By Carmel Crimmins
Updated: 11:21 p.m. ET May 17, 2007
MANILA - Philippine President Gloria Macapagal Arroyo described this week's congressional polls as a victory for the economy on Thursday, but investors believe only political pragmatism will ensure the country's take-off.
Despite the absence of an official tally, Arroyo has claimed her allies will win an even bigger majority in the lower house of Congress, effectively securing her term of office until 2010.
Partial tallies show her opponents will dominate the Senate but with members likely to be more concerned with the next presidential poll than impeaching the current incumbent, Arroyo faces a golden opportunity to break the policy logjams that crippled the last Congress.
"The Senate would be like a big negotiating table," said Ramon Casiple, executive director of the Institute for Political and Electoral Reforms.
"There will be a lot of agendas on the table, but President Gloria Macapagal Arroyo would not be one of them. With some of the senators casting their eyes on the presidential elections in 2010, it would be a totally different Senate."
The last Congress passed only 109 laws, a record-low, as Arroyo's foes in the upper house sought to obstruct government policy and members of the house tried unsuccessfully to impeach the president over allegations of vote fraud.
Despite the turmoil, the economy grew, bolstered by billions of dollars in overseas remittances and fiscal reforms that Arroyo successfully pushed through.
Analysts expect the economy to grow 5.6 percent this year from 5.4 percent in 2006, but for the Philippines to catch up with more dynamic neighbours it needs to cutback on political bickering and kickstart overdue capital expenditure.
"I do worry that there is a risk of squandering the opportunity of today because the government is too slow implementing infrastructure projects," said Adrian Mowat, chief Asian and emerging equity strategist at JP Morgan.
"I believe this country could be one of the most powerful emerging market stories over the next decade as long as they wake up to the opportunity."
PERSONAL TOUCH
After nearly a decade in the economic wilderness, the Philippines is back on foreign investors' radar largely due to record overseas remittances, which flow in regardless of political turbulence, and drive consumption and property sales.
A booming outsourcing industry and potentially lucrative mineral resources has also attracted overseas interest and pushed the main stock index to near 10 year highs and the peso to six-year peaks.
Tapping into the euphoria, JP Morgan held its first investor conference since 2000 in the Philippines this week, attracting a jubilant Arroyo and around 75 fund managers, the bulk of them from overseas.
But foreign direct investments into the Philippines remain miniscule -- $2.35 billion last year compared to $70 billion into China -- with companies still wary of buying mines and building new factories given the country's history of coup plots and instability.
"We want to come back to the Philippines," said Mayur Nallamala, of JF Asset Management, in Manila for the conference.
"We need stability from the political standpoint, we need tough economic decisions to be made."
To get those tough polices past a potentially obstructionist Senate, however, Arroyo will need to woo erstwhile foes.
"She knows the right things to be done but she has not been able to develop the personal relationships necessary to get the support for them," said Peter Wallace, head of Manila-based private think tank Wallace Business Forum.
"Now that the political uncertainties are out of the way maybe she can focus on building those relationships."
(Additional reporting by Manny Mogato, Karen Lema and Ivy Rose Domopoy)
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