A Forecast: the Philippines in 2005

It is that time of year again when we try to make sense of the uncertainty of the next twelve months. Though it is rather impossible to predict the future-- we can for the most part extrapolate using available data at hand. This blog attempts to make a forecast what the political and economic climate in the Philippines will be in the next twelve (12) months.

What is the climate in Manila today? One only needs to take a clear look at the 12 January 2005 National Economic Development Authority (NEDA) report--- inflation for food went up astronomically to 8%, unemployment at 11%, underemployment at 17%, and a dismal economic performance (GDP) of only 6.3%.

Public opinion polls conducted separately by the Social Weather Station, Pulse Asia, and IBON Foundation during the previous quarter all point to dissatisfaction with the sitting administration. All this in spite of the reported 9.9% increase in exports to US$36 Billion by NEDA.

Business World's headline today (20-01-2005) (and likewise ABS-CBNNews.com talks on recent information released by the Asian Development Bank through the survey entitled, “Philippines: Moving Toward A Better Investment Climate". The news articles quote ADB statistician Dalisay S. Maligalig who said that an average of 2% of gross revenues by the surveyed companies are for “informal payments”. Furthermore, this information is said to be slightly higher than the 1.8% in China. In addition to this, Maligalig says in the same survey that foreign firms use 4% of their revenues for these informal payments as opposed to 1.8% made by local firms and 3.8% for companies in special economic zones.

Recent moves by the Arroyo Administration with respect to propose increasing from 10% Value Added Tax now imposed on all goods and services to 12% is hitting resistance, as expected with the general public. In spite of this, we can safely say that the Arroyo Administration is dead serious in bring revenue collection up, stabilizing the country's fiscal condition and moving forward with reform.

Could all these conditions reveal another political misadventure in the Philippines' very near future?

Let us examine the condition of the Philippine Opposition parties. The Political Opposition has not successfully recovered from their disastrous defeat in May 2004 to Mrs. Arroyo (see previous post for post game analysis of the election). In fact with the unexpected death of Mr. Poe and continued imprisonment of former Philippine President Joseph Estrada on Plunder Charges, the Opposition finds itself leaderless.

Recent moves of the Opposition point to at least making a great effort to consolidate forces. Whether they are successful or not will make a difference in the political landscape, though slightly. The condition--- the continued in fighting between former Senator Angara and Senator Lacson which caused the opposition to field two candidates in May 2004 and set one of the conditions for their defeat must be resolved.

Though recent events point to Mr. Estrada as the rallying point for a United Opposition. No one doubts he is the best man to unite them probably the only one. However, it is also not the same as leading them--- the opposition should it unite must thereafter distance themselves from former President Estrada. It is a paradox that he can only unite them but can not lead them and Mr. Estrada must force himself to do so. They need new blood.

Is a United Opposition important? Yes! And not only for Mrs. Arroyo's detractors, a United Opposition will reduce in fighting amongst their ranks and can (with much hope) move Philippine politics beyond its mediocrity. Public Opinion polled recently by Pulse Asia as requested by the opposition say that Filipinos no longer distinguishes between Administration and Opposition. They are looking for someone to make their lives a better one. A United Opposition with a “Platform of Governance” and a “Charismatic Leadership” will do wonders to change this impression.

Predictions of an Arroyo Administration meltdown are far fetched at the moment. There is no credible visible organization, no leader charismatic enough or Opposition today exists that a “disgruntled” public can rally to. In this the Arroyo Administration can safely say, they can still hold power.

What of a coup d'etat? Recent Philippine history points to the lack of support for this kind of movement. The public does not support the Military. The problem any military move to topple the current goverment is similar to the political opposition's: there is no charismatic leader to rally to and recent crisis and scandal within the Military point to a disenfranchisement with the Armed Forces for the public to trust it with leadership.

