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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)

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Update No: 043 - (25/07/07)

With the mid-term elections now all but over bar the shouting, President Arroyo has entered the final three-years of her nine-year term of office by pledging to make these her "legacy years". Her avowed aim is to put the Philippines on a growth path to bring it to First World status within 20 years. 

While the domestic economy is certainly on an upswing the Philippines is not out of the woods yet by any stretch of the imagination. Look no further than the ongoing problem of the budget deficit which the government has vowed to eliminate by 2008-two years earlier than originally intended.

Sadly, the progress made on the economy has been offset by a deterioration in the human rights record of government. Things have become so bad that the Supreme Court has been forced to intervene in an effort to redress the balance. Read on.

Economy upbeat but problems remain on the revenue generation side
The national government exceeded its programmed budget deficit for the first five months of 2007 by some PhP10 billion, casting doubt as to the ability of government to meet its full year deficit target and causing panic among finance officials that has already cost the job of Bureau of Internal Revenue (BIR) Commissioner Jose Mario Buñag. Preliminary figures show that in the first half of 2007 the government incurred a budget deficit of PhP37.7 billion. This was higher by PhP6.4 billion-or 20 percent-than the programmed deficit ceiling of PhP31.3-billion for the period. For the whole of 2007, the target is to limit the deficit to PhP63 billion, or slightly lower than last year's PhP64.8 billion.

Tax collection by the Bureau of Internal Revenue (BIR ) amounted to PhP333 billion in the first six months of the year, short by PhP40 billion from the goal of PhP373 billion for the first half. Collection by the Bureau of Customs (BOC) reached PhP92.3 billion, down by PhP13-billion from a target of PhP105.3 billion.

Fitch Ratings predicted that the fiscal deficit could exceed PhP100 billion this year, and said it would keep the country's credit ratings on hold. Fitch's credit rating on the Philippines is two notches below investment grade. It has a stable outlook on the rating.

"By hook or by crook" appears to be the attitude of the Finance Department. To meet its target this year, the government will rely on asset sales and, in particular, the sale of its stakes in electricity retailer Manila Electric Corp. and food conglomerate San Miguel. These sales will raise around PhP55 billion from privatisation proceeds. The government recently sold its stake in Philippine Long Distance Telephone Co. for PhP25 billion. However leading rating agencies have already warned that government asset sales are no cure for the deficit problem.

Impatient over the widening budget deficit, President Gloria Macapagal-Arroyo has given her economic team an ultimatum to meet the 2007 tax and tariff collection targets, or face the risk of being dismissed from their posts. At a meeting between the president and the heads of the Department of Finance, Department of Budget and Management, BIR and BoC it was decided that the PhP63-billion deficit target for 2007 would be maintained despite collection gaps in the first half.

Nevertheless not all agree with this approach and senior economic managers have clashed over the issue of the fiscal deficit, with the National Economic and Development Authority (NEDA) saying growth should not be sacrificed in order to attain the fiscal goals. By contrast the Department of Finance (DOF) insists that the PhP63-billion deficit ceiling should be met this year in order to achieve a balanced budget next year, even it means clawing back in key pump-priming areas. 

Socioeconomic Planning Secretary Romulo Neri, who is also the director general of NEDA, said the economy can well afford a PhP100-billion national government budget deficit, representing around 2 percent of the gross domestic product (GDP) this year. "It is still manageable," he said, while claiming that the DOF's target is ambitious.

Otherwise the economic outlook is robust
The Philippines economy was reported to have grown by 6.9 percent in the second quarter on the back of a 5.4 percent growth for 2006 (GNP at 6.2 percent). This is the first time that the country has recorded three consecutive years of over 5 percent growth since the 1970's. Reviews on the Philippine economy from leading financial publications, quoted in the Government's Economic Overview paper-albeit carefully selected- describe an economy that has turned a corner and is "finally on the mend". Indicators of renewed business interest and increased optimism are most visible everywhere: from surveys of business executives, to hotel occupancy, to the stock market's recent performance.

