東南亞研究中心 Southeast Asia Research Centre Francisco NEMENZO The Philippines under Aquino Working Paper Series No. 134 December 2012 The Southeast Asia Research Centre (SEARC) of the City University of Hong Kong publishes SEARC Working Papers Series electronically © Copyright is held by the author or authors each Working Paper. SEARC Working Papers cannot be republished, reprinted, or reproduced in any format without the permission of the papers author or authors. Note: The views expressed in each paper are those of the author or authors of the paper. They do not represent the views of the Southeast Asia Research Centre, its Management Committee, or the City University of Hong Kong. Southeast Asia Research Centre Management Committee Professor Mark R. Thompson, Director Dr Kyaw Yin Hlaing, Associate Director Dr Chiara Formichi Dr Nicholas Thomas Dr Bill Taylor Editor of the SEARC Working Paper Series Professor Mark R. Thompson Southeast Asia Research Centre The City University of Hong Kong 83 Tat Chee Avenue Kowloon Tong, Hong Kong SAR Tel: (852 3442 6330 Fax: (852) 3442 0103 http://www.cityu.edu.hk/searc The Philippines under Aquino* Francisco Nemenzo Professor Emeritus University of the Philippines About the author Professor Francisco Nemenzo had a paradoxical career, combining academic work and revolutionary activity. An outspoken radical student leader at the height of witch-hunting in the Philippines, he was banned from the US. This forced him to go to the UK for his Ph.D. at the University of Manchester. Returning to the Philippines in 1965, he lived a double life as a respectable professor in the state university and a leading cadre of the underground communist party. After serving two years in detention under martial law, he resumed his academic career and rose to executive positions as dean, chancellor and president of the University of the Philippines. He also served as senior research fellow at the Australian National University in Canberra and visiting professor at the International Christian University in Tokyo. Upon retiring as university president in 2005, he returned to the “parliament of the streets” and survived two rebellion charges for involvement in military uprisings against President Gloria Macapagal Arroyo. * Updated version of a lecture delivered at the City University of Hong Kong, 24 October 2012. Southeast Asia Research Centre Working Paper Series, No. 134, 2012 1 In the 2010 presidential election Benigno Aquino III raised the slogan “matuwid na daan” (towards the path of righteousness), a nebulous program for eliminating corruption, reducing poverty, and improving governance. As he is getting close to the middle of his un-extendable six-year term, it is time to assess his overall performance. I did not expect much from him or from any of his seven rivals. Nothing in his past inspired hope that he would be the “reforming prince” Machiavelli envisioned. A scion of a big landowning family, he showed no promise of becoming another Fidel Castro, an oligarch who dismantled the oligarchy. In fact, he was not known to stand for any cause. His administrative skills were a subject of doubt because he never held an executive position in government or in his family business. Prior to his election as President of the Philippines, he served as an undistinguished legislator: nine years in the House of Representatives and three years in the Senate. His own party did not even consider him a “presidentiable.” At first the Liberal Party put up Senator Mar Roxas. But the outpouring of grief over the death of his well loved mother (former President Corazon Aquino) engendered a clamor for the young Aquino. So overwhelming was the clamor that Roxas had to step down and agree to run for vice president instead. Roxas lost, but Aquino won by a convincing majority. His closest rival, former President Joseph Estrada of the Partido ng Masang Pilipino (Party of the Filipino Masses), not only conceded graciously but also offered to be his unofficial adviser. On the road to economic recovery? In his report to the joint session of the Senate and the House of Representatives last July, President Aquino proclaimed that “the sick man of Asia now brims with vitality.”1 Under his watch, the GDP grew at the rate of 6.4%, the highest in Southeast Asia. Standard and Poor, Moody’s, and the World Economic Forum competitive index have raised the 1 Aquino, Benigno S.III. "Third State of the Nation Address." Official Gazette. July 23, 2012. http://www.gov.ph/2012/07/23/english-translation-benigno-s-aquino-iii-third-state-of-the-nation-address- july-23-2012/ (accessed December 13, 2012). Southeast Asia Research Centre Working Paper Series, No. 134, 2012 2 Philippine ratings by several notches.2 Foreign investments have been pouring in. An optimistic mood pervades the Philippine Stock Exchange. These figures naturally elated those with money to invest. But two questions need to be asked: Will their supposed benefits