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PHILIPPINES


 

 

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 80,574 77,076 71,400 43
         
GNI per capita
 US $ 1,080 1,020 1,050 135
Ranking is given out of 208 nations - (data from the World Bank)

Books on The Philippines

REPUBLICAN REFERENCE

Area (sq.km) 
300,000

Population 
84,619,974

Capital
Manila

Currency 
Philippine peso (PHP) 

President 
Gloria
Macapagal-Arroyo


 


Update No: 032 - (31/08/06)

August should have been a good month for the Philippines. The economy-at least in the short term-is performing better than many people dared hope for. GDP growth in the first half year was above the 5 percent level, the budget deficit has been reduced below the target level earlier anticipated and exports continue to grow at a robust pace. The Philippine peso is now at a four-year high against the US currency and the government is claiming that it is awash with funds to pour into new infrastructure projects.
But with the smell of an election in the air, is it any wonder the government is talking up the economy? In Cebu last week for a business summit sponsored by the Mandaue Chamber of Commerce, House Ways and Means Chairman Hon. Joey Salceda, one of the most influential people in Congress and a close ally of President Arroyo was ebullient. In an address, to an audience of local business and government leaders and clearly meant as the opening shots of an election campaign, he informed his audience that the government was awash with funds and had Php1.2 trillion (£13 billion approx) available to local government for new infrastructure projects. "We will solve the problems of the country by throwing money at them" he told his audience. No need for foreign investment was the message-with a record inflow of remittances the country is awash with savings that can be reinvested in the country.
Leaving aside an analysis of the numbers for the moment (which are impossible to verify anyway) and welcoming the fact that the economy does appear to be improving, why are foreign companies not beating a path to the Philippines in order to invest? Possibly it is because foreign investment is no longer welcome in this country, which would make it unique in the world, or perhaps there are other reasons to consider, like a phenomenal reputation for world class corruption?
Let us look at some of the issues that have made international headlines over the past month.
First of all there is the issue of the role of the Professional Licensing Board in leaking the questions (and the answers) from two papers (from what are acknowledged as being the most difficult subjects in nursing (medical-surgical and psychiatric nursing) ahead of the June nursing examinations to candidates from a number of cram schools which, when revealed by whistle blowers, threw the entire credibility of the professional licensing system into question. This was not the first time it had happened in professional exams and the solution adopted in this present instance was the same as that adopted the last time (involving bar exams) a scandal broke. It was not a matter of having the candidates retake the discredited test papers, rather the results from these two papers were simply ignored and the overall results recomputed. 
As a result, the PLB has revealed that instead of some candidates flunking out, a further 499 examinees were moved from "failing" grades to "pass" grades. In the process, the pass rate increased from 41.24 percent to 42.42 percent. The rest of the world, and much of the Philippines we should hasten to add, stands aghast at this act of bravado which has called into question not only the efficacy of Philippines nursing licenses but the entire professional licensing system of the country. Doors are closing rather than opening. Is it any wonder?
Next came the oil spill off the Guimaras in Central Visayas area that has now been elevated into a national calamity - a calamity that was entirely avoidable we might add, but which appears to have done long term damage to the marine environment of the area.

NOT THE RULE OF LAW BUT THE RULE OF THE GUN
Another issue to hit the headlines was the controversy surrounding the take-over of the port operations at Poro Point, a converted US military base in Northern Luzon. In early August, a group of armed men, believed to be in the employ of Ilocos Sur Governor, Luis Chavit Singson, raided the Poro Point seaport. Governor Singson, together with his allies on the boards of the Bases Conversion Development Authority (BCDA) and the Poro Point Management Corporation (PPMC) have been agitating for some time to nullify the contract made in 1999 with an overseas private investor Bulk Handlers Inc. (BHI) claiming that the deal was disadvantageous to the government. This is despite the fact that since BHI took over port operations overall port revenues and payments to government have increased significantly.
BHI manages the Poro Point port and associated bulk terminal on the strength of a 25-year contract. In 1999 the PPMC and the BHI formed a joint venture, the Poro Point Industrial Corp. (PPIC), to manage the port and build an industrial park in the former US naval facility. The industrial park has not been built but only because the BCDA has not turned over the 80 Ha of land for the facility that it was obligated to do so under its own contractual obligations.
This is not the place to go into detail of this complex dispute except to note that instead of allowing commercial disagreements to be resolved by legal means, politicians appeared to be using armed agents Russian Kremlin style, to force their own solutions. But August brought more of the same.
Some time ago, PNOC Exploration Corp. chose a consortium led by Mitra Energy Ltd of Singapore as partner for an oil extraction project in Camago-Malampaya off the western Philippine island of Palawan. Camago-Malampaya natural gas is now being used for electricity generation on the island of Luzon. Shell Exploration, a major partner in the development of the Malampaya Gas Field chose not to involve itself in the extraction of the associated oil and the project was rebid to other interested parties. Mitra, which is believed to be of Malaysian origin, won the bid. Based on Mitra's estimates, 41 million barrels of oil can be extracted from the reservoir over four years, with the cost of the project estimated at $684 million. 
Production of oil was due to start before the end of next year. That was until the Administration of President Arroyo stepped in and nullified the contract. Executive Order 556 effectively terminated Mitra's rights to take part in the development of oil deposits in the Camago-Malampaya field. The contract was only signed back in June this year. Mitra, we might add, is rumoured to have links to local political leaders on Palawan who, shall we say, are not exactly considered part of the Administration's camp. Could this have been a factor in the contract cancellation?

NO MORE INTERNATIONAL ARBITRATION
Finally, this week came the news that the administration of President Gloria Macapagal-Arroyo had rejected the decision of the Singapore Arbitration Court in relation to the mothballed Ninoy Aquino (Manila) International Airport Terminal 3 that would have allowed the PIATCO Consortium - which includes both local and German investors - to take over and operate the terminal. The Singapore Court ordered the Filipino Government to return NAIA3 to the consortium for failure to pay for the earlier takeover as agreed. 
Piatco went to arbitration following a decision by the Supreme Court that voided the contract over alleged irregularities and awarded Php3.3 billion to PIATCO as compensation. That amount has not so far been paid. Why? Has someone not been paid off?
A senior government spokesperson has said that the Philippines would only follow the decisions of local courts and not those of foreign courts. So much for arbitration .- foreign investors will of course take note (not even the communist countries took this line about international arbitration). 
We could go on and talk about government spokespersons coming out and railing against US energy giant, Mirant for selling its Filipino energy interests without paying local taxes on the sale (which because it is selling on foreign exchange it has the right to do). But we won't talk about that nor other matters that deflect us from the main point in these investor related problems that appear to have surfaced in recent weeks. Is the government angling for a cut in order to give the green light for Mirant to divest?
Why suddenly is there a spate of activity surrounding foreign contractors with legally binding deals and who have committed to invest significant sums of money in the Philippines? Some have already done so and others are about to do so. Could it have anything to do with the fact that elections are due next year and politicians are anxious to fill their war chests so that they can run the campaigns needed to keep them in power? 
Of course, we can only speculate but one explanation for the present uncertain environment is that in each of the cases cited it may be that progress is being blocked because somebody somewhere needs to be cut into the deal. Yes, there are contracts and then there are the deals that are behind the contracts and sadly in the Philippines a legally binding contract is only as good as the government that is in power. If power changes hands (or if those in power are running short of cash), expect the deal to change. That is democracy, Philippines style.

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