Scandal threatens to further unsettle troubled Philippines

It may sell newspapers, but the circus surrounding corruption allegations against the husband of the Philippine president is doing the nation no good at all.

The accusations by Senator Panfilo Lacson are explosive -- that Jose Miguel Arroyo, popularly known as Mike, stashed away at least 260 million pesos (US$4.7 million) in campaign contributions and other funds in a dozen bank accounts under false names.

After weeks of claims and counter-claims splashed across newspapers and beamed into the nation's living rooms, a senate panel yesterday began a formal inquiry into Lacson's allegations -- on live television.

Lacson, who used two privileged speeches in the senate to deliver his bombshells, has suggested Philippine President Gloria Macapagal Arroyo must have known about some of the transactions.

With an election just eight months away, it is difficult to believe the allegations have no political component.

Lacson plans to run for president but faces accusations himself that he colluded with drug and kidnapping gangs when he was chief of the national police force.

Arroyo insists she will not run in the May election, although opinion is split on whether she will change her mind.

A mutiny by rogue soldiers on July 27 and warnings of a well-funded desftabilization plot from Angelo Reyes, who quit his post as defense secretary last Friday, have done nothing to counter nervousness among foreign investors.

And Lacson's allegations and the verbal jostling of potential candidates has raised fears that policy will be paralyzed until a new administration takes over.

"It's a very distracting sideshow," said Jojo Gonzales, the managing director of Philippine Equity Partners.

"All the mud-slinging that's taking place raises the level of noise to the point where, from an investors' standpoint, they might just say `We'd rather not deal with that.' And it's happening far earlier than we imagined," Gonzales said.