The Philippines: Social and Political Outlook

Congressman Manuel A. Roxas
Majority Leader, House of Representatives, Philippines
February 3, 1999

Greetings. I've been asked to discuss the Philippines' political situation and its impact on the country's economic condition.

The short answer is that we are out of the emergency room and have been discharged from the intensive care unit of the hospital. The doctors are cautiously optimistic, though they haven't allowed us to go home. The patient requires close observation and monitoring to ensure continuous adherence to the regimen imposed by the physicians. As an aside, it is not certain that the doctors know what they are doing and that their prescriptions are necessary, let alone desirable. It is just that we've had a long relationship with the medical team and, during these turbulent times the familiar and conventional is comforting.

The long answer is what follows.

Last May 1998 we conducted a presidential election - a major political exercise in our country that is held every six years. We also voted for our Representatives and local government officials. The culmination of that exercise - the proclamation and inauguration of a new president, vice-president, 12 senators, all 220 congressmen, 78 governors, some 1600 mayors and about 13,000 councilors, approximately 17,500 officials in all - took place a month after, in June 1998.

It is noteworthy that the last election was the first time our Constitution's three term limits for Congressmen and other elected local officials became applicable. The Philippine Congress is refreshed and reinvigorated by the entry of 124 freshmen congressmen, many of them in their twenties and thirties.

Similarly, the election of the party-list representatives is consistent with our Constitution and with an enabling law that mandates representation for the normally disenfranchised and disempowered groups such as the farmers, the youth, the disabled, the women's sector, and others. Certainly, these sectoral representatives in our legislature will add color, variety, and fresh thinking into the hallowed, though sometimes slow moving, chambers of Congress.

Within the context of Southeast Asia and our own recent history, this orderly and democratic transfer of power is remarkable. In the case of the office of the presidency, the transfer was to a member of the political opposition, and it happened peacefully, with neither threats of military intervention nor suppression of dissent, All were accomplished within the precepts and procedures set by our Constitution. Indeed, it is a testament to how far the Philippines' political and social institutions have matured and to how healthy the country's civil society has become.

The Philippines' 1988 liberal democratic constitution embraces the principles of democratic elections, checks and balances, the rule of law, and respect for individual rights and civil liberties. These attributes have helped the country avoid the social upheavals, political strife, and racial hatreds that have torn our more economically advanced neighbors.

Unfortunately, Philippine media-and to a certain extent, foreign media as well-chose to dwell on the negatives: that a "bumbling" former actor is now the most powerful person in the land and that a philanderer is the President of the Republic.

The truth of the matter is that President Estrada-he considers himself an "A" actor, having won our country's equivalent of the Oscars, and not a "B" actor-has been surprising his most vocal critics and detractors.

He has committed to continue the market-oriented reforms started by his predecessor and avoided the kind of knee-jerk, demagogic, interventionist policy mistakes that many expected him to make. When he took office, there were terrific pressures on him to undertake populist actions as a reaction to the Asian crisis. These included getting government to buy stocks in the ailing stock market; imposing import controls; broadly increasing tariffs; using government money to bail out ailing companies; and reversing the recently instituted currency controls liberalisation policy.

He rejected those pressures and reaffirmed his commitment to an open economy. He said as much before an international audience in a well-applauded speech in the World Economic Forum in Singapore. Proof that the media's worst fears about him proved unjustified is that the country is stable and its economic prospects remain eminently viable.

In fact, we continue to be encouraged by his pronouncements to date that government money would not be used to bail out Philippine Air Lines or cellular operator Pilipino Telephone Company (Piltel).

We are similarly encouraged by his recent refusal to grant tariff protection to 21 industry sectors, which had petitioned the government to do so. Acting on the advice of his cabinet, President Estrada only approved tariff adjustments for 3 industry sectors. These tariff adjustments were minimal - up to a maximum of five percent - were limited to one year, and were product-specific. These upward tariff adjustments were made only after extensive public hearings and consultations and were balanced by some downward tariff adjustments.

True, there are fears and rumors of a return to crony capitalism, especially with the appointment or return of some former Marcos associates to powerful positions. To this date, these remain as rumors. Where there are insinuations of corruption or wrongdoing, President Estrada has acted swiftly and decisively to remove erring officials, as he had the former PCGG Commissioner and the Customs Commissioner. Neither has he used government money to bail out friends or associates. And as in the case with the tariff decisions, the process undertaken was very transparent.

But the biggest insurance against the return of crony capitalism is that the country's democratic institutions are alive and well - and kicking. We have had two successful, orderly transfers of power since the People Power revolution of 1986. Our rambunctious media is the freest in Asia -some say, too free - and is capable of exposing any shenanigan. Our civil society, made up of institutions such as the Church, business and civic associations, and non-governmental organizations, and which many describe as the strongest and most varied in Asia, functions as social watchdogs and pose as a deterrent to rampant abuses of political power.

We don't have a strong party system in the Philippines. By raiding the erstwhile majority party for members, forging alliances with minority parties, such as my Liberal Party, and creatively expanding his own party, President Estrada has managed to avoid political gridlock that is characteristic of partisan warfare. Even with this comfortable arrangement, President Estrada has adapted a kind of benign neglect toward the party system. Consequently, the fractiousness and friction associated with partisanship have been avoided. Individual legislators are free to speak their own mind on issues, with an informal consensus between the executive and legislative branches of government as to developing the common legislative agenda.

