The Philippines’ “New Economy”

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FilipinosThe Philippines used to be referred to as a basket case in Asia. Now it is more apparent that the Philippines is a market basket of many goods.

The average foreigner, who may not have the appropriate modes of comparison, may actually find the country a bit perplexing and burdensome with its horrendous traffic jams and a sea of people going about in an almost chaotic way. Intersperse that with crystal clear signs of poverty, it just can’t be more fun in the Philippines. But the Philippine story goes beyond the obvious.

For a country not know for producing anything industrial or electronic, the secret of the country lies somewhere else. Think about this, in 1900 there were only 8 million Filipinos. While there were 51 million citizens in Germany, Austria and Denmark together. Italy and France had about 30 million plus each while Japan had a 42 million count.

Today, the Philippines is the 12th largest country in terms of population next to Mexico and Japan with close to 100 million people if we already count the offsprings of many Filipinos working abroad but plan to eventually come home. And I venture to guess that surpassing Japan soon would be a walk in the park for my country not known for population control.

But this is the Philippine model. It is like a huge “FARM” – we breed and send people abroad: caregivers, seafarers, programmers, accountants, engineers, construction workers, farmers, musician, singers, and even domestic helpers. That in turn brings in close to $22 billion yearly in remittances which fuel a consumption driven growth story. Hence, the business models currently enjoying a boom in the country are all those that power, fast feed, educate, entertain the “farm” in an affordable way before they are shipped out, or work for backroom offshore offices set up to cater to the West.

Because the Oversea Filipino Workers’ (OFW) remittances comes in on a monthly basis, business models that flourish must make use of the ‘sachet’ concept: sachet shampoo, small bottled energy drinks and deodorants, tiny viands but unlimited rice fast food, affordable monthly amortizations for cars, condo units and installment schemes on appliances by big retailers who actually also own their banks, etc.

The Philippines was actually prepared for this phenomenon well: 300 years under a European country and 50 years of Hollywood has made the Filipino one of the most outward looking, culturally adaptable, English speaking work force. About 70 per cent of Filipinos are below 25 and 50 per cent are below 20 years old.

Back in 2007, I quoted Peter Drucker, who in 2004 said he saw a world where China would be the “brawn” of Asia, mass producing cheap goods for the world and focused on manufacturing, while India would be the “brains’ of Asia, as leader of the global outsourcing industry, thanks to its high proportion of  English speaking college graduates.

But what about the Philippines? I said, in the face of these two giants, well we can only be the “heart’ of Asia, meaning we must excel in emotional quotient (EQ)-type of services. Back then some people laughed at me. But think about it, in a fast “greying” world, would people focus on intelligence quotient (IQ) or in EQ driven services? If you were bedridden or on a wheelchair, would you want an IQ-driven staff beside you or an EQ type person?

Today, Filipinos are leading in providing call center after sales services, care giving and nursing, medical and physical therapists, entertainers to Japan and Hong Kong Disneyland, grade school teachers to the US, etc — in short, providing “EQ driven services,” which is very valuable in the service industries worldwide. Even teaching grade school stuff to unwieldy American kids is more an EQ task than IQ, isn’t it?

This once misunderstood, emotionally driven, chaotic, Hispanic yet Asian country know for sending domestic helpers abroad did something unprecedented  – and since then, investors and serious businessmen started to look at the Philippine success story differently.

You see about a year ago, the Philippines surpassed India in the global off-shoring of call center businesses.

Since then, the road to understanding the Philippines and its people, and learning how to capitalise on its hidden strengths started to take shape amongst the foreign businessmen that I met. More importantly, it opened the eyes of many Filipinos as well: there was the realization that the Filipino worker is actually world class, and that the reason why we produce $22 billion yearly in OFW remittances is not because we provide just cheap work.

Many hard up countries can also do that, but the OFW remittances has continued to grow despite a global slowdown that would clearly justify cost cutting.

A friend of mine who is now an OFW engineer in Germany, summed it up well, “They sent everybody home to their countries, but for managers and supervisors it is all Filipino here. They like us here.”

(Tony Herbosa is an Inside Investor contributor. The opinions expressed are his own.)

