MANILA, September 13, 2005
 (MALAYA) BY MAX ESTAYO - President Arroyo may have dodged the impeachment case against her, but she will be an a lame duck leader incapable of rallying her constituency to her agenda, US investment bank Morgan Stanley said.

Morgan analyst, Daniel Lian said the likelihood of Arroyo finishing her term will not even improve investors’ sentiments on the country.

Investors will remain "very cautious" about the Philippines, Lian said.

Lian said the local equities market has been broadly underperforming the region, the least to attract foreign investors.

"As the markets remain tiny, many Asian investors simply stay out of the Philippine equity market completely," the analyst said.

The dismissal of the impeachment cases against Arroyo rocked the markets, with the peso falling more than 10 centavos to 56.25 to the dollar.

The president is currently in New York for a series of meetings at the United Nations. The Philippines will preside over this year’s meeting of the powerful security council.

The president has brought along key members of her economic team including Finance secretary Margarito Teves, Bangko Sentral ng Pilipinas gov. Amando Tetangco Jr. and Trade & Industry secretary Peter Favila for meetings with US investors.

The trip will be the first for the new economic team and also the first since the government unlatched the legal hurdle on the controversial reformed VAT law, which is key to improving investors’ outlook on the local economy.

The Philippines, Southeast Asia’s biggest debt seller, has just completed its $4 billion external borrowings with the successful issue of $1 billion global bonds last year. The bonds were priced 410 basis points higher than comparable US treasuries.

However, Morgan Stanley is less optimistic of the country’s chances considering the volatile political situation.

"We have been very cautious on the Philippines because we fundamentally believe Ms. Arroyo will not be able to defeat the oligarch that dominates the country," Lian said.

"While she may be able to serve out the remainder of her term, the fact remains that her authority and power have substantially been weakened by political storms in recent months and she is likely to become quite ineffective," Lian added.

The US investment bank’s views for the Philippines were contrary to favorable reviews on the Thai and Singaporean economy.

Morgan Stanley said the worst may be over for Thailand’s oil deficit while the country’s mega projects will cushion the economy ahead.

By contrast, in Indonesia, the investment bank said the decision to keep or remove the oil subsidy, which has been shrinking the country’s current account and battering the rupiah, will only result in ugly trade-offs.


President Arroyo left last night to attend the annual meeting of the United Nations. As The Economist of London said in its Sept. 3 issue, she is joining other heads of states without probity.

The way she squeezed herself out of the threat of impeachment is far from admirable. And the world knows it.

But the colleagues that she will meet in the UN assembly will be polite to her. They are always polite, like they were to former Russian President Nikita Khrushchev who banged his shoes on the table.

That was a show of temper.

Mrs. Arroyo’s case is different. She is perceived to have cheated her way to victory before she grabbed power from a president with the highest mandate.

Her supporters in the House threw out the impeachment bid by refusing to accept the amended charges.

It’s very much like going to the party of your in-laws when they know you have not been faithful to their daughter. One usually feels ill at ease. If I know President Arroyo she would look aglow and victorious.

Chief News Editor: Sol Jose Vanzi

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