Three good things

Michael Alan Hamlin

Posted on May 7, 2009

CNN news anchor Kristie Lu Stout, leading into a segment on Manny Pacquiao’s crushing victory over Ricky Hatton on Sunday, said Monday morning that while most news out of the Philippines is negative, Pacquiao was a rare good news story that not only sent the Philippines into a frenetic, nationwide celebration but also captured the attention of the world. “Even communist insurgents and military soldiers set aside their weapons to watch the fight,” another announcer earlier noted.

“They had to mention communist insurgents,” I thought to myself as I listened to the breezy commentary. Stout’s surprise that good news can come out of the Philippines seemed sincere and unfeigned. The reports were typically punctuated with Pacquiao and Hatton’s struggles with poverty, the loyalty of their impassioned fans, and in the case of Pacquiao, the political ambitions he holds along with his closest supporters.

Visibility like everything else involves tradeoffs. Among sports fans in general and boxing enthusiasts around the world in particular, the attention Pacquiao focused on the Philippines communicated the reality that this country is capable of producing world-class athletes. The cost of that message was the context of poverty, insurgency, and the baggage associated with a developing economy that has little excuse for its poor development record.

Pacquiao’s accomplishment, the acknowledgement of his championship status, and the affection for his humility was a huge international story, and that story will continue to play out as the world’s “best pound-for-pound” boxer considers his next fight. The Las Vegas bout wasn’t the only positive news story, however, that came out of the Philippines last week. There were at least two other substantial stories, that will have profound impact on the quality of the Philippines’ visibility, albeit in smaller but very critical market segments.

The first was news that the Philippine Stock Exchange (PSE) is taking a leading role in promoting regional cooperation among Asian stock exchanges. PSE hosted the 28th general assembly of the Asian and Oceanian Stock Exchanges Federation (AOSEF) two weeks ago in Cebu, but the meeting was first reported last week. The AOSEF has 19 member exchanges in North and Southeast Asia. PSE president and CEO Francis Lim said last week’s meeting “would serve as a springboard to enhance cooperation among exchanges.”

Increased cooperation among Asian exchanges could have a dramatic effect on the region’s capacity to put capital to productive use, an urgent concern as a result of the Global Financial Crisis. Southeast Asian countries have very high savings rates for the most part, with Singapore leading at 51.47% of GDP. In one sense that’s remarkable; in another, it’s lamentable because this capital is sitting idly instead of contributing to economic development. Indonesia, Malaysia, and Thailand have savings rates approaching 30% to 40%. The Philippines has the lowest savings rate, 10.41%. That doesn’t mean that Philippine capital is at work, unfortunately. It means that most Filipinos don’t make enough to save much.

For the rest of the region, savings can’t be utilized efficiently because Asian exchanges don’t have the capacity to absorb this capital. Southeast Asia’s largest exchange, the Singapore Exchange, is only the 22nd exchange in the world in terms of capitalization. Although the PSE is the region’s oldest exchange, it is also its smallest. However, if Southeast Asia’s exchanges, including the Philippines’, were to be integrated, collectively they would form the 12th-largest exchange in the world, just behind the Swiss Exchange.

That’s large enough to both attract fresh global capital and efficiently disburse savings to regional ventures. In the Philippines’ case, it would benefit in terms of visibility by integrating into a powerful economic bloc. Incidentally, if all 19 AOSEF members are included in the integration effort and not just Southeast Asia, the regionally integrated market would account for 27% of global markets.

The third piece of good news had to do with the announcement by Thomson Reuters that it will set up a global support center for its legal content initiatives in the Philippines, creating potentially at least hundreds more value-added jobs. Thomson Reuters already has significant operations in Manila, including content operations, customer support, IFR magazine sales, corporate advisory and investor relations services, and some finance administration.

Vice president for Global Content Centers Cheryl Giraulo said, “Thomson Reuters knows the landscape of Manila, and we know the unique capabilities of the local labor pool. We are confident that we can sustain our growth here, and this move reflects our commitment to growing our capabilities here. The Philippines was the logical location to set up a center for complex services such as the ones the (legal) division provides.” (Disclosure: PSE and Thomson Reuters are clients of my firm.)

The PSE and Thomson Reuters initiatives show that the Philippines has much to offer global investors. The Pacquiao story is a heart-warming one, and has its own substance. But PSE and Thomson Reuters are creating world-class jobs and prosperity.

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