Philippines’ Aquino to Tout Successes in 2016 Kingmaker Bid

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Benigno Aquino
Philippines president Benigno Aquino. Photographer: Julian Abram Wainwright/Bloomberg

Philippine President Benigno Aquino’s final speech to Congress on Monday is likely to focus on a message of economic stability and continuity as he prepares to endorse a candidate for next year’s election.

Aquino, who has overseen an economic resurgence for the country once known as the sick man of Asia, has been meeting with potential contenders including Senator Grace Poe and Interior Secretary Mar Roxas and is expected to name his preferred candidate this week.

Announcing his pick just days after the state of the nation speech would make sense, said Euben Paracuelles, an economist at Nomura Holdings Inc. “The argument is ‘Look, I’m reminding you that we’ve done well and the reforms have moved ahead. If you can elect somebody that can carry on the progress that we’ve made, then obviously we will improve further.’”

Aquino, who took office in 2010 and is limited by law to a single six-year term, has helmed an economy in which growth exceeded 6 percent from 2012 to 2014 and credit ratings have climbed to investment-grade from junk. A crackdown on tax evaders and corrupt officials has given him revenue to build roads and schools, boost cash handouts and curb debt.

Including reinvestments of dividends, the Philippine Stock Exchange Index returned 163 percent from July 1, 2010 through Friday, the second-best performer in the Asia-Pacific region. The gauge fell 1.3% at the noon trading break.

The most popular Philippine president for three decades, Aquino, 55, “could sway the vote in case of a close fight,” said Benito Lim, a political science professor at the Ateneo de Manila University. “His anointed could also benefit from the political machinery of his administration.”

Lawmakers at the opening session of parliament on Monday pledged to pass a bill creating a new Muslim autonomous region before its end next year. Speaker Feliciano Belmonte and Senate President Franklin Drilon said in separate speeches that they would also push measures to curb smuggling and toughen a law to sustain infrastructure programs.

Economic Expansion

May’s poll will see Filipinos elect a president, vice president, senators and congressmen, and all local officials down to city councilors.

The next government will need to prioritize infrastructure investment and keep tackling graft, according to more than half of economists, bankers and academics surveyed by Bloomberg in June. They predicted economic expansion of at least 6 percent will be sustained in the next 10 years.

The popularity of Aquino, the son of ex-President Corazon Aquino, hit a record low in March amid the fallout from a botched terrorism raid, but has recovered, according to polls by Social Weather Stations and Pulse Asia Research Inc. The latter put his approval rating at 54 percent in June.

“Overall you’ve got to give Aquino high marks,” said Edwin Gutierrez, who helps oversee about $13 billion in emerging-market bonds at Aberdeen Asset Management Plc. “The biggest threat to the Philippines is politics, that is, if a populist, non-market-friendly candidate is chosen.”

Record Budget

While some governments such as Greece struggle with insufficient revenue, in the Philippines the challenge is to spend what has been appropriated. Bureaucratic bottlenecks and fear of being caught in the anti-corruption drive have contributed to the Aquino administration missing spending targets every year since 2011.

The government is preparing to bequeath his successor a record 3 trillion-peso ($66 billion) budget next year, 15 percent bigger than the plan for this year and double the program in 2010 when he took office, according to Budget Secretary Butch Abad. State spending in the first quarter was about 13 percent below target.

Still, politics “remains dominated by personalities and institutions remain weak,” Gutierrez said. Aquino has failed to exploit the country’s vast mineral wealth, though that was true of his predecessors as well, he said.

Islamic Insurgency

The government is still seeking to pass a proposed law to create an autonomous political region in the nation’s south as it seeks to end a 40-year Islamic insurgency. The pact is touted by Aquino as a chance to allow sustained exploration of the mining and energy assets in the region.

Aquino should also keep infrastructure a priority in the 2016 budget, while seeking to liberalize foreign ownership in certain sectors, said Paracuelles of Nomura Holdings.

“The country has moved further up in the past five years, whether it’s the investment-grade ratings, the growth or the medium-term prospect,” he said. “They all look better than when he started.”

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