trickle down to the vast majority, or will they just widen the socio-economic disparity: the rich becoming wealthier and the poor becoming more miserable? Is the apparent upswing sustainable? The 6.4% GDP growth rate in the first half of 2012 was not impressive at all. It was less than the growth rate in the last year of President Gloria Macapagal Arroyo. The GDP actually dropped from 7.6% in 2010 to 3.7% in 2011, in the first year under Aquino.3 What accounts for the 6.4% growth rate was the phenomenal expansion of the service sector, especially in Business Process Outsourcing (BPO).4 Most new jobs the Aquino administration claimed to have created belong to this sector. It should be noted, however, that the jobs in call centers and other BPO enterprises require a good command of the English language; in other words, they are accessible only the educated middle class, not to the millions who languish beneath the poverty line. While President Aquino cited the number of jobs created, he did not count the jobs that were lost during the same period. It is not clear whether the lucky ones who fill in the new jobs were previously unemployed, or are they the unfortunate workers who were laid off and rehired as contractual employees with reduced salaries and no security benefits? 2 *Schwab, Klaus. "The Global Competitiveness Report 2012-2013." World Economic Forum. 2012. http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2012-13.pdf (accessed December 13, 2012). *"Moody's assigns positive outlook on Philippines' sovereign credit rating." Moody's. November 15, 2012. http://www.moodys.com/research/Moodys-assigns-positive-outlook-on-Philippines-sovereign-credit- rating--PR_247006 (accessed December 13, 2012). *Benard, Agos. "Ratings Direct." Standard and Poor. October 17, 2012. http://www.standardandpoors.com/spf/ratings/121018_IndonesiaAndThePhilippines_MR.pdf (accessed December 13, 2012). 3 Senate Economic Planning Office, Economic Report, March 2012. 4 World Bank. "Philippine Quarterly Update: From Stability to Prosperity for All." March 2012. http://siteresources.worldbank.org/INTPHILIPPINES/Resources/PQUMarch2012FINAL032012.pdf (accessed November 12, 2012). Southeast Asia Research Centre Working Paper Series, No. 134, 2012 3 The investment figures are just as unconvincing. At the time of the President’s “state-of- the-nation address,” the portfolio investments increased by 247.3%. According to the central bank (Bangko Sentral ng Pilipinas), this has tripled since then.5 But the suspicions is that the bulk of this is capital temporarily parked in Philippine financial institutions while the US and European banks are in trouble. This “hot money” can flee as fast as it came in, leaving behind uncompleted projects. Direct foreign investments, the type that propel sustained growth, have actually dropped by minus 33.9% in 2010 (from 27.1% in 2009), and minus 2.8% in 2011. However, the first quarter of 2012 showed some growth. Foreign direct investments in the first quarter of 2012 totaled US$ 837 million, which is 46.6%, considerably higher than last year’s minus 33.1% in the same period.6 However, the sustainability of this growth in the midst of the global economic crisis remains open question. Taking into account the net inflows in April 2012 alone, it went down to minus US$13million, compared to last year’s US$78 million. The new foreign direct investments went mainly into mining and tourism.7 This is not necessarily a cause for rejoicing because the former is environmentally destructive and the latter is vulnerable to the whims of the global economy. In 2010, US$ 282.08 million of foreign direct investments went to mining and quarrying, followed by real estate with US$ 181.52 million; manufacturing declined to minus US$ 1, 275.19 million. There are superficial signs of progress, of course. The skylines of Metro Manila, Metro Cebu and other urban centers are cluttered with multi-storey buildings and many more are under construction. But these are mostly condominiums, shopping malls, and hotels. Housing remains a big problem as the ranks of the urban poor continue to swell. 5 "Foreign Portfolio Investments Rebound in July." Bangko Sentral ng Pilipinas. August 16, 2012. http://www.bsp.gov.ph/publications/media.asp?id=2958&yr=2012 (accessed November 12, 2012). 6 "Foreign direct investments register net inflows in the first four months of 2012." Bangko Sentral ng Pilipinas. July 10, 2012. http://www.bsp.gov.ph/publications/media.asp?id=2920&yr=2012 (accessed November 12, 2012). 7 "Net Foreign Direct Investment by Industry Sector." Bangko Sentral ng Pilipinas. n.d. http://www.bsp.gov.ph/statistics/spei_pub/Table%2031.pdf (accessed November 14, 2012). Southeast Asia Research Centre Working Paper Series, No. 134, 2012 4 Those who see the urban poor as eyesores who frustrate the local governments’ sporadic clean up and beautification drives propose an easy solution: send them back to the countryside.