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Brand
Philippines
By Michael Alan Hamlin
December 02, 2002
The Philippines' image took another
series of hard blows last week, and as usual, little, if anything,
was done by the administration's rain makers to deflect the flow
of negative news. Those blows include allegations of corruption
against Justice Secretary Hernando Perez so serious that he was
forced to go on leave. But going on leave only increased the credibility
of the allegations, which were made in spectacular fashion by opposition
congressman and U.S. fugitive Mark Jimenez.
The current administration was booted
into power in a spontaneous mass expression of outrage over corruption
by its predecessor. Despite warnings by various commentators that
voters and observers alike would be watching this administration
closely, it has been rocked by a series of corruption scandals.
The two most serious have involved cabinet members. In the first,
cabinet secretary Jose Isidro Camacho was accused of arranging for
his sister to earn P1.4 billion in a sale of government bonds.
Now comes the case of Mr. Perez,
who has also been accused of accepting bribes by other politicians,
including former chief of staff for President Gloria Macapagal Arroyo
when she was vice president, Congressman Wilfrido Villarama. Opposition
senator and presidential hopeful Panfilo Lacson accused Mr. Perez
of hoarding millions of dollars in Hong Kong bank accounts in September.
Mr. Jimenez is currently under threat of extradition to the U.S.
to face charges of illegal campaign contributions there. The effort
to extradite Mr. Jimenez is being championed by Mr. Perez.
Ordinarily, claims by a former and
reportedly disgruntled employee, an opposition senator and presidential
rival with his own suitcase of alleged scandal, and a bona fide
fugitive, even if he is a congressman, shouldn't be cause for great
alarm. However, the persistence of the calls, mishandling of the
allegations by Mr. Perez and the administration, and increasing
skepticism with the government and its commitment to reform have
changed all that. As a result, this scandal is unlikely to go away.
If it weren't for the allegations
against Perez, the government's attempt to take over Meralco would
have remained the top story. The Philippines not too many years
ago was praised as a model of privatization. Most of those deals
have come back to haunt the government - Philippine National Bank,
Philippine Airlines, Maynilad - due to government interference,
inept management, and tough economic conditions. Now, government
seems to have forsaken privatization all together.
In a startling bizarre announcement,
Mr. Camacho first said that the government would take over Meralco.
When criticism erupted, he revised that argument, claiming the government
only intended to replace the management of the firm. As economist
and commentator Winnie Monsod has pointed out elsewhere, Meralco's
problem isn't management. It's a history of inept infrastructure
development by government in the guise of the National Power Corporation,
a corrupt, inefficient regulatory environment, and political priorities
which have made it impossible for the company to achieve its legally
mandated 12 percent return.
But even if that weren't true, the
idea of government taking over the management of a utility is simply
ludicrous, especially at a time when governments worldwide have
acknowledged that they need to do exactly the opposite. The notion
of government bureaucrats infamous for their poor management running
the capital's most important power utility is simply too much to
even contemplate.
Speaking of privatization, the government
appeared to take a step closer last week to taking control of the
new terminal at the Ninoy Aquino International Airport, known as
Terminal Three. Although it is clear that this build-operate-transfer
(BOT) project has gone badly awry, it is unlikely that a government
takeover is the answer. There are a number of reasons for this.
First, government is in no position to manage the terminal and needs
the world-class expertise the operator will provide. Second, the
airport is complete and the contract has been fulfilled. Third,
if this contract is thrown out, there will never be another BOT
signed by foreign investors. If government had the resources to
build the infrastructure the country badly needs, that would be
fine. But it doesn't. It will have to continue to rely on private-sector
financiers.
The third hit the government couldn't
do much about. The Australian and Canadian embassies were closed
to the public, reportedly as a result of an immediate, credible
terrorist threat. The closing followed other reports indicating
that the Philippines has been a much more important training ground
for terrorists than originally thought. Although terrorism is a
global problem, this puts the Philippines closer to its center.
That's bad for investment, for tourism, and for business in general
because suppliers worry about the capacity of local firms to meet
agreements.
What do these stories communicate?
In the first case, that government is in disarray, and may be in
character no different from the one that it replaced. In the second,
that government is racing back to the past, having forgotten the
painful lessons we all learned there. And in doing so scaring off
opportunity of all sorts. In the final case, the Philippines is
projected as an unsafe place, which shifts attention to our competitors
for investment, jobs, and opportunity.
But while it is truly unfortunate
that these are the messages about the Philippines communicated to
the world, government's reaction is even more so. And that is because
it is merely reactive. Attention needs to be shifted from these
stories, and the only way that is going to happen is if something
credible and meaningful is communicated. It would be nice if government
could provide that. But if it can't there are plenty of other stories
that can be. I know, because I write them for a U.S. publication.
But it is the government that must
take the responsibility for its brand, and it's just not doing that.
(Michael Alan Hamlin is the managing
director of consultancy TeamAsia and the author of three books on
Asian economies and companies. His latest book is Marketing Asian
Places, of which he is a co-author (Wiley, 2001). Write him at mahamlin@teamasia.com.).
Copyright © 2002 Michael Alan
Hamlin. All Rights Reserved.
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