Geopolitics and economic opportunities
The Philippines has repeatedly failed to take economic advantage of geopolitical events.
It was Thailand, for example, that benefited from the 1985 Plaza Accord agreement which forced the Japanese to revalue the yen. Faced with a stronger yen, Japanese manufacturers relocated to Thailand. Thailand became the “Detroit of Asia” as Toyota, Honda, Isuzu and other Japanese car makers made it a base for manufacturing and exporting to other countries in Asia and beyond.
In contrast, despite its large English-speaking, relatively educated workforce, the Philippines lost investors due to its unstable political environment, lack of infrastructure, unstable power supply, and investment-unfriendly and anti-foreign laws, starting with the 1987 Constitution. As a result, the country chose to export its people instead.
For these same reasons, the Philippines continues to lose out in the geopolitical conflict between China and the West. Investors have been skipping the Philippines and heading to Vietnam and India as their insurance against further escalation of the US-China rivalry. Meanwhile, Chinese investors, faced with more expensive labor and a shrinking demographic labor pool, are also going to Vietnam, despite the history of tense Vietnam-Chinese relations.
The Philippines continues to lose manufacturing investors. Intel left the country for Vietnam, and even Korean investors, led by Samsung, have spurned the country for Vietnam. Given the close relations between South Korea and the Philippines, forged during the Korean War, one would have thought the Philippines would be a preferred investment and tourism destination for Koreans. Alas, the Philippines continues to be the bride left at the altar.
Scanning the newspaper pages, I still see many economic opportunities the Philippines can exploit, but will we?
For example, Canada and Australia are beginning to limit the number of foreign students in their universities. An expanding foreign student population is being blamed for high housing rental prices, competition for scarce jobs, and overall decline in quality of living both in Australia and Canada even if education exports contribute to a significant share of their respective GDPs. In Australia, educational exports contribute $20 billion to the economy and are the fourth biggest export after iron ore, gas, and coal. However, for political reasons, Australia and Canada are taking away the welcome mat for foreign students and hurting their economies instead.
Why don’t we take advantage of this geopolitical development and present ourselves as an alternative to English-based tertiary education? After all, we cater to foreign students from India, Nepal, and Africa for health sciences education, and various nationalities for English language education. We certainly cannot offer ourselves as an alternative to those seeking top-tier university and post-graduate education or those seeking education as a path to permanent migration in Australia or Canada. However, we can still catch some spillovers from those who have been turned away from Australia and Canada and are looking for English-based tertiary education. We can build on our education exports as another growth driver if we are intelligent and decisive enough. However, to reach that goal, we must do several things.
First, we must remove the Constitutional restriction on foreign investment in education. Removing the restriction is already part of Resolution of Both Houses (RBH) No. 7*, which amends the Constitution on foreign ownership in education, advertising, and public utilities. It is too bad these Constitutional amendments have been stalled in the Senate, but we are missing a gigantic opportunity by not doing so.
If we allow foreign investment in education, we may be able to get prestigious foreign universities to establish campuses here, especially since their home countries have started to limit international student enrollment. Having these foreign universities here will not only raise the level of tertiary education in the Philippines but also attract foreign students to come and study in the Philippines and graduate with a degree from a prestigious foreign university, say the University of Sydney or Duke University. Imagine the spillover effects on the economy in terms of housing, food, and tourism.
Second, we must also remove the constitutional restriction on the practice of professions without the need for an enabling law. This will not only make it easier for foreign professors to teach in the Philippines (the Philippine Regulation Commission considers teaching a practice of a profession) but also expand the number of foreign student graduates who have studied here, especially much-needed doctors and nurses, to practice in the Philippines.
At the very least, Congress should amend the Foreign Medical Practices Act, to enable foreign medical students who have studied in the Philippines to get a license to practice here if they pass the Physician Licensure Examination (PLE). About 10,000 Indian medical students in the Philippines face a problem since India recently mandated a reciprocity arrangement for citizens who have studied abroad to get a license to practice in India aside from an alignment of medical curriculums. If we don’t reciprocate, the number of Indian medical students in the Philippines may dry up and present huge opportunity losses to our private colleges and universities.
Third, the Free Tertiary Education Act, which provides free tuition at state universities and colleges for P40 billion annually, should be converted into a scholarship fund for poor students instead.
The College Tuition Law is wrong for many reasons. It subsidizes state schools, whether performing or not, so rich and middle-class students in those schools get free tuition. The more affluent students, especially those from private schools, are more likely to be admitted to those state schools, thereby creating a bias against poor students. This exacerbates income inequality. It is also inefficient since the cost of graduating a student in state schools is higher than in private colleges and universities.
Most importantly, it provides unfair competition to more efficient and better-managed private colleges and universities. As a result of this law, several private educational institutions have gone out of business and weakened the nation’s capacity to provide tertiary education.
Last, the growth of the education export sector should be part of the country’s development plan and should be an area to shower with government incentives and support.
Other geopolitical developments, from the demographic collapse in Japan, South Korea, and even Thailand, to political instability in Bangladesh and Thailand, can be exploited by the Philippines with the right policies. However, I will discuss these in another column.
Given our labor rigidities and the poor state of our infrastructure, we may be unable to attract many manufacturing investors despite Western governments’ push for “friend-shoring.” We may have no choice but to seek growth in services. Geopolitics presents us with an opportunity to grow our education export services sector. Let’s seize the day. n
*“A Resolution of Both Houses of Congress Proposing Amendments to Certain Economic Provisions of the 1987 Constitution of the Republic of the Philippines, Particularly on Articles Xll, XlV, and XVl.”
Calixto V. Chikiamco is a member of the board of IDEA (Institute for Development and Econometric Analysis).
