Fri, Jul 06, 2012 - Page 9 News List

Philippine president leading crusade against graft, tax evasion

By Rosemarie Francisco and Stuart Grudgings  /  Reuters, MANILA

A middle-class woman is headed to jail for tax evasion.

That would not make headlines in many countries, but it is big news in the Philippines. It was enough to send Philippine President Benigno Aquino III reaching excitedly for his phone during an interview this week to retrieve a message about the case from his tax chief.

Businesswoman Gloria Kintanar had just exhausted her appeals and would become the first tax evader in Philippine history to be jailed — once authorities deal with her claim of illness at the hospital where she is under arrest.

“Once her claim is verified ... she will be escorted to jail to serve her sentence,” Aquino said, brandishing his mobile phone. “Finally, somebody is going to go to jail for a white-collar crime.”

With such victories, Aquino says he is puncturing a culture of impunity that is at the heart of decades of sub-par economic performance in the Philippines and which has mired it in poverty.

The Philippines, a US colony until 1946, was one of Asia’s wealthiest nations in the 1950s, but now one-third of its 94 million citizens lives below the poverty line. Growth is anemic and infrastructure remains mostly woeful.

In the intervening years, the Philippines has promised much, but delivered little. However, a growing number of analysts and investors say this time the Philippines promises to leapfrog into a higher growth pattern, with signs that Aquino is serious about tackling old problems of graft and tax dodging.

“The attitude has changed, I think,” the 52-year-old bachelor said at the Malacanang Presidential Palace, a few days after marking two years in power. “We have people who had given up on the country [who are now] coming back.”

Aquino is being helped by low interest rates, improved fiscal management and a confident middle class of consumers, whose spending is fueled by the huge US$1.6 billion in monthly remittances from millions of Filipinos working overseas.

The economy grew 6.4 percent in the first three months of the year, second only to China among Asian economies, and Aquino said he expected it to accelerate in the second quarter. The government is aiming for an expansion of between 5 percent and 6 percent this year, making the Philippines a rare hot spot of growth as Europe remains hobbled by its debt crisis, the US struggles to recover and even China shows signs of a slowdown.

Economists point to a rebound in confidence among businesses operating in the country, partly due to signs that Aquino is fulfilling his campaign pledge to go after graft.

In a landmark victory, Aquino succeeded in his bid to impeach Philippine Supreme Court chief justice Renato Corona on corruption charges in May. Next in the firing line of the gun-enthusiast president is his predecessor, former Philippine president Gloria Macapagal Arroyo, who is under arrest awaiting a trial on graft charges.

Just as important as Corona’s ouster, the impeachment vote by a majority of senators showed that Aquino can control an often unruly Philippine Congress — boding well for the passage of long-delayed tax reforms that are crucial to boosting weak revenues and securing a coveted rise to investment-grade credit status by major ratings agencies.

“The governance issue, which has always been the problem of the Philippines for many years, has somehow turned around and that is what we have seen with the new administration,” said Maria Theresa Marcial-Javier, senior vice president at BPI Asset Management, which manages more than US$16 billion in assets.

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