A tale of two Philippines
January-March 2017
By: Andrew Phelan

Looking around the region, the development template is certainly there. Japan was the first and is the best example of modernization and industrialization. South Korea and Taiwan also made it and both have a large aspirational and well-educated middle class. More recently, we have the China model to learn from. There are a few things in common with all these success stories. Their leaders all studied what worked elsewhere in countries such as Germany, the United States and Britain, and selectively targeted what to bring to their countries.

The other common starting point was land reform. Peasant farmers in each case were given a degree of ownership or incentives to produce on their own plots of land. They were given some capital – some skin in the game. From there, they went to manufacturing, a great employer and a chance to rise up the value chain. In all those markets, the financial sector was kept on a relatively short leash, a case of semiconductors before derivatives, perhaps.

The Philippines could and should have done a lot better. A quick look north at China offers guidance. It was Deng Xiaoping who unleashed the potential of the Chinese people by allowing farmers to sell over and above their quotas for their own profit. He openly admitted that China in the mid-1980s was poor, backward and behind – and he did something about it. It didn’t matter if the cat was black or white, he famously said, as long as it caught the mice. It was this sort of pragmatism that led to his catchphrase, “gaige kaifang,” or reform and opening up, starting with the establishment of special economic zones in the 1980s. It’s an example that the Philippines would do well to learn from.

To understand where the Philippines is today, we must reflect on its history. The Philippines is arguably the most Western of the major economies in the Association of Southeast Asian Nations (Asean). It’s mostly Christian by virtue of its Spanish colonial history, and a sizeable portion of the population is fluent in English.

Those nasty foreigners

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