Philippines: Out of the ditch and poised for a leap at long last?

Except for the looming threat of China’s aggression over the Scarborough Shoal and Spratlys, the Philippines have so much to celebrate these days.
Not only has it been seeing the rise of its select sons and daughters to international prominence but it has also slowly been gaining respect as a country lately.
The article by David Pilling about the Philippines published in Financial Times may has used a seemingly sardonic humor in its title, “Southeast Asia’s llama breaks into a trot,” but the essence of his article was far from sarcastic. Pilling wrote:
“Whisper it if you will, but the Philippines may at last be getting its act together. These are early days. But there are definite signs that the country – with its young population of nearly 100m people, the world’s 12th largest – has turned a corner.”
He cited the following “three reasons to be hopeful, if not yet exactly cheerful.”
First, the external position has improved dramatically. The Philippines, after years of indebtedness, is a net creditor. Overseas remittances from the roughly 8m Filipinos working abroad have steadily added to foreign exchange reserves. At nearly $80bn, these are higher than the external debt.
Since 2004, remittances have grown from $7bn-$8bn to $20bn, nearly 10 per cent of GDP. The fact that so many people need to work abroad is a sign of the economy’s inability to generate enough jobs. But remittances are serving a purpose and have held up well since the financial crisis. The Philippines is emerging as a solution to the labour shortages of mature economies the world over.”
Some jobs, he stated, go the other way. Philippine call-centres have grown exponentially, trumping those in India. Revenues from back office businesses have quintupled over six years from $2bn to $11bn.
Second, the country is getting its fiscal house in order. The deficit has narrowed from a worrying 5-6 per cent a decade ago to a manageable 2 per cent. The tax net was widened under the previous administration, though the tax take remains at a lowly 13.5 per cent of GDP. Spending has been kept in check. Subsidies on fuel and power, the bane of many Asian finance ministers, were scrapped several years ago.
Third, the political situation is vastly improved. Benigno “Noynoy” Aquino, elected president in 2010, has made a creditable start. For one, his government has sent out a strong message that it will not tolerate corruption (a distinct change from past governments, which actively encouraged it). Mr Aquino has instructed tax officials to go after evaders. A few big scalps appear to be doing the trick. The tax take has edged up even without necessary tax reform.
Pilling mentioned that though progress has been slow, the faith that economists have on the Noynoy Aquino regime is solid and they predict a private investment boom here because of favourable demographics – half of the Philippine population are under 25 and it has a banking system that is the healthiest in southeast Asia.
Despite the basket case image of the Philippines in the international community, Pilling believes that today’s reality is far from it. In 2010 its economy grew 7.6 per cent faster than Indonesia, tagged as Asia’s investment darling. He pointed out that last year, the Philippines stock market was the world’s seventh-best performing. This year, the Philippine exchange is up more than 20 per cent and is among the world’s top 10 performers.
Philippines may still be the llama of south-east Asia, concluded Pilling’s article. But, for the moment, at least, he said, the llama has broken into a trot.
Don’t be surprised when in another year or two, this llama has turned into a deer and his strot, a mighty sprint!