Our political and economic life, however, is not without problems. These challenges will test the mettle of the current political leadership. We still have our long ongoing though much diminished communist insurgency that has been boosted by the financial crisis. The Moro Islamic Liberation Front with its demand for an independent Islamic state jeopardizes the peace and order in Mindanao. Criminality continues to be a big problem.

Our military is weak compared to that of our neighbors and incapable of fully defending the country against foreign national security threats. The country is particularly threatened by the erection of military outposts by China in the disputed Spratly islands. We believe that this dispute can easily escalate and threaten the peace and stability of the region. Unfortunately, our military strength lacks credibility and the Asian financial crisis has forced government to postpone its much-needed Armed Forces military modernization program. In this regard, our government is seeking to strengthen its military ties with the United States and is looking forward to the ratification of the Visiting Forces Agreement with the US.

Apart from the abundant natural resources in the Spratleys, this vital area straddles important sea-lanes. I would like to underscore the importance of a peaceful settlement of the Spratlys dispute to the peace and stability of the entire region. The problem is not a bilateral one between the Philippines and China. There are many other claimants to the Spratlys. Therefore, the United States and other Asian countries have a stake in inducing China to engage in a multilateral consensus about resolving the conflicting claims and avoiding pre-emptive actions.

The Philippines has already done much in the area of structural economic reforms. These include the deregulation of the oil industry, the passage of the comprehensive tax reform program, and the libralization of our air transport, telecommunications, and shipping sectors. Also, we have liberalized, and kept deregulated, our foreign exchange markets, restructured our Central Bank and allowed the entry of foreign owned banks, adopted an intellectual property code consistent with international standards and aligned our tariffs not only with WTO standards but with the more aggressive AFTA timetable.

Much has been accomplished and much still needs to be done.

Our economy faces structural weaknesses that we need to address immediately. Fifty percent of our exports are dangerously concentrated in a single commodity, electronics, and we need to diversify our sources of export revenue. The weakness of our agricultural sector is dragging down industrial development, which is the slowest in Southeast Asia. Our low level of savings, which is estimated to be 19 percent of GNP, will severely limit our growth potential. We have to improve our infrastructure dramatically but this would require billions in new funding.

But the most serious threat to the country and the most glaring weakness of the economy is the country's high poverty incidence and widening income equality. Although poverty incidence declined from 40 % in 1991 to 35.5 % in 1994, the country exhibited the slowest growth in poverty reduction among Southeast Asian countries.

Income inequality widened despite rapid economic growth from 1994 to 1997. Benefits have not been trickling down. In 1994, the richest ten percent had incomes 19 times bigger than the poorest ten percent. In 1997, the richest ten percent is now 24 times richer compared to the poorest ten percent. The number of poor families did not decline from 1994 to 1997 due to population growth.

Clearly there is a need for government to more decisively address the poverty and income gap problem. We have to spend more on education and social services, even as the Asian crisis has reduced government resources. We have to focus our efforts at solving the problems in the countryside, principally agricultural inefficiency and low agricultural productivity, because this is where most poor people live.

Against this background of a persisting poverty problem in our country, it is not without reason that President Estrada got elected. He presented himself as the champion of the poor. He promised to do something about food security and eradicating rural poverty. His pro-poor message resonated with the Filipino masses, impatient at the slow progress by which benefits have trickled down.

But promoting economic growth and social equity will be a challenge, especially in this age of globalization. While globalization of capital and markets delivers benefits to developing countries like the Philippines, it also demands more from them in quality of governance, in the integrity of their institutions, and in the capabilities and vision of their leaders. In navigating through the perilous shoals of globalization toward the promised land, political leaders must elicit a high degree of social trust. It doesn't hurt that we in the Philippines have a popularly elected leader enjoying a high degree of trust.

Indeed our President will need to draw from this deep reservoir of trust and confidence as he shepherds through the body politic all the remaining reforms that we need to undertake. These reforms will require more patience and sacrifice from our people, as they are mostly in the nature of "marking-to-market". Thus, there will be lesser subsidies and greater cost recognition and pass-through of the many government services demanded by our people.

These reforms include: Re-engineering the bureaucracy, Deregulation of the electric power industry and Liberalization of the retail trade industry.

We realize also that development is more than the introduction of competition and market-relations in our economy. This is an important lesson from the Russian and Asian crisis. The building of political and social institutions is as important as undertaking economic reforms. We are therefore pushing ahead with more political, judicial and social reforms. In this connection, President Estrada has called for amendments to the Constitution that, among others, would strengthen transparency and accountability; he has also called for a review of the judiciary, in particular the scope of jurisdiction of local judges in the issuance of restraining orders.

In closing, we in the Philippines believe that our maturing democracy gives us an edge. We believe that our democratic institutions and political liberties have enabled us to weather the Asian crisis better than the rest. We also believe that our democratic institutions allow us to adopt and adapt the necessary prescriptions that will usher us through this crisis without abandoning the very constituency for which these reforms are meant to benefit; that is, with out without "losing" the patient.

For these reasons, we look to the future with confidence. Thank you.