Tue, Jul 27, 2004 - Page 5 News List

Arroyo promises poverty relief

BUDGET CHALLENGE The Philippine president tried to win over critics with her state of the nation speech, but the lack of detail failed to live up to their expectations

REUTERS , MANILA

Demonstrators burn an effigy of Philippine President Gloria Arroyo during a rally near the Congress building in the Manila suburb of Quezon City yesterday, as she prepared to deliver her state-of-the-nation address.

PHOTO: AFP

Philippine President Gloria Arroyo yesterday pledged to cut the country's unwieldy bureaucracy and devote her new term to raising millions out of poverty, but gave few policy details.

In her first state of the nation speech since winning elections in May, Arroyo linked her anti-poverty fight with her decision to pull Manila's troops out of Iraq last week to save the life of a Filipino hostage at the cost of strained ties with Washington.

"I have shown that government does care even for a single Filipino life," Arroyo told a joint session of Congress. "Now we must show that we care for the rest of the Filipino people, even the weakest among us."

Analysts were looking to the speech for evidence she could cut a public-debt burden worth more than the economy, while also creating enough jobs and investment to staunch the flow of Filipinos leaving the country to seek work abroad.

Arroyo reiterated plans to introduce new tax steps to raise an extra 80 billion pesos (US$1.4 billion) a year while saving an extra 100 billion pesos a year, but gave no further details on tax.

Her energy secretary yesterday said that she had signed an order to raise tariffs on oil product imports to 5 percent from 3 percent to net an extra 4.4 billion pesos (US$78.6 million).

Arroyo asked Congress to approve a bill on the privatization of debt-laden state power firm NAPOCOR, promising that it would not be a "firesale," and to pass a bill making the country's anti-corruption ombudsman as strong as Hong Kong's.

She also promised to create a more efficient bureaucracy by cutting staffing and giving the private sector a greater role.

"We will simplify procedures to eliminate fixers," she said. "We will downsize the government, motivate excess employees to become entrepreneurs and increase the pay of a lean and mean bureaucracy."

With her first three years over-shadowed by doubts about her legitimacy, Arroyo pledged to use her mandate for a fresh six-year term and legislative majorities to wipe out the US$3.6 billion annual budget deficit, create 6 million jobs and put computers in all schools.

But it is still unclear whether politicians are ready to tackle the country's problems with renewed urgency and push aside the bickering and bad blood that has lingered since anti-graft protests turfed out former president Joseph Estrada and installed Arroyo in 2001.

The initial reaction to Arroyo's address by one senator suggested she had failed to win over doubters.

"It reads like a mediocre term paper," administration senator Joker Arroyo said in a statement. "Long in rhetoric, short in substance. The president's advisers have failed her."

Around 5,000 police were on alert as protesters gathered near the Congress building in central Manila.

Raising one of Asia's smallest revenue bases by cracking down on tax cheats and corrupt bureaucrats is a key test for the Philippines.

Although Arroyo supporters won a majority in the Congress and Senate, that does not guarantee an end to opposition to reforms by vested interests that has frustrated investors in the past.

Moves to raise "sin" taxes on tobacco and alcohol have been stymied for years by entrenched opposition, even though most analysts say that it would make economic sense.

Early proposals to abolish the value-added tax in favor of a new tax on gross income have been criticized as counter to a trend toward VAT-based tax systems in other countries.

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