Duterte’s Foreign Investment and Trade Policies: Strengthening Economic Ties and Boosting Growth

 

Duterte’s Foreign Investment and Trade Policies: Strengthening Economic Ties and Boosting Growth

During his presidency (2016–2022), Rodrigo Duterte implemented foreign investment and trade policies aimed at boosting the Philippine economy, attracting more foreign direct investments (FDIs), and expanding trade partnerships. His administration pursued business-friendly reforms, strengthened relations with China and Russia, and reduced reliance on the United States. Despite some controversies, Duterte’s policies increased FDIs, modernized trade regulations, and improved the ease of doing business.

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✅ 1. Key Foreign Investment and Trade Policies Under Duterte

A. Opening the Economy to More Foreign Investments

• Duterte pushed for liberalizing foreign ownership restrictions, allowing more FDIs in previously restricted sectors.
• Enacted the Foreign Investment Act (FIA) amendments in 2022, which:
  • Allowed 100% foreign ownership of certain public services (e.g., telecommunications, railways, airports).
  • Reduced capital requirements for foreign companies.
• Supported the passage of the Retail Trade Liberalization Act (RTLA), which:
  • Lowered the minimum investment requirement for foreign retailers from $2.5 million to $500,000, making it easier for smaller foreign companies to enter the Philippine market.

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B. CREATE Law: Boosting Foreign Direct Investments

• The Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law reduced the corporate income tax (CIT) from 30% to 25% (for large corporations) and 20% for MSMEs, making the Philippines more attractive to foreign investors.
• Provided generous tax incentives, such as:
  • Income tax holidays (ITH) for 4–7 years for qualified projects.
  • Enhanced deductions for research and development (R&D), training, and other expenses.

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C. Strengthening Trade Relations with China and Russia

• Duterte shifted foreign policy away from the US and pursued stronger ties with China and Russia.
• Secured billions of dollars in trade and investment deals from China, including:
  • $24 billion worth of investments and loan pledges in 2016.
  • Increased exports of agricultural products (e.g., bananas, pineapples) to China.
• Strengthened trade partnerships with Russia, particularly in energy and agriculture.
• Signed multiple bilateral agreements for technology, infrastructure, and defense cooperation.

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D. Participating in Free Trade Agreements (FTAs) and Regional Trade Blocs

• Duterte’s administration actively engaged in regional trade agreements to promote exports and attract investments.
• The Philippines became a signatory of the Regional Comprehensive Economic Partnership (RCEP), the world’s largest trade bloc, which includes ASEAN, China, Japan, South Korea, Australia, and New Zealand.
• The government expanded free trade agreements with ASEAN neighbors, reducing tariffs and increasing trade flows.

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E. The Ease of Doing Business Act (2018)

• Duterte signed the Ease of Doing Business Act to simplify and streamline business procedures.
• The law:
  • Reduced red tape and processing times for business permits and licenses.
  • Implemented a 3-7-20 rule, requiring government agencies to complete simple transactions in 3 days, complex transactions in 7 days, and highly technical applications in 20 days.
• Improved the Philippines’ ranking in the World Bank’s Ease of Doing Business Index.

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✅ 2. Benefits and Impact of Duterte’s Foreign Investment and Trade Policies

💡 A. Increased Foreign Direct Investments (FDIs)

• FDIs surged under Duterte’s administration, reaching:
  • $10 billion in 2017 (a record high at the time).
  • $11.98 billion in 2021 despite the pandemic.
• The CREATE Law and relaxed foreign ownership rules attracted more multinational corporations.

💡 B. Expanded Trade and Export Opportunities

• The Philippines’ exports to China significantly increased, especially in agricultural products.
• Participation in RCEP boosted regional trade partnerships and made Philippine exports more competitive.
• Tourism and service exports benefited from improved relations with China and Russia.

💡 C. Boosted Infrastructure and Investment Projects

• Chinese investments funded infrastructure projects under the "Build, Build, Build" program, including:
  • Bridges, railways, and highways.
  • Airports and seaports modernization projects.
• Russian partnerships supported energy and defense modernization efforts.

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✅ 3. Challenges and Criticism of Duterte’s Policies

❌ Overreliance on Chinese Investments

• Despite $24 billion in pledged investments, only a small portion materialized, causing disappointment.
• Concerns over China's influence and debt traps arose due to large-scale loans.

❌ Human Rights Concerns Affected FDI

• Duterte’s war on drugs and human rights violations drew international criticism, deterring some investors.
• The European Union and US raised concerns over human rights, threatening trade sanctions.

❌ COVID-19 Pandemic Impact

• The COVID-19 pandemic reduced FDI inflows in 2020 as global economies slowed.
• Trade disruptions affected supply chains and exports.

❌ Slow Implementation of Investment Reforms

• Although the FIA and RTLA reforms were passed, their implementation faced delays, slowing their impact.

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✅ 4. Long-Term Impact of Duterte’s Policies

✅ Increased Investor Confidence

• Lower taxes under the CREATE Law and relaxed ownership restrictions made the Philippines more attractive for long-term investments.
• The Ease of Doing Business Act simplified bureaucracy, improving business operations.

✅ Stronger Trade Relations with China and ASEAN

• Duterte’s policies expanded bilateral trade with China, benefiting agricultural and manufacturing sectors.
• The RCEP membership strengthened regional trade partnerships, boosting exports.

✅ Improved Infrastructure and Economic Growth

• Foreign investments in infrastructure projects helped modernize the country’s transportation and logistics systems.
• The “Build, Build, Build” program benefited from Chinese-funded projects.

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✅ Conclusion

Duterte’s foreign investment and trade policies aimed to attract more FDIs, strengthen trade relations, and boost economic growth. His administration passed business-friendly reforms, reduced corporate taxes, and engaged in strategic trade partnerships with China and Russia. While these policies increased FDIs and improved trade opportunities, they also faced challenges due to the pandemic, slow implementation, and human rights concerns. Nonetheless, Duterte’s economic reforms laid the foundation for long-term growth and global competitiveness.

Would you like a detailed analysis of Duterte’s trade agreements with specific countries? 😊