Megillah in Manila : Economy in the Philippines Has Finally Gone Global


At U.S. businessman Calvin Cox's offices here, shifts of Filipinos earning 90 cents an hour keep the keyboards busy 24 hours a day, 365 days a year, typing documents into computers.

The medical, scientific or technical texts are punched in from originals that were edited on paper in the United States and shipped here by Federal Express. The electronic copy is then zapped back to the U.S. over telephone lines for publication in magazines or books.

"They're conscientious, hard workers," said Cox, chairman and owner of Asia Prepress Technology. "And they speak English!"

The global economy has reached the Philippines, putting poor people in small towns to work not just in manufacturing but even in fields such as U.S. publishing. Boosted by foreign investment, this country--long held back by corruption and political instability--is beginning to escape the poverty it endured for decades while its Southeast Asian neighbors boomed.

Economic growth ran about 7% in 1996, following 5.7% growth in 1995 and 4% in 1994--and the government is predicting continued acceleration in 1997. This comes after many years of stagnation when annual growth averaged about 2%, or less than the population growth rate. Exports are booming too, up 29% in 1995 and an additional 24% this year.

Rapidly expanding industrial park-style development at Subic Bay, once the biggest U.S. naval base in Asia, is a dramatic symbol of the Philippines' adjustment to new global realities and the largely successful economic reforms instituted under President Fidel Ramos since 1992.

For example, the Taiwanese computer firm Acer Inc. runs a factory at Subic that employs 710--typically working 72 hours per week at 80 cents an hour--to produce 150,000 computer motherboards per month, said Kenny Wang, deputy general manager of Acer Information Products (Philippines) Inc.

Acer plans to add notebook computers, CD-ROM drives and desktop computers to the products made in Subic Bay, Wang said. The goal is to boost output tenfold in two years--from $210 million in 1996 to about $2 billion in 1998, he said.

And it is not just investors at Subic Bay who have big ambitions for the future. Change is reaching into far corners of this island nation of 70 million, where per-capita gross national product passed $1,000 for the first time in 1995.

Even the heavily Muslim southern island of Mindanao, torn for decades by an insurgency against the Philippines' Christian majority, is looking forward to better economic prospects following a peace accord signed on Sept. 2 with the main rebel group, the Moro National Liberation Front. New investment there is expected from Muslim neighbors Indonesia and Malaysia.


A long-simmering Communist insurgency that had roots throughout much of the Philippines is also much diminished, further boosting the confidence of foreign investors, who are now moving rapidly into the Philippines.

In addition to bringing political stability, Ramos' government has reduced trade and investment barriers in key sectors including power generation, telecommunications, transportation, banking and insurance. U.S. firms, which had cumulative investments of more than $2 billion in the Philippines as of 1995, have plans for at least $1 billion more in the next three to five years, according to the U.S. Embassy in Manila.

With English the dominant language of world business, the Philippines' English-speaking legacy--the result of its 1898-1946 history as a U.S. colony--is becoming an important asset in the global competition for investment dollars.

School in the Philippines is largely conducted in English, so nearly everyone, including factory workers, can speak it well enough to understand routine instructions and get by socially. Wang cited this as one of the major attractions for Acer in investing here.

Another is government action.

"There are so many investors now," Wang said. "It's because of the government's policies. I think President Ramos wants to have a new Philippines. Some of his policies are very good for the investment environment."

Among the key steps Ramos took were rapid construction of power plants, liberalization of foreign exchange and foreign investment rules, increased competition in the telecommunications industry, deregulation of oil prices, tariff reductions and privatization of $2 billion in government assets plus the sale of prime military property in Manila for $1.5 billion.

Proceeds led to a government budget surplus in 1995 for the first time in two decades.

In addition to strictly economic measures, the Ramos government has succeeded in reducing crime, Wang said.

That, plus the peace agreement in Mindanao, has reduced the once-rampant fear of kidnapping that foreign executives used to labor under, he said.

"You feel it's very safe in the Philippines compared to five years ago," Wang said. "Back then, no one wanted to be here. And also, the labor unions are not encouraged to strike."

However, critics argue that Ramos' pro-growth economic policies are only helping big international corporations, not small Philippine businesses or average Filipinos. When the Asia Pacific Economic Cooperation forum, dedicated to promoting free trade in the Pacific Rim, met here in November, protesters charged that its policies hurt the Filipino poor.


According to U.N. statistics, the incidence of rural poverty in the Philippines was barely reduced between 1985 and 1994, the latest year for which statistics are available--to 54% from 56%. Poverty in the country as a whole fell during this period to 36% of all households, from 44%, but this was the slowest rate of improvement of any country in East Asia, according to the United Nations.

"We regard poverty as another tyranny, oppressing half of all our population," Ramos declared in a 1995 speech in which he pledged stronger measures to alleviate it. But his policies reflect a clear belief that overall economic growth is the top priority.

Perhaps the biggest cloud hanging over the Philippines' improved economic performance is the fact that Ramos, who has played such a key role, is constitutionally limited to a six-year term that expires in 1998. Some supporters want him to run for reelection or otherwise hold on to power.

Opponents would view that as a return to the dictatorial days of the late President Ferdinand Marcos, who suspended the constitution in 1972 to stay in office.

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