Aquino to Address Philippine Deficit, Shortages Following Loss in Senate
Philippine President Benigno Aquino may face an uphill struggle meeting campaign pledges to fight poverty, narrow a record budget deficit and address power and water shortages after failing to gain control of the Senate.
Juan Ponce Enrile was elected Senate president today after Francis Pangilinan, Aquino’s candidate, abandoned his efforts. Enrile is an ally of former President Joseph Estrada, who placed second in the May election. Allies of Senator Manuel Villar and former President Gloria Arroyo blocked Aquino from leveraging his 16-point victory into control of the Senate.
Aquino, who failed to pass any major legislation in his 12 years as a senator, will need to show greater political skills to deliver campaign and inauguration promises. He is set to give a “state of the nation” speech today and has yet to say how he would prioritize education, health care, housing and tourism policies in his first term.
“Investors are waiting for that, for some concrete reforms,” said Paul Joseph Garcia, who helps manage $1.5 billion as chief investment officer at ING Investment in Manila. “Any program he wants to embark on hinges on the ability to raise revenue,” otherwise “he won’t be able to address poverty, improve social services, invest in infrastructure.”
In contrast to the Senate, Aquino today formalized his control of the House of Representatives with the election of his candidate Feliciano Belmonte as speaker.
Finance Secretary Cesar Purisima and other officials have repeated Aquino’s campaign promise to improve collection by catching tax cheats before raising taxes. The Department of Finance has started what it said would be weekly filings of tax evasion and smuggling complaints with prosecutors.
Meanwhile, the government last week said the budget deficit was 196.7 billion pesos ($4.2 billion) in the first six months. Achieving the new government’s 325 billion peso full-year target will be a “challenge,” according to Budget Secretary Florencio Abad.
Still, bond yields have dropped to record lows as overseas Filipinos send home $1.5 billion a month, fueling consumer spending and purchases of homes, cars, and government securities. Last year, remittances amounted to $17.3 billion in a $167 billion economy.
‘So Much Liquidity’
“Bond yields are falling because investors have so much liquidity and nowhere to put their cash,” Garcia said. “There’s a wait-and-see attitude, a lack of confidence in the government’s ability to create the environment where businesses can do business at the lowest cost possible.”
“Power rates are still high and interest rates high compared to our peers,” Garcia said. “There’s a lot of cash waiting to find a home.”
Expensive and unreliable electricity were highlighted this year after the El Nino dry spell idled many hydroelectric plants, causing whole-day outages in parts of the Mindanao region in the south and higher power prices elsewhere. Aquino said he’d lay out measures to address the shortage in Mindanao in today’s speech.
This month, the dry spell caused water shortages in Manila. More than a million of the capital’s residents had six hours or less of supply. Some had none, prompting the government and utilities to use trucks to deliver water to the worst-hit areas.
Aquino has set a different tone from Arroyo, now a member of the House of Representatives. He speaks often with reporters, whom Arroyo shut out to avoid questions about vote-rigging and corruption allegations she refuted. The media has reported him eating out or going to shopping malls with friends, while Arroyo was usually holed up in the presidential compound.
His main success so far has been in forcing Filipinos who use sirens, flashing lights and even police escorts to beat traffic to follow the rules. He’s done so by following them himself, even on inauguration day.
Aquino had no plans to stand for election until the death in August of his mother Corazon Aquino, widely revered for her role in toppling strongman Ferdinand Marcos and restoring democracy. His father, Benigno, was jailed by Marcos and assassinated in 1983 on his return from the U.S., where he had heart surgery after falling sick in prison.
Villar and other opponents said Aquino lacked the experience needed to push through legislation and changes to the civil service and government.
In a survey taken the week before his inauguration, 88 percent of respondents said they put great trust in Aquino. Even so, 62 percent said they expected him to fulfill few to none of his promises.
“He has already established a rapport with the people, his problem is to deliver the goods,” said Ramon Casiple, executive director of the Manila-based Institute for Political and Economic Reforms. The high percentage who believe he’ll deliver on few of his promises means the public knows “he’s not Superman,” he said.