The Sick Man Of Asia

MANILA - Now let's put our hands together and pray.

This is exactly what the top stars in the administration of President Gloria Macapagal-Arroyo did recently at the 23rd National Prayer Breakfast in a Manila hotel. Everybody was there, from cabinet ministers to Supreme Court justices, from former president Fidel

Gallery 1 Gallery 2 EDITORIAL Philippines: More pain, no gain

Ramos to Manila Archbishop Gaudencio Rosales - all praying for courage and faith to lead the nation as the Philippines faces an abysmal fiscal crisis.

The crisis is triggered by a P200 billion (US$3.5 billion) budget deficit and a P3 trillion ($53.2 billion) public-sector debt. The budget crisis gets even more serious because of the ballooning foreign debt. According to the Freedom from Debt Coalition, total Philippine debt, public and private, domestic and foreign, is now $96 billion - and counting. More than 31% of the 2004 national budget bleeds to service the debt. Many an economist warns that the Philippines could soon face a crisis of Argentine proportions.

Just so the message was clear, American motivational speaker John Maxwell also lent a hand to the National Prayer Breakfast. Maxwell called on all Filipinos to support Arroyo, asking that she be "the servant of all Filipinos". Compounding the mood of non-separation of Church and state - which would have pleased many a member of the Christian Right in the United States - Foreign Affairs Secretary Alberto Romulo even implored the Lord to help Arroyo bear the cross of leading the Philippines out of a number of appalling poverty statistics: "Bless her, O Lord, and give her the courage to carry on."

There's only one problem. The Lord does not seem to be listening.

Have mercy

In the 1950s, the Philippines was the most dynamic economy in Asia - hailed by the World Bank as a future powerhouse. Half a century later the country is, in the words of Rommel Banlaoi, a political-science professor at the National Defense College, "the sick man of Asia".

The numbers are extremely alarming. Let's start with the demographic bomb. The Philippines is already the 12th-most-populous country in the world: 84 million by the end of 2004, and

counting. At an annual growth rate of 2.36%, the population will have doubled by 2033 and may reach 200 million by 2042. The growth rate is extremely high compared with other Association of Southeast Asian Nations (ASEAN) countries such as Indonesia (1.6%) and Thailand (1.3%). Thailand and the Philippines had the same population size in 1965. Twenty years later, Thailand was at 52 million and the Philippines at 55 million. In 2004, Thailand's population stands at 64 million while the Philippines is approaching 84 million. Sheila Coronel, executive director of the remarkable Philippine Center for Investigative Journalism, says "we'll have to endure nine years of Arroyo without a population policy. She's a devout Catholic. She won't budge. A partial solution would be the private sector taking over the distribution of contraceptives."

This is a young population - 50% under 21 years old - and it's facing myriad very serious shortages. According to Congressman Gilbert Remulla, the latest data reveal that in 2003 there was only one government doctor for every 28,493 people; one government nurse for every 16,986 people; one government midwife for every 5,193 people; and only one rural health-care unit for every 29,746 people. The Philippines needs 9,000 additional teachers per year just to cope with the arrival of new students.

The missing doctors, nurses and teachers are part of the vast legions of Overseas Filipino Workers (OFWs) - something that leads former senator and vice-presidential candidate Loren Legarda to cry over the international image of Filipinos as "the groveling nomads of the world". Up to 8 million Filipinos are OFWs. Of those, about 2.5 million are permanent foreign residents; but the majority are registered (42%) or illegal (58%) overseas workers, at least 50% of them women. Without OFWs, the Philippines would already have hit rock bottom: they are sending about $8 billion back home per year, and counting. Unofficially, the total amount of remittances may be 50% higher, or more.

Incredible as it may seem in booming East Asia, the Philippines' average gross domestic product (GDP) per capita is actually shrinking. It peaked at $1,180 in 1996 (before the Asian financial

crisis), stood at $998 in 1999 and was at $953 in 2003. Compare this with Thailand: from $1,876 in 1999 to $2,322 in 2003. Last year, at least 27 million Filipinos - one-third of the population - were living with well under $1 a day, too poor to sustain their basic food and shelter needs. Today these poorest of the poor may be closer to 40% of the total population. According to a 2002 National Statistics Office report, during that year 3.4 million Filipinos were unemployed and 4.6 million underemployed. Today it is widely assumed, unofficially, that there are at least 10 million unemployed or underemployed Filipinos. The national debt is hovering around 85% of GDP. And with the price of oil on the rise, poverty in the Philippines is expected to worsen.

