Philippines: Back in grace

Archipelago awakes from its slumber

It has often been said of the Philippines that, unlike its neighbours in South-East Asia, it had failed to achieve the status of Asia's "little dragon". Now it's time for revenge, with the country posting the best economic results in Asia over the last five years, just behind China. Average annual GDP growth over this period has been 6.2 %.

Economic malaise in China, falling oil and gas prices affecting Indonesia and Malaysia, anaemic growth in Thailand... Uncertainties are multiplying in the ASEAN zone, which encompasses the countries of South-East Asia. That's why all eyes are now turning to the Philippines. A fitting return for a country that for decades was considered the economic "ugly duckling" of South-East Asia.

For the past ten years or so, the Philippine economy has been enjoying a veritable renaissance, largely supported by the government of Gloria Macapagal Arroyo, President of the country from 2001 to 2010. An economist by training, Arroyo's two terms in office were marked by a new dynamism. The gamble paid off, with GDP growth averaging 5 % over the period. And the momentum has only increased. In 2010, GDP growth reached 7.5 %, an all-time record for the last thirty years. At the same time, between 2000 and 2014, GDP per capita - based on purchasing power parity - doubled, rising from US$2,450 to US$4,119.

Although growth fell back to 6.2 % last year, this performance is nevertheless much better than that of most of its ASEAN neighbours. On closer inspection, the Philippines boasts three key advantages that make it an attractive location for businesses, starting with a much more favourable geographical location than appearances might suggest. Admittedly, the archipelago is on the fringes of ASEAN, and it takes between three and four hours to fly from Manila to Bangkok, Kuala Lumpur, Singapore or Jakarta. But it takes just as long to get to Tokyo, Beijing or Seoul! This makes the capital of the Philippines the most central city between South-East and North-East Asia.

Then there's the demographic advantage. With over 100 million inhabitants, the Philippines is the most populous country in ASEAN after Indonesia. Above all, the nation has seen a sharp rise in the middle class. Experts estimate that the Filipino middle class accounts for 45% of the country's 22 million households.

The final advantage is language. Having been a colony of the United States for almost 50 years has left a valuable legacy to the business community: a population with a perfect command of the English language. And this from their earliest childhood.

With their near-perfect American accent, Filipinos are particularly courted by the corporate world to work in call centres. It is estimated that one million people sit in call centres, headphones on, answering queries from customers in the United States, Australia and Ireland. All, of course, at unrivalled wage costs.

Since then, Manila has become the undisputed capital of call-centres and after-sales services, dethroning even Indian metropolises. Multinationals such as Citibank, Safeway, Chevron and Aetna have relocated their customer services to the Philippine metropolis in recent years. According to opinion polls, customers particularly appreciate the innate sense of service of the locals, who are incredibly calm and polite, even in the most inextricable situations!

Now it's the turn of tourism and leisure to capitalise on the Philippines. From Manila to Davao in the south, from Puerto Princesa in the west to Boracay or Cebu in the Visayas archipelago, luxury hotels and hotel residences are springing up like mushrooms. A recent study by consultants STR Global indicates that more than 13,500 hotel rooms are being developed in the country, most of them in the capital. Total supply is expected to jump by almost 30 %, or nearly 62,000 rooms. This craze has been fuelled not only by the boom in the gaming industry, but also by economic growth and the general rise in living standards in Asia.

Smooth growth? That remains to be seen, as there is a flip side to the coin, and it is a significant one: the country's deficient infrastructure is among the least efficient on the continent. Most airports are on the verge of implosion, rail links are virtually non-existent, and the motorway network is barely 400 km long. In 2012, according to ASEAN statistics, the percentage of paved roads in the Philippines represented just 27 % of the total road network, a far cry from Thailand's 81 % or even Indonesia's 57 %. According to the World Economic Forum, the Philippines ranked 98th in the world in terms of infrastructure in 2014, well behind Malaysia (25th) and Thailand (61st).

The government is pulling out all the stops to make up for this deficit, which certainly explains the archipelago's economic marginalisation for so long. Nearly 56 billion dollars have been earmarked for the period 2011-2016. However, this objective is unlikely to be achieved, with corruption and favouritism unfortunately playing their part, as is often the case in Asia. Nevertheless, ambitious projects for new bridges, motorways and railways have been launched. But the world is in a hurry.

The Philippines in figures

Composition of GDP (in 2012)

Services now generate the majority of the country's GDP. Unsurprisingly, it is the regions of Manila and Central Luzon that contribute the most to Philippine GDP, with 62.4% between them, followed by the islands of Mindanao with 14.1%, the Visayas with 12.8% and the rest of Luzon with 10.8%.

Source: CIA Worldbook, 2013

6 000 dollars

According to an estimate by the US economic think-tank IHS, per capita GDP in the Philippines should reach $6,000 a year by 2024. This economic growth will be driven by the boom in technology, electronics and real estate.

How to get there

Air links between Europe and the Philippines have seen a number of improvements over the last two years, starting with the return of Philippines Airlines, which offers four weekly non-stop flights between London Heathrow and Manila. In Europe, only KLM and Turkish Airlines offer non-stop services to Manila. The best alternative remains the Gulf carriers. Emirates, Etihad, Qatar Airways and Oman Air all serve the Philippine capital, often with two or three daily flights.

Formalities Valid passport. No visa required.

Time difference 6 h in summer; 7 h in winter.

Currency Philippine peso (PHP). 1 euro = 52.5 PHP (Sept. 2015).

Area code : +63.

5,5%

That's the likely figure for Philippine GDP growth in 2015, a remarkable performance in a climate of sharp economic slowdown in Southeast Asia and China. After falling to 5 % for the first three months of 2015, growth accelerated in the second quarter to 5.6 %. The economy remains buoyed by the boom in services, which continue to post excellent performances, up by more than 6% since the start of 2015.