The Worldview Guide to Investing in the Philippines

05/06/2010

The Philippines is Buffeted by Stormy Politics and Natural Disasters

The Philippines is a key participant in Asia’s growth story: one of the few countries that can be described as a former US colony, it has many characteristics that should make investors at least pause to investigate. The US colonial heritage, for one, has left in place an economic culture favoring markets and capitalism. Low-cost, relatively educated, English-speaking labor has meant that Philippine call centers and other business-service providers can compete with India for business from firms that are offshoring their business processes. Extensive mineral deposits can also feed China’s voracious commodity appetite. Nonetheless, political and geographic factors create risks that have handicapped economic performance to below what traditional economic indicators would suggest is possible.

THE PHILIPPINES IN COMPARATIVE PERSPECTIVE

Currently the world’s 12th most populous country, ranked between Mexico and Vietnam, the Philippines is home to 98 million people. Its GDP—US$318 billion in 2008—is roughly the size of Switzerland’s or Austria’s, and a little larger than Hong Kong’s. Nonetheless, with a 2008 per capita GDP of US$3,300, the Philippines is a relatively poor country, comparable to Iraq and Mongolia, and somewhat wealthier than India (US$2,900). In the 1950s, the Philippines was the second wealthiest country in Asia after Japan on a per capita basis. It has progressed since 1950 in terms of wealth and living standards, but several other countries have since overtaken it. Table 1 compares the Philippines to several others.

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