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Dr Filomeno Aguilar
President Gloria Macapagal-Arroyo’s unremitting support for the US-led war on Iraq led to the designation of the Philippines as a ‘major non-NATO ally’, a rare status, which it shares with Australia and Israel. The announcement was made on 20 May during the President’s state visit to Washington, D.C., the first accorded an Asian head of state by the current US administration.
The US decision is expected to boost the defence infrastructure of the Philippine state as it seeks to quash the 12,500-strong Muslim separatist Moro Islamic Liberation Front (MILF) and the remnants of the Abu Sayyaf and of the communist New People’s Army. The new status will enable the Philippines to purchase surplus military equipment on a priority basis, obtain US military loans, and benefit from training and other areas of cooperation. But whether it will lead to a dramatic improvement in the country’s military capability remains to be seen.
The booties of war, worth a total of US$3.35 billion pledged during the visit, included over US$1 billion in investment commitments and employment contracts, especially in Iraq; over US$1 billion worth of development projects, especially in Mindanao; US$500 million in new credit lines; and US$350 million in defence and military assistance. Despite the obvious financial aspect of the ‘new and broadened’ relationship between the two countries, Macapagal-Arroyo stresses that relations are based on ‘trade, not aid; reciprocity, not mendicancy; mutuality, not exclusivity’.
Apart from the economic and security attention gained by the Philippines, the most evident and immediate beneficiary of its elevated military status is the President herself. US President Bush referred to her as ‘the President of a confident and resurgent Philippines’. News reports made it appear that Bush encouraged her to extend her presidential tenure by running in the May 2004 election. A leading Filipino congressman declared that the President ‘took a gamble’ in backing the US war despite widespread opposition, and won. Her greatest asset as leader would seem to be the ability to wager successfully. Her successes have deepened her mark as a decisive, courageous, prescient, and intelligent leader.
Macapagal-Arroyo’s successful bet on the US has led to widespread speculation that she will recant her decision announced at the end of 2002 that she would not be a candidate in next year’s presidential election, a decision that elevated her to a high moral plateau. The President’s subsequent overseas trips in early June led to other heads of state—the South Korean President and the Malaysian Prime Minister—being portrayed in the mass media as endorsing her candidacy. Local businesspeople also weighed in with their views heavily in her favour. Even the London-based Fitch Ratings, while downgrading the country’s sovereign long-term foreign currency rating, could not resist publicizing the opinion that she should run, if only to ensure ‘policy continuity’.
In addition to her ‘winning bet’ on the US, positive macroeconomic indicators augur well for her possible candidacy. Gross Domestic Product (GDP) expanded by 4.5 per cent in the first quarter of 2003, reaching the high end of official targets. The budget deficit is under the official ceiling, while the annualised inflation rate declined to 2.7 per cent in May. Consumer confidence in the local economy surged to its highest level in the year in early June. Moreover, the government’s effective containment of the SARS outbreak led to the country’s removal from the WHO’s ‘hot list’ on 20 May, averting a potential disaster.
Macapagal-Arroyo has been insistent about her renunciation of political ambitions, freeing her, she claims, to make tough choices and unpopular moves. But calls for her to reconsider her decision seem to be increasing, particularly in view of other potential candidates deemed to have soiled reputations. Muslim officials in Mindanao and former Huk leader, the 89-year-old Luis Taruc, as well as Catholic Church eminencies have joined voices in expressing their support for the incumbent.
However, she would risk losing credibility by reneging on her word. She also lacks the charisma that former President Joseph Estrada continues to wield among his followers. The biggest drawback, however, is that macroeconomic gains have not translated into improved living standards for the hardworking poor. Only those who need not worry about their next meal would seem to be best able to appreciate the 'wages of war'.
WATCHPOINT: Will Macapagal-Arroyo take the gamble of running in the 2004 election? Will a big rise in approval ratings sway her? Will she outmanoeuvre other contenders, who seem to be even more consummate gamblers than she is?
About our company:
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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