Political Security Situationer

(This document was given to us by a source in Malacañang. Preparedby the National Security Council in September, the document was presented to the Cabinet in October by NSC Deputy Director-General Vic Mayo. We cannot say for sure whose marginal notes are in the document. I had to retype the document because of the poor quality of my copy.)

Confidential

Political Security Situationer

NEW THREATS TO PHILIPPINE DEMOCRACY
Briefing for the Cabinet
(9 September 2005)

OVERVIEW: AN ENDANGERED DEMOCRACY

Last September 7, after almost 24 hours of marathon plenary session, Congress voted 158 against 51 to end the impeachment complaint against the President. Days prior, tensions rose after former President Aquino and Ms. Susan Roces along with members of a civil society movement called the “Coalition for Truth” held prayer and unity rallies in support of the pro-impeachment bloc in the lower house. The group vowed to take its cause to the streets should the impeachment complaint not push through.

A few hours before the final rally in Congress showed a decisive defeat by the pro-impeachment bloc, government braced for the worst. Some of the leading political luminaries of EDSA 1 and 2, including Mrs. Aquino herself marched side by side with militant groups and close to 10,000 supporters. A de facto solidarity emerged on that day among the mainstream opposition militants identified with the extreme left, moderate civil society groups, even rightist groups on the single agenda of causing the ouster of the President. But the “revolutionary moment” did not materialize.

Aside from our worst fear of a violent confrontation, what was it that this government just averted, or will have to continue to guard against within the coming weeks or months?

The unstable stalemate induced by the three-month old wiretap controversy has brought about a delicate and complicated security picture. Shadowy groups have emerged, convinced that the only solution to the crisis lies outside of a system they have already condemned as a failure.They are trying to find allies among politicians and vested interest groups, who might be looking fro an opening to advance their own political ambitions. They are seeking alliances with unwitting civil society groups… for legitimate reforms in society. Should these groups succeed in … .. extra-constitutional closure to the controversy, we will have in our hand at best, as shaky transition government that could set us back by several years.

This political situationer will:

· Present a profile of the new breed of threats we are confronting and the implications, and
· Provide an assessment of the prevailing ground situation as it affects these groups’ interventionist agenda.

GROUPS CALLING FOR EXTRA-CONSTITUTIONAL OPTIONS: INTENTIONS, CAPABILITIES AND WEAKNESSES

More than three weeks ago, we alerted the NSC Cabinet group to the increasing number of loosely organized alliances calling for extra-constitutional options. Let us review these groups, their intentions, capabilities and their weaknesses.

Intentions. These groups vary by level of radicalism. But the ultimate objective of these newly emerging groups is to set up a revolutionary government that is purportedly transitional in nature. It is to be headed by some form of council that will “rule the country temporarily” until the elections are conducted. Usually, the proposed council is to be composed of a broad coalition of civilian and (in some proposals) military leaders, and from most indications would include even such groups as the CPP/NPA/NDF as sitting members. Upon assumption of power, there are proposals to suspend the Constitution and dismantle the legislature. The major decision-making powers will be concentrated on the ruling council.

· The strategy for intervention is to unite all groups demanding the resignation or ouster of the President, galvanize a united peoples’ stand against the government, and force an extra-constitutional solution to the crisis most probably through another civilian-military uprising.
· There is a lot of activity going on in the untied front effort and apparently meeting significant success. Between and among themselves, there is already an emerging alliance. They have also linked up with other key GMA-resign forces such as the Lacson and FPJ-Susan Roces and Villanueva camps.
· One of the first groups to call for an extra-legal solution to the crisis is General Abat’s Coalition for national survival (CNS) which called for the setting up of a civilian-military junta to be headed by himself and other unnamed civilian and military leaders. The CNS issued a manifesto purportedly signed by 50 other civil society groups.
· The Estrada camp later on endorsed the idea and proposed its own council composed of 9 to 15 leaders to be headed by the deposed President himself. Among those to be invited to the council are Senators Lacson and Enrile, Mayor Binay, and Bro. Eddie Villanueva.
· Identified with the Estrada camp is the UP Aware and Laban ng Masa composed of former UP heads, members of the academe and student groups. The latter called for drastic political change which will dismantle the whole government and replace it with a revolutionary, transitional one. Intelligence information revealed that Estrada actually funded the UP Aware’s proposed political platform.
· Militant groups and partylist identified with the CPP/NPA/NDF called for drastic political change through the total dismantling of the entire Arroyo government.
· The Unity for Truth and Justice marked its public debut with a proposal to set up a Multi-Partisan Revolutionary Council to be headed by Susan Roces, Bro. Eddie Villanueva, and Boy Morales. The CPP/NPA is also being invited to sit in the council.Jose Ma. Sison was quoted by Utrecht press to have endorsed plans for the setting up of a revolutionary transition government.
· The Young Officers Union New Generation (YOUNng), which claims to be a younger batch of the original YOU that launched a series of military coups against Cory Aquino in the late 80’s also joined in and vowed to bring down the Arroyo government and set up a revolutionary government in its place.
· The Solidarity Movement called for the establishment of a caretaker transition government that will rule the country for two years. The group is inviting Reporma leader Renato de Villa as head of the caretaker government. Personalities such as Mrs. Aquino, Ms. Roces, Liwayway Chato, Eddie Villanueva, and Senators Lacson and Drilon will be invited to lead the transition government.
· The Cory Aquino camp is now endorsing people power to [pressure the President to resign or cause her ouster. The Cory factor should be given careful attention. The forces identified with her are known for their persistence in causing the ouster of a regime particularly Marcos. Some members of the so-called HYATT 10, particularly Secretaries Dinky Soliman, Ging Deles and Butch Abad have linked up with her.

Based on an analysis of the composition of these groups, it is evident that the main forces behind the clamor for extra-constitutional options are the Estrada camp and the groups identified with the leftist movement. These are forces that have been infiltrating the rest of the anti-Arroyo forces in society in an attempt to forge a united front with them. They already have the grassroots support to push their agenda but they need groups such as Cory forces to facilitate the other conditionalities for a successful people power.

