Looking back at the Philippines in 2005

In January of this year, we made a forecast on the Economic and Political prospects of the Philippines and as we look back so far that forecast has generally held true. Though we could not have foreseen that there would be a Civil War between the Oligarchy controlling the Philippines.

There will be two parts to this post first, the economy, second politics.

The Economy

Let us first begin with an assessment of the more important business conditions existing in the Philippines, its economy. We foresaw this: “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.” This remains true today.

In 2005, we saw little change in market conditions: 8% food inflation, dismal agriculture and manufacturing and considerable growth in the services sector. We also saw in 2005 world crude prices soar and it has had its effect in the Philippines where power and oil is imported. Though there is a significant influence with respect to the economic performance of the Philippines because of its political crisis, forcing it once more to run on autopilot, you can clearly see that there is potential for this market if and when it gets its act together. Those these influences will remain in 2006, plus the added burden of VAT taking effect, and unless there is a great upheaval of epic proportions--- the economic prospects of the Philippines will remain at mediocre growth at best. However, we must remember that in adversity there is always opportunity, and that possibility has not been closed.

The services sector will continue to be in high demand. Outsourcing is certainly still big business and remains very lucrative. We are talking about outsourcing in Animation, in medical transcription, call centers and back-office services. Though faced with global competition, it will remain highly lucrative in the next 12 months.

How does this translate to common Filipinos? It will be a harder year for the common folk. It will certainly stretch budgets and consumer spending will be for the necessities--- food, communication, education (for families) but in it, people will endeavor to work harder and find ways to make it happen like look for greener pastures in other countries as an example.

Politics

In January 2005, we predicted that Mrs. Arroyo would face great hurdles--- and she is facing them to this day and so far is weathering the storm of a Civil War between the Oligarchy controlling the Philippines.

Though we were correct in our assessment (and remains true to this day) that “The climate in the Philippines today and in the very near future clearly 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.” likewise we knew that “there will be ample time to forecast such a scenario months or at least six weeks prior to such an unlikely event.” we could not have imagined that what we are seeing is a Civil War between the Oligarchy that runs the Philippines.

Trust Filipinos to invent a bloodless revolution and trust them to make war with words. The shots fired between the Oligarchy have been from podiums, press conferences and the airwaves for the hearts and minds of disgruntled Filipinos.

The Red Opposing Team

The political opposition has significantly consolidated forces but remain a motley band. The political opposition is formed by Civil Society, some militant organizations, some military, some clergy, some business, and of course politicians from Estrada's, Lacson's and other groups, and together the have formed an Oligarchy-Opposition Force-- we ought to call them Red Team to be simplistic about it. To call this band disgruntled, would be to insult the truly disgruntled: the people who are caught between Arroyo's camp and these people in a battlefield that would determine who squanders the scrap-spoils of a nation ravaged by a civil war between the Oligarchy.

We said in January 2005 that “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.... a United Opposition will reduce in fighting amongst their ranks and can (with much hope) move Philippine politics beyond its mediocrity. ” We were partly wrong in that a consolidation of the Political Opposition would give rise to an improvement, to raise Philippine politics from its mediocrity--- sadly it has become even more mediocre with several missteps and errors in execution by the Opposition.

We were equally wrong that for the Political Opposition to distance itself from Estrada would be disastrous for them, the truth is--- it may improve their chances in fighting their war if Estrada would come into the foreground. The Political Opposition significantly need a leader and poster boy than Erap Estrada. This however will be terrible for the greater good as the Civil War the Oligarchy is in will continue to escalate should he come to the foreground.

The political condition has turned into theatrics--- much like the soap operas people watch on prime time television for their entertainment value. The battlefield has been media--- television, print, radio, blogs, podcasts and all for the hearts and minds of a public that is increasingly loosing interest that there will be change. Ergo, though Filipinos will always call the Philippines home, they has been no significant difference in investing in the Philippines, and most dream of flight abroad to work there or to permanently stay.

The battle so far has quieted down with Arroyo holding the upper ground. The War goes on however, and the series of scandals raised against Arroyo has of course taken its toll on the People's confidence in the President. Though she is far from a lame duck president, Arroyo remains in firm control of all levels of government and continues to exercise her political and economic agenda in spite of the political climate--- which ironically is her only way out. There will be no (peaceful i.e. bloodless) removal of Gloria Macapagal-Arroyo from power unless the Opposing Oligarchy can answer three significant questions the Filipino has: 1) what is your post Arroyo plan? 2) why should we exchange one politician for another? 3) what is your plan to improve our lot?

Gloria: the Blue Team

Let us look at Gloria Macapagal-Arroyo and her ilk. They remain in power. Their agenda of recent months is quietly pursuing an economic agenda and using it as a weapon in their war against the other half of the oligarchy. Hence, the implementation of VAT--- to increase government revenue and send a clear message that she is still in business and will address the Philippines' economic reform policy such as it is.

What is exactly at stake for her personally with these scandals? Ironically her personal and the Philippines' long term prospects are inadvertently linked. Leave the Palace at this juncture in her presidency--- for any reason and she will find herself, her family and their progeny hounded in perpetually as a failure and names the Red Team has painted them in. This will be even worst than the Marcos Family. And leaving will not put an end to the vicious cycle of Philippine politics and will be terrible for the country in the long term. The only answer to her opponents is to ensure Philippine prosperity: in other words to do her job.

The question for the most part--- will President Gloria stay in power? Though the odds remain in her favour, it remains a tough question. She will still be beset with problems in 2006, how severe will greatly depend on the Opposition's ability to coordinate strikes--- deliver an economic agenda that works and convince Filipinos that their way is better than President Gloria's plan. We must poll the weather after the holidays to determine if there is much to concern President Arroyo. If we assume there will be no significant power struggle in the next three months, then the best barometer of the People's will shall be the upcoming midterm elections and when called for, a referendum for Charter Change.

Military Adventures

The prospect of a military takeover remains a sword hanging over the heads of Filipinos. Though in 2005, they remain king maker and has not raised a hand to become more than that the fact remains they may have the means to but neither the infrastructure to keep any power they take. They are beset with the same problem as the Political Opposition--- they have neither leader nor credible agenda that people's loyalties will shift to them. And this has existed in the Philippines for the last 30 years. The fact remains in this day and age, anyone with aspirations of power will have to deal with the public and though disgruntled, they have not withdrawn it from Gloria Macapagal-Arroyo.

Conclusion

2005 was a volatile year--- politically. Politics has been transformed into entertainment and a disgruntled public has no means out and only the Oligarchy can change that fact. Economically it is no different from the past few years--- the country's economy is on autopilot yet remains powerful should it ever be tapped. What will the future bring? We'll post more about it after the New Year.