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MINDANAO UPDATE (No. 2, November 2007) Introduction 1 Public Disclosure Authorized 1. This Mindanao Update covers the period from April to November 2007. The previous one was issued last April. This issue will focus on the following concerns: • May 11, 2007 Philippines elections results and their implications • National issues that impact on the stability of Philippine political economy (i.e., the Estrada verdict and the ZTE-NBN controversy) • Performance of the Philippine economy during the first half of the year • Peace and order situation in Mindanao and the prospects of the resumption of the GRP-MILF peace talks • Progress of selected donors assistance in Mindanao • Developments in the peace process with the CPP-NPA, including violation of human right issue (attachment) A. The May 11, 2007 Election Results and Their implications Public Disclosure Authorized 2. The administration’s senatorial ticket suffered electoral defeat in the last May 11 election. The official tally was as follows: 6 opposition, 3 independent, and 3 administration candidates2 formed part of the magic 12 winning bets. Opposition candidates occupied the top six slots while an administration candidate barely made it to the 12th position.3 Moreover, the two administration candidates (i.e., Angara and Arroyo) were formerly affiliated with the opposition but decided at the last minute to join the administration ticket. None of the candidates closely affiliated with the President made it to the top 12. Moreover, none of the candidates who came from the entertainment industry won, a far cry from previous election results. What do we make of these disconcerting results? 3. One is to state the obvious and that is, there is indeed widespread dissatisfaction among the public on the performance of the national government and it found its articulation from the results of the recent senatorial election. The more worrisome development is that having realized the formula for launching Public Disclosure Authorized an effective political campaign, it is most likely that potential presidential candidates in 2010 will be in a rush to join the anti-administration bandwagon to ensure their proper projection to the voting public. Expectedly as we near 2010, the administration will find it harder to institute necessary reforms or programs meant to strengthen Philippine development efforts because of the early posturings of these potential candidates. 4. On the other hand, while the current situation presents difficulties and inconveniences for the government, it can also provide a window of opportunity for Mindanao. That window is that a fairly intellectually sophisticated crop of candidates are vying for the 2010 presidential election. The last time this happened was in 1992 when there was a good stable of potential presidential candidates able to 1 The Mindanao Update is now for public reading and is posted on eMindanao.org.ph, a portal run by the Mindanao Trust Fund. This is the second update; the first was posted in April 2007. Previously the updates were produced as Watching Briefs and circulated internally within the Bank; a total of 12 watching briefs were produced. This update Public Disclosure Authorized was prepared by the Mindanao Trust Fund Secretariat with the help of Fermin Adriano. 2 The winners, according to their order of ranking, and their affiliation are as follows: (1) Loren Legarda (O), (2) Francis Joseph Escudero (O), (3) Panfilo Lacson (O), (4) Manuel Villar (I), (5) Francis Pangilinan (I), (6) Benigno Simeon Aquino (O), (7) Edgardo Angara (A), (8) Joker Arroyo (A), (9) Alan Peter Cayetano (O), (10) Gregorio Honasan (I), (11) Antonio Trillanes (O), and (12) Juan Miguel Zubiri (A). O -opposition; I –independent, and A – administration. 3 This “win” is under protest by the losing opposition candidate Aquilino Pimentel. 1 answer questions on complicated issues facing the country then. Mindanao should start thinking and planning on inviting these presidentiables in various forums in the island meant to lay down their respective program of governance for Mindanao. B. Estrada Verdict and the ZTE-NBA Controversy 5. a) The Estrada verdict. Former President Joseph Estrada was charged with plunder at the Sandiganbayan court after his removal from office as a result of “People Power II” staged in January 2001. During the duration of his trial which lasted for more than six years, he was mostly held under house arrest in his Tanay rest house nestled on a mountain slope. On September 12, 2007, the Sandiganbayan rendered a guilty verdict against Estrada sentencing him to 40 years in prison.4 Many political analysts have pointed out that the Estrada case serves as a precedent for the Arroyo administration. They warned that Estrada’s fate might eventually become that of the President’s fate and that of her relatives and supporters once they are no longer in power in 2010. Immediately after his guilty verdict, negotiations were held between government representatives and the Estrada camp for the latter to be given a Presidential pardon. The talks successfully ended with the President bestowing “unconditional pardon” to Estrada. Civil society groups and anti-corruption corruption crusaders protested noting that the pardon made futile the government’s effort to catch the so-called “big fish”. 