home / today's asian business strategy ezine / columns / pearl of the orient seas index (business in Asia & the philippines) /

 

Index to Pearl of the Orient Seas by Clarence Henderson

Clarence Henderson
Henderson Consulting International, Manila, Philippines

Filipino Political Theatre:
Some thoughts on Erap


July 1999

One of the more amazing phenomena in the Philippines is the free-for-all tag team political melodramas that play out in the halls of Congress, corporate boardrooms, lobbies of five-star hotels, and Malacañang Palace. Although politics in other Southeast Asian countries are intense, the high operatic theater in Manila just about takes the cake when it comes to intrigue, back stabbing, and complex maneuvering. New scandals erupt regularly, and everybody knows about them in short order thanks to the muckraking Manila press corps. For better or worse, the Erap administration has seen an escalation in such goings-on, driving the local political reporters and pundits into a feeding frenzy. You just about need a scorecard to keep track of the latest scandals, deals gone sour, and who's in versus who's out.

The international businessperson's first instinct may well be to ignore the chaotic domestic political scene as so much irrelevant brouhaha. However, the various and sundry political soap operas have significant implications for economic stability, regulatory policy, exchange rates, fiscal policy, procurement and bidding, and interest rates, to name only a few areas. This column represents a humble effort to review the Estrada administration's first year, no doubt oversimplifying a bit, but perhaps providing some perspective for the puzzled observer.

The First Year:

When it became clear in early 1998 that Estrada had a real shot at winning, the business community was aghast. Erap carried a lot more baggage than your typical incumbent. He was a college dropout and unapologetic womanizer, possessed limited English communications skills, and had no business or economic background. His resume looked pathetic, especially compared to the sterling credentials of the articulate, West Point-trained Fidel V. Ramos (FVR).

To make matters worse, Erap's campaign was unapologetically populist. The campaign slogan Erap para sa Mahirap ("Erap for the poor") led many to conclude that his pro-poor stance necessarily meant he was anti-business. Hardly an ideal profile for the heroic leadership needed by the Republic of the Philippines just as the Asian economic crisis was bottoming out.

Indeed, many of the political and business elite favored the Cha-cha (change the charter) initiative that would have allowed FVR to circumvent the one-term limitation, visions of Marcos and martial law be damned. When those efforts proved unsuccessful, the business community held its collective breath, hoping against hope that the hard fought gains of the Ramos' years weren't about to go down the drain.

In his inaugural address, Erap promised "to punish low crimes in the street, high crimes on Ayala Ave and Binondo (Chinatown), and graft and corruption throughout the government." He also pledged that, in contrast to long-standing Philippine practice, his administration would be based on walang kumpare, walang kaibigan, walang kamag-anak (no compadres, no friends, no relatives).

However, the early signs were not good, particularly on the cronyism front. It quickly became clear that the likes of Eduardo "Danding" Cojuangco and Lucio Tan could expect kid-glove treatment from the new kid on the block. Cojuangco was soon back in charge of the San Miguel Corporation, Tan had beaten a long-standing tax prosecution by the beleaguered Bureau of Internal Revenue (BIR), and Antonio "Tonyboy" Cojuangco was a frequent guest at Malacañang. The last year has seen the gradual consolidation of power in the hands of a tight group of Erap's friends and associates; although certainly not approaching the crony-dominated Marcos years, it's a long way from the ideals expressed in that inaugural speech.

Another rather striking dimension of the Erap administration has been the number and sheer intensity of political squabbles and feuds. While such infighting has always been a major factor in Manila politics, most reporters and astute observers agree that they have never seen anything quite like this. Among the major theaters of war have been the Departments of Agriculture, Interior, and Health, the National Police, the Cultural Center of the Philippines, and PAGCOR (the Philippine Gaming and Amusement Corporation).

