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The Good, the Bad, and the Ugly: The Philippines Faces its Future

April 2001
Index to Pearl of the Orient Seas by Clarence Henderson

Well, it's been a couple of months since the Philippines narrowly avoided political and economic meltdown. And make no mistake about it - 'twas a very close call. The entire business community breathed a huge and collective sigh of relief after the exhilarating events of People Power II (referred to as "Edsa Dos" hereabouts). Indeed, we owe a debt of gratitude to those 11 Senators who voted to keep envelope #2 sealed (thanks, guys). Had the trial dragged on much longer we would have been in deep trouble.

Okay, well and good. The Philippines played chicken with fate and escaped by the skin on its teeth. And, obviously, the situation now is preferable by a long shot to the dead-in-the-water scenarios that were swirling around prior to Edsa Dos.

But it's premature to celebrate.

How about a quick and dirty assessment borrowing a cinematic metaphor from Sergio Leone? The situation is replete with good, bad, and ugly aspects. Let's apply that spaghetti Western metaphor to four key sectors: the economy, politics, the armed forces and police, and the church.

The Economy

The Good: Merrill Lynch, in it's March 20 Asian Economic Trends, forecasts Philippines' growth in 2001 at 3.2%, making this the only Asian country for which the projection increased from the December report (which pegged 2001 growth at a miserly 2.2%). The EIU is projecting 3.4% GDP growth, while the government (predictably) is slightly more optimistic. (These projections, however, don't take into account the disturbing economic news from the states over the last week or so). Not the greatest numbers, but a heck of a lot better than would be the case if Edsa Dos hadn't occurred.

Potential foreign investors are actually showing up for AmCham's dog and pony shows, which were recently playing to empty conference rooms. This past week a trade mission of American executives heard testimonials from Ford Motor Philippines and others about GMA's positive economic policies and the quality of Filipino workers. Three specific investment commitments were announced (although no contracts were signed) and the assembled promised to spread the good word back home. Kraft Food International just announced that the Philippines will serve as its hub for regional expansion in Southeast Asia, India, and the Pacific Islands, and Fed Ex wants to extend its lease for its Subic hub.

The Philippines has tremendous promise in electronics and IT-enabled services. Globalization brings with it a free flow of information, and multinational corporations are taking advantage of the Internet in a huge way. Large companies are concentrating on their core competencies and outsourcing secondary functions (everything from customer service to back end programming to medical transcription). And many of those functions represent important economic opportunities for the Philippines.

The Bad: The country remains over-dependent on electronic sector exports, and (if the states' free fall continues) may be about to pay the price. Almost 60% of Philippine exports in 2000 were made up of semi-conductors. Further, a good proportion of those exports are concentrated in the American market. Ouch.

The Ugly: The ugly has to do with the global economy, which is not a soothing thing right now. High tech firms find their inventories piling up, which means exporting firms here (and in other Asian countries) are going to be hurt. The entire region is flirting with recession. The US economy has at least a bad cold and is sneezing repeatedly; as a consequence, the threat of pneumonia is hanging ominously in the air.

Politics

The Good: It goes without saying that the political leadership now is superior to what we had before. At least the head of state understands economic issues and is doing her best to provide decent political leadership. Few question GMA's commitment or good intentions, and she probably doesn't have millions of dollars in bank accounts under fake names.

The Bad: The current election campaign illustrates the deeply ingrained problems of the Philippines' political system. The leading Senate candidate in the polls, Noli de Castro, has as his main claim to fame a well-known face thanks to his years as popular TV newsman. Posters are plastered all over the place (Manila wallpaper), but none of the candidates is coming within a mile of a coherent policy platform. The country is in a mess, and this is a beauty contest.

Envelopmental journalism is still a fact of life ("envelopmental" refers to the way cash is placed in envelopes in exchange for favorable coverage). According to the grapevine, going rates are about what they were in 1998. One veteran columnist at an influential daily gets P 25,000 (US $500) for writing 2-3 favorable paragraphs about a candidate (can't do the whole story, too obvious). Photographers get about P500 ($10) per photo published, reporters get P 5,000 ($100) for using a press releases more or less as-is.

Then there's still the reality of guns, goons, and gold, the traditionally corrupt Filipino political process (see Filipino Political Theatre and Cronies and Booty Capitalism). There will still be some dagdag-bawas (literally "add-subtract") in the vote counting, probably involving the mistabulation of returns at the provincial level. Wholesale fraud has long been a feature of Philippine elections, although at least now there are brave and resourceful investigative journalists from places like the Philippine Center for Investigative Journalism to unearth the more obvious discrepancies between municipal and provincial tallies. Oh well, at least elections are less violent than they used to be, possibly due to term limits that discourage a kill-or-be-killed philosophy.

The Ugly: There's a certain ex-president lurking about, fulminating about how he should still be immune from prosecution and how the masa (masses) will rise up in fury if he is arrested. Which is a lot of baloney. He is guilty, the prosecution's case is very strong, and the chances of the Supreme Court ruling in his favor are about the same as the chances of snow in Manila this week. But as long as Erap is allowed to continue his rabble rousing, he's a nagging thorn in the side that is keeping investors away. He's obviously a desperate man and doesn't care how badly he hurts his country. Did he care about the Philippines when he was so doggedly hanging on to power even as it became clear the whole country was going down the tubes?

