The Philippines – Asia’s Cinderella Story

Everyone loves a Cinderella Story, a situation in which a competitor emerges out of nowhere to achieve great success.  So it’s not surprising to see so many people rooting for the Philippines lately.  After expanding on average by 3.8% per annum from 1990–2010, the country’s economy has ramped up its growth to more than 6% in recent years.  The so-called “Sick Man of Asia” is now the top performer in the region ex-China.  Its stock market is up, its currency is strong, and FDI is beginning to flow.  Some companies looking to diversify away from China are even starting to consider it as an option.

Even so, doubts linger over the sustainability of the Philippines’ growth spurt.  Indeed, this uncertainty was on full display at a Euromoney conference in Manila that I recently had the pleasure of attending.  Although the president gave a rousing speech outlining the country’s progress and the finance minister gave calm assurances that the economy was on stable footing, the same questions kept coming up – What will happen after the 2016 election?  Will the next administration continue the current administration’s policies?  What assurances can you give us?

These questions are critical because in the past, interpretation of laws in the Philippines has changed from one administration to the next. So even if a law or contract was well-written, the way it was interpreted and enforced could change dramatically every six years.  Aside from concerns about corruption – which are also tied to this dynamic – this is one of the biggest reasons the Philippines has had such trouble attracting foreign capital.

Unfortunately, it seems that investors’ questions about policy continuity will remain unanswered for now.  Noynoy Aquino has not anointed a successor, and nobody seems ready to fill his shoes.  The current frontrunner for the next election, Binay, enjoys popular support, but it is not at all clear that he is committed to continuing Aquino’s policies.  And many of the other people who have been cited as potential contenders are old-school Filipino politicians – exactly what the country doesn’t need now.

And so the Cinderella Story continues.  Will the Philippines be able to sustain its growth?  Will the “Sick Man of Asia” break away from his past and continue sprinting ahead?  We’re looking forward to examining these questions and more in our upcoming reports on the Philippines.

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