The Philippines Is Open for Business

by Gilbert C. Dulay

There is an economic slowdown in many parts of the world, but at the same time a significant transformation of the global economy is well under way. In Southeast Asia alone, there are signs that the Philippines including some of its neighbors, all emerging markets, are poised to become critical economic players in the next 15 years.

These emerging markets (known as "developing economies" in the 60s-70s) are ostensibly going to be a major part of the growth engine for the world economy with its increasing economic power. Emerging economies have been categorized into two (2) groups: advanced emerging markets (AEM) and the secondary emerging markets (SEM). The Philippines belongs to the latter group.

It is widely known that the BRIC nations (Brazil, Russia, India and China) are the most prominent AEM. To some, it should be BRICS with South Africa added in the mix. With respect to SEM, the most visible countries in this grouping are the so-called "N-11 or Next Eleven," which includes Mexico, Indonesia, Turkey, Chile, Malaysia, Philippines, Czech Republic, Pakistan, Egypt, Peru, and Thailand. South Korea and possibly Taiwan were part of this group but may have already joined the status of BRICS. The Next Eleven nations were labeled as "Mini BRICS" during last year's (2011) China Economic Form. Led by the four largest economies in that group: Korea, Mexico, Turkey, and Indonesia, the N-11 were identified as "G3 economies or global growth generators because of their potential economic firepower." Notwithstanding the extended debt woes in the euro zone, many of these Next Eleven nations are forecast to continue growing in excess of 4%. The BRICS and N-11s are projected to have the collective potential to rival the G-7/8 in terms of economic wealth.

World monitors, like S&P, Morgan Stanley, ADB, and the UN are keeping a close watch on these emerging markets. In fact, the Asian Development Bank, in its latest report for 2012, "is keeping its 5.6-percent average growth projection for the so-called ASEAN-5, which includes the Philippines, Indonesia, Malaysia, Thailand and Vietnam." ADB added that, "the Philippines and its neighbors will drive global growth as the prolonged debt crisis in the euro zone drags the world economy."

Not too long ago, it was reported by the weekly Economist that some large European and US/Canada investors are tracking "PINT" nations (the Philippines, Indonesia, Nigeria and Turkey) relative to improvements in infrastructure and political risk for possible blow-out investments. In addition, it was noted that "VIP" nations like Vietnam, Indonesia and the Philippines may soon capture manufacturing market share from China.

However, just like other emerging economies, the Philippines continue to face significant challenges. During the last World Economic Forum, it was stated that the Philippines must soon enact policy/investment reforms to ensure it is on track, "which to this date are represented by constant public debates, prolonged decision-making, and church-state bickering," while others are on pre take-off stage.

In fact, top Philippine legislative leaders stated with urgency, "that the country should act quickly to amend the economic provisions in its Constitution particularly the 60/40 requirement to make it attractive for foreign investments to locate in the Philippines."

Recently, Manila's (DTI) stated that there are metrics "indicating the Philippines has a relatively stable labor cost resulting in a number of foreign enterprises operating in China transferring their operations to the Philippines." It appears the cost is much cheaper in terms of investment value.

At the same time, it was noted that several well-known and well-established Filipino-owned entities like San Miguel Corporation, PLDT including those led by the country's Filipino-Chinese tycoons are reportedly expanding overseas that may lead to bilateral trade arrangements favoring the Philippines.

In a related matter, amongst 76 countries, the Philippines (in 2011) ranked highly proficient in its ability to communicate in "World Business English" according to Global English Corporation (a Silicon Valley technology company). With a score of 7.0 in the Business English Index, it surpassed Brazil and India. As of December 2011, the Philippines overtook India as the world hub for call centers. There are approx 450K currently employed in Philippine call centers today.

Therefore, to have a favorable impact on international investors, FDI (foreign direct investments) must be significant. The Philippines must accelerate major improvements in modern infrastructure, (primarily in energy, technology, telecommunications and transportation) that would result in modernizing its production systems and improve competitiveness as well. It should adapt to the new technological systems to leap frog the stages of economic growth like South Korea and Taiwan in the 80s-90s.

It appears that the economic monitors are encouraged by recent developments in emerging countries. Indeed, the motivation and trajectory of change, particularly in the "Asean-5" and "N-11" nations have been very positive. Ultimately, it is this path of change that can create opportunities and one that we should be excited about.

[Gilbert Dulay- currently employed by Corporate America; is a US-based Certified Public Accountant, Certified Financial Services Auditor and Certified Fraud Examiner. He earned his master's degrees in international management and public administration/governance in the US. He's a UP alumnus and has had senior policy and/or management experience in both the private and public sectors in the Philippines. He also had prior involvement in obtaining Philippine development financing assistance with USAID, German and Danish development banks including the Japanese overseas loan programs.]