“At long last, the Philippines looks poised to resume a period of strong growth. The new president, Benigno ‘Noynoy’ Aquino III, probably has just enough support, and looks likely to generate just enough reform momentum to get the job done.” From Breakout Nations by Ruchir Sharma
Indonesia and Philippines over China. India over Brazil and Russia. The "new normal" isn't just for the U.S. and Europe, writes Ruchir Sharma in his new book "Breakout Nations: In the Pursuit of the Next Economic Miracles."
After a decade of rapid growth, the world’s most celebrated emerging markets are poised to slow down. What countries will rise to challenge them? In this vignette-studded world tour Ruchir Sharma, a writer and one of the world’s largest investors, offers readers a ground-up view of the forces-many unique to each nation-that will create the coming flops and rising stars in the world economy. As an era of easy money and easy growth comes to a close, China in particular will slow. Other major players including Brazil, Russia and India face their own daunting challenges and inflated expectations. To identify the economic stars of the future, Sharma says, we should abandon the habit of extrapolating from the recent past and lumping wildly diverse countries together. We need to consider emerging markets individually and remember that sustained economic success is a rare phenomenon. The new “breakout nations” will probably spring from the margins, even from the shadows. Sharma identifies which they are most likely to be, and why, offering readers insight into how a seasoned market player sees the world.From Breakout Nations by Ruchir Sharma
“India would be my favorite of the BRICs, but in the low per capita category, the legitimate break out nations are going to be Indonesia, the Philippines, Sri Lanka and Nigeria if political leadership there can remain honest and stable after their long history of corruption.” Ruchir Sharma
Confetti and streamers are scattered during a ceremony to launch a bulk carrier at the Tsuneishi Holdings Inc. shipyard in Cebu, the Philippines.
Jose Winylito Tanquis has reason to be proud as he raises a flag to signal the launch of the 58,000- ton “Ocean Symphony” in the Philippines. Not only did he help build the cargo vessel, his son John now works at the yard.“Now, he can buy his own stuff, like shoes and clothes,” said Tanquis, 47, a foreman at Tsuneishi Holdings Inc.’s yard in Balamban on Cebu Island. At 21, John is the eldest of six siblings who will enter the workforce in the next decade.
The so-called demographic dividend from a rising supply of young workers is one reason Japan’s second-largest shipbuilder expanded in the Philippines, where workers are on average half the age of its Japanese employees. Tsuneishi is considering Indonesia, the Philippines and Myanmar for another shipyard, said Hitoshi Kono, chief of the company’s local operation.
Asia’s manufacturing powerhouses -- Japan, South Korea and China -- are among the fastest-aging countries in the world, while developing nations in Southeast Asia are among the youngest in the region. As factories, jobs and investment flow south to tap cheaper labor, growth in the 10-member Association of Southeast Asian Nations is poised to accelerate, propelling the area’s currencies and fueling consumer and property booms, Bank of America Corp. says.
“The demographic dividend is over for Japan and Korea, and it will be over for China soon,” said Yoshimasa Maruyama, chief economist at Itochu Corp., Japan’s third-largest trading company. “It’s happening now in the Asean area, and it will continue for some time.”
For Cebu, famous for its luxury beach resorts, that means regional authorities are building another four 10,000 square- meter (108,000 square-foot) factories this year. Krispy Kreme Doughnuts Inc. (KKD) unveiled its first outlets on the island in October, while 7-Eleven Inc. chose July 11 to open its first two Cebu convenience stores.
Two hours’ drive from the Shangri-La Mactan Resort & Spa -- where tourists enjoy parrotfish fillet and black-pepper squid overlooking the ocean -- Tsuneishi has launched 11 ships this year, supporting more than 15,000 workers. The company has two shipyards in Japan and one in China.
Mitsumi Electric Co. (6767), with more than 14,000 staff on Cebu, is among businesses looking to move more manufacturing out of China, said Yoshitsugu Murakami, a spokesman in Tokyo for the electronic-parts maker.
“Labor costs in China have been rising,” Murakami said. “It’s good for us to shift production to the Philippines little by little. It’s easy to recruit talented workers.”
‘Standout’ WinnerThe Philippines is a “standout” among countries set to benefit from a bigger labor pool, with its rate of economic expansion likely to rise as much as 1.5 percentage points during the next decade, according to Chua Hak Bin, an economist in Singapore at Bank of America’s Merrill Lynch division.
The International Monetary Fund predicts China’s growth will slow to 8.5 percent by 2017 from 9.2 percent last year, while the Philippines will expand 5 percent compared with 3.7 percent, and growth in Vietnam will reach 7.5 percent from 5.9 percent, according to projections published in April.
“Domestic demand will more likely grow at faster rates if the labor force is going to grow more quickly, and that will spur the exchange rates as well,” said Chua, who previously led the Singapore central bank’s external economies division.
Standard & Poor’s this month raised the Philippines’s credit rating to one level below investment grade, its highest since 2003. In January, Moody’s Investors Service elevated Indonesia to investment grade for the first time since 1997.
By William Pesek, The Sydney Morning Herald
It is often a fool's errand to predict turning points in the more erratic Asian economies. Nowhere is that truer than the Philippines, whose greatest consistency seems to be disappointing the optimists.
With Europe sliding, America limping, Japan shrinking and the once-unstoppable China slowing, it's anyone's guess where the Philippines might be in three years. At the risk of looking foolish in, say, 2015, I think it will be in a far better place than it has been in a decade.
My faith rests on four things that Benigno Aquino has done since assuming the presidency in June 2010. These were moves that mark a keen understanding of what ails Asia's 12th-biggest economy and flashes of courage that were absent in his three predecessors.
Third, addressing overpopulation. The nation's ranks are outgrowing the number of good-paying jobs being created, forcing more Filipinos to work overseas.
Any talk of family planning is suppressed by the powerful Catholic Church, which is too politically active for comfort. Aquino risked the Vatican's wrath with a "responsible parenthood" bill. Let's hope more such steps are on the way. From Bloomberg