Barros, Bercasio, Boncales, Libat, Sy Position Paper

ECO122 - B71 February 8, 2019

War on Drugs and the Philippine Economy

Since the 2016 presidential campaign, President Rodrigo Duterte has vowed

to kill every drug dealer and user in the country, and soon eradicate the use of illegal

drugs within the Philippines. His approach towards social and economic problems

within the country has garnered heavy support within the Filipinos, leading him to win

as the president, which makes his proposed policies much easier to be implemented.

On June 30, 2016, as soon as he assumed office, the war on drugs entitled ‘Oplan

Tokhang’ has commenced which aims to turn the Philippines into a drug-free

country. Since then, drug users and pushers being killed have been in and out of the

news as casualties arise. Within just six months, users and pushers that have

surrendered to the government was estimated to be more than one million - all

voluntarily (Ranada, 2016). These people were given a chance to change their

lifestyle for their betterment and for the country’s as well. Those who did not

surrender and continued to use drugs, and even resisted the police force, however,

faced their untimely death. We have seen the effect of the war on drugs on the

general public, but what does it reflect on the Philippine economy? Was it worth it for

the President to continue the war on drug in a harsh way?

First, according to Socioeconomic Planning Secretary Ernesto Pernia, the

peace and order that the war on drug emit will “definitely, substantially improve” the

investment climate, and that a lot of foreign investors would be willing to invest in the
Philippines (Pertiz, 2017). Though the foreign direct investments (FDI) showed a

decline from the last quarter of 2015 to 2016 due to turned off investors, Hongkong

and Shanghai Banking Corporation (HSBC) predicted that this decline will be short

term. True enough, by January 2018, the FDI inflow reached $919 million, from

2017’s $587 million (Schnabel, 2018).

Second, since the ‘War on Drugs’ campaign was executed by the Duterte

administration, the crime rate in the country had significantly dropped down

throughout the years 2017 and 2018. Based on the Philippine National Police (PNP)

report, crime incidents have gone down to 452,204 as compared to 493,912 in 2016.

A decrease of 35% in crime rates was considered a major accomplishment by

presidential spokesperson Harry Roque. He claimed the government’s anti-illegal

drug war has been responsible for bringing it down. In 2018, another drop of 16.77%

was recorded for the period of April to June. Where crime rates are high, economic

activity decreases. According to an article on Kyklos International Review for Social

Science, “Criminal activity acts like a tax on the entire economy: it discourages

domestic and foreign direct investments, it reduces firms' competitiveness, and

allocates resources creating uncertainty and inefficiency.” With the number of crime

rates going down, people felt more secure within their houses and property,

economic freedom becomes easier to achieve. In an article on Desert News, it was

stated that “Reducing crime rates can also help keep a lid on taxes that are

associated with paying for police protection, rehabilitation programs, halfway houses,

jails, prisons and the criminal justice system. But another major benefit of stopping

crime in its tracks is the growing propensity of businesses to locate in areas where

local and state leaders have taken steps.” Businesses will flourish in places where
people are can roam around safe and protected. The country is crawling with millions

of drug abusers, most are responsible for the endangerment of civilian lives, which is

why desperate times calls for desperate measures. Things might be currently looking

grim with the Philippines’ anti-illegal drug war, but sacrifices should be made so that

the country could reap out its benefits in the long run.

Third, endowed with rich natural resources, Philippines is promoting its more

nature-based tourism. According to the Philippine Statistics Authority, in 2017, the

tourism industries contributed 12.2 percent to the GDP of the economy measured

through the Tourism Direct Gross Value Added (TDGVA). The TDGVA amounted to

PhP 1,929.3 billion in 2017 than the previous year’s record of PhP 1,553.7 billion. It

shows that tourism contributes a lot in the economic stability of the country. With

these, the war on drugs also boosted the economy through tourism, as reassurance

that it decreased crime rate in the country, making the Philippines a safer place to

visit and explore (Dagooc, 2016). Peace and order will be more evident under this

administration which will boost the tourism up. Cebu Association of Travel Agencies

president Edilberto Mendoza Jr. foresees good impact in the government’s

restoration of peace and order towards the tourism trade of the Philippines for it will

give more confidence to the tourists.

Fourth, imposition of war on drugs can actually help the growth of economy

since illegal drug trading is one of the underground economy also known as shadow

economy that generates income or sales from criminal activities that doesn’t

contributes to Gross Domestic Product (GDP). In this case, the size of underground

economy affects to some extent of GDP. (Maverick, 2016). Implemented government

States, the Federal Reserve Bank (FED) based its decisions on GDP figures like

actions about monetary policy such as interest rates. Since there’s a large

transactions of shadow economy, the FED may make an inaccurate monetary policy

decision that will possibly affect the economy negatively because of rendering a

nation’s GDP a less precise figure. (Maverick, 2016). With the imposition of war on

drugs in the Philippines that lessens the criminal activity associated with the shadow

economy, GDP can be more accurate which would result to a reliable economic

decisions. According to Antonio Moncupa Jr., president and CEO of East-West

Banking Corp, one of the top 10 lenders in the country, the Philippine economy is in

a very good spot under President Rodrigo Duterte prioritizing infrastructure and

solving peace and order. The government announced in 2016 that at the last quarter

of the year, the economy’s GDP grew at 7% under the administration of President

Rodrigo Duterte. The Philippines is well on track to meet the full-year target growth

of 6.5-7.5 percent as Economic Planning Secretary Ernesto Pernia stated. In 2017,

household consumption grew grew at slightly faster annual pace of 5.9 percent in the

second quarter compared with 5.8 percent in the first which shows that public

consumption has increased as those drug users and dealers who surrendered to the

police were given the chance to change and improve their lifestyle by working and

spending their time on their jobs.

And lastly, this program helps the public bring out the scum of the society

from their hiding places. This would help in solving the corruption. As when President

Duterte assumed office in 2016, he named and investigated for the politicians who

are engaged in illegal drugs. He investigated for the names of 23 municipal or city
mayors who may be involved as protectors of the drug lords in their respective

localities. This is evident in Cebu city, Mayor Tomas Osmeña who has been saying

that he won’t be surprised if his name would appear in President Duterte’s list.

According to a report in 2016, Mayor Osmeña is not directly involved in illegal drugs

yet his only fault is the sin of omission, wherein Cebu’s number one drug lord, Jeffrey

“Jaguar” Diaz was a supporter of his partylist which is the Bando Osmeña Pundok

Kauswagan (BO-PK). He said that Jaguar offered him money to support his political

campaign, which he refused. Yet, it took a long time for the Cebu City police to

investigate or arrest Jaguar which contradicts his statement. Then only when Pres.

Duterte won as President, all of the sudden the police moved against Jaguar and he

ended being killed in a shootout with Cebu City and Las Piñas Police. This implies

how illegal drugs became a way to deal with criminal activities such as corruption.

Through the war on drugs, it can filter the corrupt leaders of the country.

In conclusion, war on drugs implemented by President Rodrigo Duterte helps

the economy to develop in a lot of ways. It decreases the crime rate which results to

a safer environment which attracts more investors and tourists. Tourism and foreign

investments are two of the huge contributors of the economy’s growth. War on drugs

helps in increasing the GDP since the drug pushers and dealers who surrendered

and given a chance to change their lives, spend their time working and so they have

personal consumptions which contributes to the GDP of the economy. War on drugs

should not be viewed as something bad, rather a strategy of the president to

eliminate the drugs in the Philippines in a harsh way for it would be the best way for

the country to become more developed.

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