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Negative
Country Perception
By Michael Alan Hamlin
May 18, 2001
Political and investment analysts, politicians, and
big business can always be counted on to warn that political upheaval,
election-related violence, and capricious public policy turn off
investors. But it's not often that these doomsayers, or columnists
for that matter, provide specific instances in which investors actually
rethought investments or simply chose to ignore the country.
Last week, I received a call from a US investor, which
has retained our firm, and it brought the impact of recent events
home with considerable force. Originally scheduled to initiate an
IT-related project in May, the investor told me that it had been
delayed to June or July, essentially as a result of the queasiness
of the investor's associates. That queasiness was the product of
recent news out of the Philippines. While the delay suggested a
temporary postponement, anytime major projects begin to suffer delays
they are in fact imperiled. So I was not happy.
The principal concern had to do with negative perception
of the administration's declaration of a State of Rebellion and
the warrantless arrest of opposition politicians less than two weeks
before national elections. My client said, "Media here say
she (President Gloria Macapagal-Arroyo) is cleaning house and getting
rid of the opposition before the election."
As you will recall, the foreign media, with the exception
of Barry Wain of The Asian Wall Street Journal, has been pretty
merciless about the motivation for and the end result of Edsa II.
International media are for the most part of the opinion that a
democratically elected chief-of-state was removed by extra-democratic
means. The May 1 siege of Malacañang appeared to prove the
point that parties to the People Power Coalition substantially misread
voter sentiment among die-hard supporters of former president Joseph
Estrada, and the poor in general.
The administration's decision to make the declaration
appeared to further substantiate that conclusion by suggesting that
the new administration lacked that political wherewithal to deal
with the opposition democratically, and therefore was opting for
other alternatives. In fact, opposition to the declaration among
sectors normally aligned with the administration suggested that
the administration was misreading more than the opposition. As a
result, a definitive cutoff of the State of Rebellion was announced,
and the final days it was formally in effect were just that: a formality.
Now, this further undermined perception of the legitimacy
of the administration in the view of outside observers especially,
because Ms. Arroyo was seen to be backing down. In the context of
these developments, relatively close results of the just (and messily)
concluded election convey to the outside world (and those of us
here, too) the impression of an administration on shaky political
ground, and one therefore severely compromised in terms of its ability
to generate sustainable political will. Without that political will,
it will be difficult to implement controversial components of the
administration's emerging legislative agenda, such as tax reform,
not a popular reform objective under the best of circumstances.
On balance, and in terms of seducing foreign investment
into the country, therefore, where does the Philippines and the
administration stand? In the short-term, in a not-so-happy place.
Investors will remain concerned that the administration is wobbly,
and that challenges to its legitimacy are likely to continue. To
supporters of the administration that will seem hugely unfair, given
the manner in which the former president and his allies in the Senate
attempted to abort the democratic impeachment process last January.
But much of life, especially political life, is unfair, and must
be dealt with. The present political circumstances are no exception.
In the long-term, the Philippines may be in somewhat
better shape. First, the Philippines has a good chance of emerging
from the political morass of the past six months with a more-or-less
functional two-party system. In previous elections, most opposition
politicians migrated to the administration party because they wanted
to be on a winning team. The reason was simple: the winning team
had most of the money.
In this case, the tenacity of Mr. Estrada's supporters
and the promise of a very public and very long trial of the former
president suggests that opposition politicians are far less likely
to migrate than in the past. The new reality of a deeply polarized
government and electorate further strengthens this view: an empowered
opposition will be able to exercise the leverage necessary to assure
that the administration plays "fair" with money and favors.
Second, a strong opposition, regardless of its complexion,
will make it difficult for the administration to take its legitimacy
for granted. The result could well be a consistent focus on public
policy that realistically addresses issues of poverty, and uplifting
the majority of Filipinos. This is true for other constituencies,
say, in Mindanao. The administration must be serious about addressing
peace and order issues in the manner that Mindanao residents wish
them to be addressed, rather than what seems convenient from Manila.
The bottom line will be increased democratic institutional
strength. Democratic institutions reflect not one will, but the
capacity to progress and develop based on compromise that encompasses
all major constituencies' views. By default, the administration
will have no choice but to treat the opposition with the respect,
we must admit, it deserves in terms of the results of the election.
Of course, an opposition that acts irresponsibly could derail everything,
and stymie both growth in democratic maturity as well as national
development.
But there are good reasons for the opposition to behave.
For one, the outcome of the elections is based in significant part
on principle, rather than alignment, despite the identification
of the opposition vote with Mr. Estrada and his allies. And that
principle is that the elite classes should not be allowed to have
their way with the country, at least not if it's only going to benefit
the elites.
Second, the turnout of many actors-turned-politicians
in the election suggests that voters are taking the admonition to
vote wisely to heart. Failure to heed that sentiment is as much
a danger to the opposition as it is to the administration. Voters
are not only looking for results, they know how to measure them,
too.
And that's got to be good for investment.
(Mr. Hamlin is managing director of the consultancy
TeamAsia and the author of two books on Asian economies and managing
in Asia. His latest book is The New Asian Corporation: Managing
for the Future in Post-Crisis Asia. His e-mail address is mahamlin@teamasia.com.ph.)
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