What will be the impact of Philippine-US ‘split’ on the country’s startup community?
Uncertainty looms with Philippine President Rodrigo Duterte’s ‘split’ with the US in military and economic matters. Is there a silver lining?
While the Philippines has been a longtime American ally and former US colony, President Rodrigo Duterte has shocked the international community and even his own countrymen by announcing his government’s military and economic separation from the United States during his recent visit to China.
“America has lost now. I’ve realigned myself in your ideological flow. And maybe I will also go to Russia to talk to Putin and tell him that there are three of us against the world: China, Philippines and Russia. It’s the only way,” Duterte was quoted as saying by CNN.
Even prior to this announcement, concerns have been raised about how the change in political direction and resulting uncertainty could affect Philippine startups.
Startup jitters
“I have always believed that the Philippines could well become the next Silicon Valley,” Kevin Leversee, Co-founder of outsourcing firm TrustTeck, shared with e27.
“The future is in innovation and technology, and that is where we should focus. However, when everyone is nervous and uncertain, it does not help. In the BPO industry, some of my colleagues are nervous. There are plans to put up new BPO centres that have been put on hold — even big, new, shiny office buildings are empty inside. Everyone is waiting to find out what is going on.”
Leversee added that he loves the country and will continue to do business here — moreso that his two children are half-Filipino.
However, the same could not be said for some of his compatriots, who are looking to take their business elsewhere. “I am all for a strong Philippines, but we need to be more forward looking,” he concluded.
Tighter Asian cooperation: a possible silver lining?
The other side of the coin, however, is that Duterte did not only announce the separation from the US, but also said his country would forge closer economic ties with China, apparently setting outside previous disputes.
China is an economic powerhouse that is home to a thriving startup sector and industry giants who are now looking to expand to other markets and invest in more countries.
One notable example is Alibaba Group founder and Executive Chairman Jack Ma pledging to invest more and expand further into the ASEAN region.
With the country seemingly pivoting into economic alignment with China, Philippine startups might benefit from additional investment from Chinese companies and access to the huge Chinese market.
Admittedly, there might be difficulties, particularly since the Philippines has historically adhered to Western values and practices, but as in any development, there will be pros and cons.
Rising uncertainty
While it is unclear at this point what this ‘separation’ actually means, this is precisely the kind of ‘unpredictability‘ that is becoming associated with Duterte.
Apart from the accusations of human rights violations and extrajudicial killings being perpetrated as part of his war against drugs, Duterte has been making international headlines for his profanity, off-the-cuff remarks, and outrageous statements.
On the surface, this announcement of a military and economic separation from the US might be seen as the culmination of increasingly anti-American rhetoric from Duterte, who previously shocked the world by making vulgar remarks about President of the US, Barack Obama, although he later apologised and said the “son of a bitch” comment was not a personal attack on Obama.
It is entirely possible that Duterte or his aides will say that his remarks about separating from the US were made in jest, or were taken out of context, as has been the case with a number of previously controversial statements.
In the meantime, however, this growing pattern of seemingly off-the-cuff remarks does create an environment of uncertainty for the countries and companies who have existing business relationships with the Philippines, or plan to invest in the country.
Stirrings at the local markets
The impact of such uncertainty has already been felt in the local markets. For instance, the value of the Philippine Peso against the US Dollar has fallen by five per cent in the four months marking Duterte’s presidency.
While this has a positive impact on exports and on the outsourcing industry (given cheaper cost of goods and labor), it makes foreign debt servicing more expensive, particularly those that are dollar-denominated. Jitters in the BPO industry may well offset whatever potential gains a cheaper peso might provide.
The local equities market has also suffered its share of shocks in the recent months, with fund managers pulling out hundreds of millions of dollars amid uncertainty over the new domestic and foreign policies will align well with their appetites for risk.
“The Philippine government needs to reinstate confidence in the local start-up industry and make stronger commitments to support new business owners to not only attract foreign investors and funds, but also to lure local conglomerates into taking a bigger role in the local start-up ecosystem,” said Moritz Gastl in his column for The Manila Times.
One thing is for sure: whichever direction the Philippines does take, the government must make the new ground rules clear to the business community, both local and foreign, instead of creating uncertainty from one day to the next.
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J. Angelo Racoma contributed to this article.
Image Credit: Pixabay
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