A week to remember

Ben D. Kritz

Ben D. Kritz

As a matter of style I generally do not like writing a “multi-topic” column, because most topics worth discussing are worth focusing on individually. This past week in the Philippines, however, has been so extraordinary that I suppose I have to make an exception; rumors and facts have emerged at a pace too fast for anyone to digest, and have become so hopelessly tangled that pausing to take a calm look at what’s happened and what may happen next is probably a good idea.

For better or worse, this past week will be one to remember: In the not-so-distant future, the Philippines will either be able to point to the last week of August 2013 as the moment when things began to change for the better. Or, which seems just as likely at this point, this week could mark the moment when it all started to go horribly wrong.

*Story of the Year: Janet Lim-Napoles “Surrenders” to President Aquino at Malacañang—After feeble attempts to first prevent or at least dampen the impact of the “Scrap Pork” demonstrations that took place in Manila and a couple dozen other cities on Monday by hastily producing a “reformed” version of the hated Priority Development Assistance Funds (PDAF) late last Friday, and then by having his Senior Malacañang Talking Person Ed Lacierda declare with a straight face that the administration and the protestors “were on the same side” failed to placate an increasingly angry public, President Aquino pulled his most astonishing stunt yet by first announcing a P10-million “reward” for the capture of the fugitive Napoles and then within hours “accepting” her surrender at Malacañang, personally escorting her to Camp Crame, and then turning her over to the comfortable custody of, not the National Bureau of Investigation or the Philippine National Police, but his key ally and successor-designate, Interior and Local Government Secretary Mar Roxas.

The PR-ready event was intended, of course, to show that President Aquino and Roxas are personally attending to the serious, rapidly growing corruption scandal and was meant to reinforce the Aquino image as the patron saint of accountability. Whether the administration is simply too detached to anticipate the huge public backlash of Napoles “surrender” and Aquino’s personal attention to it or simply does not care is an open question, but either way the incident was met with a predictable reaction, particularly since it came on the heels of revelations—still unconfirmed by corroborating testimony or evidence, but disturbing nonetheless—that Napoles had contributed millions of pesos to the election campaign of President Aquino (as well as other candidates) in 2010, and growing chatter about the potential link between the Office of the President and Napoles through Brian Yamsuan. Yamsuan, a Napoles-connected former consultant to Executive Secretary Paquito Ochoa, was fired about two weeks ago after it was discovered that he had arranged a meeting between Napoles and editors of the Philippine Daily Inquirer (Yamsuan’s wife is a reporter on the Senate beat for the Inquirer), and after allegations surfaced in Ochoa’s office that he had received millions of pesos from Napoles through the intercession of an unnamed senator to help cover huge gambling debts.

As far as most of the public is concerned—and for the first time since the “pork barrel” scandal began, the issue now seems to be gaining traction as a topic of conversation among the masa (Protip: If you really want to hear what’s on the common man’s mind, go get a haircut in a barbershop inside your local palengke or market.) Napoles’ “surrender” stinks of a carefully managed, high-level cover-up intended to protect the President and his key allies from whatever damaging information she could reveal as the chief organizer of the long-running PDAF embezzlement.

Whatever the outcome, the Aquino administration’s credibility is fatally damaged. If Napoles is allowed to speak freely (which almost no one expects will happen), there is a near-likelihood that at the very least she will implicate key administration allies in Congress or among local government units, and a possibility that unseemly connections to the executive branch itself will be revealed. If, on the other hand, public assumptions are satisfied and Napoles’ testimony only fingers political personalities not aligned with President Aquino and the Liberal Party, the conclusion that a cover-up is taking place will be virtually impossible for Mr. Aquino to refute.

*Meanwhile, the Philippine economy still exists, and is doing some things people should be aware of—In what had to be the most unfortunately timed and anticlimactic press release ever, the National Statistical Coordination Board (NSCB) released the country’s second-quarter gross domestic product (GDP) figures on Thursday morning while the full attention of the country was still on Napoles’ “surrender” on Wednesday night. At 7.5-percent year-on-year growth, second-quarter GDP was only slightly lower than the revised 7.7-percent indicator from the first quarter, and markedly better than most forecasts, which had expected a figure between 6 percent and 7 percent.

There are, however, some subtle signs of structural weakness beginning to show despite the positive net results. The NSCB release notes that “external trade has been lackluster,” and the pace of growth in the three major economic sectors—Agriculture, Industry and Services—has slowed, a factor that is probably more significant than it appears since election spending typically provides a big quarterly boost. Agriculture reversed five quarters of moderate growth by declining 0.8 percent, which is not good news since that figure does not include damage to agriculture from this month’s storms, which will be counted in the third-quarter figures.

A native cooling of the economy—which is not exactly happening yet, although the signs are beginning to appear—is more worrisome because external economic threats are now appearing to have more of an impact on the local economy and markets, than most analysts and policymakers are willing to admit. Thanks largely to capital flight sparked by warnings of a “winding down” of the US quantitative easing program, both the local stock market and currency have retreated, erasing a year or more of gains.

This same scenario has been playing out—although not as drastically as in the Philippines—in other emerging markets, and has the potential to create a self-sustaining, downward cycle; according to an International Monetary Fund report released this past week, the combined GDP of emerging economies for the first time in history has surpassed that of the developed economies, meaning that what happens here will have a far greater impact globally than it has in the past. Adding the prospect of a period of serious political turmoil created by the “pork barrel” scandal—especially if it leads, as it now appears to be doing, to the very top of the Aquino administration—has potentially dire implications, not just here in the Philippines, but perhaps even beyond.


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