TIMES: MIDDLE EAST TURMOIL, PHILIPPINE FALLOUT
MANILA, FEBRUARY 28, 2011 (TIMES) RICARDO SALUDO - OUTSIDE the Middle East itself, the country that would arguably be the most affected by the gush of People Power in the region is none other than the Philippines. Congress is right to worry about the expected fallout from continued Mideast unrest, although it is premature to grant emergency powers or take any major action without an expert and thorough assessment of what may be looming for the Middle East, how possible scenarios might affect the Philippines, and what we could do to cope.
Let's do a bit of that future gazing now. In this writer's Strategy and Innovation postgraduate course at Oxford, the scenario planning module stressed that looking ahead at possible developments should always make sure to work out the worst cases, even if they are very unlikely to happen.
Then if the worst-case scenarios happen, the strategic planner has already given those contingencies some serious thought and might even have responses planned, if not prepared. And if there's one thing true about game-changing, history-wrenching events, they were almost always deemed highly improbable, even impossible. Just look at recent upheavals in Tunisia and Egypt, or the eruption on EDSA 25 years ago.
So what's the worst that can happen in the Middle East against the Philippines? Senator Francis Escudero and administration congressmen in the House point to wider unrest and violence driving home many of the 1 million overseas Filipino workers in the region, most of them in Saudi Arabia. The legislators also worried about escalating global oil prices spiked by worries over possible supply disruptions due to the turmoil, as we are seeing in Libya, among other places.
Already, world markets are pricing in Middle East unrest, with the benchmark Brent oil hitting $111 a barrel, even after Saudi Arabia raised crude production to allay fears over Libya. And what if Saudi Arabia itself faced protests against the House of Saud or rivalry among clan members, which had even led to civil war since the family began ruling in the 18th Century? The geopolitical and economic impact on the world would be immense, from leaping petroleum prices and global market and financial turmoil, to increased instability and even military conflict in the Middle East.
The International Monetary Fund expects limited world economic losses as long as oil stays at current levels, keeping to its 4.4 percent global GDP growth forecast this year and 4.5 percent next—for now. But looking five to 10 years ahead, as the six-year Aquino Administration must, in the event of upheaval in Saudi Arabia, then the Philippines would be hit by massive inflation, dislocation of hundreds of thousands of OFWs, and mounting foreign exchange losses due to costlier oil imports, lower remittances, and reduced global investment in a world of economic downturn and political volatility.
There's more. With repression gone or moderated, radical Arab leaders and groups can operate more openly and aggressively. They could very well influence government policies and actions in newly democratic or democratizing states, and even catapult its stalwarts to national office. Witness the 2006 landslide victory of the Hamas extremist movement in the Palestinian Authority, even defeating the decades-old Fatah party, which had ruled since the territory was established in 1996, and had fought against Israeli rule since since Fatah's founding in 1959 by the late Yassir Arafat.
With militant groups pressuring governments and possibly even gaining power, Middle East nations could become even more hostile and aggressive toward not only Israel and the West, but also other countries accused by the radicals of oppressing Muslims. The Philippines might then be threatened with sanctions such as oil export restrictions and OFW hiring limits or bans. Or worse: a resumption of military aid to Mindanao separatists and perhaps even the Abu Sayaff. On the other hand, if authoritarian regimes adopt the Qaddafi instead of the Mubarak response to people power, then brutal repression would almost surely spur violent uprising and open a wider door for extremists to gain clout and even take over if the rulers are deposed. In the resulting cycle of repression, anti-regime violence, and more repression, oil production and shipments would be targeted for bombings, and ordinary people could face terrorist threats. There would be more restrictions on the flow of people, funds and information from abroad, including OFWs and their remittances.
What should the Philippines do? Full-scale scenario planning is recommended in one or both of the following conditions: great uncertainty in the strategic time horizon, or the possibility, even remote, of a hugely adverse turn of events with broad and massive impact on an organization or a country. The current Middle East situation certainly qualifies on both counts.
Hence, President Benigno Aquino 3rd should consider creating a special strategic planning group to draft medium-term policies, programs and contingency plans in response to Middle East scenarios. The body could be set up under the National Security Council with senior officials and experts from key agencies including the foreign affairs, defense, economic planning, energy, finance, and labor departments, plus the Bangko Sentral.
Scenario planning usually plots in a matrix of possible outcomes not just one, but two or three crucial factors affecting the organization or country's future. The factors to be plotted should be largely independent of one another, rather than being the main influence directing each other's direction.
For instance, Middle East political and economic conditions could be matched with global warming trends, policies and initiatives. Both are have huge potential impact on the Philippines, but would not be a leading force shaping each other's futures. Other possible factors that could be matched with Middle East stability are US economic and currency health, China's economic and political rise, and the development and deployment of non-oil power and transport technologies.
How badly could the Philippines suffer from escalating Middle East turmoil? The biggest impact would probably come from more expensive oil, which would push up transport costs throughout the country, with indirect impact on the costs of most goods and services. Rising prices would also force up interest rates worldwide, as monetary authorities here and abroad try to curb inflation, and lenders and investors demand higher returns to offset the declining real value of their funds.
For the Philippines, both rising prices and interest rates would hurt consumers and dampen investment, including the booming property market.
The possible OFW exodus from the Middle East would impose mammoth humanitarian and socio-economic burdens affecting tens of thousands of Filipinos in the region and their millions of dependents back home. The current Libya evacuation is nothing compared with a Saudi airlift.
The demands on government funds and logistics would be unprecedented; so would the financial dislocation of countless OFW families. And with the decline in their spending, businesses and workers serving that big market would also suffer.
In response to the Taiwan threat to delay or stop OFW hiring, President Aquino assured that other countries are keen to hire Filipinos losing jobs on the island. OFWs and recruiters know how much easier it is said than done to transfer from one place abroad to another. That kind of talk would be even more laughable in a wholesale evacuation of Filipinos from the Middle East.
Rather than big talk, the government must do serious and expert planning, and begin the long-term undertaking to reduce dependence on the Middle East for both energy and jobs, while putting in place measures to secure OFWs and, if necessary, bring them home en masse. There is no need to rush into emergency powers, but we should do much more than give empty assurances about employment elsewhere.
After celebrating People Power, let the land of its birthplace now brace for the coming aftershocks of its Arab eruption.
Ricardo Saludo heads the Center for Strategy, Enterprise and Intelligence (ric.saludo@censeisolutions.com), providing expertise in strategy and management, enterprise development, intelligence and Internet.
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