In these times of troubled markets, international investors have never been more anxious to find new places to put their cash, and their latest discovery has been the Philippines.
The economy there is growing strongly, in excess of six percent, the currency is stable, inflation is under control and the ratings agencies are making thoroughly positive noises about the country’s future.
In part the boom is being led by state investment in long-neglected infrastructure. Since Benigno Aquino won the 2010 presidential election, there has been a quiet reform of government and genuine attempts to stamp out the corruption that has disfigured this nation of more than 94 million people.
Economists say that the surest sign that a country is on a financial up is when wealthy locals, who have stashed much of their fortunes abroad, start repatriating their cash to invest in their own backyard. This is indeed what is happening in the Philippines. Analysts point out that by no means all of this domestic investment is heading into the stock market for some quick gains. Money is also being put into new businesses in both the service and manufacturing sectors. Strategic foreign investors are also finding the Philippines attractive, not least because English is widely spoken and labor rates are still relatively low. Indeed one local banker reports that an Indian call-center operator is looking to expand by having his company establish a large operation in the capital Manila.
That is the good news. However, it is important to remember that this is still a poor country with considerable disparities between the wealth of a small and politically-powerful elite and the majority of the population. In 2010, the World Bank put the average annual income at a little over $ 2,000. Given the fabulous wealth of a few families, the reality is that the real figure for most Filipinos is significantly lower. Even doctors are paid derisory salaries, which has explained why so many have left the country for markedly better pay in wealthy countries.
In the long run, if the Philippines stays on its present economic course, there will be more jobs, higher incomes and prosperity will trickle down to everyone. This is, however, likely to take time. The danger is that in the short-term, the country’s new-found affluence will only deepen the gap between the super-rich and the rest. This could lead to further political unrest, and the sort of instability that will scare away foreign investors and nip economic recovery in the bud.
President Aquino needs to be looking at ways to ensure that wealth is more evenly distributed, in part by supporting the growing middle class. He must make certain that they have a chance to break in to the magic circle of economic and indeed political power, which is still the virtual monopoly of a few powerful clans. For their part, the elite have to understand that although they will lose out to a certain degree, in the longer term, they, along with everyone else, will benefit from a broadly-based and vibrant economy.