The Philippines is back in the investor community's radar screen after having fallen off for many years. The GDP growth performance sustained at 5 percent growth and above in the past three years, is beginning to track the rest of emerging Asia, aside from China and India. And we are not likely to see any let up in the near term. This growth is even higher by at least half a percentage point when reckoned in terms of GNP. This robust and resilient growth was achieved on the back of a major fiscal adjustment and relative political and governance "unease". 

At the same time the hurdle rates to investment is the lowest it has been in years. T-bill and ROP spreads, driven by fundamental improvement in macro risk profile and an increase in global liquidity looking for investments in emerging markets. Gross global capital flows surged from approx. 5 percent in 1995 to nearly 15 percent of GDP last year. As a result, the macroeconomic risks have been significantly reduced.

There is much more about which we could write but the overall picture is clear enough. Foreign investors are once again taking note of the Philippines.

Not yet time to cheer… 
Sadly, while progress has certainly been made in returning the Philippine economy to the growth path it was tracking prior to the 1997 Asian Financial Crisis (and which has been much in the news of late since that event occurred just ten years ago this month), the same cannot be said about a maturation of political democracy in the Philippines. Indeed quite the reverse. The country appears, under the Arroyo Administration, to be locked in a zero sum game where economic progress is inextricably linked to political backsliding and the erosion of civil liberties. Leaving aside the issue of election-related violence about which we have reported previously, this is evident in the massive number of extrajudicial killings that have swelled since 2001 when President Arroyo took office.

The Commission on Human Rights has placed the number of victims at 403 from 2001 to May 31 2007 while the human rights alliance of non-governmental organizations, Karapatan, has reported 863 deaths. Either way, they are chilling numbers that have caused the judiciary to sit up and take note. . The vast majority of cases remain unsolved and the government has been widely criticised for tolerating a climate of impunity.

The wave of killings and kidnappings continues and despite giving lip-service to the need to bring perpetrators to justice, the government appears to lack the will to do so. No less than the Chief Justice of the Philippines, Justice Reynato Puno, has intervened through convening earlier this month, a two-day legal summit to look into what the Court could do pro-actively to address the issue. The summit brought together a "rainbow of interests" representing civil society, the legal profession (including the justices of the Supreme Court who headed the various working groups), law-enforcement agencies and the executive.

In convening the Summit, Chief Justice Puno sought to assert the expanded rule-making powers of the Supreme Court given under the post-Marcos 1987 Constitution, specifically those provisions designed to curb any abuse of power by the executive and the legislature.
In opening the meeting Justice Puno claimed that the executive and legislative branches of government had become inept in defending human rights, which he described, as the most important of all rights. He cited the need for Filipinos to revive their righteous indignation: " ...a large slice of our people appear to have their concern over these killings and disappearances already interred by time. Their sense of shock has been anaesthetized by the escalation of the killings and disappearances."

"By calling this summit, we are affirming our belief in human rights not only in the abstract. We are affirming that before the universal altar of human rights. There can be no atheism, or agnosticism on our part." Justice Puno asserted.

"The first and foremost of human rights is the right to life. It has long been accorded universal status for the existence of all other rights is premised on the preservation of life. The extrajudicial taking of life is the ultimate violation of human rights. It cannot be allowed anywhere, and it has to be resisted everywhere. Extrajudicial killings also constitute brazen assaults on the rule of law. It is the constitutional duty of our judiciary to protect the rule of law and we will link with all efforts to prevent its erosion," he said.

Clearly the majority of participants believed that the executive had a case to answer. The meeting called for the adoption of a number of measures including new laws that would empower investigators to search state and private premises for the victims of forced disappearances. 

While militant groups have blamed the military and the government for the spate of unresolved killings, the military claim that many of the alleged cases of extrajudicial killings and abductions were also a result of an internal purging within the communist movement. Many see this as a feint and an effort to place the blame elsewhere. Few buy this line of reasoning.

