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PHILIPPINES


 

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 77,076 71,400 74,700 42
         
GNI per capita
 US $ 1,020 1,050 1,040 133
Ranking is given out of 208 nations - (data from the World Bank)

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Area (sq.km) 
300,000

Population 
84,619,974

Capital
Manila

Currency 
Philippine peso (PHP) 

President 
Gloria
Macapagal-Arroyo
 


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Background:
The Philippines, a country of some 80 million people, is strategically located at the heart of Southeast Asia. Situated between Taiwan, China and Hong Kong in the North, Singapore, Malaysia and Thailand in the West, the Pacific Ocean in the east and Borneo in the South, this archipelagic nation is composed of 7,107 islands.
The Philippine Archipelago is one of the largest island groups in the world and is divided into three major areas that correspond broadly to the ethnicity of the human population. These three groups are Luzon in the north with a total area of 104,687.80 sq. km.; the Visayas in the central region, 57,201.92 sq. km.; and Mindanao in the south, occupying a further 94,630.10 sq. km.
This island chain stretches more than 1500 km from north to south and more than 1000 km from west to east. Less than 400 of the islands are permanently inhabited.
The majority of the people are of Indo-Malay descent although in many cases mixed with Chinese and Spanish ancestry. Many Filipinos take Spanish and derived Spanish family names. In most cases their name relates to the estate to which their ancestors were indentured. 
Around 40% of the population lives in urban areas of which 13% of the total population lives in Metro Manila alone. Manila accounts for over a third of the country's GDP.
91.5 percent of the population are of Christian Malay descent, almost 5 percent are Muslim Malay and live predominantly in the south, close to 1 percent are ethnic Chinese, and a further 3 percent are otherwise categorized and are mainly from upland tribal groups. 
In recent years there has been a rapid shift from an agricultural based economy to a service economy - much of which however is within government services. There are moves afoot at the political level to reduce and rationalize the myriad levels of government activity but equally there are entrenched political interests opposed to any fundamental change. It is hard to see such reform emerging under the present constitutional system unless there is a massive shift to federalism and an empowerment of resources to finance local decision-making and to make it accountable.
The service sector now accounts for some 43% of GDP while agriculture - which remains the largest employer in rural areas - has been reduced to some 19%. Manufacturing now accounts for a further 24% and is the most important sector in terms of foreign exchange earned through exports. Inwards remittances from overseas workers also play a big part in ensuring adequate international reserves.

