Should Jay Leno Laugh at Philippines?
By William Pesek Jr.
July 26 (Bloomberg) -- Gloria Arroyo is taking considerable flack for withdrawing Philippine troops from Iraq. Even Jay Leno is taking shots at the leader of Asia's No. 12 economy.
``A new world record has been set for the 100-meter dash -- it was set by the Philippines fleeing Iraq,'' the Tonight Show host joked recently.
It's hard to decide whether to applaud Arroyo's move or loathe the Philippine president for it. Either way, she may have shot her fragile economy in the foot.
The common complaint about Arroyo recalling troops to save a Filipino hostage is that she encouraged more terrorism in Iraq. U.S. Secretary of State Colin Powell said Arroyo ensured that ``the kidnappers were rewarded for kidnapping.'' Clearly, Arroyo's pullout was a huge blow to the White House.
Yet the real fallout may be felt not in Iraq but Arroyo's shaky, debt-laden economy.
A key pillar of the economy is the 8 million Filipinos working overseas. Filipinos are expected to send $8.2 billion home this year -- that's 10 percent of gross domestic product. The 46-year-old truck driver Arroyo saved from being beheaded was one such worker. He was in Iraq to support his wife, eight children and extended family back in the Philippines.
It's hard to exaggerate the extent to which the economy relies on this source of hard currency. It's needed to pay off $61 billion of debt, half of which is owed overseas. At the moment, a third of the national budget goes to servicing debt.
Sending Money Home
Annual remittances are three times larger than all the foreign direct investment the nation receives, estimates Alex Pomento, head of research at CLSA Philippines Inc. And when you meet with officials in Manila they invariably mention remittances as a key strength of their economy.
It's really the opposite. The Philippines isn't creating enough jobs for its swelling population, driving one in 10 people to seek employment in Frankfurt, Hong Kong, Kuwait, Riyadh, Singapore, Tokyo or elsewhere. Some surveys show that one in five Filipinos still at home would work overseas if immigration laws allowed.
For better or worse, that's the situation in which the Philippines finds itself. Trouble is, by giving in to kidnappers in Iraq, Arroyo may have declared open season on snatching Filipino workers around the world.
What's to keep an individual or organized crime unit with no terrorist ties in any city around the world from snatching a Filipino and demanding cash from Manila? What's to keep Islamic separatists in the Southern Philippines from kidnapping Filipinos and demanding their comrades be released from prison or policy concessions from the government?
Arroyo's Risk
It really is true that the Philippines' most lucrative export is its people. The risk is that the precedent Arroyo set in Iraq will imperil the millions of Philippines working overseas and, by extension, an economy that relies on their income.
Even before the Iraq hostage ordeal, the work Filipinos did overseas was often risky, the compensation poor and treatment by employers shabby. Fewer Filipinos heading abroad and sending money home could have severe fiscal implications, increasing bond yields. The nation already carries a junk debt rating.
It's not hard to understand why Arroyo withdrew the Philippines' 51 soldiers and police officers from the U.S.-led force in Iraq. For one thing, overwhelming public support informed her decision. She knew that if hostage Angelo de la Cruz lost his head, her presidency would lose its head, too.
Maintaining Support
For another, Arroyo just survived a messy presidential election in a nation often beset with rumors of military coups. To shore up the economy she'll need to take unpopular steps like hiking taxes and raising power prices. She'll need the support of the nation's poor to do it. Besides, it's not as if the justifications for the Iraq invasion served up by the U.S. have proven true.
It was a courageous thing to risk the ire of the U.S. and invite international criticism for bowing to terrorists. Just as Spain took flack for pulling its troops out of Iraq, the Philippines can expect some barbs -- even from comedians like Leno.
Arroyo's move also was a sign of insecurity. A third of the country's 85 million people live on less than 60 U.S. cents a day. Unemployment, the highest of 14 Asia Pacific countries tracked by Bloomberg, rose to 13.7 percent in April. She also faces Islamic extremists, domestic terrorism and kidnap-for- ransom groups that sometimes operate in downtown Manila.
If there's a silver lining in all this, it may be Arroyo's improved standing with voters. De la Cruz returned to Manila to a hero's welcome last week. The public euphoria cloaked Arroyo in a softer light than voters were used to; many there see her as an aristocrat with little feel for the average Filipino.
Improved support ratings could make it easier for her to attack the corruption gnawing away at the economy and boosting bond yields. It means that little of the nation's 5 percent trickles down to those to most need it. Filipinos and investors alike would be well served if Arroyo felt empowered to address impediments to higher living standards.
For the sake of one of Asia's most vulnerable and geo- Politically important economies and investors in it, let's hope Arroyo's call in Iraq was the right one.
