Metro Manila (CNN Philippines) — The Philippines is the top-performing economy in Southeast Asia and if the new government plays its cards right, it can see growth ramp up in the medium-term, a consultancy said.
“It was unthinkable seven years ago, but the Philippines is the best economy in Southeast Asia today,” Oxford Business Group (OBG) Managing Editor Paulius Kuncinas said in a news conference on Friday (May 13).
“Investors no longer ask why but where and what sectors they should invest in,” he added.
The OBG launched its investment outlook for the Philippines for 2016-2022 and the report credited the country’s strong domestic consumption, growing business process outsourcing sector and newfound political stability as some of the key factors for growth.
ICCP Group Chairman and CEO Guillermo Luchangco said he no longer has to convince his business partners to come see what the Philippines has to offer. They want to be here, he said.
The main draws for investors? A large, young, English-speaking workforce, and close trade links with Asia, the world’s fastest-growing region.
Metrobank Vice-Chairman Francisco Sebastian agreed, saying, “Before, if I could entertain five to six businessmen a year, I was lucky. Now, I entertain five to six people a week.”
So much has improved in the last few years, Sebastian said. The economy has grown above-5% annually. The Philippine Stock Exchange index now trades at about 7,000, nearly double the 3,600 in 2008. Foreign direct investments (FDI) have tripled in the same period, from a “miserable” $1-2 billion to $6 billion this year.
The Philippines must now set its sights on transitioning into a middle- to upper-middle income country, Kuncinas said.
He urged the new government to attract more FDI, particularly through relaxing foreign ownership restrictions in the Constitution.
“The government must make it easier for people to bring in capital. There is plenty of liquidity around the world. The United States, the European Union, Japan are all printing money. We’re all looking for yield,” he said.
The new government must also commit to infrastructure development, according to Kuncinas. Traffic and congestion are a drain on the economy.
The group criticized the Aquino administration for not investing enough in infrastructure during its term. No country, Kuncinas said, lets the private sector take the lead in developing public works.
Public-private partnership – Aquino’s preferred method for rolling out projects – is but one component in infrastructure development, Sebastian added. “In fact, it is even more expensive since you have to make sure your private sector partner earns.”
Kuncinas said the government must take the lead in addressing major bottlenecks, such as those in ports, airports and highways.
“The government mustn’t look at it in terms of how much it will spend, but how much return it will get. They will get their money back. Why do you think Dubai builds the biggest airports?”
Lastly, the OBG asked the government to work towards peace in Mindanao. Decades-long fighting in the south have limited the spread of development to some of its poorest provinces.
Presumptive president Rodrigo Duterte might just be the man to address this, Luchangco said. As the first head of state from Mindanao, he understands just how much resources are kept in the capital. It also helps that the core of his platform is peace and order.
Weighing in on the new president
The OBG’s recommendations fit in neatly with the eight-point economic agenda recently presented by Duterte’s transition team. It bodes well for the economy since it means there is political will to address these critical issues, business leaders said.
“We’re pleased that the next president is working very fast. He is picking his people and fleshing out his platform immediately. The main fear about him was that his economic plans were not always clear,” Sebastian said.
For Luchangco, Duterte can focus on the areas Aquino may have fallen behind in, such as agriculture and small- and medium-size enterprises.
But at the same time, the new government must not get carried away with the reform momentum.
“On the other hand, we must also admit that what lifted our economy is the work of Aquino. We must not throw that away,” he said.
In a separate research note released on Friday (May 6), JP Morgan welcomed Duterte’s eight-point agenda.
“We believe that financial markets will welcome the explicit commitment of the incoming administration in keeping the current macro-economic policies, particularly its focus on infrastructure,” it said. “The absence of any drastic shifts is encouraging, in our view.”
It said economic agenda eases investor fears that Duterte might not be as adept at managing the economy compared to his presidential rivals.
The next milestones now will be Duterte’s picks for his Cabinet, as well as his concrete plans to execute his agenda.