Breakout nation, when?

Lacking much to boast about for President Aquino’s two years in office, his propagandists have turned to Morgan Stanley managing director Ruchir Sharma’s raving over him in his book “Breakout Nations: In Pursuit of Economic Miracles.”

With such misinformed executives, it’s no wonder that Morgan Stanley had been rescued with $100 billion of US federal funds during the 2008 Wall Street meltdown. Its latest boo-boo was its overpricing of Facebook shares that has outraged investors.

Take Sharma’s statement in his Philippine section: “Filipinos voted Aquino into office after nine years of drift and decay under outgoing President Gloria Macapagal-Arroyo.”

Yet just a page later, he writes: “There are signs of a turnaround, the most dramatic being the rise of the Philippines as a rival to India in ‘business process outsourcing’—the industry that provides the operators who answer calls for customer service at almost any major global company. Call centers did not exist in the Philippines a decade ago, and now it’s a $9-billion industry employing 350,000 people. These centers are starting to open outside Metro Manila and pop up all over the islands of the Philippines, to the point that some analysts think it may turn into another successful case of Southeast Asian archipelago capitalism.” (Emphasis added.)

Arroyo’s years were of “drift and decay,” Sharma writes, but then he gushes over the call industry, which he says emerged only in the last decade? Excuse me, who led the country during that time?

The business process outsourcing (BPO) industry didn’t emerge spontaneously like mushrooms after a rain but, among other factors, was the result of the macroeconomic and political stability achieved by the past administration. If Arroyo had buckled under the pressure of the Aquino clan to step down in 2005, we would have entered into a disastrous period of coups and counter-coups, hardly a place for BPO centers.

The growth of the BPO industry is in fact an undisputed achievement of former President Arroyo, and a case study of how the state can shepherd the growth of an industry through correct policies and measures, and the dogged efforts of the country’s chief executive.

Arroyo built on the telecoms liberalization program of President Ramos, which was the first necessary step in the modernization of our ICT infrastructure. Her key move, setting up the institutional framework for the ICT industry through Executive Order 269 in 2004, was a follow up of EO 264 issued by President Estrada.

It is therefore a case of how a president can build on the gains of her or his predecessors, instead of pettily, childishly dismissing their achievements as Aquino has been doing. Among other moves, this administration has junked EO 264’s goal of establishing a Department of Information and Communications Technology and stopped the very successful “RO-RO” port development program. The Department of Foreign Affairs will soon even close three major foreign posts: the Barcelona and Frankfurt consulates, and the embassy in Ireland—which the past administration worked so hard to set up in 2008 and 2009.

We have a booming BPO industry because of the past administration’s focused efforts to develop it, among these: the Cyber-Corridor Program, ICT-investment incentives, a P500-million scholarship fund for training BPO applicants, the iSchools program that connected schools to the Internet, the establishment of a Commission on ICT headed by a chairman of Cabinet rank, and numerous ICT-focused trade missions.

Arroyo understood how important the BPO industry was because she was computer literate, the first and last president apparently who would have her laptop in all meetings. With his alleged addiction to his Playstation, perhaps Mr. Aquino could focus on making the country a center for creating computer games. At least there’ll be an industry, other than persecuting the past administration, Mr. Aquino will be known for developing.

Hard data show when the country started to be a breakout nation. The Arroyo years (see chart) were those during which the country had the highest growth rates of its gross domestic product, as well as its lowest rates of inflation and peso depreciation. (Source of basic data: http://databank.worldbank.org.)

AVERAGE ANNUAL RATES
GDP GDP Peso
per capita Inflation Depreciation
Marcos 1972 -85 3.4 0.6 16.8 9
Aquino 1986-92 3.4 0.7 9.1 4.8
Ramos 1992-98 3.1 0.8 7.6 6.7
Estrada 1998-00 2.3 0.1 6.4 15.8
Arroyo 2001-10 4.8 2.4 5.1 0.5

The respected Singapore-based journal Southeast Asian Affairs actually reported much earlier, in its January 2009 edition, the country’s breakout from its slow-growth decades:

“Notwithstanding its sometimes-negative international image, the Philippine economy has been performing well in recent years, better than is commonly recognized. Until the global financial crisis in 2008, the country experienced its longest period—five years—of uninterrupted positive per capita economic growth since the 1970s. It seems to have moved on from the ‘two lost decades’, 1983-2003, when there was no net increase in per capita incomes.” –Rigoberto Tiglao, Philippine Daily Inquirer

E-mail: tiglao.inquirer@gmail.com