Paul D. Hutchcroft


Introduction

The 1990s are proving to be an important crossroads for the Philippines, as the country not only begins to confront a greatly transformed external environment but also seeks to reverse more than a decade of disappointing economic performance. On the international front, the departure of U.S. military bases from the country in late 1992 (only a few months after Fidel Ramos assumed the presidency) presents potentially daunting challenges both to the position of the Philippines in the world and to the position of the traditional political elite within the Philippines. After almost a century of a "special relationship" with the United States, the Philippine state can no longer rely on U.S. support to guard against external threats, ensure the integrity of its national territory, and guarantee its rescue from recurring balance-of-payments difficulties. The ruling elite, moreover, cannot rely on external support to continue to finance its long-standing dominance over Philippine politics and society. In sum, the deal cut at the turn of the century, binding the interests of the United States to those of the major families of the Philippines, has come undone at century's end.

On the domestic front, the greatest challenge has been to bring renewed and sustained growth to an economy long in the doldrums. Throughout the 1980s--commonly seen as a "lost decade" for the Philippine economy--annual growth rates averaged only 0.9 percent; between 1980 and 1992 real per capita income actually declined by 7.2 percent. In 1992 Ramos began his presidency with fresh perceptions of the country's place in the world and an ambitious agenda to address the challenges of a new era. The initial years of his term brought major reform initiatives and accomplishments--most notably in the economic realm--and renewed optimism about the possibilities for change. In the late 1990s, however, it has become increasingly clear that the hardest work is yet to come. When he steps down from office in 1998, Ramos will likely be judged by his skill in navigating the country's politics through this critical crossroad and whether he has been successful in charting a course for the economy, domestic politics, and foreign policy that his successors will find worthy of emulation. Analysis of each of these realms suggests that while inducement for change is strong, obstacles to it remain formidable.



Reforming a Laggard Economy

Reform of the political economy was a top priority of the incoming Ramos administration, whose efforts were aided by a widespread sense that new approaches were needed to reverse the country's poor economic performance. The worldwide trend toward liberalization and privatization greatly influenced the choice of new strategies, particularly since such policies seemed to be working magic on the country's more economically successful neighbors. In concrete terms, the Philippines found itself faced with decisions about how it might participate in a series of associations that demanded greater commitment to economic openness--notably the Asia-Pacific Economic Cooperation (APEC) forum, the General Agreement on Tariffs and Trade (GATT), and the ASEAN Free Trade Agreement (AFTA). In each case, the national leadership was eager to jump on the bandwagon and able to claim the support of important sectors ready to try something new.

The departure of the U.S. bases, moreover, seems to have had a strong impact on national perceptions, leaving the country feeling both more exposed and more aware of its surroundings. With the American security umbrella no longer providing an extensive overhang, there was suddenly a greater tendency to look around the neighborhood. In the process, Filipino observers commonly perceived their house--once widely admired--to be in disrepair and were often surprised by the marked improvements in their neighbors' abodes.

A number of important initiatives of economic reform are traceable to the latter years of Corazon Aquino's presidency, but it has been during the Ramos administration that new perceptions of the Philippines' place in the world combined with new leadership to produce major goals for the wholesale transformation of the political economy. From the start, President Ramos expressed a clear sense of his country's weakness as a competitor in the international and regional economies. At his inauguration, the president decried an economic system that "rewards people who do not produce at the expense of those who do Ö [and] enables persons with political influence to extract wealth without effort from the economy." The political dominance of oligarchic groups, he explained later, is "the reason why the Philippines has lagged so far behind the East Asian Tigers."

Indeed, the Philippine political economy has long favored the interests of major families at the expense of national developmental objectives. Although the roots of their socioeconomic power can be traced to the development of landed elites in the nineteenth century, it was in the American colonial period that major families emerged as a national oligarchy, able to dominate the country's political and administrative apparatus and shape it to their own ends. Even as new entrants have continually expanded the ranks of this oligarchy, and familial economic interests have diversified considerably throughout the postwar years (beyond primarily agriculture to include commerce, manufacturing, services, and finance), the business success and failure of family conglomerates has depended to a large extent on gaining favorable access to political power. When dominated by the elite, mainstream politics becomes a particularistic scramble for the spoils in which ideological differences and coherent interest-based political groupings rarely play a major role. In combating these patterns of privilege, the Ramos reformers declared their determination to level the playing field and promote a process of development beneficial to the whole nation.

Perhaps the boldest initiative of the Ramos administration has been its attacks on the so-called cartels and monopolies of major oligarchic family firms that have long had a stranglehold over key segments of the national economy. The first target, a moribund and inefficient telecommunications industry, has been transformed by new competition and now serves as the model for the reform of other sectors.

Such attacks on cartels and monopolies are part of a larger program of economic liberalization and infrastructural development being undertaken by the Ramos administration under the banner of Philippines 2000--a rallying cry for the country to join the ranks of the newly industrializing countries (NICs) by the end of the century. Trade liberalization, long a priority of local technocrats, the International Monetary Fund, and the World Bank, is given ongoing support by the country's participation in the World Trade Organization, APEC, and AFTA. Foreign exchange and foreign investment have also been liberalized, and major state firms have been at least partially privatized. Moreover, in 1994 the rival stock exchanges were at last forced to unite in the midst of extraordinary growth in the long-dormant Philippine bourse. Ramos has also been credited with ending the crippling power shortages that deprived Manila and other areas of electricity in 1992 and 1993 and evidenced the woeful neglect of the country's infrastructure in the previous decade.