Gloria in excelsis

So what is Arroyo doing about this unmitigated disaster? The buzzword in Manila - from the Malacanang presidential palace to state-run companies - is "austerity". For many Filipinos - smiling, lovely, very perceptive - it's just panic: Aquilino Pimentel Jr, the minority leader in the Senate, agrees. For the absolute majority of an impoverished population, the whole thing means more sacrifice:Arroyo, via press secretary Ignacio Bunye, hinted there will be no wage increases until the economy is "nursed back to good health". Acid commentator Adrian Cristobal, a former press secretary to mega-dictator Ferdinand Marcos and currently a columnist in the Manila Bulletin, says that "if anyone is in panic, it's the people who have to live with rising prices for everything while salaries stay the same". But still everyone wants to help. "Their only condition is that since the crisis has to do with the foreign debt [more than P5 trillion], they want the IMF [International Monetary Fund], the World Bank and other foreign banks to receive their contributions directly," Cristobal says.

Press secretary Bunye - who did not reply to an Asia Times Online request for an interview - actually told workers demanding a modest wage increase they should be grateful they still had jobs. Cristobal once again hit the right note: "Shouldn't Mr Bunye be also grateful that his fellow countrymen are grateful? It took 330 years for them to be ungrateful to the Spaniards." The Philippines, as is well known, spent more than three centuries as a Spanish colony before its half-century under the Pentagon/Hollywood axis.

Arroyo, always sporting a Philippine terno (women's business suit), tries to look as though she does mean business. Her current mantra is Administrative Order No 103, which spells out a torrent of cost-cutting measures, including no foreign and local travel, no overtime pay and a ban on benefits for top executives in state-run corporations and agencies. Those who won't bow to austerity will be summarily fired. As for the 68,437 government-owned vehicles, in theory they are now closely monitored: no more free trips to the mall or weekend holiday getaways.

The frenzy inevitably has led to a surrealist show, including the campaign to have government workers drop their coins into contribution boxes and the idea that every policeman should contribute to the government one day's pay (a little more than $5). Police bosses happily say that if every cop did this they could hand a hefty $450,000 to the government. Cynics like Senator Pimentel insist that if that happens, it would only compel dirty cops to raise extra money from petty rackets.

On a more serious note, Malacanang decided to cut by 38% the P70 million of pork-barrel funds allocated to each congressional district. House Speaker Jose de Venecia swears that pork barrel will totally disappear from the 2005 national budget. The name of the game will be line-item budgeting, so "there can be no more suspicious realignment of funds". In theory, in a new, cleaned-up Philippines, the pork barrel would disappear from the Senate, the House and the executive. Cynical businessmen are not so sure. For his part, perpetually scowling Senator Panfilo Lacson - who ran against Arroyo in the latest presidential election - worries about much-needed funds ceasing to flow toward poor cities and towns that need to improve their water systems, barangay (district) roads and other vital projects.

Besides the austerity pose, Arroyo travels. She recently carried the whole family to China, including shady First Gentleman Mike Arroyo - prompting angry cries of a "family vacation". Powerful Chinese-Filipino tycoon Lucio Tan apparently paid for the family's expenses. But then Arroyo managed to bring home an alleged $1 billion in investment and soft loans. Arroyo gloated that Chinese President Hu Jintao was glad bilateral trade has gone "from practically nothing to $10 billion". She also touted the outcome of her visit: "We made another agreement, this time to increase total trade to $20 billion in the next five years."

A strong partnership with China would be essential at least to alleviate the Philippine drama: think of millions of Chinese tourists ready to burn their yuan on the pristine beaches straddling the Philippines' 8,000 islands. Moreover, it's in China's best interests to fish in the Philippines' pool of millions of skilled, English-speaking - and in many cases unemployed - professionals in communications, construction, engineering, education, distribution, environment, finance, health, tourism, travel and transport.

The non-stop Filipino talk show

The daily lunch buffets at the Peninsula or the Shangri-La in the Makati business district are essential to gauge business sentiment in Manila. And the mood is somber indeed. As a local factory owner puts it: "The banks are not lending to us. They'd rather buy [Treasury] Bills and government papers. The rates are so attractive, and the investment is risk-free and protected from depreciation." Other businessmen complain that the Philippines is forced to pay much more than Malaysia or Indonesia to get foreign currency loans. A bank analyst is adamant: "Arroyo has no short-term or long-term strategy whatsoever on how to deal with the fiscal and economic crisis. I have yet to see a well-documented plan."