Capabilities. These new emerging groups are structurally amorphous and some of them, still underground at this point. However, they have the following strengths:

· Moral and political clout (Cory group, Villanueva camp, some members of the mainstream opposition, UP Aware);
· Logistics and resources (Estrada camp, partylist);
· Well-developed organizational networking and mobilization and propaganda machinery (extreme leftist militants and partylist);
· Grassroots support and mass base (Estrada camp and extreme leftist militants and partylist );
· Armed component or capability to launch terrorist attacks (CPP/NPA identified groups); and,
· Clout in the military and police (CNS, Estrada, Lacson and De Villa camps)

Vulnerabilities. The main weaknesses of these newly emerging groups are lack of assured support from the armed forces, lack of consensus on a single rallying figure, lack of agreement on the extent and nature of political change being sought, internal disunity or incohesiveness, and identification with suspicious/discredited political agenda/politicians. For instance, proposals for a ruling council or juntas to be manned by discredited and vested-interest groups are alienating to the more conservative but influential sectors of Philippine society.

( Marginal note written by hand on the above paragraph: “AFP, divided into 3 groups- FVR, militant AFP, GMA/FG loyalists. De Casto package to take-over only to oversee snap election. As of Sept. De Castro is not willing.”)

THE GROUND SITUATION

Let us now examine the evolving ground situation and how this could affect these new threat groups, destabilization and interventionist designs. To a large extent, the
Succeeding discussions also provide explanations as to why such groups have failed so far in their agenda.

Political Alignments: Emerging Trends

Let us start with the emerging patterns and trends of political alignments. A close look at the positions of key sectors and stakeholders on relevant issues reveals that these destabilizers have not reached consensus with the former on vital questions. Let us take a look at these issues one by one.

On Calls for the President’s Resignation. On the issue of the President’s resignation, quit-calls gathered momentum after several important sectors withdrew their support from the Arroyo Administration and public opinion turned for the worse during the first month of the crisis.

o There is already a consensus among the mainstream political opposition, intellectuals/professionals groups and extreme leftist militants that the President must go. Two former presidents share the same view (Aquino and Estrada).
o Other influential sectors are divided. (Next to this sentence is a handwritten note:”Good proper strategy (carrot and stick) of PGMA group is continuously dividing the church-business society.)
o In the religious community, the influential catholic Bishops Conference of the Philippines (CBCP). Couples for Christ, the Philippine Council of Evangelical Churches (PCEC), and the Bible Believers League for Morality and Democracy (BBLMD) refused to join calls for the resignation of the President. Other religious groups such as the El Shaddai and the Iglesia Ni Cristo (INC) tend to be supportive of PGMA. A faction of the Protestant community and Brother Eddie Villanueva’s JIL, however, have taken an opposite position.

(Marginal note on CBCP: “change in CBCP will lead to call for PGMA resignation.” On CFC: “”Undecided”. On El Shaddai and INC: “have not taken call for resignation’)
o Big business is also divided. A faction of the Makati Business Club under Luz and Romulo and the Financial Executives Institute of the Philippines (FEIP) called on the President to step down. An MBC group under Yuchengco, the Philippine Chamber of commerce and Industry (PCCI), the Federation of the Chinese Chamber of Commerce and Industry (FCCCI), and the Employers Confederation of the Philippines (ECOP) took a contrary position. The PCCI and ECOP were among the first to express approval of Congress decision to junk the impeachment case against the President. PCCI also appealed for an end to protest actions after the historic September 7 plenary voting. (Marginal note: “Business maintains conditional support for PGMA-profit motivated.”)
o The more moderate civil society groups are also inching closer towards a consensus on the President’s resignation. The CODE-NGO, Plunder Watch, KOMPIL 2, and the newly launched White Ribbon and September 7 Movement, coalition for Truth and Black and White Movement are some of the middle forces that called for the President’s resignation or ouster through impeachment.

At present, her Excellency’s support base in government remains formidable even if it was recently challenged by the falling away of some members of her political coalition and cabinet.

At the local government level, the President’s support base is intact. Majority of provincial governors, municipal mayors, councilors and barangay officials are rallying behind her.

(Marginal note: “cannot be sustained for so long since government will start delaying delivery of IRA project funds. Sept.”

Likewise, there has been no mass exodus so far within the ranks of pro-administration congressmen as shown by the voting in Congress last plenary session.

(Marginal note: FVR/JDV formula is to cut short PGMA term. JDV leadership in the House must be calibrated for possible new Speaker. Nograles, Pichay, Fuentebella, Cojuangco boy.)

Meanwhile, public opinion showed signs of softening during the second month of the crisis. We have also yet to see the latest surveys to determine if this has changed for better or for worse after the impeachment battle in Congress.

(Marginal note:”Due to optimism impact of impeachment.”)

The President’s net trust rating now stands at – 24 per the latest 2-4 August survey by the SWS conducted in Metro Manila. This is a significant improvement from the –33 rating last may considering that MM has always been traditionally oppositionist.

(Marginal note:”Lowest ever for a President. Lower than Marcos.”)

As of August, there are also fewer people demanding the President’s resignation. In the same survey, 53% think the President should resign against 37% who think otherwise.This is an improvement from the 59% wanting her to resign and 31% opposing it in the 12-14 July SWS survey. The net negatives have been reduced by 43% in a matter of 21 days. This is a significant change.

Likewise, the same survey revealed that fewer people now believe that the economy would worsen should the president remain in power until 2010. The rate of change constitutes a 61% turnaround.

Her Excellency’s international image also enjoyed a boost lately after international surveys projected her as one of the world’s strongest women (Forbes survey). The US also expressed optimism that PGMA can still turn things around if she would push through with reforms.
On the Manner of Resolving the Crisis. On the manner of resolving the crisis, many sectors and the rest of the public show an overall willingness at present to give constitutional processes a chance to take their course.

· The mainstream opposition rightist civil society groups and CPP-NPA identified militants and partylist have been at the forefront of efforts to foment another popular uprising. Like we said earlier, within such circles, there are attempts to secure public endorsement for radical options in the form of either a junta-style government (CNS, Erap camp, Unity for Truth and Justice) or a revolutionary transition government (UP Aware, solidarity Movement, militant groups).

