The Pinoy Pivot

Although President Obama’s description of his foreign policy as a “pivot” to Asia was intended to be neutral in tone, political discourse in the United States has largely focused on his vision’s military aspects. From the bolstering of U.S. positions in the South China Sea to the opening of new bases in Northern Australia, the president has certainly lent credence to this military-centric interpretation.  Yet, the speech in which Obama outlined this new strategy, an address to the Parliament of Australia in November 2011, was focused on purely economic interests, recognizing Asia as “the world’s fastest-growing region — and home to more than half the global economy”.
For several decades, this discussion over Asia focused on a select group of strong-performing economies, from the “Four Tigers” to the rapidly growing China of the past decade. However, as growth in those countries slows with their rising wealth and subsequent labor costs, a new generation of countries is defining the region on its own terms. One of these countries, the Philippines, is in some senses like the U.S., adjusting to a new future in which its regional role is to be drastically changed. After decades of corruption, positive signs are emerging with a new administration in Manila that this country, one with strong Western ties and democratic values, will become a focus of America’s East Asia strategy.
The Sick Man of Asia
Despite its promising future prospects, however, the Philippines have not yet caught the tide of growth that has benefitted other East Asian nations over the past several decades. It’s GDP per capita, $4,100, trails behind that of Indonesia ($4,700), China ($8,500), and Thailand ($9,500).  South Korea, a country that had half the GDP per capita of the Philippines in 1960, now has an amount eight times greater ($32,100).  Harvard Kennedy School professor John Thomas tells the HPR, “Other countries were performing so incredibly well … [that] the Philippines were labeled as the ‘The Sick Man of Asia’”. While this is a testament to the success other countries in the region have had in creating economies geared to succeed in the latter half of the 20th century, these dynamics also reflect decades of economic mismanagement and crippling corruption in the Philippines.  This corruption was manifested in leaders such as strongman Ferdinand Marcos and the previous president Gloria Macapagal-Arroyo, who is currently under investigation for electoral fraud.
When corruption arises from the top, the hope is that good governance can eventually arise from the top as well, a hope currently vested in President Benigno Aquino III. President Aquino, elected in 2010 and popularly known as “Noynoy” or “P-Noy”, is the latest Filipino politician from the Aquino family.  His father, Benigno Aquino Jr., was a popular senator assassinated upon return from exile during the Marcos regime; and his mother, Corazon Aquino, was the President of the Philippines following Marcos. “He campaigned on a policy of hope and change,” notes Thomas, a message that resonated with a population “discouraged … and disgusted at government”. This campaign rested on the idea that Aquino would slay the persistent corruption that plagued all levels of government.
Returns on Investment
While there was tremendous excitement surrounding the 2010 election, there were also concerns that Aquino’s leadership would be all hype and no substance. As Maria Ressa, Filipino Journalist and CEO of Rappler, put it, “This is a President that came in on a wave of emotion, his main platform an anti-corruption campaign.” Noting that the Philippines relies heavily on “personality-based leadership,” Ms. Ressa further notes that part of President Aquino’s electoral success was a product of his pedigree, with two democratic icons as parents, and the recent death of his mother, Corazon Aquino, hanging over the election. Despite the tremendous excitement resulting from his selection, the first year of the Aquino administration saw growth rates drop to 3.7 percent. Despite this, Ms. Ressa notes how businesses “gave this administration a pass” as they saw the president holding true to his campaign promises, appointing officials with a demonstrated commitment to anti-corruption principles, and spearheading the conviction of a corrupt Chief Justice.
Furthermore, since the low growth of the first year, the numbers have improved significantly. The first quarter of 2012 saw a 6.4 percent growth in GDP, triggering Fitch and Moody’s to raise their ratings of the Philippines to one level below investment grade. Furthermore, Philippine sovereign bonds are trading at rates equivalent to those of investment-grade states. While simultaneously investing in infrastructure, the government has cut down on expenditures, resulting in foreign reserves that allow the Philippines to lend as opposed to borrow, their debt-to-GDP ratio falling from 80 percent to 55 percent.
In an interview with the HPR, Chairman and CEO of the Ayala Corporation Jaime Augusto Zobel ’81 recalls how in the wake of the global meltdown of 2008, many projected that “Philippine monetary remittances from its overseas service providers, which are a major driver of  local consumer demand, would decline by 20 per cent in the wake of the 2008 financial crisis. In fact, the opposite occurred and remittances have not stopped growing, on a year to year basis, since that date. It really points to our having a firm and diversified position in the global service sector.” He attributes these positive indicators to a new standard of governance set by the current administration.
At the same time, however, infrastructure issues still persist, a fact illuminated by flooding across the country this past August. While government expenditures on infrastructure grew 62.2 percent in the first quarter and 45.7 percent in the second quarter, concerns remain that the current level of expenditure will be unable to keep pace with the country’s strong economic growth. One method of solving this problem has been the use of public-private partnerships – public infrastructure projects resulting from a partnership between the government and private business. As the Filipino government lacks the capacity to address these infrastructural needs on its own, this type of partnership is vital for the acquisition of the necessary funding. While only one such project has gotten off the ground so far, the hope is that it will provide a successful and repeatable model for the future.
A Long-Distance Relationship
Colonial history will surely define parts of the US-Filipino relationship, as the actions of the United States in the Philippines during the late 19th century and early 20th century left many scars. However, the Philippines still retain a connection by way of Western practices that often transcends their ties with regional neighbors. As stated by University of the Philippines associate professor Dan Gatmaytan, “We [Filipinos] don’t know that much about the region because we associate with Western concepts, with Western models,” further noting that while English is the most widely spoken language, foreign languages were until recently, infrequently taught.
Furthermore, the Philippines currently embody many of the values that the United States promotes in its partners abroad. USAID Mission Director for the Philippines Gloria Steele explains to the HPR how the Philippines’ “political and economic values are … closely aligned to Western Values, if not particularly [those of] the U.S., [such as] free markets and individual freedoms.” She also points to the large expatriate and immigrant populations in the two countries as proof of a unique relationship between the two nations. This relationship has been only strengthened by the election of President Aquino. Referring to USAID, she stated, “When I looked around and saw what [President Aquino] was trying to do, we actually completely changed our strategy to support achievement of his inclusive growth agenda.” The result is a policy that can more effectively build the infrastructure of the Philippines, a necessary component of continued growth.
With tensions brewing in the South China Sea, the idea of US-Filipino relations will undoubtedly revert back to the military question. However, this is a short-term concern towards a short-term issue, small in the U.S.’s long-term East Asia strategy. Rather, economic cooperation is the source of greater potential, a product of positive reforms and historical ties. As we look to pivot toward Asia in what has been called the ‘Pacific Century,’ the Philippines will surely serve as a focal point.
Correction: A previous version of this article quoted Jaime Augusto Zobel ’81 without sufficient context.  He is quoted at greater length here in order to add clarity to the article as a whole.
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