GMA's Successes

By Antonio C. Abaya
Written on Jan. 16, 2008
For the Standard Today,
January 17 issue


There should be no doubt or argument about it. The Philippine economy has done better under President Gloria Macapagal-Arroyo than under any of her predecessors since Ferdinand Marcos.

In the last two years under President Marcos, the economy contracted or shrunk by about nine percent. The assassination of the beloved Ninoy Aquino on August 21, 1983 spawned massive capital flight, which in turn caused the exchange rate to balloon, if memory serves, from about 20 to 60 pesos to one US dollar.

As wealthy families and investors, both domestic and foreign, scrambled to change their pesos into dollars, inflation soared to double-digit levels, the likes of which have not been known by most Filipinos now living, except during the Japanese Occupation.

This economic meltdown, combined with moral outrage over such a dastardly act, moved the usually complacent middle-class to political activism, which manifested itself in weekly street demonstrations against the Marcos Regime. The presence of a well-known figure around whom the middle-class could rally – Ninoy's widow, Cory Aquino – gave the public protests the animus it needed, as it snow-balled into the snap elections of February 1986.

Under Cory, the Philippine GDP grew 3.5 percent in 1986. 4.3 in 1987, 6.8 in 1988, 6.2 in 1989. The coup attempt in December 1989 by then Col. Gringo Honasan and then Capt. Danilo Lim dragged the GDP down to 4.4 in 1990, and subsequently to negative 0.6 in 1991. The average GDP under Cory was 4.1 percent.

Under President Fidel Ramos, GDP grew 0.3 percent in 1992, 2.1 in 1993, 4.4 in 1994, 4.7 in 1995, 5.8 in 1996, and 5.2 in 1997. The Asian Financial Crisis that started in July 1997 dragged the GDP down to negative 0.6 in 1998 as it devastated economies all over the world. The average GDP under President Ramos was 3.1.

It should be mentioned that the low GDPs in 1992 and 1993 were due, not just to the coup attempts of Honasan-Lim in December 1989, but also to the daily power outages of up to 8-hours that plagued the economy.

And the power outages were due largely to the mothballing by President Aquino of the 620 mw Bataan nuclear power plant just before it was to be commissioned, a concession to the anti-US bases and anti-nuclear agitation of the Communist movement. The slack would have been taken up by the 300 mw Calaca plant and the 300 mw Masinloc plant, both coal-fired, but the commissioning of these plants was blocked by environmentalists.

The net effect was that thousands of businesses and industries, and tens of thousands of families were forced to buy and operate their own generators, thus creating as much pollution as, or even more than, Calaca and Masinloc put together. There is a lesson to be learned here, but I doubt if Filipinos have learned it. But I digress.

Under President Joseph Estrada, GDP grew 3.4 percent in 1999 and 4.0 in 2000, until he was deposed from office in January 2001 by a military coup d'etat pretending to be people power. The average GDP under President Estrada was 3.7 percent.

Under President Arroyo, GDP grew 1.8 percent in 2001, 4.3 in 2002, 4.7 in 2003, 6.0 in 2004, 5.1 in 2005, 5.6 in 2006 and 7.1 in 2007. The average GDP under President Arroyo was 4.94 percent. Forecasts for 2008 range from 5.0 to 6.7 percent.

(It takes GDP growth rate of at least 8 percent per annum for 20 years for an economy to reach First World status. This is the level of the achievement of South Korea, Taiwan, Hong Kong and Singapore, from the 1970s to the 1990s.)

Under President Arroyo, the economy has developed an upward momentum. And the biggest element in this upward momentum is the remittances from overseas contract workers, which will reach $14 to !5 billion in 2007, compared to practically zero in the 1970s..

The corollary is that if Presidents Aquino, Ramos and Estrada enjoyed a $10 to $15 billion annual OCW windfall during their watch, the GDP during their presidencies would have been substantially higher. (If any reader has the annual figures for OCW remittances staring in 1980, I would appreciate receiving them.)

The other corollary is that if President Arroyo did not have this $10 to $15 billion annual OCW windfall, the Philippine economy under her management would not have grown as much as it has in the past five years.