What of the Electoral Protest filed by Mr. Poe's supporters? To be blunt, the man is dead and in spite of the fact his widow will take up his cause, it is highly doubtful such protest will be upheld by the Supreme Court. History points to Senator Miriam Santiago's 1992 presidential bid against former President Fidel Ramos that case has not been resolved to date. It would be great for the country to admit their defeat (see post-game analysis of the May 2004 election as to the reasons why they “lost”).

It is also difficult to predict the circumstances of a resolution to the Estrada case should it come this year. It must however be a credible one, which the public can at least respect.

The climate in the Philippines today and in the very near future clear shows us that the Arroyo Administration will remain in power, if not solely because there is no credible organization to stand against it. Furthermore, the public despite its negative disgruntled view on the Arroyo Administration will not support any movement to topple it unless an event of epic magnitude and severity forces them to and again there must be an Organization from which they must support to do so as history tells us. The catalyst for such an event must really spark such profound disgust and disenfranchisement with the current Administration. In such a very extreme and unlikely scenario, one can argue that it will be doubtful that constitutional succession will be followed though it is more likely that it will be, as history and Filipino culture can remind us. Regardless, there will be ample time to forecast such a scenario months or at least six weeks prior to such an unlikely event.

Another Political question is a proposal to amend the Constitution or change outright the basic law. Public Opinion polls are adverse to this--- our conclusion as to why the public is against it is this: The fact is, no public debate or discussion to and for or against such a move is made heightens public opinion to shy away from it. No one is saying, why it should be done, what are the proposed changes and the method of the change. None of this is discussed. Politicians are not to keen to rock the vote in this issue at the moment which is discussed every administration, at least once. Perhaps, after economic bills are resolved in Congress, this issue can be tackled--- it is right about time to do so and a move to a more Federal Government will spur economic development and change this feudal society. We already see an imperfect form of this with the Local Government Code.

In 2005, economic conditions will stay the same at best because private sector business will remain lackluster (the ADB likewise made a similar conclusion). The Arroyo Administration will funnel several infrastructure developments which will maintain the dismal performance of the Philippines. The key lies in generating more business--- agriculture, commerce, services and other industries therein it is highly doubtful that the Administration can make it possible with the increase in tax rates and continued proliferation of graft, corruption, red tape and very tight regulation on business. And of course the other factor: the mentality of people to rely on government spending rather than private sector initiative will continuously derail any improvement in the Philippine Economy. It is a chicken and egg problem and this one of the fundamental weakness of this very tiny market.

Any Organization capable of mobilizing a reasonable, do-able Platform of Governance and a Charismatic Leader to push such proposal to bring food on the table for Filipinos will be supported by the public. It matters not from whom it came from--- administration or opposition or third force or whatever name.

Of course change is not expected overnight and will be greatly challenged by all factions, including the President, within her inner circle and within her own party and coalition. Expect that whatever measure the President will enact will entail great political hurdles and compromises within the inner circle, the party and coalition. Yet at least Arroyo's Administration has a plan.

For now, Mrs. Arroyo can sleep well--- she will stay in power and any threat to her position can easily be detected by the sign of the times and she is a highly skilled political operator to sense it. Though we doubt Mrs. Arroyo will be doing much sleeping in the months and years to come as she tries to bring to order the Philippines.

We can expect revenue measures, when adopted will improve the fiscal condition of the country though expect, “informal payments” to remain the same or slightly changed. Likewise, the Bangko Sentral (Central Bank) is working to clean up the banking industry and it is forecasting a reduction of non-perfoming loans to 10%. In 2005, unless of any dynamic event positive or otherwise, we can expect at best mediocre economic performance that is slightly better or equal to last year's.

When polled by the Social Weather Station in the fourth quarter of 2004, most Filipinos are still optimistic of better times in 2005--- it is a characteristic of this people, this great hope even amidst such depressing news that make this country difficult to construe but we must greatly admire the Filipino because of it. Imagine what an upfront, charismatic, dynamic, intense and generally respected leader can do for this slumbering people because more than anything, thats what they are looking for, that is what Filipinos need at the moment more than anything.