April 29, 2011

'Sick man of Asia' looking a bit better

Eric Ellis

Philippines president Benigno "Noynoy" Aquino III

PERMANENT sick man of Asia? Or tiger in waiting? Once Asia's richest country save Japan but now with reasonable claims to be one of its poorest, the Philippines confounds.

Progress in the Philippines can be measured in unexpected ways. The first time I arrived in Manila, the Marcos kleptocracy was collapsing, an Aquino had just been assassinated at the airport and his wife was still a Boston housewife in a yellow dress. One of Marcos's goons, moonlighting as an airport immigration official, tried to sell me his badge for $US100, his clear implication being that if this offer were refused, passage through immigration would be problematic. I paid, a ''visa fee'' with a souvenir. With the money trousered, he briskly waved me through.

Around this time Alan Bond was fighting John Elliott for control of mega-brewer San Miguel Corp, controlled then - and still - by Marcos crony Eduardo Cojuangco. Bond lieutenants told me the Philippines was the most corrupt country they had done business in, which is saying something.

This most recent time, however, immigration was a doddle, so that's progress at least. This time it was Finance Minister Margarito ''Gary'' Teves who confounded, in a country where politicians have rarely been garbed in glory. He was interviewed not in the ministry, where finance ministers are normally found in most countries, but in the gleaming tower of Land Bank of the Philippines, one of the country's biggest, which he chaired.

The interview was straightforward enough: he claimed the ''dynamic'' Philippines had loads of potential, had been overlooked by foreign investors and really should be looked at again as an equal to Singapore and even Taiwan. Teves said Manila's corruption image was overblown. His spinners didn't quite claim that the Philippines was an Asian Norway ''but things are not so bad as they can appear''.

Ministers are paid to put a gloss on things, but where there seemed a mental block in Teves's office was the not insignificant matter of conflict of interest: that a minister making fiscal and banking policy simultaneously directed one of the country's biggest banks. That's not supposed to happen in a checks-and-balances democracy, a claim Filipinos proudly make. But the bank was government-owned, his office pleaded. So what's the problem?

Teves is no longer finance secretary. His patron, Gloria Macapagal-Arroyo, reluctantly stepped down as president last June, foiled by dogged corruption claims and pesky term limits. She would not have been re-elected even if she had been allowed to stand. As her years in Malacanang Palace were coming to a close, Arroyo was wounded by an opinion poll that found Filipinos regarded her as their most corrupt president. Coming from a people who elected and endured Ferdinand Marcos and Joseph Estrada, that's quite a condemnation. The new president is Benigno Aquino III, son of Cory and her assassinated husband, Ninoy. He was elected on an anti-corruption ticket, as Philippine leaders often are. His Finance Secretary is Cesar Purisima, who did the same job for Arroyo before Teves took over. And, so it goes, Purisima too is chairman of Land Bank.

Such bureaucratic idiosyncrasies seem to go with the territory in Manila, and don't much bother analysts. Some recent upbeat numbers prompted New York-based economist Nouriel Roubini to note that this "may mark the beginning of a sustained investment boom". Foreign investment is steadily rising, particularly in telecoms and technology - Manila eyes India's cornering of the English-language call-centre and back-office outsourcing industry - and there is a buzz that Aquino just might be the one to reform the country's putrid bureaucracy.

This recent surge in foreign direct investment is generating thousands of new jobs. One of Manila's biggest - and often saddest - economic phenomena is its export of labour. From the kitchens of the Gulf to the staterooms of the global cruise and shipping industry to the crooners working in Asia's hotels, it is often claimed there are as many Filipinos working abroad as at home.

Australians have never much cared about the Philippines, their views soured partly by its image as an economic backwater. Manila is an amiable, pliable ally. Apart from the 1996 APEC summit at Subic Bay, John Howard visited only once as PM, in 2003, and Kevin Rudd and Julia Gillard not at all. When Simon Crean went in 2008 as trade minister, he said the preceding decade had been a lost opportunity, citing bilateral trade that had risen by just 17 per cent in that time.

The Philippine economy improved during Arroyo's term, but compared with its thrusting neighbours, the country has been a chronic underperformer. Now there are high hopes for this new Aquino government. The Asian Development Bank has raised its economic forecast for 2011, citing better foreign and domestic investment and rising incomes. It believes GDP growth will be about 5 per cent in 2011, after the bumper 2010 in which the Philippines motored along at 7.3 per cent, the best rate in 34 years. With that trend continuing for this infamous basket case, maybe it's time to take another look.