When talking about the Philippines, the phrase comes to my mind is ‘not so developed’. In Hong Kong, you can find lots of big shopping malls and you can even name several business centers in just a small place. While in Jagna, the market is the only business center. There is no shopping mall. If you want to find one, you may need to go to a bigger city like Tagbilaran or Manila. Not very surprisingly, Philippines does show a great potential in its GDP growth since it is still not so developed. In 2015, GDP in the Philippines showed a 6.1% growth and it recorded an average of 6% growth in the past five years. Comparing with U.S. and Hong Kong, which showed 2.4% and 2.3% growth rate respectively, the Philippines is more than twice of them. What does the 6% imply? The digit gives the Philippines an astounding doubling power. It only takes about 12 years to double its size of the economy if it maintains to grow at a rate of 6%. While other developed countries or cities need more than double of the time, said 2-3 decades in order to achieve the same growth as in the Philippines.
The question comes ‘How to secure such high growth rate in the future?’. Local businesses and foreign investments are indispensably two driving forces contributing to the growth of GDP. Something needs to be done to make the Philippines a more favorable place for business. It is a bit clichéd but they are the problems that need to be solved– corruption and cronyism.
Corruption is a long-standing problem in the Philippines. When I was talking with the owner in the Cliff Heaven Resort, she told me how she paid the ‘under table money’ to the official when she was applying for her business license two years ago. She said it is inevitable, especially when you want your application to be processed faster. This is only one of the many cases happening in the Philippines. Businesses are vulnerable to corruption. Nearly two-third of the firms in the Philippines are expected to bribe the public officials in order to smoothen their business or even to win a government contract. Bribing to get a license or permit is not unusual. Corruption exists at all levels of government and it ranks the second biggest business obstacle in the Philippines. So after all, anything can be done to fight against corruption? Maybe the Philippines can learn from Hong Kong. Hong Kong used to be very corruptive, it was particularly rampant in the public sector. When you were applying for public housing, schooling, or any other public services, you were required to put down some money to the officials. More ridiculously, you even needed to pay ‘tea money’ to the crew before getting on the ambulance. Things got changed after the inception of the Independent Commission Against Corruption (ICAC) in 1974. Through law enforcement, prevention and education, Hong Kong gradually became an incorruptible international financial hub of the world. To a certain extent, Philippines is very similar to Hong Kong in 1960s-1970s, the very corruptive period in Hong Kong history. Currently, there are Laws against graft and corruption and ongoing anti-corruption programs in the Philippines. However, the government needs to show a stronger determination and enforce the laws more strictly in order to give confidence to the general public and to encourage public supervision.
The second obstacle is cronyism. It happens in any forms in the Philippines. From appointments of friends and relatives to the government body to only cooperating with friends and relatives, cronyism causes unfairness and lost opportunities. It is not healthy for the operation of a free market and also the business itself. When I asked about the sources of supplies in my business, I was shocked by the reply. Vince, the owner’s son, said they buy from their friends and since all food suppliers are their friends, they take turns to buy one by one. When I further asked about the price of the food, Vince told me that the food might not be always cheaper than the others. The Philippines, to a certain extent, is similar to China, focuses a lot on the relationship. It is common to see everyone pay a lot of effort on building up their relationship so as to help with their life, career or their business. But it is unhealthy for the whole society. As I mentioned, unfairness and lost opportunities are the two drawbacks seriously discouraging the one who endeavors to improve their competitiveness. How to avoid it? Maybe it can be done with full transparency of the appointment and the bidding procedures together with proper monitoring. The government can disclose the selection procedure and criteria of the officials and Vince can introduce a bidding process for his suppliers to select the one offering him a better deal. All these should accompany with the supervision of a third party to make sure it is implemented properly.
In a nutshell, it is likely to see the Philippines keep growing at a high rate in the future. While it is growing, the problems of corruption and cronyism will grow as well. The future challenge to the Philippines will be the fight against corruption and cronyism so as to make it a better place for business and foreign investment.
Independent Commission Against Corruption. (2016). Brief History. Retrieved from http://www.icac.org.hk/mobile/en/about_icac/bh/index.html.
The Heritage Foundation. (2016). 2016 Index of Economy Freedom. Hong Kong. Retrieved from http://www.heritage.org/index/country/hongkong.
The Heritage Foundation. (2016). 2016 Index of Economy Freedom. Philippines. Retrieved from http://www.heritage.org/index/country/philippines.
The Heritage Foundation. (2016). 2016 Index of Economy Freedom. United States. Retrieved from http://www.heritage.org/index/country/unitedstates.
World Bank Group. (2015). Enterprise Surveys. Philippines (2015). Retrieved from http://www.enterprisesurveys.org/data/exploreeconomies/2015/philippines.