· Many key sectors, however, remain averse to people power and other extra-constitutional modes as option to resolve the crisis. Big business, the religious sector (with the exception of a few factions), and the US (as a major influence in the international community) are calling for sobriety and for allowing legally prescribed mechanisms and processes to take their course. This appears to be a significant inhibiting factor to the eruption of any unmanageable level of public emotionalism at this point.
· Likewise, the attitude of the general public is tempered at this point, even though the people are not inclined to just let the issue rest. In the June survey by the SWS in Metro manila, an overwhelming 77% of the respondents said they want some things to be done. Only 20% agreed that the controversy should be put to an end.

– Of the things they wanted done, there was abroad reference for due process. The most popular answers were:more investigation to find out the truth at 26 %, resignation at 18%, airing of the tape in public at 13%, impeachment at 7% and have an election at 6%. Only a very negligible percentage suggested power people and a recount of the votes.
– The July 2005 nationwide survey by Pulse Asia also tends to validate SWS findings in this regard. Only 7% actually support the option of the President being removed from office by any means, including unconstitutional ones.

On Consensus on Alternative Leaders. Another inhibiting factor that we noted is the lack of clear consensus at present on an alternative leader. Compared to EDSA 1 and2 revolts, the requirement for an alternative leader appears to be higher this time around.

· The Vice President is the constitutional successor and leads the people’s choice of alternative leaders at 26%, according to Pulse Asia’s July nationwide survey. The opposition, however, is posing resistance to the Vice President because there is little political gain for them in this scenario.

(Marginal note: “October indicators show increasing acceptance for De Castro as transition for snap election.)
· In the opposition camp, there appears to be a strengthening move to prop up Ms. Susan Roces. We are inclined to assume that the Erap camp is open to the idea. United Opposition Senator Pimentel already hinted that Ms. Roces could be an effective unifying figure for the opposition. However, Ms. Roces has not made known any clear personal political agenda even though she has pledged her willingness to support a people’s initiative.
· Senator Lacson is another possible alternative. Pulse Asia July nationwide survey showed Lacson as the second choice (21%) of the people.

(Marginal note: “Money and force could keep him afloat.”
· We are considering the possibility that former President Estrada retained the loyalty of some of his old supporters. In the July nationwide survey by Pulse Asia, he ranked third at 11%, Estrada has offered to head a transitional revolutionary council. He would have to contend, however, with the same forces that ousted him.

(Marginal note: “Nil possibility.”)
· Only recently, the Solidarity Movement floated Reporma leader Renato de Villa as alternative leader, possibly in a bid to win support from the military.

(Marginal note: “Not yet firm up.”)

On Charter Change. In a no –impeachment scenario, the battle now appears set to branch out to the issue of Carter change.

· Thirty-two House members have already started campaign to secure support for Charter Change. There appears to be strong support at the lower house and at the government levels.
· Business appears divided. Guillermo Luz did not speak for the MBC per se but voiced his opposition to Charter change. The heads of the Bankers Association of the Philippines, PCI, Federation of RP Industries, and Federation of Filipino-Chinese Chamber of Commerce and Industry, on the other hand, are open to the idea.
· The religious sector. the Bishops-Ulama conference has endorsed the proposal.
· Partylist groups identified with the Left (Bayan Muna, Anakpawis, Gabriela, Akbayan, and Partido ng Manggagawa) have voiced out their resistance to Chacha.
· At the public opinion level, it is clear that the people do not know enough about the Constitution to make an informed choice at this point.

– The latest August survey by the SWS found that only 22% know enough about parliamentary system. Of the 22%, respondents are evenly split at 10% on whether they feel it would work for the country.
– The respondents are also divided on the issue of which is more important, 22% say Charter change is more important and 25 % say the two are equally important.
– These surveys mean that with more education and information drive, public opinion could still turn around either way.
Trends in Protest Actions.Let us now examine the prevailing trends in protest actions. The recent indicators are not very favorable for destabilizers.

· Reduced Frequency, Inceased Coordination. After more than a month of sustained rallies, the frequency of protest actions in connection with quit calls went down after the SONA and then picked up on the run up to the plenary battle.
· Anti-Arroyo rallies were highest a the onset of the controversy, at the start of the Congressional investigation a the height of Congressional debate on the playing of the tape and the July 1, the July 13 Makati rally, the SONA rallies, and the days prior and after the Congressional voting on the impeachment.
· However, there appears to be increased coordination of rallies as protestors who will initially deploy themselves in separate locations in Metro Manila would eventually converge in a single rally site in Makati and Batasan area. Recently, there have been attempts to revive the People Power Monument in EDSA as convergence site.

Not enough Warm Bodies. Participation in rallies has not yet reached critical levels – the highest number achieved so far is between 28,000 to 40,000. Rallies after the impeachement battle in Congress theinned even more to only 8,000 at a time.

(Marginal note: “Due to change in strategy of rally organizers. We have yet to see the new mode of protest.”

Dominance of Left-Leaning Groups. It is very revealing that in most of these protest actions, the left-leaning groups are decidedly dominant.

· From January 2005 to date, 82% of protest actions were largely instigated by the leftist militants.
· There remains a basic wariness towards the leftist militants. Recently, however, it has been quite successful in forging tactical alliances with mainstream opposition personalities, the Erap camp particularly the People’s Movement against Poverty (PMAP), and oust-Gloria groups.

The CPP’s Destabilization Plot. Let us consider the CPP/NPA factor. For the past several weeks since the start of the crisis, the intelligence community has been monitoring reported plans by Leftist movement to launch a destabilization drive.

· The plot involves the employment of provocateurs in the rally sites, assassinations, and the launching of terrorist attacks. We suspect that the plot may already be operational.
· Last week, after the House Committee on Justice rejected all three impeachment complaints against the Presient, militant groups clashed violently with anti-riot personnel. Dozens were hurt in the incident.
· Significantly, after agreeing a couple of days ago to return to the negotiation table, the NDF panel once again pulled out of the talks just last night. This could mean that it’s destabilization drive could come full circle in the near future.

Vulnerability of the Military to Infiltration. Let us now discuss the increased vulnerability of the military to infiltration by destabilizers.

