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BALITA 12/1999
Recent Articles
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| 12/99
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| 8/99
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Rocky Road
for RP
The administration faces a rocky road ahead. In the economic front, the biggest threat emanates from global events outside its control. The torrid pace of US economic growth has been pulling up the rest of the world, including the Philippines. The US is the country's principal export market. Foreign Exchange/Interest Rates However, that pace may be in jeopardy as the US Federal Reserve, concerned about the inflationary dangers of a tight labor market is poised to raise interest rates by another quarter point. In its last meeting, the US Federal Reserve indicated a "tightening bias" which would mean another rate increase in November, on the back of the two quarter-point increases during the year. The weakening of the US dollar vis-à-vis the YEN may also prompt the US Federal Reserve to increase interest rates. Rising import costs, particularly of Japanese goods, will add to the inflationary pressures coming from a tight labor market. An increase in US interest rates will affect capital flows to the country. It will make it more prohibitive for the government to borrow abroad. It will also force our monetary authorities to follow the upward movement of US interest rates. It may weaken the peso further and increase uncertainty. Recent peso volatility mimicking the movement of the Thai baht also shows the vulnerability of the peso to regional contagion. Although the Philippines and Thailand have different economic fundamentals, their respective currencies have been tracking each other, however irrational that may be. This vulnerability to regional contagion may prove hazardous should the Chinese YUAN be devalued next year. Speculators may seize on the YUAN devaluation as a pretext to mount attacks on the Philippine peso and other regional currencies. Rising oil prices will also contribute to the mounting stresses on the economy. Apart from having an adverse effect on energy-intensive industries (cement, steel, plastics and petrochemicals) and the critical transport sectors, rising petroleum prices will increase the cost-pressure on the general inflation rate. Government Spending Deficits On the domestic front, the administration's softest spot is its mounting fiscal deficit. The administration has had to revise its deficit targets upwards successively as revenues have fallen short of targets. From a programmed deficit of P67 billion, the deficit looks likely to breach the P85 billion level by the end of the year (a 27% increase). An unmanageable fiscal deficit could pose risks, both economic and political. A fiscal crunch could force the administration to borrow locally to finance the deficit, forcing an increase in interest rates. Rising interest rates on the back of exchange rate uncertainty, possible wage increases, and higher petroleum prices will dampen the already fragile growth in the industrial sector. Without a clear and credible program to curb the deficit next year, the administration will face skeptical financial markets that may speculate on its fiscal difficulties. The result will be a steep yield curve and financial institutions more prone to speculation than lending for production. Local Government Projects The fiscal crunch poses political risks as well. Not only does it put the anti-poverty efforts, the government's centerpiece program, in jeopardy, it severely limits it political maneuverability. Congressmen are already extremely dissatisfied over the level of funding it's getting for their congressional districts. If the targeted revenue collections don't materialize next year, the administration may be forced into a deficit reduction program, which may involve sacrificing the congressional pork barrel, further straining relations with lawmakers. The Political & Military War Front The administration may have to weigh its tight fiscal resources against the multiple political fronts in which it is engaged. It is fighting the Catholic Church, the Cory forces, the leftist elements and other anti-Concord elements over constitutional change. It has terminated the peace talks with CPP-NPA and pledged all-out war against the insurgents even as Defense Secretary Orlando Mercado reported a significant increase in NPA ranks and number of firearms. Meanwhile, the MILF, its military forces bolstered by defections from MNLF elements and its morale boosted by the independence of East Timor, has hardened its demand for independence. If peace talks with the MILF fail, which is likely given its secessionist demands, the administration will have another military and political fight in its hands. Foreign Relations Crisis Just as it's struggling with varying political forces domestically, it must cope with multiple fronts in the international arena. Relations with Taiwan, a source of major investments and market for Filipino labor, is in crisis. Relations with Singapore and South Korea, both major trading partners, will be similarly tested over air transport policy. The administration has also tussled with China, Vietnam and Malaysia over the Spratlys. Since it has expressed sympathy with former Deputy Prime Minister Anwar Ibrahim, relations with the Mahathir government have been strained. Lowering the Price of Rice However, the administration's high popularity ratings have acted as a shield against its political enemies. But it faces the daunting task of maintaining these ratings in the face of rising petroleum prices, higher transport fares, and increased inflationary pressures. To cushion the negative effects of these adverse events, it has reduced the National Food Authority selling price. However, this might aggravate its fiscal problems and compromise its flexibility in the future. Having reduced rice prices, it may not be easy to increase them anymore. Minimum Wage Increase (Now P223/day) The wage increase issue similarly puts it between a rock and a hard place. On one hand, it can't turn a deaf ear to the clamor for higher wages, lest it be labeled anti-poor. On the other hand, a mandated minimum wage increase may well boost inflation and erode the country's export competitiveness. Gambling Haven All these problems haven't left the administration without devices or resources. In luring Macao's gambling tycoon, Stanley Ho, to make major investments in the country, the administration has smartly pushed the gaming and leisure business, in which the country has competitive advantages, to drive the economy. The stock valuation of the locally-listed BW Resources, Ho's proposed new holding company, presently exceeds that of major corporations like Petron and ABS-CBN. The old (Makati-based) wealth that opposes the administration is put on notice that new, big - but far friendlier players are in town. On the Horizon What we are going to see next year
is the administration consolidating itself politically, even in the midst
of adversity, or with government resources stretched thin, it may have
to grapple on multiple fronts with reinvigorated political enemies.
