Konstitusyon natin.”
-- Duterte, April 27, 2016 rally
“Never attempt to win by force
what can be won by deception.”
“...he who seeks to deceive will
always find someone who will
allow himself to be deceived.”
“Men are so simple of mind, and
so much dominated by their
immediate needs, that a deceitful
man will always find plenty who
are ready to be deceived.”
-- Machiavelli, The Prince (1513)

5. * Some 13k estimated
murders since June 2016
* 2nd week of August
2017 possibly the
bloodiest, 80+ people in
a week murdered mostly
by PNP
* “war on drugs” is not
unique, many countries
have such policy too.
* What makes the
Duterte drugs war unique
is the absence of due
process for poor victims.
* If claims of anonymous
hired murderers, of
Lascañas et al. are true,
then extra resources may
be sourced from
“Miscellaneous
personnel benefits fund”
and from “Gratuity fund.”
II. Duterte as President, drugs war, populism

6. * Government has no extra cash to cover extra
spending on these already substantial
expenditures. This means the deficit, new
borrowings will incr.
* spending in public elementary and secondary
education is still limited and unwise to further
expand spending in public tertiary education.

7. DoTr said these projects
will be ODA (govt loans)
funded, not PPP.
1. PNR North Railway
(Manila-Clark), construction
Q4 2017 -- Q4 2021, P255
B.
2. PNR South Railway
(Manila-Bicol), construction
Q3 2018 -- 2021, P270 B
(originally a PPP).
3. Mega-Manila subway
(Phase 1, QC-Taguig),
construction Q4 2019 --
2024, P225 B.
4. Edsa-Central Corridor
Bus Rapid Transit BRT
(Edsa, Ayala, Ortigas, BGC,
NAIA), construction Q1
2019 -- Q1 2021, P38 B.
III. Build-build-build, tax-tax-tax

8. * PH having the highest total
tax rate (TTR) in ASEAN,
East Asia, excise tax hikes
(new cars, petrol products,
SSB) should have been
abandoned, and 12% VAT
(highest in the ASEAN)
should be reduced to only 6-
8%, cover more sectors
including BPO, no
exemption if possible.
* Build-build-build plan
without those new taxes and
tax hikes, cut spending on
some agencies and
bureaucracies whose
welfarist goals and
mandates overlap with other
agencies. Then rechannel
the savings to more
infrastructure spending.

9. * possible to abolish income
tax, zero, government will still
survive and prosper via other
revenue sources. Currently
10 countries with zero
income tax policy --Bahamas,
Bahrain, Bermuda, Brunei,
Cayman Islands, Kuwait,
Oman, Qatar, Saudi Arabia,
and United Arab Emirates.
Their governments rely on
selling petroleum, natural
gas, lands, consumption-
based taxes.
* Lower PIT rate can expand
the tax base and potentially
increase overall tax
revenues.

10. “To what extent will the poor merely replace more expensive colas and 3-in-1
coffee with unsafe sugared water in plastic bags, samalamig, or home-brewed
sugared coffee, none of which are covered by the tax? … there is simply a great
deal we do not know, which is all the more reason to proceed with reserve and
caution.” -- Emmanuel de Dios, “Just take it, it’s good for you”
if they have to tax some sugar-sweetened beverages, they should tax all without
exceptions. Just keep the tax as low as possible.
Life expectancy, years

11. * Expenditures side, Household FCE Q3 2016 (7.2%) vs Q3 2017 (4.5%) declining
this year while Government FCE (3.1% vs 8.3%) rising fast.
* Dutertenomics spending big time this year, funded by lots of borrowings, to be
followed by tax-tax-tax in 2018 and beyond.
IV. Fast Growth

12. * Only PH and Laos are projected to have declining growth from 2017-2022.
* 8 other ASEAN economies projected to have faster growth in 2017.
* Fastest growing economies in ASEAN actually not PH but Cam., Laos, Myanmar

13. * Slow growth in year 1 of PNoy govt was momentum from lousy Gloria Arroyo econ.
* Fast growth in year 1 of Du30 govt is momentum from PNoy fast growth era.
* PNoy budget deficit around P300 B/yr or less, projected Du30 deficit in year 1, this
year, is p400B+.

14. * Less risks and uncertainties now
and the near future compared to
recent years;
* Endless fiscal irresponsibility by governments will create long-term risks
* Dutertenomics’ tax-tax-tax aside from kill-kill-kill in its drugs war may crack next yr

15. * Many past PPP projects,
projects under construction that
did not necessitate tax-tax-tax.
* Integrated PPP (construction
then operation and maintenance
(O&M) under one private entity or
consortium) will accomplish the
task at little financial exposure
and burden for government and
taxpayers. No need for tax-tax-
tax.
* Dutertenomics inclined on
hybrid PPP (construction is govt
via foreign loans/ODA and/or
annual budget/GAA, O&M is
private) for some unholy reasons
like implicitly favoring China

17. Concluding notes
*Duterte as candidate already promised blood and more blood.
Machiavelli, Eric Hoffer ideas worked on him.
* Duterte’s drugs war is not unique. What’s unique is the
degradation of the rule of law, murders with little investigations esp
of the poor. Populism is resorted to mitigate the discontent.
* Build-build-build is possible without many new taxes and tax
hikes. Integrated PPP, not hybrid PPP, should have been pursued.
* Fast GDP growth this year is momentum from Pnoy Aquino
administration. By 2018, the momentum is dissipated and growth
is expected to slow down.
* Duterte 1st year is a mixture of deterioration of rule of law and
continued economic growth. Admin should focus on the economy,
jobs, less on drugs fixation and let agencies follow rules on cases.