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Dr Lorraine Carlos Salazar
The political turmoil engulfing the presidency of Gloria Macapagal-Arroyo reached a plateau on 6 September when the Lower House threw out the impeachment case against her. After an intense 23-hour debate, Members of the House voted 158-51 to dismiss the impeachment complaint against the President. The complaint, which alleged that Ms. Arroyo had rigged the 2004 election, was declared insubstantial and based on illegally obtained evidence. Thus the Lower House, where allies of the President hold the majority of seats, effectively gave her a one-year protection from ouster via impeachment.
With its defeat in Congress, the Anti-Arroyo coalition threatened massive street protests. The coalition composed of the political opposition, supporters of two defeated presidential candidates, some civil society groups, members of the Philippine Left, as well as former President Corazon Aquino has vowed to obtain the President's resignation. They claimed that the killing of the impeachment signalled the move to the streets for 'the search for truth.' Yet, as it has been in the past couple of months, public support for street protests has been meagre. This is because the Anti-Arroyo coalition, composed of strange bedfellows, offers no viable leadership or policy alternative.
The military hierarchy reiterated that it would respect the civilian chain of command as mandated by the Constitution. Meanwhile, the Catholic Church, through the Catholic Bishop's Conference (CBCP) restated its July statement (See 'Philippines: Arroyo Endures a Tumultuous July,' Asian Analysis, August 2005) and called on people to 'move on forward and address the more important and urgent problem of grinding poverty'.
On another front, the Supreme Court on 1 September upheld the constitutionality of the Expanded Value Added Tax (EVAT) law. The Court, however, retained the freeze on its implementation to allow petitioners time to appeal the ruling before formally lifting the restraining order. The Court suspended the EVAT law just hours after it took effect on 1 July, acting on a petition made by Opposition lawmakers, who questioned its legality. The EVAT is a key aspect of the government's initiative to solve its perennial fiscal deficit. It expands the tax base to include electricity, fuel, air and sea transport, and other previously exempt industries. The tax rate was kept at 10 per cent but the President is authorised to raise it to 12 per cent by 2006, given certain conditions.
Opponents of the law claimed that the authority to increase the tax rate was tantamount to Congress abdicating its exclusive power to tax. The Court ruled that the 'intent and will to increase the VAT rate to 12 per cent came from Congress and the task of the President is to simply execute the legislative policy'. Thus, Congress only delegated the power to implement the law and not the power to tax.
However, given the soaring oil prices in the world market, there are already moves to defer the law's implementation. Two bills have been filed in both Houses of Congress to defer the EVAT implementation on oil and electricity for at least a year. While Finance Secretary Margarito Teves maintained his opposition to delaying the law's implementation, aides of the President have signalled her willingness to defer the EVAT on oil and electricity only if Congress proposes the measure. Given popular pressure, it is not unlikely that such a suspension will take place for the executive to regain political capital.
While the public's attention was glued to the political controversies, the economy has been performing well, growing at 4.8 per cent in the first half of the year despite political uncertainty and rising oil prices. This growth is buttressed by strong consumer demand, a vibrant services sector, and robust inflows from Overseas Filipino Workers (OFW). As of July, OFW remittances rose 25.7 per cent to $885 million from $703.91 million a year earlier, bringing the January-July total to $5.8 billion, up 22.1 per cent. OFW remittances are equivalent to 10.5 per cent of the gross domestic product or 20 per cent of the country's total export of goods and services.
In addition, the government's fiscal reform program is on track, due to its belt tightening and stepped-up revenue collection. In August, higher-than-expected revenue collections led to a budget surplus of P1.75 billion (US$31 million), bringing the eight-month budget deficit to P80.82 billion, lower than the target ceiling of P120.94 billion for the period.
Winning a one-year moratorium and fresh from chairing the UN Security Council meeting, Arroyo announced that she is committed to resolving the country's economic problems. She described the local government's support for her administration as 'rock solid' and pointed to her strong support in Congress as key in passing necessary legislation for the second phase of economic reforms. The support of these sectors is essential in putting the fiscal house in order, reducing poverty, and creating job opportunities.
With the impeachment process over, Speaker Jose de Venecia Jr. said his Chamber would now focus on the proposed P1-trillion 2006 national budget and Charter Change proposals. The Senate can be expected to vehemently oppose the latter issue.
WATCHPOINT: More than the political drama, the more important issues to watch are the government's responses to the oil price hikes, inflation, and a likely rise in interest rates, and, in this context, how the government pursues efforts to resolve its fiscal deficit.
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