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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)

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Update No: 039 - (28/03/07)

The Philippines is in the middle of election season and while the presidential office is not in contest, the President is taking it all very seriously. The opposition forces appear determined to mount one last effort to oust President Gloria Macapagal-Arroyo through gaining the numbers in the lower House of Representatives to force an impeachment process. All 250 seats in the Lower House are at risk in the election and a two-thirds majority would be needed to start and then vote on an impeachment complaint.

The opposition could not muster the number last time around and despite the fact that President Arroyo remains distinctly unpopular she has shown she has the machinery and the political will to fight. Machinery is what counts here-machinery and money; and with access to all sorts of slush funds-most notably the profits from the Philippine Amusement and Gaming Corporation (PAGCOR for short), the government body that controls gambling activities in the Philippines-the war chests are full. Congressional elections are fought at the local level and President Arroyo has been skilful at building support among local provincial leaders. It has been a clear case of "those who are not with us are against us" with staunch supporters gaining access to project funds on a grand scale, fence sitters persuaded to move to the Administration camp with promise of financial support and die-hard oppositionists left out in the cold. It is Machiavellian principles at their most raw. She will likely win.

True, politics in the Philippines-still tribal in nature after more than 100 years of democratic government in one form or another (independence from Spain was first declared in 1898 but proved to be short-lived; following the Spanish American War, the Philippines was ceded to the United States which finally granted independence in 1946)-has remained anarchic and based on personalities rather than principles. For this reason many individuals from all walks of life have hearkened back to the Marcos years as, if nothing else, at least bringing some order to the chaos. Many believe that history may now be repeating itself.

President Arroyo in full campaign flight, declares that the masa have never had it so good and that her government is improving democratic space in the Philippines. When the latest opinion survey suggested that despite buoyant economic times, more than 40 percent of Filipinos had experienced hunger at least once in the past months. "I also sometimes skip meals" the President quipped (rather too much like Marie Antoinette).
The flippancy and the dismissiveness of any hint that the times are less than rosy concerns many people. What to do about it is another matter since no alternative leader dare emerge at the present time. Those that do dare to criticise are dealt with swiftly and vengefully.

A de facto martial law?
Many would believe that President Arroyo is now turning the country back to the Marcos era with a de facto martial law in force. That may be overdramatizing the situation and carrying it a little too far in the other direction, but there are disturbing elements to the manner in which human rights and the dispensation of justice are being handled in this country under the Arroyo Administration.
Outspoken critics of the regime are finding that their personal freedom and, indeed, their very lives may be in danger and the Philippines is now regarded as the second most dangerous place on earth for journalists after Iraq. Depending on whose numbers you believe, anywhere between 300 and 900 journalists and leftists have been summarily executed since Ms. Arroyo came to office. Both the locally-appointed Melo Commission as well as UN observers visited the Philippines have pointed the finger at the military and, on chain of command principles, have implicated President Arroyo (as commander-in-chief) claiming that the government is doing little to stop the killing.

The government, as one would expect, denies the claims and counters that the killings are due to leftists killing other leftists and that the "war on insurgency" will not only continue but intensify.

In what many see as a further act of defiance (not to mention an attempt to disorient her political opponents) on March 6, President Gloria Macapagal-Arroyo signed into law Republic Act 9372 or the Human Security Act of 2007. The new law criminalises terrorism and allows authorities to arrest terror suspects without warrants and detain them for three days without charges. Under the law, authorities may also eavesdrop on communications among suspected militants. It also strengthens the government's pre-emptive capability to check the conspiracies of harm and mass murder, and contain the movement of arms and funds to sow mayhem.

The maximum punishment under the law is 40 years in prison. Any person wrongfully detained by authorities could collect PhP500,000 in damages for each day of detention. Journalists, lawyers and doctors could not be compelled to disclose details about militants. 

While both the US and Australia have expressed support for the new law. Local left-leaning groups, have denounced the passage of RA 9372 saying it brought back the "the dark ages for civil liberties and democracy." 

Leftist party-list groups, which are seeking representation within the House of Representatives, have criticised the new law fearing that it will be used against legitimate and legal opponents of the regime. The also complain about the presence of army troops in some of the poorer areas in Manila, Quezon and Caloocan allegedly to harass them in the run up to the May elections. They claim that soldiers have been harassing residents and asking people not to vote for the leftist groups. The soldiers were also accusing leftist groups of fronting for the communist New People's Army and the Communist Party of the Philippines, the party list groups said. 

