The Philippines’ BRICS future

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Last week, Brazil, Russia, India, China and South Africa, or the BRICS nations, met for their fifth summit in South Africa. The growth prospects in these economies are no longer immune to the severe debt crises in the West. In the short term, India and South Africa may be at the biggest risk of sovereign-rating downgrade.

Among the emerging economies, the Philippines is best placed for an upgrade. It is favorably positioned to sustain growth in an exceptionally grim international landscape.

During the past decade, I have used much time to analyze and to consult on the transformation of the major advanced and large emerging economies worldwide. After the global crisis of 2008-09, this transformation has only accelerated.

When Goldman Sachs identified the emerging group of potential successors to BRICS a few years ago, the Philippines also made it into the list, in the footprints of two other major Southeast Asian nations—Indonesia and Vietnam—that have attracted much more foreign direct investments so far.

In the aftermath of the Ramos era, the inclusion was based mainly on the economic potential rather than a sustained growth record. In 2002, the Philippines gross domestic product (GDP) still amounted to $81 billion, in current prices. Today, it has tripled to $241 billion.

In the aftermath of the global crisis, the Philippines is one of the few nations in which forecasts are revised up by financial analysts. In January, it reported a 6.8-percent year-to-year growth, which made it the growth leader in Southeast Asia. Almost half of the recent growth can be attributed to private consumption, which has been coupled by investment, especially in construction. Due to the impending mid-term elections in May, government spending will accelerate through the spring.

Business process outsourcing now exceeds the value of the remittances flows. Diversification is accelerating into non-electronic exports. Meanwhile, the Philippine peso has been appreciating significantly, along with resurging capital inflows. The acceleration of domestic demand since the first quarter of 2012 reflects the country’s solid macroeconomic fundamentals, stronger government finances, and high confidence in the Aquino government’s commitment to reform.

Along with current account surpluses and foreign exchange reserves, the growth record has given rise to a more diversified export basket, while shielding the economy from very challenging international headwinds.

Complacency not an option

In the past few months, one investment bank after another has argued that the Philippines is on its path for a bright BRIC future.

The beauty of the BRICS projections is that they allow policy architects to reflect on (very) long time perspectives. The trap of the same projections is that, when they create a sense of inevitability, they can lull even the most promising growth stories into complacency.

In the Philippines, delivering the growth promise is predicated on accelerated structural progress. According to various competitiveness indicators, the country has made dramatic strides in improving competitiveness, often from a very low base. The perception is that corruption and red tape are finally addressed decisively. In addition to the strong macroeconomic performance, the financial sector has become supportive of business activity.

Despite these positive trends, weaknesses remain to be addressed, including the poor infrastructure, various market inefficiencies and labor market rigidities. As the Aquino administration knows only too well, the economy needs to shift from consumption toward investment, both public and private. Sectorally, this requires rising productivity in agriculture, while requiring less dependence on low-wage and low-skill services and more on labor-intensive manufacturing and high value services.

In BRICS economies, such changes have typically preceded periods of sustained growth. However, they have required difficult policy reforms in agriculture, manufacturing, business and labor regulations, and social protection, in order to raise the incentives for entrepreneurship and job creation. In turn, these reforms make possible greater public investment in health, education, and infrastructure.

Inclusive growth

Today, the Philippines is at the verge of receiving an investment-grade rating by the major rating agencies. In the absence of adverse surprises, most agencies are likely to upgrade the Philippines economy within a year and a half, if not sooner. Nonetheless, significant challenges of poverty remain. Growth is not yet inclusive.

Except for Brazil, inequities have typically increased in all emerging economies during their high-growth phases, while job-creation has been strong and unemployment low. In the Philippines, the story is different because labor outcomes have been less responsive to growth. Even in 2011-2012, unemployment rate stayed at 7 percent, while underemployment rate rose to 22.7 percent since the number of full-time jobs declined by half a million in the same period.

In the next half a decade, GDP growth rate in the Philippines could climb close to that of China. In order to be sustained, this growth must become more inclusive, however.

In the Philippines, the BRICS future has potential for a large consumer economy, with some 150-170 million people by 2050. That objective is predicated on huge expansion of consumption, which is only viable through more inclusive growth.