In 1994 and 1995 the economy achieved annual growth rates of 5.1 percent and 5.7 percent--modest in comparison to many of the country's Southeast Asian neighbors but a tremendous improvement over the rock-bottom growth experienced late in the administration of Ramos's predecessor, Corazon Aquino. By 1995, the midpoint of his term, Ramos's most commonly cited achievements were in the economic realm: the end of the power crisis, the dismantling of the telephone monopoly, and renewed rates of growth. Gross national product (GNP) growth for 1996 reached 6.8 percent, and many in the business community expressed high hopes that economic expansion would continue through the end of the decade.

Government and private economists emphasize that current growth patterns, unlike those of earlier years, are driven not by external debt and aid but by domestic and foreign investment. Furthermore, while a large share of this new economic activity is taking place in Subic Bay Special Economic Zone and other areas near Manila, it is also extending far beyond the capital and creating regional centers of growth, including Cebu and General Santos City in the South. Many fresh faces have appeared on the business scene, and Filipino Chinese conglomerates--many of which enjoy strong links to neighboring economies--have achieved heightened prominence. In addition, new business associations (most notably that of an innovative group of exporters) provide hope that the diversified conglomerates of the major families--nurtured by favorable access to the government--may at last be challenged by entrepreneurial elements whose emergence has been far less dependent on special privileges.

The decline of American patronage has been an important impetus for the Philippines to give new attention to its neighbors and to regional groupings, especially ASEAN, AFTA, APEC, and a new growth area linking Mindanao with Indonesia's Sulawesi and Malaysia's Sabah. Closer investment and trade ties have strengthened the country's links with the rest of the region, promoting greater consciousness of the economic success of other countries and heightening fears of the Philippines' falling further behind in the mid-1990s. The country's hosting of the APEC summit in late 1996, at the Subic free port, provided an opportunity to show off its economic gains. Such occasions both expose the Philippines to new ways to promote economic goals and introduce its neighbors to distinctive Filipino viewpoints on such issues as human rights, due process, and democracy.

In broader perspective, Ramos's Philippines 2000 represents the first major strategic vision of Philippine political elites since the inauguration of Ferdinand Marcos's martial law regime in the early 1970s. Although the eclectic team of advisors supporting Ramos's program expresses a common commitment to a mutually supportive relationship between democracy and development, the team's more specific reform objectives reveal a sometimes peculiar combination of advocacy of a "strong state" (to combat oligarchic dominance and emulate the developmental patterns of Northeast Asian newly industrializing countries) and the more conventional "minimalist state" prescriptions of U.S.-trained technocrats and multilateral institutions (to curb state regulation and promote market solutions). The latter, free market perspective has been most important in defining the specifics of economic policy; the political strategies necessary for the implementation of new approaches, however, seem to have been crafted primarily by those who argue for a "strong state" that is able to ensure that decisions are made for the entire nation and not for the few. Overall, analysts note a new consensus in favor of liberalization, market discipline, and integration into the world economy.1



The Limits of Economic Liberalization

The higher growth evident since 1994, however, should not obscure enduring political and institutional obstacles to sustained economic growth and development. Unfortunately, some in the Ramos administration seemed to have grown complacent by mid-1995, pointing--with justifiable pride--to all the basic elements of reform that had already been put in place. Many foreign and local observers were confident that the country had now resolved its economic woes. Much of this confidence was nurtured by neoliberal sorcerers, who claimed that the "magic of the marketplace" would now pop out of the liberalization hat. More recently, however, relative success has at times been overshadowed. The reform measures do indeed provide major advantages to an economy long stifled by an emphasis on privilege for a few, but it has become increasingly apparent that liberalization will not in and of itself guarantee sustained economic growth.

At one level, economic liberalization remains limited in scope: It is still not clear that the Ramos administration, despite its commitment to reform, has the political strength to break all key cartels and monopolies and thus succeed in leveling the economic playing field. There has indeed been success in promoting greater competition in telecommunications: The former monopoly, the Philippine Long Distance Telephone Company, is now providing better service and making more money than ever (while many of its new competitors complain that it has often been uncooperative in facilitating interconnections with them). Impressive increases in competition have also occurred in other sectors, most obviously airlines and shipping. Thanks to measures liberalizing foreign exchange and foreign investment, many of the new competitive pressures have come from a major influx of international investment that, until recently, tended to bypass the Philippines for other locales.

Alongside such successes, however, there have also been initiatives largely stifled by those who were supposed to be reformed. Frustrated by long experience with economic stagnation, many in the business community (as well as the labor movement) initially indicated a receptiveness to new strategies. The major push for change, however, has generally come not from a business sector anxious to alter often unproductive modes of operation, but rather from a committed core of reformers within the Ramos administration. Exercising effective and persistent leadership at a propitious crossroad in the country's history, they have indeed begun to effect change. But they have often encountered major resistance from segments of the business community that, while expressing support for liberalization in general, have sometimes opposed key elements of specific liberalization measures. At times, careful political strategies have resulted in major victories for the reformers; at other points, resistance has prevailed.

A prime example of this resistance is in the banking sector, the most heavily fortified bastion of privilege and profits. New foreign banks have been allowed into the system, but clear limits have been placed on the degree of new competition that will be permitted: The greatest impact will be on upper segments of the market, which were already quite competitive, and there is little promise that banks will begin to service the needs of small- and medium-scale enterprises and ordinary depositors. Bankers voice rhetorical support for liberalization while congratulating themselves for helping to craft legislation that did not require "too many unnecessary concessions"; developmental objectives, meanwhile, continue to be defeated by the interests of a few.2

At an even more basic level, there would be clear limits to any program of economic liberalization--even if it were broader and more comprehensive in scope. For one thing, it is unfortunately questionable whether Philippine state institutions of the late 1990s are able to provide the necessary political foundations required even by a minimalist role of the state in economic transformation. Advocates of free market approaches tend to agree that governments have an important role in helping to create a level playing field on which entrepreneurial activity can flourish. But the Philippine government has often had difficulty providing such basic foundations--whether it be supplying electricity and other vital infrastructure, protecting communities from rapacious loggers, arbitrating business disputes, or providing even-handed regulation of the financial system. The Philippine government has not only been unable to emulate the strong developmental guidance provided by the skillful and powerful governments of the East Asian NICs; more fundamentally, it has also failed to provide even basic legal and administrative underpinnings necessary for free market capitalism.

