PNoy’s greatest legacy

Once considered the economic and political model of Asia, Thailand is now on the edge of becoming a failed state. The Philippines, once the “sick man of Asia” is now considered the top investment destination and most successful economic story in Asia by several major international think tanks and analysts.

Today, Thailand’s democratically elected Prime Minister Yingluck Shinawatra has been driven from Bangkok by anti-government protesters. The elite want Shinawatra to resign and be replaced by a “people’s council” which is actually a junta.  She is insisting on a democratic election to choose the next government. Once Thailand gives up on democracy, there will be political instability which will have negative effects on its economy.

A dozen years ago, the Thais were among the world’s biggest consumers of luxury goods. It was the third largest car exporter in Asia.  Its per capita income was double that of the Philippines. When Shinawatra was elected in 2011, there was hope that she would be able to address the economic downturn. For a while it appeared that democracy was finally working.

The Bangkok elite accuse Shinawatra of massive corruption and buying the support of the poor with programs like the rice subsidy. While this may be true, the question is whether the opposition’s alternative to appoint a junta instead of electing leaders is the solution or the beginning of an era of political instability, economic stagnation and military interventions.

The Philippine situation around a dozen years ago was similar. There were street demonstrations against a corrupt government. The President was forced to flee Malacañang and resign from office. The military had backed the position of the street demonstrators. There was talk of a junta taking over. But Corazon Aquino, who was then the nation’s moral leader, did not support the proposal and the vice president took over.

For nine years, under Gloria Macapagal Arroyo, again there was political instability due to massive corruption in government and alleged manipulation of electoral results. GMA’s popularity ratings were the lowest since Marcos and were, in fact, negative in the last few years. By different international ratings, from credit risk and investment ratings to corruption indexes and business opinion surveys, the Philippines was a failing state.

Again, there were anti-government demonstrations in the streets. There were repeated attempts at military interventions. But the majority of the elite and the masses continued to support democracy.

In the 2010  elections, President Noynoy Aquino was elected president.  In less than four years, the once failing state has been transformed into one of Asia’s brightest economic stars. This is the conclusion of several highly prestigious and internationally recognized institutions and organizations.

Just this week, the Philippines was judged as having the best investment climate in Asia ahead of countries like China, Indonesia, Vietnam, Malaysia , Singapore, Hong Kong, Japan, South Korea and Australia. The study, based on the results of a survey of 334 multinational corporations operating in Asia was made by London-based Economist Corporate Network, a unit of the Economist.

But this should not be a surprise. In 2013, all three major credit rating agencies — Fitch, Standard and Poor’s, Moody’s — assessed the Philippine sovereign credit rating as investment grade, the first time in our history. Moody’s cited solid growth, political stability, greater accountability and a low level of exposure to external shocks. This agency said the country’s level of economic performance is among the fastest in the Asia-Pacific region and across emerging markets globally.

 Ruchir Sharma, the author of BREAKOUT NATIONS: In Pursuit of the Next Economic Miracles, wrote that in the 1960s the Philippines had the second highest per capita income in Asia next only to Japan. But by the beginning of the 21st century, many of its neighbors had overtaken the country due primarily to corruption, political instability and crony capitalism. But after the election in 2010, here is what he writes:

“Now, at long last, the Philippines looks poised to resume a period of strong growth. The new president, Benigno “Noynoy” Aquino, probably has just enough support and looks likely to generate just enough reform momentum to get the job done...Filipinos saw him as an honest figure who could deliver on the Aquino mandate for change and they were desperate after nine years of drift and decay under outgoing president Gloria Macapagal Arroyo... Aquino is delegating power to competent technocrats and seems to understand what needs to be done...”

After three-and-a-half years of the P-Noy presidency, two articles in the January-February issue of the FOREIGN AFFAIRS magazine , published by the New York based Council on Foreign Relations, gives an extensive analysis of several emerging markets, especially Indonesia and the Philippines.

One article says: “Two of its [ASEAN] members have stood out as particularly promising. Giant Indonesia soared during the last half decade, boasting high growth, low inflation, an extremely low debt to GDP ratio. But it is the Philippines, the region’s other archipelago, that is now providing the biggest upside surprise.

The Philippines has momentum behind its reform efforts and a popular president with three years left in his term. This provides a compelling platform for growth moving forward.”

There is another article entitled “Why Economic Forecasts Fail.” It seeks to explain why countries like Brazil, Turkey, Egypt, South Africa — that were considered  future tiger economies just five years ago--failed to meet expectations. At the same time, it asked why countries like Mexico and the Philippines suddenly exceeded expectations and are poised to be the next economic superstars.

It is a well thought out article with one paragraph standing out which says: “Economists tend to ignore the story of people and politics as too soft and incorporate into forecast models. Instead they study hard numbers such as government spending or interest rates. But numbers cannot capture the energy that a vibrant leader such as Mexico’s new president, Enrique Pena Nieto or the Philippines’ Benigno Aquino III can unleash by cracking down on monopolists, bribes and dysfunctional bureaucracies.”

It is a strong and moral leadership combined with good governance and the rule of law that could lead to the dawn of a new Filipino century. This is the greatest legacy that P-Noy could leave his country in 2016.

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