Philippine Presidents, History of the Philippines

The Philippines, a group of over 7,000 islands with combined land area encompassing 300,000 square kilometres, grew into a nation under more than three centuries of Spanish conquest and 42 years of American rule. It is the first country outside the New World that closely witnessed the United States’ rise to power following the 1898 Spanish-American War.

Situated 800 kilometres southeast of mainland Asia, the archipelago, named after King Philip II of Spain, was discovered in 1521 by Ferdinand Magellan, the same explorer who had discovered the Pacific Ocean in search of the so-called “Spice Islands” and is now widely considered the first navigator to have cruised around the planet.

Ironically, the Filipinos, after having been subdued for centuries by foreign colonizers as a result of Magellan’s voyage, would emerge as the best seafarers in the world, manning a third of all international vessels today. Some 7.8 million overseas Filipino workers (OFWs) and Filipino migrants would help rebuild cities in many countries and bring back over US$10 billion in annual remittances to their families in the Philippines.

The country’s geographical location and long exposure to foreign influences has placed the Philippines on a unique cultural base in Asia. It is now the only predominantly Catholic country in the region, with 70 million out of its total population of 85 million (as of 2005) confessing to be Catholic. There are also large numbers of Protestants and Born-Again Christians in the country while the Muslim population is concentrated in southern Mindanao.

Early Trade
The first inhabitants of the Philippines were the Negritos who traveled from mainland Asia over a land bridge that is now underwater. Migrants from other Southeast Asian countries such as Indonesia and Malaysia later followed and established a Malayan culture that flourished before the Spaniards came. Chinese and Arab merchants helped establish markets at the community level.

A sultanate system, first established in the southern island of Sulu in the 14th century, is believed to have reached the islands of Luzon and Visayas, giving way to the rise of the Islamic faith. The Spaniards would later drive the Muslims to the south and establish Catholicism as the main religion in the north and central parts of the country.

Local villages, known as barangay, traded agricultural and fishery products with each other. The Igorot tribe in Northern Luzon carved the marvellous Banaue Rice Terraces from the mountains, a proof of their advanced agriculture technology. Communities near the shore exchanged goods with Chinese and Arab merchants, who came aboard large ships. These communities traded slaves, gold, beeswax, betel nuts, pearls, and shells for porcelain, silk, iron, tin and semi-precious stones.

The Philippine islands were a part of an extensive trade route used by Chinese merchants as early as the 10th century. By the time Magellan arrived in the islands, regular trade and cultural contact between Chinese traders and local chieftains were firmly instituted. Many Chinese merchants settled in the country and shared their crafts with the natives. Some historians claim that an Italian Franciscan priest, named Father Odorico, was actually the first European to have reached the Philippines in 1324 when his ship bound for China took refuge from a storm in Bolinao Island in northern part of Luzon.

Aside from the Banaue Rice Terraces in the Cordillera Mountains, early settlers did not leave any giant monument, and this is what makes conservative historians doubt the existence of the rich kingdoms in the country hundreds of years ago. However, it cannot be denied that early Filipinos were learned individuals who expressed their beliefs and sentiments in rich languages. According to the National Commission for Culture and the Arts (NCCA), there are actually 78 language groupings and over 500 dialects in the Philippines.

Feudal Society
Magellan, who claimed the archipelago for Spain in 1521, died in a battle with a group of local warriors led by Lapu Lapu at Mactan Island. It was Ruy Lopez de Villalobos, in the fourth Spanish expedition, who named the territory as Filipinas after the heir to the Spanish throne in 1543. In 1565, Miguel Lopez de Legaspi led an expedition to colonize the islands and by 1571, most parts of the archipelago came under Spanish rule.

The Spaniards established the colonial government first in Cebu in 1565 and then in Manila in 1571. Historians claim that University of San Carlos in Cebu and University of Sto. Tomas in Manila are the oldest universities teaching European type of education in Asia. Jesuit and Dominican priests established the two institutions.

Under Spanish rule, Catholicism became the dominant religion. Catholic friars not only lorded over the congregations; they enjoyed vast political and economic influence, which they eventually used to repress Filipino peasants’ uprisings in the largely feudal Philippine society at that time. The Spaniards also quelled a number of rebellions instigated by the Chinese migrants. The friars distributed lands to Spanish families, who later comprised the landowning class. To perpetuate their economic interests, this class would also rise to become the political elite that would remain in power to this day.