Proponents of economic liberalization commonly assert that it curbs overly intrusive governments and lays firmer foundations for private sector initiative. In the Philippine context, however, big government and shortage of private sector initiative, per se, have never been the major ills plaguing the political economy. First, the problem in the Philippines is not the quantity, but the quality, of government intervention. The Philippine government has a small share in the country's GNP relative to other countries in the region. Moreover, the World Bank has repeatedly expressed its concern about the country's low tax effort, which lags far behind that of its more economically successful neighbors. Second, there has never been any shortage of private sector initiative in the Philippines, where access to the political machinery--whether headed by a democratic or an authoritarian regime--has long been the major avenue to success in business, and the quest for "rent-seeking" opportunities brings a stampede of favored elites and would-be favored elites to the gates of the presidential palace. Merely cutting back the role of government through a conventional program of liberalization, then, will not in and of itself ensure either an improvement in the quality of government services or a reduction in the power of the oligarchy that has long plundered that government for particularistic gain.

At least one key Ramos aide has warned against the dangers of complacency and emphasized that the toughest work is yet to come. Presidential Security Adviser Jose Almonte, the administration's most vocal critic of cartels and monopolies and the oligarchic privilege that nurtures them, explained in a speech to the Philippine Economic Society in early 1996 that achievements to date represent the "easy" reforms. As "hard" reforms requiring greater administrative capacity are being attempted, he observed, "the weaknesses of the Philippine state are starting to show." It will be necessary, Almonte asserts, to reduce oligarchic influence over the state and promote better governmental provision of basic developmental tasks: "The paradox of market reforms is that they require capable statesÖ. Unless the Philippine state becomes stronger and more efficient, it will not be able to deal with our long-standing problems."

The current program of liberalization is best viewed as a first step in shaking up the old system; there must also be a long-term concerted effort to provide stronger foundations for sustained economic growth. In an optimistic scenario, one might hope that by reducing the sphere of rent-seeking opportunities, liberalization will disrupt old patterns of private sector plunder, nurture new patterns of entrepreneurial behavior less reliant on special privileges, and--through the growth of new elements of the business class--create a stronger constituency for those in government intent on creating stronger political foundations for economic growth. Unfortunately, it is equally possible that the entire program will be undermined by the absence of solid foundations.



Overcoming Obstacles to Developmental Success

Since the mid-1990s, the Philippines has succeeded in surmounting many important hurdles. Economic growth has resumed under an administration committed to liberalizing an economy long held back by unproductive patterns of entrepreneurship. But many troubling obstacles still lie ahead, requiring greater attention to underlying institutional and political constraints.

Business leaders commonly see insufficient government attention to such problems as poor infrastructure and crime as among the greatest obstacles to sustained economic growth. In 1995, for example, one warned that unless the government provides greater infrastructural support, "we will run into serious problems and growth will level off."3 Build-operate-transfer arrangements with private firms have often provided a clever means of circumventing an inefficient bureaucracy, but delays on the $760 million North Luzon Expressway project have shown that even privatized public-works projects can become bogged down in controversy over alleged improprieties.

Although the Ramos administration has devoted major attention to remedying deficiencies, infrastructure remains heavily strained not only by fiscal problems and corruption but also by natural disasters, environmental degradation, and rapid population growth. Administrative initiatives are often dwarfed by the magnitude of the problems involved. Any government would be challenged by the massive quantities of volcanic mud flowing off the slopes of Mt. Pinatubo onto the plains of Central Luzon. As illicit dissipation of resources and interagency battles continue to sabotage an effective response, however, future rainy seasons threaten to bury not only more farmland but also the bustling city of San Fernando, Pampanga.

Rice shortages and concomitant inflationary pressures in late 1995 refocused attention on infrastructural deficiencies and low productivity in the agricultural sector, which accounts for about one-quarter of national income and one-half of total employment. The shortages resulted, most proximately, from the government's failure to import additional stocks despite clear indications of a future shortfall (reportedly to ensure that it would not be an issue in the May 1995 elections). Needless to say, regimes unable to guarantee ready supplies of the staple crop tend to find it difficult to build broad support for larger programs of reform.

Because the country's commitment to liberalization has not been matched by as strong a commitment to export promotion, a kind of reverse mercantilism has resulted. The mercantilists of Northeast Asia restricted imports while promoting exports; in the Philippines, on the other hand, the ports have been opened up to a stream of foreign goods without any concomitant effort to promote higher-value-added exports. Impressive growth in total exports since 1993 has generally been accompanied by even more rapid growth in imported inputs: While annual export growth averaged 21 percent in the years 1993 to 1995, imported inputs expanded by an average of 22.6 percent.4 Not surprisingly, the trade deficit was a substantial $11.2 billion in 1996; the remittances of overseas workers and other foreign inflows, however, ensured that the current account deficit was kept in check.

There is also a huge and largely unaddressed need to provide diplomatic support to the some four million Filipinos who work overseas, whose remittances brought nearly $11 billion into the country between 1992 and 1995. The plight of overseas workers received national attention with the March 1995 decision of the Singaporean government to hang Flor Contemplacion, a Filipina who had been convicted of the murder of a Singaporean child and another Filipina. Among Filipinos, Singapore was widely perceived to have framed an innocent worker, and the strong sense of national outrage was intensified by anger over the Philippine government's failure to provide proper legal and diplomatic support to Ms. Contemplacion. This and subsequent episodes of perceived but unaverted injustice have served to highlight the incongruity of a country that depends on the export of labor yet is often too weak to provide proper assistance to its overseas workers.