Due to the historical legacies of the Philippine political and economic institutions, there remain strong vested interests in the current status quo. That, in turn, makes vital reforms challenging to implement, as the IMF and the World Bank have argued. However, the Aquino administration has proven able and willing to make difficult decisions.

In all BRICS nations, sustained growth has been neither inevitable nor automatic. It must be made to happen. It must be realized.

In addition to his consulting/advisory activities, Dr. Dan Steinbock is the research director of international business at the India, China and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China).

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  • RayP1766

    Let’s hope the Philppines gets elevated soon and Brazil gets dropped. We can then call the group the PRICS – a name I would have thought very apt for a group containing the totalitarian regimes of China and Russia!!

  • edleon

    Kaya natin ma sustain ito basta we pray and work hard…. pray and work hard….pray and work hard….pray and work hard….pray and work hard….pray and work hard….pray and work hard….pray and work hard….pray and work hard….pray and work hard….pray and work hard…. :)

  • Sikalarib

    This Dan Steinbock person is very vague. He says the Philippine economy needs “reforms” but doesn’t specify what that means.

    The closest i could discern was in this paragraph:

    “In BRICS economies, such changes have typically preceded periods of sustained growth. However, they have required difficult policy reforms in agriculture, manufacturing, business and labor regulations, and social protection, in order to raise the incentives for entrepreneurship and job creation. In turn, these reforms make possible greater public investment in health, education, and infrastructure.”

    The second sentence seems to advocate for the “free-market” extreme right-wing neoliberal reforms [drastically reduce taxes on the wealthy and in turn massively cutting public spending for edu/health/other programs, with the burden being borne by the poor, oh and privatize everything so that big corporations rule the world] that have been proven causative of exacerbating wealth disparities, poverty, and environmental degradation. Such far-right-wing economic policies have been rejected by many South American leftist and center-left governments, and in those countries, there has been reduced poverty (e.g., Venezuela, Ecuador), and increase in the middle class (e.g. Brazil).

    On the other hand, his third sentence in that paragraph is clearly advocating for the government to more heavily invest in public healthcare, public education, roads/bridges/mass transit, and so forth. But only After the “difficult policy reforms in agriculture, manufacturing, business and labor regulations, and social protection” are made. What “difficult policy reforms” are those?

    The thing is, the Philippines can already more heavily invest in public education, universal healthcare, and improved infrastructure in mass transit systems, trains, roads, bridges, and so on. The Philippines has had this capacity for a long time now. The volume of wealth in the country is enormous [in terms of GDP (based on purchasing power parity)], the Philippines is the 30th richest country on Earth, surpassing Belgium, Sweden, Switzerland, Hong Kong, Israel, Chile, and New Zealand.

    The problem is that the Philippines’ enormous wealth has been very lopsidedly disproportionately concentrated in the hands of a few superrich clans and individuals. This oligarchy has dominated the country’s economic and politics since the US colonial regime ended in 1946. The mestizo-dominated oligarchy itself grew out of Spanish colonialism and was further coddled by US colonialism (under which it learned how to manipulate the electoral process to entrench power among urban and rural landholding elites while shutting out peasants, the urban poor, other marginalized sectors, ethnic and religious minorities, etc.).

    What the Philippines needs is structural reforms. The Philippines has not yet achieved substantive land/agrarian reform on a national scale (which would redistribute the colonial-era hacienda land to landless peasants), whereas other Asian countries like South Korea, Taiwan, and Japan were able to successfully implement land reform and eradicate the feudal legacy after WW2. The Philippines still has this enduring feudal legacy existing alongside modern capitalist enterprises. And the Philippines needs a rigid taxation system, which would require disciplining the elites.

    Rather than allowing corrupt elites to amass hordes of wealth and keeping it for themselves (while not raising the wages of the workers who work on their feudal-ish plantations or for multinational corporate sweatshops or the service sector), the Philippine government should re-direct that wealth toward massive investments in education, health, efficient mass transit, and clean energy. With a more balanced distribution of wealth, land, resources, and power, the money would flow around more (and be able to circulate in communities that have been impoverished for so long), and there would be greater incentives (and financial capabilities) for people to open up small-and-medium-sized enterprises and for already existing businesses to hire more employees. And government construction/improvement programs would hire many as well.

