The Philippines President Rodrigo Duterte is teaming up with the wrong partner to fight the country’s growing corruption problem—China, a country with a big corruption problem of its own.
Fighting corruption has been central to President Duterte’s pre-election campaign and drug war.
The trouble is that Philippines’ corruption problem under Duterte isn’t getting better. It’s getting worse, dropping 10 notches in the 2017 Corruption Ranking published recently by Transparency International.
That’s on top of six notches it dropped in 2016, which had already pushed the country closer to highly corrupt Asian countries like Pakistan, and far below countries like Singapore and New Zealand that are almost corruption free.
|Corruption Rank 2017|
Source: Transparency International
Apparently, President Duterte hasn’t pursued the right policies to fight the “system,” the institutions that nurtured corruption for decades in the Philippines, preventing the country from making the great leap forward and becoming a developed country.
Now, he is looking for allies outside Philippines to solve the country’s corruption problem, as evidenced by his recent speech at the Boao Forum for Asia, where he called upon China to join him in the war against corruption.
But China is the wrong partner to fight this sort of war. For a simple reason: corruption cannot be solved by corruption, but with transparency. And China has a long way to go before it brings transparency to its own economy, and then exports it to other countries. China ranks 77 in the 2017 Corruption Index, far away from Philippines’ old ally–the US.
Fighting corruption is a big bet for the Philippines and for foreign investors buying Philippine stocks. Why? Because it will determine whether the Philippines can sustain growth and move forward to become a developed country or slide back to frontier status.
|Fund||3-Month Performance||2-year Performance|
|ishares MSCI China (FXI)||-4.40%||34.19|
|iShares MSCI Philippines (EPHE)||-12.95||-4.14|
|iShares MSCI Emerging Markets (EEM)||-3.55||35.72|
Source: Finance.yahoo.com 4/13/2018