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Can Davao City Become The Philippines’ Next Investment Destination?

Perhaps the Philippines’ most underrated investment destination is its largest city in terms of area. Davao City has long attracted adventurous entrepreneurs and businesses for its rich natural resources and opportunities for economic growth, and yet, security issues in the southern region of Mindanao continue to deter many investors.

Drive through Davao City and you’ll see the tell-tale signs of a growing metropolis–high-end condos and malls, construction sites and traffic congestion. Philippine President Rodrigo Duterte is credited with bringing progress to the hometown he led as mayor

for more than two decades before moving to Malacañang Palace. Today, his children are following in his footsteps: daughter Sara Duterte-Carpio is the current mayor and his son Paolo is a congressman and other son Sebastian is city vice mayor.

In the private sector, wealth and power remain mostly in the hands of the homegrown elite: pioneer families unfazed by global stigma who invested in the city’s agribusiness, real estate, logistics and infrastructure thought too risky by their counterparts in the north. Meantime, bold foreign investors saw profit potential in this “Wild West” and blazed a trail–like Lars Wittig, country manager of Regus & SPACES by IWG Philippines.

Wittig began seeking new markets in Mindanao some 30 years ago, first for tobacco giant Philip Morris, then Dole’s plantation empire, and now for a leading operator of flexible workspaces. He says one of the biggest indicators that Davao was the place for Regus to invest was the number of gas stations, McDonalds and even the Starbucks he saw in 2012.

“This is really becoming a ground zero for all types of industries to venture into,” Wittig explained, noting the need to alleviate the burden on Metro Manila and shift operations to tier two cities like Davao. “We all know how difficult it is to maintain productivity [in Manila] and meanwhile down here, there’s less competition for a very young and IT-savvy population.”

Last month, local government and business leaders sought to sell an image of openness and security at the 5th biennial investment conference Davao ICON with the theme “Davao: Your Southeast Asian Investment Destination.” It was the first to be co-organized with the Joint Foreign Chambers of Mindanao, with a third of 600+ delegates coming from China, Japan, Singapore, South Korea, Malaysia, Indonesia, Russia, Mexico, and European Union countries, including the Netherlands, Sweden, France, Belgium, Romania, Hungary and Austria, many of which sent their official ambassadors based in Manila.

“We hope they will find investment opportunities here to present to their business councils and business groups,” Mayor Duterte-Carpio said after meeting the ambassadors, reassuring them that she would ask the city council to draft a resolution requesting President Duterte to consider localizing martial law to help ease foreign investors’ concerns. She admitted that martial law may not be needed for the entire region.

Leaders in the private sector say that while foreign nationals view a militarized presence in Mindanao as negative, residents and business owners welcome soldiers as support for local law enforcement, considering the region’s history and culture.

The real challenge will be taking the positive messaging and translating it into actual business deals. Aside from the long-time presence of Japanese and Chinese investors, international investment from western countries is relatively small, ranging from Swedish company Transcom Holdings’ acquisition of local BPO firm Awesome OS to Dutch experts’ work in supporting the local cacao industry.

Philippine President Rodrigo Duterte speaks to the media after arriving in Davao on May 16, 2017, from a working visit to China.

Philippine President Rodrigo Duterte speaks to the media after arriving in Davao on May 16, 2017, from a working visit to China.

MANMAN DEJETO/AFP/Getty Image

With President Duterte’s “Mindanao First” policy, more countries are exploring the region’s potential as an economic partner, rather than a beneficiary of funding for conflict resolution. Davao’s business community touted the region’s strong economic growth of 8.6% in 2018, outpacing that of the country’s GDP, which came in at 6.2%.

Mayor Duterte-Carpio pointed to efforts to improve international connections, including direct flights to/from Hong Kong, Jinjiang and Doha, and incentives for investors to inject money into rural communities. City officials touted deals with Austrian companies and Chinese firms like China Telecom and Alibaba, as well as increased official development assistance from entities like the Japan International Cooperation Agency and the Asian Development Bank. The new Bangsamoro Autonomous Region in Muslim Mindanao, or BARMM, is also focusing on economic development to support the peace process.

The message? Davao City is an attractive alternative to overcrowded Manila and Cebu, and hungry for investment partners, particularly in tourism, infrastructure, real estate, information and communication technology, and halal trade and tourism.