The greatest crisis of confidence in governmental capacity comes in the area of "law and order"--which is ironic given that President Ramos headed up the Philippine Constabulary under Marcos and the entire national defense establishment under Aquino. Highly publicized kidnappings of foreign businesspersons sapped investor enthusiasm in the Aquino years, and the number of reported kidnappings increased from 39 in 1991 to 199 in 1995. Common targets are Chinese Filipino businesspersons and their families, many of whom choose not to inform the authorities because of widespread reports that kidnap gangs are closely connected with so-called law enforcement officials. A September 1995 statement of the Philippine Chamber of Commerce and Industry warned that persistence of "the twin problems of kidnappings and bank robberies" undermines investor confidence and reinforces "the perception that the government is helpless in alleviating the situation." Solutions to the problem continue to be attempted, but the business community and the larger public are increasingly impatient for results in breaking a kidnap-for-ransom "industry" that is actually estimated to have collective profits rivaling that of a major automobile company.

If "hoodlums in uniform" have provoked widespread cynicism toward the law enforcement system, "hoodlums in robes" (to borrow the terms of Vice President Joseph Estrada) have had the same impact on a judicial system widely disdained for its frequent dispensing of decisions to the highest bidders. Archbishop Jaime Cardinal Sin, for example, has denounced the "judicial Judases" found throughout the system and observed that the study and practice of law in the Philippines are "as different as heaven and hell." Corruption aside, uncertainties and delays generated by the court system are often a source of business frustration; court rulings related to foreign investment have done little to ease long-standing concerns of international investors. Perhaps the greatest complications, however, are found in the extraordinary quantity of litigation related in one way or another to the plunder of the Marcos years.

More generally, sustained economic growth depends on improving the quality of the bureaucracy--described by Ramos as the "weak link" in national developmental efforts. Thus far, the most successful economic reform efforts have been those that merely remove restrictions on competition; far more complicated are initiatives requiring sustained administrative capacity. It is one thing, for example, to liberalize agricultural imports or remove restrictions on agricultural exports, but quite another to provide the roads, irrigation facilities, extension services, and other infrastructure necessary for farmers to improve their productivity and meet the challenges of international competition. Similarly, it is far easier to open up the economy to foreign investment and imports than to develop sustained programs of export promotion which could assist local entrepreneurs anxious to tap new opportunities in world markets.

Recurring administrative scandals highlight the enormous need to develop a bureaucracy that can support, rather than obstruct, the country's developmental needs. Reducing the overall scope of bureaucratic activity, Ramos has argued, is the first step toward enabling the state to begin to perform more effectively the basic tasks required of it. On several occasions he has asked Congress to approve a major reorganization of the bureaucracy, but this is only one of many legislative priorities. In any case, reforming a system overflowing with congressional appointees is a herculean challenge, and efforts to provide salaries sufficient to attract better civil servants face formidable fiscal constraints.

Although it is heartening that national leaders recognize the need to strengthen the civil service over the long term, change in the short term is likely to be piecemeal at best. In any process of institution building, a logical place to begin would be the enhancement of administrative capacity at the agencies responsible for such vital tasks as revenue collection, bank supervision, and securities market regulation--where the Philippine state has long been unable to ensure that resources and regulatory responsibilities are used for public gain. Thus, no matter how sound the policy agenda promulgated at the national level, there is little hope of coherently sustaining it in the absence of strong political and institutional foundations.



Emergent Stability or Recurring Conflict?

A major factor supporting renewed economic growth has been a significant increase in political stability; overall, the national political scene is calmer than it has been at any point since before the tumult of the 1980s. The 1992 presidential and congressional elections were widely perceived as an important sign that democratic institutions were consolidating themselves in the post-Marcos era, and the May 1995 congressional elections involved former coup plotters choosing "electoral struggle" as a new means of achieving political power and goals. Most notably, former colonel Gregorio Honasan, whose renegade military band threatened the Aquino administration with several unsuccessful coup attempts in the late 1980s, is now a member of the Philippine Senate. The decline in intramilitary dissension was formalized in October 1995, when the Rebolusyonaryong Alyansang Makabansa (RAM) signed a peace agreement in which it promised to return its weapons in exchange for amnesty and reintegration into the armed forces.

Further political stability has emerged from the dramatic weakening of the once-powerful Communist Party of the Philippines (CPP), whose bitter internal differences split it and its military arm, the New People's Army (NPA), into openly feuding camps by late 1992. The party first encountered major problems adjusting to new modes of struggle after the fall of the Marcos dictatorship in 1986, and accommodationist policies of the Ramos administration--the legalization of the Communist Party, amnesty to "rebel returnees," and extensive negotiations with the communist-backed National Democratic Front--seem to have been successful both in encouraging ongoing defections and exacerbating intraparty struggles over strategy. Philippine military drives have further contributed to the NPA's marginalization, although communist rebels remain a presence in some outlying provinces. Today, breakaway urban guerrillas continue occasional assassination drives in Manila, and leftist groups remain capable of mounting occasional protest actions against price and tax increases brought on by economic reform programs. Thus, although the militant left has but a fraction of the influence it enjoyed in the mid-1980s, it would be a mistake to presume the permanent demise of radical solutions to national political woes as long as the social and economic problems that inspired past insurgency remain largely unresolved.

