The new economic dragon

Move over China.  The newest economic dragon is the Philippines.

The biggest news in Asia and the economic universe is the stellar growth of the Philippine economy in the first quarter of 2013.

The National Statistical Coordination Board (NSCB) announced that first-quarter gross domestic product or GDP rose 7.8 percent compared with the same period last year, which already registered a vibrant increase at 7.1 percent. The latest board announcement discredited a previous Dow Jones Newswires poll that had projected Philippine growth at only 6 percent.

To recall, the Philippines’ fast-paced economy registered its highest GDP growth in 2010 at 8.9 percent, only six months into the Aquino administration. The slowing down of economies in Europe and the United States last year tapered the progress although it still remained robust at 6.6 percent growth.

But the early rounds of 2013 had every economist here and abroad virtually falling off their seats:  7.8 percent economic growth that knocked out even China’s first quarter growth of 7.7 percent, Indonesia’s 6.02 percent and India’s 5.5 percent.  Some economic monitors can’t contain their effusive praises over the Philippine performance, saying it will annualize growth at 9.1 percent.

With that, the Philippines is said to have now entered the “demographic sweet spot” according to the Asian Wall Street Journal  (WSJ).

In a previous article, WSJ tagged the Philippines as the last among major Asian economies to enter the demographic sweet spot, “a phase associated with a young, vibrant labor force ably supporting the pension system, and an economy experiencing high economic growth rates due to a large base of consumers.”

NSCB Secretary General Jose Ramon attributed the strong performance to “the upbeat business and consumer sentiment, sustained government capital expenditure, as well as increased investments in construction and durable equipment such as industrial machinery.”

One has to closely analyze the specifics because upbeat business sentiment means investors are less wary that crooks will corner huge government contracts, or that state biddings will be settled by the quality of the so-called standard operating procedure (SOP) or kickbacks also known as “tongpats.”

Construction spending increased by 33.7 percent and government spending rose 13.2 percent. Private consumption climbed 5.1 percent and these are being highlighted in the stunning economic report.

Spending initiatives in the industrial sector including manufacturing and construction also grew by 10.9 percent.  Meanwhile, the services sector—which accounts for about half of GDP—was up 7 percent. Farming grew 3.3 percent and as a result, the economy expanded by 2.2 percent, according to the board.

The context of the remarkable GDP growth is the fact that under the Aquino administration, the Philippines got the least foreign direct investments (FDI) compared with other Southeast Asian neighbors.

World Bank data shows that the Philippines received only a measly US $1.87 billion FDI in 2011. When you compare that with Vietnam which attracted US $7.43 billion, the Philippine economic performance comes out not only over the top but clearly unique in the sense that Aquino is standing pat not to change fundamental policies to accommodate foreign money.

A reformed government structure led by a national leadership that strives to honestly and diligently perform its duty is all that domestic and foreign investors need to develop confidence in doing business here, not misleading campaigns for Constitutional amendments.

In another front, many Filipino-Chinese businessmen are reportedly unhappy with the way President Benigno Aquino III is plugging loopholes in tax evasion. Perhaps they are thinking their campaign contributions in 2010 would place them off the Bureau of Internal Revenue’s radar. It’s time for the business community to really put its money in support of good governance through honest practices starting with paying taxes.

One of staunch believers in the Philippine economy upon the ascent of P-Noy to power is the Asian WSJ. The global business daily had pointed to P-Noy as the country’s biggest asset but warned him against embracing anti-population growth policies as embodied, at that time, in the Reproductive Health Law.

“The Philippines doesn’t have too many people, it has too few pro-growth policies,” the WSJ said in an opinion article.

I agree that the RH Law is anti-economy and social development but that may be a strong statement to make. The President has been tapping civil society groups as tools for social development since Day 1.

The challenge is, and has always been, to translate increased GDP to lower prices of goods, cheaper electricity rates, improved infrastructure, better health care, access to good education and more job opportunities.

I have always been advocating for the strengthening of the country’s co-operative society and with the country outpacing yesterday’s economic dragon, the momentum of growth needs to be sustained.

P-Noy can very well accomplish this by leaning on the co-op sector.

Co-operatives all over the world have shown resilience in the midst of financial debacles. It is the best economic model for the Philippines because of its democratic character that can be translated to good governance practices.