Many brutal battles are played out at Malacañang, which has long had a well-deserved reputation as a snake pit. Within the Presidential Management Staff (PMS), pitched battles between Chief Lenny Vasquez-De Jesus (the "Dragon Lady") and Presidential spokesman Jerry Barican on the one hand and Ronnie Zamora and Deputy Executive Secretary Ramon "Ecki" Cardenas on the other are the norm. Sort of like a heavyweight bout, with the fighters' strength ebbing and flowing from round to round. Actually, more like the World Wrestling Federation, given that occasional intruders from outside the ring (often Senators like Tessie Oreta, John Osmena, or Miriam Defensor-Santiago) regularly hop in to poke somebody in the eyes or give 'em a good solid kick in the side.

While such infighting has always been an integral part of politics Filipino style, there's something about the current battles that transcends those of previous administrations. Marcos maintained strict control over his minions and had the requisite authoritarian power to keep things from getting out of hand. Cory Aquino had trusted lieutenants like Joker Arroyo and Teddyboy Locsin to shield her from media vampires and political assassins. FVR worked hard to maintain the technocratic professionalism of his administration, and was himself a skilled and sophisticated political operative.

Estrada? Well, Erap is Erap, and he does things his own way. Among other things, Erap pays careful attention to his utang na loob, an important Filipino cultural value that can be translated literally as "inner debt" or "heart debt." In the Philippines, when a personal debt is incurred, the recipient incurs a fundamental obligation to repay that debt at some future time -- and that repayment is seldom made with money alone. It's more likely to take the form of special favors or services. Which means that when Erap owes somebody a favor, he is damn well going to make good on it.

The prototypical example is that of Mark Jiminez (aka Mario Crespo), the erstwhile Presidential Advisor on Latin American affairs and corporate wheeler dealer now facing extradition to the US for tax evasion, illegal campaign contributions, fraud, and conspiracy. Jiminez, of course, is the character who brokered the merger of First Pacific and PLDT (the so-called "deal of the century") for a reported $50 million commission. More recently, he was a key player in the deal in which Equitable and two state-run pension funds bought 72% of PCIB, the country's 6th largest financial institution. Even though Jiminez is a relatively new acquaintance, he contributed significant amounts to Erap's political campaign. So far, Erap is standing firmly by his man ("he has done nothing illegal here -- he has done a lot of good for our economy and that's why I call him a corporate genius"), and it remains very much an open question whether the extradition will reach fruition.

So What's the Bottom Line?:

The recent one-year anniversary of the Estrada administration featured noisy backslapping, self-congratulatory radio interviews, and full-section PR puffery in all the local rags. Most pundits expressed their surprise (shock?) that Erap has done so well in spite of himself, while simultaneously decrying the growing evidence that creeping cronyism is rearing its pointed little head in a way not seen since the days before EDSA. Erap, of course, gives himself a passing grade ("between 75 and 80"), shrugging off the various scandals and accusations of corruption as so much sour grapes.

The conclusion of this more-or-less objective observer can be phrased in terms of the old cliche: "Well, I've got bad news and I've got good news." Let's get the bad news out of the way first.

Bad News: Erap's management style encourages the political battles that have become the earmark of his administration. Some have even suggested that he sort of likes it that way, in that the fragmentation and infighting help him maintain control.

Corruption continues to be a major issue. Erap himself has never been accused of graft or dipping into the trough, which is one reason he gets so angry at reporters for mentioning it all the time. However, his definition of corruption focuses on big time crime and direct kickbacks or bribes. He has a hard time taking subtler instances of influence-peddling or favoritism seriously as being corrupt.

Erap's philosophy and actions reflect the Philippines' long-established culture of corruption; here, many things that are against the law if you examine the relevant statutes are in fact supported by folk and ethical norms. Even Jiminez's alleged fraud was pretty lame by Filipino standards. Businessmen here understand that bidding on government projects is a highly politicized process, and that the open invitations to prequalify and bid published so faithfully in all the papers are seldom what they seem. In reality, the government official in charge -- the person who can release the funds, always at the Undersecretary or above level -- usually names the contractor to implement the project. It's an open secret that typical kickbacks run between 10 and 20% of the project's total cost.

