A Power Vacuum Could Engulf The Philippines

Southeast Asia has had one blow to its confidence after another in recent months. Indonesia's politics are increasingly violent and disorganized; Thailand faces a major election that could deliver power to an avowed enemy of reform. Now the region faces a new crisis: the prospect that Philippines President Joseph Estrada could be ousted. The turmoil in Manila is increasing the aversion investors feel toward the whole region. And it comes just when the Philippines desperately needs a strong leader.

Estrada, a former movie actor, has been dogged by charges of incompetence, policy waffles, and cronyism since taking office in July, 1998. But the scandal engulfing him now is the biggest crisis the Philippines has faced since the fall of President Ferdinand Marcos in 1986. A provincial governor says he personally delivered $8 million in cash from illegal numbers games to Estrada since November, 1998.

LOOKING SHAKY. An uproar has ensued. As an estimated 20,000 people rallied in Manila on Oct. 18, opposition leaders in the country's House of Representatives launched impeachment proceedings against the President. "This time we've seen names named, including the President," says Guillermo Luz, executive director of the elite Makati Business Club.

Estrada has denied the allegation but is calling on all his supporters in the House--where his Party of the Filipino Masses controls the majority--to back him so he can escape ouster. But even if Estrada's party blocks impeachment, his chances for staying in office until his term ends in 2004 are looking shakier by the day. Vice-President Gloria Macapagal Arroyo has quit her post as Social Welfare Minister in the Cabinet, even though she remains Vice-President. Manila Archbishop Cardinal Jaime L. Sin, who played a key part in the ouster of Marcos, is also calling for Estrada to resign. "This is definitely the beginning of Estrada's end," says Alexander R. Magno, president of Manila think tank Foundation for Economic Freedom.

Magno and other observers are speculating that Estrada's fate could be determined in Manila's streets. Indeed, few are ruling out a rerun of the people power movement, which toppled Marcos. "The people are not going to take this sitting down," says Perfecto Yasay, former chairman of the Securities & Exchange Commission. The longer the President stays in office, he warns, the greater the chances of violent protests and even military actions. So far, the military is backing Estrada, but if public opinion turns strongly against him, the Army could side with the people, as in 1986. If Estrada were to resign, Arroyo, who heads the opposition Lakas-NUCD party, would become President and serve out his term.

While attacking Estrada for alleged corruption, his opponents are also blaming him for the economy's poor performance. Estrada's predecessor, Fidel V. Ramos, won plaudits for liberalizing the economy and ushering in a flood of investment. That helped the Philippines weather the Asian financial crisis better than its neighbors. But Estrada has delayed reforms such as privatizing the power sector. New investment fell 38% in 1999. The economy is expected to grow just 4% this year, a sorry performance for a country that wants to join the ranks of the Asian Tigers. And the Philippine peso is in free fall. On Oct. 16, it touched a low of 49 pesos to the dollar.

In a bid to appease critics, Estrada announced on Oct. 13 that the government would privatize Philippine Amusement & Gaming Corp., which controls legal gambling. The question is whether that will be enough to assuage the people. The film star-turned-President needs a better script.

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