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Failed Mutiny in Philippines Casts Doubt over Economic Forecasts - 2003-07-28


Financial markets in the Philippines fell Monday after the attempted weekend military mutiny in Manila. Executives hope business will quickly return to normal, but the uprising casts a shadow on earlier rosy economic forecasts.

The military mutiny in the Philippines brought a sharp slum to financial markets there, with investor confidence the main casualty. Until the uprising, economic forecasts were positive and share prices were up by 26 percent for the year.

The stock market index fell four percent and the Philippine peso slipped more than one percent in early selling, but signs of recovery appeared later in the day.

Analysts say they fear the mutiny will scare foreign investors at a time when the Philippines faces serious competition from China and other countries in Southeast Asia.

A senior Australian trade commissioner in Manila, Alan Morrell, said day-to-day business should quickly return to normal, but long-term investment could suffer. "There's no doubt that the events of yesterday Sunday were quite damaging from that [long-term] perspective. The Philippines has been trying to improve its competitiveness and position re foreign direct investment so any event that hints of instability certainly isn't helpful," Mr. Morrell said.

While there is much that would attract foreign investment to the Philippines, such as a well-educated, English-speaking workforce, unrest has put the country at a disadvantage compared to its more stable neighbors.

Robert Sears, executive director of the American Chamber of Commerce in Manila, said current investors will stay, but it may be difficult to attract new money. "The short-term impact will be short lived. The fact is that investors here continue to reinvest and have done so over the years. [But] it's always been a bit difficult to get new investors to come," Mr. Sears said.

Mr. Sears said investors were expected to respond positively to President Gloria Macapagal Arroyo's pledge to set up an independent commission to investigate the mutiny.

The weekend crisis in the heart of Manila's financial district came only days after a survey by the influential Makati Business Club showing Philippine executives were confident about the economy, forecasting a growth rate of more than four percent this year.

Concerns voiced in the report included government debt, poverty and adequate power, but the primary concern was peace and order.

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