Rock stars

Back in the early ’70s, Tim Groser remembers his fellow Kiwis being “terrified” of opening their borders even to their friendly but giant northern neighbor, Australia.

At the time, Groser was starting out as a finance officer in the New Zealand government. “We thought Australia might kill us,” he recalls.

But New Zealand plunged ahead anyway with trade liberalization. Last January, HSBC predicted that the country with 4.5 million people and about 40 million sheep would be “the rock star economy” of 2014, with its growth seen to outpace other developed economies including Australia.

Groser, now the trade minister of New Zealand, can cite the experience of his nation in touting the dividends of daring to transform “from a deeply scared, very small economy to a very open economy.”

He made a pitch for trade liberalization during his visit in Manila last week with a delegation of executives representing New Zealand’s top private companies.

As we know, liberalization also produced dramatic results for what has become the world’s second largest economy: China. Its newfound prosperity, made possible by three decades of peace in its neighborhood, has allowed China to build up its external defense capability. Unwisely for its current leadership, Beijing is now threatening its own economic momentum by flexing its military muscle way beyond its shores and destabilizing its own neighborhood.

In this part of the world, it’s not China that’s regarded as the year’s economic rock star but the Philippines – even with GDP growth dampened by last year’s natural disasters.

“Considering the problems of southern China, Thailand, labor problems in Indonesia… the Philippines, even at 5.7 GDP is a star. Not just a rock star but the brightest star among the rocks,” Ebb Hinchliffe, executive director of the American Chamber of Commerce in the Philippines, told me. “And it will remain so for the next several years. Way beyond 2016.”

The Kiwi private delegation, led by director John Monaghan of dairy giant Fonterra, visited Manila because, Groser said, they see the Philippines “poised to become a major economy” and they want “to become part of this Asian success story.”

As you can see, despite our corruption scandals and natural disasters, foreigners maintain their bullish outlook on the Philippines.

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Groser spoke at a luncheon last Friday in Makati hosted by his embassy together with business groups representing his country, Australia, the Philippines and the US.

He recalled that in his youth, “Asia was not seen as a source of opportunity… to be diplomatic about it,” by Kiwis and Australians.

Groser remembers Swedish Nobel laureate in economics Gunnar Myrdal writing in “Asian Drama” that “Asia is a mess.” In 1973, Vietnam was still at war, Indonesia and Malaysia were emerging from konfrontasi, and China was still suffering from Mao’s ruinous Cultural Revolution. South Korea was rebuilding from the ashes of a bloody civil war. Communist insurgencies raged and in our little corner of the planet, martial law was in its infancy.

“How things have changed,” Groser said. “How things have changed for the better.”

He credits Asia’s dynamic rise to the peace and stability that set in after the conflicts were resolved, and to economic liberalization.

“Protectionism never made any sense in the past,” Groser said. “If you’ve got protectionism, it’s nuts… protectionism is like a metal shield protecting – frankly – vested interests.”

He was pitching for Philippine participation in the Trans-Pacific Partnership, which US President Barack Obama also pushed for during his recent visit in Manila. Philippine interest in the TPP has been tepid; participation will require amending certain restrictive economic provisions in the Constitution.

Groser, who once served as his country’s ambassador to the World Trade Organization, said the new global trade system provides an opportunity for small countries to penetrate big markets.

For a small economy to compete with the bigger ones, one either offers dirt-cheap labor and goods or high-value, specialized products and services. The latter is a strategy adopted by Scandinavian countries, for example. New Zealand has a similar strategy, according to Ambassador Reuben Levermore. A premium is placed on world-class quality to compete successfully in the global economy.

This kind of competitive culture is not yet wired into our culture. Only a few families continue to control the major economic activities, and they are happy to have a captive local market. It’s easier than competing with the world.

The Kiwis are undeterred and want to expand their participation in Philippine economic activities.

Prime Foods NZ, for example, has partnered with Alliance Select and is exporting salmon from General Santos City to several countries.

Orion Health has launched a partnership with The Medical City, with the Kiwi global firm providing health software to the hospital chain.

During the visit of the business delegation, New Zealand’s GNS Science signed an agreement with leading Philippine geothermal company Energy Development Corp., extending for another year their joint geothermal development projects in Chile, Indonesia and Peru.

With these partnerships and other economic interactions between the two countries, maybe some of New Zealand’s best practices can rub off on us.

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We can also take a leaf out of the Kiwis’ book in turning tragedy into fuel for economic growth.

That rock star tag from HSBC, which projects NZ growth this year at a “fast” 3.4 percent, was attributed to three factors: rising global dairy prices, a boom in Kiwi housing construction, and spending on the reconstruction of earthquake-devastated Christchurch and other parts of the Canterbury region.

With reconstruction activity not seen to peak until 2017, there’s continuing room for economic growth in New Zealand, according to HSBC.

In our case, there’s a huge pile of donor money available to finance the rebuilding of the areas flattened last year by Super Typhoon Yolanda and the powerful earthquake. But the funds to this day are not being properly mobilized and the reconstruction effort is a mess.

Major foreign donors at least are committed to a long-term aid program in the disaster zones. But aid utilization is held hostage by inefficiency, politics, red tape – all the problems you can think of.

Shortly after the typhoon struck, the Management Association of the Philippines suggested that the government simply download software, which provides the template used in the rapid rebuilding of Indonesia’s Aceh province after it was destroyed by the 2004 tsunami. The private sector can then come in and assist in the rebuild.

But the government insisted on drawing up its own master plan for “building back better,” according to MAP president Gregorio Navarro.

“The playbook is there,” Navarro sighed as he told me that MAP has raised $12 million so far from private donations alone from different areas.

And the opportunity is there for faster economic growth – if we can seize it, like the Kiwis.