Fallout from a scandal

President Estrada says he never exerted pressure on Securities and Exchange Commission Chairman Perfecto Yasay regarding the BW Resources case. Yasay says his testimony before the Senate was overblown by the media. There are noises about the President's impeachment for trying to influence an investigation being undertaken by what is supposed to be an independent quasi-judicial body. But the House of Representatives is dominated by the President's party so impeachment is unlikely. Yasay himself thinks the President's actions do not warrant impeachment. The beleaguered SEC chief has promised to step down as soon as Congress passes the Securities Act this year.

In this word war, the biggest loser is the Philippine stock market. Last year it was the worst performing in the region, and a major reason was the scandal surrounding the wild fluctuations in the share prices of BW Resources. Rumors of insider trading and price manipulation have bedeviled the Philippine bourse, and the BW case highlighted the problem. Yasay's testimony under oath before the Senate this week -- whether accurately reported or taken out of context -- hardly helped restore investor confidence in the market.

Yasay said the President asked him last year to drop the SEC's probe into the stock dealings of BW Resources, a gaming firm owned by a presidential friend. He felt pressured, Yasay said, to clear BW and its owner. The President admitted talking to Yasay but denied exerting pressure to whitewash the case. As stock market analysts have noted, whatever the outcome of the probe will now be suspect.

Whether or not there was presidential pressure, the case has raised a disturbing question: Can the Philippines guarantee a level playing field to all investors, presidential friend or not? It may take time before we get an accurate answer to this question. The only saving grace in this scandal is that it may finally lead to reforms that will clean up and strengthen the Philippine stock market. Unless these reforms are implemented, the fallout from this mess will be felt long after Yasay has left the SEC.