In response, the military has countered that it would deploy more soldiers in urban villages that are considered "problematic areas." The Commission on Elections also argues that the deployment of soldiers in Metro Manila is justified because of intelligence reports about terrorist groups roaming various communities in urban areas. Whatever the true reason, once again it sends all the wrong signals. No wonder the international perception of the Philippines is that of a country of high risk.

The economy is on a roll-or is it?
Certainly the President can point to an improved fiscal performance and in investment upturn. But then when you hit rock bottom, any positive number looks good. FDI hit just over $2 billion in 2006 which was more than double that achieved the previous year but compared to elsewhere in Asia, this country still has a long way to go.

President Gloria Macapagal-Arroyo would like us to believe the economy is on a roll. Certainly, incumbent governments the world over manipulate their statistical data to paint themselves well but the most recent macro-economic numbers from the Philippines are certainly encouraging. Aside from reducing the fiscal deficit to manageable proportions the latest numbers show:
· Exports surged by more than 27 percent in January;
· Dollar reserves are at a record high of US$24.4 billion;
· Inflation is in retreat and slowed to 2.6 percent in January;
· Vehicle sales are again on the rise.
· Net inflow of foreign portfolio investments during the first two months of the year were up by more than 50 percent on the same period last year.

By way of further build up she cites the large investments recently made by Japanese car manufacturer Toyota, Korean firm Hanjin, and Filipino pharmaceutical firm United Laboratories (Unilab).

On March 15, Toyota broke ground for its fourth production plant in the Philippines that will produce R-Type transmissions for multi-purpose vehicles such as the Hilux and Innova. Toyota Autoparts Philippines Inc., the local unit of the Japanese car maker, will invest PhP5.6 billion in the new facility, brining its total investment in the country to PhP11 billion.

President Arroyo also led the inauguration of the PhP1.7 billion Amherst Laboratory, the modern facility of Unilab in Laguna, which sits on a 35,000-square-metre lot. Hanjin, on the other hand, continues to construct its US$1 billion shipyard in Subic Bay.

"All these investments, such as those of Toyota and Hanjin, and that of Unilab, show confidence in our economy because of the way we handled our budget," President Gloria Macapagal-Arroyo said, noting the improvement in the government's fiscal performance.

Because of the rising confidence in the economy, the inter-agency Development Budget Coordination Committee (DBCC) forecasts that the gross domestic product will grow within a range of 6.2 percent to 7.3 percent in 2008, faster than the expected expansion of 6.1 percent to 6.7 percent this year. This estimate is higher than those of most other forecasting agencies.

But then there is another side to the picture…

A survey by the Hong Kong-based Political and Economic Risk Consultancy (PERC) has tagged the Philippines as the most corrupt in 13 economies in Asia. In a grading system with zero as the best possible score and 10 the worst, the Philippines was given 9.40 in this year's survey, pulling it down to the bottom of the list among Asian countries and past Indonesia, which was ranked the most corrupt in the previous survey. In the 2006 survey, the Philippines received a score of 7.80.

"The Philippines has the distinction of being perceived in the worst light this year," said the PERC, which conducted the survey in January and February. 

Instead of viewing the results of the survey as a challenge, President Gloria Macapagal-Arroyo, a former economist, choose to be dismissive questioning its methodology and saying the political analysis was based on old data. "They won't work on up-to-date data and they look only at newspapers," she said. Of course, the actual survey was a little more sophisticated than that.

According to the PERC, the respondents were growing tired of the inaction and insincerity of leading officials when they promise to fight corruption. It said the protracted corruption trial of deposed President Joseph Estrada is an example of the problem and probably explains why respondents to the survey were so negative in their assessment of the Philippines.

The PERC rated Singapore and Hong Kong as the least corrupt economies and noted improvements in China, Indonesia and Vietnam. Its perception of corruption in Thailand worsened, with the military junta now in power after last September's coup. Thailand and Indonesia both received a score of 8.03.

To make matters worse, Alliant Emerging Markets, a Chicago-based political and credit risk brokerage firm, has listed the Philippines among the list of 10 most dangerous spots for investors in terms of political instability, violence and cross-border risks. Alliant's political risk index, which tracks changes in the world's levels of political and economic risk on a GDP-weighted basis and with a focus on emerging markets, evaluates political and economic risks such as expropriation, credit and terrorism in 190 countries.