By William Pesek Jr.
July 26 (Bloomberg) -- Gloria Arroyo is taking considerable flack for withdrawing Philippine troops from Iraq. Even Jay Leno is taking shots at the leader of Asia's No. 12 economy.
``A new world record has been set for the 100-meter dash -- it was set by the Philippines fleeing Iraq,'' the Tonight Show host joked recently.
It's hard to decide whether to applaud Arroyo's move or loathe the Philippine president for it. Either way, she may have shot her fragile economy in the foot.
The common complaint about Arroyo recalling troops to save a Filipino hostage is that she encouraged more terrorism in Iraq. U.S. Secretary of State Colin Powell said Arroyo ensured that ``the kidnappers were rewarded for kidnapping.'' Clearly, Arroyo's pullout was a huge blow to the White House.
Yet the real fallout may be felt not in Iraq but Arroyo's shaky, debt-laden economy.
A key pillar of the economy is the 8 million Filipinos working overseas. Filipinos are expected to send $8.2 billion home this year -- that's 10 percent of gross domestic product. The 46-year-old truck driver Arroyo saved from being beheaded was one such worker. He was in Iraq to support his wife, eight children and extended family back in the Philippines.
It's hard to exaggerate the extent to which the economy relies on this source of hard currency. It's needed to pay off $61 billion of debt, half of which is owed overseas. At the moment, a third of the national budget goes to servicing debt.
Sending Money Home
Annual remittances are three times larger than all the foreign direct investment the nation receives, estimates Alex Pomento, head of research at CLSA Philippines Inc. And when you meet with officials in Manila they invariably mention remittances as a key strength of their economy.
It's really the opposite. The Philippines isn't creating enough jobs for its swelling population, driving one in 10 people to seek employment in Frankfurt, Hong Kong, Kuwait, Riyadh, Singapore, Tokyo or elsewhere. Some surveys show that one in five Filipinos still at home would work overseas if immigration laws allowed.
For better or worse, that's the situation in which the Philippines finds itself. Trouble is, by giving in to kidnappers in Iraq, Arroyo may have declared open season on snatching Filipino workers around the world.
What's to keep an individual or organized crime unit with no terrorist ties in any city around the world from snatching a Filipino and demanding cash from Manila? What's to keep Islamic separatists in the Southern Philippines from kidnapping Filipinos and demanding their comrades be released from prison or policy concessions from the government?
Arroyo's Risk
It really is true that the Philippines' most lucrative export is its people. The risk is that the precedent Arroyo set in Iraq will imperil the millions of Philippines working overseas and, by extension, an economy that relies on their income.
Even before the Iraq hostage ordeal, the work Filipinos did overseas was often risky, the compensation poor and treatment by employers shabby. Fewer Filipinos heading abroad and sending money home could have severe fiscal implications, increasing bond yields. The nation already carries a junk debt rating.
It's not hard to understand why Arroyo withdrew the Philippines' 51 soldiers and police officers from the U.S.-led force in Iraq. For one thing, overwhelming public support informed her decision. She knew that if hostage Angelo de la Cruz lost his head, her presidency would lose its head, too.
Maintaining Support
For another, Arroyo just survived a messy presidential election in a nation often beset with rumors of military coups. To shore up the economy she'll need to take unpopular steps like hiking taxes and raising power prices. She'll need the support of the nation's poor to do it. Besides, it's not as if the justifications for the Iraq invasion served up by the U.S. have proven true.
It was a courageous thing to risk the ire of the U.S. and invite international criticism for bowing to terrorists. Just as Spain took flack for pulling its troops out of Iraq, the Philippines can expect some barbs -- even from comedians like Leno.
Arroyo's move also was a sign of insecurity. A third of the country's 85 million people live on less than 60 U.S. cents a day. Unemployment, the highest of 14 Asia Pacific countries tracked by Bloomberg, rose to 13.7 percent in April. She also faces Islamic extremists, domestic terrorism and kidnap-for- ransom groups that sometimes operate in downtown Manila.
If there's a silver lining in all this, it may be Arroyo's improved standing with voters. De la Cruz returned to Manila to a hero's welcome last week. The public euphoria cloaked Arroyo in a softer light than voters were used to; many there see her as an aristocrat with little feel for the average Filipino.
Improved support ratings could make it easier for her to attack the corruption gnawing away at the economy and boosting bond yields. It means that little of the nation's 5 percent trickles down to those to most need it. Filipinos and investors alike would be well served if Arroyo felt empowered to address impediments to higher living standards.
For the sake of one of Asia's most vulnerable and geo- Politically important economies and investors in it, let's hope Arroyo's call in Iraq was the right one.
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