The Gold Standard | Philippines

Three days in Manila this week. Returned on Thursday night. The flight was full. Consistent with what I saw in Manila. The place seems to be humming, for now. Shangri-La was full. There is the upcoming ADB Board meeting from May 2nd. The memory of the deadly attack on Hong Kong tourists in 2010 is now distant.

One local businessman, when asked to name the key ingredient of President Aquino’s governance, he said that he has kept at bay all the corrupt elements that were close to his mother. The test of his integrity is going to be in the case in which the judiciary has ruled against his family.

The Manila airport is a parody of an airport. Philippines per capita GDP is twice that of India’s. But, it is arguable if, even in the Socialist era, the Indian capital had such a drab, crowded and inefficient airport. They collect the airport tax in pesos or dollars (the exchange rate is updated to reflect current market rates) and it adds to the delay. The security check stops short of a strip-search. Therefore, when one scrambles to put back the belt and shoes, the area is filled with the smell of stale odour from socks!

[Waiting for my turn at the check-in counter, it was fascinating to watch one young European banker (my guess) showing off his importance to the world to the lady assisting passengers in the check-in counter and deigning to leave his Business Card with her. He had the air of some one who has done a huge favour to a poor girl from a developing country. He was clearly the Master of (his) Universe.]

Monetary and fiscal policies score high marks. Deficit is at 2% of GDP and inflation is under control. Remittances remain the backbone and this backbone has become even more important and stronger in recent times. Of course, a country of over 100 million people with a high education attainment can and should do a lot better in providing jobs to its people onshore. I had not known before of the country’s rare earths (cobalt) and mineral endowment.

Unsurprisingly, Philippines and Indonesia are now in the forefront of the stalling of the ASEAN Services Treaty with India.

The front-page story in the local newspaper (The Star) delivered to my hotel room was the President attending the concert by a Brazilian singer with Korean TV anchor and model Grace Lee.

Of course, the big story is about China’s claims and warnings to Philippines on not to operate in a part of the South China Sea. US and Philippines have sent some ships to the disputed region. China has told Philippines not to internationalise it. But, China too has sent warships to the disputed site.

The Philippine peso and the Indian rupee used to be in lockstep against the US dollar. Since the middle of last year or around August, they diverged. The Philippine peso will now trade at 1.1-1.2 Indian rupees soon. This appears deserved. Philippine 10-year government bond is yielding 5.8% or so. It is the same as Indonesia’s. But, Philippines’ credit rating is two notches below that of Indonesia’s and India’s. Either Philippine government bond is too expensive or its credit rating deserves an upgrade. As usual, there is truth in both statements. The stock market appears fully priced. Of course, the market is shallow and free float is thin for most stocks. There are no easy ways for some foreigner to participate in the good macro story. Of course, the key is that it should last.

It is good that the Philippine Presidential term is six years. If one wants to, some useful things can be initiated and followed through. There is so much to be done and the country has numbers in its population, people of the right age, skills, drive and more. It is clear that all that is required is minimum standards of integrity and the rest of the society takes care of itself, for the most part. Hope the show continues.

DISCLAIMER: This is an archived post from the Indian National Interest blogroll. Views expressed are those of the blogger's and do not represent The Takshashila Institution’s view.