This gave way to the hacienda system in the Philippines, where cacique or landowners managed large tracts of lands tilled by peasant workers. Under the system, farmers were supposed to receive half of the harvest, but they usually ended up with much less because they had to pay for large interests on debt incurred from the cacique. This would be later corrected with a system of land reform, which, however, remains to be fully implemented to this day.

Galleon Trade
The Manila-Acapulco galleon trade became the major trading system between Asia and the Americas for nearly two centuries. Manila became a transhipment point of American silver to China. It was through this trade that the first Chinese silk and porcelain reached the shores of the New World. There were unverified claims that Filipinos helped build the city of Los Angeles in America. The Chinese and Filipinos would later become the two largest Asian migrant groups in the United States.

Coconut became the country’s top agricultural product, because of Spain’s huge need for charcoaled coconut shells used for the caulking of the galleons. In 1642, the colonial government issued an edict requiring each Filipino to plant 200 coconut trees all over the country. By 1910, coconut exports would account for a fifth of total Philippine exports and to this day, coconut oil remains the country’s top agricultural shipment.

The Galleon Trade lasted for about 200 years until 1815. It is during this period that rice and tropical fruits from the Philippines such as mango and banana made their way to Latin America. Beginning 1750, Spanish priests encouraged the development of plantations to grow abaca (hemp), tobacco, coffee and sugar. Sugar barons from the Visayas would later emerge as among the richest clans in the country.

From 1762 to 1764, the British briefly captured Manila during the Seven Years War. The treaty of Paris ended the British occupation and returned the colony to the hands of their original colonial masters.

Plantation Crops
In 1781, the Spanish governor established the tobacco monopoly in the Philippines, which would become a major source of revenue for the colonial government. From 1820 to 1870, the Philippines would be transformed to an agricultural export economy. Located on the oceanic trading routes connecting Asia to other parts of the world, the Philippines became a transhipment point of merchandise goods from all over Southeast Asia on their way to Europe.

The Philippines exported plantation crops such as sugar, abaca, other fibres, tobacco, coffee, and coconut products to China, Spain, United States, United Kingdom and British East Indies. In return, it imported textiles and rice.

Historians claim that Spain administered the Philippine affairs through Mexico. Spanish administrators in the country were actually reporting to the Viceroyalty of Mexico. After Mexico gained its independence from Spain in 1821, Madrid directly governed its only Asian colony and even allowed rich Filipinos to study in Europe. The Spanish rule gave way to the rise of a small but highly powerful elite class, which to this day, controls most of the Philippine economy. The elite families, which own large plantations, were able to send their children to Europe for education.

Foreign Investors
Investors from Spain, Germany, Britain and other European countries laid the groundwork for utility companies in steam navigation, cable, telegraphy, railroads and electricity in the country. They also invested heavily in rice and sugar milling, textile and banking. The local elite developed the brewing industry, which would become one of the most profitable sectors in the economy.

Although the educated Filipinos who studied in Europe shunned the use of force to topple the colonial government, their writings provoked nationalist sentiments among young men, who eventually formed a revolutionary movement against Spain. In 1896, the war between Spanish and Filipino soldiers escalated following the death of novelist Jose Rizal and rebel leader Andres Bonifacio. Emilio Aguinaldo, the new leader of the revolutionary forces, forged a pact with US Commodore George Dewey in Hong Kong to defeat the Spanish army.

American Colony
The Americans entered the scene because of its conflict with Spain over Cuba. With the outbreak of the Spanish-American war in the Pacific, the Philippines had to be taken by the US, lest other European countries such as Britain, France and Germany would fight for their next Southeast Asian colony. On June 12, 1898, Aguinaldo, first backed by American forces, declared the independence of Kawit, Cavite, the seat of the revolutionary Filipino government at that time, from Spanish rule. The Americans took possession of Manila on August 13, 1898.

While armed clashes with Spanish forces continued in other parts of the country, the Americans and the Spaniards were negotiating for the purchase of the Philippines for US$20 million. In the Treaty of Paris in 1898, Spain ceded the Philippines, Cuba, Puerto Rico, and Guam to the US.

Filipinos felt insulted at the fact that their country has been passed from one colonial master to another for only US$20 million. When the US, which had not conquered any country before, made known its intention to succeed Spain as the next colonizer of the Philippines, Aguinaldo and his men waged a revolutionary resistance that ended with his capture in March 1901. The American soldiers easily subdued the remaining factions of rebellion with the help of their powerful weapons and their divide-and-conquer tactic.

