If we are to believe foreign observers from respected business publications and ratings agencies, we are finally getting our economics right. The numbers are good. The GDP growth rate for the first quarter was surprisingly robust at 6.4 percent. As the Wall Street Journal observed, it “defied most forecasts as well as the mood in the global economy.”
Observes Bloomberg Businessweek: “President Benigno Aquino’s government has made progress getting the Philippines’ fiscal problems under control, with the budget deficit as a percentage of gross domestic product shrinking from 3.7 percent in 2009 to just one percent last year, according to Bloomberg chief economist Tamara Henderson.”
And Moody’s upped its outlook on the country’s credit rating to “positive,” citing prudent fiscal management. Finance Secretary Cesar Purisima was understandably ecstatic as he predicted we may yet soon be rated investment grade. Wall Street Journal gushed, “Filipinos have reasons to smile. Asia’s perennial underachiever is outperforming.”
Bloomberg Businessweek had a similar take. “The Philippines has long stood out in Southeast Asia as a consistent underperformer, its economy weighed down by a legacy of graft and instability dating back to the bad old days of Ferdinand and Imelda Marcos… What growth the Philippines has enjoyed has often come from its army of construction workers, domestic helpers, and others who have left the country to find work.”
As I wrote the other week, a book had also been published by the emerging markets head of Morgan Stanley that was upbeat about the Philippines becoming a “breakout nation”. Ruchir Sharma believes we are all set to exceed expectations in a world where even the leading emerging nations called the BRICs are starting to flounder together with Europe and the United States.
Sharma is particularly impressed with how we are about to break out of our misfortune of more than 40 years of wandering in the economic desert. He wistfully recalls the good old days “back in the 1960s when the Philippines had the second highest per capita income in Asia, behind only Japan...” He takes this to mean we have what it takes to win back old glory but only if our politicians get it right this time.
“The failure of the Philippines is typically attributed to chronic political instability,” he says. He however admits that explanation is not enough. “Thailand has been even more unstable but its economy outperformed the Philippine economy through the 1990s...
“The difference is that at least until the 2000s, Thailand’s unstable leaders made better economic choices – from controlling debt and restraining crony capitalism to making the country more attractive to foreign investment, as Japanese car companies turned Thailand into their Asian factory away from home.”
Sharma, as well as all those upbeat foreign observers seem to be banking heavily on P-Noy becoming a success. He points out that “Filipinos saw him as an honest figure who could deliver on the Aquino mandate for change, and they were desperate after nine years of drift and decay under outgoing president Gloria Macapagal Arroyo.” Can P-Noy really deliver?
Actually becoming a breakout nation is not a slam dunk... even the very optimistic Mr. Sharma concedes that. “It could be made to happen if the third Aquino can get the people power revolution right,” he says. But will he?
For the present, Sharma thinks Aquino needs “to create an environment in which businessmen are confident enough to invest – which in return requires tamping down corruption, taking on the family tycoons who sill dominate the economy and enforcing contracts fairly.” That takes political will. Does P-Noy have the guts to take on the ruling social elite and go against his class?
That objective of finally breaking out is as bureaucrats would say, “doable” if we take Indonesia’s recent progress. Sharma points out “Indonesia’s relative success over the past few years shows what the Philippines could become: it takes only a modicum of political stability and some basic economic sense...
“The Philippines also has some basic advantages over Indonesia – including a well-educated English-speaking population. For three decades it squandered those advantages, but there are signs of a turn-around, the most dramatic being the rise of the Philippines as a rival to India in ‘business process outsourcing.’”
Getting the people-power revolution right is all about politics rather than economics. For years, decades in fact, our politics had been screwing our economy. Patronage politics, a rent-seeking elite and a lack of a national vision or sense of nationhood have prevented any economic take-off from happening.
I get a little queasy when I read these positive reviews of our current prospects only because I see no real change in the political environment that could nurture the development that folks like Sharma are waxing poetic about. I share their positive views on P-Noy but unlike them, I know enough about us to realize that even P-Noy does not seem to have the political will to see transformative change through in the time allotted for him. He doesn’t look messianic enough to lead us to the promise land.
Thus, I see all these positive sentiments as mere economic hopes and dreams that can only come true with political and social cohesion. We as a people have yet to understand and accept that we face a common problem of not just raising GDP but making economic growth inclusive. Someone in my Facebook newsfeed verbalized our problem quite well: the time will come when the poor among us will have nothing more to eat except the rich.
Indeed, politics is key to resolve problems in the economic realm. This is true not just in our country but as a recent Financial Times op/ed piece asserts, also in Europe. The problems in Europe are worsening because its politicians refuse to see the Greek, Spanish, Portuguese problems as their own.
Says FT’s Gillian Tett: “In the past few decades, most investors have operated as if the world is a place in which the key variables could be plugged into a spreadsheet or computer model… now those ‘quants’ and rocket scientists find themselves at sea. Computer models alone can no longer calculate meaningful probabilities about what will happen next in the eurozone.
“Instead, what really matters now in places ranging from Finland to Greece are non-quantitative issues such as political values, social cohesion and civic identity… Seven long decades ago, when trainees joined institutions such as JPMorgan and Citibank, for example, they were taught that they could not assess credit risk as cash flow, alone. Questions of character mattered, too, be that of companies, individuals or countries.”
Applied to us, I guess she is saying that all these great quantitative reviews of the Philippine economic performance by ratings agencies and the encouraging economic statistics today are rather tentative at best. All these must be examined within the context of our national character that is reflected in our politics.
Because we have disappointed investors in the past, the trust level for our political leaders may not be solid despite the good reviews. Without investor trust, our favorable economic numbers cannot be expected to deliver even on our lowered expectations.
And our politics can’t get any better unless we are able to get a national consensus on our economic strategy. As Sharma pointed out, Thailand’s political situation was more unstable than ours in the past but whoever was in power carried out the same investor friendly policies that made Thailand the powerhouse in Asean it is now.
In our case, I doubt if DTI can even say what industries we have competitive advantage in that they should promote. We have not thought things out. We have no grand plan. Our political leaders lead this nation from the seat of their pants.
Given the state of our politics and politicians today, I am not sure having bits and pieces of good news from the edge will amount to a whole lot any time soon. I am even afraid all these good reviews may have lifted any sense of crisis and with it, a sense of urgency to get things done.
We, P-Noy, senators and congressmen have to get it right. We have to stop letting politics screw up our nation’s economics. We have to be that “breakout nation” because the alternative is simply untenable.
Ospital
Somebody texted this to me.
Bugoy 1: Pare… anong mangyayari kung busisihin ang mga SALN ng mga kongresista dahil sa nangyari kay Corona?
Bugoy 2: Naku Pare… baka mapuno ang mga bilanguan.
Bugoy 1: Mali ka, Pare.
Bugoy 2: Bakit? Anong mangyayari?
Bugoy 1: Magkakaubusan ng wheel chair at mapupuno ang mga ospital.
Boo Chanco’s e-mail address is bchanco@gmail.com. Follow him on Twitter @boochanco