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Philippines Defence and Security Report Q3 2010
Business Monitor International, July 2010, Pages: 93
Business Monitor International's Philippines Defence and Security Report provides industry professionals and strategists, corporate analysts, defence and security associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on the Philippines' defence and security industry.
On June 3 2010 the government and the Moro Islamic Liberation Front – the largest Islamist rebel group – signed a deal (a) to continue peace talks, (b) to maintain peace over the government transition period around the end of June, and (c) to involve European Union (EU) countries to a greater extent in negotiations.
The new defence secretary, Norberto Gonzales, pledged on April 23 to speed up modernisation of the Armed Forces of the Philippines (AFP). He said that modernisation attempts over the last 15 years were hampered by a lack of funding and annual spending limits for legal reasons. However, this year modernisation has been enhanced by the establishment of the multi-year obligation authority (MYOA) for the AFP. He said: ‘It is like allowing us to buy appliances on instalment basis.’ Gonzales has changed the procurement procedure to speed up the purchasing process and avoid controversy. Also, he believes that the country should embark on government-to-government arrangements rather than dealing with private suppliers.
In the next 2-3 years, the defence services wish to purchase: an armour system for the army; multi-role vessels for the navy; and long-range patrol aircraft, medium lift aircraft and attack helicopters for the air force. Gonzales has asked the AFP to compile a detailed priority list of other equipment needed. He said that the Defence Department and the AFP have been assessing various international prospective purchases.
The Philippines faces a new political climate following the election of Senator Benigno Aquino III as President in May. Aquino made a strong pledge to tackle corruption in his campaign – the campaign slogan was: ‘If no one is corrupt, no one is poor.’ One of his first priorities will be to address this major problem. In Transparency International’s Corruption Perceptions Index 2009, the Philippines rated 24th out of 33 countries in the Asia Pacific region, and 139th out of 179 in the world.
The new Aquino administration also will have to deal with a large government debt and crumbling infrastructure. There are also the violent Islamist insurgency problems in the southern Philippines – this area is becoming one of the world’s hotspots for radical Islamist militancy.
Government spending accelerated under previous President Gloria Macapagal Arroyo’s fiscal stimulus measures during the global financial crisis. We estimate it was PHP1.46trn in 2009 and a huge PHP160.7bn in March 2010 alone. We expect the fiscal deficit to expand to PHP335.7bn (4.0% of GDP) in 2010, widening in 2011 to PHP395.4bn (4.4% of GDP), as growth in tax revenues are expected to take a hit in 2011 due to the weakness of the Philippines economy.
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