(Archived document, may contain errors)

No. 122 May 1, 1992

CAN U.S.-PEK]UPPESE RELATIONS PAPROVE AIFTER AQUINO DEPARTS?

INTRODUCTION

Philippine President Corazon Aquino deserves credit for rescuing Philippine democ- racy, but Washington should welcome with relief the end of her term this June. The challenges of defeating a communist insurgency and reviving a stagnant economy, which Aquino inherited from the failed regime of Ferdinand Marcos in 1986, are left to her successor, who will be chosen in elections on May 11. The new Philippine presi- dent must also rebuild relations with the U.S., whose post-1986 friendship, including support that brought her to power and $3.4 billion in aid, have been squandered by Aquino. Her failure last September 16 to convince her hand-picked Senate to approve a ten-year base treaty with the U.S. led to the collapse of the U.S.-Philippine strategic relationship in late December 1991. U.S. forces must now vacate their last Philippine base, in Subic Bay, by the end of the year. For Washington, the Aquino years have left the impression that Manila is an unsta- ble and unworthy ally. The disappointing manner in which the U.S. was told to leave a base that has helped American forces preserve peace in Asia for nearly a century has reduced relations in 1992 to a historic low. Nevertheless, a new administration in Ma- nila presents the Bush Administration with the opportunity to rebuild relations. W.Ash- ington can now end the bases-for-money connection that cheapened U.S.-Philippine friendship, and with it, any residual guilt from American colonial rule that ended in 1947. President Bush can make clear to Manila that relations will not depend on U.S. aid, but on Philippine willingness to share responsibility for promoting economic growth and peace in Asia. Improving Philippine-American Relations. But prospects for rebuilding U.S.-Phii- ippine relations will depend even more on the outcome of elections to be held in the Philippines on May 11. Most presidential candidates want better ties with the U.S. They include House Speaker Ramon Mitra and former Defense Secretary Fidel Ramos, who both want to improve Philippine-American relations. Both have sup- ported free market reforms that will strengthen the Philippine economy. Former Mar-