As an archipelago of 7,000 islands, the Philippines is home to different ethnic groups which do not speak the same language. The national government’s attempt to declare Tagalog (spoken in Central and Southern Luzon including Metro Manila) as the national language would not easily win the support of other regions.

The Philippine-American war took the lives of 4,234 American and 16,000 Filipino soldiers. The death toll was much higher on the civilian population, with as high as 200,000 casualties. Although local resistance persisted until 1903, the US ended its military rule on July 4, 1901.

American Way
Under American civilian rule, the Philippines was introduced to US-type of education, Protestant religion, and later to the concept of democracy. Placed under US control were most parts of the country, except in the southern portion of Mindanao where Muslim rebels held strong resistance.

William Howard Taft, the 27th US president, was the first American Civil Governor in the Philippines. Taft was praised for establishing a civil service system, creating a national legislature, suppressing prices, upgrading health standards, and sponsoring land reform and road building in the country.

In 1907, the First Philippine Assembly composed of educated and rich Filipinos with vast landholdings. Manuel L. Quezon, who represented the Philippines in the US Congress, lobbied for the passage of the Jones Law, which in 1916 abolished the Philippine Assembly to give way for a bicameral legislature made up of the Senate and the House of Representatives.

With the passage of the Tydings-McDuffie Act in 1934, Filipinos had their first taste of self-rule through the Philippine Commonwealth, a transitional government designed to prepare the Filipinos over a ten-year period for independence. By 1935, the Commonwealth was in place with Quezon as its first president. The Philippines also approved a new constitution in the same year.

The United States is credited for helping establish the Republic of the Philippines, the first democratic government in Asia. Economically, the Philippines was ahead of its Asian neighbours, who were still subjects of European colonial powers before the war.

Japanese Invasion
In December 1941, the Japanese Imperial Army invaded the Philippines and drove the Commonwealth Government from Manila. While Quezon continued to head the government-in-exile until his death in New York in August 1944, the Japanese forces handpicked Jose P. Laurel, a graduate of Yale University and Tokyo International University, to head a new government under their control.

The Philippines was dragged into the war because of Japan’s military ambition to become the dominant force in Asia and the Pacific. Japan wanted to be the leader of an economic zone in East Asia, which would be the source of its raw materials. The US presence in the Philippines, known for its strategic location in Southeast Asia, was the largest threat to the Japanese forces, following the destruction of the American Pacific fleet at Pearl Harbor on December 7, 1941.

While the American forces were regrouping in the United States, Filipino soldiers formed a guerrilla organization called Hukbalahap (People's Anti-Japanese Army). Some 30,000 guerrillas at that time engaged the Japanese army in intermittent clashes. The Hukbalahap would later adopt the communist ideology and rule in the countryside.

Meanwhile, Sergio Osmeña replaced Quezon as the head of the government-in-exile and joined General Douglas MacArthur in the liberation of Manila. General MacArthur returned to the Philippines via the island province of Leyte, along with 174,000 army and navy servicemen on October 20, 1944.

The liberation of Manila took almost 20 days from February 3 to 23, 1945 and the fierce battle destroyed much of the city, with its ruins now often compared to the ruins of Warsaw, Poland in Europe. The Japanese army, however, continued to fight in the provinces, until September 2, 1945 when General Yamashita, the Tiger of Malaya who was believed to have hidden vast amount of treasures during the war, surrendered in Baguio City.

It is estimated that the battle of Manila cost the lives of 1 million Filipinos, 300,000 Japanese and 60,000 Americans. The intensity of the US-Japan war would force the former to drop an atomic bomb in Hiroshima on August 6, 1945 and in Nagasaki three days later.

US Bases
By February 1945, Osmeña restored the Commonwealth in the Philippines but it was only on July 4, 1946 that the US granted the Philippines its independence, coinciding with the celebration of the Independence Day in America.

However, US military bases would remain in the country for the next 45 years. On March 14, 1947, Manila and Washington signed the Treaty of General Relation, which provided the US to construct military bases for a lease period of 99 years. In 1959, the agreement was amended to shorten the lease period until 1991, after which both sides were to renegotiate the contract.

