By BIANCA CUARESMA & JASPER EMMANUEL Y. ARCALAS / BUSINESS MIRROR
Martial law has not affected the financial market and is not expected to affect investors’ appetite even if it is expanded to other parts of the country, according to the chief of the Department of Trade and Industry (DTI). Trade Secretary Ramon M. Lopez said businessmen have remained in the region following the declaration of martial law in Mindanao to fight terrorism. “So far, no one has pulled out or held back their investments in Mindanao. It seems that investment pledges up to May will even post double- digit growth,” Lopez told reporters on the sidelines of the launching of the National Intellectual Property Strategy (NIPS) on Tuesday. “The last time I checked, investment pledges were up 31 percent, but I think growth [in May]would be close to 30 percent,” he added. According to Lopez, the faceoff between government security forces and terrorists in Marawi would hardly make a dent in investment pledges. “Investment inflows will not stop just because of that. If I were the investors, the opportunity to invest in the Philippines would still be based on the attractiveness of the demographics and the usual [metrics],” he said. Lopez expressed confidence that investors in Mindanao would not be affected by the declaration of martial law as businessmen would want to assure the safety of their operations from terrorists. “They [investors]are not affected in Mindanao, in general, except in Marawi for now. Because if you talk of plans in Mindanao, they are still being pursued,” he said. “The imposition of martial law is Mindanao-wide because you want to control the situation. You don’t want [chaos]to spread to nearby areas; it’s a preventive measure,” Lopez said. The DTI chief also said businessmen will be “unfazed” even if President Duterte decides to expand the coverage of martial law to the Visayas region, or even nationwide. “I don’t think [expanding coverage of martial law]will have an impact on business. Businessmen would even prefer such a situation because they would feel safer,” he said. ‘Strong peso’ Despite the declaration of martial law in Mindanao, analyst Joey Cuyegkeng of ING Bank Manila said the potential impact on the financial markets is likely to remain low as market players are focused on the strong fundamentals of the country’s economy. Cuyegkeng said the Marawi siege and the President’s declaration of martial law did not overpower the sentiment of market players, as the relative strength of the peso amid political circumstances has to do with “sound and favorable economic fundamentals which are seen to remain despite the political developments in the south”. “These fundamentals include a relatively strong economy and growth outlook, large foreign-exchange reserves, strong banking system, still solid consumer and investment spending despite the weak fiscal performance in April,” he said. “The directly affected area in south Philippines by military activity is limited within the Northern Mindanao region, which contributed 3 percent to 4 percent of GDP in 2015,” Cuyegkeng added. Duterte placed the entire Mindanao under martial law last week after hostilities between the Philippine Army and terrorists from the Maute Group erupted in Marawi City. While martial law remains in effect, Cuyegkeng said foreign and local market players are likely to be unaffected as no disagreement in Congress is expected to brew in the near term with regard to the declaration. “A constitutional crisis may develop if the Supreme Court or Congress decides that martial law has to be lifted or its scope reduced. The President last weekend threatened not to listen or obey the decision of the Supreme Court or Congress and would prefer to listen to the security forces,” he said. Cuyegkeng said markets are not taking the potential constitutional crisis seriously since Congress is likely to support the decision of Duterte. “Government stance against terrorism has been supported not only by the government’s coalition but also members of the opposition and also by the Vice President. The fight against illegal drugs has also received widespread support,” he said. “The means to fight these have been the source of disagreement. Nevertheless, markets continue to focus on the strong economic fundamentals and the limited impact of the hostilities to overall economic activity,” Cuyegkeng added. On Tuesday data from the PDS Group showed the local currency moved sideways to close the day’s trade at P49.84 to a dollar. This is weaker compared to the previous day’s P49.82 to a dollar. The total traded volume on Tuesday was at $409.5 million, higher than the $385.8 million on Monday.