Resilient economy rides out the storm
WITH ITS STRONG ECONOMY, STABLE DEMOCRACY AND LOW INFLATION, THE PHILIPPINES HAS MORE THAN MATCHED THE PACE OF DEVELOPMENT SHOWN BY ITS SOUTH-EAST ASIAN NEIGHBORS. HAVING RECENTLY PASSED TWO SIGNIFICANT PIECES OF LEGISLATION-THE POWER SECTOR REFORM LAW AND THE ANTI-MONEY LAUNDERING LAW-THE COUNTRY HAS PROVED ITS DETERMINATION TO SUCCEED ON A TRULY GLOBAL LEVEL

While most of the world was bracing itself at the end of last year for a predicted global economic slowdown, in the Philippines matters were more complicated as the country also had to cope with an upsurge of separatist rebel activity in the south and a corruption-stained president who, by the end of 2000, had done more for his own personal economy than for the nation’s, had pushed the national poverty incidence back up to 1988 levels (40.6%) after years of steady decline, and all but wiped out investor confidence, both foreign and domestic.

Gloria Macapagal Arroyo President of the Philippines

By the end of 2000, Filipinos had had enough. When Joseph Estrada’s political allies tried to derail his impeachment trial, tens of thousands took to the streets in mass demonstrations that had the backing of nearly every sector of society. He finally threw in the towel on January 19 this year and, the day after, his former vice president, Gloria Macapagal Arroyo, was sworn in as president and a new era of political transparency and economic development began.
The new president, a popular two-term senator, a former economics professor and the daughter of a much-loved former president, immediately announced that her administration would be marked by four priorities, or what she calls her four core beliefs. “Win the battle against poverty within a decade; improve moral standards in government and society; establish new politics based on party programs and consultation with people rather than the traditional politics of personality and patronage; and lead by example.”

Even before taking over the presidency, Ms. Arroyo was pushing for such a strategy to cure the nation’s ailing economy and its crisis of confidence that kept investors away and pushed Filipinos deeper into poverty.
According to International Monetary Fund officials, the final economic outlook this year for the Philippines has greatly improved since the peaceful transition of power to President Arroyo, with GDP growth expected to near the 3.8% mark. “Inflation is falling, financial markets have calmed and interest rates have been lowered to the level prior to the recent turmoil.” The Philippines is also taking a leading role in the tennation Association of South East Asian Nations’ bid to include China, and then Japan and South Korea, in an ambitious free-trade pact that would decrease the region’s dependency on the United States.

But that doesn’t mean decades of warm U.S.-Philippine relations are in peril. Indeed, since the September 11 terrorist attacks, the two countries have grown even closer. In early November, a group of U.S. military advisors were on the southern island of Basilan to assist Manila’s military offensive against the hostage-taking, Islamic fundamentalist rebel group Abu Sayyaf, which Washington says has strong ties to Saudi dissident Osama bin Laden’s Al Qaida terrorist network.
President Arroyo’s bright young secretary of finance, Jose Camacho, says job creation is a very important aspect of the administration’s war on poverty, and jobs, he says, can only flourish in an investor friendly environment.
“Peace and order are at the top of everybody’s attention at the moment,” notes Mr. Camacho. “It is something we talk about regularly in the government, and it is very high on the agenda of this administration.”

Peace talks with the country’s largest rebel group are progressing and the Philippines is still a safe and attractive place to visit and to do business in. Still, Mr. Camacho acknowledges that perception is a key obstacle to overcome.
“Perception determines investor confidence and investor interest. So we are working to solve the terrorism problem in the south with Abu Sayyaf and the problem of urban kidnappings,” Mr. Camacho explains. “We need to project our successes so that the public, and investors in particular, appreciate that we are making significant progress.”