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Dr Filomeno Aguilar
In the longest and most applauded State of the Nation address in a decade, President Gloria Macapagal-Arroyo’s speech on 23 July reflected the thinking of a neo-classical economist and technocratic president who, at the same time, must deal with the poverty that provoked the rampage of Joseph Estrada’s supporters on 1 May. A reformist, she strives for growth-with-equity for a country needing to recover from political and economic crises.
Of the four components of her national agenda, two—‘an economic philosophy of free enterprise appropriate to the 21st century’ and raising ‘the moral standards of government and society’—appeal to business people and her middle-class supporters. Another two—‘the modernization of agriculture founded on social equity’ and ‘a social bias toward the disadvantaged’—are meant to win support from the masses. The first two look to the future, the hope pinned on ‘technology as the foundation of future economic development’ and a ‘new culture in governance’ that will stamp out crime and corruption. The second two look back to the past, and include vows to ‘redeem in earnest the promise of land reform’.
The populist aim of redistribution with economic growth requires a deft balancing act, both in its enunciation and in its practical pursuit. Macapagal-Arroyo blended these two contradictory goals by framing the agenda in overtly nationalist terms. Businessmen lauded the speech as ’pro-business’, while mass media accentuated it as being ‘pro-poor’. Toward the end of her address, she admitted, ‘I am not a miracle worker’, and then raised the challenge, ‘All of us must do our share. We have to think Filipino, buy Filipino, invest Filipino’ - an old slogan adapted to the new imperatives of the times.
The call to ‘invest Filipino’ was directed at ‘taipans and other businesspeople all over the country to start pump-priming the economy’ and thus ‘create jobs, accelerate progress and thereby address the root causes of the crime and unrest that so much alarm us’. Given the globalized financial markets and the staggering US$33-38 billion estimated outflow of ‘investments by Philippine residents’, the president’s appeal to the domestic bourgeoisie is basically to eschew capital flight.
Her growth-with-equity strategy requires the balancing of the domestic with the international market, economic nationalism with globalization. Despite objections from the International Monetary Fund based on fears of under reporting, the administration is pushing with its plan to shift to a gross modified tax system, arguing that ‘simplicity’ and ‘affordability’ should encourage individuals and companies to pay taxes honestly. After applauding the president’s speech, businesspeople began to call for caution, agreeing with the drive to eradicate corruption but baulking at the prospect of paying more taxes. The government appears resolute. The slide of the Philippine peso, which reached a six-month low of 54.335 to the US dollar on 18 July, has been halted by decisive moves to quash speculation. The Central Bank’s tighter monetary policy staved off inflation and eased pressure on the peso. During her visit to Kuala Lumpur on 7-8 August, Macapagal-Arroyo raised the spectre of Mahathir-style currency controls to ward off speculation. But apart from pleasing her host, the president does not seem bent on contravening the prevailing economic orthodoxy. On the heels of the peace accord with the Moro Islamic Liberation Front, she wooed Malaysian capital to invest in Mindanao and revive the EAGA (East ASEAN Growth Area), a point to be reiterated in her state visits to Brunei and Singapore in late August.
In fact, the State of the Nation Address implied stronger commitment to the regional and global economy, without explicitly saying so. Her announcement to remove government monopoly on rice importation is in direct response to the Asian Development Bank’s condition for the release of a US$30 million loan to develop the grains sector.
But what matters to most Filipinos is whether or not she will deliver on equity concerns. In her address, the president urged employers to extend an emergency cost-of-living allowance to workers. On 6 August she gave out titles to 1,357 residential lots in Quezon City; and on 17 August she inaugurated the first Grameen-style microcredit facility dubbed ‘Bank of the Poor’.
WATCHPOINT: How far will the president’s anti-poverty programs go in reversing the worsening poverty? Will her strategy work in a global economy currently in the throes of a worldwide downturn?
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AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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