The Philippines: New Man in the Palace

Said the Philippines’ new First Lady: “Where will I find $25 to get the curtains cleaned?”

Defeated in last November’s election by Liberal Party Leader Diosdado Macapagal, ex-President Carlos Garcia had walked out of his official residence, Malacañang Palace, leaving only $9.03 in the household fund. Eventually, the Treasury will allocate new funds, but until then, the curtains will remain uncleaned or the cost will be met by the President himself. Macapagal intends to account for every penny, at home and in the government. After his victory Macapagal announced that it was his “duty to set a personal example in honesty and uprightness.”

Manila has heard such fine words before, even from Garcia, whose cronies had systematically plundered the country’s resources and sold favors to the highest bidders. Cynics wondered whether Macapagal’s first moves were only part of a pose—he put up for sale Garcia’s $2,500,000 presidential yacht Lapn-Lapu and his twin-engine Fokker turboprop plane, canceled the traditional inaugural ball to mingle with the tao (common people) at an outdoor dance. During his first month in office he began to convince the country that he meant to keep his pledge.

Order No. 1. Presidential order No. 1 forbade any government official to deal with Macapagal’s wife or relatives on any government contract or purchase. The new President fired hundreds of corrupt officials. He summoned Manila business leaders to the palace and warned them against employing “fixers” and stated that public officials who took money in exchange for granting privileges would be fired and prosecuted. “Under this administration,” said Macapagal, “you don’t have to pay anything to get what is due you.”

Apart from draining the household funds, Defeated Candidate Garcia had spent his final hours in office giving spiteful “midnight appointments” to some 350 friends and followers whom he made ambassadors, administrators, judges. Most embarrassing to Garcia’s successor was his appointment of Finance Minister Dominador Aytona to the governorship of the Central Bank of the Philippines. On the first day of the new administration, Macapagal’s own appointee, Andres Castillo, arrived at the bank with an armored car and a force of constabulary rangers to oust Aytona. Ex-President Garcia shouted, “Police state,” and his Nacionalista politicos denounced Macapagal as a “power-mad and power-hungry dictator.”

While the issue was carried to the Philippines’ Supreme Court, the bank remained without a governor, and its monetary board was unable to make decisions. Exporters, anticipating the devaluation of the peso from the official rate of two to the dollar to a more realistic four to the dollar, halted shipments abroad, and kept their dollars in the U.S. until they could bring them home more profitably. The resulting trade deficit has been devastating, and foreign exchange reserves dropped to an alltime low of $100 million.

Freed Peso. The court quarrel over the bank governorship gave Macapagal time to huddle with his advisers. Using an exhaustive World Bank report and other studies, they mapped out a five-year economic program to decontrol the country’s long-stifled economy. First step: to decontrol the peso itself. Recognizing that he could not risk freeing the peso without enough dollars in hand to meet any run on the banks, Macapagal last month sent a six-man mission under Finance Minister Fernando Sison to the U.S.

Last week the Philippine Supreme Court ruled 9 to 1 that Macapagal could oust Garcia’s man from the bank governorship and install his own. Simultaneously, members of Sison’s mission returned to Manila with good news: in their search for U.S. dollars they had not met a single refusal. In hand: $166 million in private bank loans; $121 million from the International Monetary Fund and various U.S. agencies. In all, Macapagal can begin his reform administration with a sizable backlog of about $400 million. He plans to ease import-export controls, continue some tariffs in a way that will encourage agriculture, discourage luxury imports.

The feverishly busy first weeks almost convinced the tao that Macapagal might eventually solve the nation’s problems of corruption, unemployment, poverty. He seemed to be everywhere—at political conferences, on the waterfront to inspect goods confiscated by customs guards, wielding a billiard cue in the government press office, or in the chamber of the Philippine Congress, both of whose houses are dominated by the Nacionalista opposition. In his 72-minute State of the Nation address last week, Macapagal said, “It’s wasted effort to steep the young in virtue and morality only to let them realize as they grow up that their elders are neither moral nor virtuous.” He ended in an appeal, “to set aside—partisanship,” and, with tears, told the legislators: “We have been elected under different parties, but we have been elected by the same people.”