Philippines History
The earliest human inhabitants of the islands that subsequently became known as the Philippines are believed to be the Negritos (also known as the Aeta) who arrived some 30,000 years ago having crossed via a land bridge from the Asian mainland. They clashed with other immigrant waves from Borneo and Sumatra, who also made their way across then-existing land bridges. Subsequently, people of Malay stock came from the south in successive waves, the earliest by land bridges and later in boats called balangays. The Malays dominated the lowlands where they settled in scattered communities of kinship, which became known as barangays and which were ruled by local chieftains known as datus.
Permanent Spanish occupation followed in 1565 and the country was then named "Filipinas" after then King Philip II of Spain. By 1571 the entire country aside from the Islamic Sulu archipelago was under Spanish control - often exerted via Mexico and without the knowledge of the administration in Madrid. At first the interest of the Spanish was more strategic than commercial and they viewed their control of the Philippines as no more than a stepping-stone to the rich Spice Islands of Indonesia.
Following Admiral Dewey's defeat of the Spanish fleet in Manila Bay, the United States occupied the Philippines. Spain ceded the islands to the United States under the terms of the Treaty of Paris (December 10, 1898), which ended the war. The United States continued as the colonial master of the Philippines during most of the first half of the 20th Century.
As a result of the Japanese occupation during World War II, the guerrilla warfare that followed, and the battles leading to liberation, the country suffered great damage and a complete organizational breakdown. Despite the shaken state of the country, the United States and the Philippines decided to move forward with plans for independence. On July 4, 1946, the Philippine Islands became the independent Republic of the Philippines, in accordance with the terms of the Tydings-McDuffie Act. In 1962, the official Independence Day was changed from July 4 to June 12, which commemorates the date of independence from Spain as originally declared by General Aguinaldo back in 1898.
After the Second Word War, the Philippines enjoyed one of the most prosperous economies in Asia. It was proud of a per capita GDP that was second only to Japan within the Asian region.
Yet the economic miracle that swept through Asia during the 1960s and 70s, for the most part, swept past the Philippines leaving it untouched. The reasons for the failure of the Philippines to grasp the opportunity to transform economically are complex. At risk of oversimplification, it could be argued that whereas elsewhere in Asia, political emancipation followed economic emancipation, the Philippines was already a "democracy" albeit one that had more in common with the political society of eighteenth century Europe than a modern post war democratic state. The political elite controlled the country and shared power and the spoils of power (and largely still do so). In these circumstances, fundamental economic reform never really had a chance.
In 1972, President Ferdinand E. Marcos (1965-86) declared martial law, citing growing lawlessness and open rebellion by the communist rebels as justification. Marcos governed from 1973 until mid-1981 in accordance with the transitory provisions of a new constitution that replaced the commonwealth constitution of 1935. He suppressed democratic institutions and restricted civil liberties during the martial law period, ruling largely by decree and popular referenda. The government began a process of political normalization during 1978-81, culminating in the reelection of President Marcos to a 6-year term that would have ended in 1987. The Marcos' government's respect for human rights remained low despite the end of martial law on January 17, 1981. His government retained its wide arrest and detention powers. Corruption and favoritism contributed to a serious decline in economic growth and development. 
The assassination of opposition leader Benigno (Ninoy) Aquino upon his return to the Philippines in 1983, after a long period of exile, coalesced popular dissatisfaction with Marcos and set in motion a succession of events that culminated in a snap presidential election in February 1986. The opposition united under Aquino's widow, Corazon Aquino, and Salvador Laurel, head of the United Nationalist Democratic Organization (UNIDO). The election was marred by widespread electoral fraud on the part of Marcos and his supporters and an uprising followed. Marcos was forced to flee the Philippines in the face of a peaceful civilian-military uprising now known as EDSA 1 that ousted him and installed Corazon Aquino as president on February 25, 1986. 
It was under the presidency of Fidel Ramos, the first Protestant to hold the office, who was elected as the 12th President of the Philippines in 1992 that the economy began to transform. During the early years of the last decade, the Philippines belatedly started to realize its potential and was spoken of by many as being Asia's next "tiger" economy.
While Ramos put the country on a path of economic growth, the results were uneven and many - indeed most - remained untouched by the success of government policies aimed at encouraging manufacturing investment. Ramos' vice-president was a former local film star and college dropout, one Joseph Estrada. Estrada had actually stood as part of the opposition ticket in the 1992 race but under the Philippines constitution, the President and Vice President are separately elected and not part of a joint ticket. Under Ramos, Estrada had served as Chairman of the PACC anti-crime commission.
Joseph Estrada won the 1998 election and took office on June 30 of that year. Following his election, President Estrada formed the LAMP party out of a tri-partite alliance that had helped him get elected. Some members of former President Ramos's Lakas Party defected to LAMP. President Estrada publicly declared that the battles against poverty and corruption would be his highest priority. Unfortunately, things did not turn out as optimists had hoped and during the Estrada period the country again went into decline. 

