Sunday, April 13, 2014

The Philippines as the Next Asian Tiger: My Economic Musings

A few weeks ago, a friend of mine invited me to an economic briefing on the Philippines with economist Bernardo Villegas as speaker. Having attended the same seminar a year earlier, it was not much of a surprise hearing of what Mr. Villegas had to say about the country's economic climate. In the years ahead, the Philippines, he said, is going to be Asia's next tiger economy.

For people who are so accustomed to hearing about the country's mishaps, the idea that the Philippines is somehow going to be the next big thing may sound absurd. The poverty incidence has not dipped with the recent episodes of robust growth ("jobless growth"). Add to that the political issues and the Filipinos' "historical amnesia" (as one of my professors would put it), the idea seems far-fetched.

Unlike most economists, Mr. Villegas subscribes to the "population optimism" camp. To him, the Philippines is at its "sweet spot" right now. The favorable macroeconomic conditions, paired with a young population, should enable the country to emerge as one of the strongest economies in the years ahead.

"You are fortunate. You are born at the right time," Mr. Villegas said.

The economist also pointed out that unlike the miracle stories of the tiger economies, the Philippines have enough population to ensure a strong consumer base. What this means, is that the country would not have to depend too much on export-oriented strategies that countries like South Korea, Japan, and Singapore had employed in the post-war years.

I can't help but think if I am, indeed born at the right time. The thing with economics is that, like statistics, everybody can use a metric and come up with different interpretations. Having an average of around 6-8% economic growth may be commendable, but with rising unemployment, underemployment, and the poverty incidence remaining unchanged, I am not so sure of the rosy picture that is being painted.

Another thing to ponder is the unequal development among regions. When I was in high school, I've always heard of the phrase "Imperial Manila." It refers to the development bias towards Metro Manila and its adjacent regions. As of yet, the national capital region (NCR) along with the surrounding regions comprise of around two-thirds of the country's gross domestic product (GDP). It is not much of a surprise considering much of the investments come in this region through rising condominiums, highways, and malls, among others.

And then, you have the environment.

In an article that I wrote in BusinessWorld, the Philippines ranked at the bottom half of the rankings when it comes to environmental performance. Granted that it scored high on mitigating child mortality (as also indicated in the tracking of its Millennium Development Goals or MDGs), much is left to be desired when it comes to other indicators such as preserving forest covers, preserving fishing sites, and limiting air pollution.

There are, however, bright spots as far as economics is concerned.

The country is said to be making progress with providing access to drinking water and sanitation, as indicated in both the international index and the MDGs. The country's financial institutions also seems to be stable, with the Bangko Sentral ng Pilipinas (BSP) being recognized as one of the world's better performing central banks.

Also, the manufacturing sector also looks to be rebounding after years of neglect. Last year, the sector has grown considerably that there might be a "renaissance" to the lagging sector. An increase in manufacturing is said to have a huge multiplier effect, especially when considering that it can employ more workers as compared to the services sector where job requirements are more restricted to those who have a decent educational background (and a good english accent).

I can see why Mr. Villegas is optimistic to the path that the country is in. The economic fundamentals of today are way better than compared to the last few decades of economic and political turmoil. I was having a conversation with one of the audiences in the seminar and told me that indeed, the current generation are lucky. If it would only takes us months, at worst, to go find work - for them, it would take years. Not to mention the technological advances that make finding jobs easier.

So, am I really born at the right time? Time can only tell.

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