Arroyo aims at strong economy, security as legacy

Arroyo aims at strong economy, security as legacy

John O'Callaghan, Reuters, Manila

President Gloria Macapagal Arroyo said on Wednesday she wants to
make her mark in the twilight of her term by handing her
successor a stronger economy with less graft and a country safer
from terror.

Arroyo has vowed not to run for re-election in May 2004 to
devote her attention to the woes of a nation plagued by budget
deficit blow-outs, pervasive corruption, widespread poverty and
decades of rebel violence.

"We must strengthen our institutions, we must strengthen our
bureaucracy and we must work towards freeing the policy-making
from the control of vested interests," she told Reuters in a
wide-ranging interview at the presidential palace.

Arroyo was catapulted into the top job in January 2001 from
her previous position as vice-president by a popular uprising
that ousted her predecessor Joseph Estrada, who is now on trial
on economic plunder charges.

Despite making what she calls "the ultimate sacrifice" by not
seeking a new term, there is considerable doubt Arroyo will be
able to make significant changes in a country where the rich
wield enormous political power.

But the economist and daughter of a former Philippine leader
said the key was to enshrine in law her anti-corruption and anti-
poverty measures and endorse a like-minded successor.

"When reforms are legislated then they are, in effect,
irreversible for a very long time," she said.

One of Arroyo's major battles has been trying to get
legislators to back a stronger law against money-laundering to
satisfy the Paris-based Financial Action Task Force (FATF).

The country faces the threat of sanctions that would slow
trade and the flow of billions of dollars sent home each year by
Filipinos working overseas if it does not meet the requirements
of the global watchdog by March 15.

Arroyo said senators opposed to some of the amendments would
meet FATF officials in Manila shortly to discuss their concerns.

"Even the bill as it stands now has strengthened the hand of
the Philippine government against money-laundering," she said.
"Maybe it's slower than if there were no vested interests but we
have to keep moving forward."

Financial sanctions would be devastating for the Philippines
as investors already are wary about the government's ability to
control spending, collect enough tax and keep the peace.

After failing to meet its budget deficit target three times in
2002, Manila has said it needs to raise more than 198 billion
pesos ($3.68 billion) this year to finance a projected budget
shortfall of around 202 billion pesos.

"Our deficit so far this year is below the projected deficit,"
Arroyo said without providing figures.

"We've modernized our way of tracking tax evasion and also we
are strengthening the fight against graft and corruption plaguing
the Bureau of Internal Revenue and the Bureau of Customs."

The Philippines could afford to suspend auctions of Treasury
bonds and bills due to demands for higher yields because of its
fiscal discipline and improved tax collection, she said.

"We still have weapons in our arsenal to be able to close that
gap outside of borrowing from the bond market," Arroyo said.
She declined to elaborate.

The Philippine economy expanded at a decent clip of 4.6
percent last year but the benefits of that growth have been slow
to trickle down to the third of the country's 80 million people
who live on a couple of U.S. dollars a day.

Alleviating poverty and improving infrastructure are key parts
of Arroyo's development program but she has been hamstrung by
having to spread limited amounts of money across many areas.
Poverty, particularly in the Muslim south of the largely Roman
Catholic country, has played a major role in fomenting violence
by militant Islamic and communist groups.

Bombings by the rebels and battles with troops have killed at
least 200,000 people, mostly civilians, in the last 30 years.
While Arroyo said she did not subscribe to recent warnings by
senior officials that the Philippines would be hit by sympathy
attacks if the United States led a war against Iraq, she stressed
that militants could strike at any time.

"The most important thing is to be a hard target," she said.
"I'm clamping down on rebels in the Philippines not because of
any pressure from Washington -- it's because it's in our national
interest. We want to have peace and order."

Arroyo said it was perfectly possible to wage war while
negotiating an end to the rebel insurgency.

"There's no contradiction. We must show that, for those who
don't want peace, the military is capable of doing its job," she
said. "For those who want peace, we are willing to talk peace."

Arroyo did not reveal whether 2004 would mark the end of her
political career but said her goal was "to work out the reforms
that I have started and to increase the consciousness of the
people of the need for those reforms".

"I would like to continue strengthening the economy to create
jobs, to promote investment in an atmosphere that is, as much as
possible, free of corruption and red tape," she said.