RP economy seen weathering political winds

RP economy seen weathering political winds

By Ramoncito dela Cruz

MANILA (Reuter): The Philippines, the latest nation to join
the ranks of fast-growing Tiger economies in southeast Asia, also
has the region's most free-wheeling democracy.

And although presidential and congressional elections due in
1998 are expected to lead to some purely populist policies and
some back-pedaling in a four-year reforms program, the economy is
strong enough to overcome hiccups, economists say.

Critical reforms such as changes in individual tax laws, full
oil industry deregulation, privatization of public utilities, and
the liberalization of retail trade are some which are on the
anvil for 1997.

But rumbling among politicians and interest groups against the
moves is growing louder, an ominous sign of an uphill battle for
their full implementation.

"Approaching an election year next year, legislators are more
susceptible to lobbying," said University of the Philippines
Professor Benjamin Diokno.

He said watered-down laws are likely to emerge which will only
worsen the problems that they were trying to remedy.

Felipe Alfonso, president of the Asian Institute of Management
(AIM), said such a threat exists, but added: "The potential
effect of that is not going to be as significant as it would have
been if we did not have many of the reforms in place."

Since 1992, the Philippines has undergone a major revamp of
its economic structure, transforming from protectionism to an
open economy. It has opened up vital industries such as banking,
insurance, power, telecommunications and transport to foreign
competition.

As a result, economic output has grown steadily in the last
four years, with the gross national product (GNP) likely to hit
an eight-year high of more than 7.1 percent.

The economic growth has been ably supported by strong export
growth and rising foreign investments.

Total export receipts are expected to reach $20.5 billion by
the end of the year, which is 17 percent higher than last year's
total, the highest growth rate in the region.

The balance of payments surplus is projected to reach $4.0
billion in 1996, a substantial improvement from a surplus of $631
million in the previous year.

Rosier numbers are being projected by government planners.
GNP is expected to grow by eight percent, unemployment is likely
to fall to seven percent from 7.4 percent in October last year,
while inflation is seen down to six percent from 1996's 8.5
percent.

"Six, seven, eight are going to be our numbers in 1997,"
Socioeconomic Planning Secretary Cielito Habito, the government's
top economic planning official, declared at a recent forum.
Economists dismissed the threat of over-heating, saying the
economy is standing on sure footing.

"In our view, the Philippine economy is doing very well. In
fact, if you look at the 1996 performance of the Philippines, it
is clear that the Philippines is emerging as one of the star
performers within the east Asia region," said World Bank resident
representative Vinay Bhargava.

"We all believe there is no danger of over-heating," he added.

Dilip Das, an economist at the Asian Development Bank, said
that the growth path was achieved through radical market reforms,
instead of succumbing to populist and protectionist pressures
being advanced by interest groups.

"In the last three years, you were able to keep them out," Das
said.

"All the signs we see are that there is a commitment of the
administration to continue the economic liberalization and the
external orientation of the economy. We have not seen any
evidence that suggests otherwise," said Bhargava.

He added that barring any major political upheaval or external
shocks, the acceleration could be sustained over a longer period.

"What's happening in the Philippines now is very much based on
a solid foundation of structural adjustment which took place in
1987 and 1992, 1993...This changed the fundamentals of the growth
cycle as compared to some of the previous cycles of boom and
bust," he added.

Concern has been expressed in some quarters that once
President Fidel Ramos, who launched the reforms program in 1992,
leaves office, the economy may falter. Under Philippine law, the
president is limited to a single six-year term.

But Ponciano Intal, president of the Philippine Institute of
Development Studies (PIDS), said any change in political
leadership should not spawn any uncertainty as long as candidates
are all forthright in their economic agenda.

"It is the responsibility of all potential candidates next
year to deliver their economic program as transparently and as
early as possible for discussion," Intal said.

There are at least five early contenders in the presidential
race. Most of them are positioning to get the endorsement of
Ramos, whose popularity has surged during his term.

However, Diokno warned that Ramos should not get drawn into
petty political squabbling.

"What is best is for the executive department to assume a high
ground -- forget about politics. Let the politicians position
themselves; Ramos should just concentrate on the reforms. Do not
think of what is popular, just do what is right," he said.

Habito acknowledged the threat saying that "too much politics
may get in our way."

But he said government officials will not be affected by
political squabbles. "This is something for us in government and
in the public sector to guard against.