Luzon on the Java trail

Reading Time: 3 minutes
Luzon, Philippines

The Philippines and Indonesia at times seem to be tethered to the same wagon. Both countries sit just above or below investment-worthy credit ratings, compose the largest cluster of islands on the planet that boast attractive tourism destinations, have young and growing middle classes and are forecast to maintain a GDP growth rate of at least 5 per cent annually during the following decade.

By Justin Calderon

The Philippines, however, has experienced a few ruts along the way, bearing the unceremonious title of the “sad-sack of Southeast Asia” while Indonesia has become a favorite of foreign investors, with $29 billion in foreign direct investment forecast for 2013.

How the Philippines unsaddles itself from this stigma and proves to investors that it is no longer a disappointment sits on the shoulders of its largest island, and economic and political core.

Luzon, the largest island of the Philippine archipelago, is the uncontested economic and political heart of the country and home to some 44 million people in a country of 94 million. The island includes Metro Manila and represents approximately 50 per cent of the country’s total GDP, which was $233.6 billion in 2012.

Java mirrors this is some way. The oblong island of 141 million people contributes 57.5 per cent to Indonesia’s total GDP and is home to the nation’s capital, Jakarta.

Politically, both nations are now beacons of stability in the region, with incumbent administrations generating further approval by implementing business-friendly policies that have carved competitive niches for both nations. The Philippines is forecast to overtake India as the BPO center of the world by 2015; Indonesia is quickly luring away manufacturing majors from Thailand, China and elsewhere thanks in part to an improving supply chain.

The paralleled momentum doesn’t continue too much past here, however. There is a major snag in the continued development of the Philippines that investors – be they from near or far – hobby market watches and even laymen familiar with the country seem to chime in unison about.

Violence and unchecked criminality has deterred investors and foreign businesses from exploring opportunities in Luzon, not to mention the country’s second largest island and economic hopeful, Mindanao, which recently saw the signing of a peace framework between the Manila administration and Islamic fundamentalist rebels.

Over the past week, two headline-grabbing shootouts in Luzon, not far from Metro Manila, have rung out. One case in Quezon province led to the death of 13 people, three of whom were policemen and three other soldiers. Another involved a disturbed man that went on an unprovoked drug- and alcohol-fueled rampage, killing a pregnant woman and two children. Both of these occurred just days after a stray bullet killed a young girl on New Year’s Eve in Manila. These events remind outsiders that the Java-model possibilities for the Philippines lie somewhere beyond a sense that is purely primal: the desire for security.

The Philippines has often had to combat this issue – as has Indonesia. But the main difference is that violence in the Philippines remains imbued in the investor psyche and a paramount topic of discussion when the country arises in conversation.

The Aquino administration realizes that a clean up is long overdue. Abigail Valte, a spokeswoman for President Benigno Aquino III, said in relation to the killings that they “will certainly fuel the efforts of the [Philippine National Police] in its drive against loose firearms.”

This is a great start. The Philippine police estimate that there are half a million firearms that are either unlicensed or have expired licenses around the country.

Theses firearms, which are usually illegally manufactured or smuggled, have long stoked political and civil violence, as well as the Muslim rebellions in the south.

If Aquino is to truly transform his country, he will need to convince those outside of his nation that firearm issues are under control or risk becoming permanently branded as the gun-loving and violent Wild, Wild East.

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[caption id="attachment_6274" align="alignleft" width="300"] Luzon, Philippines[/caption] The Philippines and Indonesia at times seem to be tethered to the same wagon. Both countries sit just above or below investment-worthy credit ratings, compose the largest cluster of islands on the planet that boast attractive tourism destinations, have young and growing middle classes and are forecast to maintain a GDP growth rate of at least 5 per cent annually during the following decade. By Justin Calderon The Philippines, however, has experienced a few ruts along the way, bearing the unceremonious title of the “sad-sack of Southeast Asia” while Indonesia has become a favorite...

Reading Time: 3 minutes

Luzon, Philippines

The Philippines and Indonesia at times seem to be tethered to the same wagon. Both countries sit just above or below investment-worthy credit ratings, compose the largest cluster of islands on the planet that boast attractive tourism destinations, have young and growing middle classes and are forecast to maintain a GDP growth rate of at least 5 per cent annually during the following decade.

By Justin Calderon

The Philippines, however, has experienced a few ruts along the way, bearing the unceremonious title of the “sad-sack of Southeast Asia” while Indonesia has become a favorite of foreign investors, with $29 billion in foreign direct investment forecast for 2013.

How the Philippines unsaddles itself from this stigma and proves to investors that it is no longer a disappointment sits on the shoulders of its largest island, and economic and political core.

Luzon, the largest island of the Philippine archipelago, is the uncontested economic and political heart of the country and home to some 44 million people in a country of 94 million. The island includes Metro Manila and represents approximately 50 per cent of the country’s total GDP, which was $233.6 billion in 2012.

Java mirrors this is some way. The oblong island of 141 million people contributes 57.5 per cent to Indonesia’s total GDP and is home to the nation’s capital, Jakarta.

Politically, both nations are now beacons of stability in the region, with incumbent administrations generating further approval by implementing business-friendly policies that have carved competitive niches for both nations. The Philippines is forecast to overtake India as the BPO center of the world by 2015; Indonesia is quickly luring away manufacturing majors from Thailand, China and elsewhere thanks in part to an improving supply chain.

The paralleled momentum doesn’t continue too much past here, however. There is a major snag in the continued development of the Philippines that investors – be they from near or far – hobby market watches and even laymen familiar with the country seem to chime in unison about.

Violence and unchecked criminality has deterred investors and foreign businesses from exploring opportunities in Luzon, not to mention the country’s second largest island and economic hopeful, Mindanao, which recently saw the signing of a peace framework between the Manila administration and Islamic fundamentalist rebels.

Over the past week, two headline-grabbing shootouts in Luzon, not far from Metro Manila, have rung out. One case in Quezon province led to the death of 13 people, three of whom were policemen and three other soldiers. Another involved a disturbed man that went on an unprovoked drug- and alcohol-fueled rampage, killing a pregnant woman and two children. Both of these occurred just days after a stray bullet killed a young girl on New Year’s Eve in Manila. These events remind outsiders that the Java-model possibilities for the Philippines lie somewhere beyond a sense that is purely primal: the desire for security.

The Philippines has often had to combat this issue – as has Indonesia. But the main difference is that violence in the Philippines remains imbued in the investor psyche and a paramount topic of discussion when the country arises in conversation.

The Aquino administration realizes that a clean up is long overdue. Abigail Valte, a spokeswoman for President Benigno Aquino III, said in relation to the killings that they “will certainly fuel the efforts of the [Philippine National Police] in its drive against loose firearms.”

This is a great start. The Philippine police estimate that there are half a million firearms that are either unlicensed or have expired licenses around the country.

Theses firearms, which are usually illegally manufactured or smuggled, have long stoked political and civil violence, as well as the Muslim rebellions in the south.

If Aquino is to truly transform his country, he will need to convince those outside of his nation that firearm issues are under control or risk becoming permanently branded as the gun-loving and violent Wild, Wild East.

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