Present Political Environment
President Macapagal-Arroyo, the transitional president who came to power in January 2001 after former President Estrada "vacated" Malacañang Palace, is coming to the close of her three-year transitional term. Elections will take place for a new President, as well as for other branches of government in May 2004. 
The administration of her predecessor, President "Erap" Estrada was marked as a period in which the foreign business community was to all intents and purpose shut out from the consultative process. Famed for his mistresses and his nocturnal drinking habits, the Philippines was governed by a cabal of Estrada cronies known as the "midnight cabinet" - his drinking buddies. It was a period in which statesmanship and statecraft were consigned to the slagheap. 
This is the legacy that the hard-working, US-educated economist inherited. 
Her first State of the Nation address delivered in July 2001 outlined her vision for her administration with goals set in a ten-year time frame. Obviously during the three-year transition rule, she could do no more than lay the foundations. She called on all segments of society to put aside political bickering and unite behind the national agenda.
Her vision (some call it her "wish-list") called for massive new investment to pump prime the economy, to create new jobs and to eliminate poverty within ten years: Reduced to a one-liner her vision was for "jobs, education, home ownership as well as food on every table."
Unfortunately, her call to unity has not been heeded and, among the political core of society, she has remained a controversial figure throughout her presidency. Faced with such disunity, on December 30 2002 while vacationing in Baguio City she announced with much surprise to all that she would not seek re-election in 2004 and that she would pass the mantle to others to complete her vision. However, this announcement did not stop the politicking and the harassment she has received from known supporters of Estrada who have used their money and influence to destabilize the administration. 
Undoubtedly, her tenure in Malacañang has been the antithesis of her predecessor. She is known by all to be a hard-working president who, indeed, has sought to push through her reform program at every opportunity. She is intelligent, articulate and can handle herself with ease on the world stage. In many respects she represents the presidential ideal. However, she sits atop a political minefield in which she is often thwarted by vested interests who resist change at every turn and she works within a constitution which - framed in the aftermath of the martial law period - places unusual constraints on presidential powers.
It is a truism to repeat that in the course of an average lifetime, the Philippines has gone from a position as one of the most affluent of Asian countries to being one of the poorest. For that, the larger part of the blame can be placed on the Marcos years and the martial law period that not only saw the looting of the national treasury but also brought back corruption and nepotism as part of the way of life that exists until today. But there are other factors too. In part it is a legacy of the post-Marcos (1987) Constitution, which both reduced presidential powers and abandoned a two-party political system in favour of a multi-party one. It can also be blamed on the Filipino attribute to "forgive and forget." An attribute that is admirable in many ways yet which in the murky world of politics, is a liability and a millstone around the neck of any genuine reformists.

The Outlook
The Philippines is one of Asia's oldest democracies and the Filipino people have a long tradition of being outspoken and politically active. This free-wheeling democratic tradition can sometimes appear quite distinctive from the ordered political process in many other Asian countries, yet it is an essential part of the vibrancy of the Philippines to allow the free exchange and flow of ideas.
It is certainly true that the recent history of the Philippines has been marked by several periods of turbulence. Much of this turbulence can be directly traced to the Marcos period and the politicization of the military forces that occurred during that time. The present (1987) Constitution enshrines the principle that these forces - both the military and the police - are subject to the control and direction of a civilian commander in chief. This is the President of the Philippines.
Unfortunately a small group of former and present military personnel have not accepted this principle and continue to cause local disturbances. The verdict remains out on the root cause of the coup attempt of July 27 2003, however it came at a time during which the administration of President Arroyo was starting to bite into the vested interests that had controlled much of the wealth and political power for a long period of time. Many of these people were aligned with the Marcos family and with former President Joseph Estrada who, himself, is on trial for plunder - a charge which carries the death penalty. Yet to the amazement of many foreigners, he is allowed a benign form of detention in a hospital "cell" from which he continues to entertain his friends, give interviews to journalists and conduct broadcasts (and even visit his mother at her home in Metro Manila). His treatment has been contrasted with that of two former Korean presidents, Chun Doo-hwan and Rho Tae-woo who appeared in court in Seoul in prison garb and in chains for lesser crimes.
In fact the government of President Gloria Macapagal-Arroyo has enjoyed wide support from a cross section of local society including the business community, the national police and the armed forces. Increasingly, government officials are being subjected to lifestyle checks to ensure that their assets are in keeping with their positions. Significant progress has been made in the recovery of ill-gotten assets and their redistribution to the most needy sections of society. Progress has also been made in the battle against corruption and government inefficiency during her term.
Recent decisions relating to the redistribution of the funds from the taxes levied on the poorest farmers during the Marcos era as well as the recovery of part of the assets plundered from the country by Marcos could make a significant impact on poverty reduction in the Philippines if they are actually distributed as intended. At this stage however, while the first battle has been won, the war is far from over and the result remains indeterminate. 
The present administration has made a major effort to cut the "red tape" by simplifying government procedures and setting time limits on government transactions. In many agencies the number of steps required to obtain government permits has already been reduced significantly. However the results so far are patchy and standards of service in many government agencies remain far from ideal. "Fixers" are still required in most dealings with government. Certainly, there is fear that with a less vigilant administration there will be a roll-back of any improvement.
Importantly, the Department of Labor and the National Labor Relations Commission remains antagonistic towards foreigners and foreign companies and is cited by many companies as a deterrent to investing in the Philippines. 
Among the changes introduced by the Arroyo administration is the government purchase system. Government procurement has been simplified and the procurement process made more transparent. A new procurement law, Republic Act 9184 came into force in January 2003 although the enforcement rules are still being drafted. Much of the procurement process has been placed online with buyers able to compare prices offered by vendors.
The government has also set in place various feedback mechanisms making use of internet and cellphone technologies to encourage the public to report corrupt or errant government officials. The government is committed to the investigation and prosecution of government officials found to be involved in corrupt activities.
Despite the progress made on many fronts, it has yet to make any real impact on most foreign-owned operations in the Philippines. There remains a wide gulf between government rhetoric, which emphasizes the level playing field, and local practice, which is to protect local interests.
The export-manufacturing sector is heavily reliant on both the United States and the Japanese markets and indeed, during a period of shrinking foreign direct investment, those two countries remain the most significant foreign investors into the Philippines.
Yet both these economies have been sluggish. As a result, Philippines manufactured exports - much of which comes from the electronics sector - are not growing as intended. Exports currently make up around 40% of GDP with electronics accounting for two-thirds of this total. Earlier the government had forecast an export growth for 2003 of around 5% but based on the performance so far, is unlikely to meet this target. The prediction now is for a 3% growth target.

