As the World Economic Forum visits the Philippines for the first time, with the Indonesian and Vietnamese heads of state both flying in to be hosted by President Benigno Aquino, I believe there has never been a better time for the country and region to set out its stall for business.
The 10 countries of ASEAN represent one of the world’s fastest-growing economic regions, and are growing in self-confidence. When the new ASEAN Economic Community launches at the start of 2015, it will be bringing together countries that, between them, have 600 million people and a combined GDP of nearly $2 trillion.
This brings unprecedented opportunities for partnership, trade and foreign direct investment. Already, ASEAN countries have made solid progress: remarkably, every country in the region has either maintained or improved its ranking in the World Economic Forum’s Global Competitiveness Index since 2006. The Philippines, Indonesia and Cambodia have all surpassed at least 20 countries in the rankings in the past eight years.
Arguably, the demographics of the Philippines make it especially well placed to improve its competitiveness. The country has a large and growing working-age population, which is unusual for South-East Asia, and half of the population is under 24. Most expert projections see the economy continuing to grow at over 6% for the next three years – in other words, adding about a fifth to the country’s existing wealth by 2016.
This rise is all the more remarkable given that the Philippines is still recovering from the devastating earthquake and deadly typhoon that displaced more than 4 million people and caused over $400 million of damage. Ultimately, economic growth is the only way to fund disaster relief and recovery, and strengthen resilience against future catastrophe – especially important for a country ranked in the world’s top 10 most vulnerable to the effects of climate change.
Growth is meaningless, however, unless it benefits all. The income gap in the Philippines is larger than in other regional economies, such as Indonesia and Thailand, with the top 10% of the population earning about 20 times as much as the poorest 10%. Inequality is rising, but the picture is less extreme than in, say, Latin America and Africa.
The key to avoiding an ever-widening income gap is to nurture a strong and broad-based middle class. As in every emerging economy, the rising middle class in the Philippines is making its presence felt through aspirations for better healthcare, education and other public services.
Crucially, meeting these aspirations depends on combating corruption, one of the most significant causes of widening inequality. It is imperative to forge ahead with efforts to promote transparency and accountability and to cut red tape, and the resolve of the Aquino government in this respect is well documented.
If a slackening pace of reform poses a risk to the Philippines, then political instability stands out as a notable danger for the region – both within and between countries. It is no coincidence that historically strong economic growth has tended to go hand in hand with political stability and peaceful and cooperative relationships among neighbouring states.
Another priority for discussion is the need to improve infrastructure. Reliable and affordable electricity is one of the areas on which the Philippines, in particular, needs to work; as is high-speed internet, despite the country’s burgeoning digital economy and high rate of social media usage. In turn, improving infrastructure means finding ways to increase investment; rates have averaged at just 19% of GDP between 2009 and 2013, compared with 32% in Vietnam.
Fortunately, the impending evolution of ASEAN nations towards greater economic collaboration brings opportunities to improve these and other elements of their competitiveness. As cooperation progresses, I look forward to this week’s discussions in Manila being a step along the way.
Author: Philipp Rösler is Managing Director and Member of the Managing Board of the World Economic Forum
Image: Mandaluyong City, Metro Manila REUTERS/Cheryl Ravelo