The Philippines is seen in the best position now to replicate Thailand’s success in agriculture, tourism and manufacturing with President Duterte’s strategy to build hard infrastructure and increase focus on the Brunei Darussalam-Indonesia-Malaysia-Philippines East Asean Growth Area (BIMP-Eaga) initiative.
In an interview, BDO Unibank chief strategist Jonathan Ravelas said that what Thailand had achieved in the past could provide a roadmap for the future for the Philippines.
Ravelas said the 10-point economic agenda laid out by Mr. Duterte was the same as what the likes of China, India and Thailand had earlier undertaken.
To date, the economist noted that the Philippines’ per capita gross domestic product (GDP)—an estimate of how much each Filipino contributes to national productivity each year—of $2,858 was just as much as each Thai contributed in 1994. Since then, Thailand’s per capita GDP has doubled to $6,148.
Thailand, the epicenter of the Asian currency crisis that started in 1997, embarked on hard infrastructure building that attracted big automotive manufacturers and other industries. The same infrastructure rollout, Ravelas said, could become the enabler of success in tourism, agriculture and manufacturing here in the Philippines.
For its part, Ravelas said the Philippines—which has long relied on business process outsourcing and overseas remittances—was starting to attract a lot of Japanese electronics manufacturers and was likewise starting to develop tourism as a new area of growth.
Developing agriculture with Mindanao as its base—seen possible now that the Philippines has elected a President who hails from this long-neglected region—could provide a new growth story for the country, Ravelas said. Mr. Duterte’s staunch support for the BIMP-Eaga initiative following his visit to Brunei, the economist said, could provide a good platform.
The private sector-led BIMP-Eaga was launched in 1994 as a cooperation initiative to accelerate economic development in areas that are geographically distant from their national capitals, yet in strategic proximity to each other, in one of the world’s most resource-rich regions that includes the heart of Borneo and Sulu-Sulawesi Marine Ecoregion.
BIMP-Eaga covers the entire sultanate of Brunei Darussalam; the provinces of Kalimantan, Sulawesi, Maluku and West Papua of Indonesia; the states of Sabah and Sarawak and the federal territory of Labuan in Malaysia, and Mindanao and the province of Palawan in the Philippines. The subregion covers a land area of 1.6 million square kilometers with an estimated population of 70 million. This cooperation program aims to increase trade, tourism, and investments by:
•facilitating the free movement of people, goods, and services;
making the best use of common infrastructure and natural resources; and taking the fullest advantage of economic complementation.
This year, Ravelas said, the house view was “cautiously optimistic,” with Philippine GDP growth projected at 6.3 percent or just in line with market consensus. He said this was a “very conservative” forecast that factored in a lot of uncertainties on remittances and business process outsourcing (BPO).
But he said the rollout of infrastructure projects, the passage of the tax reform measures, an improving tone of (Donald) Trump-Duterte relation could provide upside surprises to an otherwise conservative growth outlook.
“If you remember the Arab Spring, there were also these concerns about remittances, but it seems they remain resilient and if they remain resilient, they can result in slightly stronger peso. From (2017 house forecast of) 51.50:$1, the peso can still improve and can probably go to 48.50-48.70.
The house view thus highlights present uncertainties, which also reflects BDO’s wide range of forecast for the Philippine Stock Exchange index of as low as 6,650 to as high as 7,500 by yearend. Corporate earnings are seen to grow by an average of 8-10 percent this year.
“But it (2017 outlook) could improve once there’s indication that in the infrastructure program, execution is going to be much faster and that the rollout of the budget will push through. But right now, we’re taking off against strong headwinds, rising global interest rates and the strengthening of the dollar,” he said.