“You have to come and see,” says Regus’ Wittig. “You don’t know the Philippines before you have experienced the hospitality, the people, the culture, not least the nature here in Mindanao and

specifically in Davao.”

I’m an international news anchor, Asia correspondent and freelance content creator based in Manila, with 20 years of experience in news, business and lifestyle reporting, producing and anchoring across Asia and the United States, including Singapore, New York City, Washington, D.C., and Los Angeles. In 2017, I launched ABS-CBN News Channel’s morning newscasts Early Edition and News Now as lead anchor and managing editor and hosted the popular “Food Diplomacy” segment. From 2013-2016, I was an anchor/correspondent for Channel NewsAsia and hosted “What’s Cooking,” a weekly food and travel show. Before moving to Asia, I worked in New York as an anchor, reporter and editor for several major media companies, including Forbes, CNBC, HGTV, Yahoo and Bloomberg. Born in Los Angeles, I graduated from UCLA and Columbia University’s Graduate School of Journalism.

 

Source: Can Davao City Become The Philippines’ Next Investment Destination?

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The Philippines’ Per-Capita GDP Has Reached An All-Time High Under Duterte

Photographer: SeongJoon Cho/Bloomberg

Photographer: SeongJoon Cho/Bloomberg

Philippines President Rodrigo Duterte has a terrible human rights record. But the average Filipino is doing better under Duterte.

When it comes to per-capita gross domestic product (GDP), that is. That’s a measure of the total output of a country divided by the number of people in that country.

The Philippines’ per-capita GDP was last recorded at an all-time high of 2,891.36 U.S. dollars in 2017, according to Tradingeconomics.com. That’s well above the average of 1,627.98 USD for the period 1960-2017.

Also, Filipinos are doing better under Duterte when per-capita GDP is adjusted by purchasing power parity (PPP). That measure, too, reached a record 7,599.19 U.S. dollars in 2017, well above the average of 4969.71 USD for the period 1990-2017.

Statistic 2015 2017
Per Capita GDP $2615.7 $2891.36
Per Capita GDP PPP 6874.4 7599.19
GDP Annual Growth Rate 6.5% 7.2%

Source: Tradingeconomics.com 10/26/2018

To be fair, comparing per-capita GDP in USD for different time periods is a tricky exercise. Numbers can be distorted by population growth and currency fluctuations. For instance, the climb in the Philippines per capita GDP has been helped by a slow-down in population growth. It’s also an ongoing trend that can be traced back to the Aquino administration, which brought macroeconomic stability to the country.

“Aquino is delegating power to competent technocrats and seems to understand what needs to be done to get the lights back on,”  wrote Ruchir Sharma in Break Out Nations.

Macroeconomic stability has helped the Philippines economy demonstrate a great deal of resilience in recent years. At the end of 2017, it grew at an annual 6.9% in the September quarter. That’s the strongest growth since the third quarter 2016. And the Philippines’ economy was still growing at 6% at the end of 2018.

Tracing per-capita GDP growth back to the Aquino period certainly raises the question: Who should take credit for the record per-capita GDP, Aquino or Duterte?

Philippines iShares MSCI ETF

Philippines iShares MSCI ETF

Meanwhile, a recent McKinsey Global Institute (MGI) study places the Philippines among the few emerging market economies that are well-prepared to achieve sustained growth over the next decade.

That’s thanks to a rise in gross fixed-capital formation (investment). It reached 695,414.08 PHP million in the second quarter of 2018 from roughly 450,000 PHP million in July of 2015–well above the 303,138.16 PHP million for the period 1998 until 2018, and an all-time high.

Still, the Philippines’ per-capita GDP is equivalent to 23% of the world’s average, which makes Filipinos poor. And a resurgence in the cost of living in recent months makes things worse for them. The Philippines’ annual inflation rate rose to 6.7% in September of 2018 from 6.4% in the August, and compared to market expectations of 6.8%.

That’s the highest reading since February 2009, thanks to soaring food, transportation and utility prices.

Inflation, together with revolution and corruption, has suspended Philippines economic progress before, and it will do it again, if they aren’t addressed effectively.

Pilippines Corruption Rank

Pilippines Corruption Rank

So rather than celebrating record per capita GDP, Duterte’s administration should keep an eye on the price of bread and rice. And he should look at his human rights record, which cannot be balanced by any economic record.