The Army/Police

The Good: GMA named General Angelo Reyes Defense Secretary this week, which is probably a good thing. Reyes, of course, was the Armed Forces of the Philippines (AFP) chief of staff under Erap whose withdrawal of support was crucial at Edsa Dos. The appointment was obviously intended to unify the military and nip dissension in the bud. Hopefully it will do the trick.

The Bad: GMA has been spending much of her time brown-nosing the military. This is not surprising, and is perhaps necessary given the key role play by the officer corps at EDSA. On Armed Forces Day, GMA's speech was loaded with flattery and included announcements of new legislation improving benefits for the military. Several key appointments are retired generals. But some folks are asking if the administration isn't just a little too chummy with (and dependent upon) the military.

The Ugly: Last week, an unidentified spokesman for the Young Officers Union (YOU) surfaced for an "anonymous" newspaper interview. YOU was closely associated with Erap and before that launched a number of coup attempts against Cory. The young officer called GMA a "left-leaning commander in chief" and gave a rather confused interview peppered with incendiary comments.

Although the comments were questioned by other leftist groups in short order, the always-reactionary Enrile jumped right in, saying that the Army generals (read Reyes) who withdrew their support from the Estrada administration at the last minute set a bad example by violating the constitution, so what do you expect from the young turks? Other ugly factors include the involvement of police in helping certain candidates (moonlighting in the goon role?), continued involvement of police in kidnappings of rich Chinese-Filipinos, and troubling accusations involving little things like torture and murder on the part of Ping Lacson (former head of the Philippine National Police, now running for Senate).

The Church

The Good: Well, this is the shortest of my good-bad-ugly sections. Let's just say Christian values are in general a good thing, Mother Teresa did good work, and I've got nothing against the Pope.

The Bad: GMA makes no secret of her piety and faith, which is fine. But she doesn't seem to grasp the concept of separation of church and state. She recently gave a keynote speech at an international conference on reproductive health in Manila. The speech was filled with generalities and waffling, but clearly had Cardinal Sin's stamp all over it. The issue of rapid population growth (currently 2.7% per annum, one of the highest in Asia) must eventually be addressed or bad things will happen. Period.

The Ugly: Jose Javier Reyes, chairman of the Director's Guild of the Philippines, wrote and directed an existential and engaging film dealing with the more sordid side of Manila, specifically the sad lives of young people who make their living performing live sex on stage (see Eva from Cebu for my own take on the sex industry here). Originally entitled Toro (slang term for live sex performers), the film premiered to international acclaim at the 50th Berlin International Filmfest and subsequently played to enthusiastic audiences at 12 other film fests in North America, Europe and Australia. By the time it opened here under the name Live Show it had brought some badly needed international credibility to a stagnant Filipino film industry.

Predictably, the Catholic Church immediately started pressuring the administration to suppress the flick. GMA obliged by issuing a letter suspending the film's showing and directing the head of the Movie and Television Review and Classification Board (MTRCG) to ban it from theaters. To his credit, Dr. Nicanor Tiongson, the gentleman in question, resigned rather than do so. He had given up a prestigious Berkeley teaching gig to come back and serve the Arroyo administration. Tiongson described his meeting with Cardinal Sin as "very traumatizing". Sin, of course, is adamant that "deviating from moral law violates the principle of freedom".

GMA's letter is informative and a bit scary in its kowtowing to the Church: "...I am for the full flowering of the arts; this is a basic commitment of my administration. As Henry James put it, it is art that makes life; this is clear, indubitably so. Yet the controversial film is not about art... " No mention of the fact that the 1987 (Edsa) Constitution guarantees freedom of expression.

Is the Bottom Line Good, Bad or Ugly?

Well, as any fan of Spaghetti Westerns can tell you, the Man with No Name (Clint Eastwood) is at root good, although you have to peel away the layers of complexity to figure that out. Angel Eyes (the Lee Van Cleef character) is bad, while Tuco (Eli Wallach) is downright ugly.

The problem in the Philippines is that it's hard to sort out all the players and all but impossible to know what's going to happen next. Uncertainty abounds. Will Erap be arrested? If so, what will happen? Which way will the election go? What will happen if the opposition does better than expected? Are the investors sniffing around serious, or just looking at the Philippines as a fallback position? Can the Philippines really leverage its advantages (especially its human resources) and surf the wave of globalization? What's going to happen with NASDAQ and the Dow Jones? How bad is the American slump going to be? Will the Philippines army mind its own business and stay professional? Will any semblance of family planning be possible in an environment dominated by the Church?

Don't look at me for answers, I just pose intriguing questions. As an entrepreneurial management consultant hanging in there and trying to go along for the ride, I'm hoping for the best. As a realist and perennial skeptic, I am nervous. As an Amerikano sympatico to the Filipino nation and people, I am hoping that everything breaks just right. I just wish that Clint Eastwood would come riding over the hill, gun blazing and cigarette hanging just so, to sort out the situation and make sure that good prevails over bad and ugly. But I'm not holding my breath.

...from Clarence Henderson's Pearl of the Orient Seas

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Clarence Henderson Henderson Consulting International Manila Philippines

Clarence has had over 20 years of consulting experience in New York, Los Angeles, and the Philippines. He brings to the forum many years of experience in the Philippines and his monthly column integrates the experience of working in the Philippines with business tips earned the hard way! You can learn more about Clarence by clicking on his photo. Clarence Henderson: Manila, Philippines Index - Sources - About Clarence - Other Columnists

See also Clarence Henderson's Philippines Capsule and Prospect Reviews at Asia Market Research dot Com

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