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Reading Time: 3 minutes

The Philippines used to be referred to as a basket case in Asia. Now it is more apparent that the Philippines is a market basket of many goods.

Reading Time: 3 minutes

FilipinosThe Philippines used to be referred to as a basket case in Asia. Now it is more apparent that the Philippines is a market basket of many goods.

The average foreigner, who may not have the appropriate modes of comparison, may actually find the country a bit perplexing and burdensome with its horrendous traffic jams and a sea of people going about in an almost chaotic way. Intersperse that with crystal clear signs of poverty, it just can’t be more fun in the Philippines. But the Philippine story goes beyond the obvious.

For a country not know for producing anything industrial or electronic, the secret of the country lies somewhere else. Think about this, in 1900 there were only 8 million Filipinos. While there were 51 million citizens in Germany, Austria and Denmark together. Italy and France had about 30 million plus each while Japan had a 42 million count.

Today, the Philippines is the 12th largest country in terms of population next to Mexico and Japan with close to 100 million people if we already count the offsprings of many Filipinos working abroad but plan to eventually come home. And I venture to guess that surpassing Japan soon would be a walk in the park for my country not known for population control.

But this is the Philippine model. It is like a huge “FARM” – we breed and send people abroad: caregivers, seafarers, programmers, accountants, engineers, construction workers, farmers, musician, singers, and even domestic helpers. That in turn brings in close to $22 billion yearly in remittances which fuel a consumption driven growth story. Hence, the business models currently enjoying a boom in the country are all those that power, fast feed, educate, entertain the “farm” in an affordable way before they are shipped out, or work for backroom offshore offices set up to cater to the West.

Because the Oversea Filipino Workers’ (OFW) remittances comes in on a monthly basis, business models that flourish must make use of the ‘sachet’ concept: sachet shampoo, small bottled energy drinks and deodorants, tiny viands but unlimited rice fast food, affordable monthly amortizations for cars, condo units and installment schemes on appliances by big retailers who actually also own their banks, etc.

The Philippines was actually prepared for this phenomenon well: 300 years under a European country and 50 years of Hollywood has made the Filipino one of the most outward looking, culturally adaptable, English speaking work force. About 70 per cent of Filipinos are below 25 and 50 per cent are below 20 years old.

Back in 2007, I quoted Peter Drucker, who in 2004 said he saw a world where China would be the “brawn” of Asia, mass producing cheap goods for the world and focused on manufacturing, while India would be the “brains’ of Asia, as leader of the global outsourcing industry, thanks to its high proportion of  English speaking college graduates.

But what about the Philippines? I said, in the face of these two giants, well we can only be the “heart’ of Asia, meaning we must excel in emotional quotient (EQ)-type of services. Back then some people laughed at me. But think about it, in a fast “greying” world, would people focus on intelligence quotient (IQ) or in EQ driven services? If you were bedridden or on a wheelchair, would you want an IQ-driven staff beside you or an EQ type person?

Today, Filipinos are leading in providing call center after sales services, care giving and nursing, medical and physical therapists, entertainers to Japan and Hong Kong Disneyland, grade school teachers to the US, etc — in short, providing “EQ driven services,” which is very valuable in the service industries worldwide. Even teaching grade school stuff to unwieldy American kids is more an EQ task than IQ, isn’t it?

This once misunderstood, emotionally driven, chaotic, Hispanic yet Asian country know for sending domestic helpers abroad did something unprecedented  – and since then, investors and serious businessmen started to look at the Philippine success story differently.

You see about a year ago, the Philippines surpassed India in the global off-shoring of call center businesses.

Since then, the road to understanding the Philippines and its people, and learning how to capitalise on its hidden strengths started to take shape amongst the foreign businessmen that I met. More importantly, it opened the eyes of many Filipinos as well: there was the realization that the Filipino worker is actually world class, and that the reason why we produce $22 billion yearly in OFW remittances is not because we provide just cheap work.

Many hard up countries can also do that, but the OFW remittances has continued to grow despite a global slowdown that would clearly justify cost cutting.

A friend of mine who is now an OFW engineer in Germany, summed it up well, “They sent everybody home to their countries, but for managers and supervisors it is all Filipino here. They like us here.”

(Tony Herbosa is an Inside Investor contributor. The opinions expressed are his own.)

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