First, there is the urgent matter of constitutional change that must be taken up as soon as possible either through a Constitutional Assembly or a Constitutional Convention. The sooner we move on it, the better. At the very least, a change will send a signal all over the world that we are making the necessary economic reforms. The system that we have been using is obsolete. Poverty, an 84 million population, the absence of law and order, the lack of investments, and an unresponsive political system are the signs that the system is overloaded. It will break down sooner or later, if not now. When it does, it will devour us completely. That is why it is imperative to effect structural reforms that will break the gridlocks in government, business, justice, security, and in other institutions that have failed to adapt to an ever-increasing globalized system.
The 1987 Constitution was an extreme reaction to the Martial Law years. That’s why the scope of the military and the president’s emergency powers have been limited. This is all understandable. But it is now time for us to change it. It allows for arbitrary decisions by the Supreme Court on foreign-funded projects, which has given us the worst investment image imaginable. The PIATCO fiasco, the Manila Hotel, Jai Alai, and PEA-Amari are prime examples. That is why we cannot expect any kind of investment to come in. Its complacency permits corruption to suck the lifeblood of the economy. The present Constitution coddles monopolies that have to be regulated in order for the country to be more competitive. It created a multiparty system that has spawned more chaos than order because it has only produced minority presidents without a strong mandate. For these reasons, investments are withheld, credit ratings get downgraded, and the peso sinks to the abyss. More than a federal parliamentary system that is vaunted to respond and to implement reforms swiftly, I am certain that we have enough intelligent and competent people to look for the right system that would work uniquely for the Filipino. To be part of the global market, it is essential to change it now. The new Constitution will be the blueprint, the template, that will decide whether we will be competitive enough to join the ranks of winners in the 21st Century.
Asymmetric warfare, such as the 9/11, LRT, and the March 11 Madrid attacks, bring us to the second point, the threat of terrorism to peace & order. After March 11, defense officials and security experts warned that terrorist activities are expected to shift to Southeast Asia. Among all other countries in the region, the Philippines is most likely to be attacked because of its active participation in the "coalition of the willing’s" global fight against terrorism and its designation by the US as a Major Non-NATO Ally (MNNA). Simply put, we could be the next target.
Because of this year’s electoral exercises, the political pressure has been ratcheted up on the major leaders of the 84-nation coalition. George W. Bush faces a strong challenge from John Kerry. A serious terrorist attack on the Philippines during the campaign period would make GMA very vulnerable. If the government security forces fail to prevent a terrorist attack, GMA may suffer the same fate as Spanish Prime Minister Aznar.
The third most critical problem facing the next president is the country’s foreign debt and the budget deficit. By December 2003, the country’s foreign debt stood at $56-B. The debt figure grew 100 percent since 1996. For the same period, the government’s budget deficit rose to $68-B. This figure grew 160 percent since 1993. In a word, staggering. Standard Chartered Bank (SCB), one of RP’s three major rating agencies, warned that "the clock is ticking". Thus, fiscal reforms have to be effected. Decisively. SCB observed that RP’s debt ration, which is currently more than 80 percent of gross domestic product (GDP), is in a much worse situation than the 2001 pre-crisis Argentine debt-to-ratio of below 60 percent.
Investors are waiting for things to clear up. Our friend Donald Dee, former head of the Employers Confederation of the Philippines (ECOP), said that investors are likely to postpone major decisions until December, when the new administration acts on its priorities after its first 200 days in office. Four million are unemployed. And their ranks could rise. In the meantime, just over two million Filipinos pay income taxes. This has forced government to run up debts approaching 90 percent of the GDP. Interest payment takes up 37 percent of the national budget while the remainder go to salaries and operating expenses. That leaves almost nothing for infrastructure and other needed capital investments.
The debt is definitely a campaign issue and, as expected, candidates are blaming each other and belittling opposing programs on how to mitigate the debt burden. The foreign financial and business communities, as well as the diplomatic community, are critically assessing the outlook of the country’s economy. They are saying that it is not that crucial who wins this May. What is more critical is the credibility of the elections. If the election results are questionable, the credit assistance stream will dry up. Consequently, the country will fall into the twin tailspins of debt crisis and debt default. In fact, Finance Secretary Juanita Amatong said last week that RP was planning a 10-year global bond issue of between $500-M to $1-B. The proceeds will be used to fund part of this year’s P197.8-B budget to address the deficit and to support the National Power Corporation (NPC).
That brings us to the fourth critical problem, which should have been anticipated years ago – the power shortage and energy crisis that we will face by the year 2007. Experts said that this will be worse than what hit us in the early 1990s. A power shortage, expected in the Visayas last year, was forestalled through joint private and public initiatives in meeting the power demand. Luzon will need additional power capacity by 2008 while Mindanao will need it by 2005. Without new power stations, there wouldn’t be enough electricity to effectively cover peak demand. To avert an energy crisis in Luzon, the country will need $2-B to $3-B in new investments over the next five years to increase generation capacity nationwide.