The Philippines emerges?
Something unusual is happening. The Philippines—beleaguered recipient of decades of scorn for trailing its Asian competitors economically—is suddenly the darling of a bevy of enthusiastic analysts. “Philippines emerges from economic shade,” a headline thundered on the Asia Times website. “Is the Philippines emerging as an investor safe haven against economic weakness in the West and potential turbulence in China?” journalist Joel D. Adriano asked.
Department of Budget & Management (DBM) Secretary Florencio Abad, in a surprisingly restrained tone given the unanticipated fawning, summarized analysts’ startling but welcome new appreciation for the Philippines. Speaking before the Foreign Correspondents Association of the Philippines (FOCAP) last Thursday he said, “top financial institutions and investment analysts say the Philippines will be among the top performers in 2012, and beyond.”
I’ve lived in the Philippines quite a few more years than most Filipinos have been alive. Over my 30-odd years here, the Philippines has infrequently but regularly approached the cusp of a historic breakout from savage economic obscurity. But it hasn’t happened.
Will it be different this time?
Mr. Abad is not alone in believing that chances are better than they ever have been. “Goldman Sachs said our country has the potential to become one of the top 10 contributors to global economic growth within the decade,” he said. And there was more. “Bank of America-Merrill Lynch said that the Philippines has become the third most-preferred market in the world for global fund managers after China and Indonesia.”
And there was still more good news. “Furthermore, HSBC has extended its optimism to as far into the future as 2050,” Mr. Abad noted, “when it said the Philippines has the potential to become the 16th largest economy in the world.” Unfortunately, speaking on the same FOCAP platform, Asian Development Bank vice president Stephen P. Groff was considerably less enthusiastic for the Philippines’ economic prospects.
“It is tempting to think of the Philippines as somewhat insulated from the global environment because about two-thirds of its trade stays within the region,” he said before pointing out the tradeoff. “However, its export products are too highly concentrated in electronics, particularly semi-conductors. This lack of diversification makes the Philippines quite vulnerable compared to its neighbors.”
Mr. Groff pointed out that about one fourth of Malaysia’s exports go to trade with emerging economies outside East Asia, compared to five percent for the Philippines. “Increasing that share could help the country shore up growth for the future,” he suggested.
Strong private consumption, “robust” remittance inflows from the Philippines’ exported army of laborers and professionals, increasing public investment and gradual improvement in exports may make it possible for the Philippines to grow at a 4.8% clip this year. If so, the Philippines will once again lag growth in the region, as usual. “We believe developing Asia will continue to show robust GDP (gross domestic product) of over 7% in 2012,” he said.
Who’s right? The investment analysts or Mr. Groff?
Mr. Groff says four things must happen for the Philippines to grow as fast as its developing neighbors. First, he believes that although the fast-growing IT-BPO industry is an “astounding” development, noting its expansion into high-value, non-voice services, he doesn’t believe that it can generate enough jobs to bring about wide-spread prosperity. “What’s needed is a stronger industrial base” to create jobs for “growing millions with lesser skills,” he said.
Second, Mr. Groff argued that inadequate infrastructure impedes growth, and that greater investment will create jobs and improve health and education services. Third, the Philippines should take better care of its natural resources to reverse damage to coastal and marine environments, farmlands, and forests. He noted declining air quality in cities, saying that nearly 5,000 premature deaths annually are due to exposure to dirty air.
Fourth, the development banker said better governance and political economy can improve perception of the Philippines, and thereby enhance its ability to eradicate poverty. That piece sounds a bit like a well-known campaign slogan. But Mr. Groff is serious. “On broad-based international indices, perceptions of the country’s quality of governance have been deteriorating,” he said.
Mr. Groff does see some signs that things are turning around. “There are indications that the current government’s reform orientation and commitment to good governance is beginning to increase investor confidence. Is Mr. Groff agreeing with the analysts after all?
Gee, after 30 years, I certainly hope so. And if so, I hope they’re right. I hope the Philippines emerges. I hope it emerges definitively. I hope it emerges for the long term.
(Michael Alan Hamlin is the managing director of TeamAsia and a Manila-based author. His latest book is High Visibility: Transforming Your Personal and Professional Brand. Write him at email@example.com and follow him on Twitter, Facebook and LinkedIn. Copyright © 2011 Michael Alan Hamlin. All Rights Reserved.)