Business World, 18 April 2012


Who’s the better economic manager — the academically trained economist Gloria Macapagal-Arroyo or the college dropout Joseph Ejercito Estrada? The answer can be gleaned from my second essay, “The Lost Decade,” in the book, Ito ang Pilipino: A Tribute to Joseph Ejercito Estrada.

Estrada served for two and a half years, Arroyo for nine and a half. Corrected for the number of years served, official statistics and international survey results would show that Estrada did a much better job in managing the economy than Arroyo.

Below are excerpts from the chapter, “The Lost Decade.”

In 2001, as she boldly called on President Joseph Estrada to resign, Vice-President Gloria Macapagal Arroyo said that Estrada was a failure in handling the economy. “It is imperative that the President resign immediately to avoid irreparable damage to the economy and to restore the people’s faith and confidence in government.” Arroyo said. The day after Estrada left Malacañng, the Inquirer editorial was entitled “Triumph of the People.”

But the economy hit its worst indexes in the nine years that Arroyo was president. It was so bad that Estrada Finance Secretary Jose “Titoy” Pardo called the Arroyo years, The Lost Decade.

The economy grew at an average of 4.09% during the period of Arroyo (from 2001 to 2009). That is much less than Estrada’s performance of 4.7% (3.4% GDP growth in 1999 and 6.0% in 2000), although slightly better than Ramos’s average of 3.6% or Aquino’s average of 3.34%.

The budget deficit under Arroyo was the highest in Philippine history measured in terms of national government, deficit, public sector borrowing requirements and consolidated public sector deficit. When Arroyo left office in 2010, the budget deficit was a whopping P340 billion. The Estrada administration engaged in deficit spending in the first two years to pump prime the economy, causing the deficit to balloon to P111.7 billion but once it achieved its growth and inflation target, it brought the deficit down to only P34.1 billion in 2000.

Foreign investors were not coming. It took the Arroyo administration six years to replicate the Foreign Direct Investment (FDI) level in 2000. Foreign investors found the Philippines as an unattractive destination because of its poor governance. While Singapore was getting $24 billion in FDIs, the Philippines was getting a measly $2.3 billion in FDIs.

This disappointment was also true for domestic investments. The domestic investment rate of the Philippines dropped from 19% in 2001 to a record low of 14.8% in 2006 while those of its neighbors like Singapore continued to rate from 20% to 40%.

… (T)he World Economic Forum observed that the Philippines ranking global competitiveness fell from a ranking of 48 in 2000 under Estrada to 71 under Arroyo in 2006. By contrast, ASEAN neighbors garnered the following rankings in 2006: Singapore 5, Malaysia 26 and Thailand 35.


Arroyo said in her inaugural address: “We must be bold in our national ambitions, so that our challenge must be that within this decade, we will win the fight against poverty.” But in the nine years following her ascension to the presidency, poverty levels grew from bad to worse to worst.

It was under Arroyo leadership that the Philippines saw the worst in terms of poverty. Displaying a shameless insensitivity to the plight of the poor, Arroyo economics neglected social services. Social spending patterns were anti-growth and anti-poor. Education, health and public infrastructure were neglecting, propelling the Philippine economy to a lower growth trajectory.

While education spending per pupil peaked during Estrada’s short-lived term, it fell during Arroyo’s watch. Completion rates in elementary and high school dropped drastically.

The drop-out rate also increased from a low of 7.6% and 8.5% for elementary and high school respectively during the time of Estrada (SY 2000) to a high of 10.57% and 15.81% during Arroyo’s term.


It was also during the reign of Arroyo that the Philippines became labeled as the MOST corrupt country in the World.

During the time of Estrada, the Philippines ranked the 6th LEAST corrupt in the region in 1998 and the 4th LEAST corrupt in 1999. The Political Risk and Economic Consultancy (PERC) also noted in its 2007 report that due to the corruption in the Arroyo administration, the Philippines consequently received the least amount of foreign direct investment, and the level of foreign capital flowing to its stock market was also one of the worst in the region.

That corruption was rampant was an understatement. It came to a point where headlines said that the Arroyo administration suffered from a Truth Crisis.

First is the electoral sabotage of the 2004 presidential elections where Arroyo is said to have cheated Fernando Poe, Jr. of the presidency.

The electoral sabotage was followed by scandal after scandal. Among those mentioned in the news are: the Jose Pidal bank account, the PhilHealth scam, OWWA fund sScam, the Road Users Tax scam, the P728-million fertilizer fund scam, the P532-million overpriced Macapagal Blvd. scam, the Lebanon repatriates scam, the computers scam, the rice smuggling scam, the jueteng scam, the $13.2-million IMPSA/Nani Perez power plant deal, the Hello Garci scandal, the military generals scam, the Germany account, the PIATCo-NAIA 3 scam, the Bridges to Nowhere scam, the School Text Book scam, the swine scam, the NBN ZTE scandal, the $503-million North Rail scam, the World Bank stops P21.5-billion RP road funding scandal, among those reported by the media.

It was no wonder that Arroyo had the worst trust ratings among all Filipino presidents, hitting negative (-) 66% in her last year in office. Estrada, even at the height of the impeachment trial, maintained a trust rating of 43% in December 2000.

This is a result of the economics of the Estrada administration: market-driven, pro-poor policies that was positively felt by the masses and which effectively brought the economy forward; very much unlike the results achieved by his successor. In the end, it was Arroyo, not Estrada, who brought damage to the economy.