Among Filipino businessmen, criticism of the daily barrage of Malacanang speeches alerting about the crisis is pointed. At the mention of Thailand or Malaysia, Filipino businessmen acknowledge that other ASEAN counties also borrowed a lot, but at least they have built highways and improved their education systems. "Our greatest achievement in education is the increase of illiteracy in our public schools," says an angry teacher.

Businessmen also complain the government is not doing anything about smuggling. Car assemblers complain that they sell a maximum of 100,000 automobile units a year while Thailand, with a smaller population, sells more than 500,000: they're still waiting for a ban on the unlimited import of used cars. "We keep asking the Americans and the Japanese to set up their Asian manufacturing hubs here, but obviously they prefer Thailand," says a Toyota dealer. "We lose because our market has no purchasing power, and on top of it there's a lot of smuggling."

There's a certain degree of schizophrenia in the air, though. While a delegation of American businessmen has praised Arroyo's "decisive steps" to deal with the crisis, local businessmen question why these "decisive steps" have not addressed another major Philippine

catastrophe in the making: a looming power crisis in 2007 or 2008. "It's tempting to reach the conclusion that what's good for American investors is not necessarily good for Filipino investors," says one businessman. This perception dovetails with what Alexander Remollino writes on the independent website Bulatlat ("to search" or "to probe" in Tagalog) about how Arroyo is very close to US President George W Bush and the reason she was Washington's favorite in the May presidential race: "The United States [is] the real decision-maker ... no one has been able to ascend to Malacanang, and stay there, without its blessings."

A consensus emerges anyway. The crisis has existed since Marcos; it's a consequence of what happened under Marcos. And Malacanang rhetoric will do nothing to solve it. But then there's the "dirty secret" that the elites will never admit to openly: the iron link between the Marcos, Aquino, Ramos, Estrada and Arroyo administrations, unable to pierce an immutable class structure in which wealth and income distribution is one of the worst in the developing world.

No biz like political show-biz

Is Arroyo credible and legitimate enough to pursue the austerity measures that would "save" the country? Hardly. According to Social Weather Stations, an independent think-tank, her popularity index is at 48% - and going down. Much of this has to do with what happened in the May presidential election.

Banlaoi of the National Defense College charges that in the Philippines "elections are nothing but overt expressions of competing interests of the Filipino elite rather than venues of contending programs of government". This being the easy-going Philippines, competitive elitism takes the form of a huge fiesta - or politics as entertainment. "Filipino voters participate in the election for the same reason they go to cockfights, boxing and basketball, festival and beauty contests," Banlaoi says. "Election season is like a big sports or concert season - highly entertaining." That's the same analysis given by Coronel from the Philippine Center for Investigative Journalism.

So the May election - the fourth presidential contest since the restoration of democracy in 1986 - was a fiesta, including elite stalwart Arroyo, inevitable former action star Fernando Poe Jr and even born-again televangelist Eduardo Villanueva. Arroyo, a self-proclaimed Harvard-trained economist and daughter of former president Diosdado Macapagal, ran under a party coalition named K4 - in pure Philippine show-biz style, the acronym was copied from F4, a male pop singing group from Taiwan. Show-biz politics has already given the Philippines former action star and disgraced former president Joseph Estrada - not to mention his son Jinggoy, who got a Senate seat last May. Nowadays the Senate has no fewer than three Filipino clones of Ah-nuld the Gubernator, California state Governor Arnold Schwarzenegger.

Former action star Poe, a very close friend of Estrada, ran without a program or even ideas, apart from a vague "unity of the Filipino people". It doesn't matter, because he got the vote of the TV-and-cinema-going masses. Manila Archbishop Rosales was not very pleased with the whole show, even saying that the greatest destructive element that ever visited the country in the past 58 years was Philippine politics. He hit the fundamental nerve when he organized a movement called Pondong Pinoy (Filipino Fund) to force people "beyond the politics of money, power, class, greed and family ambitions that has held the country captive for many generations".

The first People Power revolt in 1986 got rid of Marcos - and inspired, among others, the mass protests that got rid of Suharto in Indonesia in 1998. People Power 2, in 2001, ousted the mega-corrupt Estrada. In both events, the Catholic Church played an

absolutely crucial role - mobilizing millions to change the course of Philippine history. But now the Church simply has no one to trust: it has barely begun to contemplate the implications of the four-day military-backed civilian uprising - a de facto coup d'etat - that put Arroyo in power in January 2001. Estrada, a certified rascal, never formally resigned as president and still claims he was "robbed" - the ultimate irony. He now lives under a relaxed form of house arrest near a military camp. As for the Church, it is mired in crisis, with a shortage of priests and the occasional ban on a progressive bishop.