Another disturbing trend is the tendency for the government to favor one group over others and to intervene arbitrarily in private sector concerns. The current involvement of the Government Service Insurance System (GSIS) in buying Digitel is just one example. The problem is that such intervention benefits elite and well-connected private parties, while the state itself remains weak. Although the Erap administration is supposedly devoted to privatization and deregulation, presidential intervention of one type or another has become all too common. Many economists see this as a potentially major underlying threat, especially now that the region is poised to recover with a bang. Should the trend continue, they caution, the currently bullish assessments for the Philippines might represent misplaced optimism.

Better News: Having said all this, however, there is also a lot of good news -- especially given the rather bleak expectations of a year ago. This positive assessment can be attributed in large part to Erap's commitment to retaining the core of Ramos' policies: deregulation, liberalization, and reform. Most experts feel that his economic crew of Pardo (DTI), Espiritu (Finance), Medalla (NEDA, economic planning), and Diokno (Budget) are first rate, and probably a better cabinet than Ramos had, at least early in his administration.

Further, most of those early concerns about Erap's political leadership and inarticulateness have proven unfounded. He has been surprisingly effective as a speaker in international forms, as evidenced by his successful missions to KL, Singapore, Hong Kong, Tokyo, and Seoul. He does his homework, memorizes his speeches nicely (as one would expect from an experienced actor), and stores important facts in his mind. Under the tutelage of his competent Foreign Secretary Domingo Siazon, Jr. (another holdover from the Ramos administration), he does far better than his critics expected.

Erap also has a number of positive attributes that are more subtle and personalistic. Estrada has always played heavily to the masa, the large masses of poor people who still constitute the great majority of the Filipino people. During his movie career, Erap starred in Robin Hood roles in which he came to the rescue of the less fortunate, usually after tremendous battles to overcome a heavily stacked deck. Erap is very much a "man of the people": he speaks in the vernacular ("binocular"), likes to get drunk with his barkadas (drinking buddies), and likes to womanize. What could be more Filipino? No wonder his public approval ratings remain at amazingly high levels.

Erap shoots from the hip, calls things the way he sees them, and often goes with his gut feelings rather than carefully considered political consensus. Working in Erap's inner circle can be nerve-wracking, as attested to by some of his handlers who describe the fear and trembling they experience whenever Erap is subjected to an "ambush interview." But despite the risk of poorly timed foot wounds, it is refreshing to hear a politician who says what he feels and tells his critics to go to hell.

Finally, Erap has shown an admirable gutsiness that bodes well for the remaining five years of his term. He stood up for his old friend Anwar and received his wife in Manila when he could have easily chosen the conservative and politically expedient route. He refused to be intimidated by MILF and NDF demands, calling their bluff and obtaining the release of kidnapped officials. And he was adamant about not using government funds to bail out Philippines Airlines.

Overall, then, it looks to me like things could be a whole lot worse as we hit the home stretch of the millennium. The Philippines economy appears fundamentally sound, and recently released economic projections have been quite bullish on the prospects for 2000 and beyond. The first half of 1999 saw 2% GNP growth and 1.2% GDP growth, a stable peso, and grudging admiration from the IMF, World Bank, and Eximbank, among others. Erap has obviously been learning on the job, and has undeniably made some blunders. However, his heart is in the right place and, with luck, he'll make the adjustments needed to make those glowing predictions come true.

Clarence Henderson

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

Email article

Discuss this article
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 Sources - About Clarence - Other Columnists

Join the APMF email list
Monthly updates on new content

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

Asian strategic business ezine front page

asia's only dedicated daily ezine for the asian business, management, strategy & marketing professional
research articles   news   independent columnists   business strategy   market & street intelligence

© Asia Pacific Management Forum and Clarence Henderson 1999

email updates | email this page | discuss | search | today's asian business strategy news | advertise | about
daily asian news, research & commentary for the international business strategy, market research & strategic management professional