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Philippines' economic blemish
Publication Date : 01-10-2013
The Aquino administration laboured hard to make the economy one of the fastest growing in Asia. Now it is threatened by the wide-ranging pork barrel scandal and the armed conflict in Zamboanga City.
The government’s economic managers have downplayed the potential impact on the overall economy of the fighting between government troops and a faction of the Moro National Liberation Front, which earlier caused the closure of Zamboanga’s busy sea and air ports as well as many business establishments. At the recent economic briefing, Budget Secretary Florencio Abad said the situation in the south would not cause a huge economic dislocation, based on the amount of calamity assistance that had to be provided by the government. Even Tourism Secretary Ramon Jimenez claimed that the Philippines’ brand image was intact despite the Zamboanga conflict. “There are no immediate implications for tourism,” he said, pointing out that there were no cancellations of tourist bookings.
While the government’s economic managers claim that the conflict posed minimal or no impact on the economy, it has definitely set back efforts to draw investors to resource-rich Mindanao. It highlighted the difficulty of bringing progress to the island mainly because of peace-and-order issues. Henry Schumacher, vice president for external affairs of the European Chamber of Commerce of the Philippines, called it correctly in an interview with Reuters last week. While Mindanao has so much to offer, events like “the stupid fighting in Zamboanga is just throwing everything back,” Schumacher said. “Selling Mindanao to investors is so difficult now.”
Security concerns have long discouraged new investments in Mindanao, where one in every three persons is living in poverty. A framework agreement signed last year between the Aquino administration and the Moro Islamic Liberation Front was touted as a breakthrough to end decades of conflict in Mindanao, until a faction of the MNLF stormed some coastal barangays in Zamboanga early last month.
The scandal involving legislators’ pork barrel, formally known as the Priority Development Assistance Fund, is another issue blotting the stellar performance of the economy.
Business leaders are keeping a keen eye on the latest government initiative against corruption—a major deterrent to the inflow of local and foreign investments. While implementing the rule of law can improve investor confidence, businessmen have warned that government efforts to prosecute the accused should not lose steam. The filing of charges against certain senators has been welcomed by the business community, but, as BDO Capital and Investment Corp. president Eduardo Francisco observed, all this will come to naught unless the Aquino administration gets a quick and convincing guilty verdict on those who deserve to pay for their dastardly deeds.
The ECCP’s Schumacher said the business community was trusting that the Ombudsman and the Sandiganbayan would do their share in ensuring that justice is delivered without delay. But a quick resolution seems out of the question now. Ombudsman Conchita Carpio Morales has admitted that it may take some time before formal cases can be filed at the antigraft court against those suspected of involvement in the pork barrel scam.
Still, the bigger picture remains positive. Inflation and interest rates are low, foreign exchange inflows from overseas Filipino workers and investments in the business process outsourcing sector continue to protect the peso, government infrastructure spending is growing fast, and private investments, particularly in the property sector, are rising.
The critical issue for Mindanao remains the inflow of investments, particularly in much-needed infrastructure like power plants, job-generating factories, and roads and bridges. “We all know that so much more investment has to flow into Mindanao in order to have inclusive growth,” Schumacher pointed out. “If you don’t have inclusive growth, then these people who are fighting today have nothing to lose and will just continue.”
For the rest of the country, all eyes will be on how the government deals with the ever-widening pork barrel scandal. Will the action be as decisive as in the impeachment of then Chief Justice Renato Corona, or as painstakingly slow as in the Ampatuan massacre trial?