November 21, 2025 l The Manila Times
The flood control scandal continues to rock the country, with no end game in sight. Focus has shifted from the money stolen to the lost revenue in the economy.
The Philippine Stock Exchange index plunged to a five-and-a-half year low this month due to a disappointing gross domestic product growth and weak foreign direct investments (FDI). The government reported that GDP slowed to a four-year low of 4 percent in the third quarter (Q3) from 5.5 percent prior — a spillover from the scandal which had affected government spending and consumer sentiment.
According to the Bangko Sentral ng Pilipinas, FDI slumped by 40 percent year-on-year to $494 million in August from $830 million in the same month last year.
In the first eight months, net inflows dropped by 22.5 percent to $5.179 billion.
Nothing to do with tariffs
Some analysts are attributing the economic slowdown to external factors, specifically the Trump tariffs. Our Q3 GDP numbers debunk this completely.
Overall export growth has been growing since 2023. Export data in September even show the United States topping our export markets. The Trump tariffs had nothing to do with the GDP downturn. This was entirely our own doing, and we cannot blame anyone but ourselves.
Winnable court cases and indictments are necessary to reverse this negative sentiment from local and foreign investors. The government needs to prove it is serious in punishing the thieves.
This may not be enough, though. We need significant structural reforms to prevent future theft of the national budget. The past actions of government punished some individuals, or some would say provided scapegoats. The same crimes mutated into different forms and continued unabated.
A study by Ronald Holmes that was presented to the Australian National University in 2019 explains why such crimes persist and why “pork barrel” politics never disappeared even after the fall of Marcos Sr. and the Supreme Court rulings that abolished it.
Holmes found that Philippine presidents themselves depend on “pork” to buy political support. He identified three main forms of pork and how these evolved over time. These are congressional pork which refers to the old Priority Development Assistance Funds-style money controlled by legislators; presidential pork which are funds the chief executive can release to allies; and quasi-pork or unprogrammed funds that can be released at the president’s discretion.
The study showed that real money is tied to presidential pork, but the head of state failed to anticipate unconscionable and massive congressional insertions over the past three years.
It showed that our biggest problems are weak institutions with deficient budget transparency, politicized agencies, and a lack of independent oversight which allowed funds to be distributed based on politics rather than real public need.
The country is not alone in this regard. Another study — published by the 2024 Nobel Economic Sciences laureates Aron Acemogli and James Robinson in their book “Why Nations Fail: Origins of Power, Prosperity and Poverty“ — revealed that a nation’s prosperity and poverty is determined either by its inclusive or extractive political and economic institutions, not by geography, climate or culture.
The authors explained that countries with extractive institutions — where power and wealth are concentrated in the hands of a small ruling elite whose political power exploits economic resources (specially government resources) — are doomed to fail.
Historical examples show the effects of colonial strategies that created extractive institutions in many parts of the world. These legacies often persisted after independence, with the ruling elites simply taking over.
This is exactly what is happening in the Philippines, with political dynasties as the ruling class. When their terms end, new leaders often replicate the same system because the institutional framework stays unchanged.
The book emphasizes that change is possible but difficult, stressing that institutional reforms need to be driven by broad social and political movements.
We briefly experienced it in the EDSA 1 and 2 revolutions in 1986 and 2001, respectively. It is painfully clear now that we have never learned the lessons.
The question is, what is the endgame?
***The views expressed herein are his own and do not necessarily reflect the opinion of his office as well as FINEX. For comments, email rsgoseco@gmail.com. Photo is from Pinterest.