Much of the concern continues to revolve around peace and order (or rather the lack thereof), although one also hears the usual gripes from ex-pats about pollution, flooding during the rainy season, insufferable traffic, falling exports, the flight (disappearance) of portfolio capital (international brokers are closing their Manila offices right and left as the PSE (Philippines Stock Exchange) market cap shrinks), and the deteriorating peso. But local businesspeople are just as negative, maybe more so.

Gasps were heard when the peso crashed through the 54 barrier the other day, only to recover to 53.20 after the Department of Finance and the Central Bank (Bangko Sentral ng Pilipinas, or BSP) announced they would work hand-in-hand to support the wobbly currency. Although there are significant international factors at work (including most prominently jitters about the Argentina situation), there's also been a lot of local speculation. Most traders say BSP unloaded greenbacks totaling some $80 million in the spot market on the day in question, representing about half of total volume. However, the peso will remain under pressure due to weakened export performance linked to the US and Japan crashes and increased import bills (especially for oil). The budget deficit now sits at P80 billion (about $1.5 b.), and the just-reported May trade deficit is $81 million. Ouch.

If that's not enough to get you to pull your Captain Queeg metal balls out of your pocket and start rolling them in your sweaty palms, what about the insistent rumors that the Abus plan to start bombing in Metro Manila any day now? Or that Osama bin Laden has already dispatched top operatives here to strike hard at juicy American and Israeli targets?

The Makati Business Club (MBC) continues to maintain its high visibility and influence in the new administration. One interesting development (having to do, perhaps, with statistics, damn statistics, and lies) this week was the furious debate about the interpretation of the MBC's Business Outlook Survey for 1st half 2001. (I believe it was Mark Twain who said "Get your facts first, and then you can distort them as much as you please").

Bill Luz, Director of the MBC, put the most negative possible spin on the story. And no question that the numbers were pretty depressing. In a decent sized sample of business executives, 71% expected economic growth in 2001 to be lower than a year earlier. Over half (54.3%) said that GMA's economic agenda was not clear (a bad thing given her much-ballyhooed professional background and training in the dismal science). Other negative expectations were for an even weaker peso (are we looking at 60?) and slower exports in the face of depressed international demand. According to MBC: "The initial euphoria and excitement has significantly subsided into a more somber outlook as reality sets in." Or, per Luz: "we need to see action, not statements. Part of the problem is really confidence, not economic considerations….."

Not surprisingly, Presidential Spokesman Rigoberto Tiglao found a way to spin the report more positively. He stressed that businessmen trust the administration, citing high marks given for the new gang's governance, credible leadership, and work ethic. Personal anecdote supporting the latter point has to do with a development sector project I am working on, policy work requiring me to interview a range of officials in the veritable bowels of the Philippines government. I was shocked to discover that public officials at the U-Sec level quickly agreed to breakfast meetings at the ungodly hour of 7:30 or 8 am, something that would have been most unusual in the previous administration.

Returning to the MBC's doom and gloom scenario. The findings emphasized by Bill are generally consistent with coffee shop tsimmis, and it's hard not to notice a certain quasi-paralysis in the multinational business community. Everybody seems to be holding their breath and waiting for the Abus to fold, Greenspan to work magic, or some deus ex machina to supernaturally resolve the situation. Couldn't help noticing the contrast with some aggressive local tycoons who are making hay while the multinationals brood. In particular, San Miguel Corporation finalized the buyout of the Concepcion family's stake in Cosmos Bottling and is otherwise pursuing an aggressive expansion strategy. Whatever you might say about Danding Cojuangco, he recognizes the pointlessness of sitting around bitching and moaning, adapts to the realities and exigencies of the business environment, and makes the best of it. Perhaps some international types could learn from his example.

President Arroyo's crucial SONA (State of the Nation address) will be delivered on Monday evening, July 23rd. Key themes will include good governance/transparency, modernization of the agricultural sector, global opportunities for the Philippines in the information technology sector, and poverty alleviation, good things all. But sterling rhetoric won't amount to a hill of beans without execution (and the money to fund that execution).

Although it doesn't look like a Cabinet shakeup right now, GMA is putting her key people on alert, probably giving them six months to produce results (this will reportedly be in her speech). Certain departments will be under more pressure than others, especially Agrarian Reform Secretary Braganza (called on to redistribute 100,000 hectares within a year) and Housing Secretary Defensor (called on to build 20,000 socialized housing projects in the same time frame.). The former goal is particularly challenging given that only 20,000 hectares were redistributed during the first six months of 2001. Agrarian reform is, of course, closely linked to social unrest in the country and the inequities described in other Pearls (see Sugar Cane, Sugar Cane and Cronies and Booty Capitalism). Landlessness and poverty have always been root causes of rural (and urban) discontent here, and have a lot to do with the Philippines' long history of communist insurgency and Muslim separatist movements. But Agrarian Reform in this country has never lived up to its ambitious goals or promise.