6. b) NBB-ZTE controversy. It is at the backdrop of the guilty verdict against Estrada that the scandal over the National Broadband Network (NBN) project contracted to a Chinese firm called ZTE exploded. The NBN-ZTE project is US$329 million worth of contract to be financed by a soft loan from the Chinese government. Originally, the project was supposed to be undertaken under a BOT (build operate transfer) scheme as proposed by Jose de Venecia III, the businessman-son of the House Speaker Jose de Venecia. When the former lost the bid for the project, he revealed that officials close to the administration worked to have the bid awarded to ZTE for a considerable sum of money. A Senate inquiry was held over the incident and together with the former head of NEDA (National Economic and Development Authority), they identified Comelec (Commission on Election) Chairman Benjamin Abalos as the chief architect of the deal with ZTE. De Venecia further accused the President’s husband of pressuring him to back-off from the project, which Malacanang vehemently denied. 7. Besides the alleged massive kickbacks attending the ZTE-NBN deal, economists argue that the deal is flawed from the very start.5 First, it goes against the grain of the “privatization” thrust of the government. They claim that there already two existing (broadband) backbones in the Philippines and all that is needed is to provide the link between these existing “highways” (backbones) to that of the provincial or secondary network so that the “connectivity” problem will be addressed. This will not require a huge amount. Second, they noted that the proposed backbone will be maintained and operated by the government. Given the poor track record of the government in running a business, they question whether it will become economically viable in the long-run. And third, they are also against the BOT scheme proposed by de Venecia because it carries the stipulation that the government will be a captive market for the facilities that will be established. For them, a third backbone is unnecessary since there are existing private enterprises engaged in the business and that if telecommunications is just opened to other investors, there will surely be private foreign investors who will be willing to enter the sector, compete with the existing ones to provide better and cheaper services to the Filipino consumers. The problem, as the former NEDA chief declared, is the “regulatory capture” of some key sectors of the Philippine economy by vested interest groups. 4 Practically a life imprisonment since Estrada is in his 70s. Former Malaysian opposition leader Anwar Ibrahim who was on a visit to Manila to attend a democracy forum, opined that the sentence was “harsh” and expressed hope that Estrada would be freed soon. 5 Refer to the paper by Drs. Raul Fabella and Noel de Dios on the subject matter. 2 C. Performance of the Philippine and Mindanao Economy 8. a) The Philippine economy. The Philippine economy, despite the adverse political developments, has proven its resilience and has in fact, performed beyond expectation. For the second quarter of 2007, the GDP (gross domestic product) registered an impressive growth rate of 7.5% compared to 5.5% for the same period last year. This was due to the strong performance of trade, construction, communication and storage, and the manufacturing sectors. In fact, the growth of construction in the second quarter of 2007 was the highest since the first quarter of 1997, before the Asian regional financial crisis broke out. Services remained to be the driver of growth contributing 8.4%, industry 8% and agriculture, fishery and forestry 3.9%. In terms of contribution to GDP growth rate, again services ranked first contributing 4.1%, industry 2.7%, and agriculture, fishery and forestry only 0.7%. 9. Continued high inflows of remittances from overseas Filipino workers resulted in a 16.6% expansion in the net factor income from abroad (NFIA) and pushed the gross national product (GNP) growth rate to a remarkable 8.3% in the second quarter of 2007, upped from 6.4% for the same quarter last year. Per capita GDP grew from 5.4% in the second quarter compared to 3.4% for the same period last year. Similarly, government expenditures rose from 13.5% in the second quarter compared to only 3.3% for the same period last year. However, inflation decelerated from 6.4% in July last year to only 2.6% in July 2007. The peso continues to appreciate vis-à-vis the US dollar.

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