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Philippines Has a People Problem, Literally

Hmmm, maybe Donald Trump wouldn’t be such a disaster after all.

Just kidding! The billionaire-turned-politician would be every bit the disaster economists fear in the White House. But what of Rodrigo Duterte, who’s often called the Filipino Trump? With his disdain for political correctness, copious misogyny and authoritarian tendencies, newly sworn in President Duterte often manages to trump Trump’s bombast. Duterte didn’t disappoint in his first state of the nation address Monday, giving nods to human-rights violations and downplaying the nation’s high journalist death rate.

On the economy, though, Duterte sounded less crazy than feared. His linear focus on better airports and infrastructure to tame Manila’s productivity-killing traffic is the right one. So is his pledge to keep the policies of predecessor Benigno Aquino and “even do better” to create jobs and lift millions out of poverty. Duterte’s talk of making it easier to do business, retool the tax system, move to a federal form of government and up population control efforts will, if implemented, help spread the benefits of growth to all of his 100 million people.

That’s the good news. The bad news is that Duterte seems determined to export ever more of those people. Because the Philippines has long struggled to create enough good jobs, all too many flee overseas to work and send money home. At present, more than 10% of the population has outsourced itself to Dubai, Hong Kong, Singapore among the 170 countries than benefit from Filipino labor. The waves of cash they remit home – more than $25 billion each year – finances consumption, real estate, stock investments and shores up the national balance sheet.

Trouble is, it’s addictive. Those hard-currency inflows deaden the urgency for elected officials to generate jobs at home. It causes a brain drain that weakens the quality of the labor pool, hinders innovation and fosters a variety of social strains. Kids in rich countries have two moms, a biological one and a Filipino nanny, while many Filipinos grow up without one nearby. This isn’t a moral judgment, but sociologists like Barbara Ehrenreich have done exhaustive research on the economic fallout from this “care deficit.”

Past presidents, including Joseph Estrada and Gloria Arroyo, made exporting people a trade priority. When they traveled abroad, the first point of business was securing more work visas for compatriots. Overseas Filipino Workers, or OFWs, got their own VIP lanes at airports. Aquino, to his credit, tried to stem the exodus. Central bank Governor Amando Tetangco’s team has done impressive work to increase financial literacy so that inflows are used productively.

It seems ominous, then, that Duterte wants to create a Department of OFW Affairs. On the surface, this may sound sensible. As Syria burns, Brexit risks spread, Hong Kong treats OFWs like third-class citizens and human-trafficking risks abound, there’s logic to protecting people in harm’s way. But more time and energy should be spent bringing the diaspora home. I’ve chatted with OFW’s everywhere from Singapore to Abu Dhabi to London to Addis Ababa over the years. I’ve met very few who would live thousands of miles from family if they could find comparable wages at home.

Is Duterte veering in the Estrada/Arroyo direction and greasing the exit ramp? Granted, his focus on reducing poverty sounds grand. But then presidents have talked boldly on that score from Corazon Aquino in the 1980s to her son from 2010 to 2016. Delivering means taking on the chronic corruption that concentrates wealth in the hands of a dozen or so dynastic families. Cutting taxes is nice, but the real problem is not collecting them from “middle-class” tycoons and celebrities cheating the government. It means increasing the nation’s attractiveness as an investment destination.

Duterte still exudes too much Trumpian bravado for comfort. It’s hard to tie all the bodies turning up around the country directly to Duterte’s administration, but the language surrounding his campaign against illegal drugs appears to be inspiring considerable bloodshed. His enthusiasm for the death penalty is worrisome. His off-the-cuff speaking style, one prominently on display Monday, could be a diplomatic nightmare. Yet with his focus in the right places and surprising interest in economic nuance and minutia, might Duterte prove to be the anti-Trump?

Aquino left Duterte in a very enviable position, having won investment-grade ratings and producing growth faster than even China in the first quarter. Duterte’s team expects growth of between 6% and 7% even amid growing international headwinds. The question is what Duterte does with the solid hand he’s been dealt. So far, he’s tried to empower Filipinos with words, chest-thumping and patriotic swagger. The key now is taking Aquino’s good-governance drive to the next level by accelerating domestic job creation.

Duterte’s new Department of OFW Affairs aims to “quickly respond to their problems and concerns.” It really should be tasked with bringing more Filipinos home than it transports to far-flung nations. The best way to do it is ensure that revenues from call centers, tourism, manufacturing and mining exceed remittances. Duterte can do that by cutting red tape, leveling playing fields, investing in education and training, building new roads, high-speed rail networks and power grids and attacking graft. Declaring a unilateral cease-fire with communist rebels to reignite peace talks also was a bold move.

Yet the Philippines needs to stop viewing remittances as a secret weapon. Exporting people is a merely a crutch that distracts Manila from working to reach its boundless potential. Duterte says he’s the voice of a population that deserves better from its leaders. He should start by keeping more of it at home.

Source: Barron’s | By: William Pesek

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