Analysts fear RP is doomed to instability

Analysts fear RP is doomed to instability

By Terry Friel

MANILA (Reuters): A wave of nationalism over an assault on Muslim separatists may lift Philippine President Joseph Estrada's flagging fortunes, but his country is doomed to years of instability unless he makes headway against a raft of other woes.

Two years ago, the Philippines appeared to have survived the Asian economic meltdown better than most of its neighbors. Along with Singapore, it was the only nation to avoid negative growth in 1998.

But analysts say the country has fallen off international investors' radar screens, its currency and stock market is in trouble and its economy running out of steam as others recover.

Estrada, who has four years of his term to run, is dogged by perceptions of dithering leadership, allegations of cronyism and corruption in government, a wave of bombings in the capital and his failure to make progress on freeing 21 mostly foreign hostages held by Muslim separatists.

"Investors are still very nervous about what's happening in the Philippines and have lost quite a bit of confidence in the Estrada administration," said Li Lian Ong, regional economist with Macquarie Bank in Hong Kong.

"The slowness of the economic reforms... the hostage situation down south is seen to be symptomatic of perhaps the loss of control over the country."

At home, a full-scale offensive against the Moro Islamic Liberation Front (MILF), the main guerrilla force fighting for an independent Muslim state in the south of this mainly Catholic country, may boost his fortunes, said political columnist Nelson Navarro.

Although the fighting has hit agricultural production, it has also triggered a surge in nationalism among most Filipinos.

Newspapers and television daily highlight visits by movie stars and singers to wounded soldiers and many newspapers are running special funds to help the casualties.

"People have really rallied around the flag," Navarro told Reuters.

"If he can turn this around and end it (the insurgency), it will be a really big point. But if he doesn't it's going to turn into a quicksand to suck away resources and energy.

"It could do him in."

Congressional elections for the Senate and House of Representatives are due in May next year when the opposition hopes to wrest control of both houses, making Estrada's rule more difficult.

While the once popular former action film hero grapples with the Muslim insurgency and the hostage crisis, the latest official data shows the economy is running out of puff.

The economy grew 3.4 percent year-on-year in the first quarter, down from 4.9 percent in the last quarter of 1999.

The government remains confident it can achieve the bottom end of its 4-5 percent range in 2000, but many economists are looking to 3-3.5 percent instead.

Investor concerns have also hit the peso and stock market hard. After a poor performance in 1999, the stock index has fallen a further 27 percent so far this year.

"The government really needs to assert some authority," said Navarro. "The situation requires statesmanship and political footwork that he (Estrada) evidently doesn't have."

With virtually no way of legally forcing Estrada from office, analysts fear the country is doomed to political and economic instability if he does not improve.

"I think you will see basically the Philippines fall further and further behind its regional neighbors," said Ong.

"Basically you need to have political stability in order to push the economy ahead. But then you are never going to achieve political stability if your economy doesn't recover.

"Unless you can feed the people, there's always going to be social unrest, dissatisfaction."