PNoy leads next tiger economy

Elfren Sicangco Cruz

Posted on June 26, 2012

"At long last the Philippines is on the road to becoming part of the elite group of ‘tiger economies’ primarily due to the leadership of its new president Benigno ‘Noynoy’ Aquino III," according to Ruchir Sharma in his book Breakout Nations: In Pursuit of the Next Economic Miracles.

Sharma starts his assessment of the Philippine situation with the title "The Philippines Is No Longer a Joke." We all know the tragic story of our country. Back in the 1960s this country had the second highest per capita income in Asia, next only to Japan.

By the 1970s, South Korea and Taiwan overtook the Philippines in terms of per capita income. Malaysia and Thailand followed in the 1980s; China in the 1990s; and Indonesia in 2009.

But in his book published this year, Sharma writes: "Now at long last, the Philippines looks poised to resume a period of strong growth. The new president, Benigno ‘Noynoy’ Aquino III, probably has enough support, and looks likely to generate just enough reform momentum, to get the job done. The Aquino name is still virtually synonymous with the promise of change."

This is a key statement in Sharma’s commentary. The systemic corruption during the Marcos years led to chaotic political instability, a culture of corruption and entitlement in all segments of Philippine society, and the entrenchment of political families that resulted in the perpetuation of a feudal form of politics.

There was a clear and obvious need for change, not just in the political arena, but in all aspects of Philippine life. The worst thing that had happened was that even the ordinary Filipino had given up believing that there was no more hope for this country. People were migrating because they wanted a better future for their children.

However, Professor John Kotter once wrote an article entitled "Managing Change: The Power of Leadership," stating: "The country needed a leader who could manage the change by convincing the people that not only was change necessary, but that it could be done not in some distant future but in the next six years."

Sharma writes: "Benigno III was originally dismissed in foreign circles as an unimpressive 51-year-old bachelor who had lived most of his life with his mother and had not made much of a mark in a low-profile career as a Philippine senator. However, Filipinos saw him as an honest figure who could deliver on the Aquino mandate for change and they were desperate after nine years of drift and decay under outgoing president Gloria Macapagal Arroyo. Following his mother Corazon’s death in 2010, Noynoy Aquino won the presidency on a wave of public sympathy. His victory margin was unprecedented, and his task daunting at a time when it seemed like the whole country was in disrepair."

But now there are clear signs that the Philippines is indeed being seen as one of the most resilient economies in a troubled global economy. In a recent Wall Street Journal issue, the publication had a supplement entitled "Asia’s Euro Risk: How Asia Will Fare if Europe Cracks?"

According to the report: "Asia won’t be spared the fallout of an intensified euro crisis. But not all economies are built the same. Some rely on Europe for export demand and others for bank lending and investment. Some have fragile economies and financial systems ill-prepared for a global storm. Others have deep government pockets that provide a buffer to economic shocks."

The report then proceeded to an economy assessment of exposure to euro pain. Only the following four economies were projected to have the strength to weather a European economic and financial crisis, namely: Australia, China, Indonesia and the Philippines.

Here is the brief assessment of our country by the WSJ: "The Philippines is better prepared than in the past to withstand a downturn with a stronger government balance sheet and a robust domestic economy. Foreign reserves are high enough to fight capital flight."

Here is a sampling of statements about other economies in Southeast Asia:

• "Singapore will bear the brunt of a euro meltdown as the trade- and finance-dependent economy has more exposure to European banks and European trade than most nations."

• "Malaysia’s reliance on trade and European bank funding make it more exposed than most countries."

• "Thailand will feel a chill from a worsening crisis in Europe with nearly 7% of its GDP (gross domestic product) derived directly from European demand and a high rate of exports to GDP."

• "Vietnam is in a weak position to withstand a euro meltdown, relying heavily on Europe for exports and for foreign direct investment. Growth slowed substantially in the past year, leaving the banking system weak and unable to deliver a big lending boost like it did in 2009."

• "Indonesia’s outlook is mixed when it comes to euro trauma. It has relatively limited ties to Europe and its banks. Its economy is driven by domestic demand and consumers who are largely insulated from global markets."

According to Kotter: "If you study enough situations -- as I have -- where people need to make big changes significantly and effectively, you’ll find that there are generally eight basic things that must happen. PNoy has begun to make all the eight basic things happen.

For example Kotter says "pick a good team that can drive real change." In his book Sharma wrote: "At a conference in Manila in December 2010, put on to attract foreign investors to new infrastructure projects shortly after Aquino took office, the electricity went off in the middle of a speech by the minister in charge of power. Aquino is delegating power to competent technocrats and seems to understand what needs to be done to get the lights back on."

One of the mandates of leadership is to communicate. People need to hear the mandate for change loud and clear, with messages sent out consistently and often PNoy has been able to communicate effectively with both the Filipino masses and foreign investors.

Sharma also wrote: "In a meeting with investors, Aquino showed up casually dressed and smiling and did not make any tall promises, he emphasized his intention to keep his government clean, was attentive but not hostage to investors, and focused on giving talented Filipino expats a reason to come work home."

I am confident that with the leadership of PNoy and the overwhelming desire of most Filipinos to have a corruption-free society, Filipinos will soon tell their children and grandchildren that if they want a truly bright future, then they should come, live and work in their country.

Dr. Elfren S. Cruz is a professor of Strategic Management at the MBA Program, Ramon V. Del Rosario College of Business, De La Salle University.