When the US sought a ten-year extension of the lease period in 1991, the Philippine Senate, led by Senate President Jovito Salonga, rejected the proposal in a historic casting of vote on September 16, ending US military bases in the country.

With newfound freedom in 1946, Filipinos elected Manuel A. Roxas, leader of the Liberal Party and one of the seven members of the Constitutional Convention who drafted the 1935 Constitution, as the first president of the independent republic in April 1946. His presidency was focused on rebuilding the cities and municipalities torn by the war, redistributing lands as wealthy landowners returned to reclaim their estates, and confronting the Hukbalahap, which by this time was tagged as a socialist-communist organization. The economy grew at a rapid pace, immediately after the war.

Special Treatment
Close economic ties between Manila and Washington continued after the war on the back of agreements providing for preferential tariffs for American exports and special treatment for US investors in the Philippines. In the 1946 Philippine Trade Act, the Americans were granted duty-free access to the Philippine market and special rights to exploit the country’s natural resources. Because of the Trade Act, the Philippines suffered a huge trade deficit with the influx of American imports. In 1949, the Philippine government was forced to impose import controls, after getting the consent of Washington.

Roxas’ two-year presidency ended with his death, following a heart attack while delivering a speech at Clark Air Force Base in Pampanga province in April 1948. Vice president Elpidio Quirino succeeded Roxas as president and defeated Jose P. Laurel to keep his post in the 1949 presidential race. It was during Quirino’s term that the Minimum Wage Law was enacted and the Central Bank was established to stabilize the peso and consumer prices. The country’s gross national product grew by an average of 7.7 percent annually in the early 1960s, on the back of the double-digit increase in the manufacturing sector.

In the 1953 presidential election, Ramon Magsaysay, who had served as defense secretary under the Quirino administration, won by a landslide. The charismatic Magsaysay initiated peace talks with the Hukbalahap, which would later evolve into a communist organization. He became popular for opening the gates of Malacanang Palace to ordinary people. He died in a plane crash on Mount Manunggal in Cebu in March 1957, which to this day remains a mystery to many Filipinos.

While the standard of living in the Philippines was below that of the Western World, the country was often cited as the second richest economy in Asia, after Japan in the 1960s. However, ill-advised economic policies, poor governance and rapid population growth in the country would allow other Asian economies such as Korea, Taiwan, Singapore, Hong Kong, Malaysia, Thailand and China not only to catch up with but to leave the Philippines behind in the race towards industrialization.

Filipino First
Vice President Carlos P. Garcia assumed the country’s top government post following the death of Magsaysay. Garcia was known for his First Filipino Policy and Austerity Program, which put the interests of Filipinos ahead those of foreigners. Under his austerity measures, he encouraged temperate spending, which resulted in less imports and more exports. His nationalist policies, however, perpetuated the business interests of the ruling elite in the country and did not encourage local businesses to be competitive. Garcia lost to his vice-president in the 1961 presidential poll. Protectionist policies allowed local manufacturers to control the economy from 1949 to 1962, discouraging them from becoming competitive.

Diosdado Macapagal, father of incumbent President Gloria Macapagal-Arroyo, was the president from 1961 to 1965. Before he became president, he authored the land reform program as a legislator and was vice-president to Garcia. As president, Macapagal began a five-year socio-economic program by removing imports control and liberalizing foreign exchange. It was Macapagal who declared June 12 as the national Independence Day. In 1962, the Macapagal administration began devaluing the peso by half to around 3.90 to the US dollar.

Macapagal initiated a shift in investments from the light industries to chemicals, steel and industrial equipment. He was also one of the proponents of the MAPHILINDO, a trade bloc of three South East Asian countries – the Philippines, Malaysia, Indonesia. This bloc later expanded to what is now the Association of the Southeast Asian Nations (ASEAN). By 1965, foreign capital was present in nearly a third of the country’s capital stock.

Martial Law
Ferdinand Marcos, the Senate president, defeated Macapagal in the presidential election to become the country’s tenth president in November 1965. A close ally of the United States, Marcos launched military campaigns against the insurgents including the communist Hukbalahap and Moro rebels in Mindanao. In August 1967, Manila hosted a summit that led to the creation of the ASEAN.

With his reelection in 1969, Marcos had to contend with worsening civil strife. An ideologist named Jose Ma. Sison founded the Communist Party of the Philippines on December 26, 1968. It was during the same year that University of the Philippines Nur Misuari founded the Moro National Liberation Front (MNLF), the armed wing of Islamic resistance movement.

