From Hospital Arrest to Prime Minister? Arroyo Rises in Manila

(Bloomberg) -- Former Philippines leader Gloria Arroyo has staged a political comeback, and opponents say she’s gunning for even more power.

Shortly after the 2016 victory of President Rodrigo Duterte, an old friend of Arroyo, she was freed after almost five years in hospital detention on charges of election fraud and corruption. In July, lawmakers loyal to Duterte voted her in as speaker of the House of Representatives -- the most prominent position she’s held since her rule from 2001 to 2010.

Arroyo’s current legislative term expires in June 2019, and she’s denied that she’s positioning herself for a proposed prime minister position that would be created through a shift to federalism advocated by Duterte. But that’s not enough to convince opposition lawmakers such as Congressman Teddy Baguilat.

“The takeover of the house leadership already shows how Arroyo can easily become prime minister,” Baguilat said.

‘Duterte Beware’

Arroyo, who has a doctorate in economics, has been a key figure in Duterte’s efforts to fight the fastest inflation in almost a decade. Since she was elected speaker, Arroyo’s been attending committee hearings and expediting debates on key economic bills to ensure that they are passed.

So far, she’s had some notable successes. Several bills that had been stuck for a year or more -- including removing caps on rice imports and a proposal to boost central bank capital and allow it to issue its own debt -- passed under Arroyo. Last month Duterte’s plan to cut corporate income taxes also won approval in the house.

All these proposals must be approved by the Senate and by the president before they can be enacted. Her toughest challenge may be breaking an impasse with the Senate on how to proceed with Duterte’s dream of shifting the country to a federal system of government.

Arroyo’s top aide, Elena Bautista-Horn, didn’t reply to a mobile-phone message seeking comment on speculation that the speaker wants more power.

“My goal is straightforward -- I want to help achieve the legislative agenda of President Duterte,” Arroyo told a business summit on Oct. 18.

Recent surveys show the 71-year-old Arroyo remains unpopular with voters. Still, she’s tight with Duterte, 73, who calls her “ma’am” and claims to have been Arroyo’s confidante when she was running the country. He owes her a lot, Duterte has said.

“As long as Duterte exudes strength, Arroyo will be a good ally in Congress,” Baguilat said. “However, once Duterte’s popularity and hold on power wanes, he better beware."

‘Perfect Partner’

Arroyo came to power in Jan. 2001 after a popular revolt ousted Joseph Estrada from the presidency, and she won a disputed election in May 2004 for a fresh six-year term. She dealt with a fair amount of economic woes, with the peso sinking to a record low in 2004 and inflation climbing to a nine-year high of 10.5 percent in 2008.

Duterte’s allies in the House have great things to say about her.

“I think she saves the day -- she’s a perfect partner of the administration,” House Minority Leader Danilo Suarez, a supporter of Arroyo, said in an interview earlier this month. “She knows the problems and she knows the solutions.”

Soaring Prices

Yet for all Arroyo’s moves, Duterte’s two-year-old administration is facing a backlash as the highest inflation since 2009 threatens to hinder one of Asia’s fastest-growing economies. Duterte has said that running the economy is not his area of expertise, and he’s under greater pressure to step up.

Arroyo is presenting herself as someone “very knowledgeable” on economic issues, said Malcolm Cook, senior fellow at Singapore’s ISEAS Yushof Ishak Institute. “Publicly expressing support and showing closeness to Duterte is good politics as he is the most popular and powerful politician in the country,” Cook said.

Her key legacy as president was the introduction of a law that increased the value added tax, despite entrenched opposition. Her administration was constantly rocked by coup attempts and scandals.

Political Rifts

She was arrested in 2011 by the government of Benigno Aquino on charges that she had a hand in rigging the 2004 elections. She denies the allegations. A local court is still hearing this case while Arroyo is out on bail.

In 2004, as the peso plunged and overseas investors fled, Arroyo acknowledged the Philippines was already in a fiscal crisis. Her presidency marked the Philippines’ most aggressive borrowing and highest interest rates after the regime of dictator Ferdinand Marcos.

Arroyo’s comeback was more due to political rifts in the House and less about her own political ambitions, according to University of the Philippines Professor Gene Pilapil. He called her a “safe choice” given her term is expiring.

Edwin Gutierrez, the London-based head of emerging-market sovereign debt at Aberdeen Standard Investments, said there’s little chance of an Arroyo comeback.

“Her administration was generally a disappointment despite her background precisely because of the corruption,” he said. “So I don’t think it’s going to cause much excitement.”

To contact the reporter on this story: Andreo Calonzo in Manila at acalonzo1@bloomberg.net

To contact the editors responsible for this story: Ruth Pollard at rpollard2@bloomberg.net, ;Clarissa Batino at cbatino@bloomberg.net, Daniel Ten Kate

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