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Southeast Asian Affairs 2006 THE PHILIPPINES Crisis, Controversies, and Economic Resilience Lorraine C. Salazar For a country known for both its strong commitment to democracy and its weak political institutions, the year 2005 was full of intrigues and challenges for the Philippines. In July the Arroyo administration almost collapsed amidst rumours of coups, political controversies, and another People Power movement, sidelining efforts towards economic reform. Yet, despite this crisis and the ensuing policy setbacks, the economy displayed unexpected resilience. The analysis of the events of 2005 will be divided into three sections. The first deals with the country's main political events, the second with the state of the economy. The final section concludes by reflecting on the country's economic and political prospects in the short term. Political Developments Crisis and controversies The year 2005 saw the Filipino President almost toppled by street protests — yet again. Despite being impeached and facing considerable public opprobrium, the Arroyo administration narrowly survived. However, at the end of the year, the controversies surrounding the President's mandate were far from settled. These issues threaten to resurface in 2006 as her administration endeavours to push for changes in the Constitution as a way of solving the gridlock that besets the Philippine political system. Mrs Arroyo won the 2004 elections by a margin of about 1 million votes over her closest rival, actor Fernando Poe. This entailed a six-year term for Arroyo, Lorraine C. Salazar is Visiting Research Fellow, Institute of Southeast Asian Studies and Assistant Professor, University of the Philippines, Diliman, Quezon City. 228Lorraine C. Salazar who rose to the presidency in January 2001.1 The new presidential term evoked promise, as questions of Arroyo's mandate and legitimacy seemed to be resolved by her electoral victory.2 Yet, the optimism was short-lived as economists from the University of the Philippines warned of an impending fiscal crisis. In her July 2004 State of the Nation Address (SONA), President Arroyo declared that the country's "most urgent problem" was solving the government's worsening fiscal and debt condition. Eight new revenue measures were announced as a legislative priority but Congress took its time legislating them. Because of this, credit rating agencies downgraded their ratings of the Philippines. Rumblings early in 2005 Faced with an uphill battle getting the unpopular tax measures passed, Arroyo's public approval rating fell. In early March, rumours of coups circulated as a former general called for the establishment of a transitional government, declaring that the Arroyo government had failed to respond, thus far, to the problems of poverty, economic development, and social justice. In May Mrs Arroyo's popularity dipped further when the Senate investigated claims that her husband and son had been receiving pay-offs from jueteng (an illegal numbers game), which had led to former President Estrada's political demise. In lune Manila was abuzz with a more explosive topic. This time it involved President Arroyo herself, supposedly caught on record giving instructions to cheat to ensure her victory in the May 2004 polls. The records consisted of phone conversations allegedly between President Arroyo and a top Commission on Elections official, Virgilio Garciliano, on various occasions during May and June 2004. The government claimed that the release of the illegal recordings was part of a "grand destabilization plan". Arroyo disputed allegations by the opposition of foul play. She argued that her victory was such — over 40 per cent of all ballots cast and a margin of one million votes — that it could not have been achieved by cheating. She also reiterated her commitment to focusing on the economy, in particular addressing the hike in oil prices, tackling unemployment, and investing in infrastructure. Meanwhile, copies of the taped conversation flooded the streets, selling for about 5 pesos (S$0.15) each. The wire-tapped conversation became the number one mobile phone ringtone and jokes about the President rigging the elections proliferated, leading to further erosion in the public's respect for Arroyo. The Philippines: Crisis, Controversies, and Economic Resilience229 On 27 June, after three weeks of silence, Arroyo finally admitted on live television that she called a senior official of the Commission on Elections to "protect" her...


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