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PHILIPPINES


 

 

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 80,574 77,076 71,400 43
         
GNI per capita
 US $ 1,080 1,020 1,050 135
Ranking is given out of 208 nations - (data from the World Bank)

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Update No: 053 - (01/06/08)

First it was the so-called rice crisis which proved to be no crisis at all but rather an increase in prices as a result of global commodity trends. Then miraculously the rice issue disappeared from the front pages of the newspapers to make way for an attack on the largest electricity distribution company in the Philippines over the high price of electricity. The issue of high energy prices has been with us for some time but the Manila Electric Rail and Light Company—or Meralco as it is better known—is a favoured target of politicians, especially as its majority shareholding is owned by a well-known family that also controls the country’s foremost media empire. On this occasion, it was the head of a government insurance corporation (who sits on the Meralco board as a government representative, since government—through its agencies—retains a small shareholding) who was making all the noise and declaring he would unseat the incumbent board, take over the company and lower power rates in the process. Brushed aside was the obvious question—what does an insurance executive know about the power sector? He failed of course but in all the bluster and uncertainty, the damage was done. Once again the Philippines hit the press in a manner that could only strike fear into the heart’s of potential investors.

The two issues or power and rice are world’s apart of course except in two aspects. Firstly, they got the bad press over corruption in high places off the front pages of the country’s newspapers and secondly they provided the opportunity for President Arroyo to be seen as a “take charge” president. The President gives a directive for government to solve the rice problem and, as if by magic, the following day there is an announcement that the problem has been solved (albeit at a higher purchase price to consumers). In the case of the energy sector, the president issues a directive to bring down energy prices and within a short space of time, her Energy Secretary, Angelo Reyes, announces that the government is on top of the situation and really all it wants from Meralco is transparency and good governance. This brings us to the second aspect: in each case President Arroyo came across as the person who saved the day—defending the rights of the downtrodden masa. To many, it looked as though President Arroyo was hitting the campaign trail with an eye on the 2010 elections but then of course, President Arroyo has not been able to change the Constitution and cannot possibly run in 2010—or can she? 

It was actually a “good news month” in other ways. Despite all the problems of the global economy, growth in GDP during the first quarter of 2008 came in within the range of 5.2 to 6.2 percent in the first quarter of the year. This was lower than last year, as high fuel and food prices cut into consumer spending during the period but was better than many had expected. The country is far away from recession and is still hoping for a full year growth target of around five percent or more.
The other piece of good news came in the form of a jump in the country’s competitiveness as measured by the annual survey conducted by the Switzerland-based Institute for Management and Development (IMD). From 45th spot in 2007, the Philippines climbed five notches to 40th place this year on the basis of 331 criteria spanning four major areas identified by IMD and its partners. The United States and Singapore topped the index.

Out of a possible score of 100, the Philippines was given this year a score of 50.478 in 2008, higher than the previous year’s 47.163 points. The Philippines exhibited better scores this year, in all the four major indices, moving up to 42nd from 45th in economic performance. In terms of government efficiency, it improved its ranking to 41st from 47th; business efficiency, 31st from 39th; and infrastructure, 48th from 51st. At a briefing in Manila last week, Dr. Federico Macaranas, executive director of the Asian Institute of Management (AIM) Policy Centre, which is the local partner of IMD, linked the country’s improvement in ranking to the country’s 7.3 percent gross domestic product (GDP) growth last year. In fact the Philippines topped the index in terms of cost of living. Manila has the lowest cost of expatriate living among all 55 cities included in the survey (and benchmarked against New York). The index confirmed what local expatriate executives claim to have known for some time—that the Philippines is actually an undiscovered secret when it comes to quality of executive living.

Sadly of course that is not true for the population in general and despite the good news stories, life remains hard for the majority of the people of this country. Now with higher oil prices and food prices, the cost of living is again rising—last month it reached 8.3 percent and is likely to go higher.

There is already evidence that the number of poor and malnourished is again on the rise.

A new study by the Asian Development Bank (ADB) has warned that the recent surge in food prices will drag a further 2.3 million Filipinos or more into poverty. "During the first quarter of 2008, the 9.45 percent decline in the average standard of living was solely due to food price increases. Likewise, the 50.2 percent increase in the severity of poverty in the same period was attributable to the increase in food prices," the study said.

It estimated that a 10 percent increase in food prices would create an additional 2.3 million poor people, while a 10 percent increase in non-food prices will drive an additional 1.7 million people into poverty. That threshold has already been crossed. This is in a country where already some 30 percent of the population are below the official poverty line which is already absurdly low. According to the official definition a person is below the poverty line if annual per capita income is less than $300 per year—less than the $1 per day criterion used by the United Nations. Even so under this definition more than 4.6 million families subsist below this level.

Here is the Gordian knot that afflicts the country. With interest payments on debt now below 100 percent of the budget, supposedly more money becomes available for spending on much needed physical infrastructure as well as social infrastructure—principally education, health and nutrition. But high commodity prices are likely to negate these gains. Already the balancing of the government books, that was to have happened this year has been pushed out to 2010. The poor still get poorer and the rich still get richer. No longer do people talk about percentages when it comes to government projects (especially those funded by China under so-called concessional loans), instead the talk now is of “multipliers.” “Moderate their greed” was the instruction given by one senior public official to his consultant when the escalated cost of the now defunct national broadband network came to light. The multiplier in that case was assumed to be the cost of delivering a win to the ruling party in the 2007 elections.

Until there is sign of the greed, indeed being reined in, “muddling through” will continue to be the order of the day. 

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