By Clara Ferreira Marques

THE libel conviction for the head of a Philippine news outlet known for its scrutiny of President Rodrigo Duterte鈥檚 administration is a blow to one of Asia鈥檚 most vibrant media sectors. It鈥檚 also the sort of headline that鈥檚 often overlooked by foreign executives and fund managers casting around for fast-growing economies. They would be wrong to gloss over this one.

Duterte鈥檚 rule has already seen institutions eroded and top-level opponents targeted. If fewer questions are asked, that will reduce transparency and drive up the risk premium for investing in the Philippines. That鈥檚 something the coronavirus-weakened economy can ill afford when inbound investment is already falling.

The case against Maria Ressa 鈥 whose Rappler site has been directly denounced by the president and often critical of his war on drugs 鈥 was always about more than the allegedly defamatory article on a local businessman, first published in 2012. The verdict, similarly, has ripples far beyond the online publication.

Monday鈥檚 conviction is no isolated incident. Ressa and her co-accused, Reynaldo Santos, were sentenced to as long as six years in jail, but she faces seven other criminal charges including for alleged tax evasion. There鈥檚 more. A month ago, the country鈥檚 largest broadcaster, ABS-CBN Corp., shut TV and radio stations after its license wasn鈥檛 renewed 鈥 a move repeatedly threatened by Duterte, reportedly because of a disagreement over paid election campaign commercials. Opponents elsewhere, from the human rights commission to the Supreme Court, have fared little better. Meanwhile, lawmakers passed an anti-terrorism bill this month that, while targeting a real problem, could also allow worryingly lengthy detentions without charge.

The presidential spokesman says Duterte upholds free speech and played no role in the Ressa verdict. That should offer little comfort to investors, or to a local population facing the deepest economic contraction in decades. Indeed, it suggests weakened institutions are carrying out the president鈥檚 whims without needing to be told. The target is one of the country鈥檚 best-known journalists, at home and abroad. Ressa was honored by Time in 2018. With other governments behaving badly, there is little reason to hold back.

To be clear, Duterte isn鈥檛 the first occupant of the Malaca帽ang presidential palace to castigate the press, or indeed other institutions, since the end of martial law in the 1980s. While free and outspoken by the region鈥檚 standards, the Philippines has also had high rates of violence against journalists. The difference is in what Nicole Curato of the University of Canberra describes as the normalization of attacks on the press, and the sheer volume of vitriol released through spokespeople, political allies, and on social media. Worse, it is done with the language of democracy. At least in openly authoritarian states, as Ressa said Monday, the rules are clear.

The economic context is grim. While the Philippines is young, promising and has been an outperformer in terms of headline expansion, its economy remains highly concentrated, unequal, and opaque. Foreign direct investment and local stocks were fading even before the pandemic, despite infrastructure spending plans and tax reform efforts. After the coronavirus, an economy that had been projected to expand 7% this year will instead contract. Unemployment and underemployment are high and remittances, which account for about 10% of gross domestic product, have dropped.

Ressa鈥檚 verdict brings more reasons for concern.

The first is the increasingly arbitrary nature of the attacks, in part because of the disparate coalition behind Duterte vying for favor. This leaves investors vulnerable, says Aries Arugay, professor of political science at the University of the Philippines-Diliman. Duterte triggered a more than $2 billion stock rout in December after targeting the Ayala family and another local businessman, demanding the renegotiation of contracts with two concessionaires, Manila Water Co. and Maynilad Water Services Inc., to supply the capital. Companies such as Fraport AG and Suez SA left the Philippines over just such disputes.

While the old guard is under fire, a new, Duterte-friendly oligarchy is being created, tilting an already uneven playing field. Aaron Connelly, research fellow at the International Institute of Strategic Studies, points to telecoms as an example of the change: Duterte ally Dennis Uy, with China Telecom Corp., won the country鈥檚 third telecoms license in 2018. Partner risk has always been a problem in Southeast Asia, but the shift away from Manila elites is making this less predictable.

Lastly, there鈥檚 the issue of transparency. The simple act of questioning authority, deals, and negotiations is becoming more challenging. It could get worse still if, as Arugay posits, the current purge fosters the flourishing of partisan Duterte-friendly media. The Manila Times closed in 1999 after running afoul of then-President Joseph Estrada, only to be bought by one of his close associates.

Duterte鈥檚 enduring popular support, and a term that doesn鈥檛 end until 2022, create room for plenty more lasting damage. Investors could do worse than to ponder Ressa鈥檚 words after her conviction: This is a precipice.

BLOOMBERG OPINION