My recent book The Ten Golden Rules Of Leadership is published  by AMACOM, and can be found here. 

I’m Professor and Chair of the Department of Economics at LIU Post in New York. I also teach at Columbia University.

Source: The Philippines’ Per-Capita GDP Has Reached An All-Time High Under Duterte

Philippines Is Beginning To Pay The Price For Duterte’s South China Sea Flip-Flops

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. Photographer: SeongJoon Cho/Bloomberg

© 2018 Bloomberg Finance LP

The Philippines is beginning to pay the price for President Rodrigo Duterte’s South China Sea policy flip-flops in the form of repeated challenges to the country’s sovereignty by Beijing.

China considers the South China Sea its own sea, all of it. And it seems to be prepared to do whatever it takes to assert control over every tiny island, natural and artificial, in it — as evidenced by the presence of hundreds of Chinese vessels near a Philippines-administered island in the South China Sea in recent weeks.

That’s certainly bad news for neighboring countries — like the Philippines — which have competing claims in these territories. And bad news for the future of the economic integration of the region, as it raises geopolitical risks that could eventually turn away foreign investments.

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Philippines Shares Have Underperformed Emerging Markets

Koyfin

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Philippines External Debt

Koyfin

The trouble is that Manila doesn’t have a clear and consistent policy to deal with China’s aggression, as evidenced by several flip-flops in Duterte’s administration. Why? Perhaps out of fear of war or the appeal of the Chinese money that is expected to finance his ambitious infrastructure projects.

Back in April of 2018, President Duterte backed off his earlier decision to raise the Philippine flag in disputed islands, following Beijing’s “friendly” advice.

Manila’s 2018 flip flop came two years after the 2016 policy flip-flop. Back then, the Philippines and its close ally, the U.S., won an international arbitration ruling that China has no historic title over the waters of the South China Sea. What did Duterte do? Rather than teaming up with the US to enforce the ruling, he walked the other way. He sided with Beijing on the dispute, and sought a “divorce” from the U.S.

Apparently, Beijing had offered Manila a couple of promises, as was discussed in previous pieces here. Like the promise to finance Duterte’s “Build, Build, Build” initiative, and the promise of peace and a partnership for prosperity.

Instead, Philippines is starting to pay the cost for President Duterte’s flip-flops. For example, China continues to assert its control over Thitu island, also known as Pag-asa island in the Philippines, according to a CNN report. And that renews the threat of war between the two nations.

Beijing’s recent move comes shortly after America had assured the Philippines that it would come to that nation’s defense if it comes under attack in the South China Sea. That’s according to reports in early March, when Washington reaffirmed a defense code that Manila had sought to revise.

But apparently Washington assurances haven’t been sufficient to deter China’s aggression in the South China Sea.

Now, President Duterte is threatening to send his troops on a “suicide mission” if Beijing doesn’t “lay off” a Manila-occupied island in the South China Sea.

Another policy flip-flop? Hard to say.

Meanwhile, the Philippines is beginning to suffer consequences of the flow of Chinese money into the country, as was discussed in a previous piece here.

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Gallery: Midas List 2019: Top China Investors

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My recent book The Ten Golden Rules Of Leadership is published  by AMACOM, and can be found here. 

I’m Professor and Chair of the Department of Economics at LIU Post in New York. I also teach at Columbia University. I’ve published several articles in professional jour…

Source: Philippines Is Beginning To Pay The Price For Duterte’s South China Sea Flip-Flops

The Philippines Per Capita GDP Has Reached An All-Time High Under Duterte – Panos Mourdoukoutas

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Philippines President Rodrigo Duterte has a terrible human rights record. But the average Filipino is doing better under Duterte. When it comes to per-capita gross domestic product (GDP), that is. That’s a measure of the total output of a country divided by the number of people in that country. The Philippines’ per-capita GDP was last recorded at an all-time high of 2,891.36 U.S. dollars in 2017, according to Tradingeconomics.com. That’s well above the average of 1,627.98 USD for the period 1960-2017. Also, Filipinos are doing better under Duterte when per-capita GDP is adjusted by purchasing power parity (PPP). That measure, too, reached a record 7,599.19 U.S. dollars in 2017, well above the average of 4969.71 USD……………..

 

 

 

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