Category Archives: Philippines

Chinese Political and Economic Influence in the Philippines: Implications for Alliances and the South China Sea Dispute

Figure 1: China and Philippines: Military Expenditure and Energy Use, 1989-2011

Figure 1: China and Philippines: Military Expenditure and Energy Use, 1989-2011. Shortly after most US forces left the Philippines in 1991-2, Chinese military expenditure and activity in the South China Sea increased dramatically. Data source: Correlates of War Project.

Journal of Political Risk, Vol. 1, No. 3, July 2013.

By Anders S. Corr, Ph.D., and Priscilla A. Tacujan, Ph.D.

The Philippine government is constitutionally required to craft an independent foreign policy, but it must accelerate cooperation with foreign powers to do so effectively.  China’s growing militarization and energy consumption are fast out-pacing the meager military spending and energy consumption of the Philippines (See Figure 1). This makes China, more so than the Philippines, willing to risk military conflict over disputed energy resources, fishing areas, and transportation routes in the South China Sea. Continue reading →

Protectionist clauses in the Philippine Constitution restrict foreign direct investment

Journal of Political Risk, Vol. 1, No. 1, May 2013.

Asia Foreign Direct Investment, 2003-2012.

Asia Foreign Direct Investment, 2003-2012.

Author: Priscilla Tacujan, Ph.D.

With the investment-grade credit rating granted by Fitch Ratings in March, an improved international business reputation, and sound fiscal management, the Philippines is poised to become the next foreign direct investment (FDI) destination of Asia.  Other conditions for a robust investment climate are in place: a large market, skilled human capital, youthful population, and strategic location that connects population centers across Asia. Also, the Philippines is increasingly open to international trade. By 2015, Southeast Asia will have the advantage of a single market through the Association of Southeast Asian Nations Economic Community (ASEAN).  According to data provided in the World Economic Forum’s Global Enabling Trade Report 2012, the country’s macroeconomic fundamentals are strong, making it attractive to at least a fraction of the foreign investors concerned over the Euro crisis.

Despite the improvement in the Philippine investment climate, the Philippine Constitution (1987) still has an antiquated article that supports laws restricting foreign ownership of property to 40% (Article XII), with minor adjustments and deviations by subsequent legislation. Removing the clause, and improving access and protections of foreign-owned business, would lead to a quantum leap in FDI and Philippine economic growth. Small changes to legislation are not enough. The Constitution needs to be changed in order to fully welcome foreign investors to the Philippines. Continue reading →

Philippine Growth Prospects: Shopping Malls as Positive Indicator

By Priscilla Tacujan, Ph.D.

The Mall of Asia, in Manila, Philippines, is the 4th-largest shopping mall in the world. Photo credit: Ivan Tykhy, 2012.

The Mall of Asia, in Manila, Philippines, is the 4th-largest shopping mall in the world. Photo credit: Ivan Tykhy, 2012.

Just a few years ago, the Philippines was dubbed as “the sick man of Asia.”  Today, it is a regional star, with its stellar economic performance at 6.6% in 2012, coming second only to China’s 7.8%.  Standard & Poor’s (S&P) elevated the country’s credit rating from “stable” to “positive,” and may, according to the Philippine Finance Minister, soon get an investment grade that will enable it to attract even more foreign direct investment (FDI).  Likewise, the World Bank has for the third time upgraded the country’s growth forecast.  Its stock market is one of the best performers in the region.  According to HSBC estimates, if current trends hold up, the Philippines by 2050 can become the 16th largest economy in the world, a giant leap from its current ranking of 44th.