Its worldwide survey showed that the political risk index rose by nearly 5 percent over the past 12 months, the largest in five years and driven by rising expropriation risks in Latin America, regulatory uncertainty in Central Asia, and worsening credit conditions in Eastern Europe and Southeast Asia.
The Philippines was included in the "top ten" list (or should it be called the bottom 10?) because of legal and regulatory risks; strikes, rights and civil commotion; cross-border risk (currency inconvertibility and transfer risk and credit risk); as well as violence risk, terrorism and sabotage.

This followed a similar assessment by Research and Markets Inc., an Irish investment research firm, in February that said that weak governance and increasing political and social instability "will undermine economic stability" in the Philippines.

And then there was the Travel and Tourism Survey from the World Economic Forum which ranked the Philippines as 87th among 124 countries in the first ever Travel and Tourism Competitiveness Index. Out of the possible perfect score of 7.0, the country received a score of only 3.8.

A senior economist of the World Economic Forum's Global Competitiveness Network, quickly clarified that the ranking was not about the beauty or attractiveness of the countries included n the survey, but rather about the quality of their business and regulatory frameworks and transport and tourism infrastructure.

The Philippines was ranked behind other Southeast Asian countries such as Singapore (8th), Malaysia (31st), Thailand (43rd) and Indonesia (60th). It was ranked ahead of Vietnam (87th) and Cambodia (96th).

Finally, the Annual Survey of Mining Companies 2006-2007, released on March 5 by Canadian research firm Fraser Institute has ranked the Philippines 61st among 65 mining sites in the world. Countries were ranked in terms of having the best policy environments for mining investment. 

The Philippines received a composite score of 14 in the 2006-2007 survey, down from 18 in 2005-2006 while its ranking slid to No. 61 from No. 60. Only Zimbabwe, Venezuela, Bolivia and Mongolia received lower scores than the Philippines. The survey was biased towards the exploration sector rather than production and this may have affected the result.

According to Fraser Institute, the overall rankings were based on the survey's Policy Potential Index, a composite index that measures the effects on mining exploration of government policies including uncertainty concerning the administration, interpretation, and enforcement of existing regulations; environmental regulations; regulatory duplication and inconsistencies; taxation; uncertainty concerning native land claims and protected areas; infrastructure; socio-economic agreements; political stability; labour issues; geological database; and security. 

The survey results represent the opinions of executives and exploration managers in mining and mining consulting companies operating in 65 jurisdictions around the world. While generally regarded in the industry as "conservative," the Fraser Institute report nevertheless carries great weight within the industry.

Worrisome is the fact that it is the tourism and mining sectors that are believed to hold out the greatest promise of future growth by attracting significant foreign investment into rural areas thereby spreading the wealth and generating much needed rural employment. Yet negative assessments such as those of the Fraser Institute and the World Economic Forum are bound to give investors pause.

Does the Philippines deserve a bad press?
Or perhaps we should ask "does reality match the perception?" Well "yes" and "no" is the answer. Without doubt, part of the problem lies in the state of denial that informs much of government pronouncements. The Arroyo Administration is hypersensitive to any form of criticism and instead of "taking it on the chin" often sets about seeking to discredit those who are carrying the message. Perhaps, within the domestic political arena this can be dismissed as the stuff of politics but when the message is carried through credible international organisations and agencies a more mature approach might be expected.

No, the economic environment is not as bad as many reports paint the country. In the area of corruption for example, the government is making some headway at exposing and prosecuting some errant officials. The operative word here is "some" since those known to be close to the presidential family appear to live charmed lives.

At the time of writing the latest scandal to surface is that surrounding overpricing from the ASEAN Summit which the Philippines hosted in December last and then rescheduled the actual Leader's Summit to January for reasons which, to this day, remain unclear. Street lights normally priced at around US$400 were installed in the summit venues for a unit price of US$6,000. Newly built or reconstructed roads that are falling apart after only 3 months of use. According to reports many creditors who provided services for the Summit meetings remain unpaid. Contract abrogation is alive and well-sue me if you dare appears to inform some attitudes; too many in our view.

Only in the Philippines? Perhaps not, but the Philippines has more than its fair share of such scandals, they appear daily in the press to the point that that the reading public are inured to such reporting.

Sad to say, the biggest problem facing the Philippines is probably the lack of genuine leadership and vision for taking the country forward. There is vision, but it is the kind of vision measured in political sound bytes-like the Philippines is set to become a first-world country by 2020-rather than rooted in reality. Until such time as government admits to the shortcomings and then moves decisively to address the root of the problems, the negative perceptions will probably remain. Until then, the country will remain adrift.

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