· We do not believe that the conditions for a successful coup to be launched by factions of the military already exist.
· Nevertheless, the military remains a primary target of infiltration by provocateurs and destabilizers. The ranks of younger officers are particularly prone due to the reality of deeply-rooted internal military problems.
IMPACT OF THE CRISIS ON THE ECONOMY

Let us now examine how the crisis has taken its toll on the economy.

Pre-Crisis Situation. We must point out that before the twin controversies of alleged jueteng payola and poll fraud erupted, there were sure early signs of an economic recovery despite the impact of soaring prices. Revenue collection posted improvements not seen in many years, the budget deficit eased up, international credit rating agencies gave favorable reviews, stock market performance and the peso were stable and the national economy grew strongly.

Current Situation. At present, the economy still retains its resiliency despite the current uncertainties but the prospect of a long-drawn out political crisis could eventually take serious toll on economic recovery efforts.

(Marginal note: “Take-off is not insight- govt must start ”painting” a new landscape.”)

* After sustaining heavy losses during the first month of the crisis, stock markets are again showing signs of recovery. Prior to the impeachment battle in Congress, trading was almost back to the pre-crisis level.

– Compared to the lows experienced by the local stock markets during Estrada’s impeachment crisis, the current situation is still better off.
– The local bourses are trading between 1,800 to 2,000 points currently. At the height of Estrada’s impeachment crisis, trading was only between 1,300 and 1,500 points.

* The peso is also showing signs of weakening after breaching the P56 to the dollar mark at the height of political tensions. Still analysts are of the opinion that the peso has held remarkably steady during the past three months. In the first three months of the crisis, the peso was fluctuating at a daily average of —centavos. The current trend is less serious compared to the last three months of Estrada’s crisis when the peso was fluctuating at daily average of 31 centavos. Likewise, during the first three months of our current political crisis, the peso depreciated by P1.77 (from P54.51 to P56.28) This is much better performance compared to the first three months of Estrada’s crisis when the peso depreciated by P5.32 (from P46.36 to P51.68).

* A discouraging trend in the economic sector is the downgrading of our credit rating by Moody. Fitch and Standard and Poor from stable to negative largely in reaction to the TRO on the EVAT, JP Morgan, however, upgraded RP’s credit rating from negative to neutral.

*Fluctuating world prices of crude oil is also expected to further complicate the security picture. Last month, crude oil price hit a historic high of $70 per barrel and we are already sitting on a 7.2% inflation rate as of August.

IMPACT OF THE CRISIS ON GOVERNANCE

Let us consider the impact of our present political woes on governance.

(Marginal note: “Options – (separate briefing) resignation. Leave of absence, national govt. of Solidarity, creeping governance , and revolt within.”)

Everyone agrees, some painful and necessary reforms are needed fro the country to move forward. There are important reforms the government should undertake in the fiscal section, agriculture, defense and security, counterterrorism, and governance. But the government is prevented from doing so by this kind of divisive politics that has been with us for sometime now.

The Political and Economic Risk Consultancy could not have put it more accurately. Its 30 July 2005 report said, “Political rivals are tying up the country in knots. The whole affair shows how divided Philippine politics is and how difficult it is for any leader to push meaningful and badly needed reforms.

CONCLUSIONS AND RECOMMENDATIONS

That brings us to our conclusion. More than the instability it is causing, the brand of politics we are currently experiencing is:

· Making the country a breeding ground for radical and competing groups offering the political formulas that could either only lead to further uncertainty or signal a return to dictatorship – or both.
· Sabotaging the economy and preventing it from maximizing recent indications of economic recovery, and
· Slowing the government down, preventing it from carrying out real reforms in the economic and the political system.
At this point, we are concerned about several questions. First, do the conditions for a successful intervention by groups calling for extra-constitutional solutions already exist?

Recent developments show that some crucial conditions are still lacking which explains why anti-Arroyo forces have failed at this point to exploit “golden opportunities”. These conclusions were not strict requirements in the past EDSA revolts. But the situation might be different this time, given the magnitude of prevailing national problems.

– They lack a clear consensus on an acceptable alternative.
– There is no agreement either on a clear political plan of action in an exit-scenario. Some of the alternatives offered are either alienating to the more moderate sectors or do not provide enough details as to capture the imagination of the public and key power blocs, specially the military.

(Marginal note: “it is all geared up- waiting for its tipping point. PGMA to continuously update and shape her exit plan.”)
– In short, the Arroyo Administration is still the best alternative at present. We also witnessed how her Excellency’s support base consolidated at critical times.
Second, now that Congress has decided there will no impeachment against the President for at least one year, are our troubles over?

· A stalemate situation remains. This is so because the President’s enemies clearly do not accept the decision of congress. While civil society groups are taking their cause to the streets, pro-impeachment politicians vowed to take the fight all the way to the Supreme Court. They also vowed to continue investigation into the issue in both chambers of the legislature. Senate already started its own probe.
· The following trends are like to continue in the coming weeks or months.
– Destabilization campaign by anti-Arroyo forces, specially the CPP. (If the opportunity does not exist, then the opportunity will be created.)
– Demolition politics against the President, more dirt to be dug up; sustained trial by publicity; and
– Intensification of solidarity works by groups calling for extra-legal measures to cause the removal of the President.
· The stalemate is an uneasy one but the situation is holding. We are not yet over the mump, but there are favorable signs that the crisis has softened in the past several weeks. These include:
-Improvement in the President’s popularity
-Thinning number of protesters in major rallies
-Manageable negative impact on the national economy:continued economic resiliency.
· Nevertheless, there are future flashpoints that could be a factor in dramatically changing the current ground situation, e.g. EVAT issue, Charter Change and incoming oil crisis.