An informal survey around Manila, especially in poor neighborhoods, reveals a widespread popular perception that the May presidential election was also stolen. Fernando Poe is still contesting the result. The "stolen election" explains both the Church reticence toward Arroyo and Arroyo's low approval rating. Moreover, she was never popular enough to succeed Estrada in the first place.

Filipinos have had more than three years to judge Arroyo in action. When she claimed power in January 2001 she proclaimed "four core beliefs" as her government platform: 1) elimination of poverty within a decade; 2) improvement of moral standards and good governance; 3) true political reforms and "dialogue with the people"; and 4) leadership by example. On the troubled economic front, she set to work brandishing the good old IMF one-size-fits-all recipe book.

In 2000, the Philippines was not in as bad a shape as it is in 2004. With inflation at 4.4%, the lowest in a decade, real per capita GDP growth was only 1.8%, denoting low economic growth. Arroyo's government entered into a so-called Poverty Partnership Agreement with the Asian Development Bank (ADB), which is based in Manila. This was tried in the past - and failed. By 2002, unemployment had expanded from 10% to 11.4% (it currently stands at 11.7%). There were no wage increases. And the debt-service ratio rose from 16% of total exports of goods and services to 17%.

Arroyo's approval rate sank. She then came up with the concept of a "strong republic" as a cure to all ills - an empty public-relations mantra repeated ad nauseam. Arroyo resorted to practicing old-school Philippine politics to the hilt - appointing some dodgy characters to important positions and dressing up every successful government program as an act of personal benevolence by the benign sovereign. In 2003, per capita GDP growth slowed from 2.4% to 2.2% - one of the lowest rates among the 10 members of ASEAN. And the main factor in the growth of the gross national product (GNP) remained the increased flow of remittances by OFWs. Foreign direct investment plummeted from $1.8 billion in 2002 to a paltry $319 million in 2003. Blame the usual suspects: political instability, the terrible state of Philippine infrastructure and, most of all, corruption.

By the time of the May election, Filipinos were extremely gloomy. A survey by the Social Weather Stations think-tank revealed that 44% of the respondents believed their quality of life had deteriorated; and the all-meaningful self-rated poverty index - which had oscillated between 54% and 65% under Estrada and 53-66% during the 2001-04 Arroyo years - was still stuck at 56%. Since July 2001 there have been at least 11 accusations of corruption targeting First Gentleman Mike Arroyo, apparently very fond of dodgy "commissions". In the Corruption Perception Index established by Transparency International, the Philippines is ranked 2.5 on a scale of 0 (very corrupt) to 10 (very clean). Even under the racketeer Estrada, the country's index was 2.9.

After the first 100 days of Arroyo Part 2, enveloped by a rhetorical blitzkrieg from Malacanang, the country remains gloomy. Arroyo's national approval rate remains at only 48% - and falling. And 55% of Filipinos still believe the May elections were stolen.

Blame the poor

The Manila Municipal Development Authority (MMDA) is widely considered to be a nest of bureaucratic corruption - probably even worse than the Department of Public Works and Highways. These two agencies keep exchanging rhetorical blows over who's responsible for Manila's urban nightmare. But it seems some

MMDA officials know something that 84 million Filipinos don't. An official with the Estrada government once famously said that Filipinos were rich because they had a lot of garbage. Now MMDA officials under Arroyo have discovered that the "uncontrollable floods" in the national capital are caused by the urban poor and their garbage. So Arroyo may be right, in a sense: waging war on poverty is meaningless. After all, the poor are responsible for the whole mess. Well, not really, as we'll see next in this series.

According to research by the Philippine Center for Investigative Journalism, "the poor vote is a thinking vote". The masses are constantly dismissed by the middle classes and the Filipino elite, but they seem to smell that something is terribly wrong. The shrinking Filipino middle class shares most of the values of the conservative ruling elite. They may be striving to amplify their political voice, but they definitely have no interest in radical change - an absolute must if this long-suffering land of warm, gracious people does not want to be devastated by a social volcano.

People Power 1 got rid of a corrupt dictator, Marcos, and People Power 2 a sleazy, corrupt president, Estrada. Some say a mild version of People Power 3 has already happened - when disgruntled Estrada supporters rallied in May 2001 and almost laid siege to Malacanang. Metro Manila's Epifanio Delos Santos Avenue (EDSA) Shrine - with its faux-golden freedom statue - is constantly barricaded on Arroyo's orders. The president will do anything to prevent a People Power 4, which, considering the depth of popular desperation, is all too possible within the next two years.