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June 9, 2000 VOL. 29 NO. 22 | SEARCH ASIAWEEK

All Up, It's A Bad Rap For Erap
Only the economy survives Estrada's woes

The conference subject: corporate governance and related reforms. The venue: a plush hotel in Manila's business district. Missing in action: keynote speaker Philippine President Joseph Ejercito Estrada. The consensus: not good. "The government is adrift," sneers opposition Senator Raul Roco. "After six months of Estrada, we knew we were in trouble."

In fact, the president was busy on May 29, taping a warning to the separatist Moro Islamic Liberation Front (MILF) on the eve of renewed peace talks. Finance Secretary Josť Pardo read his conference speech instead. But that was not what the Pacific Economic Cooperation Council audience wanted to hear. The leading creditors, businessmen, scholars and researchers from the U.S., Australia and East Asia had hoped Estrada could clear the air. After all, a few things had been going on lately. Try a stock market scandal, the closure of Urban Bank, a vicious war in Mindanao, kidnappings, bombings in Metro Manila and scathing criticisms about the quality of national leadership.

Back from a two-month trip abroad, Federation of Philippine Industries chairman Raul Concepcion says the country's image has been battered to a degree not seen since a 1989 coup attempt against Corazon Aquino. "After that, the mood was one of pessimism and there was a sense of drift," notes Concepcion. "We were merely surviving on a day-to-day basis, without clear direction." At home these days, a feisty press is giving no quarter either. The Mindanao war and hostage-takers in Sulu, wrote columnist Amando Doronila in the Philippine Daily Inquirer, "have contributed to the international perception that the Philippines is politically unstable and its government is inept." Even the country's Catholic church chief has weighed in. "There is a growing perception that there exists a vacuum of leadership," says Cardinal Jaime Sin.

Woe to Estrada. Things started to unravel in March and have gone downhill rapidly since. First came an insider-trading scandal involving gaming company BW Resources -- owned by Estrada's friend, Dante Tan. No one has been jailed. Then the president fired his new chief of staff, Aprodicio Laquian. Laquian had claimed that Estrada indulged in late-night drinking sessions. Not true, countered Estrada. Next, the president declared a war against the MILF, apparently prompting extremist separatists Abu Sayyaf to seize two sets of hostages. To date, seven Filipinos remain captive on Basilan island another 21, mostly foreigners, on Jolo. Negotiators now say the Jolo bunch may be held for another three to six months. Meanwhile, one person died during three May bomb attacks in the capital. Police last week arrested 26 people in connection with the blasts, saying they were allied to the MILF. The wife of one Muslim arrested said her husband had been framed and evidence planted.

Other incidents could hardly be ascribed to government, but did nothing to help its image. The so-called Love Bug computer virus unleashed from Manila caused damage worth an estimated $10 billion worldwide. The suspects were found but the Philippines had no laws under which to charge them. A journalist was killed north of Manila during a possible assassination attempt on Jojo Ejercito, one of the president's sons. The local town mayor said the bullets were meant for her. Then a loner hijacked an internal Philippine Airlines flight from Davao City, robbed passengers and fell to his death as his homemade parachute failed to open. So much for security there.

In response to all of this, the market and the peso dived (stocks have lost 37% of their value in a year), and Finance Secretary Pardo prepared to revise downward his economic growth targets.

Central Bank governor Rafael Buenaventura, however, is not buying into litanies of economic gloom. "What uncertainty, what drift?" he queries. "The economy has never been in better shape." Buenaventura says inflation and interest rates are well below targets, exports are up 18%-19% and international reserves are at an all-time high of $16 billion. The peso has depreciated just 4% from last January -- while the Singapore dollar has dropped 4.5%, the Thai baht 4.8% and the British pound 8%. He adds that Estrada has overseen the passages of the General Banking Act to force greater competition and the Retail Trade Act, which allows foreign ownership of retailers. Before Congress is the Securities Act (to stop insider trading and stock manipulation) and an amended Central Bank Charter for closer supervision of banks.

Trade and Industry Secretary Manuel Roxas says direct foreign investment is healthy. Analysts from investment bank Lehman Brothers consider economic fundamentals to be sound. And Cielito Habito, economic planning secretary under president Fidel Ramos, concludes that "we still have a sustainable [economic] path. The challenge is to get over the present noise." Perhaps. But some quieter moments are now well and truly overdue.

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