RP economy slips back into a coma

RP economy slips back into a coma

MANILA (DPA): The Philippines has once again become the "sick
man of Asia" with the economy slipping back into a coma amid the
country's worst political crisis in years.

The Manila-based Asian Development Bank (ADB) said the
country's gross domestic product (GDP) was expected to grow by
only 3.8 percent in 2000, one of the lowest among Southeast Asian
nations. In 2001, the ADB said GDP growth would slow down to 3.3
percent.

"It could be worse," said ADB senior economist Ernesto Pernia.
"The 3.3 percent is probably on the medium variant. It could
worsen if conditions worsen."

While the Philippines was least affected by the financial
crisis that plagued the region in mid-1997, the country's economy
failed to recover as strongly as was expected and even began to
slide when President Joseph Estrada assumed the top post in mid-
1998.

Analysts said a lack of confidence in Estrada, who has faced
one scandal after another during his 29-month rule, was a major
factor in the economy's deterioration. But they noted the problem
goes beyond the political scenario.

"Political factors do tend to temper enthusiasm," said
economic analyst Antonio Gatmaitan. "But if there are
opportunities, investments will come in and the economy will move
forward."

From the very start, Estrada's "take-away from rich and give
it to the poor" Robin Hood-rhetoric had made the private sector
uneasy. The business community also doubted the former movie
actor's morality and leadership skills.

The "confidence crisis" worsened in early 2000 when former
Securities and Exchange Commission chief Perfecto Yasay accused
the president of intervening in a stock manipulation
investigation to protect a friend.

A major military offensive against Moslem separatist rebels, a
wave of bomb attacks in the southern region of Mindanao and the
capital and a hostage crisis involving foreign captives did not
help boost sentiments.

But what brought the house down was the accusations in October
by an estranged friend that Estrada collected more than US$8
million in illegal gambling payoffs and pocketed more than $2.6
million in kickbacks from tobacco taxes.

The controversy - which led to the impeachment of Estrada, who
is now on trial before a Senate tribunal - caused the peso to
plunge to a historic low of 51.95 to one U.S. dollar and the
stock market to fall to two-year lows.

"The impeachment trial is the culmination of the undercurrent
of disagreements the private sector has had with the government,"
said economic analyst Antonio Gatmaitan.

With many business groups calling on Estrada's resignation due
to the scandal, Gatmaitan said the political instability has made
"priming the economy" a more difficult task since the private
sector has abrogated its partnership with the president.

"We are in a private enterprise system," he noted. "We count
on the private sector for most of the initiatives in establishing
the capacities that we need - the kind of industries that we
need."

"The challenge to the government is to make sure that the
private sector is satisfied with its own gameplan," he added.

But Gatmaitan stressed that the Estrada debacle was not alone
to be blamed for the country's failure to extricate itself from
the boom-bust cycle that has characterized the economy since it
was granted independence by the United States in 1946.

"We don't have a strong foundation," he said. "Our growth
figures are still very much dependent on what happens to
agriculture. The modern sector of our economy is still small in
contrast to the overall picture of what a modern robust economy
should be."

Gatmaitan cited poor infrastructure, lack of manufacturing
capabilities and undeveloped or underdeveloped "strategic"
industries, such as petrochemical, steel and construction.

In its annual Asian Development Outlook in April, the ADB
noted that the slow growth in the Philippines' industry sector
"has been symptomatic" of the country's economic performance in
recent years.

"The industrial share in GDP has shrunk from more than 40
percent two decades ago to around 35 percent in 1998, in contrast
to the strong industrial growth in neighboring countries, such as
Malaysia and Thailand," the report said.

The report also lamented that the Philippines has lagged
behind many of its neighbors in physical infrastructure to
support the industrialization and general development efforts.

"Poor roads, inadequate port facilities and expensive power
have increased cost and reduced economic efficiency," the ADB
said.

Gatmaitan said the government also needs to come up with a
more comprehensive economic plan that would serve as a roadmap
for foreign and domestic investors. He noted the government's
current 5-year medium term development plan needs a lot of re-
work in the face of the current developments.

"There are still a lot of backward things," he said. "As we
modernize, our economy must be dependent more on modern
industries and high-value services."