Incredible. Amazing. While other Asian
countries describe themselves with superlatives, the Philippines national ad
campaign promises only "more fun."
Filipinos
have reasons to smile. Asia's perennial underachiever is outperforming. This
week saw more successes: Moody's upped its outlook on the country's credit
rating to "positive," citing prudent fiscal management. An anti-graft
drive notched a win with a guilty verdict in the impeachment trial of a former
chief justice. And first-quarter gross domestic product growth of 6.4%,
announced Thursday, defied most forecasts as well as the mood in the global
economy.
But to
build on the promise, the Philippines must deliver on three main growth
drivers.
Business-process
outsourcing is already booming due to strong English skills, cheap rent and low
wages. A fondness for basketball and Hollywood movies is an advantage, too,
when it comes to staffing call centers with workers who can make a cultural
connection with U.S. customers. Starting from scratch a decade ago, the sector
generated revenue of $11.25 billion last year. CLSA says that could double by 2015.
Government
officials say tourism is a low-hanging fruit. They aim to triple arrivals to 10
million by 2016. A $5 billion gambling hub under construction will help. So too
a surge in new planned hotel rooms and a rising tide of Chinese visitors, whose
numbers were up almost 30% last year.
Arrivals
hit a record high 1.2 million in the first quarter. But there are challenges. A
regional economic slowdown would hurt. Manila's spat with China over
potentially resource-rich areas of the South China Sea has raised diplomatic
tensions that could stymie Chinese tourism too.
Poor
infrastructure is a bigger issue. Security concerns at the country's airports
have led to restrictions on its carriers. International aviation regulators
won't let the nation's major airlines fly new routes to South Korea or the
U.S.—their top two markets for visitors—until domestic airports improve.
Indeed,
infrastructure spending is the third leg of the country's growth agenda. The
government has pledged an extensive public-works program. The first quarter saw
public construction jump 62% over last year. That pace must be sustained.
Private investment activity also needs to pick up. RBS says weak private
investment was a factor in disappointing first quarter construction overall,
which was up just 0.3% from a year earlier.
Manila
is more fun these days. But the Philippines must get serious on infrastructure
to make the most of its time in the sun.
DUNCAN
MAVIN
Business & Investment Opportunities
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