September 14, 2009
[I'm republishing the articles written by my friend Willy Arcilla, the marketing genius behind the success of C2 in the Philippines and Vietnam, on his 2020 vision for the Philippines. I share this vision that soon all of us will say "I Live an Awesome Life in the Philippines." - Anton, Founder/ Editor of Our Awesome Planet ]
The Philippines, long lamented as an economic laggard or the “sick man of Asia”, whose checkered past has been marked by repeated false starts coinciding with frequent changes in political leadership, has finally found its redemption, and the whole world is cheering.
The UN has lauded the Philippines as the Success Story of the early 21st Century for accomplishing all the 8 Millenium Development Goals, specifically the eradication of extreme hunger and poverty, attainment of environmental sustainability, disease prevention, reduction of child mortality, and achievement of 100% literacy. The IMF and WB have praised the country, not only for its impressive record in sustained economic growth while simultaneously improving income distribution, but also for starting to become a net donor country to multilateral lending agencies to help poorer countries now eager to emulate or adapt the Philippine economic miracle. This was despite the Philippines’ boldness to refuse compliance with IMF/WB conditions after it finally realized it had to stand up on its own, following instead in the footsteps of Asian tigers that prospered with little or no intervention from the US multilateral lending agencies.
For all these gains, Time Magazine honored all Filipinos “People of the Year” for 2020.
The 50-year communist insurgency and Muslim secessionist movements have all but ceased while the AFP and PNP have effectively stopped extrajudicial killings, eliciting commendations from the Vatican, Amnesty International, Communist governments like China and Vietnam, and the Organization of Islamic Countries. Crime and violence have disappeared along with vices like drug abuse and alcoholism, illegal gambling and prostitution. Gallup International now ranks 10 of the country’s cities among the world’s 100 most desirable to live in based on a comprehensive criteria including population density, livelihood opportunities and tax rates, cost of living, peace and order, sanitation and hygiene, availability of clean water and health services, and the air pollution index.
The country’s rich natural endowments that have been restored – verdant rain forests and coastlines with white sands and clear blue waters warmed for 12 months by a tropical sun -- capped by the trademark hospitality of its people have combined to make it a magnet for 20 million tourists annually, and a haven for medical tourism and retirement. Surveys confirm that Filipinos have regained their ranking as the happiest people in the world, representing a 180-degree change from the loss of confidence and skepticism that has depressed a country for nearly two generations. Infant mortality is at its lowest, birth rate has declined to natural replacement levels due more to a responsible parenthood campaign rather than family planning and artificial contraception, while longevity has been rising and is now averaging 88 years old vs. 70 years old as recent as 12 years ago.
After growing at 7.3% in 2007, the highest in 31 years, 8% in 2008 and 9% in 2009, the economy has expanded at an average rate of 10% for the past 10 years starting 2010, and has reached $500 Billion in 2020, translating to a per capita income of US$4,000. Impressively, the GINI coefficient, (an index to measure inequality where a lower number denotes better equity), has dropped to <0.20, an admirable feat and dramatic improvement from 0.50 within only 12 years, even significantly better than western and communist states. The middle income segment, powered by small and medium scale entrepreneurs, OFW returnees, a resurgent industrial work force, and a revitalized agriculture and fisheries sector has burgeoned from 30% to 75% within the past 12 years.
Exports are surging at a blistering pace, driven by the country’s bold decision to focus on organically-grown high-value food and health products from the Agriculture and Fisheries sector’s bumper harvests in rice, corn, sugar, coconut, vegetables, fruits, ocean and fresh water aquatic products; an Industrial sector powered by high-value information technology of silicon wafer fabrication and the manufacture of Filipino information and communications equipment; and a Mining sector credited by Greenpeace for responsible extraction that is feeding environmentally-friendly heavy industries such as steel-fabrication which in turn is helping produce Philippine-branded motorcycles and automobiles, buses and trucks running on clean and green Philippine biofuels extracted from malunggay, jathropha, sweet sorghum, sugarcane ethanol and coconut biodiesel.
The country has been able to turn its weakness as an economic laggard into a strength by capitalizing on the “latecomer advantage” – a dramatic departure from the mindset of previous government and economic planners of “let’s quit since we can’t compete”, by partnering with and learning from the mistakes of other nations, e.g., environmental sustainability, and collaborating with overseas Filipino scientists and engineers, the DOST as well as top schools to pursue “Filipinovation” and catapult the country in its development curve. Millions of seasoned engineers and technicians who had left the country as OFWs have resolved to emulate and fulfill Douglas MacArthur’s promise “I Shall Return!” BPOs reinvented themselves from being mere call centers to become a leading provider of business and economic solutions to the world’s largest corporations – from knowledge process outsourcing to high-value services including CEO mentoring.