The last question we wish to address is what should the government do in the coming months. There will be a race for the people’s hearts and minds. At present the Administration and the anti-government side are competing for the support of key sectors that have yet to make a definite stand on the matter. Some of the influential blocs in society include:
· Other political parties such as the Liberal Party (LP) and the Nationalist People’s Coalition (NPC) that have yet to take a united and official party stand on the issue.
· While refusing to join quit-calls, the Catholic Church has adopted an open-ended position that could still change in the future.
(Marginal note; “Until December – we expect to see a radical posturing under the new CBCP leadership in January 2006.”)
· The armed forces has retained an apolitical stand since the start of the crisis. We are aware, however, that a large segment of the military is quietly sitting on the fence right now, waiting for developments. While we trust our AFP, we cannot discount the possibility that in the event that the government fail to control the situation, it will step in if only to save the country from anarchy.”
Hence, if these power blocs in society along with a big chink of the silent public are discouraged by the Anti-Administration side due to its current weaknesses, then such weaknesses should become the government’s strength.
In this connection, these are our recommendations:
· Visible sustained and invigorated reform and governance approach in key areas: peace and order, energy, poverty reduction, counterterrorism, fiscal policy, anti-graft and corruption drive.
· Harness what remains of the government’s support base.
· Clear, detailed and decisive plan of political action in the event of worst-case civil disturbance scenarios.
· Formulation and adoption of a roadmap fro political change and reform.
-End-
At the end of the document are more marginal notes:
Underlined is “US factor is critical”.
Under it were three items: 1) Determine role in the crisis; 2) FVR continue to play the “bridge” for US thinking in Philippine scenario;3) role of RP in US policy for Asia (no longer lead role).
Next to those items were more notes: “Poor acceptability of GMA in Bush administration; high risk for US under PGMA; incompatibility of interest between GMA boys and US business; declining public popularity not conducive to the US; indifference of international community to GMA leadership (Japan, China, Germany, EU and Muslim countries; high profile graft.”
Additional marginal notes: “CPR, propa, House probe to be restricted, media management, offensive media plan.”
“Economic emergency measures, takeover of basic facilities, bring down tariff, prices”
“Keep EVAT hanging to appease public , to meet creditors requirement.”
“Check on FVR moves.”

November 28, 2005 9:28 am   Posted in: General

2,192 Responses

  1. Anna de Brux - November 28, 2005 12:07 pm

    The style is typically Gaby Claudio’s who must have prepared it with inputs from the NSA deputy director’s staff (because Vic Mayo is very ill and I doubt he could write anything cohesive but his trusted aide/s could) and of course, Ed Ermita (could even be EE’s marginal notes).

    Check some of the papers drafted by Gaby when he was liaising with Congress for FVR to compare the style.

  2. Ellen - November 28, 2005 2:01 pm

    Yuko in Tokyo Says:

    November 28th, 2005 at 12:54 pm

    I wonder where the Philippine government is getting its economic figures, and claim that the peso is stronger and better economy when there is no improvement at all in the economic situation of majority of Filipinos, who cannot now survive without a member or two of their families being pawned overseas even to sustain a bankrupt government.

    Funny that with the announcement of Japanese economic recovery up goes the rate of the dollar versus the yen while the dollar gets lower rate in peso with such lousy Philippine economy. The dollar is being traded here at 120 yen per dollar. A month ago it was about 105 yen to a dollar!

    Something is artificial about this trading of cheaper dollar to a peso. I wonder if this is a indication of more lootings from the national treasury to be deposited secretly in one or more foreign banks by these crooks running the Philippine government now due to this precarious political security situation.

    Cheaper peso exchange rate means less peso for the foreign currencies being remitted by the OFWs to their families so they will be forced to send more remittances especially this
    Christmas season, another reason maybe for this lowering of the peso rate at this time that is definitely not a reflection of good Philippine economy.

    I’m not an economist but I know when the economy is bad. My husband, son and I eat less outside, and spending is limited to the very basics.

  3. pepeton - November 28, 2005 2:31 pm

    Yuko in Tokyo,

    The exchange rate of the peso vis-a-vis the US dollar is a globally published fact. If you look at the last few weeks or so rates, the Philippine peso (purchasing) value has been improving.

    By popularly accepted explanation, the influx of dollars every Christmas season accounts for the stronger peso performance against the US dollars.

    There is nothing mysterious, or fake, or strange about this phenomenon.

    You brought out another concern which is properly discussed in the “economics of inflation”. Due to many factors, the Philippine economy is currently “inflationary” – “too much money (supply in circulation) chasing too few goods (indication that manufacturing and production (supply) are lagging behind steadily increasing demand, thus buoying up prices. In addition, excessive government expenditures (specially deficit spending) have also propelled the inflationary pressures, as the economy tries to move towards full employment…wage increases, etc. These are also typical cyclical effects – “post elections”. After every election, there is almost, always inflation in the economy.

    The economic problem of the Philippines is tied to its “political governance”, there is no question about that.
    How much of the “government meddling and interference in the laws of economics” are directly accountable for the current economic state of affairs, that is difficult to measure, without going into econometrics, calculus and all that sophisticated field of learning. But allowing political considerations to explain economic phenomena, may not be the most informative way to understand the economic problems of the country.

    Too much reliance on government, politicians and political governance is HARMFUL TO FREE ENTERPRISE. I advocate the PRINCIPLE OF SUBSIDIARITY: “Whatever the private individuals and citizens can do…the State ought not to do.”

    The government’s participation and involvement must be LIMITED to PROVIDING SUPPORT SERVICES…AND STRICTLY GUIDED BY THIS PRINCIPLE.

    By the same token, as private citizens, we must STOP relying too much on government and political leaders to influence our day to day existence. If we do this, then, whatever our political leaders will be inconsequential, or not as influential to our pursuit of life, liberty and happiness. That’s what real mature self-rule and self-governance is all about in a democratic society.

    This Christmas, we hope to see the peso purchasing power continue on its upward climb against the US dollars. My suggestion is for you to kick back and enjoy the “bennies” and profits of “short term gains”…just like all those who look forward to receiving and enjoying a “breadth of heaven”…this Christmas.

    Pepeton

  4. Enforcer - November 28, 2005 9:54 pm

    Excellent post, Ellen, because it gives us a clearer view of the thinking as of early September in Malacanang.

    My initial comments are:

    1. The paper is based on a wrong premise: that national security = the security in office of the incumbent president. For this reason, the military and police establishments, including the intelligence services, are dedicating a disproportionate amount of their time and energy to insuring the survival of that incumbent.

    2. The analysis of the domestic political situation is flawed because it simplistically defines the main opposition forces as the Estrada camp and the left. It ignores the growing importance of the middle forces.

