Can the Philippines become another Singapore?
I’ve been to Singapore and done business with Singaporeans and based on what I’ve learned, applying their model of development here would be very challenging… to say the least.
Singapore got to where it is (the only First World country in ASEAN) because of several key factors, small size and smaller population, among them. In my estimation, foremost among these are are a strong party system (People’s Action Party of Lee Kwan Yew) and capital formation-intensive inflows from Overseas Chinese. The strong party system minimizes corruption and centralizes developmental decisionmaking. It also eliminates the type of corruption that plagues the Philippines–intergenerational corruption (one administration accepts a project, next administration overrides the project. Example: Shell’s recent drama with the BIR and the BIR’s retroactive attempt at collecting taxes due to its own conflicting decisions). You need PREDICTABILITY when trying to do business and this type of corruption destroys that. No wonder the Philippines has had very low levels of FDI for several years now.
The other key element to Singapore’s rise was the availability of relatively cheap money it used to fund its development. This money came from Overseas Chinese in the Asean region looking to export their post-tax profits to a safe haven–far from the greedy clutches of local politicians or hostile ethnic majorities (recent example of how nasty it can get: Solomon Islands’ anti-Chinese riots).
Since Singapore enjoyed the benefits of political stability, political focus and will (due to a strong party system), and relatively cheaper capital, it was able to invest in its long term infrastructure and the human capital of its population.
The philippines has neither a strong party system or a capital flow that lends itself easily to capital formation. The OFW capital flow flows straight to expenses owed to local monopoly enterprises and the bulk of the capital is not reinvested but shifted to monopoly owned banks who then park the cash into ROP assets. In terms of human capital, recent statistics by the Department of Education shows a continuing decline in the proficiency of the average high school graduate. Diploma mills abound. I confront this reality since I invest in BPO companies–only a FRACTION pass the screening test much less make it through training. And that’s BPO… much less if we are to talk about KPO (which pays more and brings in more foreign capital/technology transfer).
Overall, future development looks very challenging indeed.
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