Making a ‘Breakout Nation’ can be Aquino’s historic legacy
As President Benigno Aquino closes his first 700 days in office and begins his last 1,400 days, it has been the best of times and the worst of times.
Going by Ruchir Sharma’s economic metrics, the Philippines is on the verge of joining the ranks of the elite group of “breakout nations,” newly emerging economies that might make it in a turbulent world. This must have been topmost in the mind of President Aquino after a whirlwind weeklong trip to the United States and the United Kingdom that included 42 hours on the wing.
President Aquino brought home the bacon worth $2.5 billion, or P100 billion, in British and American investments in the country that would mean more jobs and more food on the table.
The President came home to a country upbeat over a resurgent 6.4 percent first quarter growth rate that outpaced our Asean neighbors and was second only to China’s. The good news reinforces the country’s potential membership in “breakout nations,” a select group of high potential countries touted to become the new economic miracles.
After slowing down to a 3.7 percent laggardly growth rate in 2011, the economy surged to a 6.4 percent GDP growth in Q1 that put us ahead of our Asean neighbors, which had consistently set the pace for us.
The normally conservative Wall Street Journal gushed that the Q1 surge “defied most forecasts as well as the mood in the global economy.”
Enthused the WSJ: “Filipinos have reasons to smile. Asia’s perennial underachiever is outperforming.”
Postcards from the edge
Like most Filipinos, I have friends who toil in distant lands for various reasons. Some of them followed closely President Aquino’s talks before Filipino communities in the US and UK. They sent me back “snapshots” of their impressions, not in pictures but in words.
In London, the President talked mostly about the government’s moral crusade and the removal of Renato Corona as Chief Justice. The UK-based Filipinos watch the Filipino channels almost daily, and they know all about the impeachment. What they expected to hear was how the government was addressing their specific concerns as OFWs, and, beyond that, the big picture of the Philippine situation.
In Los Angeles, his last stop before boarding the homeward-bound plane, Mr. Aquino was full of details: The first quarter economic surge, the massive infrastructure spending, housing, rice, all the sundry details, and, of course, Mr. Corona. As with the London crowd, the LA audience a reference to the specific problems of overseas Filipino Americans, and the big picture about their country’s future.
In these are picture postcards from the edge, the people expect the President to provide the big-picture context. In short, the meaning of the details.
Mr. Aquino has an excellent opportunity to do this in his forthcoming State of the Nation Address (Sona). But only if his speechwriters don’t clutter him with the obvious details that can sufffocate his message.
And then there is the obvious temptation of gloating over the removal of Chief Justice Renato Corona.
This Sona will be his third. But it is historic in more ways than one—not only because the President will be summing up his first 700 days and crafting his next 1400 days. It will be historic because never before in our recent history is the nation on the cusp of a political and—if we are lucky—an economic breakthrough.
At the time Benigno Simeon Cojuangco Aquino III was growing in his mother’s womb, the Philippine economy was second only to Japan in the whole of Asia. Ruchir Sharma’s notable book, Breakout Nations: In Pursuit of the New Economic Miracles, marks this historical episode.
Sharma 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 believes we have the sound economic fundamentals to get back on track if our politicians get it right this time.
BRIC a brac
In a 2001 paper published in 2005, Jim O’Neill popularized the acronym BRIC (for Brazil, Russia, India, China) to represent the rising new economies at the time. Sharma, head of the emerging markets division at Morgan Stanley, names the Philippines as among the emerging economies he calls the Breakout Nations, the sequel to the BRIC.
With Turkey and Indonesia, we make up TIP, poised to upstage BRIC. BRICs are losing steam, and the breakout nations (including Nigeria and Thailand) will speed ahead.
To Sharma, President Aquino is a good leader who is “delegating power to competent technocrats and seems to understand what needs to be done to get the lights back on.”
But becoming a breakout nation does not come automatically. Breaking out into sustainable growth must be “inclusive,” economic jargon for growth that reaches the poorest of the poor. Sharma notes that the country’s stagnant economy had resulted from a few family-owned conglomerate dominating the markets.
Powered by revolution
“To understand which nations will thrive and which will falter in a world reshaped by slower growth,” Sharma stresses that we must abandon our current obsession with global macro trends and all-embracing theories. He offers instead a more discerning, nuanced view, identifying specific factors— economic, political, social—which will make for slow or fast growth.
Sharma believes the Philippines is ready to exceed expectations in a world where the leading emerging nations (the BRIC) are starting to flounder with Europe and the United States.
Sharma’s thesis banks heavily on President Aquino’s success: “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.”
Becoming a breakout nation “could be made to happen if the third Aquino can get the people power revolution right,” Sharma says.
How nations succeed
Another big-picture context book making the rounds is Why Nations Fail: The Origins of Power, Prosperity and Poverty. It is an intriguing read—for it seeks to answer a question that has fascinated scholars for centuries: Why are some nations rich and others poor?
Co-authors Daron Acemoglu and James Robinson (Massachusetts Institute of Technology and Harvard) demonstrate by historical sweep and anecdotal evidence that man-made political and economic institutions underlie economic success.
The book is an ambitious attempt to explain why 1.29 billion people in the developing world subsist on less than $1.25 a day. That includes the Philippines.
How to explain such gaping disparities?
The bottomline, asserts the authors is: To get our economics right, we must get our politics right. To illustrate this central point, the authors take us through the events that led to the “Arab Spring” of discontent that is sweeping the Middle East.
Those of us who lived through our People Power Revolution in 1986 will be overwhelmed by a great sense of pride and a poignant déjà vu feeling. But to reap the fruits of our own revolution we must contextualize what happened at Edsa and apply it to breakout tasks that remain in Mr. Aquino’s agenda in the remaining four years of his presidency.
(Next: Why Nations Fail: Arab Spring and People Power compared.)
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