• The chaos scenario

    Ben D. Kritz

    Ben D. Kritz

    AT the beginning of the year, when the election campaign began in earnest, not many people would have seriously predicted a complete political breakdown or a large-scale financial scandal with international implications before midyear. That those things seem to have come as a surprise to everyone is an indication not only of the speed things can fall apart, but is also a pregnant hint about the country’s state of preparedness to react to a crisis.

    The Poe case, as infuriating as it is to some, is not that significant outside this country in the same way as, for example, the recent elections in Iran, or last year’s Argentinian election. None of the candidates represent any sort of difference in ideology, so from an outside perspective, one is as good as another, Poe included.

    The questions being raised about the validity of the ruling, even the hints of internal conflict in the Supreme Court, also do not make much of an impression outside the country. It might, if the legal issue involved had obvious implications for business or the economy in general, but it doesn’t.

    What does get the attention of the outside world is the very real risk that the May 9 election may not take place as scheduled. A postponement or other failure of the election is the only real threat to the expectation of continuity. Again, since none of the candidates are fundamentally different from each other or the overall norm for Filipino politicians, policy continuity—with some exceptions in relatively fine details—is assured, so long as the elections happen very close to when and in what manner they are supposed to.

    It is hard to overstate what a disastrous situation the Comelec has gotten itself into and created for everyone else. With the Supreme Court ruling (an almost-unanimous 14-0 ruling at that) that at least one of the legal requirements Comelec planned to ignore—the printing of a paper receipt for voters—must be followed, Comelec essentially had to admit they were wholly unprepared to comply with that, and would take much longer than the time left before May 9 to equip the voting machines to issue paper receipts. Comelec by law cannot postpone the elections, and they cannot—because automated elections are required by law—revert to a manual voting system. There is no apparent solution to the mess, because whatever choice Comelec makes now ends with some sort of a constitutional crisis.

    A period of time, even a relatively brief period, in which the normal functions of the government are compromised, is a sobering prospect, and increases the likelihood that deals made and initiatives begun during one administration won’t be carried over into the next. And at this point, unless some magically legal deus ex machina provides an answer, there seems to be no way to avoid it.

    A couple of financial scandals—the Peñaflor case, in which investors were reportedly bilked out of a total of about P100 million, and the even bigger RCBC money-laundering case—are also sources of short-term worry. In the investment scam case, at least, whatever harm the issue has done to the market’s and regulators’ credibility, can be quickly undone with an effective, efficient investigation and eventual legal prosecution.

    The RCBC case is a bit different, because this sort of fraud of a particularly brazen nature, and on a huge scale cannot possibly be an isolated incident; in other large-scale banking scandals in other places, an investigation into one has almost always led to others. Rarely has the amount been so great as to actually threaten the financial survival of a bank—the $81 million that allegedly passed through RCBC won’t put them out of business—but it has a big impact on the reputation of the bank, and if the fraud was due to a regulatory oversight, the banking sector in general. That could even lead to unpleasant results such as credit rating or outlook downgrades. At the very least, it is likely to curb bank’s lending and market activities to some extent; greater scrutiny from anti-money laundering authorities and the regulators at the central bank will encourage most banks to exercise more caution.

    All of this will, if it happens, be having an effect on the economy at right about the time it should be enjoying an election boost, which it needs because the first half-year of the presidential term tends to be a bit stagnant in terms of government spending. And it will be happening at a time when, in all likelihood, the regional and global economy will not yet be recovered, and not providing the demand the Philippines needs to pull itself out of an in-hindsight economic rut. The most distressing part of all is that it is a self-inflicted wound; the circumstances that now threaten to crack the Philippines’ veneer of respectable stability all could have been entirely avoided, and with so little effort.



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