cos ally Eduardo Cojuangco also wants to improve relations with the U.S., but many fear he will revive the failed crony-capitalism of Marcos. Former Senate leader Jovito Salonga, led the Philippine Senate last year to reject the bases treaty, and has been a consistent opponent of free market economic reform. Free Market Priority. Regardless of who is elected, the first priority for U.S. pol- icy toward the Philippines should be to promote free market economic reforms. A com- bination of natural disasters and delay of needed reforms has reduced economic growth in 1991 to zero, from 6.4 percent in 1988. About 40 percent of Filipinos live below the poverty line. Washington should urge Manila to implement such economic reforms as reducing bureaucratic control over the economy, lowering trade barriers, and improving property rights protection. To wean Manila from dependence on Washington's financial assistance, most U.S. economic aid should be ended in five years. But Washington can reward a new commitment to free market economic reform by making a free trade agreement with Manila a high priority. Such an agreement will generate real economic growth for the Philippines and test Manila's willingness to sup- port free trade in Asia. With the end of the 1947 Military Bases Agreement, the second priority for the U.S. should be to build a new military partnership based on the 1951 U.S.-Philippine Mu- tual Defense Treaty. But Washington should also make clear that a new military rela- tionship will be linked to Manila's cooperation in sharing responsibility for preserving peace in Asia. One test of whether it is possible to rebuild such a relationship should be Manila's willingness to help the U.S. meet threats like Iraq's invasion of Kuwait. The loss of Philippine bases increases the expense and time it will take U.S. forces to respond to future threats in the Persian Gulf. If Manila allows U.S. forces to resume useful access to bases, the U.S. should respond by providing military equipment, such as retired ships and aircraft, that Manila needs to defend its 7,000 island domain. The U.S. has a continued interest in the success of Philippine democracy and eco- nomic development. A revived military relationship with Manila can help the U.S. pre- serve peace in Asia. But after shabby treatment by the Aquino government, Washing- ton has every right to expect that the main burden for rebuilding U.S.-Philippine ties rests with Manila. Washington can emphasize this by: 9 Informing the now Philippine government that America favors a strong friend- ship with the Philippines but that Manila must share the burdens of promoting peace and prosperity In Asia. X Urging the Philippines to accelerate such free market economic reforms as completing privatization of government-owned companies, reducing bureau- cratic control over the economy, and reducing tariffs, to reduce dependence on foreign aid. X Phasing out U.S. economic aid over five years In favor of a bilateral too trade agreement. X Encouraging Manila to revive the U.S.-Philippine military relationship and to purchase retired U.S. combat aircraft and ships. AQ INOIS MEKED LEGACY OF DEMOCRACY AND DECAY QU Having saved Philippine democracy in February 1986 from the ruinous government of Ferdinand Marcos, President Corazon Aquino's term will probably be remembered more for her inability effectively to lead the Philippines. She succeeded most in reviv- ing the pre-Marcos elite-based democracy. However, too often she proved unable to manage her divided cabinet, lead the new Philippine Congress, or eliminate military rebels. Finally, she delayed many free market economic reforms until the last part of her term. The result:- much of the work of building a stable and prosperous Philippines is left to Aquino's successor. Democratic Revival Aquino's greatest success was to revive Philippine-style democracy and advance the protection of basic freedoms. Though long and ponderous, a new constitution was overwhelmingly approved in a national plebiscite in February 1987. This was followed by elections in May 1987 for a revived bicameral Congress to replace the unicameral National Assembly created by Marcos. Elections for about 17,000 local officials were held in March 1988. Aquino strengthened popular support for democratic pluralism by ending the financially rewarding access of Marcos's cronies to the presidential palace, endin the press censorship imposed by Marcos, and curbing military abuses of human rights@ However, Philippine democracy is neither efficient nor stable. Partly to blame was Aquino's aloof, indecisive governing style, due in part to her disdain for her country's family- and personality-based political culture that demands strong leaders. Accord- ingly, she failed to build a strong political party. To govern she relied on cabinet advi- sors often too divided to provide clear policy direction. She was also thwarted by the Congress, which could rarely unite to take effective action. The Philippine Senate, which is elected nation-wide and lacks local constituent accountability, was particu- larly uncooperative with Aquino. Though she campaigned in 1986 to end the govern- ment corruption that flourished under Marcos, corruption scandals blossomed through- out Aquino's term, often including members of her family. As a result, Aquino grew weak. Though in 1986, the year she came to power, her popularity rivaled that of a saint, in 1992 she cannot assure the victory of her chosen successor, former Defense Secretary Fidel Ramos. Persistent Security Threats A democratic revival under Aquino did undermine support for the Communist Party of the Philippines (CPP), but it remains the world's largest communist insurgent move- ment. By early 1992, CPP strength had fallen by about 15,000 guerrillas-down from about 26,000 in 1986. Its urban fronts lack support, and scores of top leaders have been captured.2 This decline resulted largely from the Armed Forces of the Philippines (AFP) success in securing local political support and intelligence, and such CPP mis-

1, RigobewTiglao, "March of pluralism," Far Eastern Economic ReWew, September 5,1991, p. 16. 2 Caridad S. Bautista, "Military Claims Marked Decline in NPA Strength," Manila Chronicle, December 26,1991, p. 8, in FBIS East Asia, December 26,1991, p. 44. takes as conducting bloody in- .................. . uffi*".x temal purges, and the failure' Subic Say NaVal Base Mill _55. U.S. roops X.- :rxx@:; T to Leave: to craft a strategy to fi 3-ht 9 N December, 1992 . . . . ......... K ............... Aquino. But the CPP remains UZOn X@ active. This February 15 a mi Air Base N Clark CPP ambush killed 41 AFP ...U.S. Troops Left: June, 1991 troops.' And this January 17, R N .1 Now a a faction of the CPP urban .... guerrilla7unit in Manila Idd- napped Michael Barnes, a -Xx.. N . ....... . . . ...... prominent American busmess-

. .......... man, and demanded $20 mil- .. ........ . ... ...... lion in ransom. Philippine po- X@0-x IN