    3. The fight for the people’s hearts and minds is over. The surveys overwhelmingly show that more than half of the population wants the incumbent out. From thge viewpoint of the pro-GMA elements, the struggle really is to exploit the apathy of the general public and the disunity of the opposition in order to prevent either a popular uprising or a military coup.

    4. The international image of Mrs. Arroyo has not been boosted since September. The Forbes Magazine article including her in the list of the world’s most powerful women had been written way before the June Garci tapes exposé.

    5. On the contrary, her image in the world community declined dramatically since the sudden and cowardly pullout of our tiny contingent from Iraq. The US position was vividly described in the statement of the American chargé d’affaires that an Afghanistan-like situation was emerging in Mindanao. The Americans measure the dependability of their friends and allies in terms of the war against terrorism. The Tarongoy case proved that the Arroyo administration was not dependable. I don’t believe the US assessment has changed. The presence of American and Australian advisers in Mindanao is proof of the weakness of our military and police in the fight against international terrorism.

    6. Within the ASEAN, we should not take our chairmanship too seriously because we secured it by default: Myanmar had to give up the chairmanship as a result of international pressure. Except for making a few pro forma noises, the Philippines is not assuming a pro-active role in the effort
    to obtain the release of Aung Aung Suu Kyi, the opposition leader whose house arrest was extended for one whole year only yesterday by the Myanmar regime.The European Union is not happy about the wishy-washy posture of the Arroyo administration.

    7. In the UN, the administration’s debt swap proposal has not gotten off the ground. Even the Philippines’ recommendation in the Security Council that inter-faith dialogue be undertaken to achieve global peace has not been taken seriously for the simple reason that the subject had already been taken up in the UNESCO in Paris and the idea was not new.

    8. I agree with the paper’s conclusion that a sustained reform and governance approach in key areas such as peace and order, energy, poverty alleviation, counter-terrorism,
    and corruption is vital if the incumbent administration is to get out of the hole it has dug for itself. Except that a lameduck president focusing only on her survival is hardly the party that can carry out such an approach. In other words, it is too late in the game for this.

    9. The marginal notes are revealing. They seem to overrate FVR’s capability to do either good or bad. I am not too sure he still has a substantial following in the military because he is remembered by many of our soldiers as the president who failed to modernize the armed forces even if there were funds for the purpose.

  5. Hermie C. Cruz, Amb. (ret.) - November 29, 2005 12:45 am

    The Malacanang briefing paper made a comprehensive evaluation of the various groups threatening our society.
    But as expected, if did not identify the regime survival tactics of the GMA administration as the most serious threat
    of all. Let us just look at the last impeachment controversy:

    A Bulacan congressman, by his own admission, changed his
    “impeach” to “no impeach” vote when he got Php350 million
    from the Palace for his pet projects in his district. This is the outlay for only one politician. It is to be presumed that there are other equally astute politicians who played the same game. How much did it cost the country to save GMA from impeachment ? Malacanang will of course not release these figures.

    But worse, what happens if every year an impeachment complaint is filed against GMA? There are groups already advocating future impeachment initiatives. If GMA stays on until 2010, she will bankrupt the treasury.

    So let us now consider the EVAT. The added tax was supposed to retire at least part of the national debt. In this manner the heavy debt burden which takes about 40% of our annual budget will be reduced. But now it appears that all this added tax money will most likely be used to save the GMA regime until 2010. Thus another measure to improve our economic conditions will be misused to insure the regime survival of an administration which has lost public support. Maintaining an unpopular regime carries a high cost.

  6. Batong Buhay - November 29, 2005 6:45 am

    Mukhang may mga taong natatakot sa kanilang sariling multo.

  7. Dr. Peter J. H. Walker - November 29, 2005 7:45 am

    If one looks back for the past 10 years or more to the history of the Dollar for Peso exchange rates, there is no question that due to the increased influx of Dollars in the holiday season the exchange rates improve favoring the Peso. BUT NOT AS MUCH AS THIS YEAR!!!! I have to agree with Yuko in Tokyo.

    There is no question that artificial forces are playing a role at this time, though we can only speculate who. Considering that it is a publicly known, but much overlooked fact is that while about $ 800 million of the national debt has been retired this year, another $ 1.5 billion, almost twice the amount that was paid off, has been b0rrowed. To make matters worse, the new borrowings bear much higher interest rates than those debts that have been paid off. Hardly a sign of a step forward, certainly not one that could be a natural cause of the phenomenal sudden rise of the Peso. Add to that that the natural effect of increasing taxes (the new EVAT) is to set off a new round of inflation, one can only wonder what is going on.

    Considering the undeniable fact that the combined effect of the high rate of inflation and the (most likely artificially) lowered Dollar to Peso exchange rates mean that in fact the Dollar has been substantially devalued in the Philippines. Looking at the effects of this, one cannot consider it as good news. Here is why:

    Aside from the fact that this is hurting the most of the very segment of Filipinos whose remitted dollars keep the economy afloat, and thus this creates an extremely volatile situation (explaned below), there is also the problem that the prices of whatever products and or services the Philippines sells for dollars, are increased substantially. This makes these products and services less competitive on the international market.

    Furthermore, because a foreign investor would have to invest more dollars into its project today than it would had to invest before, this ineviatbly leads to project cancelations, or, at least, to postponements awaiting the improvement of the exchange rate. All and all, the much touted gain of the Peso against the Dollar, is far from being the economic good news it is being held out to be. It is BAD NEWS for the future of the economy.

    To explain why the situation became volatile, add to this the fact that there is a limit of just how much overseas Filipinos will be able to remit in order to keep their beneficiaries in better financial circumstances. Surely when that limit will be reached the bubble will burst.

    It may also burst before that limit has been reached, should the remitters wake up to the fact that the low exchange rate is actually robbing from them much of the fruits of their hard work. Thus it is not an unlikely scennario that enough of them will decide that they will stop remitting, or at least reduce their remittances, until the exchange rate improves. Sould that happen, it can cause the exchange rate to plummet overnight, even to send the Peso into an uncontrolable tail spin.

