The propaganda against President Duterte’s handling of issues ranging from the war on narco-terrorism to the South China Sea and fighting terrorism has failed to dent the Philippine leader’s popularity which continues to defy the cynics who campaign for the beloved leader’s ouster. However, when it comes to the economy, subjective criticisms of Duterte’s performance tend to cloud the reality of statistics that show a positive record across the board.
Under Duterte, the Philippine economy continues to grow in a manner consistent with Keynesian trends which indicate that in an economy undergoing rapid economic growth and development in which employment and wages are up – inflation will necessarily rise. Statistics from Trading Economics indicate that the Philippine economy “grew an annual 6.8 percent year-on-year in the March quarter of 2018“. The report further states,
Both investment and government spending rose faster while private consumption and exports continued to increase. In the three months to March, gross domestic capital formation increased by 12.5 percent, accelerating from a 8.3 percent growth in the previous quarter. Investment in intellectual property products grew by 12.7 percent, followed by durable equipment (10.1 percent); construction (8.9 percent), and breeding stocks & orchard development (4.2 percent).
Government expenditure rose 13.6 percent, faster than a 12.2 percent growth in the December quarter. Meantime, household consumption expanded 5.6 percent year-on-year, compared to a 6.2 percent increase in the fourth quarter.
Exports increased by 6.2 percent, following a 20.6 percent rise in the fourth quarter. Sales of goods rose 2.9 percent (from 12.2 percent in the fourth quarter) and those of services went up 17.9 percent (from 14.5 percent). Imports rose by 9.3 percent, following a 18.1 percent rise in the preceding quarter.
On the production side, the services sector advanced 7.0 percent, compared to a 6.9 percent growth in the three months to December. Growth in the sector was supported by public administration & defense, compulsory social security (13.2 percent); other services (8.8 percent); financial intermediation (7.6 percent), and transport, storage & communication (6.4 percent);trade and repair of motor vehicles, motorcycles, personal and household goods (6.1 percent), and real estate (4.7 percent). The industry sector expanded 7.9 percent, following a 7.0 percent growth in the preceding quarter. Agriculture, hunting, forestry and fishing rose 15 percent following a 2.4 percent expansion in the previous period. Construction grew (9.3 percent), followed by manufacturing grew (8 percent), and electricity, gas and water supply (6 percent). Mining & quarrying went up by 4.5 percent, following a 5.4 percent rise in the December quarter.
The Philippines has a 7.0-8.0 percent growth target in this year. Over the next 6 years, the government is targeting GDP growth within a 7 percent to 8 percent range annually“.
Crucially, the report above relies purely on a statistical analysis which does not include qualitative factors. On the numbers, Duterte’s developmental policies are getting the job done. When considering that recent months of 2018 have seen a dramatic rise in the price of Brent Crude, it is natural for a high-inflation economy to feel the heat from such a development. But in spite of rising fuel prices in a country that is a net energy importer, the numbers are still close to the targeted pattern of growth that the government has set out to achieve.
Duterte’s wide ranging infrastructural development project known as ‘Build, Build, Build!’ has seen further successes with the Mactan-Cebu International Airport Project on track to welcome passengers to a fully functional modern airport in less than a year. With employment rates high while wages continue to grow, the economy is now in good shape to take advantage of The Philippines’ status as the world’s top investment destination. Here, more work needs to be done to take advantage of favourable investment conditions so as to bring fresh investment into the country in a more rapid but also more thoughtful fashion.
The key from here on out is to attract the right kind of investment from abroad. While injections of capital remain important to any growing economy, what is more necessary for a country like The Philippines is to seek and obtain foreign investment designed to facilitate a sustainable economic growth model through direct stimulus aimed at infrastructure using a bottom-up approach.
The mega-projects of ‘Build, Build, Build!’ remain crucial, but equally crucial are cost effective mechanisms to improve existing streets and buildings throughout the country’s major cities. While the development of New Clark City remains an important draw for investors, refurbishing existing buildings throughout Metro Manila and other major centres should be simultaneously prioritised.
Public-private partnerships which invite foreign companies to help rebuild and refurbish entire city blocks will ultimately be an incentive for future investment in major Philippine cities and will also help to boost tourism. In exchange for investments into the refurbishing and “beautifying” of existing buildings currently in both public and private ownership, both domestic and foreign companies can be offered major tax incentives for new or existing business activities in the country. Likewise, any and all derelict buildings or plots of land in urban centres should be given to foreign investors so that they can immediately begin to develop currently useless property into revenue generating endeavours that will be beneficial to the country for year’s to come.
This win-win model allows the government to reap the long term advantages of having large sections of metropolitan areas redeveloped at no cost, while in future years, these redeveloped buildings and public spaces will also be a draw for future business activities.
Simultaneous to this, The Philippines should work on intensifying talks to create new free trade initiatives which can be achieved in conjunction with fresh injections of foreign investment from new partners.
A weak PHP when combined with strong domestic growth represents a time tested Kensyian model for prosperity. Turkey, whose economy continues to grow at a record pace, in spite of inflation fears that were recently brought under control because of a moderate intervention by the state bank which recently helped to create a more uniform set of interest rates, can be favourably compared to the Philippine economic revival that is taking shape under Duterte.
Because of this, The Philippines can use the weak PHP to begin exporting local goods to countries like Russia and in so doing, set the stage for a wider free trading agreement between The Philippines and the Russian led Eurasian Economic Union that has just signed a free trade agreement with China.
The diversity of the topography and climates of Eurasia vis-a-vis The Philippines automatically means that agricultural goods from The Philippines would be a valued commodity throughout the EAEU. Furthermore, just as is the case with China, countries from the EAEU, most notably Russia, would also be able to help The Philippines develop its own industrial economy which could pay substantial dividends in the long term future.
Such efforts can and should be combined with new programmes to attract tourists to The Philippines from countries whose nationals often think of other destinations first. Tourists from China, Russia, South Korea, Pakistan, India, South Africa, Turkey and Japan should all be targeted not only with fresh online marketing strategies to draw tourists to The Philippines but with unique cultural and educational exchange programmes can also help to facilitate both an expansion of economic ties and tourism cooperation. When discussing the key elements of attracting Russian tourists to The Philippines, I recently wrote the following,
“Tourism is an easy way to attract injections of Russian cash all the while promoting The Philippines as a top year round South East Asian destination for Russians. Here, the weak PHP is also an asset. As Russians are always eager for English language teachers to work on Russian soil, one could easily envisage an exchange programme where Filipinos with the right educational credentials can gain employment in Russia as English teachers, while Russian speakers can come as seasonal or part time employees in The Philippines to work at resorts catering to Russian speaking tourists“.
Such strategies can be applied to other nations as well, most notably China.
The Duterte era is a increasingly a “can-do” era for the economy of The Philippines, but most importantly, the “can-do” attitude must be expanded to encompass a “must-innovate” attitude in order to not only achieve but go beyond present economic targets.
Unlike Duterte’s critics, the numbers do not lie. At present, the economy is booming but much more can still be done to harness the largely untapped economic potential of the nation.