The Philippines, Asia’s fastest-growing economy after China, needs to do more to finally lose its decades-old tag as the “Sick Man of Asia,” according to the country’s president.
“We’ll have to be able to prove that this is not cyclical, or a temporary aberration,” President Benigno Aquino said in an interview yesterday of the country’s economic revival. “We’ll have to be able to do it year in, year out.”
His point was illustrated when the lights went out during the 90-minute meeting at the presidential compound in Manila, as the capital suffered a major power failure.
Aquino, 53, who is campaigning to expand his support in elections for the Senate on May 13, said more needs to be done to jail the “big fish” in his anti-corruption drive. Reducing the number of Filipinos who travel abroad to find work is also a key benchmark of success in the three years that remain in his single six-year term, he said.
In the first half of his presidency, Aquino has overseen a resurgence in the economy, which expanded 6.6 percent last year. While the growth rate and a shrinking budget deficit helped earn the country a ratings upgrade, they mask an unemployment rate that is among the highest in Asia-Pacific and poverty levels unchanged since before he took office in 2010.
Aquino “has for the right reasons focused on business climate and governance,” said Michael Wan, a Singapore-based economist at Credit Suisse Group AG. “The president has to urgently fast-track infrastructure projects to cement investors’ confidence in his ability to deliver targets.”
Aquino is still focused on governance. The president, who came to power on the promise that “if there’s no corruption, there’s no poverty,” said: “I want the biggest fish to be inside, incarcerated.”
Until “I bring people to Muntinlupa, it’s the national prison, I won’t be content,” he said.
Aquino’s predecessor, Gloria Arroyo, was arrested on graft charges, while the country’s top judge was ousted for illegally concealing his wealth. Transparency International raised the country’s ranking on its annual corruption index last year to 105 from 129. Indonesia placed 118th, the Berlin-based advocacy group said.
“The person who I replaced is one of the biggest fish,” he said. Arroyo is in the hospital, under arrest.
The bureaus of customs, immigration and corrections will be on his radar after the Senate election, he said. The Philippine justice department ordered the filing of smuggling charges last month against the head of Phoenix Petroleum Philippines Inc. (PNX) Phoenix, which sells refined petroleum products and operates oil depots, didn’t pay taxes on 5.98 billion pesos ($147 million) of oil shipments in 2010 and 2011, according to a copy of a resolution issued by the justice department on April 24.
“After the elections, there will be something that will be done,” Aquino said, without elaborating. “We have to fine-tune the civil service system also, so you don’t have an attitude that once you are granted civil service, it is practically impossible for you to be disciplined.”
The man Filipinos call PNoy, or Noynoy, was named by Time magazine as one of the world’s 100 most influential people this year. His approval rating rose 4 percentage points to 72 percent in a March survey of 1,800 adults, according to polling company Pulse Asia Inc.
Aquino, who is seeking more than $17 billion of infrastructure investments, played down the need to relax foreign ownership curbs to attract money from overseas. The Philippines limits investment from overseas in land, media and telecommunications.
The Philippines draws the least amount of foreign direct investment among its Southeast Asian peers, World Bank data show. The nation received $1.87 billion of FDI in 2011, compared with $7.43 billion for Vietnam, according to the bank.
“He is increasing efficiency in government spending, closing loopholes in tax evasion, but moving forward on more substantial things is needed,” said Trinh Nguyen, a Hong Kong-based economist at HSBC Holdings Plc. “The easiest way to absorb labor is to attract foreign direct investment into labor-intensive manufacturing given the high level of unskilled laborers.”
Asked whether the power failure during the interview was evidence of the need to bring in more investment from abroad, Aquino pointed to China’s record of growth and its curbs on foreign ownership.
“You never get to own land in China, but it’s the biggest-growing economy for a decade,” he said. “If you listen to the various chambers of commerce in the country, they will talk about other things like peace and order, price of electricity, perhaps the red tape, conflicting fiscal incentives.”
Manila and almost half of Luzon, the largest island in the Philippines, suffered a blackout yesterday after at least five power plants shut down. The Philippines needs about 3.2 trillion pesos of investments in power generation to ensure that the country will have sufficient electricity by 2030, according to the Philippine Energy Plan for 2012-2030.
Contract disputes and regulatory reversals in the past led companies including Frankfurt, Germany-based Fraport AG, an airport services provider, to leave the country. Key projects include the Laguindingan International Airport, due to open in June on the second-biggest Philippine island, Mindanao. Construction or expansion of three other airports and a port is set to begin this year.
Aquino, an economics graduate from Ateneo de Manila University, was rewarded for narrowing a record budget deficit with investment-grade credit scores this year for the first time by Fitch Ratings and Standard & Poor’s. Stocks surged to a record this month following the S&P upgrade. The Philippine Stock Exchange Composite Index (PCOMP) has risen 24 percent this year.
The Philippine economy, which was more than twice the size of Malaysia’s and 10 times bigger than Singapore’s in 1960, was termed “the sick man of Asia” as it lagged behind its peers in following decades.
Asked if his country had succeeded in losing that moniker, Aquino replied: “perhaps not completely.”
Stocks have more than doubled since Aquino took office. The peso has advanced more than 12 percent in that period and was the biggest gainer last year after the South Korean won among 11 Asian currencies tracked by Bloomberg.
“We’re trying to guard against the creation of asset bubbles,” Aquino said. “So long as we are very conscious that if a particular sector becomes too hot that we intervene, perhaps put incentives in other areas.”
A key marker for success will be his ability to keep citizens from seeking work abroad, said Aquino. The president cited the employment of several hundred overseas Filipino workers from places like Singapore and Macau in a new casino and hotel complex in Manila as an example of efforts to provide jobs.
The number of overseas Filipino workers climbed 15 percent in 2011 to almost 1.7 million, the Philippine Overseas Employment Administration said. The funds they sent home totaled $21.4 billion last year, equivalent to about 10 percent of gross domestic product.
“That is one of the most significant tests, that it’s no longer the be all and end all of how to get out of this country,” he said.
Aquino served for 12 years in Congress before he became president in June 2010. His father was jailed by Ferdinand Marcos and assassinated in 1983 on his return from the U.S., where he had undergone heart surgery after falling ill in prison. Aquino’s mother, Corazon, became president in 1986 after Marcos was ousted.
He said he believed his parents would be happy with what he has achieved so far as president, though they would tell him it’s not enough.
“When I was in grade school, I reported I was top three in my class and my dad in particular said: ‘Top three? That’s good. When will you be number one?’” he said. “If they were to talk to me face to face, they would say: ‘It’s not enough, you have to go higher than what you have achieved,’ and I agree with them.”
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