Scrapping old tags
“What are the chances of scrapping, for good, the derisive tag of the Philippines as the region’s never-do-well?” Manuel de la Torre e-mailed. His query stemmed from the economy’s 6.4-percent surge in the first quarter.
That growth, tracked by analysts from Standard & Poor’s to HSBC, trounced the earlier market consensus: “GDP growth is forecast to recover to 4.8 percent in 2012.”
That ranked the Philippines “Asia’s second fastest growing economy after China.” Once Asean’s perennial “laggard,” the Philippines grew faster than Indonesia (6.3 percent), Vietnam (4 percent), Singapore (1.6 percent) and Thailand (0.3 percent), the National Statistical Coordination Board said.
Is this smoke and mirrors? Does the feel-good mood stem from what people call a “halo effect”? asks columnist “Banyan” in the Economist.
“In a country fond of nicknames … the unlikely saint is [Benigno Aquino III] known as Noynoy, or P-Noy,” Banyan adds. “He swept to power in 2010, partly on a wave of affection … for Corazon Aquino, the first president after the dictatorship of Ferdinand Marcos. An undistinguished record as a senator did little to build [P-Noy’s] hopes of a bold presidency.”
P-Noy is an aberration in a country where politicians salivate to take over Malacañang. Like his mother, he was prodded into running. “Once elected, P-Noy crosses off, on a calendar, the days until his term ends, just as his mother did.” That’s another of those unverifiable yarns.
Mr. Aquino went on record, early on, that he’d step down in 2016. This heeds the constitutional ban on a president’s reelection. That stance buttresses P-Noy’s clout for reform. He has not been dogged by the corruption charges that shackled predecessors Marcos, Joseph Estrada and Gloria Macapagal-Arroyo.
Once, the Philippines was the basket case of Southeast Asia, David Pilling of Financial Times recalls. Its gross domestic product of $2,200 per capita bracketed it with Bolivia. Manila was way behind Bangkok with a GDP per capita of $5,400.
“But there are definite signs that the country—with its young population of nearly 100 million people, the world’s 12th largest—has turned a corner.” In its study of the world in 2050, HSBC highlights “the striking rise of the Philippines, which is set to become the world’s 16th largest economy, up 27 places.”
“There are three reasons to be hopeful, if not yet exactly cheerful,” the Financial Times says. “First, the external position improved dramatically.” Manila is a net creditor to the International Monetary Fund. Overseas remittances from the roughly eight million Filipinos working abroad held steady despite Middle East turmoil.
Adds the Financial Times: “Second, the country is getting its fiscal house in order. The deficit has narrowed to a manageable 2 percent…. Subsidies on fuel and power, the bane of many Asian finance ministers, were scrapped several years ago.
“Third, the political situation is vastly improved. The conviction of a Supreme Court chief justice is about big fish.” Tax evaders are being tracked down. “The tax take has edged up even without necessary tax reform. That a sitting President can be stripped of land (like Hacienda Luisita) is a hopeful sign that the separation of powers enshrined in the constitution is being honored.”
After Arroyo’s 9-year presidency, which in its final years was widely seen as corrupt, Mr. Aquino is “liked as a welcome change,” the Economist states. “He has gained kudos for trying to bring GMA, presently detained, to account.” That includes fresh tenders for “suspicious contracts awarded by Mrs. Arroyo’s government … and cleanups in the tax and customs authorities.”
(In a Pulse Asia survey conducted nationwide from May 20 to 26, Mr. Aquino scored an approval rating of 67 percent, down from 70 percent in March. Parallel surveys by Social Weather Stations find the President holding unprecedented “good” ratings over the last two years.)
Can these reforms be sustained? The Philippines is a country where “giving things a sleek appearance sometimes seems to matter more than fixing sordid reality.”
The economic prospects are good. The stock market has been one of the world’s rare performers this year. The population is young, the banking sector strong, mineral wealth still abundant. The economic potential of Mindanao may further be unlocked by election reforms and the arrest of warlords.
Efforts to jack up revenues—a paltry 12 percent of GDP—by “sin” taxes on alcohol and tobacco could be hijacked by embedded lobbies. It won’t be the first time. Despite its aging leadership, the communist insurgency simmers. China’s intrusion into waters of Southeast Asian countries’ exclusive economic zones bugs the region.
“A first step is to resolve pervasive constraints,” says the Asian Development Bank. “For the Philippines, these calls for three steps: (a) good governance; (b) improving the business environment; and (c) accelerating development of the physical, institutional and social infrastructure.”
Indeed, “we must unclog the bottleneck in infrastructure,” the mint-new Socioeconomic Planning Secretary Arsenio Balisacan said. “The 7 percent to 8 percent GDP growth target is doable.”
“The President’s instruction is to speed it up, especially the infrastructure,” Balisacan said. “It’s a tedious process that the bureaucracy often finds difficult to speed up. We need to declog the bottleneck in private investment.”
Undoing decades of corruption can’t be done overnight. But those derisive old tags may yet be scrapped—finally.
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