To stop the violence, the Supreme Court said it is bent on using its rule-making power under the Constitution to protect and enforce constitutional rights. Participants pushed for the enactment of a law that would criminalize state-perpetrated enforced disappearances of alleged critics of the government. Among the key recommendations adopted:
· A workshop resolution that the President be asked to issue an order to stop the extrajudicial killings and enforced disappearances; 
· Empowering probers to search government/private premises for victims of enforced disappearances, and making killings of journalists/judges/activists a new crime separate from murder/kidnapping; 
· Believing that the Commission on Human Rights was considered to be more trustworthy and responsible than the Department of Justice "which has tended under the Arroyo Administration to expedite criminal action against perceived political opponents of the president" it was recommended that the prosecution powers of the CHR be expanded (Justice Secretary Raul Gonzalez was severely criticised for alleged repressive use of the department's powers to promote the President's political interests); 
· The High Tribunal was also asked to discard or at least circumscribe the doctrine of absolute immunity of the President, adopt the doctrine of command responsibility as enunciated in the Rome Statute, and exercise its rule-making power as defined in the Constitution;
· It was also suggested that the Supreme Court seriously consider the writ of Amparo, an order first applied in Latin American countries that not only compels authorities to produce the body of a missing person (as in a writ of habeas corpus) but also compels state agents to exert efforts to find the missing person.

Chief Justice Puno also noted that the high tribunal has designated about a hundred Regional Trial Courts (RTCs) nationwide to hear, try, and decide cases involving killings of judges, political activists, and members of the media. He said the stage was being set for the possible rewriting of Philippine legal procedures to make these more helpful to the victims, more forceful against the suspected perpetrators, and more demanding of government agents assigned to solve such cases. New rules, he said, could be introduced to the legal system to address the dead ends and blank walls often impeding the investigation or prosecution of politically motivated crimes.

While the results of the summit have been described as encouraging, participants have scored the government's hard stance against what it considers to be its political enemies. In particular, a number of participants representing the executive and law-enforcement branches of government dissented from the majority report.

These dissenters were in fact the very delegates from the military and the Philippine National Police who had been tagged earlier by the Melo Commission as responsible for extrajudicial executions mainly of leftist activists within their areas of responsibility.

In fact, while there is hope that the Supreme Court initiative could act to redress the balance, there is little hope that it will do so unless there is a change of heart within the executive. Indeed some observers have commented that the summit ended by finding the citizenry "with less liberties than before and more vulnerable to law enforcement agents acting on behalf of a policy that gives priority to protecting the state and the public from terrorists than to respecting fundamental human rights."

In particular there is widespread concern over the Arroyo administration's eagerness to implement a new anti-terrorism law, which could be prone to abuse and misinterpretation. What is needed, according to them, is a law that not only respects human rights, but more so, mandates the state to protect and defend it. Revelations surfaced recently, that a paper submitted to the president in 2001 after she assumed office called for a pro-active policy to decimate the leftist movement Bayan Muna after it scored well in the 2001 election, appears to give the lie to denials that extrajudicial killings have been sanctioned by the state.

That the government remains obdurate in its approach and refuses to listen to the voice of reason can be seen from the manner in which Malacañang has deflected calls from summit for President Macapagal-Arroyo to order a stop to extra -judicial killings with a promise to take a "serious look" at its recommendations. One senior spokesperson for the president undermined the seriousness of purpose when he downgraded the summit recommendations to a "complementary effort" to what he claimed the executive branch had been doing all along.

So what is the model?
Clearly when the president talks of making the Philippines a First World country she is not thinking of the US, British or Australian model. Western-style democratic norms of behaviour seem to have been thrown out of the window. Perhaps she is thinking more along the lines of emulating China: allowing the economy to do its thing while asserting tight political control. Whether she can recork the genie once it is out of the bottle is a doubtful proposition at best. 

While we must give credit where it is due by giving President high marks on the manner in which she has managed the economy so far; to many her legacy would be far more credible were she able to work her economic charm to the benefit of the country as a whole. As things stand now, her legacy appears to be a very mixed bag indeed.

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