This is not to say that President Arroyo did not make any substantial contribution to economic growth from her own initiatives. Far from it. Her biggest success, in my opinion, is the growth of the call center-business outsourcing industry, which now employs more than 200,000 young, urban middle-class Filipinos, and is still growing fast.

If one were to revisit her Mid-term Development Plan, which was drafted at the start of her presidency in 2001, one would note that it had three major foci: agriculture, tourism and information technology or IT. So the call-center phenomenon was an Arroyo initiative and it is a major success, for which she deserves full credit.

The passage and implementation of the EVAT. is also an Arroyo success, which substantially increased government revenues, enabling it – theoretically at least – to invest more in infrastructure and social services.

But this has its limits, which may have been reached already, judging from the frantic efforts to sell government assets, such as those in the power sector. Without the sale of government assets, the government seems to be running out of money. Economists tell us that a government's tax collection efforts should amount to at least 16 percent of GDP.

Even with his dictatorial powers, President Marcos could manage only 9 to 12 percent. Presidents Aquino and Ramos were able to raise it to 13 to 14 percent. President Arroyo may have been the first president to raise that percentage to 15-16 percent, but apparently not much more than that, which suggest unresolved problems from chronic tax evasion and smuggling.

President Arroyo has also achieved moderate success in tourism, one of the three foci in her Midterm Development Plan. Tourist arrivals topped three million in 2007, for the first time ever. I say 'moderate' because Thailand drew 13 million tourists, Malaysia 16 million, in the same period.

In 1991, Indonesia and the Philippines drew more or less the same number of tourists: one million. Since then, Indonesia's tourist arrivals have reached five million, despite the Bali and Jakarta bombings, while we are celebrating only three million. Don't look now, but tiny Cambodia just topped two million in 2007, and Vietnam is investing heavily to develop its entire South China Sea coast into a tourist magnet..

President Arroyo's third economic focus: agriculture is, in my opinion, a mixed bag. Even assuming that production has increased in some sectors, the stark fact remains that we are not self sufficient in such staples as rice, corn, sugar, poultry, etc and must import several billion dollars worth every year to meet domestic demand.

This by the country that set up the UP College of Agriculture in Los Banos (when the Americans were running this place), and hosts the International Rice Research Institute (also established by the Americans), both of which trained the agriculturists of Vietnam, Thailand, Indonesia etc, which ironically now surpass us in agricultural production.

Perhaps the weakness of our agriculture is not a paucity of modern technology, but an oversupply of people, because of a galloping population growth rate. In the 1970s, the Philippines and Thailand had more or less the same population size: 45 million.

Because it had a population management program all these years, in 2007 Thailand had only 65 million people, while the Philippines had 89 million. By any yardstick of commonsense, it is easier to feed, clothe, house, educate and find jobs for 65 million people than 89 million.

For this, President Arroyo must share the blame with Presidents Marcos, Aquino and Estrada, for their wishy-washy attitude towards population management and their fear of offending the Roman Catholic bishops. (Only the Protestant President Ramos dared to defy the bishops on this issue.)

In summary, it can be said that President Arroyo's relative success in managing the economy can be credited largely to the $10-$15 billion windfall from OCW remittances.

Therefore it is not accurate to claim that there is no alternative to or substitute for her. In fact it can be said that the increase in workers deployed abroad – about one million a year – is due to her failure, and the failure of her predecessors, to create enough jobs in the domestic economy, forcing millions of Filipinos to seek employment abroad.

This means that she can be replaced by such reasonably qualified wannabes as Mar Roxas, Manuel Villar, Richard Gordon, Loren Legarda, or Panfilo Lacson – even by Governor Fr. Ed Among Panlilio or Antonio Meloto – and the economy would still chug along at least at the same pace as it does today, as long as whoever succeeds her enjoys the $10-$15 billion windfall from workers' remittances.

The $64,000 Question is: who among the actual or potential contenders can provide the MORAL LEADERSHIP that Gloria Macapagal-Arroyo has so spectacularly failed to provide. *****

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