Be honest: What do you know about the Philippines? Ten bucks says it’s 1980s First Dictator Lady Imelda Marcos’s 3,000 pairs of shoes. Or the mysterious draw of fast-food joint Jollibee. Maybe it’s the cocktail party-wowing fact that Journey front man Arnel Pineda was a Filipino street kid who turned into a cover-band sensation and then became the heir to great American Steve Perry.
The Southeast Asian country of 100 million has not had an easy history. Colonial exploitation. Corruption. Rampant poverty. False starts. But now there are signs that the Philippines, the world’s 33rd largest economy, might be on a sustainable upward trajectory. Under the leadership of Benigno “Noynoy” Aquino III, son of late ex-president Corazon Aquino, the country is fighting corruption and tax dodging and is investing heavily in infrastructure and relief for the poor. His 2012 national budget calls for 26 percent further infrastructure spending than in 2011, addressing access to potable water, better roads, and train service.
Greater Manila is a megalopolis that teems with 25 million people across six provinces; wastewater treatment and access to electricity are simply not keeping up with the capital’s sprawl. Its main airport needs to be expanded—and fast—just to keep up with the growth in tourism and business travel in and out of the country. Private capital sees opportunities. Philippine Airlines just said it plans to order at least 100 new planes, resume flights to Europe, and bolster U.S. capabilities. China Hydro is investing $500 million to construct a pair of solar and wind power-generating plants in the city of Subic.
Already, Manila sports the third largest mall on the planet: SM City North EDSA, with 1,100 shops, 400 of which include places to eat. The Philippines is becoming a preferred alternative to India for multinationals’ call-center operations. A critical stream of income to the economy is remittances from 10 million Filipinos living abroad, where they dominate nursing and hospitality-industry staffing. Perhaps no other economy so disproportionately enjoys such a steady stream of incoming dollars, euros, and pesos. According to the Philippine Overseas Employment Administration, the January-March period saw job orders for professional and technical, service, and production workers jump by 25 percent over the same period last year.
This story is getting noticed in the debt markets. The yield on the Philippines’s 8 percent bonds due July 2031 fell last week to 5.94 percent. By comparison, investors are pricing out Spain and its PIIGS peers. The Philippines Stock Exchange PSEi Index is up 20 percent this year—40 percent since September 2011—and keeps setting all-time highs.
This is but one vignette of what Goldman Sachs christened The Next 11 (PDF)—Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, and Vietnam—as a sequel to its case for investing in the BRICs of Brazil, Russia, India, and China. Goldman called the N-11 in December 2005, well before the global financial crisis changed everything.
Keep an eye on the Philippines.