Second in a series
Although the Asian financial crisis is slowing growth in the Philippines, the turmoil may help the country take a down-to-earth approach toward its economic development, according to Raul Concepcion, president of the Federation of Philippine Industries.
Concepcion says that slow but sustainable growth is much better than rapid growth, which often involves an asset-inflated boom — one that could bring serious consequences once the bubble bursts. He is relieved that the regionwide crisis hit the country before it became too deeply mired in the speculative real estate boom.
“If this (financial crisis) had happened three years later, everybody (in the Philippines) would have become involved in real estate and we would have been bankrupt. Now things are not so bad,” said Concepcion, who also serves as chairman of Concepcion Industries Group, a manufacturer of electronics products and other items.
The leader of the Philippine business organization visited Japan last week to attend The Third Asian Neighbors Forum, in which business leaders in Asia gathered to exchange opinions on, and propose remedies for, the Asian financial crisis from the private sector’s standpoint.
After the currency crisis broke out in Thailand last summer and spread to other countries in the region, the Philippine peso dropped about 30 percent against the dollar, and stock prices declined more than 20 percent between last June and mid-April.
Domestic demand shrunk in the second half of 1997, and the growth slowed to 5.1 percent from 5.5 percent in 1996. According to Concepcion, it is estimated that growth this year will slow to between 2.5 percent and 3 percent.
However, in contrast to countries such as Indonesia and Thailand that have been hit hard by the crisis, the Philippines has not been severely affected. The Philippines was already under the supervision of the International Monetary Fund, and the crisis hit it at an early stage of asset-inflation, Concepcion explained.
In the Philippines, the amount of bad loans held by banks is relatively small, which means financial turmoil is less likely to occur. But corporate bankruptcies may begin to occur among small and midsize companies, he said.
Concepcion also noted that the influence of the crisis has even helped the Philippines to correct the direction of its economic growth, in a practical sense, by shifting the focus of investment from real estate to manufacturing and by leading consumers to buy domestic goods instead of imports. “All investment goes into production, rather than real estate. So, (there are) no more luxurious condominiums. Our people realize we need to cut back on our imports, otherwise we would all suffer. People (need to) go back to buying Philippine goods,” Concepcion said.
People in the Philippines need to keep working hard so the nation can become competitive with other countries such as Malaysia and Thailand, where people tend to have a better work ethic, Concepcion said.
Turning to the May 11 presidential election, he said that regardless of who wins, he does not expect a drastic change in economic policy. But Concepcion added that if a candidate from the opposition party is elected, he would pay attention to the economic advisers selected by the president-elect. A recent Philippine poll shows that opposition candidate Joseph Estrada is leading the race, while the candidate favored by departing President Fidel Ramos has slipped to fourth place.
Although the economic turmoil in Asia has weakened regional demand, Concepcion said it has not harmed the economy of the Philippines as much because Japan and the United States are its main export markets. Of total exports from the Philippines in 1996, the U.S. accounted for 34 percent and Japan 18 percent.
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