On becoming the next economic miracle

Ten years ago, Ruchir Sharma wrote a book called “Breakout Nations: In Pursuit of the Next Economic Miracles” which became an international bestseller. At that time, he of course did not anticipate the onslaught of a pandemic on the world economy.

However, now that the pandemic is disappearing, I feel that the book is again a good starting point to identify the next rising tiger economies.

As Sharma said in his book: “The main rule for identifying breakout nations is to understand that economic regimes – the factors driving growth in any given country at any given time – are in constant flux.”

At that time, a long time ago, it was hard to imagine that the Philippines was considered one of the breakout nations. There was a time when the Philippines was seen as an Asian trendsetter and not just one with potential. This was back in the 1960s when the Philippines had the second highest per capita income in Asia behind only Japan. The nation’s fortunes started going down with the reign of the Marcos Sr. regime. By the 1970s, South Korea and Taiwan had passed the Philippines in per capita income terms.

By the 1980s, Malaysia and Taiwan also overtook the Philippines. Then in the 1990s, under Deng Xiaoping, the economic miracle in China happened and propelled this country to become the world’s second largest economy.

Then, Sharma continued: “In 2009, in a moment the Manila elite thought it would never see, Indonesia’s boom made Indonesians richer than the Filipinos for the first time in modern history.”

The Philippines was then considered as the undisputed laggard in Asia, a nation mired in chronic incompetence. Sharma’s description of the Philippine economic scene still sounds familiar today. This is what he said: “When I visited Manila in early 2010, returning for the first time in 12 years, … my overwhelming impression was how little had changed. The contrast to the frenetic progress of China and India could not have been starker. The same handful of family-owned conglomerates still dominated local markets, running everything from malls and banks to airlines and breweries, with no new players to be found. Forget high-speed trains, jeepneys which trace their origin back to World War II remained the preferred mode of public transportation. While nearly all other Asian cities boasted fancy new airports, most international visitors to Manila had to trudge through a greying terminal commission in the 1980s.”

In this book published in 2012, Sharma, however, identified the Philippines as a breakout nation. He attributed this to a new Filipino president, Benigno “Noynoy” Aquino who, he said, “looks likely to generate enough reform momentum to get the job done.”

Indonesia is an example of what the Philippines could become if there was a modicum of political stability and some basic economic sense. It is a well known fact that the Philippines has the world’s fifth richest store of natural resources. This includes natural gas, copper, nickel, iron and gold. A new advantage that is emerging is our country’s large and young workforce. While most countries, including China, Japan, Thailand and Europe, are losing population, the Philippines continues to have population growth.

However, there are some advantages that are eroding and must be immediately addressed.

The Philippines used to be one of the most literate and well educated nations in Asia. Now, many countries have surpassed Filipinos in their level of literacy.

When the Indonesian economy surpassed the Philippine economy in 2009, this should have been a wake-up call. Unfortunately, the situation has continued to deteriorate. Vietnam has emerged as a stronger economy than the Philippines for the first time in our history.

According to Sharma, Noynoy Aquino’s presidency may put the Philippines on the verge of being a breakout nation. Filipinos saw him as an honest leader who could deliver on the Aquino mandate for change. This was a much needed change after years of drift and decay.

Unfortunately, after the Aquino presidency, the Philippine economy returned to its pre-Aquino state of economic downturn.

The author Sharma was the head of Emerging Market Equities and Global Macro at Morgan Stanley. Aside from being an investment manager, he has also been a writer. He was former contributing editor of Newsweek and was a regular contributor to The Wall Street Journal and The Economic Times.

History suggests that there is no straight path to the top when it comes to economic development. Our nation has reached the status of a breakout nation only to fall back again to being the sick man of Asia. But this only means that we must start over and maybe again and again until we finally reach the status of a breakout nation. Then from there we may even reach the status of a developed economy.

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