The Justice Secretary's Fate Bodes Ill for the Philippines

By Philip Bowring - International Herald Tribune

HONG KONG - The Philippines always seems to be out of step with much of the rest of Southeast Asia. Sometimes that has been to its advantage. But while other countries recover economically or at least visibly grapple with reform, a sense of missed opportunities and backsliding toward bad old ways pervades the Philippines.

On Feb. 12, just as President Abdurrahman Wahid of Indonesia was maneuvering to sideline General Wiranto,a powerful obstacle to reform, the Philippine president, Joseph Estrada, dismissed his justice secretary, Serafin Cuevas, who was well regarded and had not been touched by scandal.

The ostensible reason was a public outcry about a decision to pardon a murderer. But it was claimed by respected commentators that the secretary's bigger fault was to have made decisions against the interests of two important associates of the president.

One instance involved a 25 billion peso (dollars 600 million) tax evasion case against Lucio Tan, arguably the country's most influential businessman. Another was a decision relating to an American attempt to extradite a close Estrada associate and former presidential adviser, Mark Jimenez, who faces criminal charges in the United States.

The presidential palace denied that there was any connection between the dismissal of Mr. Cuevas and the two cases, but the episode did not improve the image of the administration.

In other circumstances, these might be ignored as the kind of embarrassments that all governments face from time to time, especially in the Philippines, where personal connections are so important and the media so free to draw attention to them. However, they cannot be so easily written off.

Mr. Tan owed his original, tobacco-based fortune to his connections with Ferdinand Marcos. He survived the two subsequent administrations, despite vigorous legal actions against him during the presidency of Fidel Ramos. Under the Estrada presidency his influence has expanded. He has effectively taken control of the formerly government-controlled Philippine National Bank. He already had control of the national airline, Philippine Airlines.

The airline has been losing money for reasons that are themselves the subject of debate. But the government came to its aid recently by unilaterally cutting Taiwan airlines' capacity on Taiwan-Philippine routes. There was a standoff, and then Taiwan caved in. But the damage to the national interest of this support for Mr. Tan is hard to calculate. Taiwan accounts for a big slice of the Philippines' tourist trade and of its foreign investment, especially in electronics.

Nor is that all. Just last week, the Philippine Stock Exchange unveiled an inquiry into trading of a company stock whose value multiplied manyfold after it was revealed to be the likely recipient of a gambling license. Another close associate of the president's and some other business friends were named as beneficiaries of the hectic share dealings.

If this were all sudden and new, one might hope that the president would address the problem. But concern about a resurgence of cronyism has been growing steadily over the past year.

This is not to suggest that the Philippines is in dire shape. Its economic and political problems are small compared with Indonesia's. But when Mr. Estrada came to office in mid-1998, the nation had a unique opportunity to catch up with neighbors who had overtaken it in the previous 20 years. The Philippines was relatively mildly touched by the Asian crisis and had made big strides under Mr. Ramos toward improved administration and coherent policies.

But a quarter of the way through Mr. Estrada's term, there is little to show. The cabinet has some competent ministers, but their influence is modest and uncoordinated. Policies are sound but implementation feeble, and liberalization has almost stalled. The economy is growing, but very slowly, and it is ever more dependent on remittances from expatriate Filipinos.

Foreign investors, apart from those in electronics assembly, see little upside compared with most other locations. The stock market, reflecting both national and international sentiment, has been declining at a time when almost all emerging markets have been booming.

There is no crisis. Politically the nation is stable. The central bank is in good hands, and there is no major debt overhang from the Asian crisis. But leadership? Ideas? Example?

At least Mr. Marcos had energy and plans. Corazon Aquino was trusted. Mr. Ramos was a good manager. But Mr. Estrada, who set himself up as the representative of the poor and the outsiders, has so far mainly showed that he is an amiable fellow who does not forget his friends. That does not make for good governance.