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Update No: 006 - (30/06/04)

A result at last
On 30th June Ms. Gloria Macapagal-Arroyo was sworn in as the 14th President of the Republic of the Philippines. Senator Noli de Castro was sworn in with her as vice-president. In a break from previous tradition, Mrs. Arroyo traveled from Manila to Cebu and the inauguration rites were scheduled for both places. She delivered her inaugural address at Rizal Park in Manila ahead of her formal oath taking in Cebu.
By good fortune or design (depending on your political perspective), Mrs. Arroyo begins her elected six-year term in a strong position. The final canvass shows she won by a margin of more than a million votes over her closest rival. Her vice-president is from the same political party and there is therefore every chance that the potential for friction over ideological issues can be minimized; the more so since Vice-President de Castro remains somewhat a political neophyte (no disrespect intended). Her party has a commanding majority in Congress and can control both the lower and the upper house. At the provincial level her Lakas -Christian Muslim Democrats won in 64 out of the 79 provinces contested. 
The Opposition is in disarray and there is no natural leader who can emerge and provide a rallying point. This is desperately needed for the sake of democracy if nothing else. There is much talk in opposition ranks of forging a broad coalition of forces opposed to Mrs. Arroyo but if that is all that unites them then the chances of such a coalition staying the distance is slim indeed.
Much can yet go wrong. Opposition politicians have still not conceded defeat and are claiming that the election was stolen from them. According to opposition sources, the true winner was Fernando Poe Junior who won with a margin of 600,000 votes. The evidence, they claim, is locked up in the ballot boxes. Horacio Morales, FPJ's campaign manager claims that the system can survive a slow count but not a fraudulent one. He is probably right on that score. The Opposition has the option to go through due process and seek to prove its claim. If it goes that route and if its claim is substantiated then the result will be "bloody mayhem". Should such a scenario play out then one more Filipino president may be seeking asylum in the United States.
But it is a big "if" and many see the Opposition tactic as a game of bluff in which it is seeking to smear the incoming administration for no other reason than it is a sore loser. It continues to hope people will take to the streets in massive numbers, but without the smoking gun they are unlikely to do so.
By far the easier alternative is to continue to destabilize the government as and when it can. While the official Opposition eschews violence and violent tactics - publicly anyway - there seems to be no shortage of fringe dwellers ready and willing to plant bombs, strew nails on the streets and even plot to assassinate government leaders. Is this the third way of seeking change that the Opposition speaks of?
Then there is the economy; the incoming government faces formidable challenges: the fiscal deficit may not yet be in crisis but the potential is there and not far below the horizon; the energy sector needs a complete shakeout and at the very least a removal of cross-subsidisations which result in the government and the general public paying for poor business decisions by the private sector through power rate adjustments. Public education needs a complete overhaul especially if the Philippines is to continue to grow its skilled and semi-skilled workforce; this though may be one area that has to wait until the government's budgetary position improves. Unskilled jobs are better than no jobs at all seems to be the prevailing sentiment in government for the moment. Population control continues to raise its head - at an annual rate of increase of 2.36 percent it is one of the highest in the world - yet for President Arroyo, this is one issue she prefers to duck on religious grounds and that is not expected to change.
We have not even started to talk about graft and corruption as an issue nor the related issues of law, order and due process - and their universal application.
President Arroyo wants a honeymoon. She is unlikely to get one. On 1 July she needed to hit the ground with her boots on and running. She speaks of reconciliation and of the need to extend an olive branch to her opponents. Some seem to be prepared to take up her offer including Senator Panfilo "Ping" Lacson and those associated with Pastor Eddie Villaneuva. Others appear to be less inclined towards reconciliation.