    • marienkind

      That’s how you become a consultant. Never say anything specific and never fix the problem you were hired to fix. It’s pretty lucrative.

      • Sikalarib

        so true :-(

  • Albert Einstien

    you are correct sir…with or without a LEADER RP will become a SUPERPOWER as can be proven by RP’s immunity & resiliency even during the world economic disasters for the last decade especially 2007 -2009 economic meltdown…even if we put crazy pigs in our govt..RP rise is UNSTOPPABLE…RP has evolved as a super race… we are ONLY waiting for a FULL BLOOD patriotic filipino leader to begin the MARCH towards 2050 : > )

    ·
    “ RISE my Philippines RISE “ 2050 VISION

    EVERY Filipino Family will be MULTI-millionaires by 2050

    ( both muslim & christian brothers )

    your grandsons & granddaughters will be masters of the world

    NO Filipino will suffer SLAVERY in foreign land..

    PROTECT these resources with utmost PATRIOTISM…

    Why are we always in poverty & war?

    Why they dont want the archipelago to be UNITED & stand as one nation?

    Why are we targeted for Population & de-population control ?

    Why is the Philippines targeted for brain-drain & intellectuals are pirated
    abroad?

    Why are we NOT allowed to have a POWERFUL ARMed FORCES ?

    Why are we having lunatic leaders & family of traitors as our champions &
    leaders?

    ANSWER : Foreign Interest/s manipulated us because PHILIPPINES is the RICHEST country in the WORLD!

    “ Literally philippines is a PARADISE in a land of GOLD blessed by GOD ( Gold,gas
    Oil & Deuterium ).. ”

    “ we the most evolved & intelligent human specie are walking literally in a
    land of gold “

    ISLAND PARADISE

    An archipelago comprising 7,107 islands, the Philippines is categorized broadly
    into three main geographical divisions: Luzon, Visayas, & Mindanao. In
    addition the BENHAM Rise.. 250 km wide new territory. The Philippines’
    rainforests and its extensive coastlines make it home to a diverse range of
    birds, plants, animals, and sea creatures. It is one of the ten most
    biologically megadiverse countires and is at or near the top in terms of
    biodiversity per unit area. Our beautiful islands are the envy of the world we
    are surrounded by soft white & pearly black beaches. Most of the
    mountainous islands are covered in tropical rainforest and volcanic in origin.
    The Apo Reef is the country’s largest contiguous coral reef system and the
    second-largest in the world. The Philippines has a tropical maritime climate
    and is usually hot and humid. There are three seasons: the hot dry season or
    summer the rainy season ; and the cool dry season . The perfect climate system
    in the Philippines makes its air and atmosphere free from man made pollution
    after the system of storms cleansed the territory during rainy season &
    disinfecting the land by exposure to the sun’s ultra-violet rays in hot dry season.
    This is the best country in world to live in if the insurgency problem caused
    by poverty is solved by the tapping of the nation’s resource thereby freeing
    the people from poverty..

    Located within the Pacific Rim of Fire, the Philippine archipelago is
    hypothesized as having been formed 43 million years ago. Its 7,109 islands rest
    on top of underwater mountains formed by the outpourings of molten rocks from
    the earth’s interior, thus creating an ideal setting for mineral deposition.
    (After Wolfe, J.A., “Origin of the Philippines by Accumulation of
    Allochthons” in The Philippine Geologist July- September 1983 Issue, p.17)

    In the archipelago, resurgent volcanoes particularly provided access for rising
    gold-bearing solutions which cool to the geotherm of 300 degrees Celsius at
    about 400 m depth. At this point, the gold began to precipitate and epithermal
    gold deposits were formed over geologic time of 1.5 million years from the
    present time. (After Wolfe, J. A., in International Mineral Development Sourcebook,
    1993)

