Geared toward faster growth
I am more bullish than the government in forecasting a GDP growth of 6 to 7 percent for 2012. This year will see the beginning of a surge in investments in both the public and private sectors. Investors’ confidence is at an all-time high, as shown in a recent survey conducted by the Makati Business Club. The government has finally recovered from the “paralysis by analysis” syndrome of 2011.
A 7-percent growth is no longer new to the Philippine economy. In 2007, the year when the subprime crisis exploded, our GDP grew by 7.1 percent. In 2010, with the global economy still gripped by the financial crisis, Philippine GDP grew by 7.6 percent. I have no doubt that despite the expected slowdown in Europe, the United States and Japan, the Philippine economy can grow at 7 percent or more in the coming 5 to 10 years, replicating the experiences of India in the early 1990s and China in the early 1980s. Like these two countries in their own times, we are reaching our “tipping point” in 2012.
What seems to be a sudden, revolutionary and dramatic transformation is in fact the result of at least a quarter of a century process of slow and painstaking reforms—political, financial, market, social and governance reforms—that began in 1986 after the ouster of the authoritarian Marcos regime. Unlike in still existing authoritarian regimes, as China and Vietnam, where reforms can be rammed down the throats of the citizenry, the democracy restored under the presidency of Cory Aquino was true to the description given by Winston Churchill: “Democracy is the worst form of government except for all those other forms that have been tried from time to time.” It has taken over 25 years for the country to reach a critical mass of reforms that can now make it possible for the economy to register an annual growth at 7 to 10 percent in its GDP, the rate of growth necessary to make a dent on the intractable problem of mass poverty, in which some 26 to 30 percent of the population live in dehumanizing conditions. The year 2011 was a watershed in which objective observers like the HSBC perceived the country as poised to grow at double its historical rate of 3 to 4 percent. The perception of those who have become bullish about the Philippine economic situation is that in the first full year of the administration of President Benigno Aquino III, the Philippine economy has finally accumulated a critical mass of reforms that will enable it to start growing at 7 percent or more over the next 20 years.
Over the last 26 years under various presidencies, there have been a series of step-by-step reforms: restoration of democratic institutions under Cory Aquino; privatization, deregulation and liberalization under Fidel Ramos; intensified focus on rural and agricultural development under the short-lived administration of Joseph Estrada; and massive investments in infrastructure under Gloria Macapagal-Arroyo. These reforms, built on top of one another, needed one last ingredient for reaching the tipping point: good governance. The second President Aquino is contributing this final ingredient. He is showing the political will to fight graft and corruption at all costs. This explains the more optimistic view of the Philippine economy among both local and foreign investors.
The more positive perception about the Philippine economy among foreign investors was obvious to those of us who recently conducted a non-deal investment road show in three key US cities (Washington, New York and San Francisco). I traveled with a team of private-sector representatives from the mining, construction, real estate, and BPO sectors and met with record numbers of US and other potential investors. The sessions were literally standing room only (SRO). In fact, because of strict building code regulations in the United States about room capacities, some interested parties had to be turned away. We fully realized that the Philippines is finally on the radar screen of investors from all over the world, especially in such sectors as agribusiness, infrastructures, energy, mining, tourism, logistics, health care, IT-related services and high-value manufacturing.
The investment bankers we met expressed the opinion that before 2012 is over, the Philippines will get a credit rating of investment grade, following closely the footsteps of Indonesia. It is not a coincidence that it was the aggressive campaign against corruption in the first five years of the administration of President Susilo Bambang Yudyohono that turned around negative perceptions on Indonesia. It is the unwavering political will of President Aquino to uproot corruption in the Philippines that has enabled the country to reach the tipping point toward rapid economic growth.
Dr. Bernardo M. Villegas is senior vice president of the University of Asia and the Pacific. His e-mail address is [email protected].