More of the same?
This is a presidency in which the first 100 days will set the direction for the next six years. In her inaugural address, Ms. Arroyo pledged tough reforms and offered herself as a Filipino version of Robin Hood - taking from the rich to give to the poor. Yet the vision she offered the Philippines was really more of a reprise on themes she has espoused before. At least in her speech she did move beyond the apple-pie rhetoric and announced very specific targets that would benchmark her performance: between 6 and 10 million new jobs (which will barely keep pace with population growth we might add), improving education programs and delivery including a computer in every classroom (never mind, that most of the rural Philippines lacks a telephone system that would allow connection to the internet), developing the "strong republic" transportation network, providing electric power and potable water in all barangays, decongesting Metro Manila through a decentralization program for government offices, development of Clark and Subic bases into modern regional logistic centres, automating the election process (sound familiar?), ending the conflict in Mindanao and "uniting the forces of the EDSA popular uprisings".
There was little in her address that raised eyebrows though many were surprised that she did give specific numbers for targets to achieve. Some commentators focused on the fact that she was clearly entrenched for a full six-year term and that any aspirations she espoused prior to her election to continue as a transition president and give up her full-term in favour of a parliamentary system had obviously been shelved - some saw this as another broken promise but to be fair, very few thought she would do other than to serve a full term.
"Uniting the EDSA forces" is code for reconciliation with the political opposition; however there was no line drawn in the sand that would have allowed a fresh start. In the circumstances, the opposition continues to oppose. Some hoped that she might have started the reconciliation process by a measure of magnanimity to her former foes in the Filipino spirit of forgiveness, but at the same time setting rigorous standards of conduct for the future - and of course enforcing them. There was no such gesture.
Eyes are now watching for the new Cabinet appointments but no timetable has been announced as yet. She has some good people already surrounding her, but also no shortage of dead wood. Will she select a Cabinet whose members are selected not only on the basis of being the best and the brightest but also those who will join in the war on corruption? Or will she show partiality to some of her political cronies who want their turn to put their snouts into the public trough? The answer is that we don't know for the present but when the new Cabinet is announced, it will tell much of what can be expected from the new Arroyo government.

Lakas-CMD has the numbers
In the final tally the ruling K-4 coalition took eight of the twelve available seats in the Senate and won in 181 out of the 212 congressional districts giving the ruling Lakas-CMD dominance both over the ruling coalition and Congress as a whole. The Lakas party won 91 seats in its own right while the Liberal party increased its showing from 20 in the old Congress to 29 seats in the new one. These two parties thus have now an absolute majority. The Nationalist People's Coalition, the party of SMC chair Eduardo Cojuangco, holds a further 58 seats. The NPC generally votes with the administration.
The Opposition parties did not fare well at all. Senator Edgardo Angara's Liberal Democratic Party - the party that dumped Senator Lacson in favour of support for Fernando Poe Junior took only 15 seats in the house.
At the provincial level, K-4 won in 64 out of 79 provinces and with 41 of the elected provincial governors belonging to the Lakas party. The NPC and the LP won nine provinces each while the LDP won 14 governorships. Of the 119 elected city mayors, 83 are part of the K-4 coalition.