The country’s growth has attracted massive investments and technology transfer from neighboring Asian countries led by Greater China, a unified Korea and the ASEAN Economic Community, which in turn, have unleashed a virtuous cycle of growth in employment, household incomes, demand creation, expansion of production capacity and inventory, and higher value-added to the economy. The US and Japan continue to be among the top 10 but the country has largely decoupled from them as principal sources of investment, loans and partners in trade. The most significant contribution however has come from the Middle-Eastern countries as OPEC member-states sent a cumulative $100 billion worth of aid, soft loans and investment with the multiple objectives of hitting 3 birds with 1 stone – to help uplift impoverished Moslem Mindanao; mass-produce green biofuels to diversify its dwindling petroleum reserves and clean the planet we all share. The stock market index has reached a record 10,000 and real estate market values continue to appreciate, not driven by leveraged speculators, but by cash payments from a growing middle class that has improved its financial IQ to save and invest for the future.
Even the nation’s long and world-renowned notoriety for rampant graft and corruption previously institutionalized in all levels of government, and labeled cynically as SOP (Standard Operating Payola) has been miraculously erased. The bloated government bureaucracy has been reduced by half via attrition, process improvement and outsourcing from a record-high of 1.5 million , releasing 750,000 people to become service-providers, entrepreneurs and agribusinessmen. As a result of government’s new image, fresh university graduates are now flocking to join the ranks of civil servants as public salaries have risen to levels competitive with the private sector, and the best and the brightest Filipino youth pursue their dreams of serving the country before themselves.
Perhaps the best indication of the country’s turnaround is the drying up of the supply of Overseas Filipino Workers (OFWs), who used to number a previous high of over 8 million. Now they are officially down to less than 1 million, all of whom enjoy higher pay and benefits of free housing and international education for their children with annual home leaves to the Philippines. The reverse migration started in 2008 and since then, 7 million have returned over the past 12 years, eclipsing the “brain gain” phenomenon witnessed in other labor-exporting countries like China, India and Vietnam, but not before acting as tourism ambassadors to personally invite millions of their grateful hosts to visit a land where the people are as warm and sunny as the tropical climate. Many returnees have joined the academe, the government or the private sector as advisers to share their expertise gained from years of successful overseas work, while others became entrepreneurs by setting up collective ventures. OFW cooperatives are now engaged in more productive sectors like agriculture and fisheries, mining and industry, instead of following the herd mentality of opening a sari-sari store or buying a passenger jeepney.
As a result, the GDP has undergone a dramatic structural transformation on both supply and demand sides. What used to be a service-dominated economy is now more balanced among Agriculture, Industry and Services, while on the demand side, Consumption, which used to dominate by as much as 70%, continues to grow but its contribution is now down to only 30% because of the acceleration of more productive Investments, financed by astronomically high domestic savings rates, and Government Spending on physical infrastructure and public education, health and nutrition, funded by increasing tax revenues plus a resurgent Export sector. Consumption spending has also undergone a dramatic change as Filipinos decided to stop overspending on instant gratification, and started to practice frugality that increased savings rates for reinvestments. Borrowers themselves disbursed bank loans more judiciously, and with better financial management and fiscal prudence, defaults declined, leading to less foreclosures and stronger credit expansion from banking and financial institutions that rewarded their creditworthiness.
Foreign debt, which used to choke off the country with onerous amortization, has diminished to a negligible ratio of <10% of GDP. Industry has enjoyed a revival with electricity rates plunging to record lows among Asian states due to structural reforms and the popularity of local biofuels. The minimum wage remained practically unchanged in real terms for 12 years due to an appreciable drop in the country’s cost-of-living, i.e., prices of food and shelter, transportation, electricity and water services. Labor groups volunteered to freeze wages as savings increased, in order to restore the competitiveness of the Industrial sector versus other economies. The icing on the cake was a resolution by the government to banish the “Not Invented Here” syndrome of “reforming economic reforms” each time there was a change in administration thus, allowing for continuity, consistency and predictability, and ultimately creating an environment that was adjudged by foreign and domestic investors as the region’s most conducive for doing business.
It seems that the “sick man of Asia” has discovered a renewed sense of confidence and faith in its own God-given talents and strengths, skills and capabilities, reminiscent of the Gospel accounts when Jesus performed miracles on the sick, the lame, and the lepers, even bringing the dead back to life, when He said, “Your faith has made you well.”
[The author is a business graduate from the UP and an industrial economist from the UA&P-CRC. He has a 25-year career in various roles in Corporate Planning, Marketing, Sales, and General Management across Asia-Pacific, and a recipient of the Agora Award for Marketing Excellence. He is now President of Business Mentors, Inc., a newly-formed management consultancy firm and Regional Director of ZMG Ward Howell, Inc.]