NAIA incident seen to have minimal effect on markets

The international financial community was initially shocked by the three-hour drama at the air traffic control tower of the Ninoy Aquino International Airport but the tragedy was viewed as an isolated event.

Just the same, the incident at the NAIA tower is expected to affect markets this week, especially on the peso which has just recovered from the shock that attended the impeachment of Supreme Court Chief Justice Hilario Davide.

The Bank of International Settlements (BIS) is meeting in Bangkok this week, with about 55 central bank governors around the world including Bangko Sentral ng Pilipinas (BSP) Governor Rafael Buenaventura in attendance.

Buenaventura said he was asked about the crisis but it was immediately apparent that the seizure of the facility was treated as a police matter and not a military event with political consequences. Buenaventura said in a telephone interview that the swift resolution of the crisis allayed fears that the Philippines is still facing serious threats of a military coup but he was quick to add that markets would still react to the apparent holes in the security of key facilities in the country.

"It will not help the peso," Buenaventura said. "It is clear to them that this was not an organized military action but just the same, it gives an image of uncertainty that the markets will not ignore."

The NAIA tower was seized by retired Air Traffic Office chief Panfilo Villaruel who was subsequently shot and killed while trying to surrender.

According to Buenaventura, the event would not generate the same impact as an actual military action but he said it still created a perception of disorder. "Mukha tayong magulo lalo," he said.

On the other hand, market sources said that despite the government’s attempt to downplay the issue, it was becoming apparent that the unusually high incidence of armed protest actions had gone beyond the usual pre-election confusion.

"By now, it’s clear that we’re not just seeing the usual pre-election disorder," said one market player.

"There is something fundamentally wrong with this situation and it is being brushed aside. The market sees that."

The siege at the NAIA tower is the second of such "armed protest" this year. The first one was in July when about 200 military men took over the Oakwood Apartments in Makati and declared that they were"protesting corruption and lack of direction in government".

Just last week, the Arroyo administration declared that the government was "under threat of opportunistic destabilization" efforts and placed both the military and police on "maximum alert", ordering checkpoints to be set up around Metro Manila.

The elections in May 2004 is expected to spawn more instability and the market is anticipating further deterioration in the foreign exchange rate and portfolio investments as the country descends into pre-election chaos. – Des Ferriols