Abiding Political Crisis Impedes Rule in Philippines

MANILA, 3 October 2005 — For the last week, President Gloria Macapagal Arroyo’s usually soft-spoken national security adviser has been detained under guard in a Manila hospital on contempt charges filed by the Philippine Senate. He has been confined to a cardiac unit, awaiting surgery after officials said a heart ailment flared during an angry exchange with legislators demanding details about a government lobbying contract.

Norberto Gonzales is disparaged and debilitated, and in a way, so is his boss. Arroyo beat back an impeachment attempt in Congress last month, winning dismissal of charges that she rigged the voting in the 2004 presidential election before the complaints against her could be debated. But she is still plagued by allegations of wrongdoing, which prompt small street protests on a near-daily basis.

A large-scale political challenge to Arroyo first erupted in May and has hampered her ability to govern, analysts said, particularly at a time when steps are needed to repair the economy. The unemployment rate decreased from 8.3 percent in April to 7.7 in July, according to the National Statistics Office, but the country has a level of public indebtedness that compels the government to spend a third of its budget on interest payments alone.

“Governance has been halted,” said Tom Green, executive director of Pacific Strategies and Assessments, a risk consultant to foreign investors in the Philippines. “There are a lot of things that need to be done, but she’s not up to it. Those kind of tough decisions are on hold and probably on hold forever.”

Arroyo has long worried that adversaries in Congress and the military were scheming against her, and Green said she has now become so fearful of alienating allies that she is unable to push reforms required to spur investment.

However Ignacio Bunye, Arroyo’s press secretary, said the impeachment process has not distracted Arroyo nor interfered with her policy agenda.

“She still felt she should concentrate on governance and that’s what she did,” Bunye said. “She has come out of this situation politically stronger.” Bunye added that the Philippine peso has remained stable during these turbulent months and investment has been on the rise. “The message is to move forward. We have a lot of things on our plate,” he said.

The standoff concerning Gonzales underscores that atmosphere has been poisoned. He appeared last week before a Senate committee to address concerns about a contract he had signed with Venable LLP, a Washington-area law firm hired to help secure US support for several Arroyo initiatives, including amending the Philippine constitution. But he balked at answering questions about who had authorized the agreement and who, at a time of budget austerity, would pay for it.

Government and opposition figures agree that the dispute goes beyond the impeachment bid that failed. The president’s detractors counter that the administration is desperately clinging to power.

“They must feel vulnerable. They know they have something to hide,” said Guillermo Luz, executive director of the Makati Business Club, which has called on Arroyo to resign. “From the viewpoint of governance, everything has slipped back in a big way.”

The centerpiece of Arroyo’s economic program has been a proposal to increase a value-added tax and broaden the types of goods and services covered. While financial analysts deemed the measure essential for putting government accounts on a firm footing, the country’s Supreme Court has blocked the plan.

Two of Arroyo’s former economic advisers claimed this summer that the president had secretly sought to intervene with the court to stall the tax hike, fearing it could fuel demonstrations at a time when she was facing mounting criticism over corruption. Arroyo has denied the accusation.

Philippine businessmen and political analysts said the government now shows little enthusiasm for convincing the court to lift its temporary restraining order and for putting the tax into place quickly.

Bunye said Arroyo remains committed to the tax. “The president is prepared to make the hard political choice. She believes this is economically, morally the right choice,” he said.

Economic growth in the Philippines has not kept pace with the expanding labor force, pushing many to look for jobs outside the country. Officials predict a record one million Filipinos could leave this year to work abroad, joining eight million already overseas. Meantime, the burden of servicing the debt has squeezed spending on education, health care and maintaining the county’s decrepit infrastructure.

After winning a six-year term of office last year, Arroyo outlined ambitious plans to improve roads, airports and other infrastructure. But critics say those projects have stalled as her team turned its attention to the political crisis.

So, too, her administration had initially moved to boost revenue by hunting down major tax evaders. That effort lost steam after her most senior economic advisers quit en masse two months ago and urged her to do the same, according to Philippine and foreign businessmen.

Within the last week, her administration announced it would no longer allow people to demonstrate in the streets without a permit, provoking widespread criticism that Arroyo was flirting with martial law. Bunye and other government officials vehemently denied the charge. But riot police with shields and truncheons have clashed with small groups of banner-waving demonstrators in scenes largely absent during the protests against Arroyo earlier in the year.

Randy David, a sociologist at the University of the Philippines who said he planned to join the protesters, lamented that this latest furor over free speech is again diverting officials from addressing basic economic problems.

“They’re busy putting out so many brush fires,” David said. “It’s unfortunate for a country like ours, which is known in the region as a country that can’t get its act together.”