Divergent twins: PH and Thailand

In 1970, the economies of the Philippines and Thailand looked like identical twins. Almost five decades later, we all know how different the two economies have become. Let me recount and update the story, which I first wrote about in this column 13 years ago.

On at least three counts, the Philippines and Thailand were identical in 1970. We had the same population at 36 million. Our populations were growing at exactly the same brisk pace of 3.1 percent per year between 1965 and 1973. Filipinos and Thais had the same average income (gross domestic product per capita) at US$190. Just 10 years earlier, Filipinos were more than twice richer ($254) than the Thais ($101). In 1980 average income in the two countries was still identical at $684.

By 1990 the Thais (with GDP per capita of $1,508) had become more than twice richer than Filipinos (with GDP per capita of $715). Last year the numbers were $5,901 and $2,951, respectively, still with a 2 to 1 ratio. From 1980 to 1990 Thailand’s annual population growth rate had slowed down to 1.8 percent, while ours averaged 2.4 percent. By 2002 we Filipinos had numbered 80 million, while the Thais had only grown to 62 million. Thailand’s annual population growth rate has since slowed down further to only 0.3 percent, while ours is estimated at 1.6 percent. Today our population (103 million) exceeds that of the Thais (68 million) by nearly the entire population of Mindanao and the Visayas combined.

The swing in the Philippines’ relative fortunes can further be seen from the structures of the two countries’ respective economies. Agriculture contributed 32 percent of Thailand’s GDP in 1965; for the Philippines, the share was smaller, at 26 percent. That was a time when the University of the Philippines Los Baños campus was teeming with Thai agriculture students. I should know; I grew up there (my sister even had a Thai suitor)! We were more industrialized than Thailand then: Thai industry accounted for 23 percent of their output, while the industrial sector made up 27.5 percent in the Philippines. Services accounted for 45.2 percent of output in Thailand; in the Philippines the share was 46.7 percent. We were also identical twins on our foreign trade structures in 1965: Exports and imports each accounted for 17 percent of the two countries’ total production.

What a difference five decades can make. Thailand has become the industrial power hub in Asean, with industrial output now making up 35.7 percent of its total output (it had peaked at 40 percent). In the Philippines, the share of industry is 30.8 percent. Highly productive Thai agriculture now accounts for 9.1 percent of total output, while in the Philippines, agriculture’s share is 10.3 percent. Services now make up 55 percent in Thailand; in the Philippines it is 58.9 percent. Thai exports now account for 69 percent of their GDP, while imports are equivalent to 58 percent. In the Philippines, exports account for only 28 percent, while imports represent a bigger percentage at 34 percent.

In 1965, gross domestic investment made up 20 percent of GDP in both countries. Gross domestic savings as a percent of GDP were also nearly equal, with the Philippines slightly higher at 20.3 percent against Thailand’s 18.5 percent. By 1991 the situation had reversed dramatically. Thailand had 39 percent gross domestic investment, while the Philippines only had 20 percent. Savings had gone up to 30.4 percent for Thailand, but had hardly moved at only 21.3 percent for the Philippines. In 1998, Thailand attracted $7.8 billion in foreign direct investments (FDI), while we settled for $2.3 billion. With such a high saving rate coupled with three times as much FDI, it’s no wonder Thailand has less than a million unemployed workers while we have about 2.5 million.

Obviously, there is something terribly wrong with the way we have managed our affairs compared to our estranged twin of five decades ago. We have seen a dramatic reversal, sadly, from that time when it considered us its mentor, in agriculture and in many other things besides. As a reader once put it, “We just taught. We did not do.” Now it’s our turn to be taught.

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