The New Asian Tiger Cub?
Faster, higher, stronger: the rise of new Asian tiger cub
(Views are personal)
Last week I was in Manila on behalf of the Indian Chamber of Commerce to attend an event supported by the Government of India and the Government of the Philippines. The event was aimed at increasing business, investments and trade flows between India and the Philippines.
Philippines has often been described as the “sleeping tiger” of Asia. Like India, abject poverty, entrenched corruption and sluggish growth in the past have plagued the Philippines. Again, not unlike India, it has challenges in infrastructure and power. A large part of its population is engaged in agriculture where productivity is low. Power is in short supply and expensive. As a consequence, manufacturing is weak. You can look at all these factors as a challenge. And like the shoe salesman who went to Africa, you can look upon them as business opportunities.
What is propelling growth in the Philippines is the services sector which includes electronics and IT services. The services sector employs 52% of the workforce, agriculture 33% and manufacturing 15%. Some of the services space is at the lower end of the food chain. India has a similar track record if one looks at how the IT industry evolved in this country initially through "body-shopping".
Remittances sent by Overseas Filipino Workers (OFWs) represent about 10% percent of the country’s Gross Domestic Product (GDP) of $224 billion. The Bangko Sentral ng Pilipinas (BSP) reported that remittances from overseas Filipinos exceeded $20 billion in 2011. Robust remittances in the ﬁrst quarter of 2012 were supported by the continuous demand for Filipino manpower in various foreign labor markets.
The current President of Philippines is Benigno Acquino III (nicknamed Noynoy). His father Benigno “Ninoy” Acquino Jr. was assassinated. Acquino Jr. was a fierce opponent of the corrupt dictator Ferdinand Marcos. In broad daylight on Sunday, August 21, 1983 at Manila International Airport he was murdered when he landed after a 3-year self exile in the USA. At close range, a gunmen pumped a single bullet into his chest while being escorted by government law enforcement personnel from the aircraft to a vehicle that was waiting to take him to prison. 1983 was the first year I visited Manila. The suffocating atmosphere was then palpable. Things have changed-for the better.
Benigno’s widow Corazon Acquino (the current President’s mother) led a revolution that toppled the Marcos regime. She became a democratically elected President of the country. Her son Acquino III was swept into power in June 2010 in an unprecedented groundswell of support after her mother passed away in 2009. He has a clean image and is trying his best to mitigate corruption which has been plaguing his country for many years. He is also taking measures to stimulate growth. Already the results are showing.
It is not only the Filipinos who are upbeat about their economy. The Philippines can become one of the so-called "breakout nations," according to Ruchir Sharma, author of "Breakout Nations:: In Pursuit of the Next Economic Miracles". He adds,” looking back at Philippine history, in 1960s, the Philippines was 2nd richest in Asia after Japan and supposed to be the next East Asian tiger.”
Philippines has a well-educated English speaking population which is attracting investments in the IT services and BPO sector. Since 2006, the industry has grown at a blistering pace of 46% annually. As of 2011 it clocked a revenue of $ 11 billion. If it continues to grow at 20% as predicted then the industry revenues will touch $25 billion in the next few years.
Global companies are not looking at Philippines for its local market. All of them are eyeing the English-speaking talent pool with a cost-arbitrage opportunity. India is also looking at Philippines as a partner country and companies like TCS, Wipro and Birlas are already present. The footprint of IBM in the Philippines expanded after it acquired Daksh in India which had a large operation in the Philippines. Philippines-based outfits may compete with Indian companies in certain segments of the market. But that is not the big picture. The real opportunity of India lies in creating a framework of a cross-border service delivery model to serve global clients .In this future model of cloud-based service delivery, partner countries like Philippines, Argentina, Hungary and many others will play a critical role
And there are opportunities beyond BPO –in mining, plantations, healthcare, pharmaceuticals, manufacturing and tourism. I met many Pinoys (the affectionate short-form of Filipinos) of Indian origin like our Master of Ceremonies Johnny Chotrani. Johnny went from Calcutta to Manila 35 years ago. He straddles both cultures with ease. People like him can create a bridge between the two countries-one in which they were born and one in which they have chosen to live and contribute. And finally our Ambassador Amit Dasgupta is evangelizing the promotion of commercial ties for a stronger business partnership between the two countries aimed at tripling our bi-lateral trade.
In the third quarter Philippines clocked a growth rate of 7.1% which is the highest in ASEAN. It is likely to end the year as the third fastest growing nation in Asia –after China and Indonesia but ahead of India. We met Cristino L. Panlilio of the Philippines Department of Trade and Industry who spoke at our event. He has joined the government from the private sector. He is gung-ho about the economy. He says that the Philippine leadership is exhorting their countrymen to adopt the Olympic motto: Citius, Altius, Fortius, which is Latin for "Faster, Higher, Stronger". If the country can deliver on this aspiration in a sustained and equitable manner, then what we are witnessing is not a flash in the pan but the rise of a new Asian Tiger.