How incentives drive Duterte policies on drugs, housing, China

Incentives in Chinese foreign policy

Finally, incentives are also at play when it comes to our relations with China. But here, China is the one dangling the incentives, not President Duterte.

Following the President’s visit to Beijing last year, Chinese officials pledged around $6 billion in foreign aid plus $3 billion in loans to the Philippines, which the Duterte administration proudly said will help finance infrastructure development. This is the first time we will receive foreign aid from China.

At the same time, however, the President is projecting a decidedly soft stance when it comes to our sovereign claims in the disputed territories:

First, the President allowed a Chinese ship to survey Benham Rise and stay there for at least 3 months last year. Second, he said we cannot stop China from “doing its thing” and building facilities in Panatag Shoal. Third, he said “he can sell” islands in the West Philippine Sea if the Philippines becomes “very rich.”

In no way should President Duterte give the impression that we are trading away our sovereign claims for a few billion dollars of aid and loans. In the words of former foreign affairs secretary Albert del Rosario, such a submissive stance “puts us in a poor strategic position without the benefit of flexibility, especially if there is a need to negotiate.”

The ASEAN Summit is a great opportunity for the President to take a lead and show the world that our sovereign claims will not soften or yield, even as we receive a huge inflow of aid money and loans from China. However, the President already said he will not bring up the ruling of the international arbitral tribunal, claiming it’s a “non-issue.”

The power of incentives

Many social issues and public policies become clearer when viewed from the lens of incentives. In the same way that governments can dangle incentives to its citizens, governments can also dangle incentives to other governments.

As the congressional deliberations resume soon – and issues like the death penalty, lowering the age of criminal liability, and tax reform re-emerge in social discussions – our lawmakers should also bear in mind the direct and indirect effects their policies will have on the incentives people face. Otherwise, the laws they pass might only add to the nation’s problems, not its solutions.


The author is a PhD student and teaching fellow at the UP School of Economics. His views are independent of the views of his affiliations.

JC Punongbayan

JC Punongbayan is a PhD candidate and teaching fellow at the UP School of Economics. His views are independent of the views of his affiliations.