In June 1971, the government convened the Constitutional Convention to amend the Constitution. Ironically, Marcos declared Martial Law on September 21, 1972, following a series of bombings in Metro Manila, He abolished Congress, curtailed freedom of the press, imposed curfews, ordered the arrest of his political enemies, prohibited labour unions, and controlled the economy with the help of his cronies. Although his wife Imelda was credited for building some of the country’s finest monuments, she was criticized for personal extravagance, a form of which was maintaining a collection of 3,000 pairs of shoes.

Green Revolution
The so-called green revolution in the early 1970s, which introduced new farming technologies, enabled the Philippines to export rice to its neighbours. The International Rice Research Institute was established in Los Banos town, Laguna province where Thai, Vietnamese and other Asian researchers trained to develop their own rice production. Thailand would later become the world’s largest rice exporter and the Philippines one of the largest rice importers.

With the introduction of new farming technologies, the Philippines became heavily dependent on importer fertilizers, which are mostly fuel-based. The increase in world crude oil prices also pushed prices of fertilizers, to the detriment of Filipino farmers trying to adopt the modern technologies.

Chinese Tycoons
On June 9, 1975, the Marcos administration signed a joint communiqué with Communist China to restore official diplomatic relations. The Communiqué recognized that “there is but one China, of which Taiwan is an integral part. In return, China vowed not to interfere in the internal affairs of the Philippines and refrained from providing any substantial support to the Communist Party of the Philippines, the largest insurgent group in the country.

The largest success story in the Philippines actually involved Chinese merchants who left China in pursuit of business opportunities abroad. Unlike rich American investors, Chinese migrants came to the Philippines with little money but large determination that the country’s democratic society would help them become rich. True enough, they found goldmine in the Philippines. Today, the richest individuals in the Philippines have Chinese names, including billionaires such as Lucio Tan, Henry Sy, John Gokongwei, and George Ty. Together, they are the largest group of investors in the Philippines and control most of the largest companies in the country.

Overseas Workers
Under Martial Law, one man other than Marcos would singularly define labour relations in the Philippines and the role of the Filipino workers in the world. Labour Minister Blas Ople, a former journalist, authored the Labor Code on November 1, 1974 and launched the overseas employment program in 1976, which would send young and talented Filipinos who could not find work at home to other countries for dollar-earning jobs.

Ople obtained the permission of Marcos to deploy thousands of Filipino workers overseas to meet the growing need of Saudi Arabia, Iran, Iraq and the United Arab Emirates for skilled workers and the rising demand for Filipino seamen in flag-of-convenience vessels. Hesitant at first, Marcos later conceded to the proposal, if only to tame the growing militancy building among the hearts of the young and intelligent Filipinos who could not find job opportunities in their own land.

The Philippine Overseas Employment Administration (POEA) and the Overseas Workers Welfare Administration (OWWA) were established to intensify recruitment of Filipino workers. This would make the Philippines the third largest destination of dollar remittances in the world, next to the more populous countries of India and Mexico.

The Marcos administration also tried to court foreign investors, by committing guarantees against nationalization and imposing restrictions on trade-union activity. However, the blatant record of human rights abuses by the military under his administration was a big turnoff among foreigners. Under Martial law, the military and the police killed, abused, or arrested at least 10,000 Filipinos, including some of the brightest students and intellectuals. Many had disappeared without a trace.

While Marcos lifted martial law on January 17, 1981 in time for the visit of Pope John Paul II to Manila in February, he maintained most of his powers as a dictator. Benigno Aquino, an opposition senator living in asylum in the US, decided to return to Manila in 1983. His death, from assassins’ bullets at the tarmac of the Manila International Airport, sparked adverse sentiments against the Marcos administration.

Bankruptcy
As the economy stagnated under the Marcos administration because of a mix of bad economic policies, corruption and uncontrolled population growth, the government had to resort to foreign borrowing to finance the fiscal deficit. In October 1983, the Central Bank notified its creditors about its plan to default payment on debt amounting to US$24.6 billion. With the growing loss of confidence by the business community, the peso depreciated by as much as 21 percent in 1983. The gross domestic product shrank by 6.8 percent in 1984 and by 3.8 percent in 1985.