Reconciliation remains in doubt
Despite being decimated in the polls, the Opposition remains in a defiant mood and opposition leaders continue to claim that the election was "stolen" from them. They appear to blame in equal measure the administration and the local press for not allowing the "true facts" to come out. In such circumstances the prospects for early reconciliation between the government and opposition camps may prove elusive.
The opposition thesis is that the presidency has been stolen not once but twice by Mrs. Arroyo. Bearing in mind that under the Filipino Constitution, the president and vice-president run on separate slates and can be (and often are) from different political parties, the replacement of President Estrada by Mrs. Arroyo back in January 2001 represented not just a change in the presidency but the replacement of an entire administration of one political group by another. The group that came into power in 2001 by extra-constitutional means then used the advantages of incumbency to obtain a second term for Mrs. Arroyo, a scenario that was not foreseen under the 1987 Constitution that envisaged each president serving for a single six-year term. To this extent, neither the 2001 shift in power nor the 2004 reaffirmation of President Arroyo were "natural" in terms of the Constitution. At least, so says the Opposition.
This argument appears to go to the heart of opposition claims that the presidency has been fraudulently won by Mrs. Arroyo - although they go on to argue that not only did the ruling party use the advantages of incumbency to deploy massive government resources to prop up their candidate (a claim that appears to have some basis in fact) but also that there was fraud on a sufficiently wide scale to tip the result in favour of their own candidates. Had truth prevailed they maintain, then the results would show that FPJ had won the presidency by almost 600,000 votes and Senator Loren Legarda the vice presidency by more than 700,000 votes.
According to KNP President (and Makati City mayor) Jejomar Binay, even after the proclamation, the Opposition would continue to raise fundamental questions and would not acquiesce in what he termed a "travesty of democracy".

Security and destabilization continues to be issues
Over the past week police have found and defused three bombs in Metro Manila. Two bombs were discovered outside government offices - at the main office of the Department of Interior and Local Government (DILG) building on EDSA in Quezon City and in the Department of National Defense (DND) building inside Camp Aguinaldo also in Quezon City. A third bomb was discovered last week outside the Sanctuario de San Antonio church on McKinley road in Forbes Park, Makati City.
However the spate of discoveries has fueled fears that anti-government forces could be stepping up their attacks and seeking to cause mayhem following the defeat of Opposition candidate Fernando Poe Junior in the election. 
A further incident that has angered Manila residents was the scattering of metal spikes on main thoroughfares in Metro Manila and which damaged a total of 131 vehicles. The spikes were scattered along major highways in the metropolis including EDSA, where 36 spikes were recovered, Roxas Boulevard, and areas in Quezon City including Katipunan, Aurora Boulevard, and Boni Serrano. 
Muslim lawyer Ely Velez Pamatong, a disqualified presidential candidate in the May 10 polls, admitted in a television interview that he was behind the metal spike attacks. He claimed the attacks were meant to express his disappointment over his disqualification by the Comelec. He also warned he and his supporters would launch similar spike attacks in the metropolis and would torch schools but in the same breath stressed that he does not see his actions as violating any laws - rather it was a form of protest. Following the interview, Pamatong went into hiding but was subsequently arrested in a police dragnet. He faces criminal charges and possible disbarment over his statements and actions.
Subsequently the finger has been pointed at Ms. Linda Montayre, a leader of the leftist People's Consultative Assembly and an outspoken critic of the Arroyo administration aligned with the opposition, as the main instigator of both the three bombing attempts as well as the tyre-spiking incident. In fact according to police reports, the original plan was to assassinate House Speaker Jose C de Venecia Junior but this attack did not follow through since none of the group involved was capable of operating a rocket-propelled grenade that was to be used in the attack. Montayre was implicated by Pamatong who has claimed that former President Estrada was also involved.
 
