Strongman Rodrigo Duterte is presiding over one of the world's peppiest economies. Philippine growth is a China-like 6.5%, a long-delayed infrastructure boom is picking up pace and tourists are flocking to the archipelago's bevy of white-sand beaches.
But an important constituency is not buying the Philippines renaissance story: currency traders. The peso is Asia's worst performer this year, down more than 3%, while virtually all other Asian governments are struggling to cap surging exchange rates. The Thai baht and Singapore dollar, for example, are up 8% and 7% respectively.
Why? All those body bags, for one thing. After just 446 days in the presidential palace, Duterte's brutal drug war has racked up more casualties -- at least 7,000 killed extrajudicially -- than dictator Ferdinand Marcos did in 20 years. But something else also worries punters: The extent to which Dutertenomics may be hurting Manila's longer-term prospects.
Today's growth rate owes much to the six years Duterte's predecessor Benigno Aquino spent morphing the "Sick Man of Asia" into something of a recreational runner. From 2010 to 2016, Aquino got government finances in check, raised taxes on tycoons, increased transparency and accountability and took on the powerful Catholic Church to cap a population growing faster than incomes. He won Manila its first-ever investment-grade ratings.
Turning around a long-neglected and notoriously corrupt economy is not a six-year job. Voters turned to Duterte to put his strongman ways to work turning Aquinonomics up to 11. Essentially, it was a bet on Duterte taking his Davao City model national. During his 22 years running the southern city, Duterte produced faster growth than the national average, less inequality, lower crime rates and fewer bureaucratic hurdles to doing business. It was not unlike Indians electing Narendra Modi in 2014 to apply his success running the western state of Gujarat to New Delhi.
Instead of fighting poverty, though, Duterte pivoted to a war of choice against drug dealers and pushers. Addressing addiction and crime are important, of course, but all that bloodshed is eclipsing everything else. First it was rebukes from human-rights groups. Now, it is currency traders voting with their feet.
Duterte's authoritarian tendencies have cheered some investors. Early on, for example, he dispensed with red tape involving projects to upgrade roads, bridges, ports and power grids -- part of a presidential "Build, Build, Build" program. Better infrastructure is vital to raising productivity and encouraging the Googles, Samsungs and Toyotas of the world to create high-paying jobs for 103 million Filipinos.
But even here, Duterte's policies raise concerns. Among Aquino's priorities was using the public-private partnership model of financing infrastructure. The idea was to tap private-sector cash, expertise and accountability. For sure, the process moved too slowly. But Duterte's preference for government-led projects could see a return to the corruption that Aquino worked to curtail. It also could blow up the national budget in ways certain to delay additional credit upgrades.
In May, the national budget reverted to deficit territory, where it has been for three consecutive months now. Manila also is on track to post its first current-account deficit in 15 years, contributing to the peso's woes. What is surreal, though, is how Duterte is turning to the Marcos family for help in plugging mounting budget gaps.
When Marcos took office in 1965, the resource-rich nation was on track to be the Japan of Southeast Asia. The kleptocracy he built turned it into a basket case. When the Marcos's fled Manila in 1986, they are believed to have taken upward of $10 billion looted from the state. President Marcos died in exile in 1989. Later, when his wife Imelda and their children returned to the Philippines, they feigned relative poverty. Even though emissaries were caught here and there selling a Michelangelo, Monet or Picasso pilfered from the palace, the Marcos clan denied having money. Now, though, Duterte is working with the family to return gold bars they deny having to fill government coffers.
What is more, Duterte has marginalized Vice President Leni Robredo and speaks glowingly of Ferdinand Marcos Jr., the former dictator's son, as a replacement. The flawed judgement involved in putting another Marcos in the vicinity of the presidency boggles the mind. Aquino's remedy for a leaky national balance sheet was attacking graft, improving government efficiency and going after tax cheats. Duterte's seems to be rehabilitating the reputation of the family that wrecked the economy.
Another key reform Duterte has sidelined: pulling more of the Filipino diaspora back home. Thanks to tepid job growth, more than 10% of Filipinos work overseas and send money home from Singapore, Hong Kong, Dubai and elsewhere. People should never be a nation's main export, as it depletes the quality of the local labor force. Aquino worked to wean the nation off its addiction to remittances. By contrast, Duterte views overseas workers as a vital support base to be increased and coddled. The peso's declines might be much steeper were it not for cash equivalent to more than 10% of gross domestic product being sent back to the Philippines each year.
Currency traders are going the other way. Whether it is all those body bags, Manila's policy drift, or the president's alliance with the Marcos crowd, some early Dutertenomics fans are experiencing buyer's remorse. If this government does not spend more time gunning for economic reforms, and less time shooting people, the broader investment community might, too.
William Pesek is a Tokyo-based journalist and author of "Japanization: What the world can learn from Japan's lost decades." He is a former columnist for Bloomberg.