(c) 2013, Bloomberg News.
(c) 2013, Bloomberg News.
The following editorial appears on Bloomberg View:
If a silver lining can be found in the disaster visited upon the Philippines by Typhoon Haiyan, it's that the economy was less vulnerable than the nation's storm defenses. Faced with the grim and expensive task of recovery, the government can at least take advantage of the credibility and cleaned-up balance sheet it earned during the first half of Benigno Aquino's presidency. A lower-than- projected budget deficit — less than 2 percent of gross domestic product — provides a welcome fiscal cushion to help pay for reconstruction.
What's more, foreign investors may be more willing to partner with the government to rebuild roads, bridges and homes, knowing that their money won't automatically vanish into officials' pockets.
At the same time, the horrific images of Haiyan's aftermath — homes broken like matchsticks, uprooted crops, flooded villages, bloated corpses — are powerful reminders of how much remains to be accomplished. The storm was so destructive in part because its victims were so vulnerable: Many were among the quarter of the population still living on less than $1.25 a day. To these Filipinos, the glowing profiles and investment-grade ratings earned by Aquino's administration have meant precious little.
The Philippines' once-wildly popular president has been especially successful at — and been rightly praised for — cleaning up the country's corrupt political culture. To build on that success in the second half of his term, as well as to revive GDP growth rates that are sure to take a hit from the storm, Aquino needs to deliver on economic reforms as well.
He has a head start. From 2009 to 2012, the investment share of GDP grew to 22 percent from 14 percent. But too much of that money has gone into real estate rather than much-needed infrastructure improvements. A $9 billion program of public- private partnerships to build airports, classrooms, hospitals, roads and railways has struggled to get off the ground since it began in 2010: Only one project out of 47 is anywhere near completion. Aquino must do more to speed these investments, not least to ensure the country is better prepared to withstand the next superstorm.
Most important, with 1 in 4 Filipinos either out of work or underemployed even before Haiyan hit, the government must translate investment dollars into good jobs. As the World Bank and others have pointed out, this will require reforms to enhance competition, simplify business regulations and tax policies, and protect property rights.
Done right, these measures should reinforce rather than undercut Aquino's efforts to cleanse the Philippine political system. With encouragement, for instance, business process outsourcing — already a $10 billion industry employing 700,000 people — could bring home some of the millions of Filipinos who have sought work overseas. These are precisely the entrepreneurial, middle-class citizens likely to demand accountability and transparency from their politicians. Only this kind of constituency for change will ensure that, after Aquino leaves office in 2016, future presidents don't squander the goodwill he's earned for the Philippines.