  8. Rizalist - November 29, 2005 8:50 am

    Ellen, Dr. Walker has put the finger on the true culprit, our limitless addiction to debt as a way of putting the burden on future generations. I was in Morong, Bataan over the weekend, visiting the newest real estate development of Ayala Corp. there. But the irony of the situation was lost on the wealthy Manilans looking at their choice lots of seaside pathos and enjoying the opulence of Ayala hospitality. For Anvaya Coves is in the shadow of the Bataan Nuclear Power Plant — $2 billion dollars of the most advanced nuclear energy technology — and not a single kilowatt of electricity produced. Yet it could have been fully operational and supplying all of Manila’s electricity by now. Though Mt. Natib, Pinatubo’s sister is just beneath it.

    It is the single biggest piece of the sovereign national debt, which seems now devoted merely to the financing of the pork barrel, suspiciously equal in magnitude to the annual budget deficit.

    My years old article on BNPP is still posted at
    Odious Debts

    Dean Jorge Bocobo

  9. Rizalist - November 29, 2005 9:19 am

    A de Brux, Some of the idiom evokes Rick Saludo. Gabby Claudio is not an original thinker. It is too bad that Bobi Tiglao is out of the picture. He would have been a moderate voice in what is otherwise the confidently circled wagons with the gunpowder still in large supply and Indians in retreat from the idiocy of that kangaroo court (not to insult the real ‘roos, just the predilection of the Left for fantasizing a future regime). I say Saludo though because of a single phrase I have heard him say in public, “…unstable stalemate…” which displays an utter misunderstanding of the rules of the game of Chess that stalemate by definition results in a final draw. I would describe the Palace’s game situation with a different term going forward: ZUGZWANG!

  10. Anna de Brux - November 30, 2005 12:43 am

    Thanks Rizalist. I take your word for it.

    Yes, perhaps you’re right. “Unstable stalemate” is a rather unusual way of describing stalemate in chess or in any given game.

    Gloria is indeed becoming an adept of ZUGZWANG. Pretty soon moves that have something to do with an election gameboard will be called GARZINGZWANG.

    Typically, Gloria’s zugzwanging is causing a garzingzwanging – double, treble instability and pretty soon CHECKMATE!

  11. pepeton - November 30, 2005 12:08 pm

    Comments/questions on Dr. Peter J.H. Walker’ posting:

    >

    QUESTION: Will you oblige with some statistics please and show us your sources for this observation? Are you saying that there are LESS dollars remitted this year? Or that the “improvement” of the exchange rate vis-a-vis the dollar is LOWER this year as in the last ten years? Will you please demonstrate this for us? BTW, is the US dollar value and purchasing power a constant, i.e., it hasn’t change in value during the last ten years? Will you explain that also, please?
    ==================

    >

    COMMENT: This sounds like a SPECULATIVE POLITICAL STATEMENT. Be that as it may, are you implying some kind of “government interference” (manipulation) of the exchange rate?
    ===================

    >

    >

    COMMENT: I will take your word (“stats”) on this, for the moment. However, I am curious to learn from you what your personal views are about “deficit financing” and “deficit spending” as an economic tool. Good? Bad? Indifferent? It depends?

    Further, given these two hypothetical alternative choices between the USA Democrat’s versus the USA Republican’s economic platforms and economic policies, which are you inclined to favor? (and endorse for the Philippine economy, in light of your posting here)?

    Democrat’s: Tax, spend! Prefer Full employment, higher wages, higher taxes, higher interests, higher prices, higher government subsidies, (inflation), but economy is “brisk”, heading towards a “boom”….”it takes all the running to just stay in place…”

    Republican: Lower taxes, lower prices, lower interest rates, lower government subsidies, economic activities slower and tendency towards recession, higher unemployment rate. “If I get laid off, I will charge it to the government anyway.”

    =====================

    >

    COMMENT: You already established the “fact” that the improvement in the purchasing power or value of the peso is attributable to the FACT that OFW dollar remittances are coming as dictated by the holiday season. I am not sure what else you are trying to insinuate.

    Are you against the increased EVAT? If so, why?
    =============================

    >

    COMMENT: I completely and totally DISAGREE with this DISMAL AND PESSIMISTIC (IF POLITICAL) VIEW. Let me borrow from a friend who explained the perennially depicted dichotomy between: a) The pessimist says, “The glass is half empty.” b.) The optimist says: “No. The glass is half-full.” c.) Being neither, I say: “The hell with it and the hell with both of you….give me the fucking glass so I can drink it. Then, after I have quenched my thirst, we can discuss as long as you want, THEN I WILL TELL YOU, WHETHER IT HALF-FILLED ME UP, LEFT ME HALF-EMPTY. ”

    Let’s not be so full of what is right…we completely forget what is simply and practically good. Anytime the exchange rate improves and favors the Philippine Peso…THAT IS UNDENIABLY GOOD, REGARDLESS OF WHAT IS CAUSING IT….WHY IT IS HAPPENING, OR WHO IS CAUSING (even manipulating it), because it favors the Pilipinos directly and in a most personal way.

    ==================

    >

    >

    COMMENT: You seemed pretty determined to make a correlation between the exchange rate and inflation. From textbook economics we have learned that there are many different factors that account for inflation in an economy. For example, increased wages and improved income would be “inflationary”. It is simple enough to understand that when people have more disposable income, they tend to spend more. And increased spending leads to inflation. Is that good or bad???

    You said earlier that the EVAT would be inflationary. You did not explain why you said that. I would think, as a matter of fact, that the immediate impact of higher taxes would be to reduce the disposable income of private citizens, and therefore, would be deflationary, at that level. Do you agree? Or did I miss your point completely?

    You seem to take issue (or are bothered) with the fact that the peso purchasing power has been improving against the US Dollars – IN SPITE OF THE POLITICAL TURMOIL OF THE CURRENT ADMINISTRATION….and so, your analysis is coming across more as an attempt to politicize an economic issue, than an attempt to CLARIFY A DISTINCT AND DEFINITE ECONOMIC PHENOMENON.
    =============================

    >

    COMMENT: Dr. Walker, I can not believe you are actually posting something like this. WHAT EXACTLY ARE YOU SAYING???? You don’t want to see the purchasing power of the peso to improve, so that FOREIGNERS AND THEIR FOREIGN INVESTMENTS WILL HAVE GREATER VALUE as against a (stagnant) peso????? WHOSE INTERESTS ARE YOU TRYING TO PROTECT HERE? AND WHOSE ECONOMIC ADVANTAGES ARE YOU GUARDING AGAINST? THE PILIPINOS? OR THE FOREIGNERS?

