Tourists are fleeing, investments are on hold and the peso is on the ropes as the Philippines reels from a Muslim guerrilla hostage crisis in the island of Basilan and other kidnappings.
When Abu Sayyaf gunmen raided the upmarket Dos Palmas resort off the
western island of Palawan on May 27 and seized 20 tourists and hotel
they also kidnapped Palawan tourism and took the entire
Philippine economy hostage, President Gloria Arroyo said.
The local currency slipped to a five-month closing low of 52.30 pesos against the dollar on Tuesday and traded below 52 to the greenback on Wednesday.
The stock market recovered partially Wednesday due to bargain-hunting,
but Benedict de Borja of Magnum International Securities said:
still have the never-ending Abu Sayyaf story and the thing about that
is, it is wreaking havoc on the local currency.
The Dos Palmas raid was only the the latest installment of a recurring nightmare. Last year another faction of the small Muslim guerrilla group raided the Malaysian resort of Sipadan and held for ransom dozens of western captives from its base in the southern island of Jolo.
The new crime wave has deflated the euphoria of the
power revolt that swept Arroyo to the presidency in January.
Press reports say the Abu Sayyaf has raised millions of pesos from its latest batch of captives, with a Chinese-Filipino businessman said to have sold his automotive bushings business to raise money to redeem his teenage daughter from the guerrillas.
The guerrillas are not alone in the kidnapping racket. A Singapore businessman left the country earlier this month after his wife paid a 166,000 US dollar ransom to a Manila gang.
Business thrives only in an environment of peace and stability. All
of this criminal activity definitely is not conducive to economic
growth, said Benjamin Chua, president of the influential
Filipino-Chinese Chamber of Commerce here.
We hope we will get past this particular crime wave very soon and
things will go back to normal so that we could be back to business so
to speak, he said on ABS-CBN television.
The hostage crisis comes at a bad time for the Philippines, which earlier downgraded its economic prospects amid a slowdown in the United States and Japan, its main export markets.
I would not go to the extent of saying that there has been capital
flight, but the general international economic slowdown is also taking
its toll on our national economy, Chua said.
The outlook received another hammer blow on Wednesday when US credit rating agency Standard and Poor's warned that Manila risked a sovereign credit rating downgrade because of a shaky fiscal sector and rising government debt.
creditworthiness could decline if the
government fails to stabilize and reverse its increasing debt
burden, it said, warning that this could also put further pressure
on the peso.
Tourism has been one of the main victims of the kidnappings with visitors packing their bags to leave central and southern Philippine resorts after the Palawan raid.
Last weekend a US government travel advisory urged its citizens to
exercise great caution throughout the Philippines due to
possible Abu Sayyaf attacks, bombings, communist guerrilla ambushes
and political violence.
President Arroyo is fighting back, rejecting ransom talks, clamping
down on news coverage of the hostage crisis and revealing plans to set
up a law enforcement
superbody to fight kidnap gangs.
Her government is also trying to reverse the negative sentiment, even resorting to giving all expenses paid overnight trips for journalists to Dos Palmas.
Take away two or three islands in the south which are not visited
by tourists anyway, the country still has 7,103 islands for the
Japanese to enjoy, Tourism Secretary Richard Gordon told Japanese
travel executives here last week.