The Economy
While the administration's political and economic agenda for the next six years was to some extent spelled out during the presidential inaugural address on 30 June, government officials have been floating a number of "trial balloons' conditioning the public and business in what to expect from the incoming government. According to Socioeconomic Planning Secretary, Romulo Neri, microfinance reforms, increasing investment into infrastructure - much of which will be on a Build-Operate-Transfer (BOT) basis and increasing the efficiency of the supply chain will be top priorities.
According to Mr. Neri the government is looking at increasing loans for small and medium enterprises (SME) under its SME Unified Lending Opportunities for National Growth (SULONG) program. The Arroyo administration had earlier earmarked some P10 billion for the SULONG program. Mr. Neri said the objective would be to triple the amount available to P30 billion.
Further investment into tourism is also to be given priority as a means of attracting more visitors to the Philippines and creating jobs for semi-skilled workers.
Mr. Neri also said the government is looking to put more resources into Mindanao, which has the potential to become a major food exporter in East Asia. "We may undertake more developmental efforts for Mindanao and do what we call 'catching-up' strategies in health, education and poverty reduction," he said.
Mr. Neri, also said the government was looking to keep the prices of basic commodities such as food and transportation within "reasonable" levels and to keep wage levels from spiraling to ensure that the Philippines remained competitive.
On the fiscal front Mr. Neri stressed the need for the next administration to press ahead with the indexation of taxes on 'sin products' (alcohol and tobacco) in order to beef up revenues. Disposing of state-owned power assets at competitive, "not fire sale prices" was another key task given the heavy debt burden that the National Power Corporation imposes on the government as well as the need to build additional capacity to avoid future electricity shortages. To that end he stressed the need for Congress to pass the Transco Franchise Amendment Bill in order to facilitate the leasing of the country's transmission grid. Power distribution should also be reformed with more operators given access to this business.
Improving infrastructure was another area the government needed to work on with Mr. Neri arguing that it need not involve large dollops of government money. Instead project-based financing should be utilised.
At the micro level Mr. Neri has spelled out a series of reforms and measures for specific industries designed to boost the economy without putting pressure on government resources. These included more liberalisation of the airline industry to aid tourism, clearing obstacles facing the mining industry, taking steps to lower the high cost of medicines and putting more focus on housing and construction in order to provide more jobs. Currently the number of entrants coming into the labour force each year is greatly outnumbering the number of new jobs being created. 
Other priority areas for the next government were lowering the relatively high cost of key foodstuffs such as rice, promoting mariculture, and providing greater skills to the rural poor. 
Major economic reform however could not take place without political change and to that end Mr. Neri called for constitutional change with a switch to a unicameral parliamentary style of government and election campaign funding limited to the public purse. 
With rural poverty at higher levels than in urban areas, more emphasis was needed on diversifying agriculture to give farmers, such as those working in the coconut industry, off-season livelihoods. 
Moves to build new roads and rail lines to help decongest Manila and to attract fresh foreign investment were other areas the government needed to focus on to assist the economy, Mr. Neri said. He noted that to grow the economy at a sufficient rate to significantly reduce poverty levels, investment levels would have to be raised from the current 19 percent of Gross Domestic Product (GDP) to about 28 percent over the next two years.
Lastly, the new government needed to improve law and order and moral values by pushing ahead with peace talks with the Moro Islamic Liberation Front and the Communist National Democratic Front; giving local government units more control over police personnel in their areas; and lifting the moratorium on the death penalty for serious crimes. 
Putting these measures in place should help the economy grow by 7 percent or more each year up to 2010 and cut the incidence of poverty from 34 percent of the population to about 17 percent.

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AVIATION

Airbus eyes Philippine re-fleeting pacts


France's Airbus (ABI.YY) said it hopes to win a three-year re-fleeting program of the two largest Philippine carriers set to start this year, the Philippine Daily Inquirer reports. 
"We made a very competitive offer in terms of cost, reliability and passenger appeal," said Anthony Phillips, regional communications representative of Airbus. 
He was referring to the bids to upgrade the fleets of Philippine Airlines Inc. (PAI.YY) and Cebu Air Inc., the airline unit of investment holding group JG Summit Holdings Inc. (JGS.PH). 
Philippine Airlines is on an Airbus list of 28 companies that have committed to use the A320 aircraft in the future. The airline's fleet of 30 aircraft for local and overseas routes consists of Airbus and Boeing planes. Its leases on more than 10 of its aircraft are to expire starting this year. 
Cebu Air said it would retire this year 12 DC-9 aircraft that are 25 to 27 years old and replace them with 14 units of the 125-seat Boeing 717-200s or 134-seat Airbus A319. It said it would spend about US$300m for re-fleeting. 

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