Filipino President Gloria Macapagal Arroyo initiated a policy debate of a kind never seen before in Manila, when she announced the country’s fiscal deficit had become its biggest problem.
The State of the Nation Address—an occasion generally dominated by pro-poor rhetoric and visions of national unity—raised more than a few eyebrows when President Arroyo presented a list of eight tax measures to address the looming fiscal crisis.
Whilst critics were quick to dismiss her legislative agenda, it was supported by a group of economics professors from the University of the Philippines, who warned of economic collapse in the next two to three years if certain strategies were not implemented.
Although the Philippines’ budget has been running at deficit for several years, the prospects are indeed grim. The current fiscal deficit is over A$7 billion. Public sector debt is at an astounding A$130 billion and has been exacerbated by the devaluation of the peso (around half of the debt is in foreign currency). The government is currently trying to prevent a credit downgrade by foreign lenders, which would affect lending rates, debt serviceability, and availability of funds for development projects.
At first glance, Arroyo seems to possess the necessary skills to navigate the economy through these turbulent times. She is, after all, an economist.
First catapulted to the presidency by a popular revolt against Joseph Estrada in 2001, her penchant for detail came as a relief to non-government organisations and advocacy groups who feel they can engage the new administration in policy reform.
However, a pattern of politically expedient decisions have undermined Arroyo’s credibility and belie her image as a strong president.
Her decision to lift the moratorium on the death penalty late last year, was widely perceived to be a reaction to increased pressure from the local Chinese community, whose members were being targeted for kidnapping (a capital offence in the Philippines). This decision contrasts with the withdrawal of Filipino humanitarian troops from Iraq, in order to save the life of abducted truck driver Angelo de la Cruz.
While the comparison may be weak, it is worth noting the underlying inconsistency between wanting to be seen as tough on local issues yet conceding to the demands of foreign terrorists. To understand these actions, one must consider the political value of populism. In both situations Arroyo revealed her vulnerability to pressure.
Inadequate government policy on population control further highlights the issue of Arroyo’s credibility. The Philippines has a