The Philippine tragedy

In the Summer of 1992, the Philippines, while still deeply mired in poverty, seemed somewhat vibrant and promising. President Fidel Ramos, also known as “Steady Eddie,” cultivated an optimistic spirit of reform, and openly spoke of an impending economic transformation for his country.

The Philippines would no longer be the proverbial “Sick Man of Asia,” promised President Ramos. Instead, it would dramatically revitalize its economy and take its rightful place among the booming “tiger” economies of Asia (Hong Kong, Singapore, Taiwan, and Malaysia).

“Tigerization” became the Philippine slogan under the Ramos administration. And in 1993, President Ramos’ optimism seemed justified, as the Philippine stock market delivered the best returns in the world: more than 100 percent.

But the Philippine economy never really prospered. It still remains “The Sick Man of Asia” today. And the Philippine Peso, once trading at 26 to the American greenback in 1992, is now at 40 to the dollar.

(A former government official recently commented that the Philippine BFI, or Bar Fine Index, the truest measure of inflation, recently dipped, indicating rather weak aggregate demand.)

The Asian financial crisis offers a convenient excuse for the Philippine failure. But most of Asia, including South Korea and Japan, has already rebounded quite nicely. There is hope in Hong Kong, Singapore and Malaysia–but not in Manila: the Philippines still look poor and weak.

When will the Philippines become a rich country? Indeed, will it ever succeed?

So long as it continues to reject tried-and-true free markets, the Philippines will always remain deeply impoverished–and hence will continue to have to rely on its overseas workers for its very economic survival.

Merely observe Philippine President Joseph Estrada’s recent effort to liberalize the RP economy by amending the nation’s highly protectionist constitution. Estrada’s effort failed abysmally. He could not remove RP constitutional restrictions on foreign land ownership. He could not attract much needed foreign investment by opening up a highly regulated Philippine market hostile to investment. Estrada’s hands are tied.

Meanwhile, Hong Kong and Singapore–two of Asia’s richest countries–were recently rated as the two freest economies in the entire world. And, as a direct result, Singapore and Hong Kong are both expected to continue to import Philippine contract workers to work in positions they could have otherwise had at home, had their government been more open to trade liberalization, foreign investment, and free market capitalism. A lesson for us all.