In 1996, the government achieved a major breakthrough in negotiations with Muslim secessionist forces on the southern island of Mindanao. Talks with the Moro National Liberation Front (MNLF) initially were reinstated following a 1992 cease-fire agreement, but they were frequently bogged down by fundamental disagreements over how the promises of autonomy first made by Marcos in 1976 were to be implemented. The MNLF argued that an autonomous region should be granted outright, whereas the government insisted on the need for a plebiscite. Amid threats of renewed hostilities, the two parties reached a historic accord in June 1996: In lieu of an immediate plebiscite, both sides agreed to the creation of a temporary body--the Southern Philippines Council for Peace and Development (SPCPD)--to be headed by MNLF chairman Nur Misuari and nourished with ample funds from Manila (as well as, it is hoped, sympathetic Islamic countries).

The range of the SPCPD extends much farther than that of the Autonomous Region of Muslim Mindanao (ARMM) created in 1989, but the ultimate boundaries of the autonomous entity are to be decided in a plebiscite in 1999. In effect, Misuari seems to have abandoned secessionist aims in exchange for patronage resources that will enable him to build up a stronger political base. This base is formidable: He was not only promised leadership of the SPCPD but was also elected ARMM governor (on the Ramos ticket) in September 1996.

If Ramos has succeeded in making peace with the MNLF, however, he has at the same time alienated many Christian Mindanaoans. Opposition is far from unanimous--many Mindanao Christian politicians support the president--but there is no question that the agreement will face major resistance from those who resent the stature and resources given Misuari and perceive (incorrectly) that his council will dominate existing governmental units. Ramos, for his part, has mounted a determined campaign to garner support for the agreement and has made its successful implementation one of the top priorities for the remainder of his term.

Even if peace is achieved with the MNLF and Christian resistance is quelled, ongoing elements of the Muslim secessionist movement have the potential to pose an increasingly powerful challenge to the central government in Manila. The MNLF's official departure from the battlefield was accompanied by the simultaneous strengthening of other forces, not only breakaway groups from the MNLF but also the Moro Islamic Liberation Front (or MILF, which split from the MNLF in 1978) and the Abu Sayyaf Group (reportedly led by veterans of the Afghan wars). The precise links among these various groups remain the source of considerable speculation, but their military capacity was clearly demonstrated in the April 1995 ransacking of a town in western Mindanao. Officials blame Abu Sayyaf for the attack, as well as for a host of other kidnappings and bombings in Mindanao.

The strongest secessionist group, however, is the MILF, whose standing army--about 8,000 fighters by the numbers of Philippine officials, but possibly several times larger according to other analysts--and solid base in west-central Mindanao threaten Manila's control over a significant chunk of the South.5 Thus, although political stability has certainly been enhanced on many fronts, possibilities for ongoing conflicts nonetheless endure.



Ramos and Congress: New Measures, Old Methods

During the Ramos administration, relations between the executive and the legislative branches reached new--albeit often unstable--levels of cooperation. For the first half of his term, Ramos often achieved striking success in building wide bases of legislative and popular support. Despite winning just under one-quarter of the votes in 1992, he used his considerable skills in old-style political maneuvering to forge a multiparty Rainbow Coalition of support in the House of Representatives. His own political party, the LakasóNational Union of Christian Democrats (Lakas-NUCD) won only 41 of 206 seats in the 1992 elections. But through wholesale switching of parties, it claimed 112 seats by mid-1993; eventually the Rainbow Coalition came to comprise nearly three-quarters of the House. Cordial relations between the House and the Palace are nurtured by considerable congressional input into the appointment of cabinet officers (many originating in the House itself), as well as by programs that provide members of Congress at least $500,000 each per year (and, for many, several times more) in discretionary funds to be applied to their pet projects. In exchange, Ramos has enjoyed solid House support for important measures of his economic reform program. The dominance of Lakas-NUCD and its Rainbow Coalition was handily confirmed in the 1995 elections.

Unfortunately for Ramos, relations with the Senate have not proceeded so smoothly. Traditionally, the Senate has been a more independent body than the House; because its twenty-four members are elected nationally, many see themselves as serious contenders in future presidential elections. Despite the fact that senators obtain far more discretionary funds than their counterparts in the House, the relatively greater power of each senator makes it far more difficult for the Palace to obtain their compliance. In the 1992 elections, the opposition Laban ng Demokratikong Pilipino (LDP) won a strong majority of the Senate's twenty-four seats and soon found itself accused of "obstructing" the administration's measures of economic reform. Ramos managed to engineer a solution in late 1994, when his Lakas-NUCD forged a coalition with the LDP (described by Ramos as not "a temporary union of inexperienced virgins," but denounced by one Manila newspaper as "a get-together of aging tarts and incompetent harlots"). The coalition emerged victorious in the 1995 elections: Of the twelve seats being contested, the Lakas-NUCD-LDP coalition won nine. Ramos's bloc could now boast twenty-one of twenty-four seats in the Senate, of which fourteen were LDP.

This tenuous coalition of weakly institutionalized political parties fell apart within months, however, when Senate President Eduardo Angara was deposed in an August 1995 "coup" seemingly initiated by discontented senators and supported by the Palace. Although its motivation for the coup was probably the Ramos camp's eagerness to cut down a potential rival in the 1998 elections, the result was highly counterproductive. The Senate--and thus the entire Ramos legislative package--screeched to a halt; for months, the only bill to become a law concerned the iodization of salt. Angara, who had formerly given considerable support to reform legislation, established his own opposition bloc in the Senate.