Emboldened by Marcos’ dipping popularity, the opposition gathered around Aquino’s widow, Corazon Cojuangco Aquino, who would later challenge Marcos in the 1986 snap presidential election. When Batasang Pambansa (National Assembly) declared Marcos the winner amid allegations of widespread electoral fraud, protesters, buoyed by Manila archbishop Jaime Cardinal Sin, trooped to the streets.

Following the defection of Defense Minister Juan Ponce Enrile and Armed Forces vice chief Fidel Ramos from Marcos, protesters began converging along EDSA near Ortigas Avenue, which would culminate in the ouster of Marcos from Malacanang Palace on February 25, 1986. The media called the bloodless uprising as the 1986 EDSA People Power Revolution - something that political groups would later thought could be replicated time and again.

Democratic Rule
After Marcos, his family and his cronies fled from the Philippines, Aquino became president, organized a new government, freed the political prisoners and tried to restore democratic rule in the country. In February 1987, her government approved a new Constitution, which would later be subjected to heated debates over its restrictive provisions on foreign participation in the economy.

The 1987 Constitution restored the presidential system of government with a bicameral legislature composed of the Senate and the House of Representatives and an independent judiciary headed by the Supreme Court chief justice. To avoid a replication of Marcos’ excesses, the Constitution limited the president’s stay in office to one six-year term. It also created the autonomous regions of Muslim Mindanao and Cordillera and put agrarian reform as the cornerstone of the government’s plan for social transformation.

A renegade faction in the Philippine military launched a series of coup attempts against the Aquino presidency. Perception of political instability dampened economic activities and refrained the economy from matching the large strides taken by its Asian neighbors in the 1980s and 1990s. By this time, Singapore, Malaysia and Thailand have overtaken the Philippines in the race towards industrialization.

The Arroyo administration, while taking pride of having restored democracy, failed to bring the economy on track towards industrialization, and one of the factors singled out was the president’s political inexperience and lack of consistency in pushing for economic reforms. In the 1992 presidential election, Aquino endorsed the candidacy of her chosen successor – Defense Secretary Fidel Ramos.

In June 1991, Mount Pinatubo’s powerful eruption sent tons of ashes around the planet’s atmosphere. Subsequent lava/lahar flow buried several towns in Central Luzon and jolted the economy. The natural tragedy also forced American soldiers at Clark Field and Subic Bay to withdraw from their bases earlier than stipulated. The US turned over to the Philippine government the two bases with total assets amounting to US$1.3 billion. The Philippine government later transformed the two bases into special economic zones.

Liberalisation
In 1992, Fidel Ramos was elected President. He began his term amid an energy crisis, which plunged the country literally into darkness. This he was able to resolve by inviting foreign investors to take part in the so-called build-operate-transfer (BOT) scheme, where they would serve as independent power producers (IPPs) enjoying a lot of incentives and guaranteed market. While it brought light to Filipino households, the scheme would later translate to high electricity rates.

In 1995, the Ramos administration also had to contend with a rice shortage, as a result of low agricultural production and poorly managed importation program. Since then, the government has authorised the National Food Authority (NFA) to import rice at will in order to prepare for any shortage in domestic stock.

The Ramos presidency was also responsible for economic reforms such as privatisation of government assets, trade and banking liberalisation and deregulation, which would push annual trade growth at double-digit levels and draw in large-ticket foreign investments. By 1996, the Philippines was described as a newly industrialising economy along with the likes of Thailand and Malaysia.

It was also under the Ramos presidency that communism was legalised, and some leftist organisations would later join Congress as partylist groups. The government and the Moro National Liberation Front (MNLF) headed by Nur Misuari would sign a peace agreement that would establish a peace zone in southern Philippines. However, other militant rebel groups such as the Moro Islamic Liberation Front (MILF) and Abu Sayyaf would continue waging a war against the government for a Islamic state in the south.

What Ramos failed to accomplish is the amendment to the 1987 Constitution to remove the restriction on foreign ownership of land and public utilities, which limits maximum ownership to 40 percent. The opposition party accused him of trying to tinker with the charter to remove the six-year term limit of the president and in the process perpetuate his stay in power. In the end, he had to give up such attempt under the weight of public opinion.

Financial Crisis
With the outbreak of the Asian financial crisis, the Philippine economy contracted by 0.6 percent in 1998, the same year Joseph Estrada, a popular politician with links to the movie industry, became president. The economy actually grew although at a slower pace at 3.4 percent in 1999 and at 4 percent in 2000 even as the inflation and interest rates began to decline. In comparison, growth reached 5.2 percent under the Ramos presidency in 1997.

