Best in Asean, second best in Asia
After two and a half years, President Aquino’s “Kung walang corrupt, walang mahirap” mantra, loosely translated as good governance and good economics, has gained traction. Reason to smile, but not yet to celebrate.
Surging economy. Amid the serious economic problems engulfing the developed world, notably the sovereign debt crisis in Europe and the “fiscal cliff” in the United States, the Philippines has indeed shown remarkable resilience and resurgence.
This year, our economy grew 6.3 percent in the first quarter, 6 percent in the second, and a fantastic 7.1 percent in the third, for an overall 6.5 percent growth for the first nine months of the year, making the Philippines the best in Asean and second only to China in Asia.
Small wonder Christine Lagarde, the first woman managing director of the International Monetary Fund, hailed the Philippines for being “probably the only country in which [the IMF] increased its growth forecast as opposed to other places in the world where [the IMF] actually decreased [its] forecast.”
Many years ago, the IMF considered the Philippines an economic basket case. Not anymore. Since 2006, it has graduated from IMF tutelage and has now become an IMF lender, no longer a borrower. For this graduation, President Gloria Macapagal-Arroyo—as I have said before—deserves some credit.
Evidence of growth. Critics belittle this economic upturn, saying that P-Noy had no part in it because it was caused mainly by the toil of Filipino workers in business process outsourcing (BPO) and by the remittances of overseas Filipino workers (OFWs). Moreover, while “hot money” infests the stock market, the more important foreign direct investments or FDI are minimal.
True, Filipino workers helped propel the economy. True also, we need more FDIs. Nonetheless, we cannot ignore the unusually high business morale, the ebullient stock market (again, a record performance), the rise of government revenues, and the ratings upgrade of our economy by reputable international agencies. The low rates of interest, inflation and foreign exchange all point to economic stability in the midterm.
True, the economic figures have yet to impact the poor and the underprivileged. Realizing this, P-Noy’s economic team ably led by Finance Secretary Cesar Purisima continued and expanded the Conditional Cash Transfer program started by President Arroyo, while awaiting the sustainable results to uplift them.
In all economies that practice free enterprise, be it Singapore, South Korea or Thailand in our part of the world, or the United States, Germany or Brazil in other parts, the immediate beneficiaries were the entrepreneurs and pioneers. But eventually, the manna spread to their employees, customers and the general public. How to hasten the spread to the middle class and the poor, and get out of the old “trickle syndrome,” is the question.
Stated differently, the issue is how growth can be sustained over the long term, and how the middle class and the poor can be assured of equitable participation in the bonanza. The World Bank (WB), from its Korean-American president Jim Yong Kim to its effervescent Japanese country director Motoo Konishi, point to “inclusive growth” as the answer.
Inclusive vs. extractive. To help me understand inclusive growth, WB sent me a recent 529-page book, “Why Nations Fail” by Baron Acemoglu and James A. Robinson. The book explains:
“Inclusive economic institutions … enforce property rights, create a level playing field, and encourage investments in new technologies and skills… Extractive economic institutions … extract resources from the many by the few and … fail to protect property rights or provide incentives for economic activity.
“Inclusive economic institutions are … supported by, and support inclusive political institutions, that is, those that distribute political power widely in a pluralistic manner and are able to achieve some amount of political centralization so as to establish law and order, the foundations of secure property rights, and an inclusive market economy.” (p. 429)
On the other hand, “extractive economic institutions are synergistically linked to extractive political institutions, which concentrate power in the hands of a few, who will then have incentives to maintain and develop extractive economic institutions for their benefit and use the resources they obtain to cement their hold on political power.” (p. 430)
Filipinizing the above jargon, we can sum up the WB thesis thus: To banish poverty as soon as possible and achieve prosperity for all, not just for some, our economic institutions must provide a level playing field, a healthy respect for property rights, maximum tolerance for innovation, zero corruption, zero nepotism and zero cronyism, and our political institutions must demonstrate transparency, accountability, integrity, industry, trustworthiness and adherence to the rule of law.
I close with a quote from BPI president Aurelio Montinola III’s speech a few days ago, justifying why I earlier said we can smile but not yet celebrate: “[W]e are in the cusp of breaking into Tiger Economy and Investment Grade category. However, we must remember that seeing the peak is very different from scaling the peak, and that we were once so close in the mid-’90s before the Asian crises threw us back to earth. Therefore, we cannot relax, and in fact must work even harder together to move the Philippines from today’s darling to tomorrow’s sustainable and inclusive growth.”
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