The House coalition faced fewer tensions, but the cost of regaining even a modicum of reform momentum has been considerable. House members were given some $1 million each in discretionary funds in early 1996--reportedly to assist the passage of tax measures, oil deregulation, and other legislation. Ramos has continued to deliver ambitious legislative agendas to Congress; however, the price of delivering success becomes higher as the 1998 elections approach. Such transactions began to come under increasing public scrutiny after a major newspaper revealed that the total cost of the two major pork barrel programs had soared to consume nearly $1 billion of the annual budget--and that many of the legislators allegedly receive hefty kickbacks from the projects they sponsor.6

Sustaining economic reform--not only in the latter Ramos years but into subsequent administrations as well--ultimately depends on reform of a political process still dominated by traditional politicians (disparagingly referred to as trapos, or dishrags). As Joel Rocamora observes, the administration's "continuing vulnerability to the requirements of trapo politics has made it difficult to clinch a thoroughgoing reform image." A full decade after the restoration of elite democracy, the Philippine party structure continues to be even more weak and volatile than it was in the preómartial law era. In the absence of effective political parties organized around some basic programmatic agenda, the passage of legislation requires enormous expenditure of effort and resources on individual legislators. The overall cost--both in terms of public funds squandered and cabinets compromised by corrupt or inept politicos--often becomes apparent long after the short-term victory has been won.7



Decentralizing Government and Politics

The Ramos administration's reform programs are being pursued while the very shape of the nation's governing structure is being recast from top to bottom in a process as consequential on the political front as liberalization initiatives are on the economic front. In the measures of devolution mandated by the 1991 Local Government Code, the importance of the national bureaucracy is downgraded, while local mayors and governors are provided with greater autonomy and responsibility for carrying out many basic governmental functions in such areas as health, social services, agricultural extension, and public works. Local government units are now much richer (cities and provinces are given 40 percent of internal revenue allotments, compared to only 11 percent before 1992), and they enjoy much more extensive power to raise their own revenues and even negotiate their own loans.

Although many voice optimism over the possibilities for greater local control of the decision-making process, others express concern that the devolution of power to local communities has the potential merely to heighten the power of local overlords and disrupt efforts to build greater administrative capacity and consensus at the national level. Despite campaigns against them by Manila authorities, private armies continue to flourish throughout the provinces. The ultimate results of the devolution experiment are likely to vary considerably according to local political and economic conditions.

The city and provincial governments of the rapidly growing island province of Cebu offer considerable hope for the success of local devolution: Officials are utilizing their new powers to strengthen their revenue base (by floating bonds, establishing joint property ventures with the private sector, tapping foreign assistance, and proposing major increases in what have long been paltry proceeds from property tax) and initiate long-needed infrastructural improvements. In large part through the mediation of the one clearly dominant political family, it has been relatively easy for Cebu to forge high levels of cooperation with the business community, and nongovernmental organizations (NGOs) have enjoyed good access to local leaders at certain points. In other areas of the country, however, local devolution is likely to have far more mixed results. For it to succeed it is necessary not only to build the strong revenue base required to support local development, but also to ensure that the assumption of greater responsibility actually provides benefits to the entire local community.

The Local Government Code seeks to institutionalize the participation of NGOs and so-called people's organizations (POs). As is true of political reform more generally, local devolution must empower those sectors of civil society that have long been effectively disenfranchised by the formidable political, economic, and social power of the Philippine oligarchy. In fact, development-oriented and popular organizations have in many cases succeeded in empowering communities at the local level, and their national counterparts have often had a significant impact on policy decisions in Manila (as advocates of the environment, consumer protection, agrarian reform, gender equality, minority rights, and so forth). Quite often, NGOs and POs have been able to forge effective ties with established elements of civil society, including the church, academe, media, and labor.

But the Local Government Code's laudable goal of institutionalizing grass roots participation has often failed.8 Despite the profusion of NGOs and POs over the past fifteen years, they still have a long way to go before they can be considered to have significant and lasting influence on the conduct of local government and politics. Despite their successes on particular fronts and in particular localities, the cumulative impact of these nontraditional actors is decidedly weak in comparison to the formidable networks of power enjoyed by the traditional structures that they are confronting. Some umbrella political formations are seeking to build stronger links from the national to the local level, but there is as yet no reformist political party able to articulate comprehensively and effectively the demands of those long marginalized by the political system.

This is not to underestimate the popular empowerment that has taken place, nor to minimize the considerable changes that have occurred in the character of Philippine politics. New faces have emerged in recent elections, leading some to see a challenge to the dominance of the trapos. Because traditional ties between local patrons and their clients are undermined to the extent that clients have independent access to new outside resources, the infusion of overseas remittances into local communities becomes a significant force in reshaping long-standing political ties. In some localities, a strong NGO presence seems to be associated with voting patterns that challenge established families.

At the national level, anger over electoral fraud keeps alive political reform movements whose roots can be traced to the 1950s. Economic growth puts resources in new hands, and with the middle class emerging as an independent political force one can expect to see important opportunities for emancipation from the political and economic dominance of local oligarchs. Urbanization also promotes a shift from patronage-based politics to political appeals based on name recognition and media exposure; increasingly, voters approach the ballot box more as individuals than as elements of a locally organized bailiwick. In addition, a determined new group of investigative journalists has published major exposés that challenge the powerful and even force resignations of blatantly corrupt officials.

In the midst of such changes, however, much remains the same. First, members of well-established political clans continue to enjoy clear domination of such bodies as the House of Representatives, and elections are still tainted by the power of "gold, guns, and goons." The Commission on Elections does not consistently inspire confidence in the electoral process, and in any case the enormous expense of running for election serves as an effective barrier to the entrance of reformist forces into the political arena. Second, many so-called new faces often retain strong connections to old centers of power. Third, as part of the new prominence of media appeals, many of the new faces consist of basketball players and movie stars, some of whom actually manage to continue their careers even as they hold public office. Finally, as noted above, there has been little effective institutionalization of the political parties. As in earlier eras, personalities and familial power generally continue to crowd out clearly defined constituencies and careful debate of real issues.



