Philippines in economic despair amid hostage crisis MANILA: A sense of cynicism and despair is creeping over the Philippines as the economy sours and the government wrestles with a never-ending hostage crisis in the south. Abu Sayyaf gunmen gatecrashed the party as President Gloria Arroyo and most of her 76 million countrymen celebrated the peaceful downfall of her corruption-plagued predecessor Joseph Estrada. Nearly four weeks after the Muslim rebels snatched 20 Americans and Filipinos from a western resort, tourists have become scarce, investment plans are frozen, the local currency is near record lows and the government faces a credit downgrade. Other kidnap gangs are exploiting the crisis by targeting wealthy businessmen in Manila. Among recent victims were at least two Singapore nationals who are understood to have paid huge ransoms. "Psychology really affects the fundamentals of the economy," finance secretary Jose Isidro Camacho said on Radio Mindanao Network. "You can't really change that until you solve our law and order problems." Deputy economic planning secretary Gilberto Llanto said: "There will be a negative impact, we should not deny it." However, "it's not enough to swamp or bring down our economic targets." The military had boasted for days that the gunmen, who number fewer than 500, were surrounded on Basilan Island. But they conceded on Thursday that a rescue was, in fact, not imminent. Around 5,000 troops have cordoned off a 30 square-km area, "but this is jungle," said armed forces spokesman Brigadier General Edilberto Adan. "We're not offering any excuses, but that is really the nature of the war there," said defence secretary Angelo Reyes. "We should not allow mere bandits to paralyse us," Arroyo said. But crime is just one of her problems. The Today newspaper called on Arroyo to lead the nation out of its "atmosphere of hopelessness, of a sinking peso, of a region mired in slow-to-negative growth". After posting modest 4 per cent GDP growth in 2000, Manila has slashed its 3.8-4.3 per cent target and now aims for 3.3-3.8 per cent growth. Exports are plunging, government finances are deteriorating and peace talks with communist guerrillas are on hold after a wave of killings by the rebels. The rising budget deficit prompted the US rating firm Standard and Poor's to warn Manila on Wednesday that it risked a credit downgrade. A downgrade would raise the Philippines' cost of borrowing, not a good news because lowering economic growth targets means giving up on four billion pesos ($76 million) in revenues, officials say. The peso, which slid nearly 4 per cent in a matter of weeks to 52.35 pesos to the dollar midweek, and kidnappings are the people's favourite topics. A Manila columnist, in doomsayer's scenario, wrote the exchange rate could eventually reach 100:1. "In the short term this may also cause political instability," University of the Philippines sociologist Walden Bello said. Filipinos were outraged when the police issued statistics this week showing that crime rates were actually down 10 per cent in the five months to May. "Never in my lifetime has peace and order been so bad, and the (police) can have their cloud-cuckoo-land statistics for breakfast," wrote former Estrada press secretary Fernando Barican in the Philippine Inquirer newspaper. One of his employees was "robbed and almost killed last week", and "he didn't waste his time by reporting it." (AFP)
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