New Philippine Government Should Act to Curb Fiscal Crisis, Escalating Terror Threat, and Widespread Corruption

U.S. Support Vital to Bolster Valuable Asian Partner in War on Terror, Concludes Council Special Report

May 12, 2004 - Though the final results of the May 10 elections in the Philippines are not known, the steps the new government takes will be critical to ensuring the country’s economic and political stability. A critical ally in the war on terrorism and pivotal to U.S. interests in the region, the Philippines must continue to build on the important but still fragile progress made by the Arroyo administration. “The [new Philippine] administration must move quickly to avert a fiscal crisis and to halt the influx of foreign extremists and the radicalization of Philippine Muslims that threatens to turn the southern province of Mindanao into a terrorist hub.”

This is the central finding of a Council Special Report, Challenges for a Post-Election Philippines: Issues for U.S. Policy. The report, developed in consultation with experts on the Philippines, U.S. and Philippines officials, and business leaders, was authored by Catharin E. Dalpino, a former deputy assistant secretary of state in the Bureau of Democracy, Human Rights, and Labor, who now teaches at Georgetown University and the Johns Hopkins School of Advanced International Studies. An initiative of the Council’s Center for Preventive Action (CPA), the report acknowledges the improved economic indicators in the years of President Gloria Macapagal-Arroyo’s tenure, but warns that the country faces serious challenges on several fronts: long-term economic viability and social stability; competitiveness in the global economy; internal security; and ability to defend against growing transnational threats.

Manila has been a strong supporter of U.S. counter-terrorism policy and has fought groups that threaten Philippine and U.S. security alike. However, since the end of the Cold War, U.S. interest in the Philippines has waned, and even with the war on terrorism, that interest remains narrow. The United States needs to both broaden and deepen its attention. This report argues that the U.S. needs to take a number of specific steps to support the Philippine government in its efforts to address domestic issues and its internal security threats. “It is in the U.S. interest to encourage greater political stability and economic prosperity in the Philippines, as well as a stronger bond between the two countries....Ultimately, however, the success or failure of that effort will belong to the Philippines itself.”

Highlights of the specific recommendations made by the report include:

1. Boost the economy and improve competitiveness. The new Philippine administration should conduct a rigorous review of the tax code; support deficit reduction by setting clear social development targets and by retargeting budget priorities; take a cooperative approach to development with the business community; and, with IMF support, revise the deficit reduction schedule and shorten the timeline to avert a fiscal crisis. In addition, the report argues, “the United State and the Philippines should take an incremental approach to negotiating a free trade agreement.”
2. Strengthen governance and curb corruption. “The political leadership and economic elites should mount a public campaign against corruption, and individuals should take a personal stand against it.” This initiative should come from the top and involve heads of key state and private institutions. The United States should offer support and assistance to encourage the government to focus on government agencies that are particularly corruption-prone.
3. Bring peace and prosperity to Muslim Mindanao. “Unless Mindanao is integrated more successfully into the Philippine nation, the country will pay a price in terms of security and resulting economic loss.” The United States should urge the new administration to continue negotiations with the Moro Islamic Liberation Front, and stress the need for a serious approach to autonomy, as it continues to support the Philippine government’s policy of eradicating Abu Sayyaf, rather than negotiating with it.
4. Strengthen security. “Priority areas for the next few years include defense planning, staff development, defense budgeting, and modernization,” which would include strengthening its efforts to intercept illegal small arms, and, with U.S. support, improving the Philippine National Police. In addition, China and the Philippines should intensify their bilateral efforts to resolve the disputes over the Spratlys, and work on joint development of oil resources.

The Center for Preventive Action brings together representatives of governments, international organizations, nongovernmental organizations, corporations and civil society to develop and implement practical and timely strategies for promoting peace. The CPA focuses on conflicts that affect U.S. interests. The CPA has developed a new process to respond quickly to emerging crises. The Council Special Report brings together Council members, other experts, and officials from concerned countries to develop and recommend immediate actions designed to deal with emerging situations and prevent violence from starting, or to contain initial hostilities from escalating. Recommendations are disseminated to local and external actors with a stake in the conflict.

Founded in 1921, the Council on Foreign Relations is an independent, national membership organization and a nonpartisan center for scholars dedicated to producing and disseminating ideas so that individual and corporate members, as well as policymakers, journalists, students, and interested citizens in the United States and other countries, can better understand the world and the foreign policy choices facing the United States and other governments.

Contact: Lisa Shields, Vice President, Communications, (212) 434-9888