Home .Governing globalization What's wrong with the Philippines?
What's wrong with the Philippines?
Monday, 22 August 2011 08:04

Yes, what's wrong with the Philippines?  Corruption!  Corruption!  And more corruption, they will respond, like Bill Pesek’s column in today’s Japan Times!  And then of course, there is insecurity, particularly in the south.


But does this analysis really pass the test?  Are these really the main reasons why the Philippines economic growth has been so much lower than countries like China, India, Indonesia, Thailand, and Vietnam?


The Philippines is of course massively corrupt, as Pesek recounts.  This is borne out by Transparency International's Corruption Perceptions Index which ranks the Philippines at 134th in the world.  The world's cleanest countries, which share the prize of number 1 ranking, are Denmark, New Zealand and Singapore.  The Philippines shares its ranking with an unsavory group of countries like Azerbaijan, Nigeria, Honduras, Togo, Bangladesh, Sierra Leone, the Ukraine and Zimbabwe. Its score is fortunately much better than Afghanistan, Burma and Somalia which at the worst performers in this 178 country survey.


But corruption is rampant in much of emerging Asia, and has not been an obvious break on economic development in the following countries -- China and Thailand (jointly ranked 78th), India (87th), Indonesia (110th), Mongolia and Vietnam (jointly 116th), and Cambodia and Laos (154th). 


In a similar vein, the Philippines scores poorly in the World Bank’s Ease of Doing Business Survey.  Out of the 183 countries surveyed, it comes in 148th, in the bottom quarter.  But again, it is not alone in being a difficult country in which to do business.  Indonesia and India are in the same ball-park, being ranked 121st and 134th respectively.  Vietnam comes in at 78th and China at 79th, while Thailand scores very well at 19th. 


Another take on this is provided by the World Economic Forum’s Global Competitiveness Index, a broad measure of the quality of government policies and economic sophistication.  Based on this indicator, the Philippines is in much worse shape than its neighbors.  It ranks 85th of the 139 countries surveyed, while China ranks 27th, Thailand 38th, Indonesia 44th, India 51st and Vietnam 59th.    


A common criticism of the Philippines is the great security problems like kidnapping, murder and other forms of violence, especially in the south of the country.  But then again, insecurity is part and parcel of life in emerging Asia.  Thailand has been perhaps the most unstable country in the region in recent years as pro- and anti Thaksin forces do battle on the streets.  India and Indonesia also have their own share of violence.


The Fund for Peace estimates a "failed states index", based on countries level of stability and capacity, with Somalia and Chad topping the ranking at number 1 and 2.  The Philippines comes in at 50 among the 177 countries assessed with Finland and Norway being the best ranked countries on the list, a reminder that nowhere in the world are we fully safe today. 


How does the Philippines fare compared with its Asian counterparts on the failed states index?  In reality, the Philippines is not that much worse than Indonesia (ranked 64th), China (72nd), India (76th), Thailand (78th), and Vietnam (88th).  These countries have managed to grow strongly despite their instability and weak capacity.


There are other factors which are very relevant which are barely touched on by Pesek.


Now let's have a look at population trends.  Many Asian countries have experienced a "demographic dividend" as population growth has been reduced.  Smaller family sizes mean that more money can be spent on each child's education and health.  At the national level, it means that a great share of the population is economically active.  This can ultimately catch up with a nation as demographic dividend countries have to cope with ageing populations.


China's one child policy has been the most radical, but most countries have had some birth control and family planning policies.  The Philippines has not achieved much policy progress, due in large part to the Catholic Church.  In emerging Asia's rich mosaic of religions, the Philippines Catholicism is one thing that clearly sets it apart from its neighbors.   


The Philippine fertility rate (births per woman) is currently 3.0, higher than all of its economically dynamic neighbors.  China's fertility rate is 1.8, India is 2.7, Indonesia 2.1, Korea 1.3, Malaysia 2.5, Thailand 1.8, and Vietnam 2.0.  The Philippines also has a very high rate of adolescent fertility with 43 births per thousand women aged 15-19 years old.  Comparable figures for its neighbors are China (10), India (64), Indonesia (37), Korea (6), Malaysia (12), Thailand (36) and Vietnam (16).


In a recent press article, Walden Bello reports on recent research which compares Thailand and the Philippines.  In 1975, Thailand and the Philippines had similar levels of GDP, and population sizes.  But Thailand managed to slash its birth rate through family planning, with the result that its population today is 25 million lower than that of the Philippines.  It is no coincidence that Thailand’s GDP per capita is now more than twice that of the Philippines and poverty rate about one-third.


In this overview of what makes the Philippines different, the last subject that we will address is emigration.  All countries have citizens who wish to live abroad.  For example, Australia’s “stock” of emigrants abroad amounts to 2.1 per cent of its population.  But this is especially the case for developing countries, whose citizens may perceive greater opportunities in other countries. 


The Philippines stands out sharply compared with its neighbors as a labor exporting country, with its stock of emigrants being 4.6 per cent of its population.  Comparable figures for its dynamic neighbors are: China 0.6%; India 0.9%; Indonesia 1.1%; and Vietnam 2.5%.


“Of course”, you will say, “corruption pushes people out of countries with no opportunities”.  But Filipinos also have a natural advantage in the international migration game thanks to their mastery (albeit declining) of English, the language of globalization, and their very close links with their former colonial master, the United States.  Further, while many Filipinos migrate to the Middle East, large numbers also migrate to Western countries, where they have very few integration problems, thanks to their Catholic religion.  In fact, Catholic churches in Western countries serve increasingly as community centers for Filipinos, and help keep these institutions alive in the face of declining number of Western believers.


Migration has become a syndrome in the Philippines.  There are rumors that the first words that a Filipino will pronounce are “I want to migrate to the US and get a Green Card”.  This is only half a joke because education and training now is increasingly geared up for preparation for emigration, especially in the health sector.


Overall, the Philippines seems to be paying a high price for its colonial past.  Spanish colonization reinforced the feudal gap between rich and poor, which persists to this day, and has not, like other Asian countries, been corrected by land reform.  The Spaniards also brought the Catholic Church which is stopping the country from dealing with its high birth rates.  And the second colonial master, the United States, brought the English language, which made it easy for Filipinos to leave the country, rather than staying at home and fighting for justice.


But the Philippines has immense natural assets in the form of the human capital and talent of the many Filipinos who live abroad, and who, in better circumstances, would like to return home.  And these emigrants also have immense financial assets which could be invested in the country, if the business climate could only be improved, including by tackling corruption.  Don't forget that a big part of China's early growth came from investments from the overseas Chinese diaspora in Hong Kong and Taiwan, at a time when Chinese governance was much worse than now.


President Aquino's campaign to fight corruption is laudable, and will hopefully bear fruit.  But tackling the population problem is equally critical. 


The recent rapid growth in international business processing centers in the Philippines (some of which have relocated from India) can also give hope that globally minded Filipinos can benefit from globalization at home, rather than leaving their country behind.  While better governance will help attract such investment, experience shows that as development gathers pace, there are natural pressures for better governance.  A virtuous circle can take hold.


The Philippines may well be on the verge of a long awaited surge in development!



Bloomberg.  Suicide, Scams, Scandal Trap a Nation in Poverty: William Pesek


Transparency International


World Bank.  Doing Business 2011.  Making a difference for entrepreneurs


World Economic Forum.  The Global Competitiveness Report 2010-2011


The Fund for Peace.  The Failed States Index 2011


A tale of two countries: family planning in the Philippines and Thailand


World Bank.  World Development Indicators


World Bank.  The Migration and Remittances Factbook 2011 


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