Philippines ‘no longer a joke’

MANILA
That’s the verdict of an international investment expert, that the Philippines “looks poised to resume a period of strong growth.” In a recently published book, “Breakout Nations,” Ruchir Sharma of Morgan Stanley Investment Management, writes that the Philippines “is no longer a joke.”
“[T]he new president, Benigno ‘Noynoy’ Aquino III, probably has just enough support, and looks likely to generate just enough reform momentum, to get the job done.
“The Aquino name is still virtually synonymous with the promise of change: Benigno III’s legendary father, Benigno [Jr.], was the opposition leader whose assassination by [Ferdinand] Marcos supporters sparked the People Power Revolution that brought his mother, Corazon Aquino, to office in 1986. [The current President] Benigno III was originally dismissed in foreign circles as an unimpressive fifty-one-year-old bachelor who had lived most of his life with his mother and had not made much of a mark in a low-profile career as a Philippine senator.
“However, Filipinos saw him as an honest figure who could deliver on the Aquino mandate for change, and they were desperate after nine years of drift and decay under outgoing president Gloria Macapagal Arroyo.”
Sharma, who heads Morgan Stanley’s Emerging Markets and Global Macro, continues: “Aquino is delegating power to competent technocrats and seems to understand what needs to be done…. Aquino also needs to create an environment in which businessmen are confident enough to invest — which in return requires tamping down corruption, taking on the family tycoons who still dominate the economy, and enforcing contracts fairly. All those goals are combined in Aquino’s first big initiative: an invitation to private investors from all over the world to join in open bidding on a series of public-private projects to rebuild the highways around central Manila, begin a commuter rail network, and upgrade its dilapidated airport.” (Observer note: the public-private partnership initiative (PPP) mentioned by Sharma is off to a slow start, with only one project active so far under the initiative.)
On the Filipino diaspora, Sharma notes: “More than ten million Filipinos have left the country since the early 1980s for better prospects abroad and are now scattered across the world, from the United States and Japan to Britain and Germany, to Saudi Arabia and the United Arab Emirates. The cash they send home has been growing by double digits for the last decade, and now accounts for 10 percent of [gross domestic product], making these remittances the strongest growth sector in the Philippines.
“Many investment banks see this as a strength — remittances do help the balance of payments — but to have so many locals seeking work abroad is a major embarrassment, and it has created a subculture of entitlement among Filipinos who live off remittance checks rather than jobs. The stereotype of the Filipino expat is the maid in Hong Kong but many also hold corporate and middle-class jobs. The country needs some of that talent to return home.”
On this particular issue of a “brain drain,” Manila Observer disagrees that Filipinos abroad must come back home to the Philippines to help out in nation-building. My own stand on this is that there are enough bright Filipinos here who can do the job, given the right leadership and environment. Overseas Filipinos have gone abroad to seek greener pastures and should be allowed to find fulfillment and their destinies there, as I’ve written in a recent column.
Sharma provides a bit of nostalgia in his introduction of his section on the Philippines.
“When I visited Manila in early 2010, returning there for the first time in 12 years, the Philippines was still the undisputed laggard in Asia, a nation mired in chronic incompetence. My overwhelming impression was of how little had changed…. The same handful of family-owned conglomerates still dominated local markets, running everything from malls and banks to airlines and breweries, with no new players to be found.
“Forget high-speed trains: ‘Jeepneys,’ which trace their origin back to World War II, remained the preferred mode of public transportation. While nearly all other major Asian cities boasted fancy new airports, most international visitors to Manila had to trudge through a graying terminal commissioned in the 1980s.”
Looking ahead, Sharma writes: “[T]he Philippines…has some basic advantages…including a well-educated English-speaking population. For three decades it squandered those advantages, but there are signs of a turnaround, the most dramatic being the rise of the Philippines as a rival to India in ‘business process outsourcing’ — the industry that provides the operators who answer calls for customer service at almost any major global company.
“Call centers did not exist in the Philippines a decade ago, and now it’s a $9 billion industry employing 350,000 people. These centers are starting to open outside metro Manila and pop up all over the Philippines, to the point that some analysts think it may turn into another successful case of Southeast Asian archipelago capitalism. It could be made to happen, if the third Aquino can get the people-power revolution right.”
Indeed, if President Aquino can get things right, he will leave an unprecedented legacy of getting the government’s act together and improving the lives of the Filipinos.”
An international bestseller, “Breakout Nations,” as its title implies, lists the countries that are poised to lead the world in economic advancement. Subtitled “In pursuit of the next economic miracles,” the book lists Indonesia, Thailand, Turkey, Poland, the Czech Republic, South Korea, Nigeria, Sri Lanka, and the Philippines as the countries that are likely to lead the way, with Korea as the “gold medalist.”
Incidentally, Sharma notes that the Canadian economy “proved more resilient than most of its rich peers after the crisis of 2008, attributable in part to the spending restraint that Ottawa learned the hard way, during fiscal fiascos of the 1990s, and in part to the housing market that never suffered the mortgage bankruptcies that burden the United States. However, Canada didn’t benefit…from the recent boom in emerging markets, in part because it trades more with the developed world [than with the developing countries]. Canada also saw no increase in productivity growth, a sluggish trait typical of many commodity-rich countries, and a major reason why it is not likely to enjoy American-style manufacturing revival.
About the United States, Sharma writes that post-crisis US “remains flexible and innovative — the center of creativity in technology, still wide open to people and ideas, with the youngest population in the developed world and a very competitive (cheap) currency. Restoring balance to American self-perceptions, based on a reasonable calculation of weakness and strength, will have healthy political ramifications, reducing the pressure on Washington to raise new barriers to global trade, and to cast China as a growing geopolitical and military threat. There are already signs that this is happening….”
W.W. Norton published the 320-page “Breakout Nations.”
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