If forecasts are accurate, the Philippines was the poorest performing developing economy in Asia last year. Despite encouraging signs of an economic turnaround in some western markets in 2012, the expected slow pace of that turnaround, continued economic malaise in Europe, and a broken Japanese economy suggest that the Philippines and Asia are in for another tough year. There will be less demand for exports, and tourists won’t be able to afford to travel long distances.
According to the Chinese calendar, the Year of the Water Dragon begins January 23. Astrologically speaking, it’s supposed to be a mixed bag, with problems arising but their solutions leading to positive reform. While I’m not suggesting that we look to Chinese astrology for insights into our economic fortunes in 2012, it’s not much of a stretch to suggest that they are likely to be a mixed bag.
The dry economic numbers according to the International Monetary Fund (IMF) say as much. While growth will be healthy in the sense that the economy is expected to expand 4.2%, the IMF earlier expected the Philippine economy to grow at 4.9%. Last year it probably grew 3.7%, a dramatic fall from the government’s original forecast of growth between 7% and 8%. In 2010, the economy expanded 7.6%.
If 2012 growth forecasts are continually revised downward as they were last year, to about half of the IMF’s current forecast—which is similar to other closely watched forecasts—then the Philippine economy might conceivably expand at a disastrous 2% or thereabouts. That would severely compromise government’s programs to improve educational infrastructure, enhance its defense capability, and attract job-creating foreign investment.
The default strategy in such cases is to export people, rather than goods and services. This has the effect of further reducing the Philippines’ capability to grow its economy because the bulk of its most productive, most ambitious, and most resilient people are busy growing other nations’ economies. The Philippines contents itself with the table droppings these workers and professionals send home to largely deadbeat relatives who keep the retail and consumer real estate sectors in high gear.
If this inevitability leads—at best, or forces, at worst—the Philippine government to address the issues that account for chronic laggard growth and implement reforms that improve the nation’s prospects for more rapid economic development, that will be the welcome, positive outcome of the mixed bag 2012 promises. The issues are myriad in number, and well chronicled by multinational financial institutions and foreign investors alike.
So it makes little sense to repeat them here. After all, they’ve been repeated repeatedly for more than a quarter century through four and now a fifth administration. And so have the likely solutions which the Philippines’ neighbors have implemented with breathtaking success. Yet the Philippines always has a bureaucratic, judicial temporary restraining order, or cultural quirk—and often all of the above—which prevents it from implementing those same solutions and realizing the same success.
To be fair, the administration of Benigno S. Aquino III has made inroads into corruption, which is at the very top of the growth-crippling list of problems hobbling growth. He also appears to be attempting to strengthen institutions, making them more accountable—and, perhaps ironically to some—independent, by successfully calling for the impeachment and trial of Supreme Court chief justice Renato Corona, a midnight appointee of his predecessor.
The predecessor herself is sitting in a government hospital under house arrest for election fraud and corruption. Prosecutors have vowed to file more charges against former president Gloria Macapagal-Arroyo, who rose to power on a wave of street discontent with her own predecessor, former president Joseph Estrada, who she pardoned for corruption. That heads of state are being held accountable is laudable, but also shows how deep the culture of corruption runs in Philippine politics, and the scary scope of Mr. Aquino’s job.
Nevertheless, the popular president—despite slow growth polls show high approval for his efforts to eliminate corruption and hold high-ranking officials accountable for their actions—will need a strong second act that shifts from righting wrongs to doing the right things. Again, the list of right things—reforms—is exhaustive and documented ad nauseum. It’s been growing for so long that it’s woefully unrealistic to think that he can accomplish much on it.
But in the same way Mr. Aquino prioritized rooting out corruption and instilling accountability in his first 18 months in office, by setting economic, trade and investment, and other bureaucratic reform priorities it’s possible to demonstrate meaningful impact in these areas as well. A mixed bag suggests that investors and entrepreneurs won’t wait for all the problems to be addressed before they begin doing their part. They do want to see the major issues convincingly addressed, and with finality.
A mixed bag implies tradeoffs. To enjoy the benefits of the mixed bag that 2012 will be, the Philippine government must know which tradeoffs make sense, and be willing to make them.
(Michael Alan Hamlin is the managing director of TeamAsia and a Manila-based author. His latest book is High Visibility: Transforming Your Personal and Professional Brand. Write him at email@example.com and follow him on Twitter, Facebook and LinkedIn. Copyright © 2011 Michael Alan Hamlin. All Rights Reserved.)