In either case, the road ahead will be rough. The complex interplay
of global forces and internal events will determine how bumpy the ride
will be.
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| 9/99
BALITA!! |
The IS Manila videos shown at the San Jose reunion which was sponsored
by the IS Board of Trustees is now available for those who did not get
a copy. Limited quantities only!!
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| 8/99
BALITA!! |
Smoky Mountain
Blues
Plans to turn an "infamous" Manila garbage
dump into modern housing for more than 2,000 families has turned into "a
smelly mess" that threatens to leave a "rotten legacy," the Wall Street
"Smoky Mountain" began as an informal dumping ground for the city after World War II and became a nine-acre "burning heap of trash" that got its name from black smoke that spewed from underground methane fires. In 1995, then-Pres. Fidel Ramos ordered the dump closed and had the shanties built on the garbage torn down to make way for the new development that will house the one-time shanty dwellers. As envisioned, the project also includes a shopping center and recreational park. But the government and developers have had problems cleaning up the garbage because clean-air laws don't allow incineration and no permit has been issued to move the trash elsewhere. Now, backhoes "rush to churn the waste under the soil before residents move in." The garbage odor still wafts over the site, and critics warn that trapped methane could cause the development to explode. The company behind the development says the
problems are minimal because it has constructed a ventilation system to
divert the gas. Lead architect Manuel Mindanao: "We no longer
use the term 'garbage.' We prefer to call it 'matured waste'"
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| 8/99
BALITA!! |
Email addresses
at IS Manila!
You can now reach your favorite staff and faculty this way:
(i.e. take last name, first initial, add "@ismanila.com"). Examples:
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| 6/99
BALITA!! |
New Manila Airport TerminalMANILA, Philippines (AP) - President Joseph Estrada inaugurated a new terminal on August 9, 1999 for ailing Philippine Airlines at Manila's airport and said he was confident the gleaming facility would draw more tourists and investors to the Philippines.The building should convince investors "that our economy is now back
on the growth track," Estrada said.
For now it will be used exclusively by PAL, which will complete shifting its domestic flights from an older terminal on Tuesday and its international flights within a few weeks. Foreign airlines will continue operating from the airport's aging and overcrowded international terminal, built in 1982. Exclusive use of the new Terminal 2 will be a major advantage for PAL, allowing it to provide smooth transfers between domestic and international flights. Passengers on other carriers will have to endure the two-mile transfer between the airport's older domestic and international terminals. Construction of the $143 million, three-story terminal began in 1995,
before a pilots' strike and an ill-timed modernization plan left PAL $2.2
billion in debt and forced it to slash its fleet and workforce.
The new terminal is designed to accommodate 5 million domestic passengers
and 2.5 million international passengers each year.
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| 6/99
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PHILIPPINES Getting It's Clean Air Act Together?Philippine lawmakers are expected to approve a Clean Air Act that bans waste-disposal incinerators, requires oil refineries to sell less polluting fuels and sets "tough" emission limits on motor vehicles.Under the bill, the country's oil refineries would have to spend an estimated $250 million to reduce the level of benzene and aromatics in unleaded gasoline by 2003 (Reuters/PlanetArk, May 10). The refiners are also required to reduce the amount of sulfur in fuel and phase out leaded gasoline (Jess Diaz, Manila Philippine Star, 10 May). Philippine Petroleum Institute Director Reynaldo Marquez: "This is the most stringent requirement outside of California ... It's questionable whether we can afford it" (Reuters/PlanetArk, May 10). Meanwhile, Philippines House Speaker Manuel Villar said the clean air bill is just the first of several that will receive priority attention in coming weeks. Saying he wants the current session of Congress to be known as the most environment-friendly ever, Villar said the legislature is working on a comprehensive Solid Waste Management Act, a Clean Water Act and a Forest Resources Management Act. |
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