While Estrada got the backing of Filipino-Chinese businessmen by reducing the problem of kidnapping, he did not get the same support from other “elite” businessmen. Despite appointing top economists, Estrada, a former college dropout, could not convince the “high society” that he could resolve the country’s economic woes.

Ironically, what brought down the Estrada administration was not his economic policies, seen by many as not substantially different from those of Ramos, but the perception of wide corruption in his administration. In October 2000, a former ally implicated Estrada in illegal gambling payoffs and kickbacks. Reports that he has many wives housed in different mansions also got Estrada indifferent treatment from the Church, which was a force behind the 1986 People’s Power Revolution.

EDSA 2
In December 2000, the House of Representatives impeached Estrada. The subsequent impeachment trial at the Senate was aborted when senators from the opposition party walked out of the courtroom, triggering street demonstrations reminiscent of the 1986 revolt. Within hours after the walkout, the crowd at EDSA grew into millions of anti-Estrada protesters. When political and military leaders withdrew their support from Estrada, Supreme Court Chief Justice Hilario Davide swore Vice President Gloria Mapacagal Arroyo as the next president on January 20, 2001.

Arroyo, a daughter of former President Diosdado Macapagal, came to Malacanang with a promise to clean the government of corrupt officials and bring down the number of poor Filipinos, which represents a third of the total population. In her first year in office, she faced numerous challenges starting with the May 1 rebellion, instigated by the Estrada camp to regain the presidency. The rebellion proved futile, as the highly politicised military and the police remained loyal to Arroyo.

She also had to contend with Muslim extremists, who began to target cities in their attacks. Following the terrorist attacks in the US on September 11, 2001, the Philippines was one of the first countries to express support for a US-led international campaign against terrorism.

On the economic front, Congress passed the liberalisation of the retail trade sector and the Electric Power Industry Reform Act of 2001, which aims to privatise the state-owned National Power Corporation. The Arroyo administration also promoted business process outsourcing (BPO), information technology, tourism, and mining as key investment areas for foreign companies. Trade with other Asian countries was also given importance in view of the declining trade volume with the United States.

Telecommunications
One particular industry, which has led economic growth since 2000 is telecommunications, although this proved to be a bane for other industries as Filipinos cut their expenditures on other items to buy mobile phones and pay for monthly network services. By 2005, it is estimated that half of the 85 million Filipinos would have mobile phones, a high penetration rate for a developing market.

Because of the global economic slump following the September 11 attacks, the GDP grew by merely 1.8 percent in 2001. Growth reached 4.3 percent in 2002 and 4.7 percent in 2003 even as the Arroyo administration confronted communist and Islamic insurgency problems and a shocking military coup in July 2003.

After surviving the coup, Arroyo won the May 2004 presidential election over Estrada’s close friend and popular actor Fernando Poe Jr. Economic growth reached 6.1 percent in 2004, the highest in 15 years, although this was negated by high inflation and uncontrolled unemployment rates which were more felt by the poor.

Fiscal Deficit
Pressed by economists to narrow the burgeoning fiscal deficit, President Arroyo urged Congress to pass a package of tax reform measures aimed at achieving a balanced budget by the end of her term in 2010. Because of a long history of budget deficits, the public debt hit more than 130 percent of the GDP in 2003 and has been rising since then. Different sectors, however, criticised the administration for passing a heavier burden of taxation on the people at a time crude oil prices were hovering at historic high levels and pushing prices of goods and services beyond the capacity of ordinary consumers.

By the second half of 2005, there were signs that the fiscal deficit was narrowing, even with the delay in the implementation of the Expanded Value Added Tax (EVAT) law, which raised by 2 percentage points the tax rate on consumer products and services to 12 percent and by 3 percentage points the corporate income tax to 35 percent. The new EVAT law, which was expanded to cover fuel and electricity, took effect on November 1, 2005.

New Constitution
As the popularity of President Arroyo dipped to the lowest level amid allegations that she bought her way to the presidency in the 2004 presidential elections, she was given an option to correct the loopholes in the political system by amending the 1987 Constitution. She formed a Consultative Commission to recommend charter amendments focusing on lifting all restrictions to foreign investments and paving the way for a shift in the form of government from a presidential, central system into a parliamentary, federal system.