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US experts see Philippines as Asia’s next tiger economy
Publication Date : 06-08-2012
The Philippines is now out of the doldrums and on the verge of an economic takeoff, according to two visiting foreign economists.
The Philippines under President Benigno Aquino III has the “best chance” of becoming a tiger economy in Asia as emerging markets led by China have started slowing down, while the debt crisis in the euro zone and the faltering United States economy continue to spook the markets, said Drs. Tyler Cowen and John Nye.
Cowen and Nye, who are both professors at the George Mason University in Washington, DC, were two of several foreign speakers at the inaugural conference on Friday of the Angara centre for Law and Economics, a think tank founded by Sen. Edgardo Angara that will undertake economic research and innovative public policy solutions.
Nye, who has been named executive director of the Angara centre, is also research director at the Higher School of Economics in Moscow, Russia, a founding member of the International Society for the New Institutional Economics, and in 1997 became a National Fellow at the Hoover Institution in Stanford University.
Cowen’s most recent book, “The Great Stagnation: How America Ate All the Low-Hanging Fruit, Got Sick, and Will (Eventually) Feel Better”, was one of the most debated nonfiction books in 2011.
“The Philippines has strong economic fundamentals,” said Cowen, citing the economic gains of the two-year-old Aquino administration, English proficiency and the Filipinos’ belief in education as the key ingredients for economic liberation.
“I would say, maybe, it has the best chance. It really depends on human agency and human volition and making [the] right choices,” he said.
“If you’re asking what should we look for in a country to be a future winner, I would say look for rising growth, look for a relatively stable fiscal situation. I think skills in English will become increasingly important, a belief in education even though a country’s educational institutions may have problems.
“And if I ask myself those starting questions, and then I look out there in the world, and I look at the globe and turn it around, guess which country my eyes stop on?” Cowen said.
Nye cited the “hot money flowing into the Philippines” and the rapid transformation of the country’s telecommunications industry—from very few telephone landlines in the 1980s to almost 80 to 90 per cent of Filipinos owning cellular phones today.
Seize the moment
Recalling how he had witnessed the ebb and flow of the country’s economy as the longest-serving senator in the post-martial law era, Angara called on Filipinos to seize the moment.
He noted that successive governments after President Fidel Ramos failed to follow through on reforms that earned for the country the title of “Asia’s next economic tiger” before the advent of the Asian financial crisis in 1997.
“I remember very distinctly—I was Senate president in the mid-1990s—that because of close collaboration between the executive and the legislature, we pursued a common agenda and nearly made it,” said Angara.
“For the first time in history, we had a surplus because we introduced the value-added tax, we revamped the central bank, the education system, the health system and such. But in the end, the promise of the Philippines becoming the new tiger economy didn’t materialise because, I think, we dropped the ball at the last minute, and in many cases that has been the story of the Philippines,” he said.
“We were unable to sustain because we didn’t pursue the structural reforms that would have pushed it and would have sustained it and made us a true tiger. Now, we’re back to that potential, that promise. The potential can only be achieved by a series of key interventions,” he said.
The senator mentioned key reforms in the economy such as in human capital, health, education, science and technology, research, renewable energy and infrastructure as the areas to support to achieve the sustainable growth that would trickle down to the poor.
Angara singled out infrastructure development as the one that would speed up the “momentum of change” since this would connect economic zones and big islands in the country.
“Unless you provide mobility to labour, then you get stuck in Samar or Leyte, and they’ll do anything to get to Metro Manila and create those slums. Infrastructure is key. How many airports do we have that are unflyable because there are no connecting roads?” he said.
Angara personally invited Cowen and Nye, among other experts in law and economics, both foreign and local, to tackle global economic reforms and to identify the key factors for achieving economic growth.
“Now is an auspicious time to launch the centre. President Benigno Aquino III is projecting a strong economic takeoff for the Philippines—and the centre is in a position to contribute toward making growth sustainable,” he said.
“This is a small, initial step toward trying to open the Filipino mind to the outside world. As all the speakers have said, we try to create new ideas, new insights so that we can join the global conversation,” he said.
Angara said he had seen the “poor quality of policymaking in this country.”
Opportunities in recession
“We have really good research and researchers, but we have no organised research on strategic areas—research that will support lawmaking and administrative and executive policymaking.”
The conference tackled wide-ranging issues such as global investment, human capital, corruption, international arbitration and enforcement, dispute settlements, and public policy issues in international trade and investment.
Cowen, ranked one of the world’s most influential thinkers by Foreign Policy magazine, led the panel discussion on “Globalisation, Innovation and Economic Growth”.
He enumerated the current economic opportunities for developing countries as well as the issues on institutional reform and how to take advantage of the slowdown in the largest economies.
“Recession creates opportunities. What is it you are doing now to move forward?” he said.
According to Cowen, the Philippines has joined the ranks of a select group of emerging economies that global fund managers and investors are seriously taking notice of. The others are Indonesia and a few sub-Saharan countries.
Cowen’s plenary address was followed by lectures from eminent scholars in the field.
Focus on 2 areas
Nye explained the interaction among human capital, social norms and the creation of institutions, and the importance of simple and consistent rules that are clearly enforced to address corruption.
To achieve long-range changes, he said the Philippines should focus on two areas: simplify the rules and further open up the market.
“The most important change is the mindset of protection and nationalism. There are good reasons to protect the Philippine economy, but there are also bad reasons,” he said.
“Isn’t there some compromise where we loosen up these laws a little bit? I’m not talking about removing these laws, just opening up enough to attract more investments, more development, more decentralisation so we can hire more of those workers here in the Philippines,” Nye said.
He talked of ways to “transition” the agriculture industry.
“If you look at China’s development, a lot of their developments over the past 40 years boils down to helping more people move from the countryside to the city and turning more cities into development areas,” he said.
He ended with a question better answered by President Aquino and his economic advisers: “How do you make the policy good and credibly consistent?”
Other guest speakers included Dr. Alberto Simpser, professor Benito Arruñada, professor Tom Ginsburg, Dr. Yas Banifatemi, Dr. J. Romesh Weeramantry, Dr. Nils Eliasson, Dr. Chiann Bao and Prof. Jeff Waincymer. The day-long programme was hosted by Cheche Lazaro of Probe Productions.