PH economy: Not just catching up, but leaving neighbors behind



First word
MY upbeat title did not come from Palace communicators, who are probably hearing it for the first time. I took it from my continuing economic research and some very recent reports by international and national media on the economy.

Four reports this year have persuaded me that the Philippines is entering, if it has not already, a period of rapid economic expansion. This isn’t just another tease that the country will become the newest Asian tiger. In two decades, I daresay, the country will become one of the biggest Asian economies.

4 reports of economic strengthening

My journalistic exhibits are the following:
A report by Bloomberg News last Wednesday, November 29, headlined, “An investment boom in the Philippines leaves neighbors in the dust,” and bylined by Karl Lester M. Yap and Myungshin Cho.

Economy’s physical assets surge more than 10percent in one year. Capital investment in the Philippines is surging past the rest of Southeast Asia

2 .A report by the Nikkei Asian Review this year, entitled “Duterte’s six-year plan to spread the wealth” and bylined by Michael Flores. The president is not handcuffed by the problems that stymied his predecessor, Benigno Aquino 3rd; he has found other financing schemes through a major change in Philippine foreign policy, and they are likely to make all the difference.

3, The Economist last week, while noting that the “Philippines has the most persistent poverty in Southeast Asia,” reported that President Duterte is addressing the poverty problem and appears resolved to change the lives of the country’s poor.

4. A report and an editorial by the Manila Times on the decision of the Duterte government to lift restrictions on foreign ownership in the economy.

Leaving others in the dust

It’s not often that we see Bloomberg excited about the Philippines; but this year it has been very positive, and nowhere more so than in its report last week. If the Philippines did leave its Asean neighbors in the dust, the report left many Filipinos gasping.

Bloomberg reported: “In the first nine months of this year, net physical assets in the Philippines grew 10.4 percent from a year earlier. That compared with a 6.9 percent increase in Malaysia and 5.8 percent gain in Indonesia, according to data from statistics offices.

“There’s reason to remain bullish on the outlook. Philippine government spending jumped 28 percent in October, the largest rise in almost a year, with another record budget planned for 2018. Companies are also joining in: Metro Pacific Investments Corp. plans to invest as much as $16 billion through 2022 on road, water, and power projects, while Ayala Land Inc. is boosting capital spending to a record $2 billion next year.

“President Rodrigo Duterte is building a network of railroads and highways across the archipelago in an ambitious $180 billion infrastructure program. Investment firing up adds another engine to the economy, headed for a sixth year of growth exceeding 6 percent and among the world’s best performers.

The report’s conclusion could not be more cheering; “After lagging its neighbors for decades, the Philippines is catching up. Growth in net physical assets—or gross fixed capital formation—averaged 14.4 percent in the five years through 2016, the fastest in Southeast Asia and almost twice as fast as Malaysia, according to the World Bank.

“Duterte wants to transform the Philippines into an upper-middle- income country by the end of his term in 2022, and the cornerstone of his vision is a plan referred to as ‘Build, Build, Build.’ It includes the capital’s first subway and a 653-kilometer railway to the south.”

Duterte’s six-year plan

According to Michael Flores of the Nikkei Asian Review, President Duterte has a six-year plan to spread the wealth in the Philippines. He wants better transport links for the rural have-nots.

“Public-private partnerships, which yielded mixed results under former President Benigno Aquino 3rd, will remain a pillar of infrastructure development. But the institutional delays that dogged the Aquino administration will be bypassed, because Duterte has looked at other financing schemes, including development assistance from key trading partners like China and Japan.

“The government has set guidelines for tapping Chinese funding following Duterte’s visit to China in October.
The diplomatic shift has borne fruit. On March 7, Beijing and Manila resumed formal economic dialogue for the first time since 2011. During their talks, China agreed to fund three projects worth a total of $3.4 billion, including a railway link between Manila and the southern tip of Luzon, the main island. Chinese companies, meanwhile, have committed to invest $10.4 billion, according to the Philippine trade department.

“The improved relations with China did not go unnoticed in Tokyo. In January this year, Japanese Prime Minister Shinzo Abe visited the Philippines with an investment package worth 1 trillion yen ($8.6 billion) spread over five years.

“Philippine companies are responding to Duterte’s focus on less-developed parts of the country. San Miguel is constructing a brewery in Cagayan de Oro City, in Mindanao, as part of a $300 million expansion plan.
Universal Robina is also building snack factories there. SM Prime Holdings, the nation’s largest real estate company, is planning more shopping centers outside Manila.”

Persistent poverty gets attention

The Economist, perhaps the world’s most influential weekly news magazine today, took up the plight of the Filipino poor, and Duterte’s policies to address “the most persistent poverty in Southeast Asia.”

The Economist reported: “Low growth has been one key reason for the poverty problem. Between 1980 and 2005 the average annual increase in GDP was just 0.63 percent per person, a pathetic pace by regional standards. More recently a leap in remittances from the millions of Filipinos who work abroad and a boom in the outsourcing of back-office work to the country by Western firms have boosted growth. Forecasts suggest that GDP will expand by over 6 percent this year, as it did last year.

“But the growth is concentrated in Manila and the two neighboring provinces, which generate around 60 percent of the country’s output. Not only do people in the farthest-flung parts of the archipelago not share in the prosperity, they also do not have the money to move to Manila or the education to land a job if they get there….

“The government of President Rodrigo Duterte has pledged to help poorer Filipinos with all these problems. Mr. Duterte recently signed an executive order to speed implementation of a law passed five years ago to make contraception more easily available to the poor.

“Mr. Duterte’s government, in a comfortable position fiscally, is also spending more. His first budget laid out P3.4 trillion ($68 billion) of spending—an increase of 12 percent on 2016. Infrastructure is an important focus. New airports, roads and bridges will appear thanks to a planned increase in expenditure on such projects from 5.2 percent of GDP last year to 7.4 percent of GDP in 2022. These public works are critical to boosting the fortunes of the poorer bits of the country, by connecting them better to Manila.”

Lifting limits on foreign ownership

I end this survey of notable journalistic reports with the reportage and commentary of the Manila Times on the decision of the Duterte government to ease foreign ownership limitations in various industries in order to generate more foreign investments in the economy, spur competition, and create more jobs.

President Duterte signed on November 21 a memorandum order directing government agencies to fast-track the determination of other business sectors that can be opened up to foreign participation both through administrative means or through the amendment of pertinent laws.

The will to make reform may be finally the biggest factor why the country is performing better today in Southeast Asia under Duterte.


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