. .......... @R@ExKx X X lice freed Bames this March .... ...... ................... IN, ....... n anao MN. 18, killing eighteen guerrillas g. ... . in the process. Military rebels are another threat Aquino leaves to her The End of America's Military successor. Having partici- Presence in The Philippines: 1898-1992 pated in the February 1986 scale: coup that brought Aquino to 500 Mi power, these rebels now re- les gard a military role in politics I as legitimate. Under Aquino, their grievances have included anger over policies gov- erning pay and promotions within the military, political corruption, and opposition to the alliance with the U.S. In August 1987 and December 1989 rebels led unsuccessful attempts to overthrow Aquino. The latter attempt nearly succeeded, until U.S. Air Force jets based at Clark Air Base appeared over Manila and helped convince the reb- els their cause was futile. While many rebel leaders have been captured, future coup attempts are possible. Last October, AFP Chief of Staff General Lisandro Abadilla said the military had a "right to take over" if the May elections are fraudulent. Violent crime, often perpe- trated by rogue military or police, is an increasing threat. These continued threats under Aquino have depressed confidence in Philippine stability, especially among for- eign investors. Economic Decay. Aquino failed to revive the Philippine economy. In 1991 Philippine per capita GNP was $725, one of the lowest in non-communist Southeast AsiO About 40 percent of 66 million Filipinos live below the poverty line. About nine million are unemployed, with underemployment reaching 30 percent. As many as three million Filipinos work

3 William Branigan, "Philippine Rebels Show Violent Signs of Life," Washington Post, February 26,1992, p. A26. 4 "The Bottom Line,'.'Asiaweek, March 27,1991, p. 6. By comparison, GNP per capita in 1991 f6r Brunei, $17,000; Indonesia, $605; Malaysia, $2,462; Singapore, $13,600, Thailand, $1,605. abroad to support their families. Such conditions are a result of Aquino's failure to pro- mote sustained economic growth. For 1987 and 1988, Philippine GDP enjoyed a brief spurt, growing respectively by 4.7 and 6.4 percent. This was a commendable rebound from the 5 percent economic contraction of the last two years of the Marcos govern- ment. But after a major earthquake in July 1989 and the coup attempt the following De- cember, the economy took a sharp fall. In 1990 GDPFowth fell from 5.8 percent for the first quarter to -.57 percent for the fourth quarter. The devastation wrought by the eruption of Mount Pinatubo on June 15, 199 1, led to a further economic decline: in 199 1,-the GDP contracted by 1.02 percent.6 Rapid implementation of free market reforms like privatization and trade liberaliza- tion would have helped the Philippine economy to achieve steady growth. Such re- forms were supported by Jaimie Ongpin, Aquino's first Finance Minister. After he left office in September 1987 Manila's commitment to free-market reform waned.7 Doing Little to Promote Growth. Ongpin had dismantled Marcos-era monopolies on sugar and copra, to the benefit of rural incomes. But other monopolies, like the Na- tional Power Corporation and the Philippine Long Distance Telephone Company, re- main unchallenged. Phone and power services are still notoriously poor. The major eco- nomic issue for the Aquino government in 1987 and 1988 was land reform. The land reform law passed in June 1988 has done little to promote growth, having stressed re- distribution of land over improvement of agricultural infrastructure or strengthening of corporate farms. Ongpin also wanted rapid privatization of government-owned corpo- rations, subsidies for which had burdened Manila's budget by an additional $669.9 mil- lion in 1988. Privatization proceeded slowly until the pace increased last year. In 1986 Aquino inherited 521 government owned corporations. By this February, 337 govern- ment-owned companies had been sold, 65 percent of the total. Also disappointing is Aquino's failure to cut the size of government-the largest employer in the Philippines. Spme 85 to 90 percent of government spending decisions are made at the national level.* A local autonomy law passed last October will increase the power of local governments by doubling-from 20 percent to 40 percent-the share of national taxes returned to them. This surely is an improvement, but still re- stricts local officials who need freedom to allocate funds for projects like roads that can help stimulate economic growth. The ability of decentralization to spur growth is proven by the central Philippine island of Cebu, which reduced its dependence on Ma- nila bureaucrats by funding its own infrastructure improvements and attracting foreign investors. Cebu grew about 25 percent in 1990.9

5 RigobertoTiglao, "Season of good cheer," Far Eastern EconomicReview, December 19,1991, p. 74. 6 Rigoberto Tiglao, "The Aquino legacy," Far Eastern Economic Review, April 23,1992, p. 62. 7 Claudia Rosett, "Crucial Philippine Policies May Die With Ongpin," The Wall Street Journal, December 14, 1987, p. 25; William McGurn, "Corazon Aquino's Poverty Pimps," The American Spectator, September, 1990, p. 14. 8 McGurn, ibid. p. 16. 9 Ben Davies, " Cebu-a model for growth?" Asiamoney, Special Supplement, September 199 1, p. 16.