MANILA: Once known as the “sick man of Asia”, the Philippines’ economic health has been much better in recent years, with an average growth of 6.2 per cent between 2010 and 2015, its best performance since the 1970s. It was one of the fastest growing economies last year, showing resilience while its neighbours struggle to cope with a slowing China.
That strong growth has coincided with the tenure of Benigno Aquino as the president of the Philippines. During his time in power, Mr Aquino has prioritized economic reform and moved to reduce corruption. In his inauguration speech in 2010, he made a commitment to develop infrastructure, create jobs and make the Philippines a place for investment.
While there are critics who say he could have done more, some sectors of the economy have expanded rapidly.
The business process outsourcing industry has been a clear winner. Outsourcing revenues more than doubled from US$8.9 billion in 2010 to US$18.9 billion in 2014. It employed 1.07 million people in 2014, a jump from the 527,000 in 2010. These companies handle customer service calls from around the world, managing concerns related to different business transactions.
US-based outsourcing company Teleperformance celebrated its 20th anniversary in the country this year by opening its 17th call centre in the country. The company now employs 40,000 people across the Philippines, a jump from the first batch of 100 employees it had when it opened in 1996.
“As companies continue to evolve and get bigger and look for opportunities to save costs, they are looking for lower cost markets such as the Philippines who could provide the kind of labour and the kind of capabilities that the Philippines has proven they can provide time and again,” said Mr Travis Coates, Managing Director, Teleperformance Philippines.
Improving business conditions in the Philippines have also made it an attractive investment destination for other foreign businesses.
French energy solutions company Deltadore set-up shop in the country three years ago, during the Aquino administration. It’s now looking to double their team in the next 6 months, as it remains optimistic on the Philippines’ business prospects.
"The Philippines is really coming up on the international place, which means you have more and more companies who are planning to open,” said Martin Ruby, General Manager (Philippines), Deltadore.
BUSINESS CONFIDENCE BOOST
This vote of confidence has been shared by others in the international business community. Three major ratings agencies have given the country an investment grade status, which indicates they have confidence the Philippine government will be able to pay down its sovereign debt on time.
Moody’s has it at Baa2. Standard & Poor’s has given the country a BBB rating, while Fitch gives it a BBB-. Moody’s and Standard & Poor’s has a stable outlook on the country’s sovereign debt; Fitch has a positive outlook.
Such ratings make the Philippines an attractive destination for foreign investments. It also lowers the cost of borrowing by the government.
The current situation is an improvement from seven years ago, when the agencies warned of uncertainty.
"I was asked at the start of the Aquino administration in 2010 whether I would see investment grade. I said … A-rated probably not during my lifetime. But we are already there, investment grade,” said Mr Joey Cuyegkeng, Senior Economist, ING Bank Manila.
The credit ratings boost is largely due to aggressive payment of the nation's debt. According to the finance secretary, debt as measured as percentage of GDP was just under 45 per cent by the end of last year. That's a significant decline from 2004, when it was over 74 per cent.
However, despite positive economic reports, some commentators say the government could have spent more on developing infrastructure, health and social services. Some also think the outgoing administration has prized its credit ratings so much it resulted in a degree of caution, leading it to spend less than it had planned to.
“If we had better spending … then we probably would have had better growth last year and that could have also improved the employment situation,” said Mr Cuyegkeng.
The Philippine government spent 2.23 trillion pesos (US$47.5 billion) in 2015, falling short of the 2.56 trillion pesos (US$54 billion) it budgeted for expenditures that same year.
But the country's budget secretary says this is a case of being slow and careful, rather than underspending.
"There are two ways of looking at things - you can compare yourself to what you ought to be doing, but you can also compare yourselves to where you came from,” said Mr Florencio Abad, Secretary of The Philippines' Department of Budget and Management.
"Technically, it’s not really underspending because eventually they get spent, but they are not spent as fast enough as we'd wanted them to be,” he adds.
Economists say the next administration needs to keep the Philippines’ fiscal house in order, continuing the Aquino administration’s efforts in tax collection and debt payments while ramping up spending.
You've got infrastructure, focus on the agriculture and rural sector,” said Mr Cuyegkeng. “But at the same time make sure that the fiscal performance remain relatively prudent and market friendly.”