    HUMAN resource…

    we are the ONLY Country in the world ..who speaks 175 languages
    & dialects with literacy rate of 93.4% . Most speak fluent & write
    foreign languge like english , spanish,nihongo,arabic, mandarin,hindi, &
    malay than country of origin..some elderly can still speak latin…Average
    Filipino can at least speak 3 foreign language & 2 dialects..while the rest
    of the world can speak only english & their native tounge…the people are
    educated, fun loving, resilient, hospitable & industrious… in fact ,
    currently the economy is heavily reliant on remittances & BPO sector which surpass foreign direct investment as a source of foreign currency. Therefore the more population more benefit for the economy. Currently we have the BEST YOUTHFUL educated , skilled & mannered LABOR FORCE IN THE WORLD.. The Philippines need a HUGE population & Army if it intends to tap the resources otherwise foreign
    invasion can easily land on its shores & control can be had without a
    sweat.…

    MINERAL resource…..

    Initial Lode and placer GOLD DEPOSITS occur in most of the 73 out
    of 83 provinces in the Philippines.The ten provinces were not properly tested
    yet due to internal conflicts & war. The 1996 $2.1TRILLION value resource
    estimate based on conservative 10% ( $21 trillion total estimate ) maybe
    deficient and could double to $42 trillion or more of the actual resource.. .
    … such amount could catapult this country to first world status .. we could
    even buy americas $16 Trillion debt..

    Also, we have .$26.3-Trillion Oil Reserves ..Country’s Untapped Deposits
    Mostly In Spratlys Philippines News Agency April 25, 2012, MANILA, Philippines-
    The Philippines is “sitting on a mountain of gold,” with untapped hydrocarbon
    deposits estimated at $26.3 trillion, mostly found in the disputed Spratly
    chain of islands, more than enough to free the country from the shackles of
    poverty.Also if we are able to claim SABAH… It has the potential to produce 1
    million barrels of oil a day,” “The estimated reserves from the present Sabah
    oilfields is 1.4 billion barrels of oil and 7.7 trillion scf of gas.” …Malaysia
    govt does not even give our sabahan brothers share of their on wealth ONLY
    PETRONAS ( govt corp ) which give sabah a PITIFUL royalty of 5%…

    That amount is even without considering the UNQUANTIFIABLE value today (maybe
    thousands of $ trillion ) of the resources that can be found in our new
    territory called the BENHAM rise a 250km wide domain which is perceived to
    contain very huge oil & gas deposits & the envy of world for we are
    the proud owner of the vast DEUTERIUM deposits with a 868 mile long find in
    Philippine trench. With these resources properly tapped we are bigger than
    america & arabia combined.. : .yet many potential mineral & natural
    reserves are still HIDDEN n our archpelago…

    BENHAM RISE new Philippine territory 250 km wide –GMA LEGACY

    Despite its proximity to the archipelago, the plateau was previously not
    included in the territory of the Philippine Islands. On 8 April 2009 ( GMA
    govt. filed the claim to UN now we owned it.. eventually our history &
    after the political vendettas ….legislature might rename the benham rise to GMA
    rise to give honor to its finder/claimant .. ), the Republic of the Philippines
    lodged a partial territorial waters claim with the United Nations Commission on
    the Limits of the Continental Shelf in relation to the continental shelf in the
    region of Benham Rise. The UN has officially approved the claim in April 2012.
    The Philippines may soon be able to provide its own energy through Benham Rise,
    an underwater ridge to the east of Luzon which is believed to have mineral and
    gas deposits. The Philippines claim over Benham Rise is “very
    relevant” because scientific surveys indicate minerals and natural gas in
    the area. Solidified methane was found during mapping activities and the
    “probability is very high” there are oil deposits. There may be more
    natural gas than oil, and is considered better because it is cleaner. Benham
    Rise, which is bigger than Luzon, Samar, and Leyte combined, is being claimed
    solely by the Philippines

    GREATEST of them ALL- “ DEUTERIUM the Gift of Nature “- MARCOS LEGACY


    the Philippines trench has the LARGEST DEPOSIT of deuterium with 868 mile long
    52 mile wide “

    If the superpowers ALLOWED marcos to continue his governance & he produced deuterium.. in 1981-83…our INITIAL production output is 12 million
    barrels a day multiply it by $7 per barrel ..that is $ 31 billon already ( now it $62 billion at a minimum…by $7 a barrel ( 1981-83 ) ..but ..OIL now is 90-97 per barrel already….the estimate then per year if we price it by oil price is close to $ 700 billion a year & it is an UNLIMITED RESOURCE…… ) ..in JUST FEW MONTHS TIME we are FREED from poverty..

