By Phuong Nguyen & John Juenemann

President Benigno Aquino used his final State of the Nation Address on July 27 to cement his legacy of anticorruption efforts and track record of revamping the once-sluggish Philippine economy. While Aquino has played a leading role in steering the Philippines in the right direction over the past five years, his term will end in 2016—as Philippine presidents are constitutionally constrained to a six-year term. Nonetheless, the Philippines still faces daunting challenges ahead, including in its internal and external security, defense modernization drive, and economic reform agenda.

U.S.-Philippine relations have been revitalized in recent years thanks in no small part to Aquino’s domestic achievements. The United States therefore has an interest in seeing the next Philippine administration sustain the progress and advance the reform efforts that have begun under Aquino. He still has another 10 months in office, but as campaigning for the upcoming presidential elections, which will take place in May 2016, intensifies, his government’s ability to tackle a number of outstanding policy challenges has been more constrained.

Chief among these challenges is the need to pass the draft Bangsamoro Basic Law (BBL), which has stalled in the Philippine Congress since early this year. The BBL would implement a peace agreement signed between the Aquino government and the rebel Moro Islamic Liberation Front, which would establish an autonomous political entity, called the Bangsamoro, and end a decades-old insurgency in the southern Philippines. The legislation, which had been deliberated by lawmakers since 2014, became highly controversial following a clash in Mamasapano in January between Philippine police commandos and Muslim insurgents in Mindanao, which led to the deaths of 44 Philippine commandos.

In his address, Aquino asked Congress to pass the BBL within its remaining term, but did not touch on the controversy surrounding the Mamasapano clash. The incident left an enormous stain on the Aquino administration’s otherwise-positive record with the public. If Aquino fails to secure passage of the draft legislation in the next month or two, chances are the BBL will not be picked up again in the lead-up to the elections. Peace in Mindanao is vital not only because it would lead to much-needed development dollars for the region, but also because it would free up resources for Manila to redirect toward its greater security challenges in the South China Sea.

Aquino also trumpeted his government’s defense modernization program over the past five years, which has been more ambitious than under any previous administration, though implementation has been disappointingly slow. Manila has nonetheless recognized a need to upgrade its maritime security capabilities in the face of growing Chinese assertiveness in the South China Sea.

But Aquino failed to mention the Enhanced Defense Cooperation Agreement (EDCA), which Manila signed with Washington in April 2014 and would allow the rotation of U.S. forces and equipment through Philippine bases and greater capacity building for the Philippines armed forces. The EDCA is currently awaiting a ruling from the Philippine Supreme Court on its constitutionality and whether it requires ratification by the Philippine Senate.

Many in Washington and Manila hope that the EDCA ruling can take place before U.S. president Barack Obama visits the Philippines in November for the Asia-Pacific Economic Cooperation summit, but there is a risk that prolonged debates on the agreement in the Philippine Senate might delay the ruling further.

Many Filipinos, as well as foreign analysts, have begun to ask whither the Philippines in the post-Aquino era. The president in response has laid out a “righteous path” for his successors to follow if the Philippines hopes to sustain its economic success of recent years. This includes, among other things, continuing anticorruption efforts, strengthening the business environment, attracting more foreign investment, and increased investment in infrastructure.

Beyond 2016, the health of the Philippine economy will depend largely on how well future leaders can bolster the country’s institutions and whether they can secure the confidence of foreign investors.

The Aquino administration’s anticorruption drive and governance reforms have led to record levels of foreign direct investment, which reached $6.2 billion in 2014, up from a mere $1 billion in 2011. But that amount is still minuscule compared to the level of foreign investment attracted by the administration’s Southeast Asian neighbors.

Another substantial barrier to growth in the Philippines is a constitutional clause that restricts foreign ownership, which the Aquino government attempted to amend but to no avail.

Aquino is right to be proud of the Philippines’ achievements under his leadership. Yet it will be up to the next government to handle major challenges that cannot be addressed during the remainder of Aquino’s term. In this context, Aquino’s recent endorsement of Interior Secretary Mar Roxas to be his successor has attracted much attention. Aquino has publicly said that only Roxas can continue to lead the Philippines on a “righteous path.”

But Roxas, who stepped aside in 2010 to make way for Aquino to run for president on the Liberal Party ticket, has polled well behind other leading presidential contenders, including Vice President Jejomar Binay and Senator Grace Poe. While Aquino was very popular among voters, Roxas has been seen as part of the political elite and out of touch with the majority of Filipinos.

On the other hand, Poe, who also pledged to continue the anticorruption drive, has polled extremely well and may consider an independent run. She has dominated opinion polls in recent months, leading Binay, who continues to be hurt by graft allegations, by double digits.

Aquino has arguably done more than any previous Philippine president to advance the Philippines’ economy and reform its institutions. But his final State of the Nation Address shows that the answers to the Philippines’ toughest policy challenges may still be elusive. The Philippines’ foreign partners, and the United States in particular, will want to see these issues addressed to know that Manila is committed to staying on the “righteous path.”

Ms. Phuong Nguyen is a Research Associate with the Sumitro Chair for Southeast Asia Studies. Follow her on twitter @PNguyen_DC. Mr. John Juenemann is a researcher with the Sumitro Chair. This piece first appeared in the Sumitro Chair Newsletter Southeast Asia from Scott Circle.