PRESS STATEMENT

The Estrada Administration’s First 100 Days:
A Period of Adjustment

8 October 1998 - The First 100 Days of the Estrada Administration have been a difficult period of adjustment for the Philippines as the Asian economic crisis has deepened. The economy has slowed down, the markets have slumped, and demand has weakened. In light of this situation and given the complexity of the economic problems, it is imperative for the Administration to focus on an economic agenda and to communicate it clearly to the public.

Recently, the IMF released a study projecting a recession in most Asian countries and warned that the effects of the Asian Contagion were spreading far beyond Asia. However, viewed in the context of how the entire region has been affected and where the Philippines came from, the country has managed its way through the crisis and its prospects for an early recovery are strong.

The consensus forecast for East Asian growth in 1998 now points to the Philippines as one of only two countries in the region (excluding China) that may close the year with positive growth, albeit at modest levels. And though the macroeconomic figures indicate a slowdown, certain indicators continue to show signs of resilience:

• The inflation rate for the first nine months (ending September) has averaged 9.4 percent.
  
• Except for the seasonal high of 13.3 percent in April, the unemployment rate has gradually dropped to 8.9 percent in July, the latest figures available.
• With few exceptions, the industrial front has been more peaceful, with fewer strikes and fewer workers involved in strikes in July and August 1998 as compared to the same period last year.
  
• The banking and financial system remains sound. While banks exposure to risk, this exposure does not run as high as in other countries in the region. The ratio of non-performing loans to the entire system’s loan portfolio is presently 9.6 percent, second-best in ASEAN and far below the 18 to 50 percent rates presently recorded in the region.
  
• Interest rates have declined since the beginning of the year, with the bellwether 91-day Treasury Bill rate dropping to under 14 percent this week.
  
• Exports continue to perform well, expanding 20 percent in competitive market conditions. Combined with the drop in imports, our trade deficit has shrunk and the current account and balance-of-payments situation have significantly improved.

Moreover, the new Administration has wisely continued the pursuit of economic reforms of trade and investment liberalization, privatization, and deregulation – building on the gains of the two previous administrations.

The Administration has also worked to become more investor-friendly and to engage the private sector’s views more often into the government’s policy-formulation structure. A revised Economic Mobilization Group now has nine private sector members, including four from the labor sector, working with 11 Cabinet members to address critical economic problems.

Aside form working on short-term problems, more private sector participants has been built into the process of drawing up the medium-term development plans of the country. Although the effects of this greater people participation in governance will not be immediately apparent, over time his transparency will help create a government that is more responsive to the economy’s needs.

In the first100 days, the Administration has also had more than its fair share of problems and controversies to contend with. These problems, we feel, may have arisen from the natural adjustment process of a new team coming into office at a difficult time. However, these problems need to be addressed and rectified soon before they become the accepted practice or policy of government.

First and foremost, the government needs to communicate more clearly to the public in terms of its policy positions and decisions. On numerous occasions, the government has issued statements only to retract and modify them soon after. While this may reflect the government’s openness to suggestions and recommendations from the public, it also may reflect that not enough study has been made before decisions are announced. We are concerned that this may cause a loss of credibility from the public.

Second, the government must correct the impression that crony capitalism is returning to the Philippines. It must be made clear that political access and the repayment of political debt will not result in undue economic advantage being extended to a select few. The country’s experience with crony capitalism during the 1980’s amply illustrates the negative effects this can have on the economy.

Third, the executive branch of government must now work more closely with the legislature to push forward a legislative agenda. In President Estrada’s State of the Nation Address last July, he outlined a legislative agenda which was accompanied by a detailed 61-page technical report. We urge the President to establish a liaison and coordinating mechanism with the House and the Senate so that this agenda may be proactively discussed and carried out.

In outlining our observations, the Makati Business Club remains committed to supporting the Administration’s goals for economic development and poverty alleviation. In the final analysis, both the government and the business sector will need to cooperate in order to fight the battle against poverty -–with the government providing a hospitable policy environment and the business community doing its share to investing and creating jobs.