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Removing Estrada Will Not Save the Phillipines
Nov 21, 2000
By Hilton L. Root
Publisher: The International Herald Tribune

The International Herald Tribune

The Philippine Senate has set a tentative date of Dec. 1 for the start of President Joseph Estrada's trial on charges of corruption and abuse of power, following his impeachment by the House of Representatives last week. Many Filipinos appear to hope that Mr. Estrada's speedy removal from office will rescue the economy from its rapid decline.

But the real malaise of the Philippines is much deeper than the Estrada problem. While its neighbors are showing strong signs of recovery from the 1997 financial crisis, precipitous declines in the Philippines' stock market and currency values this year threaten to take the region's recovery down with them.

Many look with nostalgia to the considerable economic expansion under former President Fidel Ramos as evidence of what a difference having the right man at the top can make. But they forget why Mr. Estrada was elected in the first place. He drew support from those who were left behind while the economy was growing.

That is why Mr. Estrada can point to polls that show he has not been abandoned by the poor voters who put him in the presidency; 44 percent disagreed with calls for his resignation. They have good reason to wonder if replacing him with yet another highly educated and articulate member of the national elite will remedy the source of their misery. The Philippines is the most glaringly unequal society in East Asia, a region where discrepancies in wealth are rarely due to differences in ability, but rather to a disparity in rights. Even good economic policies have failed to close this gap.

It only takes a taxi ride from the Manila airport to the business district in Makati to see how many of the city's 14 million inhabitants live in disheveled squatter settlements without sewerage or clean water. But the deeper problems of the poor are more difficult to see.

Most poor Filipinos face invisible barriers when they seek to defend their property rights. They cannot identify or prove in a court of law what they own. Many have addresses that cannot be verified, and they are owed money by people who cannot be made to pay. They have no way to turn the resources they control into capital or use them as collateral because they often cannot prove title to their lands. When faced with disputes they cannot find a resolution mechanism that they can trust.

The problem begins with the land laws, which make ownership difficult to validate. City dwellers building on state or privately owned land must form an association with their neighbors to obtain financial support from the state housing program. This registration process requires 168 steps among 53 public and private agencies, averaging 13 to 25 years.

An estimated 57 percent of city dwellers and 67 percent of rural dwellers live in extralegal dwellings. The inability to prove ownership leads to a second problem: the inability to collateralize property as security to get loans. A Milken Institute study of the availability of entrepreneurial capital in Asia confirms that capital access in the Philippines is lower than any society in Asia except Pakistan.

The nation's human capital suffers the same repression as its physical capital. Due to a deteriorating educational infrastructure, the Philippines is creating white-collar jobs at the lowest rate in Asia.

The problem goes back to the public schools, where teachers who start at $200 a month can earn more as domestic servants in neighboring countries. Because the education system fails to provide needed skills, the rich attend private schools, intensifying the gap. The allegations of corruption have had a limited effect on Mr. Estrada's core constituency because they live in a world where the difference between legal and illegal behavior is difficult to define.

The real problem in the Philippines is that its middle class is too small and financially weak to demand accountable governance or to establish a political ethos based on public performance and civic virtue. The result is that the Philippines, known for the "people's power" movement that brought down Ferdinand Marcos, has the wrong kind of people power for the 21st century.

Politicians cannot challenge the property rights of the barons of power because they depend on their money. Mr. Estrada is a victim of this contradiction. Although he would like to provide his poor supporters with shares in the nation's wealth-producing assets, he depends on the owners of those assets for the money with which he gains the votes of the poor.

The Philippines faces a political crisis that goes beyond the need to replace the person at the top. The challenge is to correct a situation in which society is divided into those who can outsmart the system and those who cannot.

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Hilton L. Root, an Asia specialist, is director of global studies for the Milken Institute, a nonprofit economic research organization in Santa Monica, California. He contributed this comment to The International Herald Tribune.