War on Iraq Could Be Disastrous for Philippines

The Middle East hosts 1.3 million Filipino workers and should the US attack Iraq, the Philippines will find itself a major casualty.

Overseas workers pump close to US$10 billion annually into the Philippine economy, a major chunk of which comes from those employed in the Arab countries.

In this year's first half alone, foreign exchange remittances surged 43.2 per cent to US$4.14 billion, enabling the Philippines to boost its reserves and stabilise the peso-US dollar rate.

Analysts fear catastrophic consequences on the Philippine economy should war with Iraq lead to massive dislocation of the workers and a disruption of remittances. Unemployment will soar, reserves will plunge and the peso will plummet against the US dollar which, in turn, will trigger a rise in inflation and constrict the economy's growth prospects.

Finance Secretary Jose Isidro Camacho admitted that a war in the Middle East could spell disaster for the Philippine economy because of its dependence on the money the workers send back home.

But the impact on the local economy would largely depend on the scope and duration of the conflict. 'The wider and longer it is, the bigger the impact on oil prices and the peso,' he said. If a war is confined to Baghdad, it will hardly cause any ripples since there are only 112 Filipinos in Iraq, said Mr Camacho.

Oil supply is another worry. The Philippines maintains a 70-day inventory, but the threat a possible war poses to an oil-dependent economy has prompted it to consider other measures to beef up stocks.

One option is to turn to regional oil producers Malaysia, Indonesia and Brunei for supply under the Asean emergency petroleum sharing agreement. The scheme commits Asean oil-exporting countries to supply oil to a fellow member experiencing a shortage, provided it would be for domestic consumption only.

Arab nations account for the bulk of Manila's oil needs, led by Saudi Arabia, making up 32 per cent; Iran, 20 per cent; United Arab Emirates, 20 per cent; Oman, 9 per cent; and Qatar, 7 per cent.

But war worries have prompted the Philippines to turn to suppliers outside the region, notably Russia. A top-level government mission leaves shortly for Moscow to arrange a 'contingency oil reserve' deal with the Russians, officials say.

'We have to take prudent steps to protect the national interest,' mission head Congress Speaker Jose de Venecia Jr said. 'We need to build up a stockpile just in case there will be an Iraqi showdown.'

Officials fear that if the Iraq crisis spreads to other Middle East countries, oil tankers from Europe, Japan and Asia will not be able to enter the Persian Gulf to get oil from traditional sources in the Organisation of Petroleum Exporting Countries (Opec). 'We have to be alert and prepared for any eventuality. All other countries are already acting,' said Mr de Venecia.