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The Philippines – Bad Publicity but Bullish Economy?

Updated On: Jan 02, 2008

With the Philippines’ popular media’s inclination to focus on the negativities of its own country, it is difficult for the Philippines to shake off its reputation as a sinking ship.

The newspaper columns in the Philippines are often filled with reports of sluggish economic development, political scandals such as allegations (and incidents) of corruption, political crisis such as military coups or talk of military coups, human rights abuse and security problems.

In 2007, President Gloria Arroyo survived the third impeachment effort in as many years, a farcical coup in November, criticism from the UN Rapporteur on Extrajudicial Killings Philip Alston who published a report pointing to the Philippines military’s involvement in hundreds of illegal killing, a massive corruption scandal involving her husband and a Chinese firm ZTE. According to the surveys of the Social Weather Station,. Arroyo’s net satisfaction ratings went down from -4 and -3 during the first two quarters of 2007 to -11 and -16 percent in the third and fourth quarter respectively. Arroyo is now seen as the most corrupted president and least popular in the Philippines.

Yet, surprisingly, 2007 seems however, to be a reasonably good year for the Philippines economy. The economy is growing at a remarkable pace- 7.1% in the first three quarters of 2007. Renewed confidence in the economy has strengthened the peso. Remittances form foreign workers increased 15% to reach $11.87 billion between January and October 2007.

The economic prospects for 2008 continue to look good. Arroyo told her Cabinet, “We are filled with hope as the year ends and a new year begins. Our country is stable, strong and peaceful. Our economy is vibrant, the stock market is on a bull run and investments come pouring in.” The Deputy Governor of the central bank projected the net foreign direct investment in 2008 at $3.6 billions. 

The rosy economic picture is dependent to some extent on the ability of the Arroyo administration to improve infrastructure and tackle corruption. The Finance Secretary Margarito Teves has already called for more aggressive infrastructure spending to use the dollars (and mitigate the strength of the peso). Both the improvement in infrastructure and weakening of peso, if realised, will be welcomed by the business community, particularly exporters. The ability of the Arroyo to improve the fiscal position of the Philippines will be closely watched by the international community.

In 2008, President Arroyo is likely to relaunch a change in the political system from a presidential to a parliamentary system. The change, called ‘ChaCha’ (or ‘Charter Change’), was previously rejected in 2006 after one of the proposals within the package of proposed changes included scrapping the 2007 elections and extending the term of office of the national and local officials to 2010. The change was seen to be a means of buying support from these officials.

The Chacha proposal is likely to include a change from the unitary political system to a federal system. To allay suspicions that Arroyo is merely trying to extend her term of office, she is likely to suggest the federal system to be established after 2012. The federal system will be a crucial part of the peace talks with the Moro Islamic Liberation Front in Mindanao.

Another issue to watch in the new year is the government’s handling of the internal security of the country. This does not merely mean the negotiations with MILF but also ongoing battles with the Abu Sayyaf. The New People’s Army (NPA) of the Communist Party of the Philippines (CPP) has already started the new year with a bang - an attack on a mining company on New Year’s Day.  The CPP is commemorating its 40th anniversary in 2008 and has already promised to continue its armed insurgency. Arroyo’s target for the military to eliminate the insurgency by 2010 looks achievable.

While the Arroyo administration grapples with the constitutional change and the military with the various insurgent movements, the other politicians are likely to joust for prominence ahead of the 2010 elections. Some of the names- Manuel Villar Richard Gordon, Panfilo Lacson, Edgardo Angara and Mar Roxas might not be familiar now but one of them might be the next Philippinespresident.  (1 January 2008)

Sources:

Army Condemns First NPA Attack in 2008 (ABS-CBN News Online, 1 January 2008)

Rizal: His view of year 2008 (Manila Bulletin, 30 December 2007)

Events to watch in 2008 (Manila Standard, 31 December 2007)

Businessmen want results in 2008 (BusinessWorld, 28 December 2007)

Philippine president upbeat on economic outlook for 2008 (Associated Press, 27 December 2007)

Palace to CPP: Go slow in run-up to 40th year for talks to proceed (BusinessWorld, 27 December 2007)

Rivalry in Senate heats up as 2010 nears(Manila Standard, 31 December 2007)

Estrada can run for other posts but not for president(Philippine Daily Inquirer, 30 December 2007)

Charter change eyed to revive peace talks with MILF(Philippine Daily Inquirer, 30 December 2007)

Central Bank Sees Foreign Investments Doubling in ’08 (Inquirer.net, 12 December 2007