The formidable politician certainly demonstrated this in June and July as she clung on to power with tenacity, even as a tape of her talking inappropriately to an election official in 2004 was made public and major upheavals followed.
Interviewed in May, just before the crisis blew up, the president, a Georgetown University and University of the Philippines graduate, said she is a mixture of both technocrat and politician but that the problematic state of the economy necessitates a rather rigorous approach.
“My father [Diosdado Macapagal], who was [also] president of the Philippines, was both a technocrat and a politician because he was a doctor of economics and a doctor of laws, and he had been a congressman for two terms and vice-president, before he became president. In that sense, I am that combination, too. Because I am a doctor of economics and then I was senator twice and vice-president for half a term.
“But now that I am here and have the difficulty of pushing [through] the long overdue reforms, I am a technocrat above being a politician, because you have to pay [out] a lot of political capital to do them,” she concluded, speaking in the Orchid Room of the Malacañang Palace, the presidential headquarters.
Political drama
However, the dramatic sequence of events in the past two months has made her politician’s persona take priority. She apologised publicly in late June for what she called “a lapse in judgment”, in reference to her recorded phone call with a top election official while Congress was counting the results of the May 2004 presidential election.
She then sent her husband into exile on the back of allegations that he received payments from operators in an illegal numbers game, even as she insisted it was his choice: “My husband has volunteered to go abroad.” Her son also left. (In May, she brushed off a question about any conflict with her husband’s business activities. “Well, the constitution or law or tradition requires that he give up all his financial activities. He was a lawyer but had to close his law office,” she said, glibly and rather misleadingly).
Then, in the first week of July, 10 members of her cabinet resigned over the vote manipulation allegations and asked her to make the “supreme sacrifice” and follow their lead. Well-respected former president Cory Aquino added her voice to those calls, as did the influential Makati Business Club. Meanwhile, demonstrations against Ms Macapagal-Arroyo were becoming larger.
Support emerges
After that, the tide began to turn. The Catholic Bishops Conference of the Philippines, which encompasses more than 90 bishops, said she should stay in power and the normal channels should be pursued to deal with the allegations: a fact-finding commission or the initiation of impeachment proceedings.
A few days later, GMA, as she is known in the nickname-addicted Philippines, appointed Margarito Teves as her new finance secretary (minister). Formerly head of a government-owned bank, his acceptance of the job signalled that not all the technocrats had given up on GMA.
Meanwhile, another former president, Fidel Ramos, suggested that constitutional reform, which was long overdue, should be instituted, which would give the president a face-saving exit from her role sometime down the line. It was notable that he did not call for her resignation.
Subsequently, about 120,000 people held a demonstration on July 16 calling for GMA to stay in office, far outnumbering the 30,000 demonstrators that her opponents managed to gather in a demonstration a few days earlier, while she agreed to form a truth commission.
GMA may be beleaguered but she is a fighter and a workaholic who believes unequivocally in her presidency. When asked whether she had any sleepless nights, she said: “No, not really. I have very strong faith in the Lord and divine providence. I feel that if he put me in this situation at this time of our history, this must be what he was preparing me for and therefore I must do what has to be done and damn the torpedoes for a while.”
The church and poverty
A daily mass-attender, the need for popularity has tied her hands when it comes to dealing with the Catholic Church, the most powerful and popular institution in the Philippines. Its support is crucial, as shown in the current turmoil. It is firmly opposed to population control, which means that the government dare not push for it. With the lowest segments of the population producing 6.3 children per family, according to the latest census, per capita income cannot rise. That is especially problematic in a country where 35% of the population remains mired in poverty.
“Poverty is the biggest problem of my administration,” says GMA, a mother of three. “When I was inaugurated last year, I very clearly enunciated a 10-point pro-poor agenda, which represented the highlight of my more comprehensive medium-term development programme.”
This agenda includes creating jobs through attracting more foreign investment and developing micro-finance, improving education, extending the electricity and water networks, and decentralising investment to ensure that growth is more evenly spread throughout the islands. It also involves ending the Moro Islamic Liberation Front (MILF) hostilities and the threat from the New People’s Army, which have taken their toll on safety in the regions where they operate, as well as diverting much-needed funds into the fight.
Pro-poor agenda
The purpose of GMA’s pro-poor agenda is twofold: to help the poor, because she is an honourable leader with a conscience; and to increase her popularity as her headmistress-like demeanour and membership of the elite has not endeared her to the poor.
“She doesn’t get along with the poor. I get along with her fine. Maybe I am not poor enough!” jokes Tony Go, chairman of Equitable PCI Bank, the country’s third largest.
The aim of attracting more foreign investment has been dealt a blow by the latest events. However, the driver of the economy – consumer demand on the back of remittances from the eight million overseas Filipino workers – will not be affected. The central bank forecasts a 10% rise in remittances from the record $8.54bn in 2004. The remittances are responsible for almost 10% of GNP.