In the Shadow of the 1998 Elections: Issues and Choices

Since late 1996, political dynamics have to a large extent been shaped by the upcoming 1998 presidential and congressional elections. Central to this has been concern over presidential succession, both among those who have feared that the constitution would be altered to allow Ramos to extend his single six-year term and among those who wish Ramos could somehow extend his term in order to continue his program of reform. But the president repeatedly has promised to step down on schedule, and efforts to change the constitution have faltered. As a result, attention has shifted to the question of whom he will anoint as the Lakas candidate. LDP politicians (led by Angara) have formally broken their bond with Lakas in order to intensify preparations for 1998, although many of the party's members were loathe to deprive themselves of the patronage and other benefits that the coalition provided. Because Vice President Joseph Estrada is widely treated as the front-runner for the presidency, there is considerable speculation about his future alliances and choice of running mate.

Legislative races are set to produce considerable turnover, since a large number of representatives and senators face term limits and are unable to run for reelection. One important new institutional arrangement will be a party-list system, mandated by the 1987 constitution, that requires fifty members (roughly one-fifth of the body) to be chosen from parties that were not dominant in the 1995 elections.

With anticipation of 1998 as a backdrop, the Ramos administration continues to confront major issues--while keeping a close eye on its troubling performance ratings (which plunged from +32 percent in September 1992 to -19 percent in January 1996 before improving somewhat by midyear). A number of factors at home and abroad have contributed to this decline in popularity, some probably unavoidable but others reflecting at least a temporary malfunction in the political dexterity displayed in earlier years. Corruption scandals involving Ramos appointees marred the administration's public image, and reports of Palace infighting contributed to perceptions of a lack of coherence and focus.

Public concern over authoritarian impulses has also had a negative impact on the popularity of the administration. Fears of such impulses are nurtured by the central role Ramos played in the Marcos regime, as well as by the frequent appointment of retired military officers to important government posts. Memories of martial law remain a very emotive element of Philippine politics, and members and supporters of the Ramos administration resurrected past fears when they pushed a variety of proposals to revise the constitution from a presidential to a parliamentary system of government. Because Marcos employed the same strategy to prolong his tenure as chief executive in the early 1970s, prevailing political discourse in the Philippines often associates a shift to a parliamentary form of government with the advent of authoritarianism; indeed, many have accused Ramos and his congressional allies of planning charter revision as a means of circumventing term limits and extending their tenure in office. Such fears were exacerbated by the specifics of the administration's draft proposal, which contained no provisions for a question hour or a vote of no confidence. Public opinion polls reveal continuing opposition to a shift in the form of government, and even those who support other versions of parliamentarism (in hopes that it will nurture more issue-oriented parties and give greater voice to those long marginalized by the elite-dominated electoral system) forcefully denounced the plan.

Success in combating crime would be a major achievement for Ramos, who acknowledges that crime is eroding political stability and consequent economic gains. But the public (particularly in Manila) often perceives itself to be under siege by an uncontrollable scourge and has grown cynical of repeated attempts to restore a greater degree of law and order. Further threats to the well-being of the citizenry come from a regulatory apparatus that often fails to enforce basic measures of public safety. The ease with which fire and building codes can be violated (for a fee) was exposed in the wake of a March 1996 fire at a Quezon City nightclub that took the lives of more than 150 youths; similar stories emerge in the wake of ongoing maritime disasters involving the many "floating coffins" that ply interisland routes. Thousands of Leytenos drowned in 1991 when flash floods poured down from denuded slopes where logging had long been essentially unregulated, and two decades of government failure to confront those who discharge sludge from a copper mine in Marinduque has led to the massive poisoning of seabeds, rivers, and entire communities. Citizens outraged by such carnage demand a regulatory structure able to ensure their safety, but piecemeal and ad hoc responses are too rarely followed up with sustained attention to the long-term goal of strengthening the regulatory apparatus.

The government must also find politically and administratively feasible means of increasing its low rates of revenue collection. Expanding the value-added tax was supposed to have the advantage of relatively straightforward administration, but even this tax was plagued with confusion about its implementation. The most important measure, the comprehensive tax reform bill, seeks to raise over P13 billion (largely from changes in excise and income tax structures). New revenues are essential; budget surpluses in 1994 and 1995 were made possible only by huge intakes from privatization and cuts in infrastructural spending. As one economist explains, "None of these trends can, or ought, to be sustained."9 Ramos has called the bill the cornerstone of economic reform efforts, but thus far legislators have shown more fondness for approving new exemptions than for creating new revenue sources.

Laying that cornerstone will require a huge expenditure of political capital, and in the process it is quite likely to be carved into unrecognizable shapes. The formidably influential magnate Lucio Tan found many allies in Congress in his quest to ensure that revenue policies remain favorable to his beer and cigarette companies; he even managed to convince the Supreme Court, in June 1996, to support him in a $1 billion tax evasion case pressed by the Ramos administration.10 Congress faces enormous pressures from businesses seeking to keep taxes low, and the broader public may reasonably question the fairness of a tax system that has long shown itself incapable of significant exactions from property owners and other holders of large assets. Furthermore, even if a more productive revenue structure is promulgated, the far more fundamental question of whether the administrative structures of revenue collection will be able to implement it effectively will remain.

Finally, despite Ramos's strong rhetorical commitment to reducing poverty, those at the bottom of society have yet to find much reason to cheer his economic program. Meager public investment in agriculture has contributed to abysmal growth rates and enduring rural poverty. The deeply flawed agrarian reform program so facilitates loopholes and landlord evasion that it does little to promote redistributive reform and the development of a broad base of prosperity. Moreover, the glacial pace of its implementation discourages investment by both generating uncertainty and providing incentives for conversion of lands to nonagricultural uses.