    No. I absolutely disagree. RETURNS ON INVESTMENT, OPPORTUNITIES FOR BIGGER PROFITS…HIGHER INTERESTS RATES, LOWER TAXES, LOWER COSTS OF PRODUCTION are what attract investments, whether domestic or foreign. The foreign exchange rate between two countries is intricately integrated and woven into the macro-micro economics of foreign investments.

    So what if as a result of a higher and increasing purchasing power, foreign investments will have to shell out more dollars vis-a-vis the peso???? THAT IS GOOD FOR THE PHILIPPINE ECONOMY. Don’t you want to see that happen,
    regardless of who is the president??? Or whether the foreign investors are Japanese, Americans or Australians?

    Dr. Walker, whose economic side are you on?

    =====================

    >

    COMMENT: Correction. Nobody is touting this. It is a factual news. I have been reading it in the papers in the Philippines and abroad. THE PESO HAS BEEN IMPROVING ITS VALUE AND PURCHASING POWER VIS-A-VIS THE DOLLAR. That is the factual statement made.

    You are advancing all kinds of THEORETICAL EXPLANATIONS, WHY YOU DON’T THINK AN IMPROVEMENT IN THE PURCHASING POWER IS GOOD FOR THE PHILIPPINE ECONOMY OR FOR THE PILIPINO CITIZENS…

    What I see behind your defiance in accepting this simple fact and good news for the recipient of this improved exchange rate….though you are not explicitly expressing it is….your underlying POLITICAL REASONING AND MOTIVATION.

    It would make more sense to you, it seems, if the purchasing power DID NOT IMPROVE. Because then you can blame the economic policy of the GMA administration, along with the political turmoil it is embroiled in. I call this “fitting the points into a pre-conceived curve”, or putting the cart before the horse analytical approach. I do not subscribe to this approach.

    But now that you have boldly stated a prediction…will you oblige with a more detailed explanation – some real, true to (Pilipino) life examples of WHY YOU THINK AN IMPROVEMENT IN THE PURCHASING POWER OF THE PESO VIS A VIS THE DOLLAR IS NOT GOOD FOR THE ECONOMY???? OR THE INDIVIDUAL PILIPINO CITIZENS???

    Let’s bring it home, here. We are talking about the OFW remitting dollars to their families back in the Philippines. Their remittances have INCIDENTALLY caused the purchasing power of the peso to improve. So, the question is, how does that improvement DISFAVOR the OFW remitter and the recipient Pilipino???? How does that constitute BAD NEWS???

    =====================

    COMMENT: Exactly, and precisely, pls. Dr. Walker, what are you WARNING us about here? Explain the “limit” if you will. There is a limit you say? Is that operative now? But was not operative before? What constraints are there that would delimit dollar remittances from abroad to the Philippiones? What bubble are you talking about? I know something about the “dot.com” bubble. Or the “real estate” bubble. OR the stock market “bubble”. But a DOLLAR REMITTANCE BUBBLE????? What is that?

    Are there, from your vantage point, pending legislations (from foreign countries) that would unfavorably impact, by limiting the amount of dollars, that can be remitted?

    Or are you still alluding to the potential impact of your anticipated “inflation” resulting from “too much money circulating in the economy changing too few goods”? Is that bad? What would be a better situation? LESS DOLLAR REMITTANCES???

    ===================

    >

    COMMENT:
    Would you now, therefore, advise that we SHORT the peso???
    Dr. Walker, why are you preaching “doomsday” against an obviously GOOD NEWS????

    Where are you coming off with these “disguised” economic pontifications? The very simple statement was made…

    “THE PESO PURCHASING POWER HAS BEEN IMPROVING AGAINST THE DOLLAR-”

    And that, in spite of all the screw-ups and fuck ups in the governance and the government. So what else is new?

    BUT A PESO SAVED FROM AN IMPROVING EXCHANGE RATE, IS A PESO EARNED.

    And it matters little or not all how, or why, or who, is causing the improvement, shortlived as it may be…IT DOESN’T MATTER, Dr. Walker, not especially to those who are directly enjoying this “breadth of heaven”, even if it is only for the ‘holiday moment’. Besides, you really do not know for sure that your “fear and apprehension” ( I will give you the benefit of the doubt – “your sincere concern”),
    will happen. How many times have we all heard about the “sure doctor” – who PREDICTED and FORETOLD the terminally ill patient – “You have 6 months to live!”…Six months later, the patient was saddened by the news that his doctor had choked to death as he tried to swallow, what he failed (maybe forgot) to chew.

    So, give us “natives” a little slack, mate! And at least for the moment, skip and spare the analysis-paralysis. It’s Christmas. Merry C and a Happy NY. Just keep the dollars coming, and the peso up.

    Pepeton

  12. Batong Buhay - December 6, 2005 12:11 pm

    Bumaba nga ang palit, pero bumaba ba ang bilihin? Ang sukatan ng pag-igi ng ekonomiya ay pag namelengke ka sa talipapa mababa na ang presyo ng galunggong (e.g. only). Hindi mo puwedeng sabihin sa tindera na ayon sa diyaryo malakas na ang peso kaya dapat mura na ang bilihin. Ang isasagot sa iyo ng tindera – “sa diyaryo ka bumili.”

  13. Atong Kuliglig - December 6, 2005 10:35 pm

    A de Brux,

    “Zugzwang” is a situation not an act, so that one cannot “go zugzwagging.” When one is “in zugzwang,” one is in trouble because any move loses. It’s like a “catch 22” that you are damned if you do and damned if you don’t. And, if GMA is in zugzwang, would it be fitting to call her an “Azuwang?” Nagtatanong lang, po.

    Atong

  14. Ellen - December 9, 2005 12:33 am

    Environment Secretary Mike Defensor (who also serves as Gloria Arroyo’s spokesman in political issues) told me last Tuesday that this document, Political Security Situationer, was prepared by the National Security Council and presented to the cabinet by NSC deputy director-general Vic Mayo.

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