    MARCOS was a victim of ECONOMIC HITMEN…the SHARING AGREEMENT is so DISADVANTAGEOUS to the FILIPINO people that is why MARCOS made a PATRIOTIC stand against the interest of SUPERPOWER..MARCOS wanted a SHARING AGREEMENT of 80% to RP & 20% to
    INVESTORS & they will buy it at MARKET PRICE……while the superpowers want a
    40-40-20 agreement & at same time the INVESTORS will be buying the deuterium at almost 60% of the Fair market price….HOWEVER they TOPPLED marcos in feb.25, 1986 their cover story is BLOODLESS REVOLUTION…..

    MY PROPOSAL : We can produce & extract DEUTERIUM
    for FREE…. there is no need for 40/40/20 , 50/30/20 or 80-20 sharing .ALL we have to do is OFFER the investor group of allied nations/multinational corps. ( either NATO or BRICS ) the ” RIGHT to BUY ” a small portion of daily production ..or a 10% DISCOUNT of daily price per barrel …so that the resource can be fully utilized by the world.

    Imagine the Philippine DEUTERIUM will power the WORLD…every city will be having a SAFE nuclear powered electricity plants in middle of urban cities.. We will be at
    the forefront of human evolution, space exploration, science & technology…WE will POWER the world & we will FEED the world… DESTINY is already knocking for us…embrace it!….. : > )

    Any country/alliances ( nato or brics ) who controls the production of deuterium
    will control space. .any country/alliances who controls space will dictate the destiny of earth…that is how lucky we are..

    Now is the future ..in fact they are mining helium-3 from outer space ( esp. moon ).The use of helium-3 and deuterium as the fuels in “aneutronic” (power without neutrons)
    fusion reactors. The involved nuclear reaction here when helium-3 and deuterium
    fuse creates normal helium and a proton, which wastes less energy and is easier
    to contain. Nuclear fusion reactors using helium-3 could therefore provide a
    highly efficient form of nuclear power with virtually no waste and no
    radiation. can be built in urban cities..

    Speaking of helium-3, it is quite noteworthy to point out that one ton of the rare isotope costs $4 billion . But what is the value of helium-3 without deuterium? any
    aspect of future space programs DEUTERIUM which the Philippines great wealth is indispensable…our country will be the richest country in the WORLD by 2050…. be patriotic save the future… : > )

    If we allow production even for just a portion of this natural deposit… the
    Philippines will already become a first world country.. what more if we produce
    a quarter of it… Deuterium has several commercial and scientific uses today. It
    has become much more than the heavy water many countries sought after during
    World War II.Deuterium, a form of concentrated hydrogen, is used in the
    production of natural gas now utilized in Canada, America, Germany and Sweden,
    to provide fuel for cars, trucks , jet planes, & deuterium fuel for fusion
    reactors.”Deuterium can replace gasoline, (liquefied petroleum gas),
    (liquefied natural gas), Avgas, etc. in powering all types of internal
    combustion engines including maybe SPACE ships of the future & can be use
    in space explorations…. It does not emit pollutants or any harmful carbon
    monoxide and does not cause any environmental problems because it is in the
    water family. We can build electric nuclear plants in the middle of the URBAN
    cities of the world ! we will power & feed the world at the same time.

    Just imagine the philippines at the forefront of human evolution, science ,
    technology & space exploration

    The GOOD news is we have UNLIMITED deposit of it!

    • Barney Stinson

      Just a heads up – DO NOT fall into the trap of supernationalism. Otherwise you simply risk becoming the next China who’s only out to irk and annoy her neighbors.

    • ARIKUTIK

      We have wide fertile landscape but people still use carabao and plow to till a garden. First build a motorize transport before even dreaming to roam a seabed.
      Pag hilom diha !!!

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