Private investments, especially in the retail industry, are creating major contributions to the country’s economic success, including the modest shopping mall.  Shopping malls are proliferating in towns and cities far beyond Metro Manila.  According to data provided by the Philippine Retailers Association, shopping malls account for about 15% of the country’s GNP and 33% of the entire services sector.  They employ about 18% of the Philippine labor force, translating into about 5.25 million employed Filipinos. Continue reading →

GDP Per Capita and Democracy Explain 87% of the Social Progress Index

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Model 1: Effect of GDP Per Capita on the Social Progress Index

Figure 1. Effect of GDP Per Capita on the Social Progress Index (Model 1)

Journal of Political Risk, Vol. 1, No. 1, April 2013.

By Anders Corr, Ph.D.

Social Progress Imperative, a global group that produces well-being data for 50 countries, released their Social Progress Index (SPI) today. The index compares countries not on GDP, but rather on a single quality of life metric as a function of housing, health, education, and environmental sustainability. The index is backed by Harvard Business School professors and the Skoll Foundation (WSJ).

Sweden, Britain, and Switzerland have the best Social Progress Index scores, because these countries have some of the highest GDPs per capita of the fifty countries in the index. It is no coincidence that the three lowest SPI scores – Ethiopia, Nigeria, and Uganda, have very low GDPs per capita. The best way to understand SPI is therefore to control for GDP per capita. Corr Analytics did simple regression analysis on SPI. Approximately 84% of the index is explained by gross domestic product (GDP) per capita (see technical details below). Countries with large economies relative to their populations will have more wealth that can be channeled to the basic necessities measured by SPI. Therefore the simpler standard used by economists for decades — GDP per capita — works quite acceptably for well-being. Continue reading →

Fitch upgrade for Philippines will lead to increased investment in electronics and textiles

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Today Fitch Ratings upgraded the Philippines to investment-grade, which will substantially increase investment in the country. Expect particularly strong growth in electronics and textiles, which will buttress current export strengths in electronic assembly and garments.

Update 5/22/2013: The Philippines obtained the #3 position in foreign investment among South-East Asian countries so far in 2013 (WSJ).

Microfinance Report by the Economist Intelligence Unit (EIU)

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The Economist Intelligence Unit produced an insightful and detailed report on global microfinance in 2012, available at http://www.eiu.com/Handlers/WhitepaperHandler.ashx?fi=EIU_MICROFINANCE_2012_WEB_1.pdf&mode=wp&campaignid=microscope2012.

Bangladesh, Philippines, and Nepal are covered, among many other countries. Philippines takes 4th place in overall microfinance business environment rankings. Bangladesh takes 41st place, and Nepal 44th. EIU ranked a total of only 55 countries, so Bangladesh and Nepal are near the bottom. Rates to borrowers are high. In Bangladesh a 27% rate cap decreases the quantity of loans available (inflation of 7-12% in 2012), and in Nepal, government subsidies have kept rates at a comparatively low 18-24% (inflation of 7-9% in 2012). In the Philippines, there are only 1 million micro-finance borrowers of 77 million total population (http://www.census.gov.ph/content/philippines-population-expected-reach-100-million-filipinos-14-years).

Given the high interest rates and limited penetration of microfinance, it is unlikely in its current manifestation to have a large effect on development or stability in Nepal, Bangladesh, or the Philippines.

New People’s Army in the Philippines

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The New People’s Army (NPA), an insurgent group in the Philippines, attacked a Del Monte supplier in Bukidnon Province yesterday, causing property damage and casualties (http://www.miamiherald.com/2013/02/19/3242109/1-killed-in-suspected-philippine.html). Despite NPA claims regarding the effect on the environment of the company’s expansion, the attack was likely sparked by failure of the company to pay sufficient extortion money to the rebel group.

Peace process in Philippines unlikely to yield quick security gains

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Hopes have recently increased for a peace process in MIndanao (http://www.guardian.co.uk/world/2013/feb/13/philippines-peace-deal-islamist-rebels). However, the process is powered by a politician seeking a capstone to his career, which is insufficient to satisfy the  broad spectrum of insurgents who will continue to have criminal incentives post-agreement. The peace process is unlikely to yield any great security gains in the next year.