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.