Philippine economy: A new lease on life

Fitch Rating’s credit rating upgrade of the Philippine economy to investment grade — from BB+ to BBB- for the first time ever in history has given a tremendous boost to the country’s economy. A convergence of factors contributed to this milestone — among them paying down the country’s debt which started during the previous administration that continued on to the Aquino administration with its widely accepted reform initiatives. Needless to say, the over $80 billion in the country’s reserves mainly due to massive OFW remittances has been a major contributing factor. But one very important fact not seen by many is the amount of Filipino “stashed wealth” slowly finding its way back into the country. According to a bank source, an estimated $33 billion of Filipino wealth has been parked outside for several decades.

Fitch Ratings itself pointed out that “improvements in fiscal management begun under the Arroyo Administration have made general government debt dynamics more resilient to shocks” — culminating in the international ratings agency’s decision to lift our rating from junk status. Certainly, this latest development sends a strong signal to international business circles and serves as a vote of confidence for the country’s economy — once regarded as “sick and dying” and already in the ICU — which has been resurrected and given a new lease on life.

There has been a lot of interest shown in the Philippines lately not only as a viable investment destination but as a tourist destination, judging from the number of visitors in 2012 that breached the four million mark for the first time ever. This year, the target is five million visitors and so far according to DOT Secretary Mon Jimenez, we seem to be on track with arrivals averaging 400,000-plus in the first two months of 2013 — an increase of over 10 percent compared to the same period last year.

The record arrivals can perhaps be attributed to renewed interest in Asia and the very successful “It’s more fun in the Philippines” campaign, complemented by social media like Facebook and Twitter with the hashtag “#1forfunPhilippines” which is geared to boost local tourism. And though a target of five million for 2013 may look like slim pickings compared to our neighbors Thailand, Malaysia and Singapore which have all breached double digit marks, the numbers still represent a major achievement, underscored by the World Economic Forum’s Travel and Competitive Report 2013 that showed the Philippines going 12 ranks up (to 82nd place from 94th) and cited as the most improved country in Asia. 

The usual “doomsayer” suspects who continue to complain about the country’s economic gains not trickling down to the poorest Filipino families will never change their tune. But as pointed out by a local financial analyst — “patience is a virtue,” because it really takes some time for the positive effects to trickle down and be felt by majority of Filipinos. According to leading global management consulting and market research firm Lucintel, the Philippine economy is expected to reach $372 billion by 2018, citing major drivers that include a skilled labor force of Filipinos whose ability to speak the English language is considered a plus factor especially for such sectors as telecommunications, information technology and business process outsourcing, among many other industries.

However, a lot still needs to be done. Transport Infrastructure is a major concern with airports, seaports and major road networks all important ingredients that potential business investors look for. As pointed out recently by investors from Europe, better infrastructure will attract more opportunities for business from the private sector with more jobs created, resulting in better consumption and more taxes for the country. Aside from infrastructure (and the continuing bureaucratic red tape in some government offices), a looming power crisis particularly in Mindanao are some of the things that worry investors and the potential derailing of the peace process due to the Sabah adventure. Outside factors like the Chinese aggression and the North Korean threat are potential downers to the economy.

Stratbase Research Institute president Dindo Manhit also warned against the recurrence of the boom-and-bust cycle that the country has gone through in the past three decades if the problem of poor infrastructure, inefficient government bureaucracy, corruption and over-protectionist constitutional provisions are not continuously addressed. Admittedly, amending certain economic provisions in the 1987 Constitution will make the investment climate even more attractive to businessmen in view of the economic integration that ASEAN is targeting by 2015.

Aside from fostering unity by transcending linguistic, cultural and religious differences, a major aim of ASEAN integration is the creation of an economic community to strengthen the economies of Southeast Asian nations and turn ASEAN into an influential bloc in the Asia-Pacific region and not unlikely, even the rest of the world considering the downturn that continues to afflict Europe. 

However, one of the stumbling blocks in achieving integration is the perception that each nation is more concerned with pushing its own agenda or interest first. Ahmed Saleem, secretary general of the eight-member South Asian Association for Regional Cooperation or SAARC (whose members are Sri Lanka, Bhutan, India, Maldives, Nepal, Pakistan, Bangladesh and Afghanistan) hit it right on the nose when he said regional integration is an important building block in a highly globalized world — but “the ugly face of protectionism” is a major hindrance to global trade and commerce.

God has blessed our country many times before and the Fitch credit upgrade is perhaps one more blessing that is perfectly timed for Easter. As our Jesuit classmate, Fr. Lenny Sumpaico once pointed out to us, “Count your blessings, dear classmates, and stop complaining.” Absolutely true!

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