“We have a wonderful overseas community. Eight million live and work abroad in great paying jobs and they don’t forget their homeland,” says GMA. “That is why – come what may in investments and exports – the consumption that is fuelled by their families is very constant. This has contributed greatly to the consistency of our growth rate.”
It is an important factor in foreign policy. Filipino workers, ranging from stevedores to doctors, are based in 150 countries.
International links
The Philippines is also in the final stages of negotiating an economic partnership agreement with Japan. “It is more than free trade because it covers our complementarities,” says GMA. “Japan has an ageing population, [while] ours is very young. So the agreement makes room for welcoming our skilled human resources, like for instance our certified care givers to take care of their old.”
Relations with China are also very good. Many large-scale manufacturing plants had moved out of the Philippines some time ago, so there is very little competition on that front. Instead, a favourable November Superior Court ruling on mining has opened the doors to investment from resource-hungry China, among others. The Philippines is the fifth most mineralised country in the world, with an estimated $900bn in mineral wealth.
GMA has a very good personal relationship with the leader of the third great power in the region, US President George W. Bush. In her office she keeps a photo, taken at the 2004 APEC (Asia Pacific Economic Cooperation) meeting in Chile, where he has a friendly hand on her back. The Philippines has started talks about an economic partnership agreement with the US, from which it already receives aid and military co-operation to fight the insurgents in Mindanao.
The Association of Southeast Asian Nations (ASEAN) is also of growing importance on the economic front. GMA envisages it becoming a trade bloc like the European Community was. “As the world becomes more intertwined – and you have the giants of the US, Japan and China, and India coming up – we do need to be one good market. ASEAN altogether has a population half of China’s size and a GDP as big as China’s. We make a good market if we are all together,” she says.
International credibility
GMA has credibility abroad. Her domestic credibility is less secure. Reports of her throwing tantrums and books in cabinet meetings have not helped. But ultimately, her legacy will be the domestic economy (see Philippines article). So far, given the constraints of governing in the Philippines, GMA has done a good job. But the challenge has become even more formidable in the past two months. Moving ahead on reforms while maintaining her popular support is the only way. By definition, the reforms will have to be slowed down and this may well be her natural tendency.
“She is an incrementalist in the way she moves, she is not a Maggie Thatcher. There is a reluctance to step on toes. With our situation, there are a lot of toes,” says Anton Periquet, managing director of Deutsche Regis, the top broker in the Philippines.
Ironically, the Supreme Court has in effect helped to slow down reforms by freezing an expanded VAT tax due to take effect on July 1 while it considers its constitutionality. A ruling was expected as The Banker went to press. The central bank believes that the law is likely to be approved.
Tackling debt
The VAT measure is part of a concerted attack on the country’s deplorable finances. The Philippines is labouring under a record $69bn debt, making public sector debt 110% of GDP. Almost 40% of revenue goes on interest expense. As Standard & Poor’s noted in a report, the country’s fiscal profile is exposed to the composition of its government debt, almost half of which is denominated in foreign currency. As a result, rising global interest rates or a weakening peso have a detrimental effect.
The government attack on the deficit includes higher taxes on alcohol and cigarettes, raising the corporate tax rate to 35% from 33%, slashing VAT exemptions and raising the VAT rate to 12% from 10% in 2006. GMA may not choose to go ahead with the rise in VAT to 12%, which is due to take place next year, depending on political circumstances.
Meanwhile, independent forecasters and the central bank estimate that GDP will grow about 5% in 2005, down from 6.1% in 2004, while the government target remains 5.3% to 6.3%. Other growth-inhibiting factors include higher oil prices.
In May, GMA noted that she already had three-and-a-half years on the learning curve to diagnose what was ailing and had six years to carry out the treatment. She may now have less time to deal with “the curse of the past”, as she calls the Philippines’ main economic problem: “Financing our development by borrowing and then, ironically, having a smaller and smaller share going to development because it has to go to debt servicing.”
The government is ahead in its fiscal consolidation programme and, despite the disruptions, there is still an outside chance that a balanced budget can be achieved by the 2010 target if most of its stated economic prescriptions are kept in place. Even if more compromises are necessary, and cutting the deficit takes longer, what is important is the direction, which GMA understands.
What the future holds
Although a coup by the army or another people’s revolution is still a possibility, what is more likely is that GMA will go through an impeachment process in which she may survive, as parties allied to her are in control of both the Senate and the House of Representatives. Or she may use a constitutional change process to cut short what remains of her term to 2010.
Either way, she needs to boost her popularity among the poor to avoid a street revolution. “I think it is very important we have some national healing,” she said, prophetically, in May, referring to the people’s revolutions that toppled presidents Ferdinand Marcos and Joseph Estrada.
GMA has enough political nous and heredity to realise what she needs to do to remain in power, as was amply demonstrated in the past few months. Those who criticise her for that are misguided. Whatever her faults, she wrote her university thesis on fiscal consolidation and needs to stay in power to accomplish one of the few credible economic agendas in the Philippines in decades.