The administration's social reform agenda is meant to address the need for equitable growth, but analysts suggest that it has yet to yield many concrete benefits for the "basic sectors" (farmers, fisherfolk, urban poor, indigenous communities, and disabled) that it is supposed to serve.11 As the country's population continues to grow over the next generation (to perhaps 121 million by 2030, according to one estimate), demands for government services are sure to expand enormously in scope and complexity. Any lapses in implementation of population control programs will make it all the more difficult for future generations to construct an economy and a polity capable of ensuring a high quality of life for all.



Confronting the Crossroads

Building and reinforcing the institutional and political foundations needed to sustain reform is a difficult and protracted process. It can only succeed with a combination of effective leadership from the top and the emergence of new forces from below that are able to challenge the long-standing oligarchic dominance of the economy. Ramos has begun to supply more effective leadership, but there is little evidence of the emergence of a strong social coalition able to sustain reform measures into subsequent administrations.

The creation of a broad pro-reform coalition would certainly be enhanced by ensuring that the benefits of economic expansion are felt by a larger element of the population. This task is made all the more urgent and difficult, however, by the historical absence of any thorough program of land redistribution; unlike South Korea and Taiwan at similar stages of their industrialization process, the Philippines exhibits a particularly immense gulf in levels of wealth and income between the elite and the millions of Filipino workers, urban poor, and peasants.

One can certainly hope that the presence of democratic institutions might promote the eventual creation of a broad social coalition able to sustain measures of economic reform into future administrations. Yet, although democratic institutions appear to be firmly establishing themselves, many sectors of Philippine society remain marginal to the overall democratic process--and decidedly undemocratic forces hold sway in many localities. International observers applaud the Ramos administration's explicit efforts to show that democracy and economic growth can go hand in hand, but Philippine-style democracy is handicapped, not only by the continuing dominance of strong oligarchic forces but also by the weak institutionalization of both its party system and its bureaucracy. Thoroughgoing political reform and the careful nurturing of institutions that promote long-range developmental goals will likely be required for Philippine democracy to deliver economic success. Moreover, it is important not to forget--as do some politicians and business leaders when occasionally tempted to resort to anti-democratic measures--that Philippine-style authoritarianism proved highly inimical to the country's developmental efforts.

Recent Philippine experience shows that there are no shortcuts on the road to development and democracy.12 Liberalization is certainly an important first step to promoting greater international competitiveness, but without strong political and institutional foundations it will not be a sufficient response to the country's long-standing economic woes. Devolution holds out similar hope on the political front, but local governments must still prove themselves more capable than the national government in fulfilling the tasks they have assumed. Both measures are useful in shaking things up; the next--and more awesome--task is to put things together in a way that will promote greater prosperity and freedom for all classes of Filipinos. The Ramos administration has begun to address the new realities facing the Philippines in the 1990s; with so much yet to be done, however, this is not a time for either complacency or blind faith in simple solutions.



Notes

1. Joel Rocamora, Breaking Through (Metro Manila: Anvil Publishing, Inc., 1994), pp. 173, 192ó93; Alex Magno, "The Market Consensus," Far Eastern Economic Review, August 10, 1995, p. 31.

2. Rafael B. Buenaventura, President, Bankers Association of the Philippines, "At the Forefront of Change," Fookien Times Philippines Yearbook 1994, p. 180.

3. Guillermo Luz, Executive Director, Makati Business Club, commenting on a July 1995 survey of major corporate executives. Philippine Daily Inquirer, August 28, 1995.

4. Extrapolated from data presented in Jude Esguorra, "A Report on the Economy at the Homestretch," IPD Political Brief, July 1996. On the dominance of low-value- added exports, see also Raul Fabella et al., "1995: A Tale of Two Semesters," Philippine Export Confederation Policy Paper, February 1996, pp. 11ó14.

5. Western intelligence sources estimate 40,000 soldiers; the MILF itself claims to be 120,000 strong. See Rigoberto Tiglao, Far Eastern Economic Review, March 28, 1996, pp. 26ó29.

6. See Philippine Daily Inquirer, July 26 and 27, 1996. Additional details came forth in subsequent weeks and are analyzed by Amando Doronila in the August 4 and August 18 Inquirer.

7. Joel Rocamora, "The Political Requirements of Economic Reform," Issues and Letters, Vol. 4 (October 1995), pp. 1ó4; "Is the Ramos Government Unravelling?" Politik, Vol. 2 (February 1996), pp. 48ó50; "Unnatural Disasters," Politik, Vol. 2 (May 1996), pp. 46ó48.

8. See Emil P. Bolongaita, Jr., "Rethinking Participatory Governance: The Non-Institutionalization of Local Development Councils in the Philippines," Policy Research Paper No. 2 (Makati: Asian Institute of Management Policy Forum, 1996).

9. Clarence G. Pascual, "The Proposed Tax Reform Package," Issues and Letters, Vol. 5 (April 1996), p. 1.

10. See A. Lin Neumann, "Who Loves Lucio?" Asia Inc., August 1996, pp. 21ó26, and Rigoberto Tiglao, "Tan Triumphant," Far Eastern Economic Review, September 26, 1996, pp. 60ó66.

11. Edmund Martinez, "Fidel Ramosí Unfinished Business," Politik, Vol. 2 (February 1996), pp. 39ó40.

12. To paraphrase the title of Goran Hydenís No Shortcuts to Progress: African Development Management in Perspective (Berkeley and Los Angeles: University of California Press, 1983).

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For comments that contributed to this chapter, I would like to thank Tony Abad, Jose Almonte, Noel de Dios, Jaime Faustino, Jim Goodno, Gary Hawes, Edna Labra Hutchcroft, Joel Rocamora, and Steve Rood. Responsibility for any errors or omissions, of course, is mine.