The Philippine Challenge

Jakarta in 2005 was a city perpetually on the edge, hovering between hope and dread. With a new president, Susilo Bambang Yudhoyono, every bomb or natural disaster seemed to send the city — indeed the entire country — into convulsions.

Now, as I visit Manila for work, I sense a similar degree of anticipation and anxiety among Filipinos. They too are getting used to a new president, Benigno “Noynoy” Aquino III. At the same time, they’re wondering whether their country is returning to some measure of normalcy.

Having been dismissed as a basket case, the Philippines looks set for a major change.

Noynoy’s decisive victory in last year’s presidential elections has improved international perceptions of the country. There’s a sense that the Philippines has at long last a leader with a mandate to move the republic forward.

This is not to say that the country is without problems; Typhoon Pedring has highlighted the Philippines’ many weaknesses, in the way the 2004 tsunami shook Indonesia.

There’s no denying the two countries share unfortunate similarities, including a susceptibility to natural disasters, endemic corruption and poverty, poor infrastructure and weak government — especially in far-flung regions.

Indeed, the challenges are all the more acute in the Philippines. More than one-fifth of all Filipinos (23 million) currently subsist on less than $2 a day.

Philippine democracy is still shaky, emerging as it has from decades of Ferdinand Marcos’s autocratic rule. While public institutions and civil society are seeking to regain strength, they often run against the entrenched interests of the Philippine elite or “trapols” (“traditional politicians”).

Political violence is still a reality in the Philippines — as the 2009 Maguindanao massacre tragically demonstrated.

Nevertheless, the Philippines, like Indonesia, has tremendous potential. Both countries are vibrant democracies by most counts. The Philippines has a huge population of 94 million, compared with Indonesia’s 240 million. In 2010, the republic registered an amazing 7.1 percent growth rate.

Natural resources including gold, copper and nickel are also plentiful. Troubled Muslim-majority Mindanao is estimated to have a $1 trillion in oil and gas deposits.

Even the Philippines’ weaknesses are an opportunity. The construction of the roads, airports and bridges the country sorely needs will be a key source of growth.

The Philippines — for decades an international laggard — is no longer cash-strapped. Individual Filipinos have become big savers and the country’s reserves ($76 billion) far exceed net foreign debt: a better record than most of Europe.

There are three fast-growing drivers of the local economy: business process outsourcing, remittances and tourism.

According to the brokerage CLSA, BPO generated $9 billion in 2010, a 25 percent increase from a year earlier. The republic is targeting $25 billion in revenues from the sector by 2016. The Philippine workforce has the advantage (compared to Indonesia) of a strong command of English and an amazing service culture.

BPO jobs have kicked off a mini-boom as housing, banking and auto sales benefit from the country’s 600,000 middle-class consumers, with major hubs in provincial cities such as Cebu and Davao. Remittances have also grown steadily. With more than 10 million Filipinos working abroad in 2010 (compared to about 5.2 million Indonesians), over $18 billion was sent home. Moreover, the country is sending more skilled workers such as nurses, accountants and technicians to Europe, the Middle East and North America.

Tourism is also set to grow, with the Philippines well-positioned to become a major playground for North Asian tourists. The soon-to-be inaugurated “open skies policy” will loosen Philippine Airlines’ hold over aviation and bring more visitors to the splendid islands of Bohol, Boracay and Iloilo with their white sandy beaches and historic towns. At the same time, casino operators, having witnessed Resorts World’s success in the capital, will be pouring money into newer and grander developments along the Manila Bay area.

With a 70 percent approval rating, Aquino has a golden opportunity to change his nation’s future fundamentally. Having seen how SBY has transformed Indonesia’s standing, it would be very unwise to bet against the Philippines’ nascent turnaround.

Indonesia must to take note: It is no longer the only “big story” coming out of Southeast Asia. The Philippines is challenging it on multiple fronts — especially services — and it will have to up its game to stay competitive.

By Karim Raslan columnist who divides his time between Malaysia and Indonesia. Jakarta Globe