Militant/activist groups are threatening massive walkouts and street demonstrations to coincide with the SONA, the key issue being the administration's stand against a proposed P125 increase in the minimum wage (raising it from approximately US $5 to $7.50 per day). The administration's reluctance reflects the fact that the business community has been screaming bloody murder about the bad timing of the increase and the dire consequences if adopted. The Employers Federation of the Philippines, representing over 500 companies, warned that many SMEs will simply vanish off the economic radar screen if the hike is instituted (i.e., they will pay no taxes or license fees, ignore employee safety standards, and cut wages even further).

Fuel for the protests also comes from the continued desperate plight of the masa. Bayan Muna and other militant organizations are calling for "concrete" anti-poverty measures that go beyond "Presidential visits, photo ops, and dole-outs." The latter statement reflects skepticism about Malacañang spinmeisters' recent efforts to reposition GMA as the real champion of the poor (as opposed to Erap's cinematic but ultimately fake Robin Hood role). There is some evidence in recent polls that her reincarnation as "Ate Glo" and the "Gloria Labendera" gimmick are working.

Gloss: "Ate" is an affectionate term for auntie, an effort to show GMA as a loving and caring family member. "Labendera" means laundry woman, a Tagalog word that was used in an earlier derogatory attack on GMA. The administration promptly expropriated the term, and before you know it President Arroyo was bragging about how one of her ancestors was indeed a labendera and wasn't it indeed something to be proud of?

Real? GMA's own commitment seems genuine, and she certainly cares a lot more about people going hungry than her predecessor. Her Catholic faith and sense of noblesse oblige run deep, and she wants to make things better. Reports say security guys are having fits because of her unpredictable sidetracks to hand out rice and shake hands in Manila squatter settlements. But such concern and public displays didn't keep her from giving in to the business community and opposing the minimum wage hike.

Symbolism front: Last week, as I entered the Malacañang compound for one of my government meetings, I couldn't help but notice the beefed-up security, barricades, and barbed wire. And what about that newly installed electrified fence now ringing the Palace? Not enough to fry anybody, but enough to make 'em think twice before trying to scale the thing. Perhaps a tad bit of paranoia about yet another masa assault on the Palace?

Some are suggesting a spooky parallel with Cory Aquino. Both Cory and GMA came into office in a blaze of glory after having deposed a Bad Guy, both were deeply religious and corruption-free, and both promised a new era of prosperity (or at least, less dire straits). But both also faced political unrest and significant challenges during their first year. In Cory's case, a series of abortive coups, continued corruption, and backbreaking brownouts; in GMA's, the Abu Sayyaf and Manila kidnappings (see Kidnapping Philippines Style), the unrest associated with Jose Velarde, and the global economic collapse.

WTO Director General designate Supachai Panitchpakdi was in town to speak before the Philippine Chamber of Commerce and Industry (PCCI). He issued various stern warnings about the impending economic impact of a certain 800-pound gorilla (hint: think Great Wall). He stressed the urgent need for economic restructuring and closer integration among ASEAN nations, perhaps modeled on agreements such as those to be discussed in the upcoming "development round" in Qatar. The problem is that, given the current international economic mess, many countries in this part of the world are circling the wagons. Malaysia is dragging its feet on tariff liberalization for automobiles, and Singapore is fishing around for preferential trade agreements. But I suspect people had best pay attention to Panitchpakdi's message.

There's no question this is a frightening situation. Hong Kong and Singapore are in dire straits, Japan is in recession, Argentina and Turkey are basket cases, and the states are in a pickle. I have been affected personally, as I am owed a pretty good consulting fee by a certain high tech California firm, now three months overdue. Last week I tried to call to dun them, only to discover to my dismay that that they had disappeared from the face of the earth, victim of Silicon Valley terminalitis. Goodbye greenbacks. The Philippines, with its heavy dependence on electronics exports to Japan and the United States, is finding itself in a similar situation.

All things considered, the Philippines is still hanging in there. Inflation is under control (single digits so far), interest rates aren't excessive, and international reserves are adequate. But the double whammy of the international economic imbroglio and high anxiety about the Abu Sayyaf/security situation is keeping international investors away in droves. I'm working with an outsourcing company here involved in negotiations with a large American corporation getting ready to relocate certain back offices operations offshore. They are in the final stages of (basically) playing the Philippines off against India. It seems clear that they'd really prefer to locate here, but they're holding off on their commitment until the smoke clears. But they will only wait so long, and even if the Philippines might be better for them in many respects, the bottom line is there are no Abu Sayyaf in New Delhi or Bangalore. When they asked us earnestly if we could provide round-the-clock security for their ex-pat managers, we told 'em there are a hundred thousand plus Americans living and working in Manila, going about their daily business without any significant risk, no need to worry. They said something to the effect: "that's not what it looks like on CNN." And appearances can be everything.